ICICI Bank gears up for cash chase

Mumbai, June 4: ICICI Bank seems to have begun preparing itself for a turnaround in the domestic economy. The country’s largest private bank is planning to raise its borrowing limit to Rs 2,50,000 crore from Rs 2,00,000 crore.

The lender will seek shareholders’ nod to increase the borrowing limit at its annual general meeting on June 30.

“Considering the substantial growth in business and operations of the company, present and future requirements, your approval is being sought to increase the borrowing limits from Rs 2,00,000 crore to Rs 2,50,000 crore,” ICICI Bank said in a notice to shareholders. The details were disclosed in a filing with the US Securities and Exchange Commission.

Outstanding borrowings at the bank stood at around Rs 1,33,500 crore as on March 31, 2014. Of the proposed ceiling of Rs 2,50,000 crore, ICICI Bank has fixed a limit of Rs 1,00,000 crore to be raised via securities that include bonds and non-convertible debentures.

The bank added in the filing that the cost of raising funds through private placement might be up to 300 basis points above the benchmark interest rate for issuances in the rupee market and up to 500 basis points above the benchmark rate for the foreign currency market.

While the proposal to raise the borrowing limit may only be an enabling resolution, analysts said it could be an indication of how banks were gearing up for a possible recovery of the domestic economy.

On Tuesday, the Reserve Bank of India had cut the statutory liquidity ratio by 50 basis points to enable banks to cater to the need for credit from the industry as the economy recovered.

Though the Indian economy grew less than 5 per cent for the second consecutive year in 2013-14, observers said the sentiment had turned positive after the general elections where the BJP won a decisive mandate.

Some banks have already begun to look for funds. The United Bank of India will seek shareholders’ approval at its AGM on June 18 to raise funds through a follow-on public offer, qualified institutional placement (QIP) and preferential allotment.

The Union Bank of India is looking to raise a little over Rs 1,300 crore through a qualified institutional placement in the second quarter of this fiscal.

Last week, Yes Bank mobilised Rs 3,000 crore through a QIP.