Opinion | CBI FIR in Chanda Kochhar case raises more questions than it answers

But it does raise a question on what due diligence the ICICI board did before jumping to Kochhar’s defence in the first place. On March 28, 2018, the board issued an unequivocal clean chit to Kochhar. It announced an independent probe much later on May 30 and Kochhar herself stepped down in mid-June 2018.

Now, it’s up to the CBI to prove in court that the transaction was indeed a quid pro quo for sanctioning a loan. But that’s beside the point. The fact that Deepak Kochhar had lots of transactions and joint ownership with Dhoot’s firms, and the fact that Chanda did not recuse herself from the sanctioning committee should have been enough for the board to pull up the CEO. That the board didn’t do that is appalling.

Here, the role of the government and the regulator, the Reserve Bank of India, must be called into question as well. The conflict of interest allegation was raised by an investor Arvind Gupta as early as 2016. He had written to the Prime Minister’s office and RBI, but his complaints got little attention. Did RBI investigate? Did it call for an investigation by the board? These are questions that the banking regulator has to answer. If RBI had nipped this issue in the bud, then the Kochhar case wouldn’t have festered for so long.

There’s a third aspect.

ICICI Bank sanctioned some Rs 1,575 crore to Videocon group entities. In this, Chanda Kochhar personally was part of the sanctioning committee for two term loans of Rs 300 crore and Rs 750 crore. Secondly, the FIR says some of the loans to group companies of Videocon was to help them repay their loans to the parent. It also said one of the loans to Videocon Industries was to refinance its existing loans and these violated the bank’s credit policy. No doubt, that suspiciously sounds like evergreening, but again the charges need to be proved.

Till here, the fact that Chanda Kochhar’s conduct in these matters needs to be investigated is a reasonable conclusion to make. But the CBI is spreading the net wide. The FIR goes on to name a list of senior officials and board members who were part of the sanctioning committees for these loans and says their role may be investigated as these loans turned non-performing.

That sounds like a witch hunt and confuses a specific case of quid pro quo with a commercial business decision having gone wrong. And ICICI Bank was not the only one whose loan was not repaid.

Remember that ICICI Bank was part of a consortium led by State Bank of India that lent Rs 40,000 crore to Videocon. That entire amount has turned bad. Is that a lapse in due diligence by ICICI or all banks? In its zeal, CBI seems to have started questioning commercial decisions. The July 2018 chargesheeting of some retired PSU bankers is one clear example. This zealous chargesheeting of all and sundry associated with a bad loan will lead to the return of fear psychosis among bankers. Not a good idea when the country’s economic managers want to boost loan growth.

As the saying goes, the law will take its own course. But it’s up to the board of ICICI to clear the air on its own conduct in this matter. They have another more pressing problem. The present CEO Sandeep Bakhshi has also been named in the FIR, although he is not an accused. The board has to defend his continuation as well, even as the CBI investigation runs its course.