As CEO quits, ICICI Bank must dig deeper and take strong action against violators

The resignation of Chanda Kochhar from ICICI Bank has come not a day too soon. Her formal exit from the bank announced on October 4 marks a sorry end to a career that mirrored the rise and transformation of Indian banking – she rose as ICICI grew from a stodgy corporation known for project financing to a retail giant that stands as the largest private sector bank today. Kochhar began her career three decades ago with what was then known as the Industrial Credit and Investment Corporation of India and rose to become the Managing Director and Chief Executive Officer of the transformed ICICI bank, a position she held for the last nine years. She was seen as a power banker, a woman business leader whose views mattered and one who stood on important platforms and offered a carefully calibrated point of view.

The rise was slow and steady, a dream career in one company in a day and age MBAs jump jobs to move up the corporate ladder. The fall has been dramatic amid a hail of allegations that have opened up inquiries on a story we have not heard the last of.  That was made clear in the statement announcing her departure. It read: “The Board…accepted the request of Ms Chanda Kochhar to seek early retirement from the Bank at the earliest...The enquiry instituted by the Board will remain unaffected by this and certain benefits will be subject to the outcome of the enquiry…” The statement was a reversal of the view taken by the board just a few months ago, in March 2018, when the Board issued a statement headlined: “ICICI Bank Board reviews the Bank’s internal processes for credit approval and finds them robust. The Board also expresses and reposes full faith and confidence in its MD & CEO, Ms. Chanda Kochhar.” 

At the heart of the downfall are a series of allegations of conflict of interest and quid pro quos in loans of Rs.3,250 crore (in one particular instance) to the Videocon group and its business linkages to Kochar’s husband through a company called Nupower Renewables. The total loan size is of the order of Rs.40,000 crore issued by a consortium of 20 banks, of which under 10 per cent came from ICICI bank, where Ms.Kochhar sat on the committee that cleared the loan without disclosing the conflict of interest. The loans have been categorised as Non-Performing Assets. Enough has been said about the dealings and the red flags they raise even at a cursory glance.

The turn of affairs is a pointer to what goes on in the name of fair banking and how an elaborate set of norms and regulations can easily be circumvented, particularly for disbursing big-ticket loans, making a mockery of due process and regulatory frameworks. In this particular instance, the complaint was in the air for two years. The bank did nothing. The regulators did not act. The government did not pose questions. But the nature of the complaint, the persistence of the complainant, combined probably with a set of other not yet fully understood circumstances, forced a deeper look and action by the board. The board itself appeared reluctant. When it first issued a statement, it was keen to give a clean chit to the CEO rather than ask any questions.

The official statement exonerated the CEO, as if it was a case that didn’t have any leg to stand on.  In bold type, the ICICI statement of March 28, 2018 said: “…the Board has come to the conclusion that there is no question of any quid pro quo/ nepotism/ conflict of interest as is being alleged in various rumours. The Board has full confidence and reposes full faith in the Bank’s MD & CEO, Ms. Chanda Kochhar. The Board also commends the entire management team under the leadership of the MD & CEO for their hard work and dedication. We would urge you not to be misled by these rumours which are being spread to malign the Bank and its top management.” These words came when the Chairman of the board was M K Sharma, a senior corporate leader who is noted for his views on governance and was a member of the Committee on Corporate Governance formed by the Union government. At Hindustan Unilever Limited, where he retired as Vice Chairman, he spoke of the importance of upholding values like honesty, integrity, truth, courage, concern and care.

How is it that a case that calls out for an inquiry is dismissed without any confidence being given to the shareholders, the regulators and the people at large, whose money the banks run on? The loans that ICICI bank (and indeed every other bank) gives out are the savings of ordinary people that it so efficiently collects from its wide network of branches and its and competent and highly aggressive selling teams. Is it any wonder then that trust in banks is diminishing, and common citizens are left wondering how bad loans can go to the demonic size that we see today – in excess of 10 lakh crore rupees and rising. There also appears to be no particular glory in the governance standards of private sector banks, so the oft-cited arguments that the public sector banks have poorer governance standards may not be something that holds.

At ICICI Bank, as the full report of the inquiry is awaited, the new CEO and the Board of directors must not hesitate to take this occasion to order a full-fledged clean up.  When the former CEO is embroiled in allegations of this kind, there is every reason to believe that there was already a culture of pushing to the limit standards of integrity. The storm presents a good opportunity to send a new message at the bank – one that highlights transparency, integrity and a strict adherence to the rulebook. This would mean opening up many more cases that may look questionable, investigating some of them, reporting them transparently to the people and thereby sending a clear signal of the new direction at ICICI Bank. The new CEO has an excellent opportunity to send this strong message and he should make his mark by doing just that.

The noted leader Jack Welch has often spoken of four kinds of managers. One type comprises those who have the values and deliver the numbers. Of course, you keep them. There are those who have neither the values nor can they deliver the numbers – they need to go. A third type are those who have the values but do not deliver the numbers. Give them another chance. Train them. Nurture them. But the most toxic to an organisation are those who deliver the numbers and do not have the values. Fire them first. It’s a lesson ICICI Bank can heed now.

(The writer is a journalist and a faculty member at SPJIMR. Views are personal)