The arrest of Videocon chairman Venugopal Dhoot by the Central Bureau of Investigation (CBI) almost four years after it had filed an FIR in the matter closes the enquiry loop around one of the most infamous cases in Indian banking.
Just five days ago, the CBI had arrested Chanda Kochhar under whose watch as its CEO, ICICI Bank is alleged to have favoured Dhoot with a Rs 3,250 crore loan. As a quid pro, he invested in NuPower Renewables, a company owned by Chanda Kochhar’s husband Deepak Kochhar, who was also taken into custody on the same day.
The charges and the investigations date back to 2018 when a whistleblower forced the Reserve Bank of India and ICICI Bank’s board to mount an enquiry into the loan and the conduct of the CEO. Following that, Chanda Kochhar was terminated as CEO with even her retiral benefits denied to her, presumably as evidence that there was clear wrongdoing in the matter.
But the case itself has been meandering since then. This week’s arrests by the CBI therefore goes some way in alleviating fears that the case is being handled with kid gloves, a sequence that started with the bank board’s unseemly haste in giving its CEO a clean chit in April 2018, within days of the controversy first breaking.
That’s not enough though. The investigations have to go to the heart of the case, and lay bare the rot that allowed such transactions to take place.
There are two reasons why this isn’t just one more case of bank fraud. ICICI Bank’s importance lies not just in its size as one of the country's largest private banks. It is also on the RBI’s list of Domestic Systemically Important Banks (D-SIBs) along with others like State Bank of India and HDFC Bank. Till she was outed, Chanda Kochhar was the poster girl for the banking system, feted across various fora for her role in building a banking giant. As a mascot of feminine power in India she repeatedly featured in Forbes list of the world's 100 most powerful women.
Just how could such a carefully constructed edifice and its chief architect be so easily manipulated and just how flawed were the bank’s internal processes to allow such an occurrence without instantly sending alarm bells ringing? The key to that might lie in understanding the nature of absolute power. The shenanigans of Chitra Ramkrishna in collusion with her deputy Anand Subramanian at the National Stock Exchange have shown how an all-powerful leader can pervert systems and bend rules.
Including, clearing huge loans to dodgy businesses. By 2012, when the said loan was sanctioned, the Videocon group that Dhoot presided over was already neck deep in debt. Thanks to its ill-advised and reckless diversifications and expansion plans, it had squandered its lead in the consumer electronics space and was a loser in new areas like oil and telecom. With defaults and eventual bankruptcy looming large, it needed a lifeline and Dhoot did what many other businessmen in such situations have done in the past. He exploited a crack in the banking system and in return for personal favours to senior bankers, secured a loan which he knew he couldn't repay.
So far, it is a familiar enough story repeated so often that it may even have passed scrutiny had it not been for whistleblower Arvind Gupta. We have seen it in the case of Yes Bank, another private bank whose sorry story was unravelling almost in parallel with the expose at ICICI Bank. Till its chairman and co-founder Rana Kapoor was finally ejected from the bank by RBI, Yes Bank was dishing out generous loans to undeserving business owners allegedly in return for personal favours to Kapoor and his family.
Dhoot then, is symptomatic of a clutch of post-liberalisation Indian businessmen who overreached and underachieved, in the process losing everything that the founders of the group, in this case Nandlal Madhavlal Dhoot, had created. With his business in tatters - Videocon Industries was referred to the insolvency court in 2018 - there is little prospect of his coming back.
He isn’t, therefore, the central figure in this banking tragedy.
Far more critical is the role of the other senior functionaries as well as members of ICICI Bank’s high-powered board at the time, none of whom deemed it fit to protest against a huge loan to a struggling businessman, who more disturbingly had been a partner in a firm with the husband of the CEO.
From the time the Bank of Credit and Commerce International collapsed in 1981 in the UK, banks have been held to higher corporate governance standards than any other corporate entity. As a corollary, bankers are expected to be like Caesar's wife. Sadly, Kochhar and her colleagues at ICICI Bank failed to live up to those Shakespearean standards. Dhoot’s deposition will hopefully shed some light on that.
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