ICICI Bank tells Sebi it was unaware of conflict of interest

In May, Sebi had launched an adjudication proceeding against the bank and its managing director and chief executive officer Chanda Kochhar for potential conflict of interest
ICICI Bank has denied charges of violation of disclosure norms levelled against it by the market regulator Securities and Exchange Board of India (Sebi). Responding to a Sebi show cause notice issued on May 23, the bank said it was not aware of the alleged conflict of interest situation and hence couldn’t make any disclosures required under the listing regulations, it is learnt.

ICICI Bank sent its reply to Sebi last week, a source said. 

In the show cause notice, Sebi had asked ICICI Bank why it should not be charged for violation of the Listing Obligations and Disclosure Requirements (LODR) Regulations in the Videocon loan matter. The private sector lender allegedly failed to ensure compliance with the listing rules in the case of its full-time directors. In May, Sebi had launched an adjudication proceeding against the bank and its managing director and chief executive officer Chanda Kochhar for potential conflict of interest in the business dealings of her husband with the Videocon group. 

While August 24 was the deadline for replying to the show cause, Kochhar has sought more time to file the reply, the source quoted above said. An email sent to ICICI Bank did not elicit any response.

 In its reply to Sebi, the bank has elaborated the process involving the disbursement of Rs 32.5-billion loan to the Videocon group. 

“There is a full-length process for sanctioning corporate loans. In this case, the credit committee of ICICI Bank in 2012 sanctioned its share of facilities to the Videocon group. She (Kochhar) was not the committee's chairperson. It was a 12-member committee headed by then chairman K V Kamath,’’ the bank told Sebi as per the source. ICICI Bank also gave a part (Rs 32.5 billion) of a total loan of Rs 400 billion lent by a consortium of 20 banks, it said in the reply.

ICICI Bank is also believed to have apprised Sebi of the current status of its outstanding loans, at Rs 28.1 billion, to the Videocon group, which was classified as a non-performing asset (NPA) in 2017.  

In its reply, the lender has also highlighted the measures it has undertaken following the crisis. 

ICICI Bank’s board has constituted an independent inquiry under the supervision of former Supreme Court judge BN Srikrishna to probe the case. 

As of now, the bank is not keen on settling the matter through the consent mechanism as it is awaiting Srikrishna panel’s findings, another source said. In a statement recorded during Sebi’s preliminary enquiry, Kochhar had admitted that her husband Deepak Kochhar had business dealings with Videocon Group over the last several years. She also admitted that Deepak Kochhar and Venugopal Dhoot were co-founders and promoters of NuPower.

In June 2009, shares of Dhoot and Pacific Capital (owned by Deepak Kocchar's father and sister-in-law) in NuPower were sold to Supreme Energy. Dhoot continues to hold interest in NuPower through debentures of Rs 640 million, subscribed through Supreme Energy, the regulator had found.

The association between Deepak Kochhar and Videocon has also been established in the case of Credential Finance.

On the basis of a preliminary report, Sebi has concluded that there was conflict of interest in ICICI Bank’s  transactions with Videocon. By not disclosing the details of her husband's dealings with Videocon, Kochhar had not complied with the provisions of the listing agreement, prompting Sebi to initiate  adjudication proceedings. Earlier this month, the bank's newly-appointed chairman Girish Chandra Chaturvedi had met Sebi chief Ajay Tyagi to discuss the matter.