Mumbai: With the US Securities and Exchange Commission (SEC) intensifying its probe into ICICI Bank Ltd, India’s second largest private lender is reviewing all loans disbursed over the past five years to overhaul processes, plug loopholes and prepare reports to address regulatory inquiries, if any. The bank’s compliance division, risk management department and the arm that manages non-performing assets (NPAs) asked its main loans divisions last week to provide valuations of the securities (on loans that turned bad) over the past five years, three people directly aware of the latest review and the bank’s plans said, requesting anonymity.
Under the newly appointed chief operating officer Sandeep Bakhshi, ICICI Bank is trying to review and overhaul the credit disbursal processes to avoid controversies such as those surrounding its chief executive Chanda Kochhar, who is now on indefinite leave. Kochhar’s leadership came under a cloud because of allegations of a conflict of interest over loans made to Videocon Group, whose chairman had business links with her husband Deepak Kochhar.
In the past two weeks, ICICI Bank’s loan divisions were also asked to prepare exhaustive reports on the trend in valuation of securities to check if valuations were inflated, one of the three people said.
An email sent to ICICI Bank on Friday remained unanswered.
The loans divisions were also asked to seek details of the officials who valued the loan assets; the officials who approved the appointment of valuers; the credentials of the valuers and the fees paid to them and so on, the first person said.
The officials concerned were given tight deadlines to submit all the data for five years to the respective heads of the risk management department, compliance department and the performance, information and value management group (PIVG) that manages NPAs, this person said.
Officials with risk management and the PIVG departments were given a deadline of three days that ended last week, said the second person.
“After the recent board-level changes, the top management is planning to review the credit disbursal processes followed by the bank so far and take corrective actions. The exercise was initiated following the regulatory probes into the bank’s dealings," the second person said. “The objective is to avoid future controversies regarding the bank’s loan disbursal processes and strengthen corporate governance practices."
On 26 July, Mint reported that the US Securities and Exchange Commission (SEC) has intensified its investigation into alleged wrongdoings with regard to loan disbursal by ICICI Bank.
US SEC’s probe has gathered momentum after a whistleblower complained to the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) that ICICI Bank unfairly serviced at least 31 doubtful loans in order to delay provisioning and inflate profits between 2008 and 2016.
Referring to a Mint report on the US regulator’s ongoing probe, ICICI Bank in a US SEC filing on Saturday (India time), said: “The bank has been responding to requests for information from the SEC investigatory staff regarding an enquiry relating to the timing and amount of the bank’s loan impairment provisions taken under US GAAP (generally accepted accounting principles). The bank evaluates loans for impairment under US GAAP for the purpose of preparing the annual footnote reconciling the bank’s Indian GAAP financial statements to US GAAP. The bank has voluntarily complied with all requests of the US SEC investigatory staff for information and interviews related to the bank’s US GAAP loan impairment process."