ICICI Bank's Love for CEO Kochhar Is Approaching the Limit

Chanda Kochhar is one of India’s top bankers. But does that mean ICICI Bank owes her a job no matter what?

ICICI Bank's Love for CEO Kochhar Is Approaching the Limit
Chanda Kochhar, managing director and chief executive officer of ICICI Bank. (Photographer: Graham Crouch/Bloomberg)

(Bloomberg Gadfly) -- Chanda Kochhar is one of India’s top bankers. But does that mean that her employer, ICICI Bank Ltd., owes its chief executive officer a job no matter what?

The CEO's husband, Deepak Kochhar, is being investigated for windfall gains from his association with businessman Venugopal Dhoot, whose struggling Videocon group is a large debtor to ICICI. Chanda Kochhar sat on the credit committee that approved a $500 million loan to Videocon.

No deposit-taking institution, especially one with a history of prior bank runs, can afford a leader who's in the news for all the wrong reasons. The state's inquiry into the CEO's spouse is still preliminary, and it may not result in charges. But the scandal could drag on, and that’s not exactly fair to shareholders.

Kochhar showed a lack of judgment in not recusing herself from the committee that cleared the loan. The possible conflict of interest extends to her husband's brother, Singapore-based Rajiv Kochhar, who has performed debt-restructuring work on errant corporate borrowers from ICICI, including Videocon. While the work wasn't commissioned by the bank, the fact that government investigators stopped Rajiv Kochhar from leaving India and have questioned him multiple times doesn't inspire confidence in the board. (The bank has argued that Kochhar had no obligation to disclose her brother-in-law's involvement because he isn’t defined as a relative under the law.)

In these circumstances, for the stewards of ICICI to hunker down and express “full faith and confidence” in the CEO, as they did on March 28, is remarkable. It also may be premature because, as Fitch Ratings says, there's a "potential risk of financial penalties, as well as legal action," if the government's investigation comes up with findings against the bank.

ICICI directors can't possibly have enough information to determine whether Dhoot gave a quid pro quo to the CEO's husband. Dhoot and Deepak Kochhar have denied any wrongdoing, but for the board to dismiss the possibility based on a simple review of the bank's decision-making process may have been ill-advised.

The board is now divided, with some members having second thoughts about the early vote of confidence, George Smith Alexander and Anto Antony of Bloomberg News reported on Monday. That's understandable. Prime Minister Narendra Modi's government, embarrassed by a recent $2 billion scandal at state-run Punjab National Bank, can't afford another dent to its assertion of being tough on corporate malfeasance.

If a change of regime is inevitable, would that be unfair to Kochhar, whose current term expires in March next year? What if this is all a ploy by powerful enemies to bring her down?

That isn't an unrealistic hypothesis at a time when India's banking system is clogged with more than $200 billion in stressed loans, most of them taken out by large business groups. For the first time, a new bankruptcy law is making business families fear losing prized trophies for non-payment of debt; so far, bankers have targeted only small businesses with no real power to strike back.

Bear in mind also that there are two camps lobbying for alternative policies. One calls for sweeping privatization, holding up the pathetic Punjab National-style risk management at state-owned banks to buttress its argument. The rival faction favors the status quo and could use a scandal at ICICI, the second-largest private bank. State-owned lenders control 70 percent of banking assets, so privatization could completely alter the pecking order.

ICICI Bank's Love for CEO Kochhar Is Approaching the Limit

These wider questions aren't for the ICICI board to consider. As the agents of shareholders -- of a bank listed in both India and New York -- they have a fiduciary responsibility. Chairman Mahendra Kumar Sharma, a former legal eagle at Unilever NV's Indian operations, should at least initiate a debate on the merits of retaining a CEO who has underperformed peers by share-price returns since the start of her reign in May 2009. The buildup of bad loans during her tenure is sufficient cause to try out a new leader.

ICICI Bank's Love for CEO Kochhar Is Approaching the Limit

Vikram Pandit got his marching orders after he steered a floundering Citigroup Inc. out of the squalls of the 2008 crisis. Uber Technologies Inc.'s Travis Kalanick was forced out of the company he created. Even the late Steve Jobs, father of the Macintosh computer, was once fired from what was then Apple Computer Inc.

Unless Kochhar's departure would somehow cause the demise of double-entry accounting or fractional-reserve banking, the ICICI board will find it increasingly tough to justify keeping her in the job. As for potential conflicts of interest, the time for the board to order an external inquiry was when the current allegations surfaced in a whistle-blower complaint in 2016. Now, with the Central Bureau of Investigation starting a preliminary probe, that chance is lost. 

The ICICI board must adore its CEO to have backed her so far without seemingly asking for much in return, but things have become cozy even by India's poor corporate governance standards. From here on, limitless love may only wear down shareholders' patience.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

To contact the author of this story: Andy Mukherjee in Hong Kong at

To contact the editor responsible for this story: Matthew Brooker at

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