20-F 1 dp197062_20f.htm FORM 20-F


As filed with the Securities and Exchange Commission on July 28, 2023

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

FORM 20-F

 

(Mark One)

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2023.

 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                   to                                    .

 

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                                       

 

For the transition period from ___________________________ to ___________________________

 

Commission file number: 001-15002

 

ICICI BANK LIMITED

(Exact name of Registrant as specified in its charter)

 

India

(Jurisdiction of incorporation or organization)

 

ICICI Bank Towers
Bandra-Kurla Complex
Mumbai 400051, India

(Address of principal executive offices)

 

Name: Anindya Banerjee / Abhinek Bhargava

Telephone: +91 22 2653 6173

Email: anindya.banerjee@icicibank.com / abhinek.bhargava@icicibank.com

Office address: ICICI Bank Towers, Bandra-Kurla Complex, Mumbai – 400051, India

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Equity Shares of ICICI Bank Limited(1) IBN The New York Stock Exchange
American Depositary Shares, each representing two Equity Shares of    
ICICI Bank Limited, par value    
Rs. 2 per share    

 

 

1 Not for trading, but only in connection with the registration of American Depositary Shares representing such Equity Shares pursuant to the requirements of the Securities and Exchange Commission.

 

 

 

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

  

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report : the number of outstanding Equity Shares of ICICI Bank Limited as of March 31, 2023 was 6,982,815,731.

  

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 

Yes No

 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes No

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer Accelerated Filer Non-accelerated Filer Emerging Growth Company

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  

 

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on the attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b).

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP

 

International Financial Reporting Standards as issued by the International Accounting Standards Board

 

Other

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

 

☐ Item 17 Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes No

 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

Yes No

 

 


 

 

table of contents

 

Page

 

Cross Reference Sheet 2
Certain Definitions 3
Forward-Looking Statements 4
Market Price Information 5
Risk Factors 6
Major Shareholders 58
Related Party Transactions 60
Business 65
Overview 65
History 66
Strategy 66
Overview of Our Products and Services 68
Commercial Banking for Retail Customers 68
Retail Lending for Rural Customers 71
Commercial Banking for Small and Medium Enterprises and Business Banking 73
Commercial Banking for Corporate Customers 73
Commercial Banking for Government and Institutions 75
Commercial Banking for International Customers 75
Branch and ATM Netword and Call Centers 76
Investment Banking 77
Private Equity 79
Asset Management 79
Insurance 80
Risk Management 81
Market Risk 88
Audit 97
Loan Portfolio 103
Subsidiaries, Associates and Joint Ventures 105
Technology 108
Competition 113
Employees 114
Properties 115
Legal and Regulatory Proceedings 116
American Depository Receipt Fees and Payments 120
Selected Statiscal Information 122
Operating and Financial Review and Prospects 146
Management 209
Supervision and Regulation 231
Exchange Controls 273
Restriction on Foreign Ownership of Indian Securities 275
Dividends 280
Taxation 281
Presentation of Financial Information 289
Additional Information 291
Exhibit Index 294

 

 

 

 

Cross Reference Sheet

 

Form 20-F

Item Caption

Location

Page No.

Part – I      
Item 1 Identity of Directors, Senior Management and Advisers Not Applicable  
Item 2 Offer Statistics and Expected Timetable Not Applicable  
Item 3 Key Information Risk Factors 6
Item 4 Information on the Company Business 65
    Selected Statistical Information 122
    Operating and Financial Review and Prospects 146
    Supervision and Regulation 231
    Additional Information—Documents on Display 293
Item 4A Unresolved Staff Comments Not Applicable  
Item 5 Operating and Financial Review and
Prospects
Operating and Financial Review and Prospects 146
    Business—Risk Management 81
    Selected Statistical Information—Funding 132
Item 6 Directors, Senior Management and
Employees
Management 209
    Business—Employees 115
Item 7 Major Shareholders and Related Party Transactions Major Shareholders 58
    Related Party Transactions 60
    Management—Compensation and Benefits to Directors and Officers—Loans 229
    Schedule 18 Note 2 in Notes to Consolidated Financial Statements F-44
Item 8 Financial Information Report of Independent Registered Public Accounting Firm F-2
    Consolidated Financial Statements and the Notes thereto F-10
    Operating and Financial Review and Prospects 146
    Business—Legal and Regulatory Proceedings 116
    Dividends 280
Item 9 The Offer and Listing Market Price Information 5
Item 10 Additional Information Additional Information 291
    Exchange Controls 273
    Taxation 281
    Restriction on Foreign Ownership of Indian Securities 275
    Dividends 280
    Business—Subsidiaries, Associates and Joint Ventures 105
Item 11 Quantitative and Qualitative Disclosures About Market Risk Business—Risk Management—Market Risk 88
    Selected Statistical Information–Risk Management 134
Item 12 Description of Securities Other than Equity Securities Business—American Depository Receipt Fees and Payments 120
Part – II      
Item 13 Defaults, Dividend Arrearages and Delinquencies Not Applicable  
Item 14 Material Modifications to the Rights of Security Holders and Use of Proceeds Not Applicable  
Item 15 Controls and Procedures Management—Summary Comparison of Corporate Governance Practices—Controls and Procedures 223
Item 16A Audit Committee Financial Expert Management—Corporate Governance—Audit Committee 218
Item 16B Code of Ethics Management—Corporate Governance—Code of Ethics 222
Item 16C Principal Accountant Fees and Services Management—Corporate Governance—Principal Accountant Fees and Services 222
Item 16D Exemptions from the Listing Standards for Audit Committees Not Applicable  
Item 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers Not Applicable  
Item 16F Change in Registrant’s Certifying Accountant Not Applicable  
Item 16G Corporate Governance Management—Summary Comparison of Corporate Governance Practices 222
Item 16H Mine Safety Disclosure Not Applicable  
Item 16I Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not Applicable  
Item 16J Insider Trading Policies Not Applicable  
Part – III      
Item 17 Financial Statements See Item 18  
Item 18 Financial Statements Report of Independent Registered Public Accounting Firm F-2
    Consolidated Financial Statements and Notes thereto F-10
Item 19 Exhibits Exhibit Index and Attached Exhibits 294

 

2 

Certain Definitions

 

In this annual report, all references to “we”, “our”, and “us” are to ICICI Bank Limited and its consolidated subsidiaries and other consolidated entities under generally accepted accounting principles in India (“Indian GAAP”). In the financial statements contained in this annual report and the notes thereto, all references to “the Company” are to ICICI Bank Limited and its consolidated subsidiaries and other consolidated entities under Indian GAAP.

 

References to specific data applicable to particular subsidiaries or other consolidated entities are made by reference to the name of that particular entity. References to the “amalgamation” are to the amalgamation of ICICI, ICICI Personal Financial Services and ICICI Capital Services with ICICI Bank. References to “Sangli Bank” are to The Sangli Bank Limited prior to its amalgamation with ICICI Bank, effective April 19, 2007. References to “Bank of Rajasthan” are to the Bank of Rajasthan Limited prior to its amalgamation with ICICI Bank, effective from the close of business at August 12, 2010.

 

References to “ICICI Bank” and “the Bank” are to ICICI Bank Limited on an unconsolidated basis. References to a particular “fiscal” year are to the year ended on March 31 of such a year. Unless otherwise indicated, all references to the “Board of Directors” and the “Board” are to the board of directors of ICICI Bank.

 

All references to the “Companies Act”, the “Banking Regulation Act” and the “Reserve Bank of India Act” are to the Companies Act, 2013, the Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934 as passed by the Indian Parliament and as amended from time to time. All references to “RBI” and the “Reserve Bank of India” are to the central banking and monetary authority of India.

 

Pursuant to the issuance and listing of our securities in the United States under registration statements filed with the United States Securities and Exchange Commission, we file annual reports on Form 20-F which must include financial statements prepared under generally accepted accounting principles in the United States (U.S. GAAP), or financial statements prepared according to a comprehensive body of accounting principles with a reconciliation of net income and stockholders’ equity to U.S. GAAP. When we first listed our securities in the United States, Indian GAAP was not considered a comprehensive body of accounting principles under the United States securities laws and regulations. Accordingly, our annual reports on Form 20-F for fiscal years 2000 through 2005 included U.S. GAAP financial statements. However, pursuant to a significant expansion of Indian accounting standards, Indian GAAP constitutes a comprehensive body of accounting principles. Accordingly, we have included in this annual report, as in the annual reports for fiscal years 2021 through 2023, consolidated financial statements prepared according to Indian GAAP, with a reconciliation of net income and stockholders’ equity to U.S. GAAP and a description of significant differences between Indian GAAP and U.S. GAAP.

 

Our annual report prepared and distributed to our shareholders under Indian law and regulations include unconsolidated Indian GAAP financial statements, management’s discussion and analysis of the Bank’s results of operations and financial condition based on the Bank’s unconsolidated Indian GAAP financial statements and our consolidated Indian GAAP financial statements.

 

The economic and industry data and information presented in this document are sourced from government statistical releases, press releases and notifications by the Government of India, the Reserve Bank of India and other regulators, data available on the websites of the Government of India, Reserve Bank of India, other regulators and industry bodies.

 

3 

Forward-Looking Statements

 

We have included statements in this annual report which contain words or phrases such as “will”, “would”, “aim”, “aimed”, “will likely result”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, “anticipate”, “estimate”, “estimating”, “intend”, “plan”, “contemplate”, “seek to”, “seeking to”, “trying to”, “target”, “propose to”, “future”, “objective”, “goal”, “project”, “should”, “can”, “could”, “may”, “will pursue” and similar expressions or variations of such expressions that may constitute “forward-looking statements”. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, the actual growth in demand for banking and other financial products and services in the countries in which we operate or where a material number of our customers reside; the level and direction of interest rates, the yield on our loans and investments and the cost of our funding; future levels of non-performing and restructured loans and any increased provisions and regulatory and legal changes relating to those loans; our ability to successfully implement our strategies, including our growth strategy, our strategic use of technology and the internet and our strategy for resolution of non-performing assets; the continued service of our senior management; the outcome of any legal, tax or regulatory proceedings in India and in other jurisdictions in which we are or become a party to; the outcome of any internal or independent enquiries or regulatory or governmental investigations; our expansion or increased presence in areas such as small business and unsecured retail lending; our exploration of merger and acquisition opportunities; our ability to integrate recent or future mergers or acquisitions into our operations and manage the risks associated with such acquisitions to achieve our strategic and financial objectives; our ability to manage the increased complexity of the risks that we face in our international operations; our growth and expansion in domestic and overseas markets; our status as a systemically important bank in India; our ability to maintain enhanced capital and liquidity requirements; the adequacy of our allowance for credit and investment losses; our ability to market new products; investment income; cash flow projections; the impact of any changes in India’s credit rating; the impact of any new accounting standards or new accounting framework; our ability to implement our dividend payment practice; the impact of changes in banking and insurance regulations and other regulatory changes in India and other jurisdictions on us, including changes in regulatory intensity, supervision and interpretations; the state of the global financial system and systemic risks; the bond and loan market conditions and availability of liquidity amongst the investor community in these markets; the nature of credit spreads and interest spreads from time to time, including the possibility of increasing credit spreads or interest rates; our ability to roll over our short-term funding sources and our exposure to credit, market, liquidity and reputational risks. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date thereof.

 

In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this annual report include, but are not limited to, the monetary and interest rate policies of India and the other markets in which we operate, general economic and political conditions in India, southeast Asia, and the other countries which have an impact on our business activities or investments, political or financial instability in India or any other country caused by any factor including regional hostilities, terrorist attacks or social unrest, man-made or natural disasters and catastrophes, climate change events, inflation, deflation, unanticipated turbulence in interest rates, changes or volatility in the value of the rupee, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in general, changes in domestic and foreign laws, regulations and taxes, changes in competition and the pricing environment in India and regional or general changes in asset valuations. For a further discussion of the factors that could cause actual results to differ, see the discussion under “Risk Factors” contained in this annual report.

 

4 

Market Price Information

 

Equity Shares

 

Our outstanding equity shares are currently listed and traded on the BSE Limited, and the National Stock Exchange of India Limited.

 

At July 7, 2023, total 6,997,009,030 equity shares were outstanding. The prices for equity shares as quoted in the official list of each of the Indian stock exchanges are in Indian rupees.

 

At July 7, 2023, there were 1,855,355 holders of record of our equity shares, of which 1,952 had registered addresses in the United States and held an aggregate of 1,681,160 equity shares.

 

ADSs

 

Our ADSs, each representing two equity shares, were originally issued in March 2000 in a public offering and are listed and traded on the New York Stock Exchange under the symbol IBN. The equity shares underlying the ADSs are listed on the BSE Limited and the National Stock Exchange of India Limited.

 

At July 7, 2023, we had 676 million ADSs, equivalent to about 1,353 million equity shares, outstanding. At July 7, 2023, there were 166,469 record holders of our ADSs, out of which 80 have registered addresses in the United States.

 

See also “Risk Factors—Risks Relating to ADSs and Equity Shares—Conditions in the Indian securities market may adversely affect the price or liquidity of our equity shares and ADSs”.

 

5 

Risk Factors

 

You should carefully consider the following risk factors as well as other information contained in this annual report in evaluating us and our business.

 

Summary

 

Our business is subject to various risks and uncertainties. These risks include, but are not limited to, the following:

 

Risks Relating to India and Other Economic and Market Risks

 

·A prolonged slowdown in economic growth in India could cause our business to suffer.

 

·Financial instability in other countries, particularly countries where we have established operations, could adversely affect our business.

 

·Any downgrade of India’s debt rating or the rating of our senior unsecured foreign currency debt by an international rating agency could adversely affect our business, liquidity and the prices of our equity shares and ADSs.

 

·Any adverse impact on India’s external position due to an increase in the price of crude oil or the current account deficit or outflow of foreign capital or exchange rate volatility could adversely affect the Indian economy, which could adversely affect our business.

 

·The banking and financial markets in India are still evolving, and the Indian financial system could experience difficulties which could adversely affect our business and the prices of our equity shares and ADSs.

 

·A significant change in the Indian government’s policies, including economic policies, fiscal policies and structural reforms, could adversely affect our business and the prices of our equity shares and ADSs.

 

·Natural calamities, climate change and health epidemics could adversely affect the Indian economy, or the economy of other countries where we operate, our business and the prices of our equity shares and ADSs.

 

·If regional hostilities, terrorist attacks, or social unrest in India or elsewhere increase, our business and the prices of our equity shares and ADSs could be adversely affected.

 

Risks that arise as a result of our presence in a highly regulated sector

 

·The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal.

 

·We may be subject to fines, restrictions or other sanctions for regulatory compliance failures, which may adversely affect our financial position or our ability to expand our activities.

 

6 

·We are at risk of inquiries or investigations by regulatory and enforcement authorities, which may adversely affect our reputation, lead to increased regulatory scrutiny, cause us to incur additional costs or adversely affect our ability to conduct business.

 

·We are subject to the directed lending requirements of the Reserve Bank of India, which may also involve buying related certificates at a premium to meet the annual targets, and any shortfall in meeting these requirements may be required to be invested in Government of India schemes that yield low returns, thereby impacting our profitability. We may also experience a higher level of non-performing assets in our directed lending portfolio, which could adversely impact the quality of our loan portfolio, our business and the prices of our equity shares and ADSs.

 

·We are subject to capital adequacy requirements stipulated by the Reserve Bank of India, including Basel III, as well as general market expectations regarding the level of capital adequacy large Indian private sector banks should maintain, and any inability to maintain adequate capital due to changes in regulations, a lack of access to capital markets, or otherwise may impact our ability to grow and support our businesses.

 

·We are subject to liquidity requirements of the Reserve Bank of India as well as those of banking regulators in our overseas locations, and any inability to maintain adequate liquidity due to changes in regulations, a lack of access to capital markets, or otherwise may impact our ability to grow and support our businesses.

 

·Changes in the regulation and structure of the financial markets in India may adversely impact our business.

