ICICI reviewing all loans disbursed in last 5 years

Bank readying to address regulatory inquiries, if any

MUMBAI: With the US markets regulator intensifying its probe into ICICI Bank Ltd, India’s second largest private lender is reviewing all loans disbursed over the past five years to overhaul processes, plug loopholes and prepare reports to address regulatory inquiries, if any.

The bank’s compliance division, risk management department and the arm that manages non-performing assets (NPAS) asked its main loans divisions last week to provide valuations of the securities (on loans that turned bad) over the past five years, three people directly aware of the latest review and the bank’s plans said, requesting anonymity.

Under the newly appointed chief operating officer Sandeep Bakhshi, ICICI Bank is trying to review and overhaul the credit disbursal processes to avoid controversies such as those surrounding its chief executive Chanda Kochhar, who is now on indefinite leave. Kochhar’s leadership came under a cloud because of allegations of a conflict of interest over loans made to Videocon Group, whose chairman had business links with her husband Deepak.

In the past two weeks, ICICI Bank’s loan divisions were also asked to prepare exhaustive reports on the trend in valuation of securities to check if valuations were inflated, one of the three people said.

An email sent to ICICI Bank on Friday remained unanswered.

The loans divisions were also asked to seek details of the offi-

cials who valued the loan assets; the officials who approved the appointment of valuers; the credentials of the valuers and the fees paid to them and so on, the first person said.

The officials concerned were given tight deadlines to submit all the data for five years to the respective heads of the risk management department, compliance department and the performance, information and value management group (PIVG) that manages NPAS, this person said.

Officials with risk management and the PIVG departments were given a deadline of three days that ended last week, said the second person.

“After the recent board-level changes, the top management is planning to review the credit disbursal processes followed by the The bank allegedly delayed impairment in 31 loan accounts to save on provisioning costs and inflate profits by $1.3 billion

bank so far and take corrective actions. The exercise was initiated following the regulatory probes into the bank’s dealings,” the second person said. “The objective is to avoid future controversies regarding the bank’s loan disbursal processes and strengthen corporate governance practices.”

On 26 July, Mint reported that the US Securities and Exchange Commission (SEC) has intensified its investigation into alleged wrongdoings with regard to loan disbursal by ICICI Bank.

SEC’S probe has gathered momentum after a whistleblower complained to the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) that ICICI Bank unfairly serviced at least 31 doubtful loans in order to delay provisioning and inflate profits between 2008 and 2016.

Referring to a Mint report on the US regulator’s ongoing probe, ICICI Bank in a SEC filing on Saturday (India time), said: “The bank has been responding to requests for information from the SEC investigatory staff regarding an enquiry relating to the timing and amount of the bank’s loan impairment provisions taken under US GAAP (generally accepted accounting principles). The bank evaluates loans for impairment under US GAAP for the purpose of preparing the annual footnote reconciling the bank’s Indian GAAP financial statements to US GAAP. The bank has voluntarily complied with all requests of the US SEC investigatory staff for information and interviews related to the bank’s US GAAP loan impairment process.” MUMBAI: The Reserve Bank of India (RBI)’S monetary policy committee (MPC) may raise policy rates by 25 basis points (bps) on Wednesday but is expected to maintain its neutral policy stance, given the volatility in crude oil and food prices, economists say.

Of the 15 economists surveyed by Mint, 12 expect RBI to raise its repo rate, the rate at which it lends to commercial banks, to 6.5%. Only three economists expect the central bank to keep rates unchanged at 6.25%.

Since the last rate hike in June, food and consumer price inflation have surprised to the downside, while core inflation has accelerated. Consumer price inflation quickened to 5% in June, slower than the 5.3% consensus estimate of economists, but faster than the 4.87% pace in May. Core CPI, excluding food and fuel, accelerated to 6.4% from 6.2% in May, adding to RBI’S concerns. While global crude prices have declined, they are still hovering above $70 per barrel, which could push the CAD wider.

The previous policy cited uncertainties around the implementation of minimum support price (MSP) as one of the factors that could stoke inflation. With the centre announcing a doubledigit increase in MSP, economists believe that its impact on inflation could be limited as much of it depends on its implementation. Economists believe that risks to the medium-term inflation target of 4% have increased, warranting a rate hike.

“With real rates less than MPC’S preferred range of 175bps, we believe a hike will reaffirm its commitment towards inflation targeting framework and play a key role in reducing risks to macroeconomic stability amidst several global uncertainties,” said Anubhuti Sahay, senior economist at Standard Chartered Bank. While a rate hike is almost unanimous, many economists believe that RBI will maintain its neutral policy stance and wait to assess the impact of monsoon and fiscal developments before changing its stance.

The majority of economists expect one more rate hike before the end of the fiscal year. But some believe that RBI will pause as growth and inflation peak off in the second quarter.