ICICI BANK- Corporate Communication During the Chanda Kochhar Saga

What Exactly Happened?

It all started in 2016 when a whistle-blower, Arvind Gupta, wrote on a blog, as well as to RBI, ED, CBI and PMO about
the financial dealings between ICICI Bank, Videocon Group, and NuPower Renewables (promoted by ICICI Bank CEO
Chanda Kochhar’s husband- Deepak Kochhar). Arvind sought an investigation into the connection between Videocon
investing in NuPower back in 2008, and later being granted 6 high value loans by ICICI Bank between 2009-2011. In
2012, ICICI Bank granted a loan of INR 3,250 Crore to NuPower but just days before the loan was sanctioned, Videocon
transferred its entire stake to Deepak Kochhar for mere INR 9 lakhs!

Quid pro quo, conflict of interest, lapses in corporate governance & money laundering were the charges being levied.
While refuting calls for an independent probe by external agencies, ICICI Bank conducted an internal inquiry, which
didn’t find any merit in the allegations. The RBI also carried out a scrutiny but it was inconclusive, in that it didn’t find
any material evidence that conclusively established the charges. The complaint did however, attract some discussion
on social media but the mainstream media did not pick it up.

The allegation resurfaced with a greater intensity in 2018, when the banking system was rife with incidences of frauds
and higher NPAs. The CBI summoned Deepak Kochhar for questioning, which led the market regulator- SEBI to initiate
a detailed inquiry against Chanda Kochhar. ICICI Bank appointed an external investigation committee headed by Justice
B.N. Srikrishna to look into allegations from the period 2009-18, only after CBI &b ED began issuing notices and Ministry
of Corporate Affairs began its own probe into the matter- all this while Mrs Kochhar was on a planned leave. This gave
a lot of credibility to the speculations and mainstream media made it a major story.

Was Chanda Kochhar’s Conduct Appropriate?

It is evident now, that Chanda Kochhar showed lack of judgement in not recusing herself from the loan clearing
committee. Secondly, NuPower was classified as related party only in 2015. The conflict of interest also extends to her
husbands’ brother- Rajiv Kochhar’s firm Avista Advisory Group, which was involved in restructuring of advances for the
Bank’s corporate borrowers. Her actions exposed ICICI Bank to headline risk, because it is an Indian listed company,
whose ADRs are listed in US exchanges, making it vulnerable to class action lawsuits.

How Did ICICI Bank Respond to Allegations?

March 28,2018- first official statement stated that there is no question of any favouritism, nepotism or quid-pro-quo and
reposed faith in Chanda Kochhar because…

1. The loans were sanctioned by a committee NOT chaired by Kochhar.

2. The loans were a part of consortium lending at terms agreed by ALL lenders.
3. RBI’s investigation couldn’t establish any allegation.

It reiterated that its credit approval system was robust, unbiased and disallowed any individual to unduly influence it,
irrespective of his/her position.

March 29, 2019- ICICI Chairman reiterated at a press conference that the Board didn’t see any conflict of interest as
Videocon Group was not an investor in NuPower. The Chairman maintained that Mrs Kochhar had been making all
disclosures in accordance with regulatory guidelines.

April 5, 2018- Chairman M K Sharma in a media interview backed Kochhar again citing that these were malignant
attempts at distracting people from issues in which other financial institutions were involved.

April-2018 end- Chanda Kochhar made her first public appearance post controversy at India Economic Summit where
she avoided questions from media. Even post that, while announcing Q4 earnings, the media relentlessly bombarded
Kochhar with questions about the case and continuity of her tenure, which she avoided.

May-2018- An independent whistle-blower raised fresh concerns on governance, quid pro quo and money laundering,
which forced SEBI, Ministry of Corporate Affairs and the ICICI Bank’s board to institute inquiries against Kochhar. She
went on “planned” annual leave. As per media reports, an internal source from the Bank confirmed that these
developments led the board to plan an independent enquiry while Kochhar was on her leave. The source gave detailed
account of the independent committee that was being discussed along with names of key people involved. In an official
statement ICICI Bank rubbished these reports. However, on May 29, 2018, in a filing to NSE, the board confirmed that
it had decided to conduct an independent probe and look at all allegations against Kochhar.

June 18, 2018- the Bank announced that Kochhar will remain on leave till the enquiry concludes and appointed Sandeep
Bakhshi as Wholetime Director and COO as in-charge of the bank’s business. It mentioned that Kochhar had
volunteered for this leave in line with the highest levels of corporate governance. This move sent the media and markets
into a frenzy where everyone questioned the consistent backing by board and Chanda not stepping down when the first
set of doubts were cast.

September 12, 2018 (AGM)- shareholders questioned the Bank on corporate governance and demanded a response.

Mid-September, 2018-, a Bank spokesperson claimed that it had not asked for any settlement in its response to SEBI’s
notice, while SEBI mentioned that ICICI Bank had expressed an informal intent for consent plea to settle allegations
against Chanda.

October 4, 2018- Chanda quit her position at ICICI Bank and in a statement, the Bank termed it as acceptance of request
for early retirement with immediate effect. It also stated that the ongoing enquiry remains unaffected.

January 30, 2019- Multiple enquiries began unravelling and based on CBI’s inquiry outcome, the Bank issued a
statement accepting allegations against Kochhar and stating that her resignation would be treated as “‘Termination for
Cause’ and all benefits & bonuses will be clawed-back.

Issues with Communication and Impact on Social Capital…

ICICI Bank’s communication during the entire episode was muddled & incoherent. It did a volte-face from strongly
backing Kochhar to announcing an independent probe 2 months later and eventually terminating her. It raised serious
questions about its integrity and corporate governance. All attempts of media cover ups were counter-productive, with
each statement further tarnishing its reputation.

Throughout this case, the Bank tried to portray “a business as usual” picture to its stakeholders. They made many
positive announcements and CSR initiatives, as a part of an Online Reputation Management (ORM) strategy, but the
case was too intense for the ORM efforts to really work or minimize damage.

The Bank’s attempt to appear righteous with high standards of governance failed miserably as the independent probe
by Srikrishna Commission indicted Kochhar for not adhering to corporate governance & compliance standards. Both
mainstream and social media was flooded with negative reactions and pointed questions. Continuous information leaks
from within the Bank made matters worse. Refuting the leaked information only to validate it later through official
announcements depleted its credibility. It also failed to consider the information media was receiving from other sources
such as CBI and SEBI, that contradicted its claims.

The reputational damage was reflected in ICICI Bank’s stock price, which plummeted 25% from INR 360 to INR 265-
270 level during Feb-Mar 2018 as the inquiries were initiated. See the trend line for the period in the chart below. The
prices recovered once Kochhar put in her resignation in October 2018.

The company’s crisis communication was more damaging than damage control itself. Even today, almost 6 months post
issue, the hashtag #chandakochhar is being used in reference to frauds and the media is still keeping a hawk’s eye on
the smallest of developments in the case. Clearly, the lack of effective crisis communication has eroded ICICI Bank’s
social capital to the extent that it will take years to earn back.