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ICICI’s Compromised Governance

India’s largest private sector bank ICICI, has been in the news, for serious charges of violation of standards of corporate governance and the grave instances of misconduct by Chanda Kochhar, its high profile CEO, presently under leave. The Bank’s governance and management is being probed by India’s top agencies and regulators, including the RBI, SEBI and CBI, in addition to an internal investigation being conducted by Justice B. N. Srikrishna. ICICI Bank needs to unearth the truth, amend its ways and redeem its stained public image. At the centre of these multiple probes are allegations that the Chanda Kochhar family benefitted because of loans given by ICICI Bank, to the Videocon and Essar Group companies, with footprints of a direct nexus between the loans given and funds received by NuPower, the company owned and promoted by Deepak Kochhar. The other charges under enquiry are those of manipulation of the financial statements of ICICI Bank, by under reporting its NPAs and of properties bought by the Kochhar family at discounted/concessional rates, in lieu of the loans given. The RBI, as also an internal audit committee of ICICI is extensively probing the grant of loans by the Bank and possibilities of similar misconduct therein, wherein internal procedures and due diligence was bypassed.

These grave lapses of ICICI Bank and the malpractices of its top management, have resulted in a huge reputational risk for it, which can be fatal to a banking institution. It is being questioned not just by its institutional shareholders for such mismanagement, but also by the SEC USA. A number of its FII shareholders have sold off their shareholding, not being satisfied with the manner in which the Bank has dealt with these allegations against it and its CEO. Take the case of the SEBI notice to ICICI Bank, on charges of conflict of interest of Chanda Kochhar not being reported by the Bank. Not only did the Bank seek multiple adjournments in the matter, but even its delayed response to SEBI merely said that the Bank did not report thereon, simply because it was not aware of it. That’s a reply without any hint of a regret or a mea culpa and seems to give a clean chit to its embattled CEO.

A similar poor corporate governance conduct by ICICI Bank was evident in the fact that instead of not letting Chanda Kocchar be reappointed as chairperson of its subsidiary ICICI Securities Ltd., it chose to ignore the widespread opposition to her appointment by the minority shareholders and simply bullied through her appointment with its brute shareholding majority. The Bank would have redeemed its image and started the process of repairing its reputation, if it had heeded to the desire of its minority shareholders and had refrained from her reappointment, until she received a clean chit from all the ongoing investigations against her, none of which is complete. The Bank should have waited for the multiple probes to be over, instead of reinstating her as the chairperson of ICICI Securities Ltd. In confirming her reappointment as chairperson of ICICI Securities, the Bank has lost an opportunity to redeem its image and has confirmed the reputation risk that it faces. It continues to raise questions on ICICI’s corporate governance standards and its compliance therewith.

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