Bank looks to raise Rs 4,000 cr from CRR cut

ICICI Bank on Friday said it will get Rs 4,000 crore from the Reserve Bank following cut in cash reserve ratio, but ruled out slashing lending rates for its customers.

RBI?s decision to cut CRR is basically to tackle the liquidity position in the system and would not have any immediate impact on lending rates, ICICI Bank?s joint managing director and CFO, Chanda Kochhar.

?Liquidity is tight as such in the system…Rs 60,000 crore being released in the system after RBI?s CRR cut decision would improve the situation… (Out of this) Rs 4,000 crore would be released for us,? she said.

Immediately, it would have no impact on lending rates, she added.

Kochhar debunked run-on-bank rumours; says vested interests were hammering down share price.

On rumours that the current global financial crisis might lead to the government asking for merger among the country?s banks, Kochhar said she does not see any such situation. Earlier in the day, a finance ministry official said the government does not see any problem with the bank. Stressing that ICICI Bank has a strong liquidity position, Kochhar told agencies over telephone from Mumbai that the bank?s market value is plummeting because the perception was getting destroyed by rumours.

Kochhar also debunked the reports that ICICI Bank?s high cost borrowings was aimed at augmenting its liquidity position and meet its obligations.

?Call money market rate has gone to as high as 24 % and everyone is borrowing at these high rates,? she said, adding there is no cause for panic in this regard.

?I want to re-assure all depositors there is nothing like run-on-bank. Our financial position continues to be strong, whether in form of net worth, capital adequacy ratio or current liquidity position,? she asserted.

The bank has ?adequate rupee liquidity in the context of the current environment,? she said

Pointing out that ICICI Bank has never used rupee funds for its international growth initiative, she said that the bank has liquidity of Rs 12,000 crore in overseas units.

Kochhar further said the bank has assets of Rs 4.8 lakh crore as on June 30, 2008.

Asked about the outcome of the Sebi probe on the hammering of stock prices, Kochhar said, ?we will wait for the findings…it takes time for such inve-stigations.?

ICICI Bank shares plunged by nearly 20% on Friday after a partial recovery from an intra-day fall of close to 28% taking its market cap to Rs 40,512 crore? below its net worth of close to Rs 47,000 crore as on June 30. The Bank has lost out its place as the country?s most valued private sector bank to HDFC Bank, as its share price fell by about 20%. Market capitalisation of ICICI Bank, the top private sector lender in terms of asset size, today fell to Rs 40,512 crore, as against Rs 44,461.22 crore of rival HDFC Bank.

Asked whether the bank would request for expediting the probe, Kochhar said, ?We have made our request and we will leave it to the regulators to carry out the investigation…We will concentrate on our performance and working.?

Meanwhile the cost of default protection on ICICI Bank Ltd., the Indian lender that?s reported the biggest losses on overseas investments, rose to a record as the shares fell the most since 1997, credit-default swaps show.

Five-year contracts on the Mumbai-based bank?s debt were quoted 130 basis points higher at 900, Barclays Capital prices show. The previous record of 860 was set on Oct. 8, according to CMA Datavision prices tracking the contracts back to 2004.

?I don?t see why anyone would want to take ICICI risk,?? said Eugene Kim, chief investment officer of Tribridge Investment Partners Ltd., a Hong Kong-based hedge fund managing $200 million. ?There are a lot of ICICI bonds in the market which fund managers can?t sell, so the only way they can do it is to buy its CDS. But then no one wants to sell the protection, so the price keeps on going higher and higher.??

ICICI, the worst performer among financial stocks in Asia today, has slumped 47% from the beginning of September as the global credit crisis triggered the collapse or seizure of US and European banks. The Reserve Bank of India and finance minister Palaniappan Chidambaram last week issued statements reassuring investors that India?s second-largest bank has enough capital.

ICICI?s capital adequacy ratio was 13.4% as of June 30, more than the minimum 9 percent required by regulators, Chief Executive Officer KV Kamath said on 30 September.

Credit-default swaps, financial instruments based on bonds or loans, were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities, or cash equivalent, should the borrower default.

At 900 basis points ICICI swaps, which rise as perceptions of credit quality deteriorate, are equivalent to $900,000 annually to protect a $10 million investment in the bank?s notes. A basis point is 0.01 percentage point.