Chanda Kochhar Quits As ICICI Bank Chief
Benefits due to Chanda Kochhar will be “subject to the outcome of the inquiry”, according to ICICI Bank’s statement.
Chanda Kochhar has quit as CEO and managing director of the ICICI Bank, the lender said on Thursday. Ms Kochhar is being investigated for charges of conflict of interest and has been on leave since June. The inquiry against Ms Kochhar in the case involving a loan of Rs. 3,250 crore to the Videocon Group will not be affected, ICICI Bank said in its regulatory filing to the Bombay Stock Exchange (BSE). Sandeep Bakhshi, the chief operating officer (COO) of ICICI Bank, will replace Ms Kochhar.
Kochhar had joined ICICI back in 1984 as a management trainee when the bank was still a non-banking financial company (NBFC) called the Industrial Credit and Investment Corporation of India which later became the ICICI bank.
Over the years, Kochhar’s growth in ICICI Bank was steady and a model for any aspiring banker; she rose through the ranks and played an instrumental role in building the entity to one of the biggest banks in the country, particularly its retail portfolio.
Everything changed for Kochhar and her image took a big hit when the Videocon loan controversy broke out raising questions after questions about her role in it. A probe on this is not yet concluded.
It is no secret as to why the investors cheered the resignation of one of the longest-serving executives at ICICI bank. The Kochhar issue was heavily weighing on the bank’s shares and no one who had put their money on the table liked the brewing controversy.
From its recent peak, ICICI Bank shares have lost 12.73 per cent from Rs 362 to Rs 316 while BSE Sensex is down by 2.69 per cent. Investors desperately wanted the uncertainty to vanish and clarity to emerge on a succession plan. This was the reason why large investors such as the mutual funds met ICICI non-executive chairman M K Sharma in April to discuss the CEO succession plan.
The ICICI board loved Kochhar with its whole heart, till the last moment. Even when the world questioned the logic of her continuation and raised questions on the corporate governance standards of the bank, they stood by their beloved CEO. Even an independent enquiry was pushed to the last moment after the board was pushed to a corner by regulators and investors.
The timing of Kochhar’s resignation
The timing of Kochhar’s early exit is interesting because the outcome of a major internal probe by a panel headed by former supreme court judge Justice Srikrishna is pending. This is with respect to the alleged connection and conflict of interest regarding a Rs 3,250 crore loan given to the Videocon group and the business dealings of Deepak Kochhar, Chanda’s husband with Videocon’s Venugopal Dhoot.
In a media release, ICICI Bank said Kochhar’s exit will not impact the ongoing investigation and certain benefits to Kochhar will be subjected to the probe outcome.
But the question is, Why did the board accept her resignation before the probe was over? Couldn’t it have waited till the issue to be cleared? After all, it is the same board which gave a clean chit to Kochhar immediately after the allegations became known to the public. Or does her quitting before the probe is complete give an indication that the board is pre-empting the outcome of the probe and wants to avoid an embarrassing situation if the probe indicts Kochhar?
ICICI Bank Board’s handling of the Kochhar issue
The Board of ICICI Bank could have handled the Kochhar issue better. The writing was on the wall for Kochhar ever since the allegations first came to light. The charges against her and her family members pertaining to the misuse of the CEO’s office were serious in nature. Whether there is truth in the charges or not; the board and Kochhar should have tread cautiously considering that the bank’s first commitment is to its depositors and shareholders, not to one of its top management employee.
As mentioned above, the probe announcement happened with many delays. This complicated the whole issue given that the allegations pointed out fingers at big names such as the Videocon group, the Essar Group, Chanda’s husband Deepak and her brother-in-law Rajiv Kochhar. Secondly, it didn’t ask Kochhar to step down from the beginning pending the probe.
Anyone could have alleged that her continuance at the powerful office could influence any internal probe in some way. Kochhar was finally sent on leave in June but this decision was too late; the image of the bank, with respect to safeguarding the corporate governance standards it represented at one point had by then suffered much damage.
Throughout the episode, the bank board was supportive of Kochhar and an independent probe was ordered after pressure mounted from regulators and the media.
At this stage, Kochhar’s ‘early retirement’ appears to be nothing but a face-saving exercise for the bank to avoid an embarrassing situation should the probe lead to an indictment of Kochhar in the Videocon case.