Investors want Chanda Kochhar to step down

Has she? Hasn’t she? Has Chanda Kochhar, the MD and CEO of ICICI Bank, been asked to go on leave by the board?

That’s the question people were asking on Friday morning when a financial daily reported that the bank had asked her to go on “indefinite leave” after instituting an independent probe into a whistleblower’s charges against her. Barely an hour later, the bank denied the report, saying she was on planned annual leave.

“The ICICI Bank Board denies having asked Ms. Chanda Kochhar to go on leave. She is on her annual leave which was planned in advance. Further, the Board denies that it has appointed any search committee to find her successor,” said the bank in its exchange filing.

Either way, pressure is mounting on one of India’s most powerful women bankers facing allegations of conflict of interest in loans to Videocon, which is alleged to have been favoured by Kochhar.

The bank’s stock - which had risen nearly 5% on the back of reports of Kochhar going on indefinite leave - began to drop immediately after the clarification hit exchanges. It fell from an intraday high of Rs 299.8 to Rs 288.7 in early trade.

Some Twitter users called for her resignation as the stock fell after the denial. “Morning rumors were that Chanda Kochhar was asked to go on leave. ICICI share prices went up. Once bank clarified its planned leave, share prices came down. Says a lot on what markets think of her and the bank,” tweeted Vasudevan K.

Sanjiv Bhasin of IIFL said the stock has been under pressure in the past few months due to the cloud of allegations over Kochhar. “Domestic, foreign and institutional investors are clearly of the view that Caesar’s wife must be above suspicion. Any sort of suspicion related to the head of a bank is never good for the company,” he said.

He went on to say that although the bank is calling her leave a pre-planned one, this may be the beginning of the end for Kochhar’s time at the helm of the bank. “We may have seen the last of Chanda Kochhar at ICICI Bank; I think it’s just a matter of time before we see her bidding adieu.”

Kochhar has been accused of non-compliance with the bank’s code of conduct in issuing loans to Videocon. A whistleblower alleged there was a "quid pro quo" in terms of loans extended to Dhoot's Videocon and Dhoot's investment and stake transfer with respect to NuPower, a company floated by Chanda Kochhar's husband, Deepak Kochhar. The Central Bureau of Investigation has launched a preliminary enquiry into the matter.

Ajay Bagga of OPC Asset Solutions asserted that while there should be a fair investigation and not a wtich hunt, it was important to disassociate the person with the company as soon as possible.

“Globally, in comparable situations, the people in question have been very quickly asked to step down and disassociate themselves from the company. The most recent example being Martin Sorrell, who had to exit WPP after allegations of misconduct were made despite him being the founder,” he said.

Bagga went on to say that, in the light of the recent announcement of an independent probe by the board, there were concerns over corporate governance practices in ICICI Bank’s board as well.

“There is an overwhelming sentiment in the investor community that the board must go first, given the delay in taking resolute action which has led to whispers, uncertainty and would have impaired the day to day functioning of a systemically important institution .” he added.

ICICI Bank’s stock declined nearly 7% between January 1 and early May. However, it rose 3% between May 1 and May 31. At the time of filing this story, the stock had recovered from the day’s low and was trading around the Rs 291 mark at 2 pm.