Oct. 10 (Bloomberg) -- The cost of default protection on ICICI Bank Ltd., the Indian lender that's reported the biggest losses on overseas investments, rose to a record as the shares fell the most since 1997, credit-default swaps show.

Five-year contracts on the Mumbai-based bank's debt were quoted 130 basis points higher at 900, Barclays Capital prices show. The previous record of 860 was set on Oct. 8, according to CMA Datavision prices tracking the contracts back to 2004.

``I don't see why anyone would want to take ICICI risk,'' said Eugene Kim, chief investment officer of Tribridge Investment Partners Ltd., a Hong Kong-based hedge fund managing $200 million. ``There are a lot of ICICI bonds in the market which fund managers can't sell, so the only way they can do it is to buy its CDS. But then no one wants to sell the protection, so the price keeps on going higher and higher.''

ICICI, the worst performer among financial stocks in Asia today, has slumped 47 percent from the beginning of September as the global credit crisis triggered the collapse or seizure of U.S. and European banks. The Reserve Bank of India and Finance Minister Palaniappan Chidambaram last week issued statements reassuring investors that India's second-largest bank has enough capital.

ICICI's capital adequacy ratio was 13.4 percent as of June 30, more than the minimum 9 percent required by regulators, Chief Executive Officer K.V. Kamath said on Sept. 30.

Credit-default swaps, financial instruments based on bonds or loans, were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities, or cash equivalent, should the borrower default.

At 900 basis points ICICI swaps, which rise as perceptions of credit quality deteriorate, are equivalent to $900,000 annually to protect a $10 million investment in the bank's notes. A basis point is 0.01 percentage point.

To contact the reporters on this story: Oliver Biggadike in Tokyo at obiggadike@bloomberg.net; Patricia Kuo in Hong Kong at pkuo2@bloomberg.net.

Last Updated: October 10, 2008 05:09 EDT