ICICI Bank, country’s largest private sector lender, after a steady increase in bad loans has decided to tighten its corporate lending growth and apply breaks on growing its corporate books.
In a recent presentation made to the investors the bank stated that going ahead it will apply "selective approach to incremental business" in its corporate book. With this, the lender will put a limit on single borrower/group exposures for lower rated companies as significantly lower than what has been prescribed by the banking regulator.
As per the Reserve Bank of India, exposure to a single borrower or a group should not exceed 25% of its tier-one and tier-2 capital. Apart from this, the bank has also decided to increase the proportion of higher rated exposures in portfolio and put limits on project finance exposure.
Another significant check that the bank has put in place includes now planning to limit the growth in corporate loans (including international) to about 10% year on year.
This comes at a time when after several quarters of single digit growth in corporate book, the bank had finally begun to see an uptick in corporate loans. Among the private sector banks, ICICI Bank has the largest corporate loan book which at the end of quarter ended December was at 28.8% out of the Rs 4, 34,800 crore total loan book.
This comes at a time when after several quarters of single digit growth in corporate book, the bank had finally begun to see an uptick in corporate loans. Among the private sector banks, ICICI Bank has the largest corporate loan book which at the end of quarter ended December was at 28.8% out of the Rs 4, 34,800 crore total loan book.
At the end of the quarter ended December, growth in domestic corporate portfolio had inched up to 14.9% on a year-on-year basis as compared to 7.5% year-on-year as of September 30, 2015.
On the other hand, in the same period, the net advances of the overseas branches had increased by 2.6% on a year-on-year basis. At the end of October-December quarter, the management had said that they would want to grow the corporate book in mid-teens. However, that expectation seems to have been revised considerably.
On the other hand, in the same period, the net advances of the overseas branches had increased by 2.6% on a year-on-year basis. At the end of October-December quarter, the management had said that they would want to grow the corporate book in mid-teens. However, that expectation seems to have been revised considerably.
“On the retail side, we are hopeful of 25% growth on a year-on-year basis. The corporate book has just started growing. We had said earlier that we would soon like to grow in the teens, the expectation continues,” said N S Kannan, Executive Director, ICICI Bank in the post result analyst conference call.
This comes at a time when the bad loan in its subsidiary also remains at an elevated level. At the end of quarter ended December, the Gross Non Performing Assets at ratio for the Canadian subsidiary was about 3.7% and UK subsidiary was about 5.5%.
Apart from this the bank has also decided to form a separate credit administration team that will help in recovery of bad loans. This comes at a time when the asset quality pressure in the bank has intensified after the Reserve Bank of India has directed banks to reclassify certain assets by the quarter ended December or March.
As a result of this, in the quarter ended December, GNPA soared 33.3% to Rs 21,149 crore, compared with Rs 15,858 crore in the quarter ended September 2015. In the same period, gross bad loans as a percentage of total loans also increased to 4.72% in the December quarter, compared with 3.77% in the quarter ended September.
On a sequential basis, even the net NPA increased to 2.28% from 1.65% in the quarter ended December. The management had also guided that they expected NPA levels to remain elevated in the quarter ended March.
As a result of this, in the quarter ended December, GNPA soared 33.3% to Rs 21,149 crore, compared with Rs 15,858 crore in the quarter ended September 2015. In the same period, gross bad loans as a percentage of total loans also increased to 4.72% in the December quarter, compared with 3.77% in the quarter ended September.
On a sequential basis, even the net NPA increased to 2.28% from 1.65% in the quarter ended December. The management had also guided that they expected NPA levels to remain elevated in the quarter ended March.
