Gold Silver Reports (GSR) – Finally, Chanda Kochhar Did What She Should Have Done Earlier — On 1 June, reacting to a Mint report that the independent directors of ICICI Bank Ltd asked managing director and chief executive officer (CEO) Chanda Kochhar to go on leave till a probe into her conduct by an independent agency is complete, the bank’s stock rose nearly 5%. The probe was announced following a whistleblower’s complaint on her alleged misconduct. After the bank denied the report and said she was on her planned annual leave, shares surrendered most of the gains.
On Monday, amid speculation on Sandeep Bakhshi, managing director and CEO of group company ICICI Prudential Life Insurance Ltd, taking over as interim boss of ICICI Bank, its stock rose by 4.07% even as the shares of its peers, Axis Bank Ltd, HDFC Bank Ltd and Kotak Mahindra Bank Ltd all declined.
Nothing else could better illustrate how the market perceives the developments in ICICI Bank. A late evening release by the bank said it appointed Bakhshi as wholetime director and chief operating officer (a new position that has been created) of ICICI Bank for five years, effective Tuesday or later, if the regulatory approval is delayed.
All business heads will report to Bakhshi, who, in turn, will report to Kochhar, who “has decided to go on leave till the completion of the enquiry”.
Indeed, Kochhar’s decision to go on leave is “in line with the highest levels of governance and corporate standards,” as the bank’s release says, but why did she take so long to decide on this? By delaying it inordinately, both Kochhar and the bank’s board pushed themselves into a corner and finally were left with no choice but to remind the world that they care for corporate governance.
Except for a brief appearance at a public function in Mumbai, in the past few months since the controversy flared up, Kochhar has focused on her daily chores with meticulous care and confidence until the day she went on leave. In her interaction with analysts, after announcing March quarter earnings, she gave a two-year guidance; it has been business as usual for her and ICICI Bank.
Four senior executives of ICICI Bank who have been on the board are N.S. Kannan, Vijay Chandok, Vishakha Mulye and Anup Bagchi. However, the choice for the COO’s job fell on Bakhshi (and Kannan is being shifted to ICICI Prudential), probably because he is seen as a leader who doesn’t believe in factionalism and can take the team along. Credited with taking the first Indian insurance company public, Bakhshi, 57, had recently been re-appointed as ICICI Prudential CEO for two years. He is as “cool as a cucumber” who cares for stability, says one of his colleagues.
Bakhshi cut his teeth in development banking with the erstwhile ICICI Ltd in 1986. He headed the group’s non-life insurance company ICICI Lombard General Insurance Co. Ltd for two years between March 2007 and April 2009 and became a deputy managing director and head of retail in the bank before shifting to the life insurance company in August 2010. With varied experience in project financing, risk management and corporate banking beside retail, he is perceived to be an institution builder.
Kochhar’s current term ends in March 2019. Will she come back and complete her term? Will the ICICI Bank board consider giving her another term? All these issues are in the realm of speculation at this point; we need to wait till the probe by retired Supreme Court justice B.N. Srikrishna is completed.
Even though the banking regulator Reserve Bank of India in 2016 did not find anything wrong in the bank’s lending to a particular group with which Kochhar’s husband has a business relationship, a string of probes is being conducted by multiple agencies, including the Central Bureau of Investigation (CBI), income tax department, and India’s capital market regulator. We need to wait till we hear from them.
Chanda Kochhar, MD & CEO and Rajiv Sabharwal, Executive Director interacting with the media on ‘Pockets’! pic.twitter.com/V00NdEJ0Lz
— ICICI Bank (@ICICIBank) February 10, 2015
One thing is for sure, if Kochhar does not continue beyond her current term, the bank will not look for an outsider to succeed her. Bakhshi fits the bill. If that happens, he will have at least one term as, typically, ICICI Bank bosses do not continue beyond the age of 62-63. Both N. Vaghul and K.V. Kamath, who had headed ICICI Bank before Kochhar, had stepped down in their early 60s.
