Chanda Kochhar : Crash of the Banking Sector

Chanda Kochar,ICICI Bank,scam
Chanda Kochar, ICICI Bank, scam | Image: PTI

Chanda Kochhar, who was arrested for a cash-for-loan scam on Friday, was once a powerful banker and instrumental in making ICICI Bank the country’s biggest private-sector lender.

Kochhar, a regular feature on Forbes’s top global honcho’s lists, was arrested by the Central Bureau of Investigation (CBI) along with her husband Deepak Kochhar in connection with alleged cheating and irregularities in loans sanctioned by ICICI Bank to Videocon Group companies.

Kochhar was called to the agency headquarters and arrested after a brief questioning session.

Her chapter at ICICI Bank ended abruptly in 2018 when the board of directors approved a request from Kochhar to seek early retirement following allegations of corruption and quid pro quo while extending loans to the now-bankrupt Videocon Industries.

Kochhar, who rose to occupy the corner office at the largest private sector lender, was mired in allegations of conflicts of interest, lack of disclosures and quid pro-quo while extending loans to Videocon.

She, in fact, was the first woman to head a large lender in the country.

Kochhar, a favourite of the then group chairman K V Kamath, joined ICICI, an infrastructure lender in its earlier avatar, as a management trainee in 1984. She rose to play an important part in its transformation into a retail-focused lender when it turned into a commercial bank in the early 1990s.

In 2009, she was chosen to succeed the larger-than-life Kamath as the managing director and chief executive despite a strong leadership bench.

Her elevation also led to the exit of Shikha Sharma (former Axis Bank chief), who was senior to her in ranking in the group. Before her elevation to the corner office, she was a key member of the bank’s management, and oversaw the retail business and was also chief financial officer.

While Kamath faced many bank runs during his tenure, Kochhar’s firm control on the institution led to a complete stoppage of such negative press.

There was just one bank run incident during her tenure. When an RBI review in 2015 found high amount of under-reported dud assets with the bank, she announced a new strategy of concentrating only on well-rated borrowers.

She also championed many social causes but it was her inspiring rise to the top that was most admired. Yet, she perplexed many with her contrarian views like girls lack quantitative analytical skills, leading to limited number of women in B-schools.

Over the years, her leadership of the bank became a hyphenated relationship, wherein she came to define ICICI Bank, till the announcement of her formal exit six months after allegations of impropriety first cropped up, though she had been on an indefinite leave after the board was forced to launch an external probe into the entire issue.

The reasons for her ouster pertain to a loan to Videocon and the business dalliances between its promoter Venugopal Dhoot and her husband Deepak Kochhar.

Dhoot had invested in and subsequently exited a power company promoted by Deepak and Chanda Kochhar did not recuse herself or disclose this when a loan was granted by ICICI Bank to Videocon as part of a consortium.

Initially, she enjoyed the full backing of the board but lost support as the list of allegations kept growing, with more names such as an Essar group shell company of the Ruias emerging among those with which the Kochhar family had links.

However, the gains from the Ruia ties were only a fraction of Videocon’s loan of Rs 3,250 crore in FY11, which soon turned dud. These allegations led to probes by multiple agencies, including the CBI, ED and SFIO.

Finally, it was a complaint by a whistleblower, who is yet to be named, which proved to be her undoing.

After exonerating her initially in the face of Videocon allegations, the bank launched an independent probe by retired judge B N Srikrishna and Kochhar went on indefinite leave pending the enquiry.

This led to Sandeep Bakhshi being made the chief operating officer to oversee the day-to-day operations. Kochhar had six months to go before her current term expired in March 2019.

Regulations allow private sector bank chiefs to continue till the age of 70. Her offer to resign was accepted with immediate effect.

In the past few months, shareholders have sought clarity on the issue at annual meetings and also raised concerns over the bank’s move to appoint her as the chairman of the group’s securities arm.

Kochhar, who maintained a huge public profile, had been away from public glare since her forced leave.

From a performance perspective, when she took over ICICI Bank, it was the second largest in the system and the largest among its private sector peers.

But at the end of her career, it slipped to a distant third spot in the sector and the second largest private sector lender after HDFC Bank.