The `A1+' rating, indicating highest safety, assigned to the Rs 4,500-crore short-term borrowing programme of ICICI in October 1998, has been retained for an enhanced size of Rs 6,000 crore.

The agency notes with some concern the increase in the net non-performing assets from Rs 2,811 crore on March 31, 1998 to Rs 3,623 crore on March 31, 1999. "While the level of net NPAs compares favourably with its peers, Icra notes that ICICI continues to have significant exposure in commodity sectors, the prospects for which are increasingly being linked to trends in global markets", the release said.

In this context, Icra notes that ICICI has initiated focussed efforts in containing portfolio contamination through continuous monitoring, recoveries, and measures to arrive at early settlements. Further,there have been initial signs of price recovery in commodity sectors such as steel, cement and petrochemicals and this is likely to benefit ICICI's borrowers engaged in these businesses.

ICICI's disbursements grew 22 per cent from Rs 19,225 crore in 1998-99 to Rs 15,807 crore in 1998-99 . On account of lower interest spreads and higher provisioning charged to the profit and loss account, net interest margins of ICICI declined to 3.19 per cent in 1998-99 from. Profit after tax as a percentage of average funds deployed declined to 1.94 per cent in 1998-99.

"While ICRA believes that yields would remain under pressure due to increasing competition, it notes that the positive steps taken by ICICI to reduce its cost of funds and introduce greater efficiency in its treasury operations would help to mitigate the impact of lower yields on ICICI's profitability", the release said.