The hunt for a new Chairman of ICICI Bank couldn't have come in more trying times for India's biggest private lender.
The bank's CEO and Managing Director, Chanda Kochhar, is on an “annual leave,” with several investigations taking place over the alleged provision of loans on quid pro quo basis, benefiting her relatives.
Shares of the company had tanked nearly 8 per cent when the allegations first surfaced in end-March. Though there was a correction after news came on investigations, the bank’s stock has fallen by over 8.7 percent in May, eroding almost Rs 15,960 crore worth of shareholder value.
On the financial performance, despite meeting analyst expectations, its profit halved to Rs 1,020 crore in the fourth quarter ending March 2018, due to a 17 percent jump in non-performing assets to Rs 54,063 crore, constituting 8.84 percent of its total loans.
There is also buzz that a well known rating agency has not been given appointments at the bank, after it came out with a critical report, detailing the impact allegations would have on the lender.
The company is hoping that the changes in the board, and Kochhar’s absence (leave duration is yet undisclosed) till the enquiry is through, may soothe the apprehensions of its investors over the uncertainty given Kochhar’s non-communication.
The present chairman MK Sharma's term ends on June 30, 2018.
But a token change wouldn't suffice.
“One can say that the restructuring of the ICICI Bank Board is a positive development... As of now, one does not know what action the new board will take. But if they were to endorse Chanda Kochhar’s actions, then somewhere it would put them in the same light as the previous board,” said Hemindra Hazari, an independent banking analyst.
Sharma, the present chairman, is seen as close to Kochhar. He has been a director on the ICICI Bank board since 2003, and had joined under Kochhar’s predecessor KV Kamath. He was appointed the chairman in 2015.
While the bank had cleared Sharma's appointment for a five-year period, the RBI had given approval only for three years, which ends this month.
Sharma came under media focus during a hurriedly called press conference. Reports by then had come on the alleged quid pro quo while granting loans to the Videocon Group.
In October 2016, a shareholder whistleblower, through a blog, alleged that the loans were given despite the Videocon Group’s promoter Venugopal Dhoot being an investor in Nupower Renewables, whose founder is husband of Kochhar.
A day before media reported this, ICICI Bank informed the stock exchanges that an internal probe, following the whistleblower’s complaint, did not find any wrongdoings by Kochhar.
And at the conference, Sharma steadfastly defended Kochhar. He said, "The Board has full confidence and reposes full faith in the Bank’s MD & CEO, Ms. Chanda Kochhar."
But mounting pressure has led to investigations.
The Serious Fraud Investigation Office (SFIO) and the Central Bureau of Investigation (CBI) is examining the case and markets regulator Sebi has also issued notice to the bank for allegedly violating the disclosure requirements in the case.
The board had last week ordered an independent probe into yet another fresh anonymous allegation of “conflict of interest” and “quid pro quo” in Kochhar’s dealing with certain borrowers.
On Monday, the Parliamentary Panel is said to have posed queries before Indian Banks’ Association (IBA) members including State Bank of India (SBI) chief Rajnish Kumar and Punjab National Bank (PNB) managing director Sunil Mehta on the alleged "nepotism" by Kochhar in the Videocon loan. A consortium of 20 banks had given the loan.
While the nature of the probe and its duration is uncertain, the bank has said the enquiry will cover all “connected matters” in the course of investigations to bring the matter to a final close.
While technically, Sharma can get another extension, chances are slim.
The board has already seen three changes in the last two months.
On April 5, almost a week after the “conflict of interest” issue came to light, the government replaced its nominee, Amit Agarwal - who was part of earlier board decisions - with Lok Ranjan, then a joint secretary in the Department of Financial Services.
Later, two other independent directors were changed, followed by the appointment of Radhakrishnan Nair and MD Mallya on the board.
Both Nair and Mallya are former public sector bankers, and come with considerable experience. While Nair has had stints with the stock market and insurance regulator, Mallya, in his previous roles has been the chairman and managing director of Bank of Maharashtra and Bank of Baroda, the third largest government bank.
Of the total eight independent directors, others are Uday Chitale, Dileep Choksi, Neelam Dhawan, and VK Sharma, the LIC chairman.
Will one of these eight directors be the new Chairman or will the bank bring a new face?
The Board also includes five directors who have executive role in the bank. These are - apart from Kochhar - NS Kannan, Vishakha Mulye, Vijay Chandok and Anup Bagchi.