It is improper that ICICI bank’s CEO, Chanda Kochhar, should remain in office even after the Board of Directors has instituted an “independent enquiry” into allegations of impropriety against her. In April, the board gave a clean chit to Kochhar and ruled out any quid pro quo in ICICI’s Rs 3,250 crore loan to the Videocon group — now an NPA — after an investigation by this newspaper revealed that Videocon’s chairman had significant commercial dealings with a firm operated by Kochhar’s spouse.
But the board has decided to call for a fresh investigation after an anonymous whistleblower alleged “conflict of interest”, “non adherence to rules”, and “quid pro quo” by Kochhar while dealing with “certain customers of the bank”. The probe will be headed by an “independent and credible person and it will bring the matter to a final close,” the board has stressed. But given that Kochhar will continue to be at the helm and the items under scrutiny, including “e-mails and statements of relevant personnel” would remain under her charge, serious questions are bound to be raised over the probe’s fairness. The CBI has initiated an enquiry against ICICI while other agencies, including the Enforcement Directorate, have also opened investigations against the bank. Last month, the global rating agency, Fitch, said that the allegation against Kochhar raises questions over the “lender’s governance and creates reputational risks”. On May 24, the Securities and Exchange Board (SEBI) issued a show cause notice to ICICI for alleged violation of disclosure requirements under the securities law in the case involving the Videocon group. SEBI has observed that the bank did not disclose the allegations against its CEO to the stock exchanges.
ICICI’s troubles owe as much to the aspersions cast on its top official as to its board’s handling of the crisis. For over a month, it insisted that all was kosher with the Videocon loans and reposed confidence in Kochhar. In doing so, the board blinkered itself to a fundamental tenet of the banking system: A questioning of the process of loan disbursal to one group is bound to raise doubts on the integrity of the sanctioning process itself. In fact, the Fitch report flagged this issue when it warned that the CBI probe could undermine investor confidence. The board also chose to close its eyes to another banking axiom: Investor trust holds the key to the system. The inquiry against Kochhar is only a partial corrective. But to be seen to be serious about getting to the bottom of the issue, the board must ask her to step down.