Need more disclosures: Full enquiry by investigation agencies is called for

The Central Bureau of Investigation (CBI) has reportedly registered a preliminary enquiry against Deepak Kochhar, husband of ICICI Bank Managing Director (MD) and Chief Executive Officer Chanda Kochhar, and Venugopal Dhoot, chairman of the Videocon group, to verify the Rs 32.5-billion loan to the company in 2012. To be sure, this does not yet prove any wrongdoing: A preliminary enquiry is short of even a First Information Report. And Ms Kochhar is not under enquiry. On its part, the board of ICICI Bank last week strongly backed the MD, and refuted what it called rumours. In its defence of Ms Kochhar, the board said ICICI Bank was only part of a consortium of 20 lenders, the bank lent on the same terms as the other banks in the consortium, and the bank’s share in the loan facility was less than 10 per cent of the total of Rs 400 billion. India’s largest private sector lender also said Ms Kochhar was not chairperson of the credit committee when the loan was sanctioned and the bank’s credit approval process ensured that no individual employee, whatever might be his or her position, had the ability to influence any credit decision. 

All this is good as far as it goes, and the board has done well to move quickly in response to disclosures in the press. But the bank chairman took no questions when making his statement to the media, and there are questions that need to be addressed. The bank’s statement inexplicably does not make any mention of the fact that Ms Kochhar’s husband and two close family members set up a 50:50 joint venture, NuPower Renewables, with Mr Dhoot in December 2008, and at what stage this was disclosed to the bank by Ms Kochhar. Mr Dhoot transferred his stake to Mr Kochhar just six months after Videocon got the loan, almost 86 per cent of which remains unpaid. The ICICI Bank statement only says “There is no question of any quid pro quo/nepotism/conflict of interest…” This is inadequate; the bank and its board must clarify the exact role Ms Kochhar played in the loans given to the Videocon group, whether she voted for the loans, and whether she recused herself, given the obvious conflict of interest. The board disclosed more about the exact “internal review process” it followed and in which period. The bank’s investors would also want to know more, given that Mr Dhoot’s public statements seem to be at variance with the facts as disclosed.

The bank’s board can only go so far. An external investigation can and should go further, and look into the precise nature of the deals between Mr Kochhar and Mr Dhoot, in India and overseas. Investments have come in from known and opaque sources, on terms consistently favourable to Mr Kochhar. A major bank customer and defaulter is involved, even as the identity and role of various intermediaries needs to be explored. In the end, it may turn out that there was no wrongdoing on anyone’s part, but such a position should emerge from a full investigation. After all, India’s largest private bank and its chief executive officer are involved.