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IFC to Help Kotak Mahindra Bank Augment Its Capital Base and Strengthen India’s Private Banking Sector
In New Delhi
Minakshi Seth
Phone: + (91) 11 4111-1058
Email: MSeth@ifc.org
In Washington, DC
Cynthia Case
Phone: + 1 (202) 473-6287
Email: ccase@ifc.org
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.
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