The Indian unit of Industrial and Commercial Bank of China (ICBC), the world’s largest bank, has steadily increased lending in the last two years, in a sign of the rising tide of Chinese funds entering India.
The Beijing-based bank, which operates through a single branch in Mumbai, saw its loan book grow 42% in a year to ₹1,250 crore in FY19, the latest data with the registrar of companies (RoC) showed. ICBC, with over $4.53 trillion in assets globally, managed ₹681 crore of assets in India in FY17. Its growing presence assumes significance against the backdrop of the ongoing border skirmishes between the two countries, which has prompted calls to boycott Chinese firms.
As mandated by the Reserve Bank of India (RBI) for banks operating in India, ICBC also has priority sector advances. Of its total loan book of ₹1,250 crore, priority sector accounted for ₹227 crore. The rest was in the category named “others", according to the balance sheet. Interestingly, the bank‘s advances of ₹219 crore were to public sector entities as on 31 March 2018, but is not present in its FY19 balance sheet. However, the largest portion of its advances is in trade finance at ₹857 crore, which is classified as bills purchased and discounted. Experts said that traders use Chinese banks because of the convenience they bring owing to the seller’s account held in one of these banks, which speeds up transaction closure.
“Most of the assets that you are seeing is on account of trade finance. My belief is that despite the ongoing tussle between the two countries, some amount of trade will continue to happen and to that extent, Chinese banks will play a role," said Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services Llp.
To be sure, loans extended by the India branch would be only a small portion of what the parent bank would have lent to Indian businesses. That is because most foreign banks disbursing large loans do so from their branches abroad, as the Indian unit has limited capital.
ICBC also has 1,504 crore invested in government securities, including ₹45 crore kept with RBI under Section 11(2) (b) of the Banking Regulation Act.
The bank’s net investments in India stood at ₹1,904 crore, as of 31 March 2019. The bank is yet to submit its FY20 numbers to the RoC. ICBC posted a net profit of ₹36.5 crore in FY19, up from ₹18.4 crore in FY18.
Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated
