ICICI Bank has shut its project financing division in a bid to reduce its exposure to long-term assets, especially in the infrastructure sector, and focus on retail and unsecured lending. Executives working in this division have been sent to others, including corporate banking.

The move comes in the backdrop of lacklustre credit demand from the infrastructure sector.

Banks are baulking at funding infrastructure projects due to asset-liability mismatches (with the projects requiring long-term financing but banks funding them through short-term liabilities), delays in statutory clearances, and bad loans.

“The bank has been saying it will reduce its exposure to long-term assets and to lower rated corporates. It has also been focussing more on unsecured and retail lending. Also, there is no huge demand for infrastructure projects these days. But if there is a good project or borrower then the bank is always there to lend,” said an industry source.

The source added that the team may have been reduced as it was felt that there is no need for a dedicated team.

Infrastructure lending down

According to Reserve Bank of India data on sectoral deployment of bank credit, the outstanding credit of scheduled commercial banks to the infrastructure sector has come down by ₹52,135 crore so far this fiscal (up to September-end), against a growth of ₹45,747 crore in the year-ago period.

ICICI Bank was among the biggest infrastructure lenders till 2013. But the economic downturn and poor regulatory environment hit the infrastructure sector, which in turn added to ICICI Bank’s rising NPAs.

The dismal performance of the infrastructure sector can be attributed to loan impairment resulting in lending constraints due to tighter regulatory norms and adverse effects on profitability, especially in telecommunication and power, said RBI officials Jessica M. Anthony, Shiv Shankar and Satyananda Sahoo in an article in the RBI bulletin.

ICICI Bank did not respond to an email sent by BusinessLine seeking comments.