Letter to BS: ICICI Bank is under a cloud on account of CBI investigation

The Reserve Bank of India (RBI) has done the right thing by not extending the tenure of the Axis Bank CEO on account of the considerable increase in the non-performing assets (NPAs) in 2015-16 and 2016-17 and under-reporting them. Meanwhile, ICICI Bank is under a cloud on account of the CBI investigation into the loan to Videocon and the Videocon-NuPower relationship. The stock prices of ICICI Bank have fallen sharply, and rating company Fitch has expressed concerns about the impact of the investigations on the bank’s reputation. Some board members have sought a meeting with the top brass of ICICI Bank. Depositors are getting worried as to where this situation is headed and its likely impact on financials of the bank. This situation needs to be tackled quickly. It can’t be allowed to drag on and damage the reputation of the bank, adversely impacting the depositors whose interests need to be protected along with those of the shareholders and other stakeholders.

The problem for ICICI Bank couldn’t have come at a worse time. The public sector banks (PSBs) are facing huge NPAs and low profits/losses. A major PSB is mired in a huge fraud and two major private banks are under a cloud. If this scenario lingers on (pending conclusion of investigations) bank depositors may start having doubts about the integrity of governance processes in banks specifically and the financial system in general. The RBI must step in and direct the CEO of ICICI Bank to step down. Also, the central bank needs to look at the constitution of the board of the bank which reposed its unqualified confidence in the CEO. A new CEO and a reconstituted board should take appropriate measures quickly to restore the confidence of depositors and other stakeholders.

Arun Pasricha   New Delhi

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