 

·The opportunities for growth in our international operations and our ability to repatriate capital from these operations may be limited by the local regulatory environments.

 

·The board of directors of the Bank has, pursuant to an independent enquiry, taken action against the former Managing Director and CEO. In the event the Bank is found by any of the enquiries in the matter by government and regulatory agencies to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations, financial condition and reputation.

 

·Our asset management, private equity, insurance and securities broking subsidiaries and affiliates are subject to extensive regulation and supervision which can lead to increased costs or additional restrictions on their activities that could adversely impact the Bank.

 

·Adoption of a different basis of accounting or new accounting standards may result in changes in our reported financial position and results of operations for future and prior periods.

 

·The transition from LIBOR to other alternative reference rates may adversely affect our income and also bring about the vagaries that such alternative reference rates may have.

 

7 

Risks Relating to Our Business

 

·If the level of our non-performing assets increases and the overall quality of our loan portfolio deteriorates, our business will suffer.

 

·We have a high concentration of loans to certain customers, borrower groups and sectors and if a substantial portion of these loans become non-performing, the overall quality of our loan portfolio, our business and the prices of our equity shares and ADSs could be adversely affected.

 

·The value of our collateral may decrease or we may experience delays in enforcing our collateral when borrowers default on their obligations to us which may result in failure to recover the expected value of collateral security exposing us to a potential loss.

 

·Our banking and trading activities are particularly vulnerable to interest rate risk and movements in interest rates could adversely affect our net interest margin, the value of our fixed income portfolio, our income from treasury operations, the quality of our loan portfolio and our financial performance.

 

·Our inability to effectively manage credit, market and liquidity risk and inaccuracy of our valuation models and accounting estimates may have an adverse effect on our earnings, capitalization, credit ratings and cost of funds.

 

·Our funding is primarily short-term and if depositors do not roll over deposited funds upon maturity, our business could be adversely affected.

 

·Negative publicity could damage our reputation and adversely impact our business and financial results and the prices of our equity shares and ADSs.

 

·The exposures of our international branches and banking subsidiaries could generally affect our business, financial condition and results of operations.

 

·Entry into new businesses or rapid growth in existing loan portfolios may expose us to increased risks that may adversely affect our business.

 

·Commission, exchange and brokerage income, profit on foreign exchange transactions and other sources of fee income are important elements of our profitability, and regulatory changes and market conditions could cause these income streams to decline and adversely impact our financial performance.

 

·Our industry is very competitive and our strategy depends on our ability to compete effectively.

 

·There is operational risk associated with the financial industry which, when realized, may have an adverse impact on our business.

 

·We and our customers are exposed to fluctuations in foreign exchange rates.

 

8 

·We may seek opportunities for growth through acquisitions, divest our existing businesses, or be required to undertake mergers by the Reserve Bank of India and could face integration and other acquisitions risks.

 

·We depend on the accuracy and completeness of information about customers and counterparties.

 

·A determination against us in respect of disputed tax assessments may adversely impact our financial performance.

 

·We are involved in various litigations. Any final judgment awarding material damages against us could have a material adverse impact on our future financial performance and our stockholders’ equity.

 

·We continue to expand our branch network and any inability to use these branches productively may have an adverse impact on our growth and profitability.

 

·We depend on the knowledge and skills of our senior management. Any inability to attract and retain them and other talented professionals or any loss of senior management or other talented professionals may adversely impact our business.

 

Risks relating to technology

 

·The growing use of technology in banking and financial services creates additional risks of competition, reliability and security.

 

·We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion or data corruption attempts, and identity theft that could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal and financial exposure.

 

·System failures or system downtime could adversely impact our business.

 

·Our business may be adversely affected by computer, internet and telecommunications fraud.

 

Risks relating to our insurance subsidiary and affiliate

 

·Additional capital requirements of our insurance entities or our inability to monetize a part of our shareholding or make additional investments in these entities as required may adversely impact our business and the prices of our equity shares and ADSs.

 

·While our insurance businesses are an important part of our business, there can be no assurance of their future rates of growth or levels of profitability.

 

·Actuarial experience and other factors could differ from assumptions made in the calculation

 

9 

of life actuarial reserves and other actuarial information.

 

·Loss reserves for our affiliate’s general insurance business are based on estimates as to future claims liabilities and adverse developments relating to claims could lead to further reserve additions and materially adversely affect the operation of our general insurance affiliate.

 

·The financial results of our insurance companies could be materially adversely affected by the occurrence of a catastrophe.

 

Risks Relating to ADSs and Equity Shares

 

·You will not be able to vote your ADSs and your ability to withdraw equity shares from the depositary facility is subject to delays and legal restrictions.

 

·Your holdings may be diluted by additional issuances of equity and any dilution may adversely affect the market prices of our equity shares and ADSs.

 

·You may be unable to exercise pre-emptive rights available to other shareholders.

 

·Your ability to sell in India any equity shares withdrawn from the depositary facility, the conversion of rupee proceeds from such sale into a foreign currency and the repatriation of such foreign currency may be subject to delays if specific approval of the Reserve Bank of India is required.

 

·Restrictions on reissuance and deposit of equity shares in the depositary facility could adversely affect the price of our ADSs.

 

·Certain shareholders own a large percentage of our equity shares and their actions could adversely affect the prices of our equity shares and ADSs.

 

·Conditions in the Indian securities market may adversely affect the price or liquidity of our equity shares and ADSs.

 

·Settlement of trades of equity shares on Indian stock exchanges may be subject to delays.

 

·Because the equity shares underlying ADSs are quoted in rupees in India, you may be subject to potential losses arising out of exchange rate risk on the Indian rupee.

 

·You may be subject to Indian taxes arising out of capital gains.

 

·There may be less company information available in Indian securities markets than in securities markets in the United States.

 

10 

Risks Relating to India and Other Economic and Market Risks

 

A prolonged slowdown in economic growth in India could cause our business to suffer.

 

We are heavily dependent upon the state of the Indian economy, and a slowdown in growth in the Indian economy could adversely affect our business, our borrowers, our counterparties and other constituents, especially if such a slowdown was to be prolonged. India’s gross domestic product declined by 6.6% in fiscal 2021 as the outbreak of the COVID-19 pandemic and consequent lockdowns and other containment measures negatively impacted economic activity during the year. India’s gross domestic product grew by 8.7% in fiscal 2022 and by 7.2% in fiscal 2023.

 

An economic slowdown and a general decline in business activity in India could impose stress on our borrowers’ financial soundness and profitability and thus expose us to increased credit risk.

 

Economic growth in India is also influenced by inflation, interest rates, external trade and capital flows. The level of inflation or depreciation of the Indian rupee may limit monetary easing or cause monetary policy tightening. Any increase in inflation, due to increases in domestic food prices or global prices of commodities, including crude oil, the impact of currency depreciation on the prices of imported commodities and additional pass through of higher fuel prices to consumers, or otherwise, may result in a tightening of monetary policy. Between May 2022 and February 2023, the Monetary Policy Committee increased the repo rate by 250 basis points from 4.00% to 6.50% in response to the rise in inflation. In its meetings in April and June 2023, the Monetary Policy Committee kept the repo rate unchanged and decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns within the target of 4%, while supporting growth.

 

Uncertainties remain in the global environment due to geo-political tensions, uncertainties around global growth recovery, volatility in commodity prices and an increase in inflation. Adverse changes to global liquidity conditions, comparative interest rates and risk appetite could lead to significant capital outflows from India, which could adversely affect our business. For instance, the increased uncertainties and risk aversion caused by the COVID-19 pandemic led to significant net outflows of investments by foreign portfolio investors from Indian equity and debt markets in an aggregate amount of approximately US$ 14.7 billion during the three months ended March 31, 2020. There was a net outflow of investments by foreign portfolio investors of approximately US$ 16.0 billion in fiscal 2022 and approximately US$ 5.5 billion in fiscal 2023. A slowdown in global growth may impact India’s exports. Sharp and sustained price reductions of globally traded commodities such as metals and minerals in the event of a global slowdown may negatively impact our borrowers in these sectors. Global trade disputes and protectionist measures and counter-measures could impact trade and capital flows and negatively affect the Indian economy, which could adversely affect our business. Developments in technology, such as artificial intelligence, may impact businesses, including ours and our customers’, and influence global and Indian employment markets, with an impact on employment and incomes of our existing and potential customers.

 

11 

Adverse economic conditions in India due to movements in global capital, commodity and other markets, changes in business due to technology or adverse impact of any natural disasters could result in reduction of demand for credit and other financial products and services, increased competition, and higher defaults among corporate, small business, retail and rural borrowers, which could adversely impact our business, our financial performance, our stockholders’ equity, our ability to implement our strategy and the prices of our equity shares and ADSs.

 

Financial instability in other countries, particularly countries where we have established operations, could adversely affect our business.

 

There is a history of financial crises and boom-bust cycles in multiple markets in both the emerging and developed economies, which increase risks for all financial institutions, including for our business and results of operations.

 

Global economic changes, such as developments in the Eurozone, including the United Kingdom’s relationship with the European Union following the United Kingdom’s exit from the European Union (“Brexit”); concerns related to the impact of tightening monetary policy including the failure of three regional banks in the U.S. and a European bank in fiscal 2023; the ongoing war between Russia and Ukraine and the sanctions imposed on Russia; elevated core inflation levels; supply and demand imbalances; high global energy prices; potential trade wars between large economies; the economic consequences of pandemics may lead to increased risk aversion and volatility in global capital markets and foreign exchange rate movements, which could impact global liquidity and adversely affect our business.

 

Uncertainty around these and related issues could lead to adverse effects on the economy of the United Kingdom and the other economies in which we operate. Our subsidiary in the United Kingdom has made changes to its operations in the European Union due to Brexit, which could adversely affect our business in the United Kingdom and Europe if the changes do not operate effectively. In addition, China is one of India’s major trading partners and the border dispute between India and China could have an adverse impact on economic relations between the two countries. Further, India has trade ties with both Russia and Ukraine. These factors may also result in a slowdown in India’s trade growth. The effect of any legislative and regulatory efforts to address these risks is uncertain, and they may not have the intended positive effects. Such volatility and negative economic developments could, in turn, materially adversely affect our business, prospects, financial conditions or results of operations.

 

A loss of investor confidence in the financial systems of India or other markets and countries or any financial instability in India or any other market may cause increased volatility in the Indian financial markets and, directly or indirectly, adversely affect the Indian economy and financial sector, our business and our future financial performance. We remain subject to the risks posed by the indirect impact of adverse developments in the global economy and the global banking environment, some of which cannot be anticipated and the vast majority of which are not under our control. We also remain subject to counterparty risk to financial institutions that fail or are otherwise unable to meet their obligations to us.

 

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Any downgrade of India’s debt rating or the rating of our senior unsecured foreign currency debt by an international rating agency could adversely affect our business, liquidity and the prices of our equity shares and ADSs.

 

Any adverse revisions to India’s credit ratings by international rating agencies may adversely impact our business and limit our access to capital markets and adversely impact our liquidity position and market perception of the Bank.

 

We are rated by Moody’s and Standard and Poor’s in international markets. In June 2020, Moody’s lowered the sovereign rating for India from Baa2 to Baa3, with a negative outlook due to the impact of the COVID-19 pandemic on the Government of India’s fiscal position and the stress in the financial sector. In 2021, both the rating agencies revised the outlook on our ratings from negative to stable, while maintaining the rating on our senior unsecured foreign currency debt at BBB- by Standard and Poor’s and Baa3 by Moody’s. The credit ratings have been maintained since 2021.

 

Rating agencies may also change their methodology for rating banks or their assessment of specific parameters which may impact our ratings. In April 2020, Moody’s revised its assessment of government support for Indian private sector banks in view of the mechanism of resolution for a stressed private sector bank. Such revisions in assessment methodologies could adversely impact the rating of private sector banks compared to public sector banks.

 

The rating of our foreign branches is impacted by the sovereign rating of the country in which the branch is located, particularly if the rating is below India’s rating. Any revision to the sovereign rating of the countries in which we operate to below India’s rating could impact the rating of our foreign branch in the jurisdiction and the bonds issued from these branches. Our subsidiary in the United Kingdom is rated by Moody’s and any change in our rating or outlook or in the financial position of the subsidiary could impact the rating or outlook of our subsidiary.

 

Given the significant uncertainties caused by global economic challenges, there can be no assurance that rating agencies will maintain their views on India’s sovereign rating or that we and our subsidiaries and affiliates will be able to meet the expectations of rating agencies and maintain our credit ratings. See also “—Risks Relating to Our Business—Our inability to effectively manage credit, market and liquidity risk and inaccuracy of our valuation models and accounting estimates may have an adverse effect on our earnings, capitalization, credit ratings and cost of funds”.

 

Any adverse impact on India’s external position due to an increase in the price of crude oil or the current account deficit or outflow of foreign capital or exchange rate volatility could adversely affect the Indian economy, which could adversely affect our business.

 

India is vulnerable to developments in the trade account. India imports a majority of its requirements of petroleum oil and petroleum products. The decline in the oil import bill in fiscal 2021 was largely due to a decline in global crude oil prices and weak demand conditions in the Indian economy caused by the COVID-19 pandemic. However, global crude oil prices rose starting November 2020 and experienced a sharp increase following the hostilities between

 

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Russia and Ukraine leading to a high import bill in fiscal 2023. However, the crude oil prices have moderated in fiscal 2024. The risk of a possible rise in global oil prices if there is further escalation in geo-political uncertainty cannot be ruled out. In the event of elevated oil price levels or volatility in oil prices, as well as the impact of currency depreciation, which makes imports more expensive in local currency, and the pass-through of such increases to Indian consumers or an increase in subsidies (which would increase the fiscal deficit) could have a material adverse impact on the Indian economy and the Indian banking and financial system, including through a rise in inflation and market interest rates, higher trade and fiscal deficits and currency depreciation.

 

India’s trade relationships with other countries and its trade deficit, may adversely affect Indian economic conditions and the exchange rate for the rupee. As a proportion of India’s gross domestic product, there was a surplus in the current account of 0.9% in fiscal 2021. In fiscal 2022, the current account deficit was 1.2% of India’s gross domestic product. In fiscal 2023, the current account deficit was 2.0% of India’s gross domestic product. If current account and trade deficits continue to increase, or are no longer manageable because of factors impacting the trade deficit like a significant rise in global crude oil prices or otherwise, the Indian economy, and therefore our business, our financial performance and the prices of our equity shares and ADSs could be adversely affected. Any reduction of or increase in the volatility of capital flows may impact the Indian economy and financial markets and increase the complexity and uncertainty in monetary policy decisions in India, leading to volatility in inflation and interest rates in India, which could also adversely impact our business, our financial performance, our stockholders’ equity, and the prices of our equity shares and ADSs.

 

See also “—Risks Relating to Our Business—We and our customers are exposed to fluctuations in foreign exchange rates”.

 

The banking and financial markets in India are still evolving and the Indian financial system could experience difficulties which could adversely affect our business and the prices of our equity shares and ADSs.

 

As an Indian bank, we are exposed to the risks of the Indian financial system which may be affected by the financial difficulties faced by certain Indian financial institutions because the commercial soundness of many financial institutions may be closely related as a result of credit, trading, clearing or other relationships. This risk, which is sometimes referred to as systemic risk, may adversely affect financial intermediaries, such as clearing agencies, banks, securities firms and exchanges with which we interact on a daily basis. Any such difficulties or instability of the Indian financial system in general could create an adverse market perception about Indian financial institutions and banks and adversely affect our business. For instance, in March 2020, the Reserve Bank of India imposed a moratorium restricting deposit withdrawals from a private sector bank, followed by implementation of a scheme of reconstruction involving change in management and equity capital infusion by several Indian banks, including us. Such developments may impact credit markets and there could be an adverse impact on the loan portfolios of banks, including us, if customers are no longer able to access financing or refinancing from these entities or replace such financing or refinancing from other sources, thereby impacting their ability to conduct operations or meet their financial obligations. Our transactions with these financial institutions expose us to credit risk in the event of default by the counterparty, which can be exacerbated during periods of market illiquidity. See also “—Risks

 

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Relating to Our Business—There is operational risk associated with the financial industry which, when realized, may have an adverse impact on our business”.

