Mumbai, March 21, 2007 -
IFC, the private sector arm of the World Bank Group, will invest to help India’s Kotak Mahindra Bank Limited augment its capital base and increase its lending to small and medium enterprises and for individual housing. IFC will invest $45 million in Upper Tier II subordinated bonds with a final maturity of 15 years to be issued by Kotak Mahindra Bank. The bonds qualify as Upper Tier II Capital according to the recent guidelines issued by the Reserve Bank of India. IFC’s investment will also help enhance the bank’s long-term funding resources.
Uday Kotak, Executive Vice Chairman and Managing Director, Kotak Mahindra Bank said, “IFC’s quick response to the Reserve Bank of India’s Upper Tier II guidelines will help further improve Kotak Mahindra Bank’s capital adequacy and diversify its funding sources.”
Iyad Malas, Director, IFC South Asia, elaborated, “IFC’s investment in Kotak Mahindra Bank supports our larger goal of developing and strengthening the financial sector in India. Our support will help the bank leverage its improved capitalization, enhancing credit distribution to its clients, especially from the SME sector. IFC’s investment will also help expand the private sector's role in banking services and strengthen the efficiency and reach of these services in the country.”
To date, only a few private sector banks have successfully issued Upper Tier II capital due to the complex and long-term nature of these products. This is IFC’s third subscription to Upper Tier II subordinated bonds issued bilaterally to IFC by Indian private sector banks, following transactions with HDFC Bank and ICICI Bank in recent months.
IFC’s decisive responses to the Reserve Bank’s Upper Tier II guidelines are part of the World Bank Group’s strategy in India to improve financial intermediation by building capacity in private financial institutions. They also support pioneering transactions that help deepen the financial markets and broaden the financial inclusion of underserved groups, particularly SMEs.
This transaction continues IFC’s partnership with Kotak Mahindra Bank. In 2003, IFC provided a six-year senior loan of $22 million to Kotak Mahindra Bank when it was converted into a bank from a nonbanking finance corporation, the former Kotak Mahindra Finance Company.
Kotak Mahindra Bank offers financial services to SMEs, retail, individuals, and corporates. The bank has a network of over 100 branches across more than 60 cities and towns in India. Kotak Mahindra Bank has ratings of AAA and AA+ for the bank's fixed deposits and subordinated debt programs respectively. It is listed on the Mumbai and National Stock Exchanges, as well as on the Luxembourg Stock exchange (through its Global Depository Share program).
IFC in India
In India, IFC’s current held portfolio is $1.3 billion (as of June 2006) making it IFC’s fourth-largest country of operations. Since 1956, IFC has committed financing to projects in India, amounting to $3.3 billion. IFC focuses on supporting the private sector–led development through direct investment and advisory services that promote growth and competitiveness in India. In FY06, IFC committed over $400 million in new investments in India.
Infrastructure is central to IFC's strategy in South Asia. In recent years, IFC has supported manufacturing companies aspiring to global competitiveness. IFC also supports innovation in financial services, including expansion of consumer and housing finance for lower-income groups. IFC provides advisory services and equity finance to microfinance institutions that provide loans to farmers and small non farm enterprises in rural areas. IFC is helping companies overcome the limited availability of long-term financing by using its strong credit rating and financial structuring expertise to encourage domestic investors to buy longer-term commercial paper. IFC has also focused on the innovative application of technology by backing IT companies whose products offer potential for important contributions to economic development.
About IFC
IFC, the private sector arm of the World Bank Group, promotes open and competitive markets in developing countries. IFC supports sustainable private sector companies and other partners in generating productive jobs and delivering basic services, so that people have opportunities to escape poverty and improve their lives. Through FY06, IFC Financial Products have committed more than $56 billion in funding for private sector investments and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. IFC Advisory Services and donor partners have provided more than $1 billion in program support to build small enterprises, to accelerate private participation in infrastructure, to improve the business enabling environment, to increase access to finance, and to strengthen environmental and social sustainability. For more information, please visit
www.ifc.org
.
