ICICI Bank goes slow on foreign deposit mop-up

ICICI Bank, the country's largest private lender, has slowed mobilising deposits from retail depositors in foreign markets. The move follows banking regulators in markets like the United Kingdom and Canada directing banks, including ICICI Bank, to disburse these deposits locally.

“We are hardly growing retail deposits in these markets. While we are getting a lot of deposits, we are not taking that many because we cannot use these funds to lend to Indian companies. The growth in our international operations is now coming from the wholesale side,” Chanda Kochhar, managing director and chief executive officer told Business Standard.

She said after the economic crisis in 2008, regulators all over the world have turned cautious and do not want retail depositors' money to be exposed to foreign risks. Hence, if banks are raising deposits locally, they have to disburse this for projects within that country.

ICICI Bank had set up subsidiaries in the United Kingdom and Canada, aiming to raise funds abroad and lend these to Indian companies.

“Global regulators were okay with that approach, and that's how we started that business. But after 2008, due to the global uncertainty, regulators changed their approach. Their worry is not particularly on Indian exposure. They are worried about co-mingling the risks of two countries,” Kochhar said.

Following the global financial crisis, private sector banks have seen a flight of their domestic deposits to public sector entities. As a result, the reliance of these banks on foreign deposits to fund domestic loan growth has increased. Public sector banks, however, continued using resources mobilised in foreign geographies for lending in the same country.

Kochhar said other international operations of the bank, like borrowing through foreign currency bonds and other long-term instruments, remained unaffected.

Currently, international business accounts for 23 per cent of ICICI Bank's total business, compared with 25 per cent earlier. The share of this business is likely to shrink in the coming years. “It is not really about our intention to scale it down. But given India's growth compared to other countries, operations here would grow much faster than other international markets,” Kochhar said.