Icici Bank Gets Nod To Dilute Promoters Stake

ICICI Banking Corporation Ltd (IBCL), which will go public with a maiden equity issue in the coming fiscal, received permission from the Reserve Bank of India (RBI) last week to dilute promoters' stake to only 25 per cent in the first go. This is the first time that the apex bank has granted permission of this nature to a private sector bank.

"We received the notification from the RBI only a few days ago. However, we have not taken any decision so far regarding the size of our initial public offering as we are presently busy with the financial year-end," said P V Maiya, the bank's chairman and managing director. The bank currently has an equity base of Rs 150 crore and a comfortable capital adequacy ratio of 16.87 per cent.

 

The bank's promoters--ICICI and SCICI, which are to be merged in April--now hold a 100 per cent stake in the bank. As per RBI guidelines, the promoters are required to dilute their stake to 40 per cent. This can be done by disinvestment of existing equity or issue of fresh equity or both.

At present, the IBCL board is in the process of deciding the nature of its equity issue. However, the dilution process will be in phases of more than one issue. Currently, the bank is revamping its image to strengthen its retail finance operations in urban, semi-urban and rural areas. It has announced several new retail schemes including `Customer Information Series', fixed deposits with loan facility against the deposit and retail treasury instruments.

While the earlier slogan of `Partnership Banking' will still be retained for corporate banking, a new slogan has been coined--`We make banking a pleasure'--to appeal to retail customers.

The retail treasury instruments enable high net worth retail customers, firms, NBFCs and corporates, non-government provident funds, superannuation funds, gratuity funds or mutual funds to invest in money market instruments. These instruments include treasury bills, commercial papers, certificates of deposits, government securities, tax-free bonds, taxable bonds and debentures.

Except for the last two, these instruments are exempt from tax deduction at source (TDS). The minimum investment size is Rs 25 lakh.

These instruments are being picked up by corporate investors who have money on their hands for short periods, say 20 days, and hence cannot be placed in a traditional deposit. The investor can instead opt for a treasury instrument which will mature in 20 days. The bank has a separate SGL account for this.

By June 1997, the bank will have approximately 25 per cent of its branches in semi-urban and rural areas. Branches are proposed to be opened in Goa, Tamil Nadu, Noida (UP) and Maharashtra.

By the end of this month, the bank will have 22 branches and it plans to increase this figure by next year by another 50 per cent.