 

As the Indian financial system operates in an emerging market, we face risks of a nature and extent not typically faced in more developed economies. Our credit risk may be higher than the credit risk of banks in some developed economies. Our access to information about the credit histories of our borrowers, especially individuals and small businesses, may be limited relative to what is typically available for similar borrowers in developed economies. In addition, the credit risk of our borrowers is often higher than borrowers in more developed economies due to the evolving Indian regulatory, political, economic and industrial environment. The directed lending norms of the Reserve Bank of India require us to lend a certain proportion of our loans to “priority sectors”, including agriculture and small enterprises, where we are less able to control the portfolio quality and where economic difficulties are likely to affect our borrowers more severely. We also purchase priority sector lending certificates to meet directed lending requirements, and the cost of purchasing such certificates may increase substantially depending on the demand and supply scenario of the certificates. Any shortfall in meeting the priority sector lending targets and sub-targets may be required to be allocated to investments yielding sub-market returns. See also “—Risks that arise as a result of our presence in a highly regulated sector—We are subject to the directed lending requirements of the Reserve Bank of India, which may also involve buying related certificates at a premium to meet the annual targets, and any shortfall in meeting these requirements may be required to be invested in Government of India schemes that yield low returns, thereby impacting our profitability. We may also experience a higher level of non-performing assets in our directed lending portfolio, which could adversely impact the quality of our loan portfolio, our business and the prices of our equity shares and ADSs” and “Supervision and Regulation—Regulations Relating to Advancing Loans—Directed Lending”.

 

We may face the risk of deposit runs notwithstanding the existence of a national deposit insurance scheme. Any failure in controlling such situations in the future could result in high volumes of deposit withdrawals, which would adversely impact our liquidity position, disrupt our business and, in times of market stress, undermine our financial strength.

 

We pursue our banking, insurance and other activities in India in a developing economy with all of the risks that come with operating in a developing economy. Our activities in India are widespread and diverse and involve employees, contractors, counterparties and customers with widely varying levels of education, financial sophistication and wealth. Although we seek to implement policies and procedures to reduce and manage marketplace risks as well as risks within our own organization, some risks remain inherent in doing business in a large, developing country. We cannot eliminate these marketplace and operational risks, which may lead to or exacerbate legal, regulatory or judicial actions, negative publicity or other developments that could reduce our profitability. See also “—Risks that arise as a result of our presence in a highly regulated sector—The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal”,

 

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—Risks that arise as a result of our presence in a highly regulated sector—We are at risk for inquiries or investigations by regulatory and enforcement authorities, which may adversely affect our reputation, lead to increased regulatory scrutiny, cause us to incur additional costs or adversely affect our ability to conduct business” and “—Risks Relating to Our Business—Entry into new businesses or rapid growth in existing loan portfolios may expose us to increased risks that may adversely affect our business”.

 

A significant change in the Indian government’s policies, including economic policies, fiscal policies and structural reforms, could adversely affect our business and the prices of our equity shares and ADSs.

 

Our business and customers are predominantly located in India or are related to and influenced by the Indian economy. The Indian government has traditionally exercised, and continues to exercise, a dominant influence over many aspects of the economy. The Indian government’s policies could adversely affect business and economic conditions in India, our ability to implement our strategy, the operations of our subsidiaries and affiliates and our future financial performance. Successive Indian governments have pursued policies of economic liberalization, including significantly relaxing restrictions on the private sector and encouraging the development of the Indian financial sector. While a single party achieved majority in the general elections in fiscal 2015 and fiscal 2020, India has been governed by coalition governments in the past. The leadership of India and the composition of the government are subject to change, and election results are not predictable. It is difficult to predict the economic policies that will be pursued by governments in the future. In addition, investments by the corporate sector in India may be impacted by government policies and decisions including judicial decisions, such as with respect to awards of licenses and resources, access to land and natural resources and policies with respect to protection of the environment. Such policies and decisions may result in delays in execution of projects, including those financed by us, and also limit new project investments, and thereby impact economic growth.

 

The pace of economic liberalization could change, and specific laws and policies affecting banking and finance companies, foreign investment, currency exchange and other matters affecting investment in our securities could change as well. Decisions by the Government of India could impact our business and financial performance. The Indian government announced the introduction of central bank digital currency by the Reserve Bank of India in the Union Budget for fiscal 2023, and the impact of the introduction of digital currency on the banking system, including us, is uncertain. Any changes in regulations or significant change in India’s economic policies or any market volatility as a result of uncertainty surrounding India’s macroeconomic policies or the future elections of its government could adversely affect business and economic conditions in India generally and our business in particular and the prices of our equity shares and ADSs could be adversely affected.

 

Natural calamities, climate change and health epidemics could adversely affect the Indian economy, or the economy of other countries where we operate, our business and the prices of our equity shares and ADSs.

 

India has experienced natural calamities such as earthquakes, floods and droughts in the past few years. The extent and severity of these natural disasters determine their impact on the Indian economy. In particular, climatic and weather conditions, such as the level and timing of monsoon

 

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rainfall, impact the agricultural sector, which constituted approximately 18% of India’s gross value added in fiscal 2023. Prolonged spells of below or above normal rainfall or other natural calamities, or global or regional climate change, could adversely affect the Indian economy and our business, especially our rural portfolio. Similarly, global or regional climate change in India and other countries where we operate could result in change in weather patterns and frequency of natural calamities like droughts, El Nino, floods and cyclones, which could affect the economy of India, the countries where we operate and our operations in those countries.

 

Health epidemics could also disrupt our business, our borrowers, our counterparties and other constituents. The emergence of disease pandemics like COVID-19, and other earlier outbreaks like the nipah virus in 2018 in certain regions of southeast Asia, including India, have caused, and could in the future cause, economic and financial disruptions. Such disruptions in India and other areas of the world in which we operate could lead to operational difficulties, including travel restrictions, that could impact our business and our ability to manage or conduct our business. Any future outbreak of health epidemics may impact the quality of our portfolio and result in an increase in our non-performing loans, and restrict the level of business activity in affected areas, which may in turn adversely affect our business and the prices of our equity shares and ADSs.

 

If regional hostilities, terrorist attacks, or social unrest in India or elsewhere increase, our business and the prices of our equity shares and ADSs could be adversely affected.

 

India has from time to time experienced social and civil unrest and hostilities both internally and with neighboring countries. In the past, there have been military confrontations between India and Pakistan, and border disputes with neighboring countries, including China. In June 2020, Indian and Chinese troops engaged in physical conflict in the Galwan River valley. Both Indian and Chinese governments have undertaken protective measures, such as, in relation to the presence of Chinese businesses in India. We cannot predict how such geopolitical events will develop in the future and how it may impact our business, operations, reputation and financial condition.

 

India has also experienced terrorist attacks in some parts of the country, including in Mumbai, where our headquarters are located. India could also be impacted by intensifying border disputes with its neighbors, trade wars between large economies like the U.S. increasing trade tariffs on goods imported from China, or possible import restrictions on Indian goods by trading partners that could have an adverse impact on India’s trade and capital flows, exchange rate and macroeconomic stability. In addition, geopolitical events in the Middle East, Asia and Europe or terrorist or military action in other parts of the world, including the ongoing military conflict between Russia and Ukraine, may impact prices of key commodities, financial markets and trade and capital flows, including by leading to restrictions on countries which are among India’s significant trading partners. These factors and any political or economic instability in India could adversely affect our business, our future financial performance and the prices of our equity shares and ADSs.

 

Risks that arise as a result of our presence in a highly regulated sector

 

The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal.

 

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We are subject to a wide variety of banking, insurance and financial services laws, regulations and regulatory policies and a large number of regulatory and enforcement authorities in each of the jurisdictions in which we operate. Regulators in India and in the other jurisdictions in which we operate subject financial sector institutions, including us, to intense review, supervision and scrutiny. This heightened level of review and scrutiny or any changes in the existing regulatory supervision framework, increases the possibility that we will face adverse legal or regulatory actions. In the face of difficulties in the Indian banking sector, the Reserve Bank of India has been increasing the intensity of its scrutiny of Indian banks and has been imposing fines and penalties that are larger than the historic norms on Indian banks. The Reserve Bank of India and other regulators regularly review our operations, and there can be no guarantee that all regulators will agree with our internal assessments of asset quality, provisions, risk management, capital adequacy and management functioning, other measures of the safety and soundness of our operations or compliance with applicable laws, regulations, accounting and taxation norms, listing norms or regulatory policies.

 

Regulators, including among others the Reserve Bank of India and the Securities and Exchange Board of India, as well as governmental authorities and courts, may find that we are not in compliance with applicable laws, regulations, accounting and taxation norms, listing norms or regulatory policies, or with the regulators’ revised interpretations of such laws, regulations or regulatory policies, and may take formal or informal actions against us. Such formal or informal actions might force us to make additional provisions for our non-performing assets or otherwise, divest our assets, adopt new compliance programs or policies, remove personnel including senior executives, reduce dividend or executive compensation, provide remediation or refunds to customers or undertake other changes to our business operations, and may reduce our revenues, require us to incur additional expenses, impact our profitability and damage our reputation. In fiscal 2021, pursuant to judicial orders, the Reserve Bank of India provided copies of its supervisory inspection reports for certain banks, including us, for earlier years to an external party. The consequences of these reports, or any future reports, being available in the public domain are uncertain and may result in negative publicity about us. See also “Supervision and Regulation”.

 

If we fail to manage our legal and regulatory risk in the many jurisdictions in which we operate, our business could suffer, our reputation could be harmed and we would be subject to additional legal and regulatory risks. This could, in turn, increase the size and number of claims and damages asserted against us and/or subject us to regulatory investigations, enforcement actions or other proceedings, or lead to increased supervisory concerns. We may also be required to spend additional time and resources on remedial measures and conducting enquiries, beyond those already initiated and ongoing, which could have an adverse effect on our business.

 

New regulations and compliance and disclosure requirements relating to environment, social and governance matters, especially climate change, have been recommended or are under consideration by regulators in the jurisdictions where we have our operations. In July 2022, the Reserve Bank of India released a discussion paper on a disclosure framework on climate-related financial risks and guidance on climate scenario analysis and stress testing. This paper has been made public for feedback and comments. Subsequently, the Reserve Bank of India released a framework for the acceptance of green deposits. Other jurisdictions in which we operate are also proposing or considering climate-risk related initiatives, policies and standards. For example, the U.S. Securities and Exchange Commission has proposed, but not finalized, climate-related

 

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disclosures of publicly traded entities, which would include new requirements to disclose information about climate-related risks. We may be subject to risk arising from the inconsistencies and conflicts in the manner in which climate policy and financial regulation is implemented in the regions where the Bank operates, including initiatives to apply and enforce policy and regulation with extraterritorial effect.

 

Despite our best efforts to comply with all applicable regulations, there are a number of risks that cannot be completely controlled. Our international presence has led to increased legal and regulatory risks. Regulators in every jurisdiction in which we operate or have listed our securities have the power to restrict our operations, stipulate higher capital and liquidity requirements or bring administrative or judicial proceedings against us (or our employees, representatives, agents and third-party service providers), which could result, among other things, in suspension or revocation of one or more of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or other disciplinary action which could materially harm our reputation, results of operations and financial condition.

 

We may be subject to fines, restrictions or other sanctions for regulatory compliance failures, which may adversely affect our financial position or our ability to expand our activities.

 

Failure to comply with applicable regulations in various jurisdictions, including unauthorized actions by employees, representatives, agents and third parties, suspected or perceived failures and media reports, and ensuing inquiries or investigations or proceedings by regulatory and enforcement authorities, has resulted, and may result in the future, in regulatory actions, including financial penalties and restrictions on or suspension of the related business operations. Whenever we consider it appropriate and the regulatory guidelines so permit, we may seek to settle or compound regulatory inquiries or investigations or proceedings through consensual process with the concerned regulator, which may entail monetary payment by us or agreeing to non-monetary terms. The non-monetary terms may include suspension or cessation of business activities for a specified period; change in key management personnel or restrictions being placed on key management personnel; disgorgement; implementation of enhanced policies and procedures to prevent future violations; appointing or engaging an independent consultant to review internal policies, processes and procedures; providing enhanced training and education; and/or submitting to enhanced internal audit, concurrent audit or reporting requirements.

 

We are at risk for inquiries or investigations by regulatory and enforcement authorities, which may adversely affect our reputation, lead to increased regulatory scrutiny, cause us to incur additional costs or adversely affect our ability to conduct business.

 

A failure to comply with the applicable regulations in various jurisdictions by our employees, representatives, agents and third-party service providers either in or outside the course of their services, or suspected or perceived failures by them, may result in further inquiries or investigations by regulatory and enforcement authorities and in additional regulatory or enforcement action against either us, or such employees, representatives, agents and third-party service providers. Such additional actions may further impact our reputation, result in adverse media reports, lead to increased or enhanced regulatory or supervisory concerns, cause us to incur additional costs, penalties, claims and expenses or impact adversely our ability to conduct business. See also “—Risks that arise as a result of our presence in a highly regulated sector—

 

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The board of directors of the Bank has, pursuant to an independent enquiry, taken action against the former Managing Director and CEO. In the event the Bank is found by any of the enquiries in the matter by government and regulatory agencies to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations or financial condition and reputation.

 

We have also experienced international expansion into banking in multiple jurisdictions which exposes us to a variety of regulatory and business challenges and risks, including cross-cultural risk, and further increases the risk of inquiries or investigations by regulatory and enforcement authorities. In October 2022, ICICI Bank’s New York Federal Branch (“New York Branch”)   entered into a consent order with its federal banking supervisor, the Office of the Comptroller of the Currency, which required the New York Branch to enhance certain processes in its Bank Secrecy Act/Anti-Money Laundering program, and establish and maintain an effective sanctions compliance program. The Consent Order did not involve any monetary penalty. The New York Branch is committed to taking all necessary and appropriate steps to address the aspects identified and implement the necessary corrective actions as approved by the Office of the Comptroller of the Currency. The New York Branch provides a quarterly update to the Office of the Comptroller of the Currency on the progress of the corrective actions being undertaken. Expansion into additional jurisdictions also increases the complexity of our risks in a number of areas including currency risks, interest rate risks, compliance risk, regulatory risk, reputational risk and operational risk. We, or our employees, may from time to time, and as is common in the financial services industry, be the subject of inquiries, examinations or investigations that could lead to proceedings against us or our employees.

 

We cannot predict the timing or form of any current or future regulatory or law enforcement initiatives, which are increasingly common for international banks and financial institutions.

 

We are subject to the directed lending requirements of the Reserve Bank of India, which may also involve buying related certificates at a premium to meet the annual targets, and any shortfall in meeting these requirements may be required to be invested in Government of India schemes that yield low returns, thereby impacting our profitability. We may also experience a higher level of non-performing assets in our directed lending portfolio, which could adversely impact the quality of our loan portfolio, our business and the prices of our equity shares and ADSs.

 

Under the directed lending norms of the Reserve Bank of India, banks in India are required to lend 40.0% of their adjusted net bank credit to certain eligible sectors, categorized as priority sectors. Under such lending norms, banks also have sub-targets for lending to key segments or sectors. A proportion of 9.5% and 11.5% of adjusted net bank credit were required to be lent to small and marginal farmers and identified weaker sections of society, respectively, in fiscal 2023, the proportion of which will increase to 10.0% and 12.0% respectively in fiscal 2024. The Reserve Bank of India has directed banks to maintain direct lending to non-corporate farmers at the banking system’s average level for the last three years and set a target of 13.78% of adjusted net bank credit for this purpose for fiscal 2023. In addition, 7.5% of adjusted net bank credit is required to be lent to micro-enterprises. The balance of the priority sector lending requirement can be met by lending to a range of sectors, including small businesses, medium-sized enterprises, renewable energy, social infrastructure and residential mortgages satisfying certain criteria. These requirements and achievements are assessed considering the average of the

 

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outstanding balances at the quarter end. From fiscal 2022, the priority sector achievements are computed based on the weight assigned to the incremental priority sector credit in identified districts. The necessary adjustments for weight of districts and calculation of achievement are done by the Reserve Bank of India on the basis of data submitted by banks on a quarterly basis.

