RESTORING FAITH IN

CORPORATE
GOVERNANCE

GROUP -2
Asha Christina Hembrom (H030-23)
Ashim R.R Baba(H035-23)
Sumesh R Nair(H057-23)
Junaid K(H059-23)
Aaryan Namgyal Dutta Roy(H069-23)
Varun Gautam(H071-23)
Gokul Krishna Sabu(H072-23)
Aswin EP(H073-23)
 CASE INTRODUCTION
Investor Arvind Gupta accused Chanda Kochhar, the CEO of ICICI Bank, of nepotism and
having a conflict of interest when she approved loans for Videocon, a company
connected to her husband Deepak Kochhar's business NuPower

Following an internal investigation, Justice B.N. Srikrishna determined that Chanda

Kochhar had violated the code of conduct and had breached her fiduciary
obligation.

After ICICI originally backed Chanda Kochhar, investigations by CBI, SEBI, and ED in
2018 resulted in Kochhar's resignation in October of that same year.

Then, The goal of ICICI's new chairman Girish C. Chaturvedi was to improve the
company's governance and risk culture while also demanding that Chanda
Kochhar repay her $30 million in compensation.
1. Options Chaturvedi has to prevent similar fraud situations in
the future

Implement robust conflict of interest policies

Mandatory disclosure, Process for managing conflict
Enhance efficiency of loan approval processes
Multiple parties in loan decisions, stricter diligence
Improve whistleblower protection mechanism
Anonymous reporting channels, incentives
Strengthen independent oversight
Independent directors, Transparency
Regular audits and reviews
Independent audit team, Audit plan
 2.What can the Indian government do to restore the International
community's faith in the Indian banking system?

ICICI INTERNATIONAL ACTION

In 2022, ICICI reported an NPA ratio of Strengthen regulations and

The average NPA ratio for major developed
Transparency and 3.32%, exceeding the RBI's recommended enforcement mechanisms for
economies was around 1.5% in 2022. (Source: Fitch
Disclosure: threshold of 2%. (Source: ICICI Bank Annual Report transparency and disclosure in the
Ratings)
2021-22) banking sector.

Japan successfully reduced its NPA ratio from

RBI data shows India's gross NPA ratio at 5.8% in Facilitate legal and regulatory reforms
22.4% in 1998 to 1.3% in 2023 through debt-to-
Nonperforming Assets March 2023, higher than the global average of to enable efficient NPA resolution and
equity swaps and market
(NPAs): 2.8%. (Source: RBI Financial Stability Report, June create a conducive environment for
mechanisms. (Source: Japan Financial Services
2023) secondary loan markets.
Agency)

A 2021 report by the Committee on Public Respect the autonomy of public sector
The Bank of England, for example, operates with an
Undertakings in India raised concerns about banks and appoint boards based on
Autonomy and independent board and governor, demonstrating
government interference in public sector merit and expertise.
Governance: autonomy in policy decisions. (Source: Bank of
banks, potentially impacting ICICI's
England)
autonomy. (Source: Lok Sabha Secretariat)
3.Whether the termination/ recalling bonus and stock options were
enough punishment for the degree of the offense committed by
Chanda Kochar?
Compared to the gravity of the accusations and potential
repercussions, the imposed penalties seem relatively
insignificant.

The absence of criminal charges or regulatory sanctions

leaves a gap in holding Kochhar truly accountable for her
alleged actions.

For shareholders who suffered losses, employees who faced

uncertainty, and stakeholders who felt misled, the imposed
punishment might not offer a strong enough symbolic
gesture of justice

Chanda Kochhar is permanently associated with fraud in the eyes of the public,
considered guilty until proven innocent.
 Suggested Punishments

1)Imprisonment- Up to 5 years or a fine or both for offenses like

fraudulent trading, misrepresentation, and suppression of material
information (Sections 447, 448, 477A).

2)Disqualification-Disqualification from holding directorships in any company for up

to 5 years or permanently for offenses related to fraud, misrepresentation, or
mismanagement (Sections 164, 167).

3)Financial Penalties-Monetary penalties imposed by regulatory bodies like SEBI

or RBI for violations of regulations related to insider trading, corporate governance,
and disclosure requirements.

4)Debarment- Debarment from accessing the securities market for specified

periods for offenses related to fraudulent trading or insider trading
 Q4. ROLE OF BOARD OF DIRECTORS

ACTIONS OF THE BOARD

GRANTED FULL COMPENSATION DURING HER LEAVE

Initially supported kocchar
CHANGED THEIR STANCE ONLY AFTER THE INTERNAL
LAUNCHED A DELAYED INTERNAL INVESTIGATION
REPORT

POSSIBLE PUNISHMENTS

Regulatory bodies like SEBI could impose fines or other penalties on the board
members.

Ban or suspend directors from accessing the securities market for specified period

Directors should be resigned from their positions

Q5: What should be the role of the government, shareholders and boards in other banks to
prevent such cases in future

The government, shareholders, and otherbank boards should push for:

Limits on tenure to refresh boards

Board evaluation by third party experts

Protections for whistleblowers

Giving board Risk Committee real power over risk decisions

External annual governance audits on risk, transparency, compliance parameters

Making individual directors legally liable for governance lapses