Icici.docx

ICICI BANK CHANDA KOCHHAR CASE

Kochhar impact on ICICI Kochhar is credited for consolidating the operations of the bank after the departure of K V Kamath. The bank, with roots in development finance, has also seen a massive rise in its sour assets, courtesy mainly on exposure to the infrastructure sector, along with its peers, which led to a massive drop in profit in recent quarters. What’s the issue? Kochhar and her family members facing allegations of quid pro quo and conflict of interest with respect to a loan extended to certain entities, including the Videocon group. Multiple agencies, including the CBI and regulator Sebi, are already probing the alleged lapses involving Kochhar and her family members. “Kochhar has decided to go on leave till completion of the enquiry as announced on May 30. The board has noted and accepted this. During her period of leave, the COO will report to the board,” the statement said. The current tenure of Kochhar, who has been at the helm since 2009 and has been on “annual leave” for some time now, ends next March. Complicated Controversy Kochhar, a career ICICI Group employee has been under the cloud since late March, when allegations of conflicts of interest and possible quid pro quo in lending to Videocon group, along with lack of disclosures by the bank, made headlines. Following reports of allegations based on an activist’s complaint, the bank board earlier had come out strongly in support of her. Complicating the matters for her, the bank received another complaint against Kochhar by an internal whistle-blower, who made allegations of not following the bank’s code of conduct, late May. This led the board to announce a detailed probe by an external expert into the allegations. Retired Supreme Court judge B N Srikrishna would be heading the probe panel. According to sources, he has accepted the request from the bank and the terms of reference for the panel are to be decided by the audit and governance committee of the bank.

While the contents of the whistle-blower’s complaint are not known, the first set of allegations against Kochhar pertains to alleged impropriety while lending to the cash-strapped Videocon Group and companies associated with the Ruia family, the promoters of beleaguered Essar Group. However, the statement from the bank did not have any mention of it. The cases under scanner include the bank extending Rs 3,250 crore to Videocon Group in 2012 and the involvement of Chanda Kochhar’s family members, including her husband Deepak Kochhar, in first sanctioning the loan and then restructuring the same through Avista Advisory, a company run by his younger brother Rajiv Kochhar. There are also allegations that NuPower — a company floated by Videocon group and Deepak — got investments of Rs 325 crore from the Mauritius-based Firstland Holdings, a firm owned by Nishant Kanodia, the son-in-law of Essar Group co-founder Ravi Ruia.

TIMELINE: October 2016: The issue of alleged irregularities in loans comes into the light, after a shareholder whistleblower Arvind Gupta, an investor in both ICICI Bank and Videocon Group, raised concerns through a blog. Gupta alleges that Chanda Kochhar influenced an Rs 3,250-crore loan to the Venugopal Dhoot-led Videocon group in 2012 in return for a deal in NuPower Renewables and Supreme Energy, a clean-energy firm run by her husband Deepak Kochhar. Gupta writes to the Prime Minister, the RBI Governor and several other authorities demanding a probe. His complaint, however, gathers no attention. March 2018: The case again comes in spotlight when another unnamed whistleblower complains against the bank and its top management, including Kochhar, alleging a deliberate delay in recognising impairment in 31 loan accounts between 2008 and 2016 to save on provisioning costs. These allegations lead to probes by multiple agencies, including the CBI, ED and SFIO, and also questioning of Kochhar family members.