 

These requirements apply to ICICI Bank on a standalone basis. The Reserve Bank of India allows banks to sell and purchase priority sector lending certificates in the event of excess/shortfall in meeting priority sector targets, which help in reducing the shortfall in priority sector lending. These instruments are issued by banks that have a surplus in priority sector lending or any of its individual sub-segments and are purchased by banks having a shortfall, through a trading portal, without the transfer of risks or loan assets. The Bank also purchases priority sector lending certificates to meet directed lending requirements, the cost of which may vary based on the demand for and supply of such certificates. During fiscal 2023, the Bank met most of the targets, except the average lending to the agriculture sector and other sub-category targets such as non-corporate farmers and weaker section. The quarterly achievement as a percentage of the adjusted net bank credit for agricultural sector was 17.7% against the requirement of 18.0%, sub-category within agricultural sector for non-corporate farmers was 13.3% against the requirement of 13.8% and for lending to weaker sections was 11.3% against the requirement of 11.5%.

 

Any shortfall in meeting the priority sector lending requirements, after taking into account the priority sector lending certificates purchased, may be required to be invested at any time, at the Reserve Bank of India’s directive, in Government of India schemes that yield low returns, determined depending on the prevailing bank rate and on the level of shortfall, thereby impacting our profitability. At March 31, 2023, our total investments in such schemes on account of past shortfalls in achieving the required level of priority sector lending were Rs. 216.2 billion. Our investments in Government of India schemes are expected to increase in view of the continuing shortfall in agriculture lending sub-targets. These investments count towards overall priority sector target achievement. Investments at March 31 of the preceding year are included in the adjusted net bank credit which forms the base for computation of the priority sector and sub-segment lending requirements.

 

As a result of priority sector lending requirements, we may experience a higher level of non-performing assets in our directed lending portfolio, particularly due to loans to the agricultural sector and small enterprises, where we are less able to control the portfolio quality and where economic difficulties are likely to affect our borrowers more severely. The Bank’s gross non-performing assets in the priority sector loan portfolio were 2.3% in fiscal 2020, 3.4% in fiscal 2021, 2.7% in fiscal 2022 and 1.9% in fiscal 2023. In fiscal 2018 and fiscal 2019, some states in India announced schemes for waiver of loans taken by farmers. While the cost of such schemes is borne by the state governments, such schemes or borrower expectations of such schemes result in higher delinquencies including in the farmer loan portfolio for banks, including us. Under the Reserve Bank of India’s guidelines, these and other specified categories of agricultural loans are classified as non-performing when they are overdue for more than 360 days, as compared to 90 days for loans in general. Thus, the classification of overdue loans as non-performing occurs at a later stage in respect of such loans than the loan portfolio in general.

 

Going forward, the increase in sub-segment targets and growth in our domestic loan portfolio could lead to a significant increase in our priority sector lending target amounts. In view of the continuing shortfall in agriculture lending sub-targets and weaker section loans, the Bank may

 

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have to significantly increase the purchase of priority sector lending certificates. The Reserve Bank of India has from time to time issued guidelines on priority sector lending requirements that restrict the ability of banks to meet the directed lending obligations through lending to specialized financial intermediaries, specify criteria to be fulfilled for investments by banks in securitized assets and outright purchases of loans and assignments to be eligible for classification as priority sector lending and regulate the interest rates charged to ultimate borrowers by the originating entities in such transactions. See also “Supervision and Regulation—Regulations Relating to Advancing Loans—Directed Lending”. Any future changes by the Reserve Bank of India to the directed lending norms may result in an inability to meet the priority sector lending requirements as well as require us to increase our lending to relatively riskier segments and may result in an increase in non-performing loans.

 

We are subject to capital adequacy requirements stipulated by the Reserve Bank of India, including Basel III, as well as general market expectations regarding the level of capital adequacy large Indian private sector banks should maintain, and any inability to maintain adequate capital due to changes in regulations, a lack of access to capital markets, or otherwise may impact our ability to grow and support our businesses.

 

Banks in India are subject to the Basel III capital adequacy framework as stipulated by the Reserve Bank of India. The Basel III guidelines in India, among other things, require a minimum common equity Tier 1 risk-based capital ratio of 5.5% and a minimum Tier 1 risk-based capital ratio of 7.0%, a minimum total risk-based capital ratio of 9.0%, and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets above the minimum requirements to avoid restrictions on capital distributions and discretionary bonus payments. The Bank is also required to maintain a capital surcharge of 0.20% on account of being designated a domestic systemically important bank. The guidelines also establish eligibility criteria for capital instruments in each tier of regulatory capital, require adjustments to and deductions from regulatory capital, and provide for limited recognition of minority interests in the regulatory capital of a consolidated banking group. Applying the Basel III guidelines, our capital ratios on a consolidated basis at March 31, 2023 were: common equity Tier 1 risk-based capital ratio of 16.9%; Tier 1 risk-based capital ratio of 17.3%; and total risk-based capital ratio of 18.1%.

 

The Reserve Bank of India has released guidelines on implementation of counter cyclical capital buffers, which propose higher capital requirements for banks, ranging from 0% to 2.5% of risk-weighted assets, during periods of high economic growth. This capital requirement would be determined based on certain triggers such as deviation of long-term average credit-to-GDP ratio and other indicators. While these guidelines are already effective, the Reserve Bank of India has stated that current economic conditions do not warrant activation of the counter cyclical capital buffer. The Reserve Bank of India has also issued a leverage ratio framework which is measured as the ratio of a bank’s Tier 1 capital and total exposure. Since October 2019, the Reserve Bank of India has required maintenance of a minimum leverage ratio of 4.0% for domestic systemically important banks, including us, and 3.5% for other banks. In 2018, the Reserve Bank of India advised banks to create an Investment Fluctuation Reserve from fiscal 2019 with the aim of building adequate reserves to protect against any sudden increase in Government of India bond yields. A minimum amount equal to the lesser of either the net profit on sale of investments during the year or net profit for the year excluding mandatory appropriations would have to be transferred to the Investment Fluctuation Reserve and would

 

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cover at least 2.0% of the held-for-trading and available-for-sale portfolio of a bank, on a continuing basis. This reserve is eligible for inclusion in tier 2 capital.

 

Regulatory changes may impact the amount of capital that we are required to hold. Our ability to grow our business and execute our strategy is dependent on our level of capitalization and we may be required to raise resources from the capital markets or to divest stake in one or more of our subsidiaries to meet our capital requirements. Any reduction in our regulatory capital ratios, changes to the capital requirements applicable to us on account of regulatory changes or otherwise, our inability to access capital markets or otherwise increase our capital base and our inability to meet stakeholder expectations of the appropriate level of capital for us, while also meeting expectations of return on capital, may limit our ability to maintain our market standing and grow our business, and adversely impact our future performance and strategy. Debt and equity investors, rating agencies, equity and fixed income analysts, regulators and others would likely expect us to maintain capital adequacy ratios well above the regulatory requirements, reflecting our position as a large private sector bank. In 2020, we raised Rs. 150.0 billion of equity capital through a Qualified Institutions Placement. We may seek to access the equity capital markets in the future, or make additional divestments of our investments in our subsidiaries and affiliates. Increases in our equity shares would dilute the shareholding of existing shareholders. There can be no assurance that we will be successful in raising the capital when required or that the timing for accessing the market or the terms of the capital raised would be attractive, and these may be subject to various uncertainties including liquidity conditions, market stability, or political or economic conditions. If we are unable to raise enough capital to satisfy our regulatory capital requirements, we will be subject to restrictions on capital distributions and discretionary bonus payments, as well as other potential regulatory actions.

 

In fiscal 2021, the Reserve Bank of India prohibited banks from making any dividend payouts from the profit pertaining to fiscal 2020 in order to conserve capital and to maintain their capacity to support the economy and absorb losses in an environment of heightened uncertainty caused by the COVID-19 pandemic. Accordingly, we did not declare any dividend for fiscal 2020. We cannot guarantee that we will not be subject to similar restrictions in the future. The Reserve Bank of India’s Prompt Corrective Action framework for banks defines risk thresholds for indicators like capital adequacy, asset quality and leverage, and stipulates actions like restriction on dividend distribution/remittance of profits, restriction on branch expansion, domestic and/or overseas expansion, and restrictions on capital expenditure other than for technological upgradation. At year-end fiscal 2023, the Bank’s financial indicators did not breach the risk thresholds prescribed by the Reserve Bank of India. There can be no assurance that we will always remain within the thresholds prescribed by the Reserve Bank of India in the future.

 

Our insurance, banking and home finance subsidiaries and affiliate are also subject to solvency and capital requirements imposed by their respective regulators. While we currently do not expect these entities to require significant additional equity capital, any requirement for ICICI Bank to make additional equity investments in these entities in the event of an increase in their capital requirements due to regulation or material stress would impact our capital adequacy.

 

We are subject to liquidity requirements of the Reserve Bank of India as well as those of banking regulators in our overseas locations, and any inability to maintain adequate liquidity due to changes in regulations, a lack of access to capital markets, or otherwise may impact our ability to grow and support our businesses.

 

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The Reserve Bank of India has released guidelines on liquidity coverage ratio requirements under the Basel III liquidity framework that require banks to maintain and report the Basel III liquidity coverage ratio, which is a ratio of the stock of high quality liquid assets and total net cash outflows over the next 30 calendar days. The Reserve Bank of India has also defined categories of assets qualifying as high quality liquid assets and mandated a minimum liquidity coverage ratio of 100.0%. Further, the Reserve Bank of India has issued final guidelines on the net stable funding ratio for banks and would require banks to maintain sufficient funds that are considered as reliable to cover the liquidity requirements and asset maturities coming up over the next one year on an ongoing basis. There are similar requirements stipulated by regulators in most of our overseas locations due to which we are required to maintain appropriate levels of liquidity in those geographies as well. These liquidity requirements, together with the existing liquidity and cash reserve requirements, result in Indian banks, including us, holding high amounts of liquidity, thereby impacting profitability.

 

Any reduction in our liquidity coverage or net stable funding ratios, increase in liquidity requirements applicable to us on account of regulatory changes or otherwise, changes in the composition of liquidity or inability to access capital markets may limit our ability to grow our business or adversely impact our profitability and our future performance and strategy.

 

As we and other banks manage these various liquidity requirements, there could be a sudden increase in demand for liquidity in the banking system, which could have an adverse impact in the financial markets, and result in an increase in our short term borrowing costs and a sudden increase in the bank’s cost of funds. Further, any tightening of liquidity and volatility in international markets may limit our access to international funding markets and result in an increase in our cost of funding for our international branches and overseas banking subsidiaries, and impact our ability to replace maturing borrowings and fund new assets.

 

Changes in the regulation and structure of the financial markets in India may adversely impact our business.

 

The Indian financial markets have in recent years experienced, and continue to experience, changes and developments aimed at reducing the cost and improving the quality of service delivery to users of financial services. We may experience an adverse impact on the cash float and fees from our cash management business resulting from the development and increased usage of payment systems, as well as other similar structural changes. The Reserve Bank of India, from time to time, imposes limits on transaction charges levied by banks on customers, including those on cash and card transactions. The Reserve Bank of India has announced the introduction of an electronic trading platform for buying and selling foreign currencies by retail customers of banks, aimed at enhancing transparency and competition and lowering costs for retail customers. In August 2020, the Reserve Bank of India issued rules for opening current account of customers having credit facilities from the banking system. Such developments may adversely impact the profitability of banks, including us, by reducing float balances and fee incomes, and increasing costs. See also “—Risks that arise as a result of our presence in a highly regulated sector—The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal”.

 

Our subsidiaries and affiliates are also subject to similar risks. For instance, the Indian government’s tax policies generally influence the purchase of insurance and investment in mutual funds by customers. See also “—Risks relating to our insurance subsidiary and affiliate—

 

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While our insurance businesses are an important part of our business, there can be no assurance of their future rates of growth or levels of profitability”.

 

The Reserve Bank of India has been permitting the entry of new players in the financial sector, including through issuance of licenses for universal banks and small finance banks in the private sector under the continuous licensing policy and allowing fintechs and technology companies to offer payment and other financial services. The entry of new players has intensified competition which could impact our ability to capture business opportunities if we are not able to adapt our business strategy to new developments. See also “—Risks Relating to Our Business—Our industry is very competitive and our strategy depends on our ability to compete effectively.”

 

The Reserve Bank of India had set up an internal working group to consider, among other things, holding of financial subsidiaries through a financial holding company that itself is a non operating company. The Reserve Bank of India released the report of the internal working group in November 2020, and in November 2021, accepted certain recommendations made by the internal working group including such a non-operative financial holding company structure for all new licenses issued for universal banks. The nature of any future regulatory changes and their impact on our group structure and business cannot be predicted currently.

 

In addition, changes in laws, regulations or regulatory policies, including changes in the interpretation or application of such laws, regulations and regulatory policies, may adversely affect the products and services we offer, the value of our assets or the collateral or contractual comforts available for our loans or our business in general. For example, in August 2020, the Reserve Bank of India issued rules linking opening and maintaining current accounts with banks by companies having credit facilities from the banking system. As per the guidelines, banks are allowed to open a current account for customers who have not availed any credit from the banking system. Current accounts cannot be opened for customers who have availed only cash credit or overdraft facility, through which all their transactions must be routed; only a lending bank meeting specified credit exposure thresholds is eligible to open a current account of the borrower. Banks are required to monitor all current accounts on a periodic basis to comply with the rules. Changes in regulations, such as those relating to ownership, governance and corporate structure of private sector banks, management compensation, board governance, consumer protection, sustainable finance and risk management, may have an impact on our business and our future strategy. These changes could require us to reduce or increase our business in specific segments, increase competition, and impact our overall growth and return on capital. We cannot predict future legal or regulatory changes. Any such regulatory or structural changes may result in increased expenses, including enhanced compliance costs, operational restrictions, increased competition or revisions to our business operations, which may reduce our profitability or force us to forego potentially profitable business opportunities.

 

The opportunities for growth in our international operations and our ability to repatriate capital from these operations may be limited by the local regulatory environments.

 

Our international franchise focuses on non-resident Indians for deposits, wealth and remittances businesses and on deepening relationships with well-rated Indian corporates in international markets and multinational companies to maximize the India-linked trade, transaction banking and lending opportunities within our risk management framework. Our overseas banking subsidiaries continue to serve local markets selectively with a focus on risk

 

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management and granularity of business. There can be no assurance of the successful execution of this strategy and the future growth and profitability of our international operations.

 

Further, while both our overseas banking subsidiaries are focused on optimizing their capital base and have repatriated capital and made dividend payments to ICICI Bank in the past, such actions are subject to regulatory approvals. There can be no assurance regarding the timing or grant of such approvals in the future. Our international branches are also subject to respective local regulatory requirements, including any requirements related to liquidity, capital and asset classification and provisioning.

 

The board of directors of the Bank has, pursuant to an independent enquiry, taken action against the former Managing Director and CEO. In the event the Bank is found by any of the enquiries in the matter by government and regulatory agencies to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations or financial condition and reputation.

