Should Chanda Kochhar take a break?

Chanda Kochhar must be having horrendous times these days thanks to disclosures by the whistleblower, Arvind Gupta. She is only 56 years old and in the normal course she may continue as ICICI Bank's CEO and MD for some more years. (She became CEO and MD in 2009.)

Though the bank is not known for squeaky clean governance, nobody seriously suspected nepotism and blatant violation of ethical practices, save Arvind Gupta. He wrote to the PM, FM, SEBI and RBI two years ago. These authorities seem to have woken up suddenly now.

There are indications that all is not well in Axis Bank also. Shikha Sharma has come in for adverse notice by RBI. She was appointed the CEO and MD of Axis Bank around the same time as Chanda Kochhar became ICICI Bank's CEO. Both these persons were groomed and mentored by K.V.Kamath in ICICI Bank.

Nine years as CEO is an adequately long period to become accountable for any managerial misdemeanour. It is now worth asking if the private sector banks are mismanaged because their CEOs have a much longer tenure than desirable just as public sector banks are suffering from their CEOs' shorter than necessary tenure.

This philosophical question apart, Chanda Kochhar is verily facing an existential crisis in the bank. The bank's Board has expectedly and dutifully thrown its weight behind her. Yet, the fact remains that Chanda Kochhar has willy-nilly to spend a lot of her time agonising over various governance issues that are now talk of the town. The allegations may or may not prove her guilt, ethical or legal. But the damage is done for the bank and her.

Even if Chanda Kochhar cannot ultimately be faulted for any lapses which again may or may not be proved, she cannot now be in a position to do full justice to her role as leader of the bank. In these trying circumstances, she will do well for herself and the institution to quit her position at least temporarily till all enquiries are completed. The Board may hesitate to suggest this to her. But she has an opportunity to prove that she considers bank's interests to be more important than her own.

ICICI Bank claims that its culture ensures organic growth of leaders within the organisation. So there should be no dearth of managers within the bank who can easily fill up the void that Chanda Kochhar's exit may create.

Arvind Kejriwal's contempt of court

Arvind Kejriwal made serious allegations against many leaders of non-AAP parties. One does not know the veracity of these charges. At least, the accuser must have thought of them as true.

Some of these allegations have been fought in courts of law and considerable judicial time has been spent on them (injudiciously, in hindsight). Courts are already reeling under Docket Explosion. Kejriwal has done a signal disservice to Indian judiciary by preempting its precious time through diversionary tactics.

The courts should view this disrespect for judiciary seriously. Even if the accused have accepted Kejriwal's apology and are ready to withdraw their plaints, judiciary should put its foot down and demand that the accuser prove his charges or be punished for contempt of court. If the courts express their disdain for frivolous political allegations, politicians may learn to behave better.

Controversial CAs

These are embarrassing times for CAs - Cambridge Analytica and Cricket Australia. Australian cricket team has never been known for integrity and fair play. It has crossed all limits of decency indulging in a planned tampering of the cricket ball while playing against S.Africa on Saturday.

One CA tampered with sanctity of data and the other CA with integrity of cricket ball. Both acts are just not cricket. Cameron Bancroft, the player who did the act and Steve Smith, the Australian captain have both accepted their wrong-doing. They could not deny because it was all caught on camera. If the brazenness of the act is shocking, the intention is shameful. The deplorable plan to tamper with the ball was hatched by the Australian cricket team during the lunch break. It is disgraceful that there was not even a single sane voice to counter the deceitful design.

Being the skipper of Aussie cricket team is deemed more prestigious than Australian primeministership. It is similar to President of Harvard University vs President of America. (Once, the secretary to Harvard President called up the White House and asked, "Is Mr.Kennedy {who was then American President} there ? Our President wants to speak to him." This incident may be apocryphal but it conveys a sense of the significance of Harvard University President.) Steve Smith has done incalculable harm to such an exalted  position.

Every cricket match is a prestigious event for Australians. However, this does not entitle the players to degrade themselves and the game by resorting to unlawful and unethical acts. Cricket is a game of decency and values. Cricket Australia has never understood this.

Rejuvenated Congress and Debilitated BJP

"A week is a long time in politics" said Harold Wilson who was prime minister of U.K. twice. Four years is a substantially long period. It is now almost four years since India rejected UPA and particularly the Congress as unfit to govern the country.

In 2014, corruption as an issue was occupying centre-stage. BJP whipped up the issue with characteristic adroitness and the voters rewarded it handsomely. After a long time, we vested a party with majority in the Lok Sabha so that it could focus on governance without being handicapped by what Manmohan Singh spuriously called as 'coalition dharma'.

