The $79-billion ICICI Bank, the country?s second-largest bank, is set to witness a significant shift in its business portfolio, as corporate lending sees an upswing and retail lending slows following a tightening of interest rates. Over the next two to three years, the bank will reduce the retail component from 70% to around 50%, or even lower. The retail portfolio of the bank grew from 0-70% in seven years.

In an exclusive interview with FE, ICICI Bank MD & CEO K Vaman Kamath said this shift would be accelerated on account of the sharp increase in corporate lending. Kamath said growth in retail lending was invariably set to be tempered owing chiefly to the higher base.

The subsequent hikes in interest rates have also had an effect on retail loans and Kamath said going forward, it was difficult to take a view of more than three to six months on the interest rate scenario. However, despite the tight monetary policy stance followed by RBI, the liquidity position was healthy, he said.

ICICI Bank had a total balance sheet size of Rs 3.44 lakh crore, or $79 billion, on March 31, 2007. Growth in the last two years for the retail business has already indicated the shift. In FY07, the bank?s retail portfolio grew 39%, against 64% in the previous fiscal.

Said Kamath: ?The retail lending base is now very high for the system: $50-60-billion in terms of annual lending. This grew 40% compounded for the last six to seven years. Will it stop growing or turn negative? I don?t think that will happen. The base is so large, it provides momentum to the economy.?

Kamath said rural lending was at around 18% of the total portfolio. ?The balance sheet is also growing, so getting rural to outgrow 18% will take time. The international business of the bank is also growing rapidly and almost doubled in FY07.?

On the vexed issue of the intermediate holding company planned by ICICI Bank for its investments in insurance and asset management, Kamath said his bank was open to whatever structure RBI decides.

ICICI Bank clocked a PAT of Rs 1,003 crore for the Q2 FY08, up 33% against the same period the previous fiscal.