34782 - Axis Bank III

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Summary of Investment Information

Project Number

34782

Company Name

AXIS BANK LIMITED

Date SPI Disclosed

Dec 9, 2014

Country

India

Region

South Asia

Projected Board Date

Feb 13, 2014

Environmental Category

FI-1 - Significant

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Feb 13, 2014
Signed : Mar 19, 2014
Invested : Nov 28, 2014

Sector

Commercial Banking - General

Project Description

Axis Bank is India’s third largest private sector bank in terms of assets with assets of around US$64 billion as of September 30, 2014. It has over 2,500 branches and 13,000 ATMs spread across the country with 8 international offices. Over 50 percent of the Bank’s branches are in rural and semi-urban areas. Axis Bank is using its nation-wide network and innovative approach to expand its focus on financial inclusion, infrastructure and agribusiness which are all strategic priorities for IFC in South Asia.

This investment is consistent with IFC’s strategy for South Asia which focuses on three strategic pillars: (i) inclusive growth: targeting the base of the pyramid, improving access to finance for MSMEs including in the low income states (“LIS”) and infrastructure building; (ii) climate change: focus on adaptation and mitigation (including renewable energy, cleaner production and energy efficiency financing); and (iii) regional and global integration: focus on financial infrastructure, investment climate reforms, trade financing, logistics and promoting South-South investments.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity	50.0

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	INFRA Project (RE/Waste Management)

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

1. Increasing Access to Finance for Infrastructure and Affordable Housing Finance: By providing longer-term funding, the proposed project would support Axis Bank in growing its infrastructure and affordable housing finance portfolio. The new Government in India has declared infrastructure development and access to affordable housing finance to be top priorities and is raising financing for these sectors through the banking system. Given the high level of NPLs in public sector banks, private sector banks are expected to play a vital role in channeling liquidity to infrastructure and affordable housing projects. Axis Bank has traditionally been a leading financier of infrastructure and housing and the proposed project will support the Bank in further expanding this business and contributing to the Government''s priorities for economic growth.

2. Promoting a New Asset Class: The recent directive of the Reserve Bank of India (RBI) allowing banks to issue infrastructure bonds will result in the creation of a new asset class for investors. The success of the proposed bond issue will send a positive signal to other banks and help promote the growth of this asset class.

3. Promoting Environmental and Social (E&S) Standards: Axis bank has agreed with IFC to adopt a roadmap towards implementation of IFC Performance Standards and other environmental best practices across the Bank''s portfolio which will make it amongst the largest private sector banks in India to be compliant with IFC''s E&S standards. The Bank is expected to be an industry leader in adopting E&S global standards with a strong demonstration impact on the banking sector in India.

1. Market Signal - RBI regulations do not permit banks to invest in the infrastructure bonds issued by banks. Since banks are significant investors in the domestic bond market, their absence from investing in this asset class could have an adverse effect on the proposed project. IFC''s participation in the proposed project is expected to attract sufficient liquidity from other high-quality domestic and foreign investors to support the bond issue.

2. Access to Longer Tenor - Through its participation in the proposed project, IFC will facilitate much needed access to stable long-term credit required by the Bank to match its long-term asset portfolio in infrastructure.

E&S Category Rationale / Risks and Mitigation

The lending business of the bank involves full spectrum of commercial banking including project finance, large corporates and SME finance as several short term products. Overall, the existing lending portfolio comprises several high risk sector investments such as mining, power, petrochemicals, roads, cement, iron &steel, construction etc. These sectors have a potential of generating adverse environmental or social risks or impacts which are widespread, irreversible, and unprecedented in several cases. Hence, the E&S risk of the proposed investment is high and the project is categorised as FI-1. The applicable Performance requirements will be i) the IFC- FI Exclusion List; ii) The host country E&S laws and regulations; and iii) the IFC Performance Standards.

Mitigation measure	Timeline
*Upgrade the SEMS* In line with its ESP policy the bank will upgrade the existing Social & Environmental Management System and broaden the scope of its application to ensure that the Company Operations are consistent with the IFC Performance Standards, applicable Host Country social and environmental regulations and the IFC Exclusion List.	Three month from signing this agreement
*Appoint a team for SEMS* Axis shall nominate a team with the responsibility of overall administration and oversight for the implementation of the Social & Environmental Management System, preferably from within Risk Management department.	Three months from signing this agreement
*Training Plan with budget* Axis shall develop and implement a Training Plan including an approved budget to ensure that all staff responsible for implementation of the Social & Environmental Management System are trained to be able to ensure its effective implementation.	Within six months from signing this agreement
*Implement the SEMS* The bank will implement its upgraded SEMS to its portfolio over a period of six to nine months. This will include high risk sectors of infrastructure, power and mining in the first phase. In second phase this will be implemented over the entire portfolio over a period of nine to twelve months, thereby achieving implementation across the portfolio in a time span of 12 to 15 months	15 months from signing this agreement

Contacts

For Inquiries About the Project, Contact

Mr. Sidharth Rath
President (Treasury, Business Banking and Capital Markets)
Axis Bank Ltd
Bombay Dyeing Mill Compound,
P.B. Marg, Worli,
Mumbai – 400025
Tel: +91-22-24255836

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