Mrs Chanda Kochhar, ethics and conflict of interest

 The question of ‘Conflict of Interest’ and ethics

Mrs. Chanda Kochhar, ex-MD & CEO, ICICI Bank, and her husband Mr. Deepak Kochhar are being tried in a case involving Videocon and group of companies, on corruption charges. It was in the news again, recently, as they were arrested and released. When the issue was at its peak ( in March - April 2018), I wrote to RBI, ICICI Bank and Mrs. Chanda Kochhar herself on 26th April 2018 to come out transparently on the issue. Of course, I received no response, . Interestingly, after defending their then MD & CEO to the hilt at that pointvof time, ICICI Bank not only distanced itself, but terminated her services also. Thought, I will share my letter to Mrs. Chanda Kochhar in my blog, without in any way trying to demean her. Even today, she is only alleged to have committed the irregularities; let the truth, for or against, finally prevail. 

Quote:

"Madam

The question of ‘Conflict of Interest’ and ethics

At the Outset, I have watched your elevation from time to time with admiration and always felt that you, along with some of the most powerful women in India, provide the beacon of light to the millions of Indian Women. The recent events appearing in the media gives me concern that the reputation built by you over the years is reaching the Danger Zone.  For thousands of youngsters, male members included, who aspire to “think and achieve big in life’, you have been the role model. It is right time for you to come out with a statement that morally you have not committed anything wrong. With the above brief, I present before you what I understood about the whole event.

Defence of ICICI

The Board of Directors of ICICI Bank met on 28th March 2018 and declared that their CEO had no conflict of interest in sanction of facilities to Videocon Group. The present Non-Executive Chairman Shri M.K.Sharma again met the Press on 5th April 2018 to reiterate the same points and assert that the Board has full faith in their MD & CEO Smt. Chanda Kochhar. Founder and ex-Chairman of ICICI Bank Shri N. Vaghul was more than eloquent in defending Smt. Kochhar in his interview with the Television Channels. The arguments were

·         ICICI Bank was part of the Consortium of 12 Banks and FIs led by SBI, which sanctioned the facilities to Videocon Group for implementing the Debt Consolidation Programme and the Group’s Oil & Gas expenditure Programme aggregating Rs.40,000 Crores.

·         The Bank appraised the loan facilities after receipt of the Information Memorandum and other details from the lead Bank SBI

·         Terms and Conditions stipulated by the Bank were similar to the ones stipulated by the other Consortium Banks.

·         The Committee included independent and working directors with the Non-Executive Chairman as the Chairperson.

·         The Loan amount was credited to the common escrow account maintained with the Lead Bank

·         Shri Vaghul, the Founder Chairman on his part said the relationship with Videocon Group started in 1985. The Participation in 2012 was no more than the actual exposure of ICICI at that point of time.

One infers from the above arguments that the loans sanctioned by ICICI Bank in 2012 was akin to a refinance (not renewal) of the aggregate outstanding at that point of time, but with different terms and conditions like tenor, repayment, moratorium, rate of interest etc. The crux of the argument is that since (i) the Group was already an existing borrower, (ii) there was no increase in the aggregate outstanding (not the limits) post-sanction and (iii) the Sanction Committee was not headed by Smt. Chanda Kochhar, there was no ‘conflict of interest’ on her part. 

My impressions:

Is it acceptable? It is customary and practice in Banks that the family members of a Supervising Official do not enter into business deals with borrowers for whom the limits were considered by the Supervising Official concerned. In case of any deviation, the Supervisory Official is duty bound to get the approval or keep the next higher authority duly appraised in the matter.  This is applicable in respect of credit officer, branch manager & higher ups who do not sit in the Board. In respect of Executives, who are Directors in the Board, the related transaction/business details shall be brought out in the credit proposal itself and to participate/recuse oneself from the meeting is left to the individual and Chairman of the Board. 

Videocon is banking with ICICI since 1985 as per the statement of Shri Vaghul, the ex-Chairman. Smt. Kochhar, who joined ICICI Bank in 1984, went up the ladder in ICICI Bank and became the Executive Director in 2001 and held the position of CFO and JMD, before becoming the MD & CEO in 2009. As per the complaint of Shri Arvind Gupta in March 2016, the JV business enterprise NuPower Renewables Pvt. Ltd. between Shri Deepak Kochhar and the directors of Videocon Group was incorporated in December 2008. The transactions funding the NuPower Renewables happened in 2009-10. In the last six years, the advisory firm Avitsa Advisory of Shri Rajiv Kochhar was involved in the restructuring exercise of loans given to seven major borrowers. ICICI Bank had exposure in these accounts and was the lead Bank in one of them. If the business deal and transactions mentioned in the complaint by Shri Gupta are true, to maintain the highest Corporate Governance Standards, Smt. Kochhar should have apprised the Board at least on three occasions.


  1. In Dec 2008, when the JV between the borrower Group and her husband was commenced as she was the CFO & JMD at that point of time.
  2. In March 2012, when the Debt Consolidation proposal of Videocon Group was put up to the Board for sanction
  3. Her relationship with Shri Rajiv Kochhar, if ICICI had any role in awarding the restructure exercise of the loan facilities of seven major companies to Avista Advisory of Shri Rajiv Kochhar. 

My Submissions:

I. ICICI to dispel all apprehensions in the minds of investors, should state clearly whether their CEO made the disclosures to the Board, as and when warranted, as per the Corporate Governance Practices followed by the Bank.

II. While one understands that you may not be able to speak on behalf of ICICI Bank in the matter, you can definitely give a personal statement in the whole matter like  your husband’s business relationship with Mr. Dhoot or with other directors of Videocon.  You may also choose to explain how the dealings of ICICI with Avista Advisory, a consultancy firm run by Mr. Rajiv Kochhar, were always kept at an arm’s length from you. Please think over."

Unquote

Whether the CBI, which is pursuing the case and filed a FIR, will be able to proceed further for a speedier judgement? Or will it drag on like what happened to the MD & CEO of Indian Bank, who occupied the top headline news in 1990s for right and wrong reasons, convicted in lower courts five times  but appeals were  still pending, when he breathed his last? Let us wait and see.

Regards

V.Viswanathan

14th February 2023



Comments

  1. PK OJHAFebruary 17, 2023 at 4:58 AM

    The board of ICICI bank acted most irresponsibily, first not having any control over such rogue decisions and then singling out only Mrs Kochhar when the matter exploded...How other board members, critically incharge of corporate governance and control mechanisms simply chose to eat cookies and have tea in their perfunctory meetings...and got away unscathed

    ReplyDelete

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