Essar headquarters
Records of a Reserve Bank of India (RBI) probe into ICICI Bank former CEO Chanda Kochhar's alleged irregularities suggest the bank may have granted $365-million loan to the group and the funds from it may have gone to service an earlier loan the group owed the bank. REUTERS/Vivek Prakash/File Photo

Records of an ongoing probe suggest ICICI bank's former managing director Chanda Kochhar may have misled Reserve Bank of India (RBI) on sanctioning a second loan to an Essar Steel entity while the first one was still unpaid, resulting in 'ever-greening' of loans, according to reports. This means the borrower was getting a second loan from the same lender to pay off the first loan.

ICICI Bank disbursed to Essar Steel Minnesota a loan to increase the capacity of its pellets manufacturing project from 4.1 MTPA (metric tonnes per annum) to 7 MTPA, a report in Indian Express said. The bank in June 2014 approved $365-million loan for Essar Steel Minnesota's holding company Essar Steel Mauritius, the report says.

ICICI Bank, however, in September 2014, informed the RBI that although the bank had approved a capacity increase, which also included an extension of commencement time, it had not "participated in any additional funding". This, records revealed, was incorrect as the bank, in June 2014, had extended a $365-million foreign currency term loan to Essar Steel Ltd, Mauritius, according to the report.

Chanda Kochhar
ICICI Bank under Chanda Kochhar may have misled Reserve Bank of India (RBI) on granting Essar Group a second loan while an earlier one was outstanding.

The team looking into the alleged irregularities in the ICICI Bank during Kochhar's term believes that the bank's approval to extend the commencement time of the pellet project indicated "ever-greening" of loans – the bank was lending a second time to pay off an earlier loan. The loan to the Mauritius firm, the minutes of the credit committee meeting of ICICI Bank that Kochhar had attended showed, was for infusion of funds into Essar Steel Minnesota.

The funds Essar Steel Mauritius obtained allegedly went to make payments to Essar Projects for invoices raised by it against Essar Steel Minnesota, the records showed. Essar Projects subsequently transferred these funds to Essar Global Fund Ltd, the promoter of Essar Steel Minnesota, which finally used it to service its debt obligation to ICICI Bank, the report says.

The probe team found that between April 2009 and March 2018, the bank sanctioned 71 loans to the Essar group and Chanda Kochhar participated in as many as 35 meetings of various committees that dealt with sanctioning the loans to Essar, the newspaper report said citing unidentified sources. There is evidence that ICICI Bank under Kochhar continued to lend to Essar Steel Minnesota and ignored "red flags" including an external complaint against the Essar Group, negative credit ratings by agencies and waivers of defaults the group sought. The Essar Group was allegedly close to defaulting on debts when the bank lent to the Essar Steel Mauritius, the report said.