Dear Srinivasan,
Thanks once again for inviting me in to the PR point group.
The e-mail you have sent on ICICI Bank is well received. ICICI is the second largest Bank in India and as rightly pointed out by you, much stronger than many nationalised Banks now operating in the country.
However, majority stake of over 60% of ICICI Bank is with Foreign investment Cos,Banks,(Deutche Bank, Merryl Lynch,Singapore Government,& Instituitions in India (viz.,LIC and New India assuarance)and OCBs and FIIs.The stake of people of India is in minority and the stock has lost its sheen in the bourses.
The Bank had or still has the Finance Secy of GOI(Dr.Arun Ramanathan) on its Board, and it is but natural that the RBI Governor and the minister of finance have gone on record, testifying its "soundness". However, the following concerns have to be clarified by the Bank thru' a sustained PR exercise.
1.We ,Indians do believe in the dictum that "there' s no smoke without fire"and there was literally a run on ICICI counters when the Bank's exposure to Lehmann Bros at London.was publicised.However, the impact of this exposure could be termed as marginal.
2. ICICI Bank also had huge position in currency swaps, where they had offered hedging of other currencies vis -a vis the Dollar (to exporters).The issue was clarified in the parliament by the FM, but considerable loss will result to the Bank on account of these "innovative technology products". There is a pending case in Madras of High court of one exporter against another private sector bank for selling this type of derivative product, which they(the exporter)now say they did not comprehend..
3.ICICI has almost exited the retail business of two/four wheelers , and the industry rumour is that the *NPA(*Euphimism for bad debts) ratio in this segment of the Bank is very high...the industry is having around 2 to 3% NPA portfolio and ICICI Bank is supposed to have NPA ratio of many multiples of the Industry norm.The cause of worry for ICICI Bank is not its net worth or liquidity but the mounting NPA which is the most important aspect of present day Banking.
Another aspect of this retail loan portfolio is that,many Nationalised Banks have "purchased " this portfolio from ICICI considering it as good credit portfolio and this will trigger collateral damage for other Banks also..
The views expressed here are personal and open for discussion by your elite group...thanks once again
R.Vaidyanathan
Secy,
Public Sector PR Forum, Tamilnadu.
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