 

In fiscal 2019, the Audit Committee under direction given by the Board of Directors of the Bank had instituted an independent enquiry to consider various allegations relating to the former Managing Director and Chief Executive Officer, Ms. Chanda Kochhar. The enquiry was supported by an external counsel and a forensic firm. The allegations levelled against Ms. Kochhar included nepotism, quid pro quo and claims that Ms. Kochhar, by not disclosing conflicts of interest caused by certain transactions between certain borrowers of the Bank and entities controlled by Ms. Kochhar’s spouse, committed infractions under applicable regulations and the Bank’s Code of Conduct. While the enquiry was underway, the Board accepted Ms. Kochhar’s request for early retirement, while noting that the enquiry would remain unaffected by this and certain benefits would be subject to the outcome of the enquiry. Subsequently, on consideration of the enquiry report and its conclusions, the Board of Directors decided to treat the separation of Ms. Chanda Kochhar from the Bank as a ‘Termination for Cause’ under the Bank’s internal policies, schemes and the Code of Conduct, with all attendant consequences.

 

In January 2020, the Bank instituted a recovery suit against Ms. Kochhar for, among other things, the clawback of bonus paid from April 2009 to March 2018. Ms. Kochhar also filed a suit before Bombay High Court in January 2022 contending that her employment termination is invalid and she is entitled to all the Employee Stock Options, which were originally allocated to her. An alternative prayer for claiming, damages of Rs. 17.3 billion is sought by her. Both these suits are under trial and being heard by the single bench of Bombay High Court.

 

Enquiries by government authorities and regulatory agencies in the matter are continuing and the Bank is cooperating with such enquiries and requests. The Securities and Exchange Board of India issued a show-cause notice to Ms. Kochhar and to the Bank in 2018 in relation to the allegations. In November 2020, the Securities and Exchange Board of India issued a modified show cause notice to the Bank and responses were submitted by the Bank. In fiscal 2023, pursuant to the Securities Appellate Tribunal order the Securities and Exchange Board of India sought documents and materials in relation to the adjudication proceedings from the Bank, which were then submitted by the Bank.

 

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Authorities such as the Enforcement Directorate and Income-tax authorities are also probing the matter. In the event that the Bank is found by Securities and Exchange Board of India or the Central Bureau of Investigation or by any other authority or agency to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our reputation and may impact results of operations or financial condition.

 

Our asset management, private equity, insurance and securities broking subsidiaries and affiliates are subject to extensive regulation and supervision which can lead to increased costs or additional restrictions on their activities that could adversely impact the Bank.

 

Our asset management subsidiary, ICICI Prudential Asset Management Company Limited, is subject to supervision and regulation by the Securities and Exchange Board of India.

 

The Securities and Exchange Board of India, based on any observations reported in inspection reports or reports submitted by our asset management subsidiary, may take actions like issuing administrative warnings, show cause notices, penalties or initiating enforcement actions. Further, there could be claims from investors of the funds or the portfolios managed by our subsidiary, which would be determined in the court of law or by regulators and may impact the reputation and business of our subsidiary and us.

 

Our insurance businesses are also subject to extensive regulation and supervision by India’s insurance regulator. They also have a large number of retail and corporate clients, from whom claims may arise which could be determined in courts or also by regulators and result in determination against our insurance businesses or us or our insurance businesses’ management and employees. The Insurance Regulatory and Development Authority of India has the authority to specify, modify and interpret regulations regarding the insurance industry, including regulations governing products, selling commissions, solvency margins and reserving, issuance of new licenses, which can lead to additional costs or restrictions on our insurance subsidiaries’ activities.

 

Further, our insurance and securities broking subsidiaries and insurance affiliate are now publicly listed companies on the Indian stock exchanges, which has resulted in enhanced compliance requirements and regulatory oversight. There can be no assurance that increased regulatory scrutiny of our insurance and securities broking subsidiaries and affiliate along with stringent requirements, including additional disclosures, will not have a material adverse impact on the Bank. There could be instances where the regulator or governmental agency may find that we are not in compliance with applicable laws and regulations pertaining to listed companies or their relationship with the parent or other group companies, or with their interpretations of laws and regulations, and may take formal or informal actions against us and our subsidiaries or affiliates.

 

Adoption of a different basis of accounting or new accounting standards may result in changes in our reported financial position and results of operations for future and prior periods.

 

The financial statements and other financial information included or incorporated by reference in this annual report are based on our unconsolidated and consolidated financial

 

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statements under Indian GAAP. Indian corporations have transitioned to Ind AS, a revised set of accounting standards, which largely converges the Indian accounting standards with International Financial Reporting Standards, as per the roadmap provided to the Ministry of Corporate Affairs, which is the law making authority for adoption of accounting standards in India. Some of our group non-banking finance companies have transitioned to Ind AS. For banking and insurance companies, the implementation of Ind AS has been deferred until further notice. During fiscal 2022, the Reserve Bank of India had issued a discussion paper on Review of prudential norms on classification, valuation and operations of investment portfolio of commercial banks, which was broadly based on the principles of the International Financial Reporting Standard 9. Further, during fiscal 2023, the Reserve Bank of India, through its discussion paper on Introduction of Expected Credit Loss framework for provisioning by banks has proposed to adopt expected credit loss framework based on approach used in International Financial Reporting Standard 9, supplemented by regulatory backstops wherever necessary. –Adoption of Ind AS 109 - Financial Instruments (Standard equivalent to International Financial Reporting Standard 9) or final guidelines issued by the Reserve Bank of India based on above discussion papers would have a significant impact on the way financial assets and liabilities are classified and measured, resulting in volatility in profit or loss and equity. See also “Operating and Financial Review and Prospects—Convergence of Indian accounting standards with International Financial Reporting Standards”.

 

The transition from LIBOR to other alternative reference rates may adversely affect our income and also bring about the vagaries that such alternative reference rates may have.

 

The Chief Executive of the United Kingdom Financial Conduct Authority, which regulates the London Interbank Offered Rate or LIBOR, has stopped persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR tenors, except for certain tenors of US$ LIBOR as the LIBOR has ceased to exist from June 30, 2023.

 

The Bank has a program for its LIBOR transition, which includes a governance framework, exposure assessment, tracking of fallback provisions and contract remediation programs and tracking of global developments. In addition, the Bank has been using alternate reference rates in new contracts after December 31, 2021 and had incorporated suitable benchmark replacement provisions in contracts linked to LIBOR originated prior to December 31, 2021. For further details, see “Business—Risk Management—Market Risk—Interest Rate Risk”. The Bank has implemented and continues to implement changes to the technology systems and infrastructure as part of the transition to the new benchmark regime. The Bank has conducted information sharing sessions with clients on the LIBOR transition. Any efforts taken by the Bank in order to transition away from LIBOR to alternative reference rates could have operational risks associated with it. The transition to alternative reference rates is complex, could bring about unanticipated challenges and vagaries which could adversely impact our business, our future financial performance and the prices of our equity shares and ADSs.

 

Risks Relating to Our Business

 

If the level of our non-performing assets increases and the overall quality of our loan portfolio deteriorates, our business will suffer.

 

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In recent years, banks in India, including us, have focused on growing their retail and small business lending portfolios. While we expect the retail and small business segment to remain a key driver of growth, a slowdown in economic growth, investment, consumption or employment or any increase in unemployment, could have an adverse impact on the quality of our retail loan portfolio. As a recent example, following the outbreak of the first wave of the COVID-19 pandemic, the Government of India and the Reserve Bank of India announced several measures during fiscal 2021, including a moratorium on loan repayments for certain borrowers and an asset classification standstill benefit for overdue accounts where a moratorium had been granted, restructuring of loans to small borrowers including individuals, small businesses and micro, small and medium enterprises, and funding under the Emergency Credit Line Guarantee Scheme for micro, small and medium enterprises and other stressed sectors. Our portfolio includes lending under the guarantee scheme and loans where a resolution plan had been implemented and loans to borrowers who had availed moratorium, that may carry higher risks compared to our overall portfolio.

 

Our loan portfolio includes long-term project finance loans, which are particularly vulnerable to completion and other risks. The viability of these projects depends upon a number of factors, including market demand, government policies, the processes for awarding government licenses and access to natural resources and their subsequent judicial or other review, the financial condition of the government or other entities that are the primary customers for the output of such projects and the overall economic environment in India and the international markets. In the past, we have experienced a high level of default and restructuring in our industrial and manufacturing project finance loan portfolio. Our loans to the power sector as a proportion of total loans declined from 3.1% at March 31, 2019 to 1.7% at March 31, 2023. Power projects face a variety of risks, including access to fuel such as coal and gas, volatility in pricing of power and off-take of the power produced. In addition, power projects inherently have high leverage levels.

 

Our loan portfolio also includes project finance, corporate finance, and working capital loans to commodity-based sectors such as iron and steel, other metals and mining, which are subject to similar and additional risks, as well as global commodity price cycles. Further, the growing focus on climate change and national commitments towards a low-carbon economy may impact the flow of capital to specific sectors and could lead to structural shifts in these sectors, and the overall economy. It is difficult to assess the impact of these changes, and can expose us to new risks and challenges in managing the loan portfolio.

 

Our portfolio also includes purchases of retail asset pools of home finance companies and non-banking finance companies, that may expose us to additional risks, including the failure of the underlying borrowers to perform as anticipated, risks arising out of weakness in the financial position or operations of the originators, who are generally responsible for collections and servicing, and additional mark-to-market provisions where the purchases are structured as securitized instruments classified as investments. In addition, challenges in certain sectors like real estate, such as the inability of real estate developers to complete and deliver residential properties for which we have provided loans to customers, may impact the repayment behavior of the customers and result in higher delinquencies and non-performing loans. See also “—Risks Relating to India and Other Economic and Market Risks—A prolonged slowdown in economic growth in India could cause our business to suffer” and “—Risks Relating to India and Other Economic and Market Risks—A significant change in the Indian government’s policies,

 

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including economic policies, fiscal policies and structural reforms, could adversely affect our business and the prices of our equity shares and ADSs”.

 

The Reserve Bank of India has substantially expanded its guidance relating to the identification of non-performing assets over the last few years, which has resulted in an increase in our loans classified as non-performing and an increase in provisions. Nevertheless, these provisions may not be adequate to cover further increases in the amount of non-performing loans or further deterioration in our non-performing loan portfolio. In addition, the Reserve Bank of India’s annual supervisory process may assess higher provisions than we have made. In the event that additional provisioning is required by the Reserve Bank of India, our net income, balance sheet and capital adequacy could be affected, which could have a material adverse impact on our business, future financial performance, shareholders’ equity and the price of our equity shares and ADSs. The Reserve Bank of India also requires banks to disclose the divergence in asset classification and provisioning between what banks report and what the Reserve Bank of India assesses through the Reserve Bank of India’s annual supervisory process. There can be no assurance that such disclosures in the future will not impact us, our reputation, our business and future financial performance. Our subsidiaries and affiliates are also regulated by their respective regulatory bodies. Similar to us, there may arise a requirement for additional disclosures from our subsidiaries and affiliates in the future, which may have an adverse impact on us.

 

If the level of our non-performing assets increases and the overall quality of our loan portfolio deteriorates, our provisioning costs could increase, our net interest income and net interest margin could be negatively impacted due to non-accrual of income on non-performing loans, our credit ratings and liquidity may be adversely impacted, we may become subject to enhanced regulatory oversight and scrutiny, and our reputation, our business, our future financial performance and the prices of our equity shares and ADSs could be adversely impacted. The Bank held contingency provisions of Rs. 131.0 billion at March 31, 2023, including contingency provisions of Rs. 56.5 billion made on a prudent basis during fiscal 2023. There can be no assurance of the adequacy of these provisions, or the level of additional provisions that will be required.

 

Any adverse economic, regulatory, legal developments and natural disasters like the COVID-19 pandemic could cause further increases in the level of our non-performing assets and have a material adverse impact on the quality of our loan portfolio and business.

 

See also “—Risks Relating to Our Business—Our loan portfolio includes long-term project finance loans, which are particularly vulnerable to completion and other risks” and “—Risks Relating to Our Business—We have a high concentration of loans to certain customers, borrower groups and sectors and if a substantial portion of these loans become non-performing, the overall quality of our loan portfolio, our business and the prices of our equity shares and ADSs could be adversely affected”.

 

We have a high concentration of loans to certain customers, borrower groups and sectors and if a substantial portion of these loans become non-performing, the overall quality of our loan portfolio, our business and the prices of our equity shares and ADSs could be adversely affected.

 

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Our loans and advances to the retail finance sector constituted 54.2% of our gross advances (gross loans) at March 31, 2023. Our loans and advances to the rural finance sector were 8.1%, services-finance sector were 7.2%, the infrastructure sector (excluding power) were 3.0%, the wholesale/retail trade sector were 4.0%, and the power sector were 1.7% of our gross loans and advances at March 31, 2023.

 

Banks are subject to the Reserve Bank of India’s framework for large exposures with limits on exposure of banks to a single counterparty and a group of connected counterparties. As per this framework, the sum of all the exposure values of a bank to a single counterparty must not be higher than 20% of the bank’s available eligible capital base (i.e., Tier 1 capital) at all times and the sum of all the exposure values of a bank to a group of connected counterparties must not be higher than 25% of the bank’s available eligible capital base at all times. At year-end fiscal 2023, our largest single counterparty accounted for 13.3% of our Tier I capital fund. The largest group of connected counterparties accounted for 17.4% of our Tier I capital fund.

 

Since April 2019, banks have also been subject to the Reserve Bank of India’s guidelines proposing that large borrowers should reduce reliance on banks for their additional funding and access market borrowings and other funding sources. Borrowers to be considered for this purpose were those having an aggregate fund-based credit limit of Rs. 250.0 billion at any time during fiscal 2018 and the limit was reduced to Rs. 100.0 billion from fiscal 2020 onwards. Loans from banks in excess of 50.0% of the incremental funds raised by these borrowers attracts higher risk weights and provisioning.

 

These guidelines, and our focus on controlling and reducing concentration risk, may restrict our ability to grow our business with some customers, thereby impacting our earnings. There can be no assurance that we will be successful in controlling the concentration risk and that we will be able to successfully grow our operating profits while controlling non-performing loans and provisions.

 

The value of our collateral may decrease or we may experience delays in enforcing our collateral when borrowers default on their obligations to us which may result in failure to recover the expected value of collateral security exposing us to a potential loss.

 

A substantial portion of our loans to corporate and retail customers is secured by collateral. See also “Business—Loan Portfolio—Collateral—Completion, Perfection and Enforcement”. Changes in asset prices may cause the value of our collateral to decline, and we may not be able to realize the full value of our collateral as a result of delays in bankruptcy and foreclosure proceedings, delays in the creation of security interests, defects or deficiencies in the perfection of collateral (including due to inability to obtain approvals that may be required from various persons, agencies or authorities), fraudulent transfers by borrowers and other factors, including depreciation in the value of the collateral and illiquid market for disposal of and volatility in the market prices for the collateral, current legislative provisions or changes thereto and past or future judicial pronouncements.

 

In India, foreclosure on collateral consisting of property can be undertaken directly by lenders by fulfilling certain procedures and requirements (unless challenged in courts of law) or

 

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otherwise by a written petition to an Indian court or tribunal. An application, when made (or a legal challenge to the foreclosure undertaken directly), may be subject to delays or administrative requirements that may result in, or be accompanied by, a decrease in the value of collateral. These delays can last for several years and might lead to deterioration in the physical condition or market value of the collateral. In the event, a corporate borrower is in financial difficulty and unable to sustain itself, it may opt for the process of voluntary winding up. Corporate borrowers may voluntarily, or by creditor action be admitted to the insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. During the period of resolution under the Insolvency and Bankruptcy Code, 2016, there is a standstill applicable on foreclosure and other recovery proceedings by the lenders. In some cases, we may foreclose on collateral in lieu of principal and interest dues but may experience delays in liquidating the collateral.

