ICICI Bank hid NPA accounting policy changes from shareholders

ICICI Bank wrote off corporate loans worth ₹5,000 to ₹5,600 cr in March 2017 that brought down their gross NPA ratio to 7.89%. Which would have otherwise been at 8.5%. Managing Director Chanda Kochhar sought the audit committee’s approval on 5 April and the Board’s approval on 7 April 2017. However, the ‘technical write-offs’ were done before that.

Gross NPA ratio reflects the quality of a bank’s loan book. Higher the ratio, lower the quality.

Kochhar’s note to the Board

Mint reviewed a copy of the Board note. ‘From the quarter ending 31 March, 2017, it is proposed that in addition to credit facilities of borrowers classified as loss assets, the unsecured portion of loans of borrowers classified as doubtful would be eligible to be considered for write-off’.

‘Based on the non-performing loans outstanding at 31 December 2016, it is estimated that the unsecured portion of non-performing loans classified as doubtful in the range of ₹5,000 crore to ₹5,600 crore would be eligible to be considered for a write-off at 31 March 2017’, Kochhar’s note to the board read.

Accounting Standard (AS) violation

ICICI Bank did not disclose the accounting changes to shareholders which is considered an Accounting Standard (AS) violation. SEBI and RBI have made it mandatory for banks to adhere to AS norms if the company is publicly listed.

‘If a change is made in the accounting policies, which has no material effect on the financial statements for the current period but which is reasonably expected to have a material effect in later periods, the fact of such change should be appropriately disclosed in the period in which the change is adopted,’ states the norm.

Annual Report FY17

Bank’s annual report for fiscal 2017 (1 October 2016 – 30 September 2017) stated developments regarding changes in Board and other meetings held on 6-7 April. But remained quiet on accounting policy changes.

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