With the board of ICICI Bank deciding on an inquiry into the allegations raised by a new whistleblower against its CEO Chanda Kochhar, calls for her exit have resurfaced.
Similar instance in the past
Bankers and analysts drew parallels to a 2001 case when P.J. Nayak, who was chairman of UTI Bank, went on leave after a draft report of the Joint Parliamentary Committee (JPC) said he stood to gain from his bank’s failed merger with Global Trust Bank (GTB). The committee was set up following the surfacing of scam that involved Ketan Parekh who was charged for rigging the share price of GTB ahead of the merger. Nayak had asked the board to allow him to go on leave while the board conducted an independent inquiry into the matter. He was later reinstated after the inquiry revealed no evidence of wrongdoing. The final report of the JPC also had no mention of Nayak’s involvement in the scam.
Proxy shareholders believe following Nayak’s example could help Chanda set a high standard of corporate governance. However, it could also set a wrong precedent for other corporates.
What is at stake in ICICI bank?
“Like similar previous instances in cases of other banks, if Kochhar goes on a leave until the inquiry is completed, it may send out a positive signal to the stakeholders as it will be seen as a sacrifice by her to preserve her reputation. But on the flip side, such a leave or resignation by a bank’s chief after an anonymous complaint may often create a damaging situation for the bank because if the probe finds any guilt, people may see the bank’s overall policy itself to be flawed.
What is the issue?
Kochhar has been in the eye of the storm over the granting of a Rs3,250 crore consortium loan to Videocon group companies given that her husband had business dealings with the Venugopal Dhoot-led conglomerate. On 29 March, M.K. Sharma, chairman of ICICI Bank, said there is “no conflict of interest as Videocon group is not an investor in NuPower Renewables.” However, markets regulator Securities and Exchange Board of India (Sebi) has sent notices to the bank and Kochhar for non-disclosure of information in the matter.
How the bank decided to conduct independent inquiry?
The bank’s decision to conduct an independent inquiry comes after a second complaint was raised by a whistleblower in addition to the 2016 letter by investor Arvind Gupta, who had alleged that loans to Videocon Group pointed to Kochhar’s conflict of interest.
(Adapted from Livemint)