Chanda Kochhar, chief executive officer and managing director of ICICI Bank Ltd., speaks during an interview (Photographer: Prashanth Vishwanathan/Bloomberg News)

Questions Raised By The Indian Express Investigation Into ICICI Bank - Videocon Dealings

On Thursday, Indian Express newspaper published a report raising questions about the dealings between ICICI Bank Ltd. and the Videocon Group.

In its investigation, the newspaper detailed a series of transactions between the Videocon Group and NuPower Renewables Ltd. - a company founded and headed by Chanda Kochhar’s husband Deepak Kochhar - between 2008-2013.

  • In Dec. 2008 Deepak Kochhar and Venugopal Dhoot set up NuPower Renewables Pvt Ltd as a 50:50 joint venture.
  • A month later Dhoot resigned as director of NuPower and transferred his shares in the company to Kochhar.
  • In 2010 an entity owned by Videocon Group promoter Venugopal Dhoot gave a loan of Rs 64 crore to NuPower Renewables in 2010.
  • Another round of transactions between 2010 and 2013 led to an effective transfer of shareholding from Dhoot to Deepak Kochhar for a sum of Rs 9 lakh.
  • The newspaper report then went on to question whether the transactions had led to a quid pro quo via nearly more than Rs 3,000 crore in loans granted by ICICI Bank to Videocon Industries. These loans were granted as a part of a broader banking consortium loan, worth almost Rs 40,000 crore, approved in 2012.

Ahead of the publication of the Indian Express investigation, the board of ICICI Bank released a statement on Wednesday expressing full faith in Chanda Kochhar and reiterating that the bank’s credit approval processes are robust. This was followed up by a short press conference by the bank’s chairman where he took no questions.

The clarifications issued by the bank leave a few questions unanswered and raise new ones as well. BloombergQuint has not independently verified the facts presented in the Indian Express report.

The Nature Of Transactions Between NuPower And Videocon Group?

The key question that remains unanswered is about the nature of transactions between Deepak Kochhar’s renewable energy company and the Videocon Group.

Transactions that need explaining include:

  • Why did Dhoot co-found the company and a month later exit it?
  • What were terms of the Rs 64 crore loan given by Dhoot-owned Supreme Energy Pvt Ltd to NuPower?
  • What was the reason behind the transfer of 94.99 percent shareholding from Deepak Kochhar to Dhoot in 2010?
  • Why did Dhoot transfer his shareholding to associate Mahesh Chandra Punglia in November 2010, who then over a period of three years transferred the shareholding back to Deepak Kochhar?
  • How was the valuation of the final stake transfer (valued at Rs 9 lakh according to the Indian Express report) arrived at?

To be sure, it is not upto ICICI Bank or its board to clear the air on these transactions. However, in her personal capacity, Chanda Kochhar could choose to address concerns raised in order to protect the standing of the deposit-taking organisation that she leads.

Did Chanda Kochhar Disclose Conflict Of Interest?

The issue of a conflict of interest in loans approved by Chanda Kochhar-led ICICI Bank to the Videocon Group first came to light in 2016, when a whistleblower raised concerns similar to those in the Indian Express investigation.

To counter these concerns, the board made the following statements on Wednesday, Mar. 28:

  • The loan to Videocon was part of a wider banking consortium which included 20 banks.
  • The credit committee was headed by the Chairman of ICICI Bank.
  • Chanda Kochhar was not the chairperson of the committee with sanctioned this specific loan to Videocon Industries Ltd.

Speaking the Thursday, ICICI bank chairman MK Sharma said that Chanda Kochhar had not recused herself from meeting related to loan sanctions to the Videocon Group and the board saw nothing wrong with that. Sharma also said that all disclosures necessary as per regulations were made. But questions remain about whether specific disclosures were made.

  • Were the dealings between Chanda Kochhar’s husband and the Videocon Group disclosed to the board? Have these disclosures been documented in minutes of the credit committee meeting in question?
  • Did KV Kamath chair the credit committee meeting in question? Kamath at the time was non-executive chairman of the bank. The bank, in its statement said that the bank’s chairman was the chair of the credit committee. It did not specify whether Kamath chaired the meeting in his non-executive role.
  • Equally, has she disclosed any potential conflicts in subsequent negotiations related to loans to Videocon Industries that are now classified as non performing loans?

Videocon Industries, according to a Care Ratings report of June 2016, has a debt of Rs 43,000 core. More than half of it is dollar-denominated and the rest is from Indian lenders. The account, now tagged as non-performing, has been included in the second list of accounts to be referred for insolvency proceedings.

Did The Board Conduct A Detailed Inquiry?

Questions remain about the conduct of the ICICI Bank board as well. The board issued an unequivocal statement on Wednesday saying that it reposes faith in Chanda Kochhar as the Managing Director and CEO and that credit approval systems are robust enough to stave-off conflicts of interest.

  • How did the board come to that conclusion? Over what period of time did the board deliberate this and did it examine relevant documents from credit committee meetings?
  • Was an internal investigation conducted? If so, why was this investigation not disclosed to exchanges?
  • Would it not be best practice for the board to seek an external investigation report?

Along with the board, the Reserve Bank of India too is in a position to ask Chanda Kochhar and ICICI Bank to clarify their position. In Thursday’s press meet the bank’s chairman MK Sharma said “we have satisfactorily replied to all regulatory questions”. He disclosed no further information on the basis that it was “privileged information”.