An investigation into allegations against ICICI Bank could pose 'reputational risks' for the private sector lender, says a report by global ratings agency.
An investigation into allegations against ICICI Bank could pose ‘reputational risks’ for the private sector lender, says a report by global ratings agency. “An investigation into allegations that India’s ICICI Bank extended a loan with a potential conflict of interest raises questions over the bank’s governance and creates reputational risks,” says Fitch Ratings report. Such a probe may also undermine the confidence of investors in the bank resulting in probable implications for funding costs, the report says further.
In case of a probe ending up with findings against the bank, there lies a potential risk of financial penalties and legal action, the report published on Monday adds. However, the ratings agency also says that private banks such as ICICI have in place a much efficient corporate governance in comparison to state-owned banks.
Earlier in the day, Bloomberg reported that ICICI Bank’s board that was fully backing CEO Chanda Kochhar earlier, now is undecided over whether to ask her to step down amid ongoing investigation by the investigative agencies or not. Bloomberg reports citing unidentified sources that some outside directors are against Kochhar’s continuation as CEO of the bank. The bank board may meet early as this week to consider its next course of action, media reports say. Chanda Kochhar’s present tenure as CEO is scheduled to end on March 31, next year.
The ratings agency is closely monitoring the developments and ready to take action when risks on bank’s reputation and financial profile arise, it says. There are allegations of malpractice between ICICI Bank’s loan approval to Videocon Industries and linkage to companies promoted by husband or relatives bank CEO Chanda Kochhar. The loan amount in question is about Rs 32.5 billion.
The shares of ICICI Bank closed at Rs 280.45 down 0.05 percent on BSE on Monday.