India's ICICI Bank is expected to appoint a forensic auditor to probe allegations of improper use of letters of credit (L/Cs).

Earlier this year a whistleblower alleged the bank issued hundreds of L/Cs to entities related to financially distressed corporate borrowers to help them avoid loan default.

Overstated profits

Issuing the L/Cs enabled the bank to avoid declaring non-performing assets (NPAs) and escape setting aside money for those assets.

By not provisioning for the NPAs, ICICI Bank allegedly inflated profits by at least US$1.3 billion over eight years.


The forensic auditor will be specifically looking at 31 accounts in which irregularities have been spotted. The auditor's scope of work will include an examination of the roles ICICI Bank's executives may have played in the alleged irregularities.

Specialist law firm Panag & Babu has already been appointed to investigate the 31 accounts.

SEC reporting

The appointment of the auditor comes after pressure from the US Securities and Exchange Commission (SEC) on the bank.

The forensic auditor and Panag & Babu are required to submit their reports by end of January.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.