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MUMBAI, March 7

INTERNATIONAL rating agency, Moody's Investors Service, has upgraded the foreign currency bond rating of ICICI Bank Ltd to `investment grade' making it, probably the only company in India to get this rating.

Moody's Investors Service has upgraded the long-term foreign currency bond ratings of ICICI Bank to `Baa3' from `Ba1'and thereby has pierced the country's debt rating, said a Moody's rating report. The rating outlook is stable.

Speaking on the impact of the upgrade, Ms Kalpana Morparia, Executive Director, ICICI Bank said, "This would be extremely beneficial to the bank as it would have a positive impact on the cost of any future overseas borrowings of the bank. This investment grade will also help us widen our investor base in our debt issues abroad and thereby increasing its liquidity.''

Ms Morparai also spoke about how the upgrade would facilitate the bank's international trade finance business as a number of banks around the world allocate counter-party credit limits for trade finance based on the rating by such international agencies.

However, the outlook for the bank's foreign currency deposit ratings is negative, reflecting the outlook of the respective country ceiling.

According to Moody's, the revised foreign-currency bond ratings of ICICI Bank address the relatively low risk that the bank's foreign currency bonds may be affected by a possible general moratorium imposed by the Government of India on foreign currency obligations. In such a case, the Government may choose to allow foreign currency payments by some favoured classes of issuers such as ICICI Bank. This would lead to the debt of such an issuer piercing the country debt ceiling.

ICICI Bank's `too big to fail' features coupled with its importance to the financial system as one of India's main foreign currency borrowers in the international capital markets means that a possible default on its foreign currency obligations would inflict substantial damage on the economy, the report said.

The ratings of ICICI Bank affected by this rating action are senior unsecured $150 million bond due on August 2007 upgraded to `Baa3' from `Ba1'and the multiple seniority MTN programme which includes, senior unsecured rating upgraded to `Baa3' from `Ba1' and the subordinated rating upgraded to `Baa3' from `Ba1'.

ICICI Bank's foreign currency debt ratings also incorporate the bank's stand-alone intrinsic financial strength as expressed by its `D+' financial strength ratings, its changing business profile towards retail, its strong management as well as some asset quality concerns, Moody's comments.

"The merger between ICICI Ltd and ICICI Bank Ltd in March 2003 has created the second biggest commercial bank in India, and at the same time a dynamic universal bank with an improved credit risk profile achieved through rigorous business diversification.

The increasing access to retail deposits has enabled the bank to successfully penetrate the relatively untapped market of consumer loans, which are more profitable and also carry a lower credit risk cost compared to the bank's traditional project finance business,'' said Moody's.

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