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No cash crunch: ICICI Bank — It's financially sound, says RBI

Our Bureau

MUMBAI, April 12

THE country's largest private bank, ICICI Bank, today said it did not have any liquidity problem after throngs of depositors in several places in Gujarat and Mumbai emptied out automated teller machines (ATMs) on news that the bank was caught in a cash crunch.

ICICI Bank, which has an asset base of about Rs 1 lakh crore, dismissed the news as "rumours" and reassured the public that the bank was financially sound, a claim backed by the Reserve Bank of India in a press release today.

Ms Kalpana Morparia, Executive Director, ICICI, who was overseeing damage-control along with other senior colleagues, termed the rumours baseless and mischievous.

"We would like to reassure our depositors and customers that ICICI Bank is one of the premier banks of the country and there has been no adverse change in the financial position of the bank. The bank is completely solvent and a profit-making organisation. The depositors', bondholders' and lenders' funds are safe with ICICI Bank," Ms Morparia said. She added that the bank enjoys top ratings from leading rating agencies.

The Reserve Bank said it was monitoring the developments and had arranged to provide adequate cash to ICICI Bank to meet the demands of its customers at the branches and ATMs.

"It is clarified that ICICI Bank has sufficient liquidity, including in its current account with the RBI, to meet the requirements of its depositors. The bank's financial position is also sound," the central bank said.

Ms Morparia told Business Line that the bank would keep its branches in Gujarat and Mumbai open tomorrow (Sunday) and Monday to reassure its customers of its soundness and pay out cash in case depositors wanted to withdraw money.

Yesterday customers withdrew about Rs 15 crore from ATMs in different parts of Gujarat.

"The situation has quietened down enormously. We have despatched cash vans to ensure that ATMs are replenished," she said.

According to sources, ICICI Bank's cash chest currently holds about Rs 50 crore, enough to tide over a crisis. However, this could not be confirmed.

The bank's cash movement countrywide is handled by Mumbai-based, Brinks Arya, which moves currency in its secured vans to ATMs and branches. The bank has a network of 1,675 ATMs and 450 branches and extension counters.

Meanwhile, market sources said that ICICI Bank has been borrowing heavily in the market for the past few weeks. Money market sources said the bank had borrowed about Rs 800-900 crore from State Bank of India recently. It also borrowed about Rs 1,000 crore from Life Insurance Corporation. A spokesman for the bank described these borrowings as routine. He said the bank had nil borrowings in the call market.

A couple of bankers said, on condition of anonymity, that ICICI Bank indeed has been quite an aggressive borrower recently. "They have been contracting money at very high rates. They have also been offering inter-bank participatory certificates at a large premium, which is quite unusual. It has also sold assets," the treasury head of a top public sector bank said.

A source at ICICI Bank confirmed that it had been an active borrower but said it was mainly for refinancing old loans and had nothing to do with a liquidity crisis.

The bank has been paying high interest rate on retail deposits too. A retail-sales executive said he had contracted 14-day deposits at even 7.5 per cent annualised when the current market rate for 14-day deposits is not more than 4.5-5 per cent annualised. Another official said the bank's branches had been given deposit mobilisation targets so stiff that many branches could collect only half of them.

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