ICICI Board split on Chanda Kochhar’s fate
■ Fitch sees credibility crisis
■ FINANCE MINISTRY is of the view that it is not their role to look into the affairs of ICICI Bank but the RBI as a regulator could look at allegations heaped against the bank’s CEO Chanda Kochhar.
The fate of ICICI Bank CEO Chanda Kochhar appears to be uncertain with the lender’s directors are reportedly divided over the future course of action.
“The board of ICICI Bank Ltd., is divided over whether to ask her ( Ms Kochhar) to step down as federal authorities investigate allegations of impropriety over loans made to Videocon group,” said news agency Bloomberg quoting its sources.
According to the news agency, some independent directors are opposed to Ms Kochhar continuing in her role and the board may meet as early as this week to consider its next course of action.
Apart from five executive directors, the 12member ICICI Bank board has six independent directors and a government director.
The news agency also quoted ICICI Bank spokesman of calling its information “totally baseless and incorrect”.
After the controversy over the bank’s lending to Videocon broke, the ICICI board met on March 28 and reviewed credit approval processes and found them to be robust. It also ruled out any quid pro quo, nepotism or conflict of interest and expressed “full faith and confidence” in its CEO.
However, the board’s stamp of approval may not be enough to help the bank to tide over the credibility crisis as Fitch Ratings believes that the ongoing probe could undermine investors confidence in the bank.
The ratings agency said it will closely monitor developments, and would take appropriate rating action if risks to the banks’ reputation and financial profile were to rise considerably.
“An investigation into allegations that India’s ICICI Bank extended a loan with a potential conflict of interest raises questions over the bank's governance and creates reputational risks. Other regulatory sanctions are also possible, depending on the outcome of the investigation,’ it said.
Fitch believes corporate governance at private banks, such as ICICI, is generally stronger than at state- run banks due to better- qualified board members and more professional management. Moreover, compensation structures at private banks are more performanceoriented.