ICICI Raises Record $1 Billion in Yen to Fund Lending

ICICI Bank Ltd., India's largest by market value, raised $1 billion by borrowing in yen, the biggest syndicated loan by a bank from the South Asian nation, to meet credit demand.

The loan will be split into three portions of $350 million, $450 million and $200 million maturing in one year to three years, the Mumbai-based bank said in an e-mailed statement today. The loan agreement was signed yesterday in Geneva.

ICICI and other banks in India are raising money to fund lending as the $775 billion economy expands at an annual pace of 8 percent, spurring companies and consumers to borrow more. At ICICI, loans surged 47 percent in the quarter ended Sept. 30.

``We may use a part of the loan for domestic purposes in retail, corporate and rural lending and for corporate lending in our international operations,'' Chanda Kochhar, deputy managing director, ICICI Bank, said from Geneva. ``The $1 billion loan syndication is a benchmark deal as this facility marks the largest syndicated loan for an Indian bank borrower.''

Twenty-six banks participated in the facility, the largest number for loan syndication by any Indian bank in the international market, ICICI Bank said. They included BNP Paribas SA, Royal Bank of Scotland Plc, Standard Chartered Plc, HSBC Holdings Plc, Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Banking Corp.

Interest Rates

ICICI Bank will raise the funds in yen to save on withholding tax because of lower Japanese interest rates, and swap the proceeds into rupee, bankers involved in the deal said last month. The three-month yen London Interbank offered rate, or Libor, is 0.5456 percent, according to data compiled by Bloomberg. The comparable U.S. dollar rate is 5.36 percent.

The bank got ``very competitive'' rates, Kochhar said, declining to specify the loan rate.

Indian companies are also tapping overseas markets to access larger amounts, said Bhaskar Desai, treasurer at Bank of Nova Scotia in Mumbai.

``The risk appetite of overseas investors is good, helping local companies borrow more from overseas,'' Desai said.

ICICI's joint managing director, Kalpana Morparia, said in October that rising consumer loans, increasing investment by Indian corporations and overseas acquisitions, combined with the government's push to expand credit in rural India, will sustain growth in the world's fastest-growing major economy after China.

Chief Executive Officer K.V. Kamath predicted the funds needed by local companies will more than double to $175 billion in three years.

Economic Growth

The Indian economy may expand ``close to 9 percent'' in the year to March 31, Finance Minister P. Chidambaram said today. The economy is poised to expand more than 8 percent for a fourth straight year. The government aims to lift economic growth to as much as 10 percent to eliminate poverty in a nation of 1.1 billion people.

The bank raised $400 million selling five-year bonds in October, receiving demand for $1 billion from investors.

ICICI Bank shares, up 73 percent in the past six months, fell 0.5 percent to 854.55 rupees at the 3:30 p.m. close of trading on the Bombay Stock Exchange.