Videocon loan case: Embattled ICICI board plans investor outreach
Mumbai: ICICI Bank Ltd’s board is preparing a plan that includes more public disclosures related to conflict-of-interest allegations against its chief executive Chanda Kochhar with the objective of allaying the growing concerns of its shareholders and restoring their confidence in the bank.
The board plans to look afresh at disclosures that the bank has already made after its initial statement failed to assuage shareholders’ concerns, a person directly aware of the development said, without giving more details.
The plan appears to be an attempt to respond to shareholders who are demanding that the board, led by chairman M.K. Sharma, explain why it has given Kochhar a clean chit without first ordering an independent probe.
On 28 March, the ICICI Bank board issued a statement reposing its confidence in the corporate governance of the lender and the integrity of Kochhar.
ICICI’s board was aware of a 2016 Reserve Bank of India (RBI) probe on this issue and considered that information before giving Kocchar a clean chit, added this person, speaking on condition of anonymity. RBI had initiated the probe after a whistle-blower alleged conflict of interest, said this person.
The board’s efforts come at a time when markets regulator Securities and Exchange Board of India (Sebi) has begun a preliminary enquiry into the alleged corporate governance lapses at the bank.
Sebi is looking at three angles: whether there were any disclosure lapses on the bank’s part; the board’s role in decisions regarding loans given to the Videocon group; and independent directors’ view on the alleged conflict of interest, said another person aware of the matter, requesting anonymity.
Kochhar has been in the eye of a storm over the granting of a Rs3,250 crore loan to Videocon group companies because her husband had business dealings with the Venugopal Dhoot-led conglomerate.
Sebi has so far sent routine queries to the bank and no specific queries have been sent on the above mentioned lines, said a third person familiar with the matter, also on condition of anonymity.
An email sent to a Sebi spokesperson was not answered till press time.
“Clarifications have been provided to Sebi with regard to the reports that have appeared in media,” said an ICICI Bank spokesperson.
He added that Sebi has not asked the bank about the specific details mentioned in Mint’s queries.
“Sebi can examine the issue in terms of whether the bank has been making adequate disclosures in consonance with the listing agreement,” said J.N. Gupta, co-founder and managing director of Stakeholders Empowerment Services.
Even so, the market regulator’s probe will be hobbled by the fact that the said transactions happened in 2012, when neither the Companies Act nor Sebi norms defined Related Party Transactions (RPT).
“One of the allegations against the bank is restructuring Videocon loans through a firm which appears to be a related party. But in 2012, RPT was not defined. But there was a concept of person of interest (to the company management),” said the third person cited above.
The Economic Times reported on Thursday that in 2016, RBI had found no evidence of reciprocal benefit, stating the allegation “could not be conclusively established”. The newspaper, however, reported that RBI had raised some “red flags” such as some NuPower Renewables investments coming from a Mauritius-based entity and ICICI Bank not declaring three firms that had dealings with NuPower as related parties.
“The RBI probe did not reveal any such flow of money from the bank to NuPower (the company owned by Deepak Kochhar, husband of Chanda Kochhar) which could indicate any mala fide transaction by any employee of the bank. The RBI report said disclosures were followed. The board was aware of it and after considering the information, the board supported the bank’s head and its management. The facts in the report of RBI were stated so clearly that the board never felt the need to do any additional independent inquiry after that,” added the first person cited earlier.
“She (Chanda Kochhar) made all the disclosures about her relations, so all the things coming in the media reports now were already known to the board and after seeing all the disclosures, the board was not required to conduct any further inquiry,” added this person.
The board is scheduled to meet on 7 May to consider its annual financial results.
“If Chanda Kochhar quits at this moment amid the ongoing market sentiment, it can be destabilizing for the bank and the stock, making people feel that she is guilty of something, when the fact is that she is not guilty or hiding anything. Let the authorities like CBI and RBI carry out their duties and when such authorities are conducting their studies, we don’t think any additional independent inquiry by any agency is required,” added this person.
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