Mumbai: ICICI Bank’s managing director and chief executive officer (CEO), Chanda Kochhar, came out of an enforced indefinite leave on Thursday to quit the country’s third-largest lender by assets, amid allegations of loans for favours and conflict of interest.

The announcement by ICICI Bank on Thursday afternoon drove the bank’s stock higher by 5.8% to 320.90. Following a board meeting on Thursday, ICICI Bank said its board had accepted Kochhar’s resignation with immediate effect and had named Sandeep Bakhshi, who has been serving as the bank’s chief operating officer over the past four months, as the new managing director and CEO for a term of five years.

Kochhar’s resignation brought the curtains down on a tumultuous career that began in the same institution in 1984 as a trainee. She grew through the ranks and eventually, in 2009, stepped into the large shoes of her predecessor K.V. Kamath, who had aggressively converted a development financial institution focused on long-term lending into a consumer-focused commercial bank.

As part of Kamath’s dream team, Kochhar was rotated through multiple critical roles, including as head of retail banking and the bank’s chief financial officer.

In 1993, after the financial institution got the central bank’s approval to convert into a new-generation private bank, Kochhar was on the front lines, recruiting from 40 different organizations, selecting a core banking software platform and even designing the bank’s first cheque books.

In 2000, Kamath enlisted Kochhar to build the bank’s retail business from scratch. At that time, she was overseeing the bank’s corporate business, which accounted for about 50% of the institution’s balance sheet; but in six years, Kochhar ramped up the retail business to about 67% of the bank’s balance sheet.

Kamath worked assiduously to add size and heft to the bank. This journey was fraught with numerous potholes, including multiple runs on the bank, thereby affording Kochhar invaluable experience in not only managing crises but also in acquiring a competitive gene. This must have come in handy when staving off competition from numerous compatriots after Kamath retired: she prevailed over her senior Shikha Sharma (who thereafter moved to Axis Bank as CEO and MD) to occupy the bank’s corner office.

After taking over as ICICI Bank’s MD and CEO, Kochhar’s first task was to shrink the balance sheet, which was suspected of harbouring inconspicuous non-performing assets, growing against the backdrop of an unprecedented global credit crunch. Her list of priorities included improving the share of low-cost current-account-savings-account deposits as part of the total deposits (26% then), as well as credit quality and capital conservation.

Her tenure has not been without controversy: while ICICI Bank’s net profit improved from 878 crore in June 2009 to 1,650 crore in December 2017, bad loans ballooned from 9,416 crore to 46,038 crore during the same period.

Kochhar has been in the eye of a storm since the Serious Fraud Investigation Office summoned her in March 2018 in connection with loans extended to fugitive Mehul Choksi’s Gitanjali Group.

Later, on 20 March, a whistle-blower complained against the bank and its top management, including Kochhar, alleging a deliberate delay in recognizing impairment in 31 loan accounts between fiscal 2008 and March 2016 to save on provisioning costs and inflate profits by $1.3 billion over eight years. Mint reported this first on 25 June.

But the decisive blow was delivered by allegations of granting loans to the Videocon Group as a quid pro quo for the business group’s dealings with her husband Deepak Kochhar. On 12 April, the Securities and Exchange Board of India began a probe into alleged corporate governance lapses at the bank and failure to make adequate disclosures about the bank’s loan to Videocon Group.

On 2 June, Mint was the first to report that Kochhar had been asked to proceed on indefinite leave until an independent enquiry to probe the alleged cases of impropriety could be concluded.

The bank’s board has appointed retired Supreme Court judge B.N. Srikrishna to look into the allegations. The independent probe is likely to be completed before December.

“The enquiry instituted by the board will remain unaffected by this (Kochhar’s resignation) and certain benefits will be subject to the outcome," the bank said in a statement after a board meeting on Thursday.

Kochhar, 56, will also be stepping down from the boards of all ICICI Bank subsidiaries, the bank said in its exchange filing. Kochhar’s term was supposed to end in March 2019.

“The board of directors of ICICI Bank accepted the request of Chanda Kochhar to seek early retirement from the bank at the earliest… Kochhar will also relinquish office from the board of directors of the bank’s subsidiaries," said the bank.

M.D. Mallya, one of the independent directors of the bank, also resigned from the board on Thursday, citing health reasons, the bank said.

Bakhshi will lead ICICI Bank till 3 October 2023, subject to regulatory approval, while other conditions of his appointment remain unchanged, the bank said.

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