In the last one month, the ICICI Bank Ltd stock has had a hard time. The erosion was triggered by allegations of misconduct against its chief executive officer Chanda Kochhar, accusing her of nepotism and misuse of her position in the bank.

The allegations are by now well known. The developments since the allegations came to light have not been in favour of the bank. Kochhar’s relatives are being questioned by the Central Board of Investigation, and other agencies have also jumped into the fray.

In question is her presence in the credit committee that decided on loans to the Videocon group given the potential conflict of interest. Also in question is whether the board was aware of it.

The board led by chairman M.K Sharma gave a clean chit to Kochhar and put its weight behind her without any reservations. It was intended to demonstrate that the CEO enjoys the full faith of the group of people that appointed her. But it was also too hasty a decision.

A board of a company is expected to be independent of the stakeholders and the management. By giving Kochhar a clean chit without giving clarity or full disclosure on the allegations, the board has made itself look weak.

What the ICICI Bank board has done is undermine its own independence in the eyes of stakeholders. It hasn’t given clear reasons for its unwavering support to Ms Kochhar. and the potential conflict of interest involved in the Videocon-Kochhar relationship. There are scores of unanswered questions and investors have had to rely on third- party resources to get clarity. All this adds to the cloud of uncertainty hanging over the bank’s corporate governance practices, a cloud the board must dispel.

Transparency and detailed disclosures should have been the priority of the board and it owes them to the investors. “In view of the controversy surrounding potential conflicts of interest, the ICICI Bank board must take concrete steps to dispel the doubts in the minds of investors," said Jayant Thakur, an independent consultant.

At stake is the bank’s reputation. The board of ICICI Bank must now make amends by instituting an independent enquiry to repair the damage done to the reputation of the bank.

For the future, a rule that all directors and top officials of banks must disclose their dealings and their relatives’ dealings with firms financed by the bank in the annual report would be a step forward.