Can Chanda Kochhar come out of conflict of interest?

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Though ICICI Bank chairman MK Sharma has given a clean chit to the Managing Director and Chief Executive Officer of bank, Chanda Kochhar, in allegations of impropriety against her in Videocon loan case, would she be able to come out of it? What compounds her problems is that the CBI and SEBI are going ahead to probe the alleged nexus between husband of Chanda Kochhar and Videocon chairman Venugopal Dhoot.

Not only that the CBI has arrested Chanda Kochhar’s brother-in-law Rajiv Kochhar and stopped him from boarding a flight from Mumbai to Singapore, he was picked up by Central Bureau of Investigation sleuths and taken to an undisclosed destination for questioning.

According to sources, a lookout circular had been issued against Rajiv and other members of the Kochhar family so that none of them could leave the country. The CBI has filed for a preliminary enquiry against Chanda Kochhar, her husband Deepak and brother-in-law Rajiv and others as part of a probe into the 3,250-crore loan issued to the Videocon group in 2012. The preliminary enquiry comes after reports alleged that financial dealings of Deepak’s companies coincided with the big loans made by ICICI Bank to Videocon. Rajiv, who runs a firm, Avista Advisory, in Singapore is reported to have business dealings with several companies that had borrowed money from ICICI Bank but are now facing bankruptcy.

Surprisingly, the bank board has expressed full faith in its MD and CEO, Chanda Kochhar apparently because of her long association with the ICICI Group. Her association with ICICI dates back to 1984, when she joined as a management trainee at Industrial Credit and Investment Corporation of India Limited (ICICI), which later became ICICI Bank Limited. One of her biggest achievements was to oversee the establishment of the bank’s retail franchise. In 2000, Kochhar’s predecessor K.V. Kamath asked her to build the bank’s retail business from scratch. Between then and her taking over as CEO in May 2009, the share of retail loans in the book grew to nearly over 54 per cent. Chanda Kocchar, who won the Padma Bhushan award in 2011, is also known for leading other initiatives such as adopting 600 villages and providing them a digital ecosystem. She is also known for speaking about gender issues and talked about how ICICI has fostered a culture of gender equality. A graduate of the Jamnalal Bajaj Institute of Management Studies, then Chanda Advani met her husband Deepak Kochhar there.

It was not an easy task to fit into the big shoes of Kamath but she did that quite effortlessly. The ICICI Bank is the second largest new generation bank in the country and a thorough probe is called for into the alleged “quid pro quo” by independent agencies to get to the whole truth. The allegation that Kochhar’s husband, Deepak Kochhar gained undue favours from industrialist Venugopal Dhoot after the bank approved a loan of over 3,000 crore six years ago, needs to be investigated. The Videocon account is now a Non Performing Asset (NPA) and it arouses huge suspicion.

Crux of the issue

Ironically Chanda Kochhar waded through range of issues but the problem of bad loans stuck and these have jumped from 9416 crore in June 2009 to 46,039 crore in December 2017. Proportionately, the gross NPA ratio went up from 4.63 per cent in June 2009 quarter to 7.82 per cent by December 2017 quarter. With the ICICI Bank embroiled in a controversy over alleged conflict of interest involving its CEO Chanda Kochhar, market regulator SEBI has begun looking into the matter for any possible disclosure and corporate governance-related lapses. The CBI has by now examined some officials of ICICI Bank in connection with a preliminary enquiry involving the husband of Chanda Kochhar, and the Videocon Group, pertaining to a loan 3,250 crore extended to the latter.

Deepak Kochhar and Videocon have been mentioned in the preliminary enquiry by the CBI. The agency may convert the preliminary enquiry into a regular FIR after determining that there is prima facie a case pertaining to the allegations. Similarly, if there is not enough evidence than the preliminary enquiry can be closed by the agency.

There are reports alleging that Videocon’s Dhoot had through another entity Supreme Energy made investments in Deepak Kochhar’s firm. According to the CBI, the preliminary enquiry has begun into an alleged link between the loan extended to Venugopal Dhoot’s Videocon group and funding of the NuPower Renewables, a company founded by Deepak Kochhar and others.

The 3,250 crore was part of a loan of about 40,000 crore that the Videocon Group had received from a consortium of 20 banks led by the State Bank of India. While the current outstanding of the group against ICICI Bank loan stands at 2,849 crore, the specific account was declared non-performing asset last year. NuPower Renewables was incorporated in December 2008 by Deepak Kochhar, Dhoot and others and Dhoot later resigned as director in January 2009 and sold all his shares. It allegedly received 64 crore through Supreme Energy, which was later allegedly taken over by a trust, in which Deepak Kochhar was the managing trustee.

Support for Chanda Kochhar
Venugopal Dhoot, Chairman of Videocon Industries, who is in the eyes of storm has come out in support of Chanda Kochhar saying that “the ICICI Bank has already clarified that I have not been given any favour as I have not received a loan from ICICI alone — Videocon Industries took loans from a consortium led by the State Bank of India.This was done after a high degree of credit appraisal by the bankers as they found Videocon to be a very lucrative investment because of its oil assets. When the matter came to the ICICI Bank Board, Chanda Kochhar was not the Chairperson but one of the members of the committee.

Till the time the matter comes to the Board, Chanda Kochhar did not know which proposal was coming so she could not have influenced it. I have not invested 64 crore in NuPower nor issued any money to Deepak Kochhar. Then where is the question of any quid pro quo? The ICICI Bank board has also come out in strong support of Chanda Kochhar. In a statement, the ICICI Bank said that “ICICI Bank was not the lead bank for this consortium and the bank only sanctioned its share of facilities aggregating approximately 3, 250 crore which was less than 10 per cent of the total consortium facility in April 2012.”

Stating that there was no conflict of interest involved, the bank said none of the NuPower Renewables investors were its borrowers. It said Chanda Kochhar had made all necessary disclosures to the board in advance as per the regulatory guidelines. In view of support pouring in for Chanda Kochhar it seems that only a thorough probe by the Central agency would uncover the mystery of conflict of interest.