Why ICICI Bank should call KV Kamath for help
If there are two key takeaways from the ICICI Bank-Videocon imbroglio, they are these: Indian private banks are no holy cows in matters of impropriety, unethical deals or lack of corporate governance principles, and second, by their inept handling of the issue so far, the ICICI Bank board, the MD and CEO Chanda Kochhar, her husband and businessman Deepak Kochhar and the old stalwarts of the bank like former chairman N Vaghul are creating a further web tangle in which the CEO and the board are getting mired in, dragging down the reputation of India’s second largest private bank with them.
It is beyond doubt that Kochhar, her husband and his brother Rajiv Kochhar should have ensured that business interests of the latter are distant from the business interests of the bank itself, which include its top clients. This was not done. It is still not officially established if there was a "quid pro quo" (a favour granted in return for something) in the case so far. That is up to the investigating agencies to conclude, and the CBI investigations are on.
However, by saying that Chanda Kochhar was unaware of her husband’s business links with Videocon is a bit too far-fetched to suit the public’s imagination. The same holds true for Rajiv Kochhar, who has been accused of having business interests with large borrowers of ICICI Bank, helping them, among other things, to restructure their loans.
The difference of the bank, in this case, has been that under the Companies Act, a brother-in-law does not fall under the definition of a “relative”, and therefore, it is not mandatory for the bank to disclose the business interests of Rajiv Kochhar.
This may be true in letter, but in spirit, the argument falls flat. Isn’t it but natural for the public, the investors and shareholders of a reputed bank to expect the highest levels of probity and transparency from its top executive? This is a trait that should have been displayed voluntarily by the executive, not something to be forced, as it seems to be where it is headed at the moment, with multiple agencies probing the deal. It may not be too far before the board orders a probe into the matter by an external agency or asks the CEO to step down before further damage is done to the brand.
One has not heard on the matter from KV Kamath, the iconic former chairman of the bank, who is fabled to have mentored his successor Kochhar at ICICI Bank, and now heads the BRICS bank at its Shanghai office.
He may excuse himself from what is going on in the bank in India citing his present responsibilities which he took over in 2015, but there may not be a better time to dial him up than now for some rescue lessons.
After all, managing crisis is not new to Kamath. In his really long tenure with ICICI bank (he started his career at the bank in 1971 and retired as MD and CEO in 2009, to take over as non-executive chairman), he has had to shoulder big responsibilities.
Most notable among them was the rumoured "run-on-the-bank" in 2008, where thousands of customers queued up before the bank’s branches to withdraw money as they feared it would go down. At that point, Kamath came out with public statements reiterating the strong financial position of the bank and called the rumours “baseless and malicious”.
Kamath is reported to have been chairman of the credit committee of ICICI Bank which sanctioned loan to Videocon, so he would be in a better position to clarify if there has been any conflict of interest in the matter at all. In India, it is not unusual for past CEOs to step in at times of crisis.
The looming crisis at IT giant Infosys, caused by a tussle between founder NR Narayana Murthy and CEO Vishal Sikka, who subsequently left the firm over allegations of slack corporate governance, was averted by the re-entry of Nandan Nilekani, who was called back from retirement to head the bank as nonexecutive chairman.
Nilekani was able to steady the ship, convince big clients to stay back, assuage the fears of Infosys staff and investors, and set in place a new CEO and hand-hold him through the difficult global terrain. Iconic institutions cannot be allowed to rot under the shadow of the misdoings of its management. Swift and stern measures need to be taken to ensure the credibility of the bank is restored, and the public is assured that they can fully trust their money with the bank.
(Courtesy of Mail Today)