Careers are built over decades. They are damaged far more quickly. In this case, over a period of two months and two days.
It was on 28 March, that the board of ICICI Bank issued a statement to the stock exchanges saying that it has full faith in Managing Director and Chief Executive Officer Chanda Kochhar. The board termed allegations of a conflict of interest in Kochhar’s dealings with the Videocon Group as “malicious and unfounded rumours”. It went on to say that there is “no question or scope of any favoritism, nepotism or quid-pro-quo.”
With that the board and Kochhar perhaps hoped that the matter would be laid to rest. It was not to be. The story has continued to develop over the past two months:
- On 31 March, the CBI said it is conducting a preliminary enquiry into the matter. It named Deepak Kochhar (Chanda Kochhar’s husband), the Videocon Group and unknown others.
- On 3 April, Deepak Kochhar’s NuPower Renewables got a tax notice as the Income Tax Department started to look at possibilities of evasion.
- By mid-April, PTI reported that an RBI enquiry conducted into allegations of quid pro quo in 2016 had thrown up no evidence of conflict of interest. However, the RBI had recommended that relevant agencies look into the funding patterns of some of the firms associated with Deepak Kochhar. BloombergQuint confirmed this with a senior former RBI official.
- On 16 April, the bank disclosed that capital market regulator SEBI had sought clarifications based on news reports alleging conflict of interest. The bank has duly responded to this, the lender said.
- Last week, the bank disclosed that it has received another notice from SEBI regarding non-compliance with certain provisions of the listing agreement.
Through all this, the bank’s board has continued to back Chanda Kochhar. She herself has relied on the board’s support. At her only press interaction since the allegations, Kochhar repeatedly said that she has nothing to add to the board’s position, which, until now, has been one of unquestioning support.
This stance changed on Wednesday when the board said that it has decided to institute an enquiry following an anonymous whistleblower complaint.
The bank did not reveal the details of the complaint but said that the whistleblower had alleged ‘quid pro quo’ in the course of Chanda Kochhar’s work in dealing with certain customers/borrowers of the bank. This complaint is different from the allegations made publicly by investor Arvind Gupta in 2016. However, the underlying issues seem to be similar.
Acknowledging the second complaint (assuming there aren’t any other such complaints), the board said that an enquiry would be initiated. It would be headed by an independent and credible person. The bank’s audit committee will “operationalise” the decision, said the board statement. This includes deciding who heads the enquiry, the terms of reference of the enquiry and period which will be covered by the enquiry.
Everyone agrees the board’s decision is a step in the right direction. But does it go far enough? And is it coming too late, at least for Chanda Kochhar?
The answer to the first question will depend on the composition of the enquiry committee and the manner in which the enquiry is conducted. Is it headed by a truly independent person? And do the terms of reference give the committee enough room to investigate all allegations?
The enquiry would need to look into dealings between ICICI Bank and the concerned corporates over many years since the loan sanctions are not recent. The committee should also go beyond the explanation that these loans were given as part of a wider consortium. It would be advisable for the committee to look at dealing between the bank and the concerned corporates since the sanction of loans as well, as some of these accounts have turned bad.
The second question is whether such a wide ranging enquiry can be conducted effectively if the MD and CEO, against whom these allegations have been made remains in the chair. Should the board have asked Chanda Kochhar to step down till the investigations were completed? “I would have preferred that the CEO step down for the period of the investigation,” M Damodaran, former chairman of SEBI told BloombergQuint.
That brings us to Chanda Kochhar.
While ICICI Bank’s board may have redeemed itself a touch by disclosing a new whistleblower complaint and initiating an enquiry into the matter, Kochhar’s position has weakened further.
No longer can she shrug off the complaint made by Arvind Gupta or the investigation conducted by Indian Express as motivated or superfluous. There is now a second complaint making similar allegations.
She also cannot shrug off SEBI’s concerns about inadequate disclosures by her bank. The government, which has a seat on the bank’s board, has kept quiet. It hasn’t taken a position against Chanda Kochhar but it hasn’t come out in support of her either. And presumably, the banking regulator, though silent, is carefully watching developments unfolding at India’s second largest private bank.
Meanwhile, CBI’s enquiry against her husband continues. The income tax department continues its proceedings into his business as well.
Unrelated to the concerns around Chanda Kochhar’s conduct, it is worth noting that ICICI Bank has hardly come out smelling roses in a bad loan cycle, which claimed its first private sector victim in the form of Axis Bank chief Shikha Sharma. If the regulator’s reluctance to reappoint Sharma as the head of Axis Bank stemmed from the bank’s performance under her leadership, then Kochhar could face similar questions.
If Chanda Kochhar were to speak out candidly about the last two months, she would probably acknowledge that this has been the worst crisis of her long banking career. It’s possible that she will survive it. It’s equally possible that she won’t.
(Ira Dugal is Editor - Banking, Finance & Economy at BloombergQuint.)
(This piece was originally published on BloombergQuint.)
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