By: John Elliott

The resignation this week of Chanda Kochhar, the chief executive of ICICI Bank, has terminated the impressive career of India’s top woman banker, while illustrating how easy it is to become snared in the country’s crony business world of shady liaisons and deals that straddle the borders of ethics and good corporate practice.

Kochhar, age 56 and widely described as “feisty,” had been with the bank for all of her 34-year career. She had been the chief executive since 2009 and could maybe have risen to further heights in India’s financial world if she had not been caught in conflicts of interest with her businessman husband and a company that doesn’t shine in the league tables of Indian corporates.

Her apparently forced departure, after taking indefinite leave in June, brings to an end a remarkable rise in the early 2000s of women bankers in ICICI, India’s second largest private sector bank. Breaking the glass ceiling, women held 13 of the top 40 management posts just over a decade ago, had three of five executive board seats, and ran two of five subsidiaries.

“Almost all the leaders we have picked have succeeded and most have been women,” K.V.Kamath, then ICICI’s (male) managing director and CEO, told me in September 2006, when I wrote about them in Fortune magazine. He had been responsible for empowering them, mostly when they were young.

Once dubbed the “petticoat brigade” by Mumbai’s chauvinistic banking fraternity, these highly competitive women helped build ICICI into a business that became famed for its aggressive risk-taking attitude and for its growth from a sleepy and bureaucratic development institution into India’s most widely diversified and customer-oriented bank.

Kochhar told me then that she knew nothing about retail banking when she became head of ICICI Bank’s fledgling retail operations in 1998 at the edge of 36. That made “Citi and others think we were doing a small flirtation,” she said. In April 2006, she was made head of corporate banking, then a small activity, and later that year figured for the second time in Fortune’s list of top 50 international businesswomen.

Now the tables have turned and she is the third top private sector banker to have their jobs curtailed by the Reserve Bank of India (RBI) in recent months.

Earlier this year it was announced that Shikha Sharma, Kochhar’s former ICICI colleague and rival, will leave Axis Bank, the third largest private sector lender, in December. The RBI opposed her reappointment as chief executive after Axis Bank’s non-performing assets (NPAs) rose by more than 300 percent in three years.

More intriguing is the RBI saying that Yes Bank, the fourth largest, should not renew the contract next January of its chief executive, Rana Kapoor, 61, who was one of the bank’s founders in 2004. His co-founder, Ashok Kapoor, was killed in the 2008 Mumbai terror attacks. Again, bad loans were the problem – the RBI said that Yes Bank had under-reported its bad loans for two years. 

Kapoor also hit the headlines in 2014 when, for unexplained reasons, he refused to allow Kapur’s widow (and his sister-in-law) or her daughter to be appointed to the board.

RBI actions

It is worth noting that, while the RBI’s action on these three private sector banks reflects a long-needed assault on the banking system’s failings, it has also helped to deflect attention from public sector banks that have been heavily criticized for poor management and regulatory controls.

The criticisms escalated early this year when an alleged US$1.77 billion corporate fraud emanated from the government’s owned Punjab National Bank and the businessman involved, jeweler Nirav Modi fled abroad.

News of Kochhar’s alleged conflicts of interest, which were started by a whistle-blower over a year ago, built up shortly after that. She had led a big expansion of ICICI’s retail and corporate banking, more than doubling the bank’s assets, but she then presided over a sharp increase in non-performing corporate loans.

One of the defaulters was Videocon Industries, a diversified group controlled by Venugopal Dhoot, who had done business deals with Kochhar’s husband, Deepak Kochhar involving an energy company. This led to questions about the transactions, which included Chanda Kochhar herself from a loan committee that approved a $440m Videocon loan in 2012 as part of a multi-bank consortium.

Ironically I was told in 2006 that one of the basic reasons why there were so many women was that, while they enjoyed working in the ICICI environment, their husbands were the main money earners (almost all those in the top levels were married). The wives could therefore afford to enjoy job fulfilment without worrying about ICICI’s then low pay levels that were in the bottom 25 percent of the country’s banks.

An era is ending with the departure of Kochhar and Sharma, but their removal along with Kapoor shows that the RBI has at last had begun to deal with the enormous mountain of banks’ bad assets. If it continues with the work, more skeletons will emerge because India’s corporate sector is riddled with corporate cronyism and a lack of ethics.

John Elliott is Asia Sentinel’s South Asia correspondent. He blogs at Riding the Elephant.