ICICI Bank seeks FDI hike in insurance to free capital

ICICI Bank wants foreign direct investment (FDI) in insurance to be raised to the promised 49 per cent so that it can free up a part of its capital invested in ICICI Prudential Life Insurance Company.

"There is no clarity yet on the 49 per cent FDI in insurance. The capital requirement plans were based on the assumption that the FDI limit would be enhanced to 49 per cent (from the present 26 per cent)," said K V Kamath, managing director and CEO.

Increase in FDI limit in insurance will "release the capital already invested", said Nachiket Mor, executive director of the bank.

About the Reserve Bank of India's concerns about banks' investments in subsidiaries growing too large, Kamath said "I think every regulator would be concerned. We need to have adequate capital, whatever the comfort level."

ICICI Bank is in the market to raise Rs 5,750 crore from its public issue of equity shares and another Rs 2,300 from a follow-on American depository share issue, including 15 per cent greenshoe option in both.

Apart from supporting investments in its life insurance joint venture, the bank needs capital to meet regulatory capital adequacy requirements.

ICICI Bank has a 74 per cent stake in the life insurance joint venture with Prudential PLC of the UK holding the remaining 26 per cent. The life insurance venture commenced operations in December 2000 and its equity capital has grown to Rs 1,085 crore at the end of September 2005 from Rs 425 crore at the end of March 2003.

The net worth of ICICI Prudential Life is Rs 305.21 crore, given the losses a life insurance company incurs in the initial years. ICICI Bank's equity capital at the end of September 2005 stood at Rs 741 crore, up from Rs 613 crore at the end of March 2003.