ICICI Bank may face class action in the US if charges against Chanda Kochchar proven: Jeffries

MUMBAI: The noose appears to be tightening around beleaguered private lender ICICI Bank. On Wednesday, US brokerage Jefferies said the bank and its management run the risk of facing a class action suit in the US, should the quid pro quo charges against the bank’s CEO & MD Chanda Kochhar be proven.

It also wondered if the top management, including the CEO, will step down if the CBI files an FIR. 

Class action suit is where a group of people sue an individual or a corporate defendant for financial or other damages caused by negligence or mismanagement.

Jefferies’ note comes at a time when whistleblower Arvind Gupta told Express that the entire ICICI board should be liable, if Kochhar had made relevant disclosures prior to loan sanctioning. “Emerging risks could be a formalised corruption and more such instances coming up, and the bank facing a ‘class action’ suit (American Depository Receipts are 24 per cent of total shares) and a costly settlement,” Jefferies analysts Nilanjan Karfa and Harshit Toshniwal said.

“While further investigations do not preclude risks of business slowdown, the second line of management is capable of steering the ship,” Karfa and Toshniwal added.

Meanwhile, ICICI’s board defended Kochhar saying she made necessary disclosures. It has also put a protective cordon around Kochhar absolving her of any quid pro quo, nepotism or conflict of interest. “Such words effectively rule out the possibility of appointing external investigators for further examination, if at all,” the analysts noted.

Earlier this week, the CBI had initiated a preliminary enquiry (PE) to probe alleged irregularities between Deepak Kochhar, Chanda Kochhar's husband, and the Videocon Group. The latter had availed Rs 3,250 crore loan from the bank, of which Rs 2,810 crore remained unpaid and was declared NPA in 2017.

ICICI Bank was part of a consortium of 20 banks that granted loan to the Venugopal Dhoot-led Group to the tune of Rs 40,000 crore.

“However, the role of Chanda Kochar will also be examined if the enquiry leads to a nexus between the ICICI Bank’s grant of loan to Videocon Group and quid pro quo deals with her husband,” a CBI official said.

Through the PE, the agency will enquire into the series of alleged transactions between Deepak Kochar and Videocon Group and any relation thereof with grant of loans to the Group by ICICI.

The CBI officials enquiring into the issue claimed that the PE was registered some time ago and had nothing to do with recent media reports on deals between Deepak Kochar and the Videocon Group and the grant of a loan by ICICI to the Venugopal Dhoot-led Group.

(With inputs from Rakesh K Singh)