 

The Insolvency and Bankruptcy Code enacted in 2016 provides for a time-bound mechanism to resolve stressed assets. Further, the prudential framework for resolution of stressed assets, initially introduced in 2018 and subsequently amended in 2019 by the Reserve Bank of India, requires banks to implement a plan to resolve any overdue account within timelines as approved by the board and may include legal proceedings for insolvency or recovery. The process of resolution of accounts referred under the Insolvency and Bankruptcy Code is still evolving, with periodic amendments being incorporated in the framework through both legislation and judicial decisions. A few large accounts have been resolved under the Code since fiscal 2019. However, uncertainties continue and there are delays in the resolution of accounts referred under the Code. Should the resolution of accounts not be achieved and the borrowers go into liquidation, the market value of the collateral may come down thus impacting the recovery of dues by lenders. There can be no assurance of the level of recovery even in cases where a resolution is achieved.

 

In addition, for collateral we hold in jurisdictions outside India, the applicable laws and regulations in such jurisdictions may impact our ability to foreclose on collateral and realize its value. Failure to recover the expected value of collateral could expose us to potential losses, which could adversely affect our future financial performance, our stockholders’ equity and the prices of our equity shares and ADSs.

 

Our banking and trading activities are particularly vulnerable to interest rate risk and movements in interest rates could adversely affect our net interest margin, the value of our fixed income portfolio, our income from treasury operations, the quality of our loan portfolio and our financial performance.

 

Interest rates in India are impacted by a range of factors including inflation, fiscal deficit and government borrowing, monetary policy and market liquidity.

 

Due to the reserve requirements of the Reserve Bank of India, we may be more structurally exposed to interest rate risk than banks in other countries. See also “Supervision and Regulation—Legal Reserve Requirements”. These requirements result in our maintaining a large portfolio of fixed income Government of India securities, and we could be materially adversely impacted by a rise in interest rates, especially if the rise were sudden or sharp. A rise in yields on government securities reduces our realized and marked-to-market gains and the value of our fixed income portfolio. The requirement to maintain a large portfolio of government securities and other liquid assets to comply with reserve requirements and the liquidity coverage ratio also has a negative impact on our net interest income and net interest margin because we earn interest

 

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on a portion of our assets at rates that are generally less favorable than those typically received on our other interest-earning assets.

 

If the yield on our interest-earning assets does not increase at the same time or to the same extent as our cost of funds, or if our cost of funds does not decline at the same time or to the same extent as the decrease in yield on our interest-earning assets, our net interest income and net interest margin would be adversely impacted. A slower growth in low cost deposits in the form of current and savings account deposits compared to total deposits would result in an increase in the cost of funds and could adversely impact our net interest margin if we are not able to pass on the increase to borrowers. Introduction of higher deposit interest rates, by banks with whom we compete may also lead to revisions in our deposit rates to remain competitive and this could adversely impact our cost of funds.

 

Effective October 2019, the Reserve Bank of India mandated the linking of interest rates on new floating rate retail loans and floating rate loans to micro and small enterprises to an external benchmark. From April 2020, floating rate loans to medium enterprises were also required to be linked to an external benchmark. Since our funding is primarily fixed rate, volatility in external benchmarks underlying loan pricing may cause volatility in or compress our net interest margin. If there are increases in our cost of funds and if we are unable to pass on the increases fully into our lending rates, our net interest margins and profitability would be adversely impacted. Such revisions in external benchmark lending rates may impact the yield on our interest-earning assets, our net interest income and net interest margin. At year-end fiscal 2023, approximately 50.0% of the Bank’s domestic loan portfolio was linked to external benchmarks.

 

We are also exposed to interest rate risk through our treasury operations as well as the operations of certain of our subsidiaries and affiliates, including ICICI Prudential Life Insurance Company and ICICI Lombard General Insurance Company, which have a portfolio of fixed income securities, and ICICI Securities Primary Dealership, which is a primary dealer in Government of India securities. In our asset management business, we manage money market, debt and hybrid mutual fund schemes whose performance is impacted by a rise in interest rates, which adversely impacts our revenues and profits from this business. See also “—Risks Relating to India and Other Economic and Market Risks—A prolonged slowdown in economic growth in India could cause our business to suffer.

 

High and increasing interest rates or greater interest rate volatility and differential movement between external benchmarks underlying loan pricing and our cost of funding may adversely affect our ability to grow, our net interest margins, our net interest income, our income from treasury operations and the value of our fixed income securities portfolio as well as the operations of certain of our subsidiaries.

 

Our inability to effectively manage credit, market and liquidity risk and inaccuracy of our valuation models and accounting estimates may have an adverse effect on our earnings, capitalization, credit ratings and cost of funds.

 

Our risk management strategies may not be effective because in a difficult or less liquid market environment other market participants may be attempting to use the same or similar strategies to deal with difficult market conditions. In such circumstances, it may be difficult for us to reduce our risk positions due to the activity of such other market participants. Our

 

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derivatives businesses may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses or enhanced regulatory scrutiny. Severe declines in asset values, unanticipated credit events, or unforeseen circumstances that may cause previously uncorrelated factors to become correlated may create losses resulting from risks not appropriately taken into account in the development, structuring or pricing of a derivative instrument. In addition, some derivative transactions are not cleared and settled through a central clearing house or exchange, and they may not always be confirmed or settled by counterparties on a timely basis. In these situations, we are subject to heightened credit and operational risk, and in the event of a default, we may find the contract more difficult to enforce. Further, as new and more complex derivative products are created, disputes regarding the terms or the settlement procedures of the contracts could arise, which could force us to incur unexpected costs, including transaction and legal costs, and impair our ability to manage effectively our risk exposure to these products. Many of our hedging strategies and other risk management techniques have a basis in historic market behavior, and all such strategies and techniques are based to some degree on management’s subjective judgment. To the extent any of the instruments and strategies we use to hedge or otherwise manage our exposure to market or credit risk are not effective, we may not be able to mitigate effectively our risk exposures in particular market environments or against particular types of risk. Our balance sheet growth is dependent upon economic conditions, as well as upon our ability to securitize, sell, purchase or syndicate particular loans or loan portfolios. Our trading revenues and interest rate risk are dependent upon our ability to properly identify, and mark-to-market, changes in the value of financial instruments caused by changes in market prices or rates. Our earnings are dependent upon the effectiveness of our management of migrations in credit quality and risk concentrations, the accuracy of our valuation models and our critical accounting estimates and the adequacy of our allowances for loan losses. The risk of future pandemics, climate change, the geological situation and related economic disruption have significantly complicated risk management for banks, including us, and we may not be able to effectively mitigate the changes in our risk exposures.

 

To the extent our assessments, assumptions or estimates prove inaccurate or not predictive of actual results, we could suffer higher than anticipated losses and enhanced regulatory scrutiny. The successful management of credit, market and operational risk is an important consideration in managing our liquidity risk because it affects the evaluation of our credit ratings by domestic and international rating agencies. Rating agencies may reduce or indicate their intention to reduce the ratings at any time. See also “—Risks Relating to India and Other Economic and Market Risks—Any downgrade of India’s debt rating or the rating of our senior unsecured foreign currency debt by an international rating agency could adversely affect our business, liquidity and the prices of our equity shares and ADSs”. The rating agencies can also decide to withdraw their ratings altogether, which may have the same effect as a reduction in our ratings. We are rated by certain Indian rating agencies, which include CRISIL, CARE and ICRA, with a long-term rating of AAA and a stable outlook. However, there is no assurance that we will always be able to maintain the highest rating and any significant decline in our business or capital position or increase in non-performing loans could impact our rating or outlook. Any reduction in our ratings (or withdrawal of ratings) may increase our borrowing costs, limit our access to capital markets and adversely affect our ability to sell or market our products, engage in business transactions particularly longer-term, and derivatives transactions, or retain our customers. Conditions in the international and Indian debt markets may adversely impact our access to financing and liquidity. This, in turn, could reduce our liquidity and negatively impact

 

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our operating results and financial condition. For more information, relating to our ratings, see also “Business—Risk Management—Market Risk—Liquidity Risk.

 

Our funding is primarily short-term and if depositors do not roll over deposited funds upon maturity, our business could be adversely affected.

 

Most of our incremental funding requirements are met through short-term funding sources, primarily in the form of deposits including current and savings account deposits, term deposits from retail customers, term deposits from corporate customers and inter-bank deposits. Our customer deposits generally have a maturity of less than two years with an option of early withdrawal before contractual maturity. A large portion of our assets have medium or long-term maturities, creating the potential for funding mismatches. For instance, our mortgage loans and corporate term loans typically have longer-term maturities compared to our funding profile.

 

Our international branches are primarily funded by debt capital market issuances and syndicated/bilateral loans, while our international subsidiaries generally raise deposits in their local markets. Volatility in the international debt markets may constrain our international capital market borrowings. There can be no assurance that our international branches and subsidiaries will be able to obtain funding from the international debt markets or other sources in a timely manner on terms acceptable to them or at all. This may adversely impact our ability to replace maturing borrowings and fund new assets. In addition, borrowers who have taken foreign currency loans from us may face challenges in meeting their repayment obligations on account of market conditions and currency movements. See also “—Risks Relating to India and Other Economic and Market Risks—Financial instability in other countries, particularly countries where we have established operations, could adversely affect our business.

 

Negative publicity could damage our reputation and adversely impact our business and financial results and the prices of our equity shares and ADSs.

 

Reputation risk, or the risk to our business, earnings and capital from negative publicity, is inherent in our business. Negative public opinion about the financial services industry generally or us specifically could adversely affect our ability to keep and attract customers, and expose us to litigation and regulatory action. Negative publicity can result from our actual or alleged conduct in any number of activities, including lending practices and specific credit exposures, the level of non-performing loans, corporate governance, regulatory compliance, mergers and acquisitions, and related disclosure, sharing or inadequate protection of customer information, and actions taken by government, regulators, investigative agencies, courts and community organizations in response to that conduct. Being a large financial services organization, we are exposed to media coverage and public scrutiny of our business practices, our board of directors, key management personnel, policies and actions. Although we take steps to minimize reputation risk in dealing with such events, we, are inherently exposed to this risk.

 

We have experienced negative publicity with respect to the allegations levelled against Ms. Kochhar and her spouse and the whistleblower complaints regarding alleged incorrect asset classification and other allegations. See also “—Risks that arise as a result of our presence in a highly regulated sector—The board of directors of the Bank has, pursuant to an

 

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independent enquiry, taken action against the former Managing Director and CEO. In the event the Bank is found by any of the enquiries in the matter by government and regulatory agencies to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations, financial condition and reputation. Investigations are still going on and we cannot be certain how the investigations by the government and regulatory and other agencies will conclude with regard to the issue of the former CEO and it is possible that the conclusions of these investigations could lead to more negative publicity.

 

Any additional unfavorable publicity may adversely impact investor confidence and affect the prices of our equity shares and ADSs. Our subsidiaries’ businesses include mutual fund, portfolio and private equity fund management, which are exposed to various risks including diminution in value of investments and inadequate liquidity of the investments. We also distribute products of our insurance, asset management and private equity subsidiaries and affiliate. Investors in these funds and schemes may allege mismanagement or weak fund management as well as mis-selling and conflicts of interest, which may impact our overall reputation as a financial services group and may require us to support these businesses with liquidity and may result in a reduction in business volumes and revenues from these businesses. We are also exposed to the risk of litigation, claims or disputes by customers, counterparties or other constituents across our businesses.

 

The exposures of our international branches and banking subsidiaries could generally affect our business, financial condition and results of operations.

 

The loan portfolio of our international branches and banking subsidiaries includes foreign currency loans to Indian companies for their Indian operations (where permitted by regulation) as well as for their overseas ventures, including cross-border acquisitions. This exposes us to specific additional risks including the failure of the acquired entities to perform as expected, and our inexperience in various aspects of the economic and legal framework in overseas markets. We are, through our international branches and banking subsidiaries, also exposed to a variety of credit risks in local markets, where our expertise and experience may be limited. Our international profile has also increased the complexity of our risks in a number of areas including price risks, currency risks, interest rate risks, compliance risk, regulatory and reputational risk and operational risk. We also face risks arising from our ability to manage inconsistent legal and regulatory requirements in the multiple jurisdictions in which we operate. Our businesses are subject to changes in legal and regulatory requirements and it may not be possible to predict the timing or nature of such changes. See also “—Risks that arise as a result of our presence in a highly regulated sector—The opportunities for growth in our international operations and our ability to repatriate capital from these operations may be limited by the local regulatory environments.” Business opportunities in these jurisdictions will also determine the growth in our operations.

 

Global developments including geopolitical tensions could impact economic growth in Canada and the United Kingdom, which in turn could impact the business of our banking subsidiaries in these countries. Our international branches and banking subsidiaries undertake select local banking businesses, including lending to multinational and local corporations, small businesses, property backed lending and insured and other mortgages, and in the event of these corporations being impacted by global and local economic conditions it could have an adverse impact on our business.

 

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Our international branches and banking subsidiaries have also made investments in bonds, certificates of deposit, mortgage backed securities, treasury bills and asset-backed commercial paper.

 

We are repositioning our international business strategy to sharpen our focus on the non-resident Indian community and on India-linked trade. We aim to progressively exit exposures that are not linked to India in a planned manner at our international branches. Our overseas banking subsidiaries will continue to serve local markets selectively with a focus on risk mitigation and granularity of business. There can be no assurance of our successful execution of this strategy. Moreover, the risk of future pandemics and financial crises may also increase challenges for our international branches and banking subsidiaries. If we are unable to manage these risks, our business would be adversely affected. The classification of the loan portfolio of our international branches and banking subsidiaries is also subject to the regulations of respective local regulators. Such loans that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the current Reserve Bank of India guidelines, are classified as non-performing to the extent of the amount of outstanding loan in the host country. Overseas regulators may also require higher provisions against loans held in their jurisdictions.

 

Entry into new businesses or rapid growth in existing loan portfolios may expose us to increased risks that may adversely affect our business.

 

The rapid growth of our retail, rural and small business loan portfolios exposes us to increased risks within India including higher levels of non-performing loans in our unsecured retail credit portfolio, increased operational risk, increased fraud risk and increased regulatory and legal risk. We continue to focus on scaling up our retail lending volumes and have seen an increase in our retail unsecured portfolio and our lending to small businesses and entrepreneurs. Retail lending, including unsecured retail credit, has been an important driver of growth for the Indian banking system. We have also entered into partnerships with technology companies with large customer bases to offer co-branded credit products and as well as with non-banking financial companies for co-origination and/or purchases of loans. We intend to continue to pursue similar partnerships.

 

While we have taken measures to address the risks in these businesses, there can be no assurance that the businesses would perform according to our expectations or that there would not be any adverse developments in these businesses in the future. We use data analytics extensively in our lending to retail and small business customers, and there can be no assurance that these analytical models will perform as intended. Our focus on partnerships with other entities to grow our portfolio may not yield the desired results and may lead to additional risks. Our inability to manage such risks may have an adverse impact on our future business and strategy, our asset quality and profitability and the prices of our equity shares and ADSs.

 

Commission, exchange and brokerage income, profit on foreign exchange transactions and other sources of fee income are important elements of our profitability, and regulatory

 

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changes and market conditions could cause these income streams to decline and adversely impact our financial performance.

 

We earn commission, exchange and brokerage income from a variety of activities, including loan processing, syndication and advisory services for corporate clients with respect to their acquisition and project financing, distribution of retail investment and insurance products, transaction banking and retail credit products. Our commission, exchange and brokerage income is therefore impacted by the level of corporate activity including new financing proposals, the demand for retail financial products and the overall level of economic and trade activity. Our commission, exchange and brokerage income is also impacted by applicable regulations governing various products and segments of financial services and changes in these regulations may adversely impact our income streams and ability to grow our business. Our fee income from distribution of third party financial products is dependent on applicable regulations, the demand for these products and our distribution strategy for banking and third party products.

 

Our industry is very competitive and our strategy depends on our ability to compete effectively.

