?Credit offtake could be sluggish to mid-Apr?

After lying low for about a year, the country’s second largest bank, ICICI Bank, is now gearing up see its balance sheet grow. Speaking to FE’s Sitanshu Swain & Hemang Palan, the bank’s managing director & CEO Chanda Kochhar says its retail portfolio will now be smaller than it was earlier. Excerpts:

Do you think time is ripe for withdrawing the stimulus package?

The domestic consumption model prevailing in India is expected to drive the country’s growth for a very long time. The stimulus packages provided in the last one year added to the existing robust domestic demand in the country. Henceforth, investments by the corporate sector would prove to be a big fillip. I estimate that about $250 billion of project investments would take place over next two to three years across various sectors like power, oil & gas, cement and steel.

Last year, companies were not taking up capital expenditure plans. However, investments in infrastructure would be about 50% of the total anticipated investments. The actual impact of these investments on credit growth would be seen after March-April 2010. Till April 2010, there may not be too much of an offtake in bank credit. Even if the interest rates rise , the rise could be limited to 100-150 basis points, so the credit offtake won’t get affected too much next year.

How are you restructuring your lending portfolio?

Retail and corporate loan growth of ICICI Bank would remain balanced in the ratio 45:55. Within retail, the unsecured segment would witness very little growth. We will be able to grow our corporate exposure. In the last three to four years, capacity addition never happened in the corporate sectors but that’s picking up now. ICICI Bank always had capability pertaining to project financing. In the last three to four years we did not wind down our project financing activity. In the September quarter of the current fiscal, our corporate loan approvals went up 100%. The disbursements of these approved loans would happen in first quarter of the next fiscal.

Do you think Indian banking system has adequate resources to meet the large demands from the corporates?

Yes, Indian banking system is ready for the anticipated investments over next few years. The equity or internal cash accruals would form roughly 50%, around $125 billion of the total proposed investments. Out of the rest 50% debt requirement, a majority would get funded domestically and the left-over would get funded by foreign debt. It’s always good to fund the infrastructure projects with right mix of debt and equity. However, we need to strengthen the bond market. We need to develop long-term bonds, tax free bonds etc. I expect that huge investments would flow into roads in the next calendar year and I expect many more infrastructure sector development related policy announcements by the government in the near future.

How is the non-performing asset scenario now?

The NPA level of the system went up mainly in the retail unsecured segments. We thus downsized these portfolios. Broadly, our quality of restructuring is pretty sound. We restructured the loans to good and credible companies and, so we do not expect any problems on this front.

Your bank is fairly well capitalised as reflected in the high capital adequacy ratio. Do you have any plans to grow inorganically?

ICICI Bank currently does not have any plans to acquire, although we are open to grow inorganically in the domestic market. We believe there are no good opportunities at present if we consider the cost-benefit analysis. We are getting new branch licences easily which has allowed us to expand organically. We are opening around 600 branches this year. Our subsidiaries too won’t need much capital going forward and, over a period, we would list them on bourses.

How are the bank?s international operations faring?

Currently, our international operations are stable and we are not in a hurry to grow them, at least for the next one year. Let me clarify that our Dubai balance sheet exposure is very minimal though our Bahrain branch balancesheet size is around $6 billion.

Are you adding to your manpower?

We are hiring at junior levels currently. We would approach Indian Institute of Management (IIMs) over a period of time. We increased salaries last year and will do so this year too.