Allegations of fraud at ICICI Bank pose governance and reputational risks: Fitch

The alleged scam relates to a $500 million loan to Videocon Group, whose controlling shareholder co-founded a separate company with the spouse of ICICI’s CEO Chanda Kochhar.

The allegations of fraud at ICICI Bank have raised questions over its governance standards while creating reputational risks, said global rating major Fitch Ratings.
 
“An investigation into allegations that India’s ICICI Bank extended a loan with a potential conflict of interest raises questions over the bank's governance and creates reputational risks,” it said in a statement.
 
The alleged scam relates to a $500 million loan to Videocon Group, whose controlling shareholder co-founded a separate company with the spouse of ICICI’s CEO Chanda Kochhar. 
 
A large amount of the loan has since become non-performing, said fitch Ratings.
 
The private lender’s board has denied any wrongdoing saying the loan was underwritten in accordance with the bank’s credit standards and was extended as part of a consortium involving over 20 banks.
 
“Nevertheless, the presence of the bank’s CEO on this credit committee — and the bank’s reluctance to support an independent probe — have, in our opinion, created doubts over the strength of its corporate governance practices,” said Fitch.
 
The ongoing investigation, says the global ratings major, could also undermine investor confidence in the bank.
 
This will have potential implications for funding costs and liquidity, although its status as a systemically important bank means it will benefit from some form of state support.
 
In a latest, major shareholders have sought clarifications from the management over the alleged governance failures in the Bank, three people aware of the matter told LiveMint.
 
In its March 28 stock exchange filing, the bank reposed its faith in Chanda Kochhar and said there was no question of a “quid pro quo”.
 
ICICI Bank Ltd is India’s second largest private sector bank after HDFC Bank. 
 
Source: The Hindu, LiveMint and other media reports

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