Source: The Hitavada      Date: 01 Feb 2019 10:00:06

THE report of the Justice Srikrishna enquiry committee, indicting former Chief Executive Officer (CEO) Chanda Kochhar for violating various regulations and finding her guilty of conflict of interest, must have come as a big embarrassment for the management of private sector lender ICICI bank. Initially, the ICICI bank management had stoutly defended Mrs. Kochhar in the wake of reports appearing in the media that she had favoured the Videocon group, with the Videocon group, in turn, pumping in much finance in the private of company of her husband. The bank management then was not willing to accept any accusation of wrong-doing on the part of Mrs. Kochhar. However, as investigations by various agencies, including Central Bureau of Investigations (CBI), Enforcement Directorate (ED) and the Serious Fraud Investigation Office (SFIO), unfolded the truth and later when the independent enquiry committee led by former judge Justice Srikrishna found merit in the allegations, the bank has been forced to take serious action against its own former CEO.

Soon after the report of the Srikrishna committee the bank management has made it clear that her resignation, which she had put in after the allegations surfaced and had gone on leave, would now be treated as the termination letter “with all attendant consequences.” Not only that, the bank has also decided to recover all the bonuses or increments paid to her since the year 2009, medical benefits, stock options and other retirement benefits. Such a drastic action reflects the magnitude of violations that Mrs. Chanda Kochhar had indulged in in granting financial facilities to the Videocon group in utter disregard of the code of conduct of the ICICI bank. Conflict of interest arose as the Videocon group pumped in money in the company of Mrs. Kochhar’s husband.

Mrs. Chanda Kochhar was regarded as one of the eminent bankers in the country which had earned her the national honour of Padma Bhushan. But this high profile banker’s reputation came crashing down as reports of wrong-doing began to surface. Though Mrs. Kochhar denies any wrong-doing on her part and rules out any conflict of interest citing “organisational design” there are obvious violations of banking norms. The Videocon connection with Deepak Kochhar’s (Mrs. Kochhar’s husband) private company is bound to haunt her for a long time. In this case whistle-blowers have played a major role in triggering investigations by multifarious investigating agencies, culminating into Mrs. Chanda Kochhar’s ouster.

But the Kochhar case is just one example of what has gone wrong with the country’s banking system. The Non-Performing Assets (NPA) is a termite that has been nurtured by the high and mighty not only in the banking sector but also the political community. In fact the major blame for the prevailing crisis in the nation’s banking system must lay at the door of the political community which has the capacity to influence bankers’ decisions as regard to extending credit to private businesses. All norms of security of credit have been thrown out of the window overlooking the quality of collateral offered by the borrower.

The cases of Neerav Modi, Mehul Choksi, Vijay Mallya and a host of others, who either defaulted on the repayment of their loans or have fled the country, is a glaring example of how much compromise has been done with banking norms. The banking system is currently looking at a loss of lakhs of crores of rupees due to NPAs. Many of these are willful defaults done in connivance with some black sheep in the banking system and political community. The fact that the Government has to lend budgetary support to banks to keep them afloat explains the situation. Will any lessons be learnt from these episodes?