ICICI Bank defends its chief from conflict of interest allegations

ICICI Bank, India’s largest private-sector lender by assets, has defended its longstanding chief executive Chanda Kochhar after a newspaper investigation suggested possible conflicts of interest in relation to her husband’s business dealings.

The controversy comes as scrutiny of governance standards in India’s banking sector intensifies, after surging bad loans and an alleged $2bn fraud at Punjab National Bank.

An investigation by the Indian Express says that over five years from 2008, Ms Kochhar’s husband, Deepak Kochhar, undertook a series of transactions with Venugopal Dhoot, controlling shareholder of electronics group Videocon.

Mr Dhoot’s group in 2012 secured loans of $500m from ICICI Bank, and has been in default on repayments since last year.

Filings to India’s registrar of companies show that in December 2008, Mr Kochhar and Mr Dhoot established an energy company named NuPower Renewables. A month later, the Indian Express reported, Mr Dhoot sold his shares in NuPower to Mr Kochhar for about $4,000.

Public filings show that Supreme Energy, a company owned by Mr Dhoot, extended a $10m loan to NuPower through a convertible debenture, which was later converted into equity. According to the Indian Express, Supreme Energy then sold this stake to an associate of Mr Dhoot, who then sold it to a trust controlled by Mr Kochhar for about $1,500 between September 2012 and April 2013.

In April 2012, several Videocon companies had secured loans of $500m from ICICI Bank, as part of a $6bn borrowing programme from 20 banks, to fund an expansion into the oil and gas industry.

After earnings in its core electronics business failed to cover repayments on its dramatically expanded debt burden, Videocon last year became one of the largest Indian groups to be formally declared a non-performing account. The group still owes $438m to ICICI Bank, the bank said.

ICICI Bank described allegations of conflict of interest as “malicious and unfounded”. It said that the committee that approved the 2012 loan to Videocon was headed by the bank’s then-chairman, not by Ms Kochhar. It added that the terms of the loan were similar to those agreed by other lenders to Videocon and that ICICI Bank accounted for less than 10 per cent of the banking sector’s total exposure to the group.

Mr Dhoot told the Indian Express that he had no association with NuPower or Supreme Energy since selling his shares in both companies in January 2009, although the latter company named him as a director owning 99.9 per cent of its stock in its annual corporate filing in June 2010.​

Videocon said: “The contention of the said reports regarding chairman Mr Venugopal Dhoot is totally false and malicious.“

NuPower said: “There is no conflict of interest whatsoever and the above transactions have nothing to do with any loans processed by ICICI Bank.“

Mr Kochhar could not be reached for comment.

The controversy at ICICI Bank comes amid allegations bank executives have failed to apply strict standards in their corporate borrowing, leading to surging levels of defaults that threaten to undermine the sector’s lending capacity.

During Ms Kochhar’s nine-year tenure, ICICI Bank has become the private-sector bank worst affected by the problem, with a non-performing loan ratio of 7.8 per cent in December. This compares with 1.3 per cent for HDFC Bank, India’s most valuable lender by market capitalisation. However, the state-controlled banks — which account for more than two-thirds of Indian bank assets — are still worse hit, with an average non-performing loan ratio of 13 per cent in December, according to Credit Suisse.

This article has been updated to amend the sum for which a trust controlled by Mr Kochhar paid for NuPower shares