The Central Bureau of Investigation’s (CBI’s) decision to book former ICICI Bank CEO Chanda Kochhar, her spouse Deepak Kochhar, and Videocon group managing director Venugopal Dhoot for corruption in the sanction of large loans to the Videocon group will send a new chill down the spines of bankers, this time private sector ones.
The CBI is not the right kind of agency to handle cases of this sort, which need strong forensic audit skills and the ability to establish a direct money trail between alleged bribe-giver and taker. If the case against the Kochhars and Dhoot is not watertight, all it will end up achieving is a further freeze in the flow of bank funds to India Inc.
We have seen this happen in the case of nationalised banks, where there is an extreme reluctance to lend to anyone but the bluest of blue-chip companies. Banks that were already slow to lend due to high levels of bad loans on their books, clammed up further after the discovery of fraud in Punjab National Bank (the Nirav Modi case) and some other banks. The charge-sheeting of Punjab National’s former CEO and top managers, and the arrest of Ravindra Marathe, CEO of the Bank of Maharashtra, by the Pune police last year sent fresh waves of fear down public sector spines.
The ICICI Bank case will make things worse. Criminal fraud is one thing, but if the bad loans crisis is treated as a reason to go after all bankers who made bad decisions, there will be a further crimp in the credit pipeline to companies. The Kochhar case will make even private sector bankers wary of lending to corporates and the anticipated recovery in private investment this year will be further delayed.
The charges against the Kochhars include criminal conspiracy, cheating, corruption and receipt of illegal gratification for the sanction of six loans totalling to Rs 1,875 crore by the bank between 2009 and 2011, decisions which were allegedly influenced by a sweetheart deal of Rs 64 crore to Deepak Kochhar’s company from Dhoot. (Read the details here and here). The loans turned bad in 2017, saddling the bank with huge non-performing assets.
A deeper probe into the alleged nexus between ICICI Bank’s lending to Dhoot and the latter’s investment in Deepak Kochhar’s company is warranted, but it is doubtful if the CBI case will fly. The proximity of Dhoot’s investment in Kochhar’s company to the bank’s loan sanction surely gives us a reason to suspect a nexus, but such a nexus is always hard to prove beyond doubt in a court of law. Not least because big loans are not decided by one person, but many others. In any event, one wonders what would have happened if the loan had not turned bad.
Worse, the CBI has needlessly indicated that further probes are needed into the roles of several other ICICI Bank executives, current and former, who may have had a hand in sanctioning the Dhoot loans. The names include former chairman K V Kamath, current CEO Sandeep Bakshi, other senior bank officials like K Ramkumar, Sonjoy Chatterjee, N S Kannan and Rajiv Sabharwal, apart from former directors Zarin Daruwala and Homi Khusrokhan. Daruwala is currently CEO of Standard Chartered Bank, and Khusrokhan was a former Tata Chemicals managing director.
While it is obvious that loans of the size granted to Videocon would have been passed through several loops involving many top managers and directors, the CBI cannot be suggesting the launch of a fishing expedition into the roles of so many people without needlessly besmirching reputations and disrupting the normal activities of the bank.
For her alleged wrongdoing, Chanda Kochhar has already been eased out of office and a new CEO, Sandeep Bakshi, has replaced her. The bank board has also asked retired justice B N Srikrishna to probe conflict of interest charges against Chanda Kochhar when she was part of the loan sanction committees.
But the entry of the CBI with hobnailed boots will make the more sensitive enquiries redundant. When a bull enters the China shop, you get disruption and damage, not competent investigations and justice.
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