Synopsis of the story
As the old adage goes, money is the root of all evil, and the story of Chanda Kochhar serves as a cautionary tale of the destructive power of greed in the corporate world. From her rise to the top of ICICI Bank to her fall from grace amid allegations of corruption and irregularities, Kochhar’s story illustrates the importance of strong corporate governance in preventing greed and ensuring ethical business practices.
By Rusen Kumar
Greed for money can have destructive consequences, as it can lead individuals to prioritize their own financial gain over the well-being of others and the broader community. Those who are excessively greedy often lack a sense of ethics and morality and may be willing to engage in dishonest or unethical behaviors in order to achieve their financial goals.
Chanda Kochhar serves as a cautionary tale of the dangers of greed in the corporate world. Her arrest in connection with allegations of corruption and irregularities related to loans granted by ICICI Bank to firms affiliated with the Videocon Group highlights the potential consequences of greed and the importance of corporate governance in curbing such behaviors.
Corporate governance, which refers to the system of rules, practices, and processes by which a company is directed and controlled, plays a crucial role in ensuring that businesses are run ethically and in the best interests of their stakeholders. One of the key responsibilities of corporate governance is to prevent corporate greed and ensure that businesses are operated in a responsible and transparent manner. By enforcing strong ethical standards and holding individuals accountable for their actions, corporate governance can help to curb greed and protect the interests of shareholders, customers, and the broader community.
In this article, we will explore Kochhar’s rise to success, the events that led to her downfall, and the lessons that can be learned from her story about the importance of strong corporate governance in preventing greed and ensuring ethical business practices.
Chanda Kochhar was a prominent figure in the banking industry in India, known for her role in the growth and success of ICICI Bank, one of the country’s largest private-sector lenders. She was the first woman to hold the position of CEO at a major lender in India and was widely admired for her leadership and contributions to the industry.
In March 2018, a preliminary investigation was launched to examine alleged irregularities in the approximately INR 40,000 crore (approximately $5.5 billion) in loans granted to the Videocon Group by ICICI Bank. This investigation targeted both Deepak Kochhar and Venugopal Dhoot, the promoter of the Videocon Group, in connection with these alleged irregularities.
ICICI Bank’s Non-Performing Assets
The volume of non-performing assets (NPA) of ICICI Bank increased by nearly 1500% to INR 34,000 crore (approx. USD 4.6 billion) during the 12-year tenure of Chanda Kochhar, according to data from the Reserve Bank of India (RBI). Kochhar, a celebrity banker who has since become disgraced, oversaw a 249.4% increase in bad loans disbursed by the bank since she was awarded the Padma award in April 2011, according to the RBI data obtained through an RTI query. ICICI Bank, one of India’s largest private lenders, saw its NPAs start to grow significantly in 2007, the year Kochhar was appointed as chief financial officer and joint managing director.
Chanda Kochhar and Venugopal Dhoot
In August 2021, the Enforcement Directorate (ED) filed draft charges against Chanda Kochhar, her husband Deepak Kochhar, and other individuals accused in connection with a money laundering case in a special Prevention of Money Laundering Act (PMLA) court. Deepak Kochhar had been arrested by the ED in September 2020, but Chanda Kochhar and Venugopal Dhoot, the promoter of the Videocon Group, had been granted bail by the special PMLA court in February and March 2021, respectively, despite arrest warrants being issued for them.
However, Kochhar’s career came to a sudden end in 2018 when she was arrested by the Central Bureau of Investigation (CBI) along with her husband, Deepak Kochhar, in connection with allegations of cheating and irregularities related to loans that ICICI Bank had granted to firms affiliated with the Videocon Group.
These allegations centered around claims of conflicts of interest, lack of disclosures, and quid pro quo, or a mutual exchange of favors, in the process of granting these loans.
The Controversial Loans and Allegations of Corruption
The controversy surrounding Chanda Kochhar, former CEO of ICICI Bank, and her husband Deepak Kochhar, along with Videocon Group promoter Venugopal Dhoot, can be traced back to 2010 when Kochhar was the CEO of the bank. According to the Central Bureau of Investigation (CBI), credit facilities totaling around INR 3,250 crore (approximately $450 million) were improperly granted to Videocon group companies during Kochhar’s tenure as CEO, in violation of both Reserve Bank of India (RBI) rules and ICICI Bank’s credit policy.
