Why bank reforms are vital

The connection between Venugopal Dhoot’s Videocon and ICICI Bank’s MD-cum-CEO Chanda Kochhar through her husband Deepak Kochhar in the Rs 3,250-crore loan deal is, on the face of it, a no-brainer. ICICI Bank gives Videocon a loan and six months later Videocon funnels money to Mr Kochhar’s company NuPower Renewables through a web of companies. If ICICI Bank gets a clean chit, all will be well. If not, the bank’s stock could take a beating. It has already lost 10 per cent in the past five days and at least 15 per cent in the past month. Interestingly, this scam was talked about in the social media by whistleblower investor Arvind Gupta for months. In 2016, he informed every possible investigative agency in India, from the Central Vigilance Commission to Sebi, as well as the Prime Minister’s Office, about the scam, but there was an ominous silence. The sudden attention now could have been triggered by the PNB scam fallout and the focus on state-owned banks. The latest revelations have taken the sheen off the premium good governance image in private sector banks.

Two issues must be flagged here in the interest of banking reforms. One, the fact that Ms Kochhar didn’t recuse herself from the committee that decided on the loan to her husband points to the standards of corporate governance norms in private banks. Not surprising. Axis Bank was earlier involved in fake accounts involving Rs 100 crores. The other issue concerns Mr Dhoot being declared bankrupt — so where has all the money gone? It’s the people’s hard-earned money that banks have squandered. Is this a joke on the people?