Case Study | Risk Compliance | CORRUPTION - GRM Institute

Case Study | Risk Compliance | CORRUPTION

ICICI and HDFC Report


By Chunkey Ojha, Gaurav Kumar, Rohit Gangakhedkar, Vidushi Gupta (PGDRM Batch July’19-20 and Jan’20-21)



Corruption is basically a criminal offense conducted by a person or an organization to gain personal benefits.​ Corruption has no limit it occurs at a smaller scale and reaches up to the highest level.


Categorization of Corruption


Factors Separating Corruption and Bribery
  • Bribery is the act of taking bribe ,in the form of money or cash to act dishonestly. Mostly of smaller amount.​
  • Corruption is dishonest conduct , done by a person with or without taking bribe. Usually involves huge money.



Corruption Perception Index
  • Corruption perception index CPI is an index that ranks countries by their levels of public sector corruption.​
  • CPI defines corruption as misuse of power for personal benefits.​​
  • It is published annually by transparency international since 1995.​
  • India ranks 80 on the CPI .​
  • Denmark & New Zealand are the least corrupt nations in the world.



Root-case Analysis:​
  1. Inaccurate Credit Assessment: Credit risk assessment on account of sanction of loan was not accurate. Ex. There was a Rs.650 Cr loan sanctioned against collateral of Evans Fraser (Co-obligator to ICICI), which was 9 times its total sales. ​
  2. Weaker Internal Controls: Loan Sanction committee responsible for approval of loan could not function in an unbiased manner as Chanda Kochhar (one of the key members of committee) had conflict of interest at the time of approval.​

Stakeholder Mapping:​
  1. Area of Control – Loan sanction committee, Credit Assessment Department, ICICI employees​
  2. Area of Influence – Consortium Banks, Co-obligators to ICICI Bank​
  3. Area of Concern – Customers (Retail as well as Corporate), Shareholders, Creditors, Reserve Bank of India etc.


Effect on share price
  • During the period between feb’18 to march’18 when the news came out on the alleged scam, banks stock fell 14 percent, which lead to a loss of around rs.30000 crore in the shareholders wealth.​
  • Then again there was a major drop of 2.19% in January’19 when CBI filed the FIR.


Impact on the financials of ICICI



Penalties and criminal charges

Chanda Kochhar, Deepak Kochhar and Venugopal Dhoot were found guilty for:​

  • Criminal conspiracy​
  • Criminal Misconduct​
  • Cheating​
  • Obtaining Pecuniary Advantage under PC Act, 1988​
  • Criminal charges under PMLA​
  • Property worth Rs.78 crores was also seized by ED as a provisional order under PMLA​
  • In May 2017, penalty of Rs.14 crore was levied on Videocon and an additional penalty of Rs. 45 crore on Venugopal Dhoot and directors of Videocon.​

Example Of Ethical Company


Mergers & Acquisition
  • Times Bank in February 2000​
  • 2008, Centurion Bank was acquired by HDFC Bank


Awards and Recognition
  • On Forbes List : Worlds Best Bank 2019                           ​
                                Asia Fab 50 Companies 2017​
  • US-based think tank Ethisphere Institute : Most ethical companies 2011​
  • India’s Best Bank, Euromoney Awards for Excellence 2019​
  • Best Large Bank & Fastest Growing Large Bank in 2019, by Business World Magna Awards​
  • Guiness Award-Blood Donation 2016​


Lesser Known Facts
  • Majority shares are held by Foreign Institutional Investors.​
  • It offers (or had offered) all kinds of financial products and services except one, Home loans..​
  • It has same CEO from day one. Mr. Aditya Puri.​
  • It is one of first investors in National Stock Exchange(NSE) and Goods & Services Tax Network(GSTN).​




This report has been produced by students of Global Risk Management Institute for their own research, classroom discussions and general information purposes only. While care has been taken in gathering the data and preparing the report, the student’s or GRMI does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. References to the information collected have been given where necessary.

GRMI or its students accepts no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.


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