The CBI alleges that six loans were disbursed by ICICI Bank to the Videocon Group and its associated firms between 2009 and 2011 while Kochhar was the CEO and that she was a part of the committees that approved two major loans worth INR 300 crore (approximately $41.5 million) and INR 750 crore (approximately $103.7 million). The situation became further complicated when the CBI claimed that the Videocon Group transferred a portion of the sanctioned loans to a company owned by Deepak Kochhar.
According to the CBI, Venugopal Dhoot invested INR 64 crore (approximately $8.8 million) in Deepak Kochhar’s Nupower Renewables through a company called Supreme Energy Private Limited (SEPL), which he later transferred to Pinnacle Energy Trust, a company managed by Deepak Kochhar. These transfers occurred from 2010 to 2012. The CBI alleges that the transfer of INR 64 crore to Nupower took place one day after a loan worth INR 300 crore was disbursed in September 2009.
Despite ICICI Bank’s initial claims that the loans were disbursed in accordance with the bank’s guidelines and with the support of Kochhar, she was forced to resign in 2018 as the case gained widespread attention. It was also alleged that many of these loans became non-performing assets. At the time of her retirement, Kochhar held 6,90,000 shares of the bank through employee stock ownership plans (ESOPs).
A Profile of the Former CEO and Banking Industry Icon
Chanda Kochhar began her career at ICICI Bank as a management trainee in 1984, quickly gaining favor with the then-group chairman KV Kamath. Through her hard work and dedication, she was able to rise through the ranks and played a crucial role in the bank’s transition into a retail-focused lender when it became a commercial bank in the early 1990s.
In 2009, Chanda Kochhar was selected to succeed KV Kamath as the managing director and chief executive of ICICI Bank, despite the bank having a strong pool of leadership candidates to choose from. This decision was seen as a significant achievement for Kochhar, as it marked her ascent to the top leadership position at the bank.
However, her promotion also led to the departure of Shikha Sharma, who was the former chief of Axis Bank and was senior to Kochhar in the ICICI Bank group. Sharma’s departure may have been because she was passed over for the top leadership role in favor of Kochhar.
Regardless of the reason, Kochhar’s appointment as CEO marked a significant milestone in her career and solidified her position as a leader in the banking industry. During her tenure at the bank, she played a key role in its transition to a retail-focused lender and was known for her strong control of the institution, which helped to prevent negative press and incidents of bank runs.
However, Kochhar’s reputation and career were ultimately tarnished by the allegations of impropriety surrounding the loans to the Videocon Group. In 2015, a review conducted by the Reserve Bank of India (RBI) discovered that ICICI Bank had a significant amount of under-reported non-performing assets, also known as dud assets.
In response to this finding, Chanda Kochhar, who was the CEO of the bank at the time, announced a new strategy that involved focusing exclusively on lending to well-rated borrowers. This decision was likely intended to help the bank reduce its risk and improve its financial performance by limiting its exposure to potentially risky borrowers.
The Tangle of Business Dealings and Allegations of Corruption
These allegations stemmed from the business dealings between the group’s promoter, Venugopal Dhoot, and Deepak Kochhar, and the failure to disclose these dealings when the loans were granted. As a result of these allegations, Kochhar was forced to go on indefinite leave and eventually retired from her position at the bank.
- Chanda Kochhar was a former CEO and managing director of ICICI Bank, one of India’s largest private sector lenders
- Kochhar was instrumental in making ICICI Bank the country’s biggest private sector lender and was known for her strong control of the institution
- Kochhar’s career was marked by controversy and allegations of corruption, including accusations of conflicts of interest, lack of disclosures, and quid pro quo related to loans granted to the Videocon Group by ICICI Bank
- Kochhar was arrested by the Central Bureau of Investigation (CBI) along with her husband Deepak in connection with these allegations
- Kochhar’s stint at ICICI Bank ended abruptly in 2018 when she sought early retirement following the allegations of corruption and quid pro quo
- The controversy surrounding Kochhar and the loans granted by ICICI Bank to the Videocon Group highlights the dangers of greed in the corporate world and the importance of strong corporate governance in preventing unethical behavior.
Conclusion
In the world of business, greed has the power to corrupt even the most successful and respected individuals. Chanda Kochhar, once a pioneer in the retail banking industry and a celebrated CEO, is a prime example of this. From her rapid rise to the top of ICICI Bank to her abrupt fall from grace amid allegations of corruption and irregularities, Kochhar’s story serves as a cautionary tale about the dangers of greed in the corporate world.
(India CSR)
