ICICI Bank has applied for a licence to set up a non-banking finance company (NBFC), even as it has decided to stick to its knitting in other areas. The country’s second-largest bank has shelved plans to get into the fund of funds (FoF) business. It has also dropped the idea of setting up an infrastructure fund by itself.
Last year, the bank had made plans to foray into the FoF business. It was looking to start with around $500-million fund and then expand it to around $2.5 billion with multiple closing. However, with international markets going into a tizzy on the back of the subprime crisis, the bank has decided to shelve its FoF business plans. The bank was also looking at setting up a $2-billion infrastructure fund.
On the investor appetite for funds, ICICI Bank joint MD Chanda Kochhar said, “The demand for such funds continues to be strong, because infrastructure in India is still attracting a lot of interest and investors are long-term players who are not affected by short-term movements in the market.”
Some other players like Citi, Blackstone, 3i and Axis Bank have set up infrastructure funds to invest in India. On the FoF, she pointed, “We haven’t really finalised all plans there. In the current market scenario, it doesn’t make sense.” The FoFs are essentially investor groups that invest in private equity funds in order to provide investors with a low-risk product through exposure to a large number of vehicles across sectors and even geographies.
The bank has applied for a NBFC licence to RBI. If RBI approval comes through, it will be the second private sector bank after HDFC Bank to set up a NBFC. However, the plans have not been finalised. The group is also looking at using its housing finance company to book more home loans from this year.
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