ICICI Bank Ltd’s Managing Director and Chief Executive Officer Chanda Kochhar will go on leave till an independent probe against allegations of impropriety against her is complete.
The private lender named Sandeep Bakhshi as its Chief Operating Officer for five years, according to an exchange filing. He will report to the board, and Kochhar will continue in her role as MD and CEO, the bank said.
Bakhshi, like Chanda Kochhar, is an ICICI veteran. He joined the institution in 1996 and has held various positions within the group. In his last assignment at the bank, Bakhshi was deputy managing director and head of retail operations. In August 2010, Bakhshi was appointed the head of ICICI Prudential Life Insurance.
The decision comes after the bank’s board decided to initiate an enquiry headed by retired Justice BN Srikrishna to look into allegations of conflict of interest in the dealings of Chanda Kochhar. The enquiry followed an anonymous whistleblower complaint received by the bank.
The CBI is also in the midst of a preliminary inquiry into possible quid pro quo in loans granted by ICICI Bank to the Videocon Group, in light of the dealings between Venugopal Dhoot and NuPower Renewables, founded by Chanda Kochhar’s husband Deepak Kochhar. The preliminary inquiry named Dhoot, Deepak Kochhar and unidentified others. Since then, the CBI has questioned Deepak Kochhar and his brother Rajiv Kochhar in relation with the case.
The Backdrop
In an article published on 29 March, The Indian Express detailed a series of transactions between the Videocon Group and NuPower Renewables between 2008-2013.
- In December 2008, Deepak Kochhar and Venugopal Dhoot set up NuPower Renewables Pvt Ltd as a 50:50 joint venture.
- A month later, Dhoot resigned as director of NuPower and transferred his shares in the company to Kochhar.
- In 2010, an entity owned by Videocon Group promoter Venugopal Dhoot gave a loan of Rs 64 crore to NuPower Renewables in 2010.
- Another round of transactions between 2010 and 2013 led to an effective transfer of shareholding from Dhoot to Deepak Kochhar for a sum of Rs 9 lakh.
- The newspaper report then went on to question whether the transactions had led to a quid pro quo via more than Rs 3,000 crore in loans granted by ICICI Bank to Videocon Industries. These loans were granted as a part of a broader banking consortium loan, worth almost Rs 40,000 crore, approved in 2012.
Similar concerns had been raised by a whistleblower in 2016.
A day before the article was published, the board of ICICI Bank released a letter expressing full faith in Chanda Kochhar, in an attempt to dispel concerns of quid pro quo in loan approvals. At the time, the board said that it has full confidence and reposes full faith in Chanda Kochhar. The bank's internal credit approval processes are robust, it had added. The board’s position changed after the second set of allegations from an anonymous whistleblower emerged.
Chanda Kochhar’s Reign At ICICI Bank
Chanda Kochhar took over as the CEO of ICICI Bank from KV Kamath in May 2009, having already spent 25 years at the bank. Her tenure began at a time when the bank was battling an increase in bad loans in the aftermath of the global financial crisis.
After spending her early time as chief of the bank cleaning up the retail loan book, Chanda Kochhar shifted focus to the corporate loan book to try and take advantage of a surge in infrastructure investments in the country. This led to rapid growth in the bank’s loan book but has, since then, led to a surge in bad loans too.
Since 2009-10, the bank’s loan book has more than doubled from Rs 2.3 lakh crore to Rs 5.12 lakh crore at the end of 2017-18. Its gross non-performing assets have risen from 4.32 percent in March 2009 to 9.90 percent as of March 2018. The bank, like other lenders, has seen bad loans surge following the RBI’s asset quality review initiated in 2015 to help snuff out under-reported stressed assets.
As corporate bad loans surged, the bank said it will reorient its strategy once again to focus on retail lending and loans to higher rated corporates.
While announcing the bank’s January-March quarter results on Monday, Kochhar said that the bank was going to base its future growth strategy on increasing the share of retail loans on its loan book, while continuing to reduce the share of foreign loans to less than 10 percent by March 2020. The bank also aims at reducing its NPA ratio to below 1.5 percent within the next two years.
In the process of cleaning up its books, the bank has lost its tag of being the largest private sector lender to HDFC Bank, which now has a larger domestic loan book.
ICICI Bank has also given lower returns to shareholders compared to HDFC Bank. ICICI’s standalone price to book ratio has remained below other private sector peers like HDFC Bank and Kotak Mahindra Bank.
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