On Thursday, shares of ICICI Bank Ltd rise as much as 8.57% to a high of Rs 345.50 a share. A level is last seen on 1 February after the bank clarifies that it has made full disclosures about its loans and non-performing assets(NPA’s) investor presentations and analysts calls. Accounting standard norms were required an accounting challenges policy, however, the bank was silent from previous years. At 11.16am, the ICICI Bank stock was trading at Rs 334.20 on BSE, up 5% from the previous close.
According to a note Chanda Kochhar sent to the bank’s board in early April, ICICI Bank management wrote off unsecured portions of doubtful corporate loans totalling Rs 5,000-5,600 crore for the fiscal year 2016-17, On 7th August 2018.
The change in accounting policy that enabled these “technical write-offs” was cleared by the bank’s board only in the new financial year, and never communicated to shareholders, as required by banking and market regulators. Thanks, in part, to the changed policy, ICICI Bank managed to keep its 2016-17 bad loan ratios low.
“The bank classifies loans as non-performing (sub-standard/doubtful/loss) and makes provisions for them as per RBI guidelines. Write-offs are generally made out of existing provisions against existing NPAs. The write-offs do not impact loan classification, additions to NPAs, the profit & loss account or the net NPA ratio of the Bank”, the bank said in a clarification to exchanges.
The Significant Accounting Policies, which are part of the audited financial statements in the Annual Report of the Bank, have always mentioned that ‘Loss assets and the unsecured portion of doubtful assets are provided/written-off as per the extant RBI guidelines’ (for fiscal 2016, the disclosure has been made on page 137 and for fiscal 2017, the disclosure has been made on page 146 of respective Annual Reports). Detailed disclosures on write-offs are made in the financial statements (for fiscal 2017, the disclosures have been made in Note 18 on pages 170-171 of the annual report). Further, the Bank has also made disclosures regarding write-off amounts in the Management’s Discussion & Analysis, investor presentation and analyst call. The Bank has also disclosed the provision coverage ratio both including and excluding prudential/ technical write-offs”, the clarification added.
Central Bureau of Investigation registered a preliminary inquiry against Chanda Kochhar’s husband Deepak and businessman Venugopal Dhoot to verify alleged conflict of interest in a Rs 3,250 crore loan made by ICICI Bank to Dhoot’s Videocon group. After that ICICI Bank is facing series of a problem as the bank had extended the loan as part of a Rs 40,000 crore loan by an association of 20 banks in 2012.
SEBI also asked ICICI Bank to clarify on reports of this corporate governance violate. In April the tax department issued notices to Deepak Kochhar to look into the flow of about Rs 325 crores from two Mauritius-based firms to NuPower Renewables, which he once co-owned with Dhoot.
Following which in May the board instituted a fresh inquiry into the allegations and asked its chief executive Chanda Kocchar to go on indefinite leave till the problem is over. The bank declared retired supreme court judge BN Srikrishna would head the inquiry and appointed Sandeep Bakhshi as the chief operating officer for a five-year term.
On 27 July, the lender reported a loss for the first time ever to Rs 120 crore from a profit of Rs 2049 crore on account of rising bad loans and treasury losses. On 30th June, it’s NPA rose to RS. 53,464 crore compared with RS. 43,147 crore in the year-ago quarter. Gross NPAs, as a percentage of total advances, were at 8.81% in the June quarter compared to 7.99% in a corresponding period of last year.
Fresh loan failed to stand at Rs 4,036 crore, the lowest in the last 11 quarters, compared with RS.15,737 crores in the previous quarter.
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