Mumbai: There is concern about the governance premium in India following developments at private sector banks Axis Bank Ltd and ICICI Bank Ltd, said M. Damodaran, former chairman of the Securities and Exchange Board of India (Sebi), in an interview CNBC TV 18 on Tuesday.
According to Damodaran, there are too many things in ICICI Bank that are “uncomfortable” and are suffering a great reputation risk. “It is disturbing to use a very, very soft word and board, you should have appointed an independent investigative authority, not do your own investigation because there are interested parties, there is a reputation management, this can only be done by carrying out an investigation impartial, and that’s what everyone does, whether in India or abroad, “Damodaran said in the interview.
“The mitigation of reputational risk resides at the board level and nowhere else,” he added.
Press reports have raised questions about the ICICI Bank sanctioning loans for Videocon because its president Venugopal Dhoot allegedly had dealings with NuPower, founded by Kochhar’s husband, Deepak Kochhar. Mint could not independently determine the veracity of these accusations.
According to the former bureaucrat, ICICI Bank is a systemically important bank, stakeholders have reasonably higher expectations of it.
“What the board has done is put it in telegraphic form, they seem to have jumped the gun,” said Damodaran.
Typically, when someone joins a company in a senior management position, they are required to provide a list of the companies with which they are associated with the joint companies to which they are associated, Damodaran said.
“If a company was created later on, it is becoming the board director.” At the time it was created and it is perceived that there was a conflict, which clearly existed, he was forced to notify the board, “he said.
At Axis, where its executive director and managing director, Shikha Sharma, decided to reduce its mandate on Monday and will now step down on December 31, Damodaran said the board should have better addressed succession planning. Sharma’s term was scheduled to end in June 2021.
If there were valid reasons to consider a fourth term of three years and the board decided collectively, when the regulator denied it, there should be a reason why the board thinks Sharma should continue, Damodaran said.
“The way the decision is made is that when the term is about to expire, you ask yourself two questions: Who is the best one to lead the bank in the next three or five years? Do not ask the question, should we give it another extension? That is not the way to address the issue of succession, “said Damodaran.