Zero tolerance to corruption and inefficiency should be the calling card of any bank, whether it is state-run, private or a foreign entity. For that matter, commercial operations of organisations must be above board. News reports suggest that not everything is above board at Axis Bank and ICICI Bank, the country’s top private banks. These banking entities have been hogging the headlines for the wrong reasons in the last few weeks. The choice for them is straightforward: the managements of these banks have to come clean on their operations; both Shikha Sharma of Axis Bank and Chanda Kochhar of ICICI Bank should be made accountable to all stakeholders, apart from the Reserve Bank of India, the Union finance ministry and the Parliament. Unless the top-deck CEOs are above suspicion, how can bank managements expect their corporate borrowers to judiciously and responsibly repay their loans?
India has been fortunate to have over half a dozen women as top bankers. They have till now been feted as the ‘best’ in the industry hitherto dominated by their male counterparts. But Sharma and Kochhar’s performance-related issues have unsettled the banking sector. As a logical extension, other female CEOs may also face closer scrutiny, their performance reassessed and that may not augur well for the banking industry.
Before the developments at Axis Bank and ICICI Bank have contagion effect, the banks’ CEOs need to come up with a plausible explanation for what has been happening in their organisations under their watch. The starting point would be to offer an explanation on issues flagged by RBI. Multi-fold increase in non-performing assets or bad loans of Axis Bank under Sharma’s stewardship has been pointed out by the central bank while questioning the fourth three-year term recommended for her. Only after the RBI raised red flags that the board chose to curtail her fourth term to a few months.
It is surprising that Axis Bank was silent on divergence of Rs 5,633 crore in the second quarter of 2017-18 and Rs 4,867 crore in the previous financial year. Statements on following ‘standard procedures to senior appointments’ will not wash away the alleged sins committed by the Axis Bank.
The case of Kochhar, regarded as the poster woman of the Indian banking industry, is all the more curious as it borders on power peddling, outright favouritism and corruption – if the CBI proves the allegations. Whistle-blower Arvind Gupta accused Kochhar of quid-pro-quo while sanctioning Rs 3,250 crore loan to debt-laden Videocon Group that had business arrangements with her husband. Most curious was that the bank board denied any wrongdoing and justified its exposure to the Videocon group of Venugopal Dhoot as part of 20-banks consortium. In the first place, was it not incumbent upon Kochhar to recuse herself when the loan proposal for Videocon group was considered, considering her husband had business links with Dhoot’s company? Secondly, having given a clean chit to Kochhar, why is it that some directors of ICICI Bank now have other views?
Further, why is it that RBI remained a silent spectator till now on developments at the two banks. With serious lapses and shortcomings in both the top private banks, how can the finance ministry absolve itself of responsibility? When even slightest deviation in procedures at state-run banks becomes fodder for the media, how can these banks remain non-transparent? The RBI, government and all the stakeholders have to offer serious explanation to Parliament and the people on the state of the banking industry against the backdrop of the Axis Bank and ICICI Bank cases, and before this the PNB scam. It would be wise of Prime Minister Narendra Modi to step in and issue a white paper on the Indian banking industry.