India’s ICICI announces investigation of chief executive

ICICI Bank, India’s second-largest private sector lender by assets, has announced an independent inquiry into conflict-of-interest allegations against its chief executive.

In a stock exchange announcement, ICICI said that “an independent and credible person” would lead the probe into the claims against Chanda Kochhar, who has led the bank since 2009.

The bank said the investigation would look into an anonymous whistleblower’s complaint that Ms Kochhar did not adhere to rules relating to conflicts of interest and that she had engaged in “quid pro quo in the course of her work in dealing with certain customers/borrowers of the bank”.

Ms Kochhar declined to comment.

The statement did not give further details of the allegations. However, ICICI’s board had been under criticism for its staunch defence of Ms Kochhar after allegations against her came into the media spotlight in recent weeks — a new blow to a banking sector dogged by non-performing corporate loans. 

On March 29, the Indian Express published an account of dealings starting from late 2008 between Ms Kochhar’s husband, Deepak Kochhar, and Venugopal Dhoot, head of the conglomerate Videocon — which later secured, and defaulted on, Rs32.5bn ($500m) of loans from ICICI. India’s Central Bureau of Investigation has since launched a probe into the matter.

Public records show that Mr Kochhar and Mr Dhoot in December 2008 established an energy company named NuPower Renewables, from which Mr Dhoot resigned after a month.

Supreme Energy, a company owned by Mr Dhoot, later extended a $10m convertible loan to NuPower. Mr Dhoot went on to sell his 99.9 per cent stake in Supreme Energy to another director, who in turn sold it to a trust controlled by Mr Kochhar for just Rs99,900 ($1,500).

Arvind Gupta, a shareholder advocate who flagged the transactions to Indian authorities in 2016, said the string of transactions amounted to a deliberate transfer of wealth from Mr Dhoot to Mr Kochhar.

NuPower, where Mr Kochhar remains the managing director, said that the latter transaction was made at fair market value. Mr Dhoot told the Indian Express that he no longer owned Supreme Energy when the loan to NuPower was made in early 2010, although public filings show that he sold his shares in November that year.

In April 2012, several Videocon companies secured the loans worth $500m from ICICI to fund an expansion into the oil and gas industry — most of which is now part of the bank’s hefty portfolio of non-performing debt. ICICI has since said that these loans were made as part of a 20-bank consortium.

Despite the promised inquiry, ICICI’s board may now struggle to regain investor confidence after its initial firm defence of Ms Kochhar, said Shriram Subramanian, head of InGovern, a shareholder advisory firm. “They rushed into it and didn’t seem to have any justification for doing so,” he said.

ICICI declined to comment.

ICICI Bank has been the worst affected of Indian private-sector lenders by a rising volume of corporate loan defaults in recent years. Earlier this month it reported a 50 per cent drop in profit for the first quarter of the year and an increase in its bad loan ratio to 8.8 per cent.