Understanding ICICI - Videocon case

April 1, 2018

 

Rising non-performing assets coupled with banking frauds has been the major challenge for Indian banking sector. Government and banks have been overtly cautious lately in dealing with loans so as to curb banking frauds. One recent example of this has been the Rs 32.50 billion loan extended to Videocon by ICICI bank which has come under the scrutiny of CBI and Enforcement directorate. 

 Background:

  1. Whistleblower and investor Arvind Gupta alleged a nexus between Deepak Kochhar, ICICI Bank Managing Director and Chief Executive Officer Chanda Kochhar’s husband, and Videocon group Chairman Venugopal Dhoot.

  2. Gupta wrote to the Prime Minister, the regulators and other authorities, seeking an inquiry into the dealings related to the three entities. However, none acted on his complaint.

  3. A month ago, the Central Bureau of Investigation (CBI) registered a preliminary enquiry (PE) into the matter, concerning Deepak Kochhar, executives of the Videocon group, and others.

Alleged Dealing:

 As per the allegations, Videocon invested 94 crore rupees in NuPower renewables and transferred 325 crore to the company through Mauritius route. The company NuPower is owned by Deepak Kochar who is the husband of MD and CEO of ICICI bank Chanda Kochar. ICICI bank then extended a loan of 3250 crore to the Videocon group. 

 Legal Questions:

  1. Is the loan extended by ICICI bank, a part of Quid Pro Quo arrangement between the three entities?

  2. Is there misappropriation of funds, discrepancies in transactions, criminal breach of trust, and violation of anti-money laundering laws or the Foreign Exchange Management Act (FEMA)?

Ethical Questions:

  1. Is it right to use the public post for private gains?

  2. Critical analysis of Nepotism?

 Conclusion:

 

The matter is sub-judice and it is It is premature to comment about the case and the breach of law at this point of time. Also, the cautiousness of the government and banks should not lead to witch hunting in which even the genuine borrowers are hunted as wilful defaulters. Credit extension and borrowing is the backbone of banking sector and thus such a witch hunt can be more costly for the Indian economy than the disease of fraud itself. 

 

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