ICICI slashes bond borrowing ceiling

Mumbai, June 7: ICICI Bank, the country's second largest private bank, has decided to borrow considerably less in bonds in the current fiscal.

The lender will move a special resolution to seek shareholders' approval at the forthcoming annual general meeting for a borrowing limit of Rs 50,000 crore in bonds, much lower than the Rs 1,00,000 crore approved at the last meeting.

It has borrowed Rs 6,850 crore by issuing non-convertible debentures on private placement basis since its last AGM in June 2014 till March 31 this year. These were long-term infrastructure bonds.

"The bank has assessed its fund requirements and it is proposed that the borrowing limit... by way of securities, including but not limited to bonds and NCDs, be fixed at Rs 50,000 crore, a reduction from Rs 1,00,000 crore approved at the last AGM. This would form part of the overall borrowing limit under Section 180(1)(c) of the Companies Act, 2013, of Rs 250,000 crore approved at the last AGM," the bank has said in a filing with the US Securities and Exchange Commission.

According to ICICI, the pricing will depend primarily on the rates for risk-free instruments among others.

In private placement, it could issue securities up to "300 basis points above the rates for risk-free instruments as represented by the respective tenor rupee sovereign bonds for issuances in the rupee market".

For the fiscal ended March 31, 2015, ICICI had made total borrowings (from domestic and international markets) of Rs 1,72,400 crore compared with Rs 1,54,700 crore in the preceding year.

Of this, domestic borrowings stood at Rs 84,395 crore and overseas borrowings at Rs 88,022 crore.

Capital market instruments contributed around 46 per cent to the domestic borrowing.

Analysts said the bank planned to slash its borrowing requirement in bonds as it was well capitalised.

Capital adequacy The private lender has a strong capital adequacy ratio of over 17 per cent, of which tier-1 capital stood at 12.78 per cent as on March 31, 2015.

The capital adequacy ratio is a measure of a bank's financial strength, and tier-1 capital consists of equity capital and reserves.

At a conference call after declaring the fourth-quarter earnings, the senior management had said it did not have any plans to raise equity capital for some time.

"We are well-placed with regard to the capital required to support this growth and given our current capital position, we believe we do not need to raise equity capital for the next three years, based on the current regulation," N. S. Kannan, executive director of ICICI Bank, had said.