Mumbai, Aug 13 (Truth Dive): New credit cards, loans for two-wheeler purchase and financing power and infrastructure projects, a core market are now taboo for ICICI.
Only those who are having credit cards and existing customers of the bank will be extended this facility. India’s second-biggest bank has decided to go slow and cautious after the financial crisis.
Executive director and chief financial officer, N S Kannan feels that achieving growth for the sake of growth can get into asset quality problems. ICICI is largest private sector bank, with assets of $93 billion.
ICICI will be cautious with project finance and aims to grow its domestic loans section by around a fifth this fiscal year. ICICI cut back overall loan growth to 17 from its initial target of 20 percent.
Norms have been tightened for retail unsecured loans and identifying worthy projects carefully will be the policy said Kannan, who assumed his present position in 2009 when Chanda Kochhar was promoted as CEO.
ICICI still bears the brunt of the financial crisis, when bad loans surpassed 5 percent of total assets in March 2010. It has cut that to about 3.5 percent, still far above rival HDFC Bank’s, which is just under 1 percent.
The Lehman’s 2008 collapse got investors concerned about ICICI’s overseas exposure which led to 50 percent one-month drop in its shares and depositors to withdraw cash. The bank issued text messages assuring that it was healthy and RBI declared it is well-capitalised.
Consumer lending accounted 65% in 2007, now it is almost half that now, although it wants to grow that to increase 35-40 percent. In 2007, consumer lending accounted for more than 65 percent of ICICI’s assets; it is almost half that now, although it wants to grow that to 35-40 percent over the next couple of years.
ICICI’s bad loans were Kingfisher Airlines, Air India and GTL Infrastructure. It sold its remaining exposure to Kingfisher at face value, even though it took a loss by converting part of its debt to equity. This move is much better than other Kingfisher creditors, mostly state banks, who are still saddled with the account.