Merged ICICI Bank to service all bonds

Our Banking Bureau

Mumbai, Nov 19: All outstanding bonds floated by ICICI will be serviced by the merged entity, ICICI Bank, after the reverse merger. The appointed date of merger is end-March 2002 or the date of approval by the Reserve Bank of India (RBI), whichever is later.

ICICI has also sounded the authorities over the applicability of section 36 (1)(viii) of the Income Tax Act under which it is allowed a deduction of 40 per cent of its taxable income derived from long-term financing, which is set aside to the special reserve. Further, the merged entity will cut its underwriting commitments under any single obligation to 15 per cent of an issue.

The issue of the party servicing of bonds has been stated by ICICI in its issue prospectus for its upcoming Rs 400-crore ‘Safety Bond’ issue. ICICI’s bond issue carries a green-shoe option of Rs 400 crore. In its umbrella prospectus, the company says it will raise Rs 5,000 crore with a green-shoe option of an equal amount. It has already raised Rs 1,600 crore in the fiscal so far by this route.

On the usage of these funds, ICICI says it cannot give assurance that its past trend “would continue in the current year”. For the quarter ended June 30, 2001, 62.02 per cent of disbursements were through rupee-loans; 2.52 per cent through foreign currency loans; 19.54 per cent through investments; 2.63 per cent through lines of credit and deferred credit; 0.15 per cent through leasing; and 13.03 per cent by way of personal finance loans. On the issue of reserve norms, the prospectus says that it will fully comply with the prudential norms applicable to banks on all of ICICI’s existing liabilities. Cash reserve ratio and statutory liquidity ratio of 5.5 per cent and 25 per cent respectively are charged on a banking entity’s net demand and time liabilities under the Banking Regulation Act (1949). The Act does not distinguish between deposits and bonds for calculation of NDTL.

Meanwhile, under section 36 (1)(viii) of the I-T Act, ICICI is allowed a deduction of 40 per cent of its taxable income derived from long-term financing, which is set aside to the special reserve.