 

Within the Indian market, we face intense competition from other commercial banks, investment banks, insurance companies, non-bank finance companies, new private sector banks like payments banks and small finance banks and non-bank entities offering retail payments services. Some Indian public and private sector banks have experienced higher growth and increase in market shares relative to us. The expansion of existing competitors or the entry of new competitors could increase competition for products and services. There could be greater competition for business opportunities if there is a slowdown in growth in the Indian banking sector. The establishment of account aggregators, permitted by the Reserve Bank of India, facilitates sharing of customer data with different financial service providers from whom customers may be seeking loans or other products and may increase competition by making it easier for new entrants to onboard customers at a lower cost than traditional models. A large private sector bank in India has executed a merger of its parent company, which is a large housing finance company, with itself, leading to a significant increase in size and scale for the bank. Further, a large private sector bank in India completed the acquisition of the consumer businesses of a foreign bank operating in India, which will consolidate the bank’s position in certain retail products. These moves may significantly impact competition in the industry, especially for deposits and retail products.

 

Further, technology innovations in mobility and digitization of financial services require banks and financial services companies to continuously develop new and simplified models for offering banking products and services. The emergence of new platforms, or new operating models or new types of banks or other entities offering digital banking solutions, are trends that could increase competitive pressures on banks, including us. Innovations in the payments system and increasing use of mobile banking are leading to emergence of new platforms for cashless payments. This can also lead to new types of banks expanding their presence in other financial products like insurance and mutual funds. Non-financial companies, particularly international technology companies including large e-commerce players and internet-based service providers are increasing their presence in the financial sector and are offering payment platforms and select services. We are currently partnering with some of these entities to jointly offer payment and credit products and services. Some or all of these entities, which have substantially more

 

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resources than us and other Indian banks, may eventually seek a larger share of the banking and financial services market in India and compete with us. Our subsidiaries also face similar risks, including enhanced competition from new, technology-led players with disruptive business models that may result in a loss of market share or reduced profitability or both, for existing players. There is no assurance that we will be able to continue to respond promptly to new technological developments, and be in a position to participate in new market opportunities or dedicate resources to upgrade our systems and compete with new players entering the market. See also “—Risks relating to technology—The growing use of technology in banking and financial services creates additional risks of competition, reliability and security”.

 

We face competition from non-banking finance companies that are lending in segments in which banks also have a presence, including home loans and vehicle loans. Their presence in the market may grow during periods when banks are unable to grow their advances due to challenges and stress in other businesses. There is no assurance that we will be able to effectively compete with these non-banking finance companies at all times. Further, changes in the banking sector structure due to consolidation as well as entry of new competitors may lead to volatility and new challenges and may increase pressure on banks to remain competitive.

 

Any changes in the banking structure in India, including the entry of new banks, greater competition between existing players and improvement in the efficiency and competitiveness of existing banks, may have an adverse impact on our business. Due to competitive pressures, we may be unable to successfully execute our growth strategy or offer products and services at reasonable returns and this may adversely impact our business. See also “Business—Competition”.

 

In our international operations we also face competition from the full range of competitors in the financial services industry, both banks and non-banks and both Indian and foreign banks. We remain a small to mid-size player in the international market and many of our competitors have resources much greater than our own.

 

There is operational risk associated with the financial industry which, when realized, may have an adverse impact on our business.

 

We, like all financial institutions, are exposed to many types of operational risk, including the risk of fraud or other misconduct by employees or outsiders, unauthorized transactions by employees and third parties (including violation of regulations for prevention of corrupt practices, and other regulations governing our business activities), misreporting or non-reporting with respect to statutory, legal or regulatory reporting and disclosure obligations, or operational errors, including non-compliance with internal processes, clerical or recordkeeping and reconciliation errors or errors resulting from faulty computer or telecommunications systems. We have experienced significant growth in a fast changing environment, and management as well as our regulators are aware that this may pose significant challenges to our control framework. As a result of our internal evaluations, we and our regulators have noted certain areas where our processes and controls could be improved. Our growth, particularly in retail, small business and rural lending, our international business and our insurance businesses, and our extensive use of digital technology, expose us to additional operational and control risks. Regulatory scrutiny of areas related to operational risk, including internal audit information, systems and data processing is increasing. The large size of our treasury and retail operations, which use

 

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automated control and recording systems as well as manual checks and recordkeeping, exposes us to the risk of errors in control, recordkeeping and reconciliation. The increasing size of our insurance business and the complexities of the products expose us to the risk that the models set up on actuarial software to compute the actuarial liabilities and deferred acquisition cost may contain errors or may require continuous improvement over a period of time. Given our high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. In addition, our dependence upon automated systems to record and process transactions may further increase the risk that technical system flaws, employee tampering, manipulation of those systems and deficiency in access control management will result in losses that are difficult to detect. We may also be subject to disruptions of our operating systems, arising from events that are wholly or partially beyond our control (including, for instance, computer viruses or electrical or telecommunication outages), which may give rise to deterioration in customer service and to loss or liability to us.

 

We also outsource some functions, like collections, sourcing of retail loans and management of ATMs to other agencies and hence we are also exposed to the risk that external vendors may be unable to fulfil their contractual obligations to us (or will be subject to the same risk of fraud or operational errors by their respective employees as we are), and to the risk that our (or our vendors’) business continuity and data security systems prove not to be sufficiently adequate. We also face the risk that the design of our controls and procedures proves inadequate, or is circumvented, thereby causing delays in detection or errors in information. We are also exposed to operational risks from transactions with other financial institutions and intermediaries. Although we maintain a system of controls designed to keep operational risk at appropriate levels, like all banks and insurance companies we have suffered losses from operational risk and there can be no assurance that we will not suffer losses from operational risks in the future that may be material in amount, and our reputation could be adversely affected by the occurrence of any such events involving our employees, customers or third parties.

 

In addition, regulators or governmental authorities or courts may also hold banks, including us, liable for losses on account of customer errors such as inadvertent sharing of confidential account related information. There are inherent limitations to the effectiveness of any system especially of controls and procedures, including the possibility of human error, circumvention or overriding of the controls and procedures, in a fast changing environment or when entering new areas of business or expanding geographic reach. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. We are committed to continuing to implement and improve internal controls and our risk management processes, and this remains a key priority for us. If, however, we are unable to manage operational risk in India and in the other jurisdictions in which we operate, or if we are perceived as being unable to manage such risk, we may be subject to enhanced regulatory oversight and scrutiny. For a discussion of how operational risk is managed, see also “Business—Risk Management—Market Risk—Operational Risk”.

 

Our failure to establish, maintain and apply an adequate internal control over financial reporting could have a material adverse affect on our reputation, business, financial condition or results of operations.

 

We are responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting

 

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and preparation and fair presentation of our published Indian GAAP consolidated financial statements and disclosures relating to U.S. GAAP net income reconciliation, stockholders’ equity reconciliation and other disclosures as required by U.S. Securities and Exchange Commission and applicable GAAP. Our management is required to assess the effectiveness of our internal control over financial reporting and disclose whether such internal controls are effective. Our independent registered public accounting firm has to conduct an audit to evaluate and then render an opinion on the effectiveness of our internal control over financial reporting. See “Management—Summary Comparison of Corporate Governance Practices—Management’s Report on Internal Control Over Financial Reporting”.

 

We have established internal controls over financial reporting, as well as policies and procedures for evaluating those controls, in order to provide reasonable assurance of the reliability of our financial reporting and the preparation of financial statements. However, these controls may not prevent or detect errors. Any evaluation of effectiveness of future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. To the extent any issues are identified through the foregoing processes, there can be no assurance that we will be able to resolve them in a timely manner or at all. If this occurs, our reputation may be damaged, which could lead to a decline in investor confidence in us and may adversely affect our business, financial conditions and results of operations.

 

We and our customers are exposed to fluctuations in foreign exchange rates.

 

Certain of our borrowers enter into derivative contracts to manage their foreign exchange risk exposures. Volatility in exchange rates may result in increased mark-to-market losses in derivative transactions for our clients. Upon the maturity or premature termination of the derivative contracts, these mark-to-market losses become receivables owed to us. Consequently, we become exposed to various kinds of risks including but not limited to credit risk, market risk and exchange risk.

 

Exchange rates are impacted by a number of factors including volatility of international capital markets, geo-political events, interest rates and monetary policy stance in developed economies like the United States, level of inflation and interest rates in India, the balance of payment position and trends in economic activity. Rising volatility in capital flows due to changes in monetary policy in the United States or other economies or a reduction in risk appetite or increase in risk aversion among global investors and consequent reduction in global liquidity may impact the Indian economy and financial markets. During fiscal 2022, several factors impacted the exchange rate including the second and third wave of the COVID-19 pandemic, geo-political tensions due to the crisis in Ukraine and sanctions on Russia, and deterioration in economic conditions following a sharp rise in global crude oil prices and increase in inflation in developed economies. The rupee depreciated to Rs. 75.87 per U.S. dollar at March 31, 2022 from Rs. 73.17 per U.S. dollar at March 31, 2021.

 

As discussed above, in the past, concerns over India’s current account deficit and changes in capital flows due to changes in U.S. monetary policy have caused the rupee to depreciate against the U.S. dollar. The rupee depreciated to Rs. 82.19 per U.S. dollar at March 31, 2023. This was following the tightening of monetary policy by the U.S. Federal Reserve due to rising inflation concerns including the failure of three regional banks in the U.S. and a bank in Europe; the

 

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ongoing war between Russia and Ukraine and the sanctions imposed on Russia. Some of our borrowers with foreign exchange and derivative exposures may be adversely impacted by the depreciation of the rupee. These include borrowers impacted by higher rupee denominated interest or principal repayment on unhedged foreign currency borrowings; increases in the cost of raw material imports where there is limited ability to pass through such escalations to customers; and the escalation of project costs due to higher imported equipment costs; and borrowers that may have taken adverse positions in the foreign exchange markets. The failure of our borrowers to manage their exposures to foreign exchange and derivative risk, particularly adverse movements and volatility in foreign exchange rates, may adversely affect our borrowers and consequently the quality of our exposure to our borrowers and our business volumes and profitability.

 

Further, any increased intervention in the foreign exchange market or other measures by the Reserve Bank of India to control the volatility of the exchange rate, may result in a decline in India’s foreign exchange reserves and reduced liquidity and higher interest rates in the Indian economy. Prolonged periods of volatility in exchange rates, reduced liquidity and high interest rates could adversely affect our business, our future financial performance and the prices of our equity shares and ADSs. A sharp depreciation in the exchange rate may also impact some corporate borrowers having foreign currency obligations that are not fully hedged.

 

An increase in non-performing or restructured assets on account of our borrowers’ inability to manage exchange rate risk and any increased capital or provisioning requirement against such exposures may have an adverse impact on our profitability, our business and the prices of our equity shares and ADSs. We have adopted certain risk management policies to mitigate such risk. However, there is no assurance that such measures will be fully effective in mitigating such risks.

 

We may seek opportunities for growth through acquisitions, divest our existing businesses, or be required to undertake mergers by the Reserve Bank of India and could face integration and other acquisitions risks.

 

We may seek opportunities for growth through acquisitions or be required to undertake mergers mandated by the Reserve Bank of India under its statutory powers. In the past, we have undertaken mergers and acquisitions. In some cases, the Reserve Bank of India has ordered mergers of weak banks with other banks primarily in the interest of depositors of the weak banks. For example, the Government of India announced the amalgamation of 10 public sector banks into four larger banks from April 2020 as part of a consolidation measure to create fewer banks that are individually larger in scale. We may in the future examine and seek opportunities for acquisitions. Our subsidiaries in India may also undertake mergers, acquisitions and takeovers in India or internationally.

 

We may also increase or reduce our shareholding in our subsidiaries and affiliates, or divest other existing businesses wholly or partially, for a variety of reasons including changes in strategic focus, redeployment of capital, contractual obligations and regulatory requirements. Mergers and acquisitions by our subsidiaries could lead to reduction in our shareholding in such subsidiaries (including to below majority ownership in certain subsidiaries), and under applicable law that may require us to reduce our shareholding to 30.0% or less, unless we receive regulatory and governmental approval to maintain a higher level of shareholding, which may be subject to

 

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various conditions including divestment to the required level of 30.0% within a specified timeframe. During fiscal 2022, following the completion of a previously announced all-stock merger by ICICI Lombard General Insurance Company, the Bank’s shareholding in ICICI Lombard General Insurance decreased to 48.1%, and ICICI Lombard General Insurance ceased to be a subsidiary of the Bank. To reduce its shareholding in ICICI Lombard General Insurance to 30.0%, the Bank was granted time until September 2023, which was further extended to September 2024. In May 2023, the Board of Directors of the Bank approved an increase in shareholding in ICICI Lombard General Insurance Company, in multiple tranches up to 4.0% additional shareholding, to ensure compliance with the Banking Regulation Act, 1949 and make ICICI Lombard General Insurance Company a subsidiary of the Bank. This will be subject to the receipt of necessary regulatory approvals.

 

At March 31, 2023, ICICI Bank held 74.85% of the equity shares of its broking subsidiary, ICICI Securities Limited (ICICI Securities), and the balance 25.15% equity shares were held by the public. In June 2023, the Board of Directors of the Bank approved the draft scheme of arrangement for delisting of equity shares of our broking subsidiary, ICICI Securities Limited (“ICICI Securities”), by issuing equity shares of the Bank to the public shareholders of ICICI Securities in lieu of cancellation of their equity shares in ICICI Securities, thereby making ICICI Securities a wholly-owned subsidiary of the Bank, in accordance with Chapter VI, Part C, Regulation 37 of the SEBI (Delisting of Equity Shares) Regulations, 2021, subject to receipt of requisite approvals from the shareholders and creditors of the Bank and ICICI Securities, Reserve Bank of India, the National Company Law Tribunal, BSE Limited and the National Stock Exchange of India Limited and other statutory and regulatory authorities, under applicable law. Pursuant to the Scheme, public shareholders of ICICI Securities would be allotted 67 equity shares of ICICI Bank for every 100 equity shares of ICICI Securities.

 

Any future acquisitions or mergers or takeovers, whether by us or our subsidiaries, may involve a number of risks, Risks may include the possibility of a deterioration of asset quality, quality of business and business operations, financial impact of employee related liabilities, and diversion of our management’s attention required to integrate the acquired business. Risks may include the failure to retain key acquired personnel and clients, leverage synergies or rationalize operations, or develop the skills required for new businesses and markets. We are also at risk of liabilities including any ongoing litigation, claims or disputes concerning such acquisition, merger, its shareholders, share capital or its legal and regulatory compliance obligations or practices. Some or all of these risks could have an adverse effect on our business or that of our subsidiaries.  

 

We depend on the accuracy and completeness of information about customers and counterparties.

 

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We may also rely on certain representations as to the accuracy and completeness of that information and, with respect to financial statements, on reports of their independent auditors. For instance, in deciding whether to extend credit, we may assume that a customer’s audited financial statements conform to generally accepted accounting principles and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our financial condition

 

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and results of operations could be negatively affected by relying on financial statements that do not comply with generally accepted accounting principles or other information that is materially misleading. According to data published by the Reserve Bank of India, frauds reported in the Indian banking sector have shown an increasing trend in recent years, and the composition of the fraud amount reported is largely dominated by frauds related to loans and advances. In addition, our access to information about the credit histories of our borrowers, especially individuals and small businesses, may be limited, relative to what is typically available for similar borrowers in developed economies with more established nation-wide credit bureaus. This may affect the quality of information available to us about the credit history of our borrowers, especially individuals and small businesses. As a result, our ability to effectively manage our credit risk may be adversely affected.

 

A determination against us in respect of disputed tax assessments may adversely impact our financial performance.

