ICICI Bank had been quick to dismiss the allegations of irregularities in the financial statements of the bank made by a whistleblower in March. In a regulatory filing on June 22, the bank had put forward facts and figures claiming that the allegations "were not borne out" but it now seems to be rethinking its stand.
According to The Economic Times, ICICI Bank has launched a second external probe to look into the third whistleblower's allegations. A source told the daily that the bank has hired white-collar crime specialist law firm Panag and Babu to investigate the matter.
The whistleblower, reportedly an anonymous ICICI Bank employee, had written to the bank and the RBI in March alleging irregularities in the conduct of 31 borrower accounts, resulting in incorrect asset classification. The report added that the bank had been accused of inflating profits by at least $1.3 billion over eight years by delaying provisioning for these NPA accounts.
However, in June ICICI Bank had informed the exchange that following the complaint, it had instituted an enquiry "as per the Whistle Blower Policy of the Bank under the supervision of the Audit Committee of the Board of Directors, without involvement of the senior management other than Internal Audit."
The interim report found that all the red-flagged loans had been classified as non-performing and provided for as per applicable norms by December 31, 2017 itself. "These accounts were classified as non-performing between the year ended March 31, 2012 (FY2012) and the year ended March 31, 2017 (FY2017), other than two accounts which were classified by December 31, 2017. Thus, all these loans had been classified as non-performing prior to the Bank becoming aware of the complaint," the bank informed the exchange.
It had further claimed that "Based on the procedures performed in the enquiry, 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."
The scepticism among corporate governance experts and investors alike following this defence by ICICI Bank may have prompted it to consider a second probe. According to the daily, this fresh probe will be independent of the probe being conducted by retired Supreme Court judge BN Srikrishna.
The latter is looking into older allegations that some of the loans given to Videocon and Essar Groups were granted as a quid pro quo for their business dealings with Deepak Kochhar, the bank's Chief Executive Officer Chanda Kochhar's husband. Law firm Luthra and Luthra and forensic audit company Control Risk Group are reportedly assisting Srikrishna in the probe.
"In the past, the ICICI Bank board had to be nudged to initiate any enquiry. Now it's clear they want to steer themselves out of any controversy, which is why they have initiated another probe," said a source, adding, "I believe the scope of investigation is limited to allegations levelled in the third whistleblower complaint."
Another source pointed out that the above-mentioned interim report has already been submitted to the Reserve Bank of India and that the external agency had been appointed to "conduct an exhaustive" probe. "The bank has already submitted an internal investigation report to the RBI, which says that all these accounts were provided for and any delay in deciding on impaired assets was purely a business decision," said the person. "I don't think these accounts were even part of any asset classification divergence the bank may have reported in the past."Confirming the development, an ICICI Bank spokesperson told the daily that "An independent law firm has been appointed by the audit committee to assist it".
Though ICICI Bank had initially defended its chief and denied all accusations of wrongdoing, when the controversy continued to snowball, the board brought in its senior-most executive Sandeep Bakhshi as the Wholetime Director and Chief Operating Officer. Kochhar is currently on leave pending the findings of the Srikrishna committee.
Meanwhile, the bank's stock has taken a fresh hit this morning. It is currently trading at Rs 259.10 apiece on the BSE, down 3.3 per cent from its previous close.