The story so far:
On December 23, the Central Bureau of Investigation (CBI) arrested private lender ICICI Bank’s former Managing Director and Chief Executive Officer (MD & CEO) Chanda Kochhar along with her husband, Deepak Kochhar. This was in a case pertaining to fraudulent disbursal of loans amounting to ₹1,875 crore between 2009-11 to the Videocon group of companies, during her tenure at the helm of the private lender. The CBI also arrested Videocon promoter Venugopal Dhoot.
What is the case about?
Ms. Kochhar is accused of conspiring with her husband to abuse her powers at the helm of the private lender for extending loans to the Videocon Group. Between June 2009 and October 2011, ICICI Bank had sanctioned six high value loans to varied companies owned by Videocon. The financial transactions resulted in wrongful loss to the private lender. Further, they were in violation of the credit (extending) policy and were later deemed to be non-performing assets (NPAs) for the lender.
On August 26, 2009, the private lender sanctioned Rupee Term Loan (RTL) of ₹300 crore (of which ₹283.45 crore was eventually disbursed) to Videocon. The loan was disbursed on September 7. It was on the very next day that Mr. Dhoot transferred ₹64 crore to NuPower Renewables Ltd (NRL) managed by Mr. Kochhar.
The ₹64 crore in question, thus, is being alleged to be part of a reciprocal arrangement between Mr. Kochhar and Mr. Dhoot.
What have been the key developments?
The allegations first came to light in 2016. Back then, the Reserve Bank of India (RBI) did not find anything concrete in the allegation. However, in June 2017, the accounts belonging to Videocon Industries Ltd (VIL) were deemed to be non-performing assets.
The allegations re-emerged in March 2018 following a whistleblower complaint alleging that assets were not being correctly classified. The private lender’s board initially denied any wrongdoing on part of Ms. Kochhar to shift its stance and initiate an independent probe under retired Justice B.N. Srikrishna. Ms. Kochhar was thereby sent on leave pending the outcome of the investigation. She later stepped down from her position in October 2018. It was in November 2020 that the ED filed a chargesheet against the former MD and CEO. The CBI filed its FIR against Ms. Kochhar in May 2022.
What is their defence?
Arguing for his bail plea in the Bombay High Court, Mr. Kochhar’s defence had stated that Videocon has been a client of the private lender since 1985. It had extended several loans and credit facilities to the group as part of their long-standing relationship. It also stated that Videocon’s investment in NRL was in the nature of equity where the return “would be gathered by capital appreciation on the basis of growth of the company and valuation of its assets”.
What were its broader implications?
Ratings agency Fitch stated in April 2018 that the development “raises questions over the bank’s governance and creates reputational risk”. In a separate development back then, the Serious Fraud Investigation Office (SFIO) had sought permission from the Ministry of Corporate Affairs to probe ICICI Bank about the ₹3,250 crore line of credit extended to the Videocon Group.
Fitch’s note had added the presence of the bank’s CEO on the credit committee had “created doubts over the strength of its corporate governance practices”.
