Global rating agency Standard and Poor’s (S&P) said the developments around former ICICI Bank Managing Director (MD) and Chief Executive Officer (CEO) Chanda Kochhar and the board’s changing stance raises serious governance problems in the country’s banking sector.
“The recent developments surrounding former ICICI Bank CEO Chanda Kochhar and the changing view of the bank's board of directors affirms our view of generally weak governance and transparency in the Indian banking sector,” it said on Friday.
The comments come days after the private sector lender sacked Kochhar based on the BN Srikrishna enquiry report which found her guilty of violating the bank’s code of conduct and making inadequate disclosures.
Meanwhile, the Central Bureau of Investigation (CBI) has also filed a first information report (FIR) against Kochhar, her husband Deepak Kocchar and Venugopal Dhoot, MD, Videocon Group for alleged quid pro quo and misconduct in loans sanctioned in 2012 to the Videocon Group.
Noting that the Board had in 2016 and in early 2018 given its full support to Kochhar, S&P said, “The Board's reversal of its previous strident support of Kochhar is significant in our view, and will likely result in Boards across the sector being more careful in giving clean chits to key management personnel facing allegations.”
It, however, said that the Board's ability and willingness to claw back bonuses and other benefits when a person is deemed to be at fault is an important check that supports accountability and good stewardship of companies.
S&P also noted that it is unclear if ICICI Bank would face any legal or financial risk due to this episode. More clarity on this matter is likely in the next few months.
“We note that there is limited public information on ICICI and CBI's findings, and the results are not judicial,”it added.