Private sector lender ICICI Bank is reported to have closed down its project finance division, citing lack of demand for loans in the infrastructure sector, even as the bank said it was still open to lending opportunities in the infra space.
However, the bank has shifted staff in its project finance division to the wholesale banking vertical that caters to clients across all sectors.
For a bank that was originally established by the government as Industrial Credit and Investment Corporation of India (ICICI) for providing long-term finance for projects, this move may, however, sound the end of road.
ICICI Bank, along with Industrial Development Bank of India (IDBI) were the two domestic financial institutions providing long-term funds for large industrial projects in the country.
ICICI Bank, which was created from the remains of the former ICICI Ltd, however, defended its decision saying it is still open to lending opportunities in the sector "There was no need for a dedicated team to source loans due to lack of demand in the sector," reports quoted sources at the bank as saying.
The bank's exposure to the infrastructure sector stood at 4.5 per cent as of 30 September 2019.
The bank is now focusing on retail loans as demand from large corporate borrowers have dried up due to the ongoing economic slowdown.
ICICI Bank has not made any formal statement on the closure of the project finance division, which offered rupee term loans, foreign currency term loans, credit guarantee, external commercial borrowings, subordinated debt and mezzanine financing.
The bank, however, plans to add 450 new branches this financial year, in order to expand its retail reach. Already 346 new branches have become functional in the April-September period. The lender also plans to hire around 5,000 employees to support its branch expansion plan this year.