industry

Did Chanda Kochhar fall to an obscure bank rule?


MUMBAI: Why did Chanda Kochhar abruptly quit ICICI Bank as managing director and chief executive officer after appearing to hold on to the positions even after charges of favouritism to corporate clients first surfaced?

An obscure section of the Banking Regulation Act of 1949, which states that no bank can operate with a temporary chief for more than four months, may have been one of the factors that contributed to her exit.

The provision in the act states that “… where a person appointed on a whole-time basis, as Chairman of the board of Directors or the Managing Director dies or resigns or is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise in circumstances not involving the vacation of his office, the banking company may, with the approval of the Reserve Bank, make suitable arrangements for carrying out the duties of Chairman or Managing Director for a total period not exceeding four months.”

Kochhar went on leave on June 18, pending completion of an enquiry into the allegations against her, and the board appointed Sandeep Bakhshi as wholetime director and chief operating officer. For Kochhar to return as chief, the probe would have to be completed by October 17. However, it appears the Justice Srikrishna Committee is unlikely to finish its task by then.

“The fact that the enquiry is taking too long a time, she must have taken a decision that it is not fair from the point of view of Sandeep that she should continue,” said N Vaghul, former chairman and founder of ICICI Bank.

While accepting Kochhar’s request for early retirement, the board appointed Bakhshi as MD and CEO for five years till October 2023. The probe on charges of nepotism and conflict of interest is under way and the report is likely to be submitted in a month. The enquiry instituted by the board will remain unaffected by Kochhar’s departure and certain benefits will be subject to the outcome of the enquiry, ICICI Bank said in a stock exchange filing on Thursday.

The ICICI Bank board had rejected allegations of favouritism by Kochhar on March 28 and expressed confidence in her and her leadership. She faces charges of quid pro quo and conflict of interest over a Rs 3,250 crore loan disbursed to the Videocon Group in 2012. ICICI Bank share have advanced 8% since Bakhshi was appointed COO on June 18.

The stock gained 4.07% to Rs 315.95 on Thursday, while the benchmark Sensex index fell 2.24%.





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