Sense of rumour

Last month, Mahalakshmi Mahajan (name changed) rushed to the nearest ICICI Bank ATM in Mumbai’s Dadar area to withdraw whatever little savings she had maintained for the last five years. Like Mahajan, there were many more jittery folk amongst the bank’s 27 million customers, nervously enquiring about the bank’s health. The trigger was the London subsidiary’s exposure of e57 million to Lehman Brothers of the US, which had filed for bankruptcy.

Chanda Kochhar

Pankaj Namdharni, Senior Investment Analyst at SPA Securities, says: “ICICI Bank has a strong balance sheet as of now to handle any such crisis.” Global credit ratings major S&P, while maintaining that ICICI Bank’s credit fundamentals continue to be sound, can’t foresee a scenario in which ICICI Bank will go under.

That’s because “we also consider ICICI Bank to be systemically important and hence is expected to receive extraordinary systemic support in the event of any financial distress”, is how S&P analysts put it in a recent report.

The bank, for its part, filed a police complaint against Tirupurbased sub-brokers associated with Motilal Oswal and couple of websites for spreading rumours, which it thinks are responsible for the almost 50 per cent erosion in the share price in a month (although at the time of writing, the stock did recover and is now down by 33 per cent since last month). But at a time when blue-blooded investment banks have gone bust, is it really unthinkable that an Indian bank could go the same way? Marketmen point out that the aggressive selling on the counter could simply be a result of foreign institutional investors (FIIs)— who are anyway in sell mode— offloading ICICI Bank stock. The FII holding in ICICI Bank stood at 67 per cent as on June 30, 2008.