March 28, 2018: The bank states that it has reviewed internal processes for credit approval and 'found them to be robust'. The statement points out that the decision to lend to Videocon Group was taken at the consortium level. Even though Kochhar was part of the lending committee that approved the loan, she did not have any personal stake in it. The bank's board also expresses full faith in Kochhar, denying any wrongdoing on her part and ruling out any 'conflict of interest'. March 31, 2018: The Central Bureau of Investigation (CBI) files an initial inquiry. The investigative agency later also questions Deepak Kochhar and his brother Rajiv Kochhar. April 3, 2018: Coming to the defence of its CEO Chanda Kochhar, then ICICI Bank and rules out any quid pro quo as alleged with regard to the loan given to Videocon group. "The board has come to the conclusion that there is no question of any quid pro quo/nepotism/conflict of interest as is being alleged in various rumours," he tells reporters. April 4, 2018: The Serious Fraud Investigation Office (SFIO) seeks the Ministry of Corporate Affairs' nod to probe ICICI Bank's Rs 3,250 crore loan to the Videocon group in 2012. May 23, 2018: The Securities and Exchange Board of India (SEBI) serves a notice to ICICI Bank's CEO and MD Chanda Kochhar on dealings of the lender with Videocon Group and NuPower Renewables, an entity promoted by her spouse Deepak Kochhar. The market regulator asks Kochhar and the bank to submit their responses till June 7 in relation to a 12-page show cause notice it served to ICICI Bank and Kochhar on May 23. May 30, 2018: The ICICI Bank board starts an independent probe. June 2018: The bank appoints retired Supreme Court judge Justice BN Srikrishna to head the independent panel initiated by ICICI Bank’s board. June 8, 2018: ICICI Bank and Chanda Kochhar seek more time to respond to the show cause notice served by markets regulator SEBI. July 5, 2018: SEBI asks Kochhar to reply to the show cause notice over alleged violation 0f listing disclosure norms by July 10. Kochhar and the bank had missed the June 7

deadline and sought more time to respond to the notice due to lack of documentary proof that support the allegations. October 4, 2018: The ICICI Bank board accepts Chanda Kochhar's request to seek early retirement. The bank says that the enquiry instituted by the board will remain unaffected and certain benefits will be subject to the outcome of the enquiry. January 24, 2019: The CBI registers an FIR against Chanda Kochhar, her husband Deepak Kochhar and Videocon group MD Venugopal Dhoot over alleged irregularities in loans sanctioned by the bank to the group in 2012. January 30, 2019: Following the report, the bank's board says it will treat her separation as 'termination for cause' under their internal policies.

ANALYSIS: Chanda Kochhar, the managing director and chief executive officer of ICICI Bank, is at the center of a scandal that broke out after a whistle-blower alleged that the bank sanctioned loans to Videocon because its chairman Venugopal Dhoot had dealings with NuPower, a company founded by Kochhar’s husband, Deepak Kochhar. The Videocon loan later turned into a nonperforming asset. Nearly 86 per cent of the loan remains unpaid. The Income Tax Department has issued a notice to Deepak Kochhar, husband of ICICI Bank MD and CEO Chanda Kochhar, in connection with its tax evasion probe in the Videocon bank loan case. They said the notice has been issued to Deepak Kochhar under section 131 (power regarding discovery, production of evidence) of the I-T Act and he has been asked to furnish details of his personal finances, Income Tax Returns (ITRs) for the last few years and business transactions with the firm NuPower Renewables. Media reports have suggested that Videocon’s promoter Venugopal Dhoot was one of the first investors in a renewables company promoted by Ms. Kochhar’s husband Deepak Kochhar called NuPower Renewables in 2008. He subsequently sold his stake but companies controlled by him or associates close to him maintained a relationship with NuPower Renewables till early 2013 when its control was finally transferred to a trust controlled by Deepak Kochhar. In January 2009 just after buying a stake in NuPower, Dhoot transferred his shares to Deepak Kochhar for Rs 2.5 lakh and resigned as director. But the association with the Dhoot family did not end there. In March 2010, NuPower got a loan of Rs 64 crore by a company named Supreme Energy, entirely owned by Mr. Dhoot. At the end of the same month, Supreme Energy became a 94.99 percent shareholder in NuPower. The remaining shares were held by Mr. Kochhar. In November 2010, Dhoot transferred his entire stake in Supreme Energy to associate

Mahesh Chandra Punglia. From September 2012 to April 2013, Punglia transferred his holding to Pinnacle Energy, a trust, where Deepak Kochhar was the managing trustee. Few notices have been sent to the people associated with the firm. In a related development, Deepak Kochhar will be called for questioning soon. ICICI has denied any wrongdoing on its part and that of Chanda Kochhar. In a statement the bank denied any conflict of interest and said that Videocon is not an investor in NuPower and that the renewables firm did not have a banking arrangement with ICICI. The ICICI Bank board came out in support of Chanda Kochhar, saying it has full faith and confidence in her and described reports to Videocon group as “malicious and unfounded rumors”.