By stepping aside and ensuring a truly independent probe, Kochhar has done the right thing. It would have been a great example of corporate governance had she done it much earlier. By doing it now, she gives the impression that it was not her choice—she has done it under pressure from the board which all along looked the other way. Anyway, better late than never.
A Timeline Of What Led To The Probe Against Chanda Kochhar
ICICI Bank Ltd. will conduct an independent probe into an anonymous whistleblower’s complaint against its Managing Director and Chief Executive Officer Chanda Kochhar, who has faced allegations of impropriety over loans to the Videocon Group.
The board’s audit committee will appoint an independent and credible outsider to head the investigation, according to an exchange filing . The committee will also provide necessary independent legal and professional support to the head of the investigation.
The complaint is in addition to a 2016 letter by investor Arvind Gupta, who had alleged that loans to the Videocon Group pointed to Kochhar’s conflict of interest since the appliance maker’s promoter Venugopal Dhoot had business dealings with her husband.
Here’s a timeline of events of what happened at ICICI Bank before it decided to initiate a probe:
October 2016: Investor’s Letter
Gupta, an investor in both ICICI Bank and Videocon Group, in an October 2016 blog posted a letter he had written to Prime Minister Narendra Modi, listing some issues in the way the bank had conducted itself. The letter, originally written in March 2016, alleged that Kochhar’s husband Deepak Kochhar had business relations with Dhoot, which could lead to a potential conflict of interest. ICICI Bank had approved a Rs 3,250 crore loan to Videocon Group as part of a consortium.
At the time, neither did ICICI Bank respond to the letter nor it did it conduct any public investigation.
The Reserve Bank of India probed the matter after the letter became public but didn’t find anything material against ICICI Bank’s management. The regulator then sent the matter to the Finance Ministry with a note saying that further investigations were needed.
March 2018: Social Media Buzz Around The Letter
Two years after the letter became public, there was a buzz on social media about a potential investigation against the head of two large private sector banks. News reports quoting unnamed government officials also started saying as much. While reports didn’t name the heads of the private sector banks, Kochhar was widely believed to be one of the two.
On March 28, the bank’s board released a statement to stock exchanges saying it didn’t find any issues with the way Kochhar had conducted herself in the Videocon Group case. The statement pointed out that the decision to lend to Videocon Group was taken at the consortium level. Even though Kochhar was part of the lending committee that approved the loan, she did not have any personal stake in it, the board’s statement said, fully backing the MD and CEO.
On March 29, the Indian Express reported details of many suspicious financial transactions between Deepak Kochhar’s NuPower Renewables Pvt Ltd. and many of Dhoot’s companies.
The same evening, ICICI Bank Chairman MK Sharma spoke to the press reiterating that the board didn’t find any impropriety on Kochhar’s or the lender’s part. Sharma said the bank had “satisfactorily replied to all regulatory questions”. That such communication was part of regular activity and also privileged information. He said the bank will not share any specific details regarding communication with regulators.
On March 31, the Central Bureau of Investigation filed an initial enquiry, which is typically a precursor to a full-fledged investigation. The investigative agency later also questioned Deepak Kochhar and his brother Rajiv Kochhar.
May 2018: Board Meet Didn’t Discuss Kochhar’s Fate
The ICICI Bank board met on May 7 to discuss the January-March quarter results. The expectation was that the government nominee, Lok Ranjan, would bring up the Videocon Group issue during the meet, be he didn’t attend the meeting.
The board also didn’t discuss the issue, Kochhar said in an interaction with the media after the results were announced. During the interaction, Kochhar said the board had already clarified what it had to and that she had nothing more to add. “Bank has supported all investigative authorities and co-operated with them in the past. ICICI Bank will continue to do so,” Kochhar told the press.
Later, it was reported that the Securities and Exchanges Bureau of India had sent a letter seeking clarification from the MD and CEO and also from the bank. The bank, in a May 25 statement to exchanges, confirmed that she had received a show-cause notice from the markets regulator for non-adherence to listing norms. The notice, the lender said, was based on information furnished by the bank and its officials in the Videocon Group loan case. – Neal Bhai Reports (NBR)
Post Updated: Tue, Jun 19 2018. 09:09 AM IST
