ICICI: Role of its Directors

SEBI needs to crack the whip on the Board too

ICICI: Role of its Directors
ICICI: Role of its Directors

Mrs. Chanda Kochhar’s actions are in conflict with the interest of the ICICI Bank and deserve to be strictly dealt with by the RBI.

While it is commendable that the Srikrishna committee indicted Chanda Kocchar and recommended a clawback of all bonuses from April 2009 to 2018, there is a lingering malaise that still afflicts Indian companies[1]. While all these shenanigans were happening, what was the Board doing? Why did it do a sham job of appointing a new Chairman, Mahendra Kumar Sharma, who gave Kochhar a hasty vote of confidence?[2] While it is murmured that a few in the Board were dissenting, the overall impression it gave was that everything was right with ICICI and this was a mere passing cloud. Was it? More importantly, it’s not Chanda Kocchar that was the “sole proprietor” of the Bank, isn’t the Bank and its various Committees that sanction advances and take decisions, comprised of eminent Board Members? What happened to their spine and their mental faculties?

SEBI, MCA and DFS (Dept of Financial Services, GOI) must ensure that all other Board Members, who were party to these decisions, should be classified an “unfit” and disqualified to be on Boards of other Banks and Companies

Arvind Gupta, ICICI Whistleblower

It all started with a vigilant shareholder of ICICI Bank and Videocon, Arvind Gupta, who wrote to the Prime Minister on Mar 15, 2016, questioning the illegal relationship between Videocon Group and Nu-Power Renewable Group, steered by the Deepak Kochhar, the husband of Chanda Kochhar.

For two years, nothing happened. Then[3], PGurus published a detailed article on the investigation of probe agencies which were looking into the misuse of office by Chanda Kochhar. The saga, as described by Arvind Gupta, is sordid:

“In April 2012, just after complete transfer of ownership and control of NuPower Renewables to Kochhar’s family the ICICI Bank extended Rupee loan to various private companies belonging to the Videocon Industries Limited to the tune of Rs. 3,250 crore as per the break-up given below:

Rupee Loan of Rs. 3,250 crore to the Promoters of Videocon Group by ICICI Bank
Name of the Company Date of ICICI Bank funding Amount of loan in Rs. Crore
Trend Electronics Limited 30.04.2012 650
Century Appliances Limited 30.04.2012 650
Kail Limited 30.04.2012 650
Value Industries Limited 30.04.2012 650
Evans Fraser & Company India Limited 30.04.2012 650
Total 3,250

In addition, the helping hands of the ICICI Bank extend overseas destinations as well. The ICICI Bank extended offshore funding amounting to Rs. 660 crores to another foreign entity owned by the Videocon Group.

A Videocon Group Company based in the Cayman Islands namely Tuskar Overseas Inc. was also funded by ICICI Bank Ltd through its UK and Canada branches with a massive sum of Rs. 660 crores. The said the offshore loan was backed by guarantees given by six Indian Videocon Group firms including Tek Care India Pvt. Ltd, Shree Dhoot Trading and Agencies Ltd, Value Industries Ltd and Trend Electronics Ltd.

Sir, round tripping foreign investments in Indian corporates have been a subject of a curious investigation to unearth a host of scams perpetrated by the Congress-led UPA Government. It is against this background that the Bank funding provided by the ICICI Bank to Videocon Group assumes significance. The above said banking transaction reflects a deep-rooted conspiracy on the part of ICICI Bank’s lending arrangement with the Videocon Group. Such transactions constitute an Indian private sector Banking scam.

Evidently, Mrs. Chanda Kochhar facilitated this unscrupulous domestic offshore funding in abuse of her position as the CEO & MD. Chanda Kochhar’s greed of making private gains by corrupt means has resulted in wrongful losses to the ICICI Bank and the ICICI Bank’s future is in a precarious financial condition. There is a  serious risk of sticky loans extended to groups like the Videocon promoted by Venugopal Dhoot becoming NPA’s with the ICICI Bank. Mrs. Chanda Kochhar’s actions are in conflict with the interest of the ICICI Bank and deserve to be strictly dealt with by the RBI.

Furthermore, during the period between December 2010 and March 2012, NuPower Renewables also received large overseas funding aggregating to Rs. 325 crore in the form of compulsorily convertible preference shares (CCPS) from an obscure Mauritius based entity named Firstland Holdings Limited. Later in 2014, the above funding was shifted to another Mauritius based entity named DH Renewables Holding Limited.”

What should SEBI do?

For far too long, SEBI has been looking the other way as many Public Limited companies have done pretty much what they please. The long-suffering shareholder does not even have a clue of the real owners of this bank. SEBI should:

  1. List the real names behind each shareholding in ICICI. No more hiding behind shell corporations and opaque entities.
  2. Make each and every Board member accountable too, for his or her actions in allowing this scam to go on for so long. Institute clawback provisions and ensure that these individuals are prevented from being on any board until this investigation reaches its logical end. In fact, more important than Chand Kocchar, it is the collective Board and the Committee that sanctions these dubious loans are responsible. In no Bank, only the CEO and MD can sign off and ensure disbursal of such a large loan amount. All other Board Members are complicit and thus very clearly unfit to be on Boards of other companies.
  3. SEBI, MCA and DFS (Dept of Financial Services, GOI) must ensure that all other Board Members, who were party to these decisions, should be classified an “unfit” and disqualified to be on Boards of other Banks and Companies.

Will SEBI, RBI and Fin Min act? Only time will tell.

