Beena Parmar & M Saraswathy
Axis Bank MD & CEO Shikha Sharma’s decision to step down is seen adding to the pressure on the ICICI Bank board to re-examine the tenure of its MD and CEO, Chanda Kochhar.
Sharma’s exit follows the Reserve Bank of India’s directive to the Axis Bank board that Sharma’s tenure to be extended for only a year, and not three years, as was decided in July last year.
At ICICI Bank, Kochhar is battling allegations of nepotism over loans given to Videocon Group whose promoter Venugopal Dhoot had business dealings with her husband Deepak Kochhar's firm. When reports about the Dhoot-Kochhar link first surfaced last month, the ICICI Bank hastily issued a statement backing Chanda Kochhar. But media reports over the last few days hint that the board members are divided on the issue.
The Finance Ministry is understood to be keeping close tabs on the developments at ICICI Bank, although there is no official word from the government yet.
“Investigative agencies are already probing the allegations. The government is getting updates on the matter on a daily basis,” said a banking source, who didn't want to be named.
The executive added that the government will let the Reserve Bank of India take a call on the matter and if required, will intervene directly.
The issue of Chanda Kochhar leadership is likely to be discussed at the next board meet of ICICI Bank to be held shortly.
According to JN Gupta, MD at Stakeholders Empowerment Services, "It is for the independent directors to safeguard their reputation and come out with a call...Here, RBI should do its duty given that they know the best facts."
On calls for an external, independent probe, Gupta said this would question the independence of ICICI Bank's independent directors.
Government on ICICI Board
The government nominee on the board of ICICI Bank is Lok Ranjan, Joint Secretary in the Department of Financial Services. LIC Chairman VK Sharma is also on the board. Agrawal was replaced by Lok Ranjan on April 5.
It has come to light that both, the previous government representative Amit Agarwal and Sharma, were missing from the March 28 board meeting held by ICICI Bank. At the meeting, the Board gave a clean chit to Chanda Kochhar, ruling out any wrongdoing in the Rs 3,250-crore loans given by the bank to Videocon Group.
LIC representative was away in the US due to his prior commitments.
A senior LIC official said, "They (Bank) are aggressively trying to sort out the issue and that space needs to be given to them."
Sources said that LIC has reposed its faith in the bank and the functioning of the organisation.
Contrary to reports, the country's largest insurer has denied seeking any meeting with the bank board. But it is keeping a close watch on this matter, being a large shareholder.
A Business Standard report said, the Life Insurance Corporation of India (LIC), which holds about a 9.4 percent stake in ICICI Bank, and the government’s new nominee on the private lender’s board have called a meeting of the bank’s top management this week.
"There is no such official meeting being sought by us," said a LIC official close to the development.
Institutional investors are understood to be raising concerns over the alleged irregularities and conflict of interest in the bank’s Rs 3,250-crore loan to the Videocon Group in 2012. Dhoot set up NuPower Renewables, along with Chanda Kochhar's husband Deepak Kochhar.
On Monday, the private sector lender continued to face the heat as global rating agency Fitch said allegations over the loan to Videocon raise questions of corporate governance and pose reputational risks for the bank.
“Fitch will closely monitor developments, and would take appropriate rating action if risks to the bank’s reputation and financial profile were to rise considerably,” it said in a statement.
“That said, the bank’s rating is underpinned by relatively strong capitalisation and profitability,” it added.
This comes against the backdrop of declining investor confidence and concerns over losses incurred due to the decline in the bank’s stock price.
ICICI Bank has lost over 8 percent of its value since reports about the alleged conflict of interest against Chanda Kochhar came to light last month.
On Monday, the ICICI Bank stock closed at Rs 280 per share on BSE.
Meanwhile, the CBI questioned Kochhar’s brother-in-law Rajiv Kochhar for the fifth straight day. He is likely to be questioned on Tuesday as well.
The CBI is expected to widen its investigation and question more officials from NuPower Renewables, which was founded by Deepak Kochhar, husband of the ICICI Bank chief and Rajiv Kochhar's brother.
Since last week, Rajiv Kochhar, Videocon’s consultant, Mahesh Chandra Pungalia, have been quizzed by the CBI as part of the investigations.
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