The ICICI bank is India’s largest private sector bank. The bank has assets worth $100 Billion. A wild rumour that ICICI Bank was going bankrupt due to the subprime mess of the US market started floating around India today. As a result, a large number of ICICI customers rushed to the bank’s ATMs to withdraw all their deposits. A local newspaper is said to be the source of the rumour. When people read stuff like this in a newspaper, they assume that it has to be true. But the fact is that this newspaper report was far from accurate and caused the widespread panic among customers of ICICI bank and other private sector banks.
ICICI was quick to respond to rumours and said that the bank’s financial health was good. There seems to be no reason for customers to worry and withdraw their deposits.
ICICI Bank said that its UK subsidiary, which was in the news a few days ago over concerns about its investments in the instruments of the bankrupt Lehman Brothers, has no exposure to the US subprime credit. The subsidiary’s non-India investment book has been estimated at $3.5 billion, and about 89 per cent of those investments are rated A- and above by Standard & Poor’s, Moody’s and Fitch.
“Only about 18 per cent of ICICI Bank UK PLC’s non-India investment book has exposure to the US. The bank has a total balance sheet size of $8.5 billion and has zero non-performing loans on the balance portfolio of $3.9 biilion,” an official statement by ICICI Bank said.
Here is a video of Chandra Kochhar, Joint Managing Director Of ICICI Bank, dismissing the rumours and stating that the ICICI bank is in good health.
ICICI shares were battered on Dalal Street. The bank’s shares fell more than 12% on the Bombay Stock Exchange (BSE). The rejection of the Bailout bill HR 3997 by the U.S. House Of Representatives will add more fuel to the fire and is likely to help continue the slip of stock prices of financial institutions.
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{ 4 comments… read them below or add one }
ICICI Bank Service Team 09.30.08 at 3:59 am
September 30, 2008
Dear Sir/Madam
We greatly value your relationship with us. In the context of the developments in the international financial markets, we thought it pertinent to bring to you our perspective of the prevailing situation.
We would like to bring to your attention that the Indian banking system is well regulated and significantly insulated from global developments. This is because it is mandatory for all Indian Scheduled Commercial Banks to retain 34% of the deposit base in the form of Government Securities (SLR) and cash with RBI (CRR). Besides, sound policies of RBI have ensured prudent credit practices in the Indian Banking system.
ICICI Bank is already compliant with the BASLE II requirement in respect of risk management practices and capital adequacy. At 13.4%, ICICI Bank has one of the highest capital adequacy ratios in the Indian banking industry. Last year, ICICI Bank raised Rs. 20,000 crores (US $ 5 billion) of equity capital, which almost doubled our equity capital base. We have a net worth of over Rs. 47,000 crores (US$ 10 billion), again one of the highest in the banking industry in India We have consolidated total assets of over Rs. 4,84,000 crores (over US $ 105 billion), which is diversified across a wide range of asset classes across retail, wholesale and rural banking.
ICICI Bank is amongst the most profitable banks in India. In FY 08, ICICI Bank made a profit of Rs. 4,158 crores (US$ 900 million).
ICICI Bank has the highest credit ratings in the Indian financial sector. We have AAA ratings for our instruments, such as senior bonds, subordinated bonds, and deposits. We have the highest foreign currency bond ratings assigned to any Indian bank from Moodys and S&P.
We continue to invest in growth, indicating our confidence in the opportunities in the Indian market. In 07-08, ICICI Bank added 650 new branches, taking the total strength to over 1400 branches.
We thank you for reposing trust in us over the years. We look forward to setting new benchmarks in service levels in India and to create a bank that you will continue to be proud of.
As a testimony to the above ,please find below the clarification given by Reserve Bank of India:
Date : 30 Sep 2008
RBI Statement on ICICI Bank’s Financial Position
There are reports in some sections of the media that based on rumours regarding the financial strength of ICICI Bank, depositors are withdrawing cash at its ATMs and branches in some locations.
It is clarified that the ICICI Bank has sufficient liquidity, including in its current account with the Reserve Bank of India, to meet the requirements of its depositors. The Reserve Bank of India is monitoring the developments and has arranged to provide adequate cash to ICICI Bank to meet the demands of its customers at its branches/ ATMs.
The ICICI Bank and its subsidiary banks abroad are well capitalised.
Alpana Killawala
Chief General Manager
Press Release : 2008-2009/412
Sincerely,
Rakesh Sah
Office of Head Service Quality
ICICI Bank Limited
iwebie 09.30.08 at 1:59 pm
A strong rumour that ICICI Bank has gone bankrupt sent several depositors rushing for ATMs to withdraw money late on sunday night .
http://www.iwebie.com/icici-bank-bankrupt
Gautam Kshatriya 10.11.08 at 10:41 am
Hi,
I wrote a few posts about the rumours that have been going on - and I got a standardized response from ICICI Bank. I do feel, however, that there is something amiss here. In January, there were reports that ICICI has credit derivative exposures of over $2.2bn, and in March we learned that their Mark to Market losses were in excess of $260mn. We haven’t heard any more information about their final position vis-a-vis their Mark to Market losses. This is strange, given that capital markets have worsened considerably since March. If indeed, ICICI feels that there is nothing to worry about, it should come out and share its current MTM position.
I *do not* think that that depositors need to be worried, and there is absolutely no reason to start withdrawing from your checking account. There is no chance that ICICI Bank will collapse - the regulator wouldn’t allow it. However, that doesn’t mean that the shareholder shouldn’t be cautious, and expect some additional MTM losses.
Read more about my response to ICICI’s standardized statement here: http://www.moneyvidya.com/blog/response-from-icici-bank-to-my-post-fresh-rumours-icici-bank-collapse-imminent/
Gautam Kshatriya
gautam.kshatriya@moneyvidya.com
http://www.moneyvidya.com/blog
Disclaimer: This comment, or anything else on MoneyVidya.com should not be taken as investment advice. This comment and all other comments / articles on MoneyVidya.com/blog are opinions of the authors themselves. I do not hold any positions in ICICI Bank.
Murli Menon 10.12.08 at 2:26 am
You may have seen certain advertisements about ICICI bank in the past
few days. We would like to share some important points about the same.
The accountants amongst you will appreciate this simple
axiom ………
**
*Popular quote doing email forwards rounds post Lehman, AIG, Merrill
fiasco…**
There are two sides to a Balance Sheet.*
*Left & the Right (Liabilities and**
Assets respectively.*
*On the Left side there is nothing right.. and on the Right
side there is
nothing left “*
Why spend crores of rupees of our money to release FRNT PAGE quater
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rumours”. A simple email to all your 25 million customers would have
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By being attention to certain rumours, now you have aroused the
curiosity of 75 million reders of the newspapers pushing “Is ICICI Bank
bankrupt” amongst the top Google searches. In effect, the bank spent
money to spread the rumour further……..
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