Will cut lending, ICICI Bank tells RBI

ICICI Bank, the country’s largest private bank and the second largest after government-owned State Bank of India, has told the Reserve Bank of India...

ICICI Bank, the country’s largest private bank and the second largest after government-owned State Bank of India, has told the Reserve Bank of India that it will significantly temper down its credit or growth in advances. This may result in a shrinking of its balance sheet if the economic environment in India remains sluggish over the next two or three years.

Government sources said ICICI Bank, which has total assets of Rs 3,85,000 crore or $81.5 billion as on September 2008, wrote to the central bank last month that it will not grow its assets in the retail segment as aggressively as it did in the last three years. In a falling interest rate regime, ICICI Bank expanded vigorously in the retail segment with 35-40% growth in advances. “We borrowed wholesale funds and expanded rapidly. This was the right strategy in a falling interest rate scenario,” Chanda Kochhar, Joint Managing Director and Chief Financial Officer, ICICI Bank, told The Indian Express.

But Kochhar said the bank has now tightened its term loans, credit card loans and two-wheeler loans in its bid to moderate its retail advances. “We also reduced dependence on wholesale deposits in a rising interest rate scenario and our growth is centred more around CASA (current account, savings account) deposits now,” she said.

The bank’s net profits during April-Sept 2008 dropped 2% year-on-year and its group net profits declined 22.7%. Global credit rating agency Moody’s today lowered its baseline credit assessment. It said the bank’s asset quality has been on an adverse trend, with bad loans up to 4.2% of gross loans in September compared with 2.8% a year ago. The absolute volume of such loans increased year-on-year to 60.2%, it noted.

P Vaidyanathan Iyer

P. Vaidyanathan Iyer is The Indian Express’s Managing Editor, and leads the newspaper’s reporting across the country. He writes on India’s political economy, and works closely with reporters exploring investigation in subjects where business and politics intersect. He was earlier the Resident Editor in Mumbai driving Maharashtra’s political and government coverage. He joined the newspaper in April 2008 as its National Business Editor in Delhi, reporting and leading the economy and policy coverage. He has won several accolades including the Ramnath Goenka Excellence in Journalism Award twice, the KC Kulish Award of Merit, and the Prem Bhatia Award for Political Reporting and Analysis. A member of the Pulitzer-winning International Consortium of Investigative Journalists (ICIJ), Vaidyanathan worked on several projects investigating offshore tax havens. He co-authored Panama Papers: The Untold India Story of the Trailblazing Offshore Investigation, published by Penguin. ... Read More