A finance ministry official said on Friday Indian banks were well capitalised and the ministry did not see specific problem with ICICI.

ICICI's shares fell as much as 28 percent to 326.70 rupees, their lowest in almost four years. At the low, the shares had fallen 50 percent in four weeks.

By 2:00 p.m, the shares were down 17.3 percent at 375 rupees. The banking index was down 4.8 percent.

"ICICI Bank has adequate rupee liquidity in the context of the current environment," joint managing director Chanda Kochhar said in a statement, the lastest in a series from ICICI over the past four weeks to try to calm investors and arrest sharp falls in its stock price.

"There is pure selling pressure. Sentiment is weak. Even if you discount the risks in its overseas operations, the stock fall is high," Vaibhav Agarwal, an analyst at Angel Broking.

The bank had liquidity of 120 billion rupees ($2.5 billion) in its overseas subsidiaries, and had never used rupee funds for its international growth initiatives, Kochhar said.

"If people have fears around us, I'm reclarifying these are small exposures considering our size and profitability," she said of the bank's exposures through its international units in a television interview.

Spreads on ICICI's 5-year credit default swaps, or the cost of protection against defaults, widened to around 900-1000 basis points on Friday in thin trade, a Hong Kong-based dealer said.

That means an investor would need to pay $900,000 annually to insure against a default in $10 million of the bank's underlying debt. At the end of 2007, the cost was only $185,000.

Shankar Narayanaswamy, head of fixed-income credit analysis at Standard Chartered, said the widening spreads reflected the broader credit crisis.

"Among all the Indian banks, they have the biggest requirements for buying dollars in the overseas money markets and those markets have completely dried up," he said.

Late last month, the central bank in a rare statement said ICICI and its units were well capitalised and has enough cash to meet depositors demands.

ICICI has also said its UK unit had no exposure to the U.S. subprime market and 98 percent of its non-Indian investment was rated investment grade by rating agencies.

ICICI on Sept. 16 said it had an exposure of about $81 million to Lehman Brothers senior bonds and would raise provisions by $28 million to cover half that.

Broker Edelweiss Capital has said it expected ICICI Bank to post $200 million in losses on bonds, including Lehman debt.

On Sept. 17, ICICI issued a statement saying rumours that top management were selling shares were baseless and irresponsible.