Banking
China’s Predatory Lending
February 12, 2025
The ICICI bank is the largest private sector bank in India. It was also famous for being one of the organizations where a woman was able to break the glass ceiling and hold the top job. Chanda Kocchar, the bank’s woman Chief Executive Officer had been responsible for its rapid growth. The bank had scaled new heights under her tenure.
However, the ICICI bank, like other Indian banks was engulfed in a scandal regarding non-performing assets. Most government banks are known to have made bad loans under government pressure. However, ICICI bank is one of the few private sector banks which have a significant amount of bad loans on its books.
It later came to light that these bad loans were not accidental. Rather, they could have been avoided if the due diligence process defined by the bank were followed. CEO Chanda Kocchar was personally held responsible for these loans. In this article, we will have a closer look at these non-performing loans and how they led to the downfall of Chanda Kocchar.
The Questionable Loans
The allegations against Chanda Kochhar are about making unjustified loans to Videocon group which was owned by Venugopal Dhoot. ICICI bank loaned Rs 3250 crores to Videocon group. It has been alleged that this loan was given based on personal relationships rather than by following the bank’s due diligence process. There are allegations that Chanda Kocchar has received quid pro quo benefits from Venugopal Dhoot in lieu of endangering the hard earned money of ICICI bank’s depositors.
Along with the loans to Videocon group, whistleblowers at ICICI bank have also alleged regarding improper loans being made to the Ruia family, which is in control of the cash strapped Essar Group.
Was there Quid Pro Quo?
Whistle-blowers have alleged that the loans to Videocon group were made after receiving quid pro quo benefits. These allegations are based on the cozy relationship which was present between the Kocchar family and the Dhoot family.
- The Kocchar family had close relationships with the Dhoot family for decades. They had invested in the same firm in 2001. The Kocchar family held close to 2% shares of a company called Credential Finance. The Videocon group held 18% shares in the same company.
- The close relationship between Chanda Kocchar’s husband Deepak Kocchar and Venugopal Dhoot is common knowledge. It is alleged that Venugopal Dhoot invested heavily in Deepak Kocchar’s company NuPower after receiving funds from the ICICI loan. This is the quid pro quo that whistle-blowers are alleging. If this is indeed true, then Chanda Kocchar has lent out money to her own husband without proper due diligence. Videocon has been used as a shell company in the process.
- Lastly, the loans given to Videocon soon turned out to be non-performing assets. This is when ICICI bank renegotiated the terms of the loan with ICICI bank. A firm called Avista Advisory was representing Videocon in this renegotiation. As a result of this renegotiation, the terms of the loan were changed, i.e. the loan was restructured. Avista Advisory is owned by Chanda Kocchar’s brother in law Rajiv Kocchar. This once again raises the question of whether ICICI bank’s interests were sacrificed for the Kocchar family’s personal gain.
It is important to understand that the mere existence of all these personal transactions does not mean quid pro quo. It is also possible that Venugopal Dhoot invested in NuPower because he thought it was a good investment. Also, he appointed Avista Advisors for reasons beyond Chanda Kocchar’s control.
The real problem is that Chanda Kocchar failed to disclose the extent of her personal relationships at ICICI bank. Had Chanda Kocchar listed down all her personal relationships and excused herself from the committee that made the loan to Videocon, her personal integrity would not have been questioned. Therefore, the repercussions that Chanda Kocchar is facing is because she failed to follow the code of conduct defined at ICICI bank. Because of her actions, the corporate governance at ICICI bank came into question. As a result, she had to be removed from office.
What Happened in the End?
The alleged wrongdoings came to light after a whistleblower wrote the internal committee at ICICI bank. This was around the same time, when Fitch, which is a credit rating agency also raised concerns about the corporate governance process being followed at ICICI bank.
As a result of these concerns, Chanda Kocchar was asked to step down as CEO of ICICI bank with immediate effect. An inquiry was launched into the matter, and Chanda was sent on leave till the inquiry was not complete. The inquiry being conducted was an external one, and government agencies such as the Central Bureau of Investigation (CBI) were also involved.
Later, it was found that Chanda Kocchar was in violation of the bank’s code of conduct. As mentioned above, it does not mean that Chanda Kocchar was party to the fraud. However, because she violated the bank’s code of conduct, her employment was terminated, and the bank decided to recover all bonuses paid from 2009 onwards from the retrials of Mrs. Kocchar.