Why ICICI Bank should look within itself for a clean-up
If the ICICI Bank thought it could rest the issue of impropriety and conflict of interest of its MD and CEO Chanda Kochhar by issuing a statement after a hurriedly convened board meeting on March 28, it was mistaken.
Nor did a blanket backing by the bank’s board lay the matter to rest. There are so many questions that have been thrown up following media reports that there was a clear case of impropriety after the bank extended a Rs 3,250 crore loan to Venugopal Dhoot-led Videocon group, since it has been established that Dhoot had business interests with Kochhar’s husband, Deepak Kochhar.
Reports pointed out to the multiple layers of transactions that took place in Deepak Kochhar’s wind energy firm, NuPower. Deepak Kochhar is not very much known as an entrepreneur in the Mumbai media circuit, but the kind of transactions that have allegedly happened in his firm, set up as a 50-50 joint venture with Dhoot in 2008, has left many confounded.
Why did Dhoot resign as director of NuPower in 2009, transferring his 24,999 shares in the company to Kochhar for Rs 2.5 lakh?
What was the purpose of the Rs 64 crore loan that NuPower got in March 2010 (as fully convertible debenture) from a company called Supreme Energy Private Limited which was 99.9 per cent owned by Dhoot?
What explains all the various transactions that then took place, including the creation of a trust, Pinnacle Energy, where Deepak Kochhar was the managing trustee?
ICICI Bank has said it has “full confidence and reposes full faith” in Chaanda Kochhar. In a telephonic interview, Dhoot denied that he has invested any money into Nupower. He says the company was founded for Rs 1 lakh when he and Deepak Kochhar decided to go together. Other than that, there have been no transactions between him and the energy firm, he reiterates. But as days pass by, fresh reports are appearing in the media, which point to further chinks in good corporate governance standards at the bank.
One media report said that Chanda Kochhar's brother-in-law (Rajiv Kochhar, brother of Deepak) advised borrowers of ICICI Bank on their foreign loans, helping them restructure foreign currency-denominated debt deals worth over $1.7 billion over six years.
Another report said that one of the five companies in the Videocon Group that received Rs 650 crore loan from ICICI Bank in 2012, had a net sales of just Rs 75 crore in 2011 and a net profit of Rs 94 lakh. Questions have been raised as to how a company could get a loan close to nine times its total sales. Moreover, each of the five companies have exactly received Rs 650 crore each, which has also raised eyebrows.
In response to the allegations of conflict of interest in the case of Rajiv Kochhar advising ICICI Bank’s borrowers through his company Avista Advisory, the bank has said that “the brother of a husband does not fall within the definition of a "relative” under the Companies Act, 1956 or 2013 or the Rules thereunder. Hence, there is no requirement of any disclosure of such a relationship by any official of the Bank".
While it is one thing to present technicalities to prove that one is on the right path, the issue of corporate ethics demands a much broader and more transparent approach. Often, what matters there are not syntax and technicalities, but an ardent attempt to be "above board" and put all facts available on the table.
In the matters above, what was stopping Chanda Kochhar from recusing herself from the credit committee when the matter of Videocon was being heard, by placing before the board that her husband had business interests with Dhoot?
Was the ICICI Board aware of the business dealings of Rajiv Kochhar, and if it was, why did it turn a blind eye to the matter? Did it not anticipate trouble in future, especially since 86 per cent of the loan (Rs 2,810 crore) provided to Videocon was declared a non-performing asset (NPA) in 2017?
Meanwhile, the ICICI Bank board has reposed its faith in Chanda Kochhar, and does not find any meat in the allegations. It categorically says that it "has come to the conclusion that there is no question of any quid pro quo/nepotism/conflict of interest as is being alleged in various rumours".
Well, now that there are more facts available in the public domain, should not the board take a fresh look at the matter? Should it not ask the CEO for an explanation for not disclosing fully these matters that have now raised serious charges of conflict of interest?
Should it not institute an internal probe into the allegations and make public the results? And, if there are indeed issues of impropriety and conflict of interest, should it not ask its CEO to step down for the sake of transparency and to place corporate governance before everything else at India’s second largest private sector bank?