ICICI Bank to probe role of CEO Kochhar following whistle-blower complaint

Enquiry headed by independent person to examine allegations of conflict of interest after whistle-blower complaint

Private sector lender ICICI Bank will conduct an independent enquiry into allegations of breach of code of conduct and conflict of interest against Managing Director and Chief Executive Chanda Kochhar after a complaint from an anonymous whistle-blower. This comes soon after the Securities and Exchange Board of India (Sebi) served a notice to the bank and Kochhar.

The allegations of wrongdoing pertain to loans extended by ICICI Bank to the Videocon group, which had business relations with NuPower Renewables, owned by Chanda Kochhar’s husband Deepak Kochhar.  

The enquiry will be headed by an “independent and credible person”, the bank said in a filing to the stock exchanges. The scope of the enquiry will be comprehensive and involve examination of facts as well as use of forensics and of statements of relevant persons. “The enquiry would also cover all connected matters in the course of the investigation to bring the matter to a final course,” it added. 

The bank’s board has mandated its audit committee to take further actions, including appointing the head of enquiry and determining the terms of reference of the enquiry. It will assist the head of enquiry with the required legal and professional support. 
 

ICICI Bank did not respond to Business Standard’s e-mail queries about the timeline for conducting the probe, name of the person heading the enquiry and the number of people to be involved in the process. 

The bank’s whistle-blower policy “encourages employees to report any breach of law, statute or regulation by the bank, issues related to accounting policies and procedures, acts resulting in financial or reputation loss and actual or suspected fraud and criminal offences,” according to its website.

Experts said the inquiry was the result of Sebi’s notice. 

“Sebi has already been investigating the issue and the bank has to give a proper response unlike earlier. Everybody has bits and pieces till now, hopefully this inquiry will help to fit the entire jigsaw puzzle. There is an atmosphere of uncertainty and doubt right now and this inquiry is good for all stakeholders,” said J N Gupta, managing director, Stakeholders Empowerment Services. He had earlier served as Sebi’s executive director.

“The inquiry should have been done long ago. This looks like a consequence of the Sebi notice, said M Damodaran, chairman, Excellence Enablers, Corporate Governance Advisors. He was former Sebi chairman. While Damodaran said that managing director and chief executive officer should step down while the investigations are going on, Shriram Subramanian, managing director, InGovern, said “it was not necessary since the allegations came from an outsider.” 

The inquiry should be truly ‘independent’ and needs to go beyond the boundaries of ICICI Bank’s dealings. Since the Central Bureau of Investigation (CBI) and Sebi were investigating the matter, the inquiry should be time bound, Subramanian added.

While the Videocon-NuPower deal is only in the limelight since the last few months, it was first brought to notice two years ago in 2016. In a letter addressed to Prime Minister Narendra Modi dated March 15, 2016, ICICI Bank and Videocon shareholder Arvind Gupta alleged that the bank extended loans to the Videocon group despite their “dubious track record of using fresh borrowings to service their mounting debts.” “A corrupt nexus between ICICI Bank’s chief Chanda Kochhar’s dealings with Videocon Group chief Venugopal Dhoot and his family is well established,” he added.

The CBI launched a preliminary investigation into the Rs 32.50 billion loan that ICICI Bank had extended to Videocon in 2012 and the possible role of Deepak Kochhar. Reports have alleged that Videocon Chairman Venugopal Dhoot invested Rs 640 million in NuPower Renewables.

ICICI Bank has denied any wrongdoing and said it was part of a consortium of lenders that extended the facility to Videocon. Earlier, the bank had clarified that none of investors of NuPower Renewables was a borrower of ICICI Bank.

ICICI Bank Chairman M K Sharma had said in March that the board had full confidence in Chanda Kochhar and ruled out any quid pro quo as alleged with regard to certain loan given to the Videocon group. The bank has started the search for a successor to Sharma whose term ends on June 30, 2018.

The board of the private lender has seen additions to the number of its independent directors lately. Early this month, the board appointed Radhakrishnan Nair as an additional (independent) director for five years. Nair, a commercial banker, has worked with two regulators, first in the capacity of executive director with Sebi and then as a full-time board member with the Insurance Regulatory and Development Authority of India. 

The bank also inducted MD Mallya, another commercial banker, as an independent director for a five-year term. Mallya has been the chairman and managing director of Bank of Baroda and Bank of Maharashtra, and had a three-year stint as an independent director on the board of State Bank of India, post retirement.  ICICI Bank’s shares closed at Rs 285.25 on the BSE, down 1.86 per cent from its previous close. The filing came after market hours.  

THE STORY SO FAR

• 2008: Chanda Kochhar's husband Deepak Kochhar and Videocon Chairman Venugopal Dhoot float NuPower Renewables
• ICICI Bank announces Chanda Kochhar would take over as MD and CEO next year
• 2012: ICICI Bank sanctions Rs 32.5 bn loan to Videocon group
• 2016: Arvind Gupta writes letter to PM on conflict of interest
• RBI finds no quid pro quo in Videocon-NuPower dealings 
• 2017: Videocon does not pay back Rs 28 bn out of the total loan taken; ICICI Bank declares it NPA
• 2018: CBI launches preliminary investigation into the matter
• Chanda Kochhar denies allegations, bank board backs MD
• Taxmen probe ICICI’s dealing in Videocon-NuPower issue  
• Sebi serves notice to ICICI, Chanda Kochhar