ICICI Bank closes its dedicated project finance vertical, to continue infra lending through corporate finance vertical

ICICI one of the largest private-sector lenders in India, has shut down its dedicated project finance vertical amid a slowdown in demand for such loans and as part of the bank’s strategy to focus on retail banking, multiple people aware of the move confirmed to CNBC-TV18.

A “handful” of people that were part of the project finance vertical have been reassigned roles in other teams, said a person aware of the developments, adding that the vertical was closed almost a month or two back.

However, a bank executive that CNBC-TV18 spoke to, clarified that the move was purely part of reorganisation keeping in mind the bank’s current priorities and that shutting down of the dedicated vertical should not be taken to mean that the bank will not undertake any project financing in future. The bank will continue to fund project finance, provided the borrower meets the risk threshold internally set by the bank.

All the persons CNBC-TV18 spoke to for this article requested anonymity.

Rakesh Jha, the chief financial officer of ICICI Bank had told analysts during a post-results call on October 29, “The way the bank and each of our businesses are looking at loan growth is that wherever there is an opportunity which meets our risk and returns threshold, we would be happy to grow.”

ICICI Bank was established by the Industrial Credit and Investment Corporation of India (ICICI) as a wholly-owned subsidiary in 1994 with the objective of lending for industrial development. ICICI was one of the country’s oldest Development Finance Institution (DFI) before it converted into a bank in the early 2000s.

The bank has shifted focus towards retail over the past few years, with the portfolio now accounting for over 60 percent of the total book, while its corporate book has shrunk to about 24 percent of the book. It recently announced its plan to open 450 branches to expand its retail footprint.

The decision to close the project financing vertical comes at a time when credit to the industry has plunged to multi-year lows amid weakening economic activity.

ICICI Bank reported a 28 percent drop in net profit Rs 655 crore in the September quarter. Its gross non-performing loans stood at 6.37 percent and net non-performing loans at 1.60 percent as of September 2019.

In absolute terms, the gross non-performing assets stood at Rs 456.39 billion as of September 30, 2019, which included slippages of Rs 11.59 billion from corporate and SME segments during the quarter.


By Loknath

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