A "culture" of doing a deal "at any cost," mistakes "made knowingly," "suppressing" facts, rewarding staff for such behaviour - this scathing indictment of ICICI Bank's processes was put on record by a top official of the bank's risk department in an email to his senior colleagues in 2016 when Chanda Kochhar was the bank's managing director and chief executive officer.
This official requested his colleagues to delete that mail after reading but an executive director of ICICI Bank, who was one of the recipients, forwarded it to Chanda Kochhar suggesting that such analysis and mails can "freeze" the organisation. Kochhar, too, supported this view and those red flags got a quiet burial.
These emails and internal exchanges form part of official records accessed by The Indian Express that underline how
serious concerns were raised within the bank over the lending process followed while appraising certain loan proposals.
Indeed, the risk department official's email attributed the pile-up of large value stressed assets at ICICI Bank to loan "proposals were recommended for sanction when there were enough evidence right in front of the teams, if considered honestly, the proposal should have been rejected at the first instance itself".
Records show that this official was respected in his bank and his "opinions and judgement on matters were considered highly credible".
The official alleged that the culture at ICICI Bank was to "decide first that the deal should be done at any cost (for reasons known to the team that originates the deal) and then create a logical explanation based on illogical assumptions and partly by suppressing material facts".
He went on to add: "If we (ICICI Bank) tolerate and in some cases even reward the inpidual or teams…who indiscriminately increased exposures to groups like Essar…no risk measure will work however strong they are…Risk measures and controls can take care of genuine mistakes, errors, oversights…. They cannot control mistakes made knowingly."
Calling for the implementation of a strong review mechanism of the bank's credit decisions, the official said that this would help affix accountability "not when it goes bad because by that time either the inpidual has left the bank or department or he/she would have become a very senior person".
An internal investigation by the bank found that no action was taken by ICICI Bank on concerns raised by the senior official in his email. The official left the organisation in March 2017.
Records show that no loan proposal went to the credit committee of ICICI Bank without discussing and being approved by Chanda Kochhar. Sources said the probe found that "substantive discussions pertaining to loan approval took place outside the appropriate sanctioning forums, before the managing director" and there was "an unwritten rule that once a proposal goes before the credit committee, then, issues discussed internally would not be raised again".
These discussions, according to the investigation, were not duly minuted/or presented to the relevant sanctioning committee.
Sources said the probe concluded that this approach of ICICI Bank "significantly altered" the information available to the independent directors to take decisions on sanctioning of loans and "did not allow an independent director to be fully cognizant of all relevant facts while arriving at the decision".
The investigation said that Chanda Kochhar, even after leaving the bank in October 2018, "was in a position to excercise significant influence" to obtain "confidential" information from ICICI Bank.
E-mails sent to Chanda Kochhar did not elicit any response.
According to officials familiar with the case, ICICI Bank's processes to identify conflict of interest of senior management and directors of the bank is solely dependent on annual disclosures made by inpiduals and their fiduciary duty to recuse themselves from a possible conflict of interest case based on these disclosures. In case of Kochhar, her "lack of diligence" with respect to annual disclosures on directorships and business interests of her relatives, rendered the bank's processes "ineffective" said sources.
A spokesperson for ICICI Bank in an email response said that all these incidents are related to the period from 2011 to 2016 and the bank has taken significant concrete steps to improve the risk profile of its balance sheet.
"The Bank has designed and implemented a board approved revised Risk Management Framework with effect from March 2016. As per this framework, a hard limit was stipulated on corporate borrower groups as well as lower rated companies. Under this framework, about 80% of the incremental loans sanctioned and disbursed by the Bank, have been to borrowers with a credit rating of A- and above. This was a sharp departure from the previous framework followed by the Bank. Hence, your contention that the bank did not act on the concerns raised is totally wrong."
The spokesperson said the bank won't comment on client-specific queries. "However, we would like to assure you, that all the issues raised by you have no impact on our balance sheet as of now."
"You have also referred to the conduct of the former MD & CEO of the Bank. We would like to state that the Board had initiated an enquiry and based on the findings, the Board had taken the strictest possible action against the concerned person. This decision of the Board reflects the highest standards of governance that the Bank adheres to," the spokesperson said.
Responding to queries, an Essar Group spokesperson said the group is not aware of the investigation report and no investigating authority has ever approached it for their version.
The Indian Express first reported on March 29, 2018 that Videocon Group promoter Venugopal Dhoot provided crores to a firm he had set up with Chanda Kochhar's husband Deepak Kochhar and two relatives six months after the Videocon Group got Rs 3,250 crore as loan from ICICI Bank in 2012. Following allegations of conflict of interest and impropriety by Chanda Kochhar, the ICICI Bank board instituted an investigation under retired Supreme Court Justice B N Srikrishna. That probe found Kochhar guilty of violating the lender's code of conduct. On January 30, 2019, the bank board termed Kochhar's resignation on October 4, 2018 as a sacking and decided to claw back all bonuses given to her from 2009 when she took over as MD & CEO.