Political scenario has undergone a drastic change in the recent past. Opposition parties excluding the Congress and communists have become more upbeat in the aftermath of shock defeats of BJP candidates in Lok Sabha by-elections in U.P. and Bihar. It is true that Narendra Modi did not canvass in these by-elections. But if the overwhelming and enthusiastic support of voters as it existed in 2014 for Narendra Modi had not dissipated, these shock defeats would not have occurred.

Congress has nothing to gloat over its continuing dismal performance in elections. When disenchantment with BJP and Narendra Modi is gaining impetus, a national party like Congress should start making hay. (Some sceptics may argue that Congress is no longer a national party. This argument is a bit premature. Congress is even now salvageable.)

It is a no-brainer that Congress cannot muster majority on its own in the Lok Sabha in the near future. At best, it can be one of the parties forming a possible coalition in the centre post-2019. For this to happen, two crucial requirements must be met.

It is very likely that BJP will continue to be the largest single party in the lower house of parliament. Since BJP is an assertive party causing constant discomfort to its adversaries, opposition to BJP is virulent. Virulent splintered parties are not a threat to BJP. But a combined opposition would be, like what was seen in the recent by-elections. So the first condition is continued unity among opposition parties.

Congress continues to be treated as a liability by other parties. If Congress wants to become acceptable to other parties and more importantly to voters, it has to get rid of proven corrupt leaders forthwith. In addition, the Gandhi family must cease to dominate. Dumping corrupt leaders and non-glorification of a particular family are the second requirement.

Banking drama

Banking scene in India is becoming curiouser and more pathetic day by day. PNB keeps increasing the size of its LOU scam periodically. As of March 13 (morning 11 a.m ), it was pegged at Rs.13,578 crore. Let us not be surprised if it snowballs further. Such is the state of managerial efficiency in one of the largest banks in India.

RBI has tried to mask its inability for effective supervision by banning LOUs and Letters of Comfort. It does not seem to realise that the problem is lack of operational risk management and not the concept of LOU.

RBI is making two mistakes. One, it is locking the stable after the horses have bolted. Second, it is using the wrong lock.

Gaps in operational risk management can manifest as losses in different areas and not in LOUs alone. Now the fraudsters know that they have milked the LOUs sufficiently. They are not fools to target the same area again. They are fleet-footed and sharp-minded enough to pick holes and reap illegitimate fruits elsewhere.

RBI needs to ensure that proper systems, checks and control are in place in the banking system. Despite best regulatory efforts, frauds can and do happen. This is no excuse for laxity.' 

Why is RBI ineffective?

RBI is reputed to be one of the best central bankers in the world. Unfortunately, it has lost its sheen in the recent past.

There are mainly two reasons for this. 1) It is fighting the previous battle. After a fraud has occurred, RBI asks the banks to tighten their control systems so that similar frauds do not happen again. It does not realise that different kinds of frauds are waiting to happen.
2) In banking industry, the service providers ( the commercial banks) are smarter than the regulator (RBI). It may be true in other industries also. The customers (mainly borrowers) are smarter than service-providers. This smartness-asymmetry is the main reason for scams.

Punjab National Bank, Abhiramapuram, Chennai

Last Friday I visited Punjab National Bank and had Stephen Leacockian experience. As eacock would say, I got rattled the moment I entered the premises. The ground floor was bereft of people, staff or customers. After getting over the shock of 'the missing branch', I gained some courage to look hither and thither. A hefty man looking more like a bouncer beckoned me from the far end. "What do you want?", he shouted.

"Where is the bank?" I shouted back. He pointed to the first floor. Afraid, and yet keen to know what would happen to my deposits, I rushed upstairs. I had a cheque in my hand, but since fear had overtaken me I could not utter any word. I furiously waved my cheque. The first person who saw me recognised my problem easily (he must have come across this problem with many terrified customers) and asked me to go deeper in. Now I knew I was cornered. How deep inside could I venture? Was my life safe? Finally, a spectacled man at the remotest corner took the cheque from me. Was he going to pay me cash? He said, "Yes, but not immediately; sit". Needless to say, there was no place to sit. "Give me a token", I demanded. His response was curt. "No way, we have no tokens here. This is a temporary layout adjustment." A few more customers came in or got pushed in and I felt a little more comfortable. I would not die alone, I comforted myself. When cash was finally paid to me, I wanted to run away. But seeing that the branch manager was now in, I could not avoid lamenting to him that this was not the right time to renovate the branch when Nirav Modi was talk of the town. He tried to assure me that PNB was a sturdy bank with about Rs. 36,000 crore in capital funds easily capable of surviving a scam of Rs.12,000 crore.I came out with the confidence that the bank can easily face two more such scams.

10:29 PM