The reaction of the ICICI Bank Ltd’s stock doesn’t seem to reflect much confidence that the lender’s troubles are behind it, even after chief executive Chanda Kochhar goes on leave pending the inquiry against her. The stock hasn’t gone anywhere near its recent high of around 310 seen in mid-May.

There’s no question that the new chief operating officer Sandeep Bakhshi is a good choice. For all practical purposes, Bakshi will run the show now. Transition will be smooth because he is an insider. Before going to the life insurance business, Bakhshi had put in nearly two decades into the bank at various verticals. Under him, ICICI Prudential Life Insurance has gone from strength to strength. Even the general insurance business did well under Bakhshi. But that is all the good news there is.

The trouble is that confidence in the ICICI Bank board has been shaken. Its behaviour during the Chanda Kochhar controversy has been little short of craven. Rather than defending the interests of shareholders, it has rushed to exonerate the CEO. It has dragged its feet in ordering an inquiry.

Analysts and proxy advisory firms are already making light of the change of guard. Some foreign investors have already fled worrying about the governance, as a Mint story pointed out.

There are several uncertainties that continue to dog ICICI Bank. One, even if the inquiry exonerates Kochhar, the cloud will continue to hover over the bank till the investigative agencies arrive at a conclusion. Two, are the exposes that have come out so far all there is to the matter, or are their more skeletons in the cupboard? The question that is being asked is whether the bank’s lending practices are kosher. Three, the consequences of losing trust in the bank’s board can be far-reaching. The bank needs to think up strategies to restore the confidence of investors and frequent, transparent and timely communication of the measures it is taking to do so is essential.

As this column had pointed out earlier, investors seek closure, which remains elusive.

There is one other important question: what does the ICICI Bank events say about governance in Indian corporates? The fact that corporate governance standards at the board of the country’s third largest lender are so shoddy doesn’t look too good for other private corporations. While there has been much criticism of company promoters stuffing boards with their cronies, the ICICI Bank controversy lays bare the deficiencies in the boards of professionally managed companies.

In seven weeks, shareholders of ICICI Bank will get the chance to question about the sloppy way its board has handled the situation at the bank’s annual general meeting on 10 August. But they cannot vote for her ouster at the AGM. A vote against Kochhar’s reappointment or for her removal will need a requisition of extraordinary general meeting which only investors holding more than 10% in the bank can do.

Halftimes for the losing teams are a time to find their mojo back. But the dismal way in which the ICICI Bank board played in the first half doesn’t augur too well for the second half of this match.

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