The board of India’s ICICI Bank Ltd., which less than two weeks earlier expressed full faith in Chief Executive Officer Chanda Kochhar, is divided over whether to ask her to step down as federal authorities investigate allegations of impropriety over loans made to Videocon group, people with knowledge of the matter said.
At least some outside directors are opposed to Kochhar continuing in her role, according to the people, who asked not to be identified as the information is not public. The board of India’s second-largest private sector bank may meet as early as this week to consider its next course of action, the people said. Kochhar’s current tenure as CEO is set to end on March 31, 2019.
ICICI’s board, which consists of 12 members, reviewed credit approval processes and found them to be robust, according to a March 28 filing. The board headed by Chairman M. K. Sharma said there was “no question” of any quid pro quo, nepotism or conflict of interest and expressed “full faith and confidence” in Kochhar, according to the filing.
There are six independent directors on the ICICI board, including the bank’s chairman as well as the head of state-owned Life Insurance Corp. of India, which owns about a 9.4 per cent stake, according to data compiled by Bloomberg. The board also includes a government nominee and five executive directors from ICICI.
India’s Central Bureau of Investigation recently started a so-called preliminary enquiry into an alleged nexus between Videocon Chairman Venugopal Dhoot and Kochhar’s husband, according to officials from the agency. A preliminary enquiry is the first step to assess allegations of wrongdoing.
“Your information is totally baseless and incorrect,” an ICICI spokesman said in an email when asked if some board members want Kochhar to step down.
ICICI shares were down 1.6 per cent at 9:56 a.m. Monday in Mumbai, set for the biggest drop in a week, after earlier declining as much as 2.2 per cent. The broader Bankex index of Indian lenders rose 0.5 per cent. ICICI has been the worst performer among private-sector peers on the 10-member gauge since May 2009, when Kochhar took over as CEO, and has a bad-loan ratio that’s one of the highest among its peers. Kochhar is on the bank’s credit committee that approves loans and reviews key borrower accounts.
“If the CEO has to step down, the shares might see a knee-jerk fall and then recover from there on,” said Gaurang Shah, head investment strategist at Geojit Financial Services Ltd. in Mumbai. “Allegations are regarding transactions which have happened in the past and the market has already priced in most of the risks that could come from it.”
Bloomberg News couldn’t reach Deepak Kochhar, Chanda’s husband, for comment through phone calls made to NuPower Renewables, where he is CEO and founder. Dhoot has denied any wrongdoing.