The CBI’s naming of former ICICI Bank managing director and CEO Chanda Kochhar, her husband Deepak Kochhar, and Videocon Group chief Venugopal Dhoot, in an FIR, imputing that there was a quid pro quo in the bank having extended a whopping Rs 3,250 core loan to Videocon Group during UPA rule is sensational indeed. Also named are firms including Nupower Renewables and Videocon Industries which were the instruments through which the loans were taken which added to the staggering sums that ended up being written off as Non-Performing Assets (NPAs). The FIR bares an alleged nexus that reveals serious infirmities in the system whereby the national exchequer was defrauded under UPA rule until March 2012. It is truly a shocking saga of how the Reserve Bank failed to act against such gross violations by officials involved in the ICICI-Videocon matter and the then government abdicated the responsibility of grave misdoings under its very nose.
Strangely, while in the case of Punjab National Bank regarding the over Rs 14,000-crore scam by Nirav Modi, the lender’s managing director and two executive directors were sacked on grounds of procedural lapses, the relatively strong case regarding Chanda Kochhar in the ICICI scam was not dealt with appropriately. It leaves one wondering whether there was a deep-rooted nexus between the then political establishment and those who perpetrated such grave financial misdemeanours which were sought to be concealed from public glare. The repeated denials by the ICICI Bank board on the issue of conflict of interest in giving loans to Videocon Industries under Chanda Kochhar’s leadership and her husband getting a favourable financial deal from Venugopal Dhoot hint at a nexus from which the board can hardly wash its hands off. The uncanny haste with which the board cleared Chanda Kochhar makes one smell a rat. Was there proper application of mind in absolving her of all blame and was the board’s action not tantamount to dereliction of duty and an attempt at cover-up? These are questions that deserve an answer. It is to be hoped that the CBI would also unravel in clear terms the political involvement in the whole operation. An All India Bank Officers’ Confederation (AIBOC) spokesperson alleging double standards of RBI in dealing with public sector and private sector banks has said the central bank did not take any action against ICICI Bank or its officials even after a leading law firm withdrew its report that had given a clean chit to Chanda Kochhar. The whole issue indeed needs to be probed threadbare.
As per CBI, on August 26, 2009, the sanctioning committee of ICICI Bank that included Chanda Kochhar approved a loan of Rs 300 crore to Videocon International Electronics Limited “in contravention of the rules and policy.” The CBI alleged that Chanda Kochhar “dishonestly” abused her official position to disburse this loan on Sept 7, 2008 and the very next day her husband’s firm Nupower Renewables received Rs 64 crore from Videocon Industry Ltd to acquire its first power plant. All eyes are now on what shape the CBI probe will take. Will it lead to the NDA government looking hard at its regulatory mechanisms so that correctives can be built in to ensure that scamsters do not take advantage of the disbursal of loans to duck their repayment? While loans cannot be altogether stopped, the abuse of systems to defraud the exchequer cannot be allowed a free run. A balance has to be struck between the need for loans to deserving people and the abuse of the practice by perpetrators of scams. Strict regulatory mechanisms need to be in place to thwart the NPAs from spiralling out of control.
Last year, former RBI Governor Urjit Patel had acknowledged that while it had far more control over private sector banks, the weak legal framework over public sector banks tended to deter the central bank from exercising better control over them. Patel’s remarks had come close on the heels of government indicating that regulators were not accountable to anyone. It would indeed be a boon if the NPA crisis leads to structural reforms and for greater accountability in the banking sector especially in regard to public sector banks.