A roadside vendor arranges fruits at a stall as pedestrians walk past a ICICI Bank Ltd. branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

SEBI Favours Adjudication Proceedings Against ICICI Bank, Chanda Kochhar 

A preliminary examination by market regulator SEBI has favoured adjudication proceedings against ICICI Bank Ltd. and its Chief Executive Officer Chanda Kochhar for alleged violation of listing disclosure norms regarding ‘conflict of interest’ in business dealings of her husband with the Videocon Group.

ICICI Bank may face a penalty of up to Rs 25 crore under the relevant SEBI regulations for such lapses, while the fine for Kochhar may go up to Rs 1 crore, besides other penal actions, a senior official said.

The adjudication process will convene formally soon after taking into account the replies to the show-cause notices issued by SEBI to ICICI Bank, Kochhar and others in this matter, the official added.

Besides SEBI probe, ICICI Bank’s board has also constituted an “independent enquiry” and Kochhar has gone on leave till completion of this enquiry.

According to a regulatory filing by the bank last week, Kochhar will continue as MD and CEO, though the group’s life insurance arm head Sandeep Bakshi has been appointed as a whole time director and COO. Bakshi will report to Kochhar and will handle the day-to-day operations in her absence.

The bank has maintained that its board has full faith in Kochhar.

According to regulatory sources, SEBI’s preliminary examination findings are based on enquiries made by the regulator in the matter involving Kochhar, ICICI Bank and Videocon Group.

As per the report, Kochhar has admitted that her husband Deepak Kochhar has had many dealings with Videocon Group over the last several years. Besides, it has also been admitted by her that Deepak Kochhar and Venugopal Dhoot were co-founder and promoters of NuPower.

Also read: NuPower Renewables: A Rs 210 Crore Firm Cost ICICI Bank Shareholders Rs 27,000 Crore

Further, 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. Also, Dhoot continues to hold interest in NuPower through debentures of Rs 64 crore, subscribed through Supreme Energy, the regulator found.

Association of Deepak Kochhar and Videocon has also been confirmed in case of Credential Finance. On the basis of the preliminary report, SEBI has concluded that there was conflict of interest in the transactions of ICICI Bank with Videocon.

By not disclosing the details of her husband's dealings with Videocon, Kochhar has not complied with the provisions of listing agreement. Further, the bank also failed in ensuring that its directors comply with listing rules, the official said.

Therefore, adjudication proceedings have been recommended against ICICI Bank and Kochhar, he added. Last week, SEBI Chairman Ajay Tyagi had said the regulator is yet to receive a reply from ICICI Bank on the allegations involving Kochhar.

The cases under scanner include the bank’s Rs 3,250 crore loan to Videocon Group in 2012 and the involvement of Kochhar's family members in restructuring of the loan.

Kochhar and her family members are facing allegations of quid pro quo and conflict of interest with respect to a loan extended to certain entities.

Also read: ICICI Bank Discloses Third Whistleblower Complaint