Icici Goes Easy On Dilution Of Bank Arm Pie

ICICI Ltd appears to have put on the backburner its obligation to offload 6.5 per cent equity holding in ICICI Bank to comply with existing banking regulations but has an open mind on expansion through acquisitions.

With the Reserve Bank of India (RBI) lending a sympathetic ear to the demand of financial institutions like ICICI to take up universal banking and reincarnate themselves as banks, the question of dilution of stake in ICICI Bank has become "irrelevant".

The deadline for offloading the stake in September 30. In fact, ICICI may not be averse to taking over any other bank. "If we find one that can leverage our synergies we will obviously give it a thought," explained executive director, Kalpana Morparia.

In a bid to reduce non-performing assets (NPAs), ICICI will try to bring down its exposure to the steel industry to about five per cent in the next couple of years. At present its exposure to the sector stands at 10 per cent, second only to its power sector exposure of 11 per cent of its Rs 66,000 crore portfolio.

Thrust at ICICI in on the retail sector and restructuring loans sanctioned to players in the past. The FI has been substituting five-year loans at 16 per cent with 10-year loans at 11 per cent. ON funds costing 12 per cent, the average yield was 14 per cent, with asset liability mismatch being limited.

"We expect as much as 35 per cent of our business to come from the retail sector and incremental deposit in the banking to touch Rs 2.2 trillion," said Morparia, highlighting the excess liquidity situation facing bankers.

The company is also actively pursuing salary accounts from large corporates. This, explains Morparia, "provides us the potential of providing a host of retail services to employees." Number of such accounts handles at the bank has increased from two lakh in 1991 to about four million in 2001.

Government business has also been targeted as a growth area because central and state governments are the largest employers and initiators of financial transactions. Collection of power dues, port tolls and sales tax have been taken up in certain states, while special packages like securitisation of deferred sales tax payments and housing loans have been developed for some states.

The loan portfolio at ICICI has also undergone a major change. As much as 73 per cent of ICICI's exposure was to the manufacturing sector. This has been brought down to 35 per cent at present.