ICICI-Videocon saga raises corporate governance concerns 

The issue remains to be seen whether loan to Videocon was the only one where Chanda Kochhar misused her authority and sanctioned the loan against gratification, or there are many more such cases?

Chanda Kochhar

Recently, former MD and CEO of ICICI Bank, Mrs Chanda Kochhar was arrested by Central Bureau of Investigation (CBI) on charges of corruption and misuse of power to irregularly lend money to Videocon Group. This was done against Videocon Group then investing in Mrs Kochhar’s husband’s company Nupower Renewables. In other words, this can be deemed to be a kind of kickback paid to Kochhar for sanctioning loans to Videocon Group. Total loan advanced by ICICI Bank to Videocon Group is around Rs. 3,900 crores. However, this whole controversy has two critical angles. First is the gross misuse of power by which Mrs Kochhar irregularly sanctioned loans to Videocon Group. Second and the larger concern is that this controversy doesn’t only involve ICICI Bank alone, but other 54 banks advanced loans aggregating to around Rs. 40,000 crores. The bigger question that looms large is how were top managements of so many banks made to engage in irregularities and misuse of their authority to fund Videocon Group. 

The astounding level of irregularities in disbursing loans to Videocon is distinctly visible in case of ICICI Bank. There are allegations that Mrs Kochhar misused her authority and indulged in corruption, lack of disclosure of interest, and conflict of interest while sanctioning loans to Videocon Group. It is now come to the notice of the investigative agencies that she was staying in the flat owned by Videocon Group companies or promoters. She didn’t make the relevant disclosure while chairing the credit committee that sanctioned loans to Videocon Group. Over and above that, she is mired in allegations of indirectly taking bribes from Videocon Group in form of Videocon Group funding Nupower Renewables. Nupower Renewables is beneficially owned by Mrs Kochhar’s husband Deepak Kochhar. Mrs Kochhar headed the credit committee that sanctioned Rs. 300 crores to Videocon Group and immediately next day Videocon Group through its group company Supreme Energy Pvt. Ltd. gave Rs. 64 crores to Nupower Renewables. 

This raises concerns of corporate governance, conflict of interests, and oppression and mismanagement. Here, other questions that have now cropped up in minds of many people are: 

Is this (Videocon) loan the only one where Mrs Kochhar misused her authority and sanctioned the loan against gratification, or there are many more such cases? 

Did Mrs. Kochhar do this all alone or she had other members of the board and credit committee who supported her in all these wrong doings? This becomes more important and serious issue, considering the fact that for a long time the whole board of ICICI Bank steadfastly stood with Mrs Kochhar and stated that there was no subversion of corporate governance and no case of mismanagement and misused of authority and corruption in the lending operations of the bank. How did the bank manage to keep its Non Performing Assets (NPA) levels down? Was there a case of window dressing of the balance sheet or did bank further engage in ever greening of loans? 

How did this escape the scrutiny of RBI officials and auditors? Is there a case of professional misconduct and failure to exercise proper audit procedures on the part of RBI officials and auditors? 

What is the role of independent directors and how can they engage more effectively in ensuring proper corporate governance? 

However, this issue is not just restricted to ICICI Bank. Total borrowings of Videocon Group are around Rs. 40,000 crores. This includes many PSU Banks. Total exposure of PSU Banks in Videocon Group exceeds Rs. 20,000 crores. This raises questions on the operations and management of PSU Banks. Here the elephant in the room is what were banks doing after loans were advanced to Videocon? The reason this question has arisen is that the assets of Videocon were sold and banks collectively got Rs. 3,000 crores against loans of around Rs. 40,000 crores. This is a case siphoning and diversion of funds from Videocon. People in the know of things believe that this cannot happen without active support of the top management of the banks who have advanced loans to the company. 

While Mrs Kochhar is arrested and investigation is done to expose her role in lending ICICI Bank’s money to Videocon Group, no investigation is done in the role of PSU Banks and its top management who advanced money to Videocon Group. Here it is imperative to know that Governments after Governments have bailed out PSU Banks who were riddled with NPAs with taxpayer’s money. 

Hence it is even more important to know who all from PSU Banks were involved in lending money to Videocon Group and how were they rewarded. In the past we have seen PSU Banks lose money after lending huge sums to Vijay Mallya and Nirav Modi. In Videocon case PSU Banks stand to lose around Rs. 20,000 crores. It is the responsibility of the Government to bring in light the truth about who all from PSU Banks were involved and instrumental in lending public money to Videocon Group that resulted in losses of Rs. 20,000 crores. The corporate governance of PSU Banks is now under question. 

Sumeet Mehta is a Chartered Accountant by qualification and a Corporate Finance Professional. He is author of “Diagnosing GST for Doctors”. He tweets from @sumeetnmehta