References:

[1]Justice Srikrishna panel indicts Chanda Kochhar, ICICI Bank sacks herJan 31, 2019, Economic Times

[2]ICICI’s CEO Love Must Have a LimitApr 12, 2018, Bloomberg.com

[3]ICICI Bank head Chanda Kochhar and husband on the radar of probe agencies for doubtful loans to debt-ridden Videocon group?Mar 25, 2018, PGurus.com

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Sree Iyer

An inventor and out-of-the-box thinker, Sree Iyer has 37 patents in the areas of Hardware, Software, Encryption and Systems.

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7 COMMENTS

  1. Sree Iyer Esq, thanks for another post on ICICI Bank frauds.
    It was Dr.S.Swamy who alerted GOI at the backdrop of ONE TAX ONE NATION introducing GST on 1st July 2017 midnight, cautioned one and all not to involve ICICI/HDFC/Private banks and likewise to collect /deposit Tax amounts!! After a year GOI amended GST Act on his suggestion!
    In your post you have rightly said,”….all other Board Members are complicit and thus very clearly unfit to be on Boards of other companies”. Under the circumstances the government of the day would have asked board of members/directors to dissolve first and elect a new members/directors.
    Present NDA government’s priority is to get “good conduct certificates”, adhere to “fiscal deficit” as if it is sacrosanct and coming under “top 50 nations ease of doing business label” and earn brownie points from internationals agencies and from the English media! Hardly 3% of the population understands theses things.

    High profile corruption and mega scams of UPA1&2 were never a priority with the present government. Government feels that it’s Dr.S.Swamy’s personal hobby, forte and lets him go after corrupt crooks.
    Nobody knows HDFC bank scam involving Cong-I pepper spraying former MP….. panama papers,……Nationalized and Private Banks underhand dealings during DeMo and RBI officials huge roles in siphoning off new currency notes and RRR during DeMo….what happen to officials who were caught?
    What is earlier case to case to suit case to suit case, mega corruption/scams/hawala saga in this country for nearly 70 years is that our country is on the verge of becoming soft/digital corruption destination. Even after DeMo still agencies “after raids” show us wads/suit case full of newly printed 2000 and 500 currency notes from Cong-I netas and their agents while we waited for rs.2500 per head in a long que then and now in banks we can see businessmen waiting for hours to draw over Rs.1.00 lakh and more!! It was revealed what for the amount is being withdrawn and if some deposits money what for it is being deposited and source of it?!!
    Who is responsible RBI/FM for selective approaches?
    Why government demands “security deposits” or Bank Guarantee (BG) or Pledging Fixed Deposits in the name of the concerned agency /President of India from entrepreneurs and looks the other way when it involves netas, babus and board members? Once is six or one year KYC/Re-KYC is needed for small bank account holders while no such thing is needed for fraudsters in this country!!
    I feel that “banking rules” must be revisited and fix the responsibilities on every employee.Younger ones working in Banks must be trained first.Today what is happening in Banks is that these so called younger ones are interested in “selling” his/her Banks’s “products” including Credit/debit cards instead of focusing and serving its customers first. When it comes to previous FIRCs/ BRC/ eBRC issues and FEMA we come across blank heads like Cong-I president. Banking employees do not know how to solve a problem.Their RMs sit on the issue for over a year and he/she gets transferred and the issue becomes older and older only to become a brahma-Rakshasi to haunt the customers at the end and the so called Banker/Authorized Dealers demand “customer copy of documents” already submitted to look into it again!! It is sad that UPAs phone banking produced huge NPAs while NDAs digitized banking is becoming a mess with untrained staff.

  2. In addition to ICICI, few other banks including SBI have also lent to this group, initially as individual banks and subsequently in a consortium arrangement. It’s high time a thorough scrutiny of all the amount lent to this group is done and culprits brought on record.

  3. What is the role of RBI in monitoring banks functioning ? Why feel shy to name R R R ? If the ownership details of bank are provided, one can track the investment to overseas shell companies controlled by Indians.

    Entire Board of bank is involved in this case. And I am sure buck will stop with UPA FM. Surprisingly no tweets from A Jaitley.

  4. Dear Sri Iyer Sir, It is incredible how these thieves get away with such massive corruption even after whistle blowers and the alternate media like yours reveal such wrongdoings. The entire Indian system of administration, management and enforcement appears compromised. Strangely, this rectification of the rot should have been the priority of the Modi government. Unfortunately Modi seems to have in fact enhanced the corrupt through his inability to appoint the clean and honourable people in the key positions of his cabinet. It is a pain to see the sheer brilliance and unfettered intelligence of Dr. Subramanian Swamy simply go to waste especially given his irreproachable integrity. Time is running out and hope the Modi government gets another term to make India great given the alternative is a non-starter.

  5. Rightly said, also Sebi / MCA/ RBI should publish the statutory auditors, Internal auditors, Company Secratry of ICICI bank and their intentionaal silence on these important issues. They must also reimburse for the loss.

  6. The govt must also probe lawyers, accountants, auditors and bankers who have facilitated such a fraud. This is not an isolated case but very commonplace in corporate India where the entire focus is on financial engineering to loot the country.

  7. Gr8 Sir, ya it’s absolutely necessary to punish such white collared theives. They deny the fraud when they are asked but when it is unveiled they disappear. SEBi and other regulators remain silent on such unethical and serious lapses of code of conduct and wake up only when pressure is build. Helpless shareholder have no option but depend on regulators. Now a day the definition of PID (Public Interest Director) needs to be changed to PID (Personally Interested Director). There are many such directors whose personal assets should be attached to compensate the loss suffered by the company because of their acts. Sree Iyerji great job down…

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