UNDER PROBE, ICICI’S KOCHHAR QUITS, BAKHSHI TAKES OVER

MUMBAI: Confronting a multiagency probe of allegations of loans-for-favours and conflict of interest, Chanda Kochhar resigned on Thursday as managing director (MD) and chief executive officer (CEO) of ICICI Bank Ltd in a turbulent end to an almost 35-year banking career in which she rose up ranks from the position of a management trainee.

Kochhar, 56, on an enforced leave of absence since early June, was replaced by Sandeep Bakhshi, serving as the bank’s chief operating officer over the past four months, who was appointed as the new MD and CEO for a term of five years, the bank said in a statement.

“The Board of Directors of ICICI Bank Limited accepted the request of Ms Chanda Kochhar to seek early retirement from the Bank at the earliest. The Board accepted this request with immediate effect. 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 said.

The bank’s board has appointed retired Supreme Court Judge BN Srikrishna to look into the allegations against Kochhar, including one of loaning money to Videocon Group in an alleged quid pro quo for the group’s business dealings with her husband Deepak Kochhar, founder of NuPower Renewables. In March, she was summoned by the Serious Fraud Investigation Office (SFIO) in connection with loans extended to fugitive Mehul Choksi’s Gitanjali Group. In the same month, a whistle-blower complained against the bank and its top management, including Kochhar, alleging a deliberate delay in recognising impairment in 31 loan accounts between fiscal 2008 and March 2016 to save on provisioning costs and inflate profits by $1.3 billion over eight years.

On April 12, the Securities and Exchange Board of India (Sebi) began a probe into alleged corporate governance lapses at the bank and failure to make adequate disclosures about the loan to Videocon Group.

“The board’s decision to accept Kochhar’s resignation is not surprising,” N Vaghul, former chairman of ICICI Bank, told BloombergQuint. “The bank’s growth before this controversy was quite impressive... As for the controversy itself, I can say, right now they’re allegations.”

Kochhar will also be stepping down from the boards of all ICICI Bank subsidiaries, the bank, which had initially exonerated her of the Videocon-related allegations, added in its statement. Kochhar’s term was supposed to end in March 2019.

Investors cheered the exit of Kochhar that removes some of the uncertainty surrounding ICICI Bank, an institution she joined as a management trainee in 1984 when it was a staid development bank. Shares of the lender, which converted itself into a full-fledged commercial bank in the early 1990s, rose 4.1% to ₹315.95 on a day the Bombay Stock Exchange’s benchmark Sensex plummeted 806 points, or 2.24%, to 35,169.16 points

“Investors were worried about the management transition issues at ICICI Bank and were eagerly awaiting the outcome of the Srikrishna Committee, which was appointed to investigate allegations of a quidpro-quo arrangement by Ms Kochhar,” Macquarie Research wrote in a note to investors. “Though the board has said clearly that this move doesn’t necessarily affect the enquiry instituted by the board, we believe the outcome of the report to be submitted by the committee now has less relevance from a stock perspective. Investors like certainty, and Ms Kochhar also has relinquished office from the Board of Directors of the banks’ subsidiaries.”

It was in 2009 that Kochhar stepped into the shoes of her predecessor KV Kamath, who had aggressively converted a development financial institution focused on long-term lending into a consumer-focused commercial bank. As part of Kamath’s dream team, Kochhar was rotated through critical roles, including as head of retail banking and chief financial officer.

In 1993, after the financial institution got the central bank’s approval to convert into a new generation private bank, Kochhar was on the front lines, recruiting from 40 different organisations, selecting a core banking software platform and even designing the bank’s first cheque books. In 2000, Kamath enlisted Kochhar to build the bank’s retail business from scratch. At that time, she was overseeing the bank’s corporate business which accounted for about 50% of the institution’s balance sheet; in six years, Kochhar ramped up the retail business to about 67% of the bank’s balance sheet.

After taking over as ICICI Bank’s MD & CEO, Kochhar’s first task was to shrink the balance sheet, which was suspected of harbouring inconspicuous non-performing assets growing against the backdrop of an unprecedented global credit crunch in 2008. Her list of priorities also included improving the share of low-cost current-account-savings-account deposits as part of the total deposits (26% then), credit quality and capital conservation.

Her tenure has not been without controversy: while ICICI Bank’s net profit improved from ₹878 crore in June 2009 to ₹1,650 crore in December 2017, bad loans ballooned from ₹9,416 crore to ₹46,038 crore during the same period.

Bakhshi will lead ICICI Bank till October 3, 2023, subject to regulatory approval, while other conditions of his appointment remain unchanged, the bank said.

MD Mallya, one of the independent directors of the bank also resigned from the board on Thursday, citing health reasons, the bank said.