ICICI Bank gets third whistleblower complaint on irregularities, incorrect accounting Since 2016, this is the third whistleblower complaint the bank has received for alleged impropriety in giving loans

Beena Parmar@BeenaParmar

There seems to be no end to the troubles plaguing ICICI Bank and its chief executive Chanda Kochhar.The bank now faces allegations of "irregularities in the conduct of some borrower accounts" and "incorrect accounting", thanks to a third whistleblower complaint in as many years.

After the complaint was received in March, the country's largest private lender instituted an inquiry into the matter under the supervision of the audit committee of the board of directors.The findings of the inquiry had no material impact on the financial statements for the year ended March 2018, ICICI Bank said in a statement to stock exchanges on Friday evening.The complaint alleged that --

• Irregularities in the conduct of some borrower accounts, resulting in incorrect asset classification. The complaint cited 31 loan accounts in respect of which the above was alleged.


• Incorrect accounting of interest income and NPA recoveries as fees. No specific examples were cited in the complaint.


• Overvaluation of security for corporate loans. No specific examples were cited in the complaint

The bank's internal investigation found that all 31 loan accounts had been classified non-performing assets (NPAs) well before the complaint was filed.

Of these, 29 accounts were classified NPA between March 31, 2012 and March 31, 2017, while two others were classified NPA between March and December, 2017, the bank said.

As was made clear by the bank, it had already classified the loans mentioned in the complaint as NPAs, before it became aware of said complaint.

The aggregate outstanding on the loans mentioned above (gross of prudential/ technical write-offs) as on March 31, was Rs 6,082 crore ($898 million), around 1.1 percent of gross loans, the bank said.

The lender added that it has already provided for 50 percent of the amount.

Based on the findings inquiry, the allegations relating to incorrect accounting of interest income and NPA recoveries as fees, and overvaluation of security for corporate loans, were not borne out.

In certain accounts, it was observed that there were transactions that may have delayed the classification of the account as NPA under Indian GAAP in earlier years, the bank said.

In its statement, ICICI Bank reiterated that "no disclosure on divergence in asset classification and provisioning for NPAs was required to be made by the bank with respect to RBI's annual supervisory process for FY2017".

Further action in the whistleblower complaint matter will being taken by the audit committee.

ICICI Bank-Videocon case

Since 2016, this is the third whistleblower complaint the bank has received for alleged impropriety in giving loans.

Shareholder whistleblower Arvind Gupta was the first to raise concerns in October 2016 through a blog, alleging impropriety in loan-related decisions made by Managing Director and Chief Executive Officer Chanda Kochhar.

He also alleged quid pro quo in the approval of loans given to Videocon Group, whose promoter had business dealings with Kochhar's husband Deepak.

At the end of March this year, the bank stated, in response to news reports, that it had reviewed internal processes for credit approval and "found them to be robust".

The bank's board has since expressed full faith in Chanda Kochhar, denying any wrongdoing on her part and ruling out any "conflict of interest".

However, after a second whistleblower complaint emerged, the board changed its stance and instituted an independent inquiry on May 30.The board said the inquiry into the allegations would be headed by an independent and credible person. Retired Justice Srikrishna is said to be heading it now, though the bank itself has not officially confirmed it.Currently, investigation agencies and markets regulators in India and overseas, have sent notices to the bank seeking responses to the allegations.After being under pressure for two months, Chanda Kochhar opted to extend her "annual leave" till such time that the internal inquiry into allegations against her is completed.

Meanwhile, Sandeep Bakhshi has been appointed Chief Operating Officer of ICICI Bank.

First Published on Jun 22, 2018 11:06 pm livemint.