Term lending institution ICICI reiterated its strategy of turning into a universal bank at a meeting of top stockmarket brokers last Friday.
ICICI managing director and chief executive officer K V Kamath addressed the brokers at the institution's headquarters.
Early this month, the ICICI top brass met the global investment community during its roadshow where Kamath explained the rationale behind the strategy of turning into a bank.
At Friday's meeting, Kamath reportedly impressed upon the brokers the importance of size in the changing Indian financial scenario.
"The government has decided to dilute its stake in the public sector banks to 33 per cent and foreign banks such as Citibank and HSBC are willing to pick up Indian banks provided there is no regulatory barrier.
"In this context, ICICI needs to increase the size of the balance sheet to withstand competition from the foreign banks," Kamath reportedly told the brokers.
Post-merger of ICICI Bank with ICICI, the institution will have a size comparable with that of the State Bank of India.
Foreign banks such as HSBC, Citi and StanChart have grown in size in south-east Asia through acquisition of local banks in recent years and this can happen in India too provided the regulator permits foreign banks local acquisitions, Kamath reportedly pointed out.
According to sources who attended the meeting, the message has gone down well with the broking community.
Kamath's address to the brokers has been expected as both ICICI and ICICI Bank got a drubbing in the markets after the institution made a presentation to the Reserve Bank of India on its transformation into a universal bank through a merger with the bank.
"The market did not take the proposal kindly. The institution does not want to take chances any more with the broking community. It wants to convince the broker about the necessity of the merger and turning into a universal bank," said sources. The response from the global investment community towards the merger proposal is also positive.
ICICI submitted a 7-year roadmap to the RBI on its transformation into a universal bank.
It had said that it would fulfill the regulatory norms like statutory liquidity ratio (SLR), cash reserve ratio (CRR) and 40 per cent priority sector stipulation on an incremental basis on its way to become a bank.
The proposal, however, did not find favour with the RBI. The central bank felt any financial intermediary wanting to turn into a bank should fulfill the obligations of a bank immediately.
