ICICI Bank to halve growth in lending

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Nov 18: ICICI Bank, India’s second largest bank, has halved its target for growth in lending to 15% as global financial-market turmoil spills into Asia’s third-largest economy.

High borrowing costs and a slowing economy are denting demand for loans in India, ICICI chief executive officer K V Kamath said in a Bloomberg Television interview. India’s benchmark interest rate, at 7.5%, is higher than that of China, which is growing faster. “Instead of growing at 30%, the target rate we had set two to three years back, we will now probably grow domestically and globally at probably around 15%,” Kamath said. “The domestic growth cycle has slowed down and interest rates are high domestically.”

ICICI tumbled 5.1% to Rs 366.65 as of 10:13 am local time in Mumbai trading. It was the worst performer on the Bombay Stock Exchange’s benchmark Sensex.

Credit expansion in India is stalling even after the central bank cut borrowing costs twice in the past month to shield the economy from a global recession.

ICICI’s loan growth slumped to 16% from a peak of 55% in the year that ended March 2006.

“There will be a slowdown in India and steps that will be taken, to a large extent, will compensate the factors causing the slowdown,” finance minister P Chidambaram told the World Economic Forum’s India Economic Summit in New Delhi on Tuesday. “We are confident we’ll end this year with satisfactory growth rate,” he added.

Lending rates must fall by another 3 percentage points to ignite a rebound in loan demand, said Kamath.