Chanda Kochhar may have stepped aside at ICICI but her shadow looms large

The private lender's board created a new position -- that of Chief Operating Officer (COO) -- and brought in Sandeep Bakhshi to fill the role. Bakhshi has been with ICICI for a long time, and was heading group company ICICI Prudential Life Insurance before the board rang him up.

Even before the announcement was made, expectations of a move like this one pushed ICICI Bank's up 4.07 percent, even as the shares of most of its peers like HDFC Bank, Axis Bank and Kotak Mahindra Bank, declined.

But on Tuesday morning, the ICICI Bank scrip was down one percent.

Nothing changed?

Late on Monday evening, the bank released a statement that it had appointed Bakhshi as whole-time director and COO of ICICI Bank for five years, effective Tuesday, subject to regulatory approvals.

Also Read: COMMENT | Like Kochhar, the ICICI Bank board should go on leave, but permanently

"This has created a boundary between the CEO and the second rung roles. So, the present structure created is a temporary structure till the inquiry finds her guilty or exonerates her…This new position created keeps the respect of the current CEO intact," said JN Gupta, Co-Founder and MD, Stakeholders Empowerment Services.

Once approved, Bakhshi (57) will take charge of all the business and corporate functions at ICICI Bank and will report to Kochhar, who will continue to remain the CEO and MD. The bank's board will now report to him.

"This clearly means that nothing changes for the bank materially. They were put to the wall by Sebi's show-cause notice and they had to give something substantive for which they called upon an independent inquiry. So it was not change of heart but circumstantial questioning that called for this move," a senior analyst said.

Kochhar will continue to be on leave till the ongoing independent inquiry, headed by former Supreme Court judge BN Srikrishna, is concluded.

In haste

The latest development has also brought the focus back on ICICI Bank's board, which supported Kochhar, when allegations were first leveled against her in March.

After a whistleblower first raised the issue in October 2016, media reports in March alleged that Kochhar had conflict of interest while giving loans to Videocon Group.

The reports said that Venugopal Dhoot, promoter of the Videocon Group, had business dealings with a renewable energy firm owned by Kochhar's husband, Deepak Kochhar, and that the bank's loan deal was quid pro quo.

Videocon group is currently undergoing insolvency and bankruptcy proceedings.

ICICI Bank's board had continued to support Kochhar, denying any wrongdoing on her part, and ruled out any quid pro quo or conflict of interest in the sanctioning of loans to some corporate borrowers, which was alleged by another whistleblower last month.

Instilling confidence

ICICI Bank is now hopeful that its latest move helps instill faith in investors that Kochhar is away from the bank's functioning.

"Recusal or absence is at best an optical illusion. If you are a strong person, I can still control you from a remote place…Investors are reading that Chanda Kochhar is on her way out eventually, but I read it as March 2019," said Gupta.

Kochhar's second five-year term as the bank's CEO will end in March 2019.

Former ICICI Bank CFO and Executive Director NS Kannan has now been moved to fill Bakhshi's shoes as MD and CEO of ICICI Prudential Life Insurance, which automatically rules out his coming back to the bank.

"Mr Bakhshi is yet to be tested and so this uncertainty might keep investors wary," Gupta said.