ICICI Bank raises $17.9 billion through FCNR(B) window, boosts lending liquidity

Mumbai: ICICI Bank successfully raised approximately $17.9 billion (Rs 1.70 lakh crore) through the Reserve Bank of India's FCNR(B) window, which concluded on August 31. This makes it one of the top beneficiaries of the RBI's special swap facility designed to attract longer-term foreign-currency funding into the banking sector. The vast sum provides ICICI Bank with a substantial pool of funding that can be utilized for loans, thus supporting credit growth without taking on significant unhedged foreign-exchange risk.

Of the total mobilization, about $9 billion (Rs 85,600 crore) of loans have been extended by the bank's international branches and subsidiaries against these FCNR(B) deposits. These loans represent roughly half of the total funds raised. Additionally, ICICI Bank has issued standby letters of credit (SBLCs) worth around $3.63 billion (Rs 34,600 crore) to other banks in exchange for loans extended against these deposits.

This brings the combined total of direct loans and SBLC-supported loans to approximately $12.63 billion (over 70% of the mobilized funds), indicating that a significant portion of the liquidity has already been linked to lending activities.

The bank's strategy of issuing SBLCs further amplifies the impact of the funds raised, as these letters of credit provide additional financial support to other financial institutions for loans. This approach not only maximizes the utilization of the raised funds but also strengthens the banking ecosystem by enabling banks to extend credit more effectively.

ICICI Bank's mobilization of funds through the FCNR(B) window coincides with a period of strong inflows into foreign-currency non-resident deposits following the RBI's decision to offer banks a swap facility to attract longer-term foreign-currency funding. This decision has led to a surge in deposits, prompting the RBI to advance the closure of the FCNR(B) window from its initially scheduled September 30 deadline to August 31.

The facility enables banks to mobilize dollar deposits from non-resident Indians, swap the foreign currency with the RBI, and effectively limit foreign-exchange risk while enhancing their funding position. This, in turn, provides banks with additional liquidity that can be deployed towards loans, offering relief to their domestic deposit base.