New Delhi: The finance ministry is unlikely to be a silent spectator of the ongoing affairs in ICICI Bank. It is likely to raise the allegations of conflict of interest and corporate governance issues in the next board meeting of ICICI Bank on May 7 or even before that once its new nominee director formally joins the board this week.
ICICI Bank is mired in a controversy over alleged conflict of interest involving its chief executive officer Chanda Kochhar (in pic) and her husband Deepak Kochhar.
Official sources said the government as a principle would keep an arm’s length distance, leaving the investigation and supervision to law enforcement agencies and the regulator. It would, however, seek a response on some related issues on the governance standard through its nominee on the bank board. The government is of the view that the ICICI Bank episode involves the broader investor and depositor issues even if it is a private sector bank.
On April 5, the government replaced Amit Agarwal from the board of ICICI Bank as its nominee and appointed Lok Ranjan, joint secretary in the DFS, in his place. Agarwal did not attend the key March 28 board meeting of ICICI Bank that gave Kochhar a clean chit on the Videocon loan case.
ICICI Bank had informed the exchanges that its board would meet on May 7 to disclose the Q4 results and dividends.
Sources said the ministry is likely to partner with LIC, which has 9.4 per cent stake in ICICI Bank, to press for a response to as to why the CEO did not recuse herself while a consortium, led by ICICI Bank, granted Rs 3,520 crore loan to Videocon in 2012 and later there were business partnership between Videocon promoter Venugopal Dhoot and Kochhar’s husband.
The bank board has already backed Kochhar on all her decisions relating to the controversy on March 28, a few days before CBI registered a preliminary enquiry (PE) into the case. The loan given to Videocon Group later turned into a non-performing asset (NPA).
Sources said even if the Reserve Bank of India (RBI) would be the authority on decisions over ICICI Bank, government and LIC could take positions as stakeholders on the board to protect their investments which is coming under threat as the ICICI bank stock is on a slide after allegations of nepotism emerged. This also adds to their demand for a change of head of the bank. There could also be a demand for an external audit into the allegations which bank’s has already rejected in its earlier meeting.
A source in a PSU bank said the government should exercise its statutory powers through the nominee director by questioning the bank management while leaving the decisions, if any, to RBI and the bank board so that it does not have to take the blame of inaction of not even raising issues when so many bank frauds and poor governance are taking place.
The source further added most of these frauds are governance issues and are due to lack of detections, decisions and actions on time. Considering that the finance ministry has replaced the earlier nominee with a new one, its message is clear on a aggressive stand on governance issues on the context of public money — be it private sector banks or PSU.
There is pressure on Kochhar to step down and there are reports that a certain section of the bank board is keen that an interim CEO be brought in to replace her while investigations are on. However this is one decision which will be entirely taken by the board and the RBI.
Sources said both LIC and the finance ministry could try to gauge the mood of the board in the coming days over this. It is alleged that Kochhar's husband Deepak Kochhar had formed a joint venture with Venugopal Dhoot for a business dealing in renewable energy and there were a string of transactions later, which gave him full control of the venture after the exit of Dhoot.
Late last month, the bank admitted that Kochhar did not recuse herself from a credit panel meeting which decided to give a Rs 3,250 crore loan to diversified Videocon Group in 2012.
