ICICI Bank borrowing limit doubled

ICICI Bank, the largest lender by market capitalisation, is nearly doubling its borrowing limit to Rs 2,00,000 crore, to largely fund the expansion of its international business. The bank is also proposing to seek an enabling authorisation from its shareholders to issue depository receipts (DRs) against preference shares, subject to legal and regulatory amendments.

The bank's borrowing limits, which are linked to Tier-1 capital, have increased following the just-concluded Rs 20,000 crore domestic and american depository receipts (ADR) issues. Its net worth has increased to about Rs 44,500 crore from Rs 24,300 crore as on March 31, 2007.

In a notice to the shareholders for its thirteenth annual general meeting on July 21 in Vadodara, ICICI Bank explained that it would need to borrow more as it has identified international business as one of the key growth drivers. The expected growth in its international banking group would entail higher funding requirements. The bank had last increased its borrowing limit on May 3, 2002 to Rs 1,03,550 crore from Rs 3,000 crore set on June 15, 1998.

In a resolution on capital requirements, the bank said it will need to allocate additional capital for operational risk under the revised Basel II capital adequacy norms. Apart from more sophisticated ways of allocating capital for credit and market risk, the Basel II norms require banks to provide about 12 per cent of total income as capital for operational risks.

Subject to necessary amendments to the Banking Regulation Act and changes in the government scheme for the issue of foreign currency convertible bonds (FCCBs), the bank plans to issue overseas DRs and FCCBs against preference shares. The RBI has allowed the issue of perpetual non-cumulative preference shares. These would be eligible for inclusion as Tier 1 capital, which now includes equity, reserves and perpetual bonds.