The Reserve Bank of India (RBI) has said that an inspection of the books of ICICI Bank and that of its subsidiary in the UK has not uncovered anything that could be a cause for alarm.
Speaking to the Business Standard, RBI deputy governor has said that the central bank inspected the books of accounts of ICICI Bank and ICICI Bank's subsidiary in the UK and has found ''nothing to worry about.'' He said ICICI Bank has maintained sufficient liquidity of around Rs5,000 crore, evidence of which is found in the fact that the bank has been an active lender in the call money market.
ICICI Bank had slowed its retail lending over the past few months on account of interest rates going up and a rise in its delinquency levels. The bank's net non-performing assets were estimated to be around 1.83 per cent of advances at the end of the June 2008 quarter.
According to reports, ICICI Bank has a net worth of around Rs47,000 crore, and its statutory liquidity ratio (SLR) is 26 per cent. The bank's capital adequacy ratio is 13.42 per cent, which means that around half of the bank's deposits are covered by the SLR, cash reserve ratio and capital.
For its part, ICICI Bank has decided to respond aggressively with rumour mongers who are spreading fears that tantamount to ''economic terrorism''. It has filed complaints with the economic offences wing (EOW) of the Mumbai and Coimbatore police, accusing some brokers of rumour-mongering with the intent to hammer its share price and spread panic among its investors and depositors.
Ahead of the weekend, ICICI bank had suffered heavy losses on the bourses as a result of rumours that it could fall prey to the global credit crisis on account of its exposure overseas. In its complaints with the Mumbai and Coimbatore police, ICICI has said that a broker or sub-broker was spreading misinformation via text messages, or SMS.
The complaint quoted one SMS's as reading, ''Kindly withdraw all your deposits and cash in account with ICICI Bank as ICICI bank already rushed to RBI for insolvency.'' It cited a second SMS as saying, ''ICICI top officials r all sellng thr icici holdings in mkt 4 lst 2 wks. Thy knw that icici is going to annnce vry bad bankruptcy soon. This is confirmed news from1 of its board drctrs. exit all ur holding in icici all bnk stks. kamath also selling his binami holdings from 750 levels.''
ICICI's investigations into the matter traced one of the text messages to a mass SMS-sending website called www.smsgupshup.com.
International rating agency Moody's, meanwhile, reaffirmed its rating on ICICI Bank UK Plc (ICICI UK) with a stable outlook, in a credit opinion released on 10 October.
ICICI Bank's joint venture partner for its insurance business, Prudential plc, also reaffirmed its commitment to businesses with the bank.
Moody's reaffirmed ICICI Bank's rating at Baa1 for senior debt, higher than the foreign currency senior debt rating of any Indian bank. The rating agency said that the rating reflects the bank's improving core banking activities and robust asset quality, as well as the developing franchise within the UK. The report said that the mark-to-market impact in the bank's investment book is not associated with any structured or high-risk sub-prime related securities, but is instead on account of the general widening of the credit spreads due to global market conditions.
Standards & Poor's (S&P) too gave ICICI Bank a shot in the arm, saying that the bank's credit fundamentals of continue to remain sound despite the reports on its exposure to Lehman Brothers or the Bakerie group. S&P said that these have to be seen in the context of the $10-billion capitalisation of the bank and $1-billion of profits.
"Credit fundamentals of ICICI Bank Ltd. (ICICI; foreign currency counterparty credit rating BBB-/Stable/A-3) continue to be sound, backed by strong market position in the domestic banking industry, adequate financial profile, which is supported by its healthy capitalization, satisfactory loan quality, and diversification." S&P said in its rating report.
It added, "The overseas loan and credit derivative portfolio of the bank, including its overseas subsidiaries, is predominantly to Indian companies for their Indian and overseas operations and hence its quality is largely dependent on corporate credit quality and economic conditions in India."
Prudential plc, which has joint ventures with ICICI Bank for its life insurance and asset management operations, also denied rumours about its commitment to India and its joint ventures with ICICI.