Some ICICI Bank directors feel they should wait for a communication or directive from the Reserve Bank of India before taking the next step on the conflict of interest controversy involving CEO Chanda Kochhar and the bank’s loans to Videocon.
This line of thinking has gained ground in recent days, especially after RBI’s direction to Axis Bank to reconsider another term for CEO Shikha Sharma earlier this month and her subsequent decision to step down.
In the absence of any regulatory intervention on the issue, the board members believe there isn’t much for them to do on their own to reassure investors or depositors despite the probe by investigative agencies.
Directors continue to talk to each other on a regular basis to stay abreast of developments and would take a call on handling the issue if there are any developments, said people in the know.
“In the case of Axis, there was a clear regulatory direction from the RBI. That hasn’t happened as far as ICICI Bank is concerned,” said a person briefed on the thinking of key board members. “If the regulator is unhappy with the board’s decision (to give a clean chit to Kochhar), it should be communicated clearly.”
Axis Bank CEO Shikha Sharma has sought a reduction in her fourth term at the lender till December 2018.
Board’s Actions Questioned
Sharma’s original term was to continue till May 2021. Her decision to cut short her term follows the RBI questioning the Axis Bank board on whether Sharma should be given a fourth term given the performance of the lender and accounting disparities that came to light during the regulator’s inspection.Some ICICI Bank board members, thus, believe they should act only after regulatory direction.
ICICI Bank chairman MK Sharma declared on March 28 that the board had full faith in Chanda Kochhar. But subsequent developments, such as the questioning of her brother-in-law Rajiv Kochhar for five days by the Central Bureau of Investigation, has triggered a debate among some of the ICICI directors on the next course of action.
“ICICI board’s take-it-or-leave-it narrative is not acceptable. This is acomplicated matter and there are many wheels within wheels,” said Anil Singhvi, founder of shareholder advisory firm IiAS. “There has to be an independent inquiry that the institution as a deposit-holder owes its stakeholders, which includes the common man.”
The investing community is also at unease after rating agencies questioned the continuation of Kochhar at the top. “The presence of the bank’s CEO on this credit committee — and the bank’s reluctance to support an independent probe — have, in our opinion, created doubts over the strength of its corporate governance practices,” Fitch Ratings has said.