 

We are regularly assessed by the Government of India’s tax authorities, and on account of outstanding tax demands we have included in contingent liabilities Rs. 82.5 billion in additional taxes in excess of our provisions at March 31, 2023. These additional tax demands mainly relate to income tax, service tax, goods and services tax, sales tax and value added tax demands by the Government of India’s tax authorities for past years. The amount of Rs. 82.5 billion included in our contingent liabilities does not include further disputed tax assessments amounting to Rs. 34.9 billion, of which Rs. 30.5 billion mainly relates to bad debts written off, broken period interest and penalties levied, where the possibility of liability arising has been considered remote based on favorable Supreme Court of India decisions in own or other similar cases, and Rs. 3.6 billion relating to error requiring rectification by tax authorities. See also “Business—Legal and Regulatory Proceedings”. Further, we are subject to various inquiries by the tax authorities through ongoing investigations/ notices which mainly consist of levy of service tax on deemed services provided by banks to customers maintaining specified minimum balances in their deposit accounts and denial of goods and services input tax credit on non-cashless settlements and marketing expenses in the case of our insurance subsidiary and affiliate. These issues are industry wide issues and the ICICI Group is contesting these issues with the tax authorities. The tax related inquiries are usually not included in contingent liabilities, as we believe that such proceedings will not be upheld by judicial authorities. In one such matter, our life insurance subsidiary has received a show cause cum demand notice from the Directorate General of Goods and Services Tax Intelligence in June 2023, disputing input tax credit being availed and utilised on certain expenses. The Group believes that input tax credit utilised is in compliance with the provisions of applicable laws and is currently in the process of filing its response to the said notice. Accordingly, an amount of Rs. 4.9 billion has been included in contingent liability in the period subsequent to March 31, 2023.

 

We have contested all of these issues which are the subject matter of investigations initiated or unfavorable orders issued by the tax authorities. While we expect that no additional liability will arise out of these matters based on our consultations with tax counsel and favorable decisions in our own and other cases, wherever applicable, there can be no assurance that these matters will be settled in our favor or that no further liability will arise out of these demands. Any additional tax liability may adversely impact our financial performance and the prices of our equity shares and ADSs.

 

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There could be a difference in the assessment of our indirect tax liability which may lead to additional demand being raised subsequently by tax authorities. For instance, the service tax authorities, in earlier years, had raised a demand on trusts for certain funds managed by ICICI Venture Funds Management Company Limited (“ICICI Venture”), our private equity subsidiary, including in relation to the amounts retained by the trusts for incurring various expenses, distribution of certain class of unit holders and provisions for certain expenses/losses. This matter is under litigation in the High Court and is pending for resolution.

 

We are involved in various litigations. Any final judgment awarding material damages against us could have a material adverse impact on our future financial performance and our stockholders’ equity.

 

We and our group companies, or our or their directors or officers, are often involved in litigations (civil and criminal) in India and in the other jurisdictions in which we operate for a variety of reasons, which generally arise because we seek to recover amounts due from borrowers or because customers seek claims against us or disputes may arise in connection with banking services. In certain instances, former employees have instituted legal and other proceedings against us. The majority of these cases arise in the normal course of business and we believe, based on the facts of the cases and consultation with counsel, that these cases generally do not involve the risk of a material adverse impact on our financial performance or stockholders’ equity. We estimate the probability of losses that may be incurred in connection with legal and regulatory proceedings as of the date on which our unconsolidated and consolidated financial statements are prepared. We recognize a provision when we have a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. We determine the amount of provision based on our estimate of the amount required to settle the obligation at the balance sheet date, supplemented by our experience in similar situations. We review provisions at each balance sheet date and adjust them to reflect current estimates. In cases where the available information indicates that a loss is reasonably possible but the amount of such loss cannot be reasonably estimated, we make a disclosure to this effect in the unconsolidated and consolidated financial statements. Whenever we consider it appropriate and the legal or regulatory guidelines so permit, we may seek to settle or compound legal or regulatory proceedings through consensual process with the concerned claimant or regulator, which may entail monetary payment or receipt or agreeing to non-monetary terms. When there is only a remote risk of loss, we do not recognize a provision nor do we include a disclosure in the unconsolidated and consolidated financial statements. See also “Business—Legal and Regulatory Proceedings”. We cannot guarantee that the judgments in, or the outcomes of any of the litigation or other proceedings or of any settlement or compounding of legal or regulatory proceedings in which we are involved would be favorable to us and if our assessment of the risk changes, our view on provisions will also change.

 

Further, certain investors of a real estate investment fund, registered in Mauritius, which is an investor in a real estate fund in India managed by ICICI Venture had initiated legal proceedings in Mauritius alleging, among others, mis-selling and mismanagement. The court has stayed the proceedings against ICICI Bank and ICICI Venture. In view of the stay, application for removal of averments/prayers against ICICI Bank and ICICI Venture was made, which was allowed by the court. The plaintiffs subsequently filed an appeal against the order permitting removal of averments/prayers against ICICI Bank and ICICI Venture.

 

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In the same matter, ICICI Venture after receiving a notice from the Securities and Exchange Board of India, settled the matter with the Securities and Exchange Board of India. However, one of the investors in the real estate investment fund, registered in Mauritius has filed a writ petition in the Bombay High Court against, among others, the Securities and Exchange Board of India and ICICI Venture in respect of the settlement order. In the said writ petition, no reliefs have been sought as against ICICI Venture. At present, the writ petition has not been admitted and no notice to ICICI Venture has been issued by the Bombay High Court. See also, “—Risks Relating to Our Business—A determination against us in respect of disputed tax assessments may adversely impact our financial performance.” and “Business—Legal and Regulatory Proceedings”.

 

We continue to expand our branch network and any inability to use these branches productively may have an adverse impact on our growth and profitability.

 

The Bank’s branch network in India increased from 5,418 branches at March 31, 2022 to 5,900 branches at March 31, 2023. Although we plan to leverage our extensive geographical reach to support growth in our business, our new branches typically operate at lower productivity levels, as compared to our existing branches. See also “—Risks Relating to Our Business—We may seek opportunities for growth through acquisitions, divest our existing businesses, or be required to undertake mergers by the Reserve Bank of India and could face integration and other acquisitions risks”. We also have a substantial branch network in rural and semi-urban areas and have also established branches in villages that did not have any banking services. Any inability to achieve or substantial delays in achieving desired levels of deposits, advances and revenues from the new branches would have an adverse impact on our growth and profitability and the prices of our equity shares and ADSs.

 

We depend on the knowledge and skills of our senior management. Any inability to attract them and retain them and other talented professionals or any loss of senior management or other talented professionals may adversely impact our business.

 

Our continued success depends in part on the continued service of key members of our management team and our ability to continue to attract, train, motivate and retain highly qualified professionals. This is a key element of our strategy and we believe it to be a significant source of competitive advantage. The successful implementation of our strategy depends on the availability of skilled management, both at our head office and at each of our business units and international locations, continuity in the service of our directors, executives and senior managers, and our ability to attract and train young professionals.

 

The appointment of individuals in certain positions is subject to regulatory and shareholder approvals. Any stringent requirements by our regulator for appointing key members in the management may require us to reorganize our management structure and may affect our ability to identify, hire and appoint suitable professionals for various roles.

 

The loss of any member from our senior management, including directors and key personnel, can have a material impact on our business, our financial performance, our stockholders’ equity, our ability to implement our strategy and the prices of our equity shares and ADSs. If we or one of our business units or other functions fail to staff operations appropriately, or lose one or more

 

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key senior executives or qualified young professionals and fail to replace them in a satisfactory and timely manner, our business, financial condition and results of operations, including our control and operational risks, may be adversely affected. Likewise, if we fail to attract and appropriately train, motivate and retain young professionals or other talent, our business may likewise be affected. We have recently made several changes to our human resource management practices, including key performance indicators, unit-level operating flexibility and accountability and a shift from grades to functional designations at senior levels, aimed at greater agility and synergy across the organization. There can be no assurance that these measures will be successful in meeting the desired objectives.

 

A substantial portion of our compensation structure for middle and senior management is in the form of employee stock options and dependent on the market price of our equity shares. We introduced an employee stock unit scheme aimed primarily at up to the middle-level management employees pursuant to which, stock units will be issued at the face value of Rs. 2.0 per unit, with phased vesting of units based upon the continuation of the employee. However, increased competition, including the entry of new banks into an already competitive sector, may affect our ability to hire and retain qualified employees. See also “Business—Employees”.

 

Future health epidemics or natural disasters could impact our employees, including senior management. There can be no assurance that this would not impact our ability to manage or conduct our business or the price of our equity shares and ADSs.

 

Risks relating to technology

 

The growing use of technology in banking and financial services creates additional risks of competition, reliability and security.

 

Our business and our operations are heavily dependent upon our ability to offer digital products and services and process large volumes of transactions. This has increased our reliance on technology in recent years. Technology innovations in financial services require banks and financial services companies to continuously develop new and simplified models for offering banking products and services. See also “—Risks Relating to Our Business—Our industry is very competitive and our strategy depends on our ability to compete effectively.”

 

The growing demand for digital banking services, accelerated in part due to the COVID-19 pandemic, has substantially increased the volume of transactions for the banking system, including us. This has required banks to enhance their focus on the availability and scalability of their systems in the context of growing customer dependence on digital transactions and increasing volumes of such transactions and may require additional investments. Any disruption in service delivery could impact our business, our financial position and our reputation, and also lead to regulatory action including imposing restrictions on business.

 

We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion or data corruption attempts, and identity theft that could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal and financial exposure.

 

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Our businesses rely on our secure processing, transmission, storage and retrieval of confidential, proprietary and other information in our computer and data management systems and networks and in the computer and data management systems and networks of third parties. To access our products and services, our customers may use personal smartphones, tablets, laptops, PCs, and other mobile devices that are beyond our control systems and subject to their own cybersecurity risks. Given our reliance and focus on technology and presence in diverse geographies, our technologies, systems, networks, and our customers’ devices are subject to security risks and are susceptible to cyber-attacks (such as, denial of service attacks, hacking, terrorist activities or identity theft) that could negatively impact the confidentiality, integrity or availability of data pertaining to us or our customers, which in turn may cause direct loss of money to our customers or to us, damage to our reputation and adversely impact our business and financial results. Third parties with which we do business or that facilitate our business activities could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints.

 

We, our customers, regulators and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to, and are likely to continue to be the target of, cyber-attacks. These cyber-attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information, ransomware, advanced threats from large language models, improper access by employees or vendors, attacks on personal email of employees, ransom demands to not expose security vulnerabilities in our systems or the systems of third parties or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of third parties, damage our systems or otherwise materially disrupt our or our customers’ or other third parties’ network access or business operations. Like many other large global financial institutions, we have also experienced a few attacks pertaining to distributed denial of services which were intended to disrupt customer access to our main portal. While our monitoring and mitigating controls were able to detect and effectively respond to such incidents, there can be no assurance that these security measures will be successful in the future. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

 

We have a governance framework in place for security and have implemented information security policies, procedures and technologies. However, considering that technology is currently in a phase of rapid evolution and that the methods used for cyber-attacks are also changing frequently or, in some cases, are not recognized until an actual attack, we may not be able to anticipate or to implement effective preventive measures against all security breaches. Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.

 

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, and the use of the internet and telecommunications technologies to conduct financial transactions. For example, cybersecurity risks may increase as we continue to increase our mobile-payment and other internet-based product offerings and expand our internal usage of web-based products and applications. In addition, cybersecurity risks have significantly increased in recent years in part due to the increased sophistication and activities of organized crime affiliates, terrorist organizations,

 

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hostile foreign governments, disgruntled employees or vendors, activists and other external parties, including those involved in corporate espionage. Some of the newer technologies like quantum computing harnesses the laws of quantum mechanics to solve problems that are too complex for classical computers. Encryption tools are used to secure online communications between parties from any possible attackers. Such newer technologies could pose a threat to the existing encryption protocols and could lead to unauthorized access to internal data. Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks and “spear phishing” attacks are becoming more sophisticated and are extremely difficult to prevent. In such an attack, an attacker will attempt to fraudulently induce colleagues, customers or other users of our systems to disclose sensitive information in order to gain access to its data or that of its clients. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and may not be recognized until well after a breach has occurred. The risk of a security breach caused by a cyber-attack at a vendor or by unauthorized vendor access has also increased in recent years. Additionally, the existence of cyber-attacks or security breaches at third-party vendors with access to our data may not be disclosed to us in a timely manner. We could also face cybersecurity risks which result in direct loss of money, as has happened with certain other banks in the past where their high value payment systems were compromised resulting in direct monetary loss for the Bank. We also face risks where our customers could lose money because of cyber attacks, and these could result in monetary as well as reputational risks for the Bank.

 

We also face indirect technology, cybersecurity and operational risks relating to clients and other third parties with whom we do business or upon whom we rely to facilitate or enable our business activities, including, for example, financial counterparties, regulators and providers of critical infrastructure such as internet access and electrical power. As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyber-attack or other information or security breach that significantly degrades, deletes or compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including us. This consolidation, interconnectivity and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis.

 

Any third-party technology failure, cyber-attack or other information or security breach, termination or constraint could, among other things, adversely affect our ability to effect transactions, service our clients, manage our exposure to risk or expand our business. Cyber-attacks or other information or security breaches, whether directed at us or third parties, may result in a material loss or have material consequences. Furthermore, the public perception that a cyber-attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business. Hacking of personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention of system security could cause us serious negative consequences, including our loss of customers and business opportunities, costs associated with maintaining business relationships after an attack or breach; significant business disruption to our operations and business, misappropriation, exposure, or destruction of our confidential information, intellectual property, funds, and/or those of our customers; or damage to our computers or systems, and could result in a violation of applicable privacy laws and other laws,

 

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litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, additional compliance costs, and could adversely impact our results of operations, liquidity and financial condition.

 

Our customers could also be exposed to increased phishing and vishing attacks that could result in a financial loss to them, and in turn lead to claims for compensation from the Bank or reputation loss for the Bank.

 

System failures or system downtime could adversely impact our business.

 

Given the large share of retail products and services and transaction banking services in our total business, the importance of systems technology to our business has increased significantly. Our business, financial, accounting, data processing systems or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control, such as surges in customer transaction volume, utility disruptions or failures, natural disasters, diseases pandemics, events arising from political or social matters and terrorist attacks. While we have procedures to monitor for and prevent system downtime or failures, and to recover from system failures in the event they occur, there is no guarantee that these procedures will successfully prevent a system failure or allow us to recover quickly from a system failure. In the event that our data center is severely impacted, while we have a secondary disaster recovery data center, recovery of some of our systems and services may be delayed, thereby adversely impacting our operations and customer service levels. Any failure in our systems, particularly for retail products and services and transaction banking, could significantly affect our operations and the quality of our customer service and could result in enhanced regulatory scrutiny and business and financial losses that would adversely affect the prices of our equity shares and ADSs. Regulatory scrutiny in this area is increasing. See also “—Risks that arise as a result of our presence in a highly regulated sector—The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal.

 

Risks relating to our insurance subsidiary and affiliate

 

Additional capital requirements of our insurance subsidiary and affiliate or our inability to monetize a part of our shareholding or make further investments in these companies as required may adversely impact our business and the prices of our equity shares and ADSs.

 

At March 31, 2023, we owned 51.3% of the equity shares of our life insurance subsidiary, ICICI Prudential Life Insurance Company, and 48.0% of the equity shares of our general insurance affiliate, ICICI Lombard General Insurance Company.

 

Although our insurance businesses are profitable and we currently do not anticipate they would require capital, additional capital may be required to support the business which may, among other reasons, arise due to regulatory requirements or increased opportunities for growth or changes in loss experience and actuarial assumptions. See also “—Risks relating to our insurance subsidiary and affiliate— Actuarial experience and other factors could differ from assumptions made in the calculation of life actuarial reserves and other actuarial information” and “—Risks relating to our insurance subsidiary and affiliate—Loss reserves for our affiliate’s general insurance business are based on estimates as to

 

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future claims liabilities and adverse developments relating to claims could lead to further reserve additions and materially adversely affect the operation of our general insurance affiliate.” Our insurance subsidiary and affiliate may also explore mergers and acquisitions which may lead to issuance of equity shares. Issuance of additional equity shares for these or other reasons would reduce our shareholding, unless we invest additional capital in these businesses. Our ability to invest additional capital in these businesses is subject to the Reserve Bank of India’s regulations on capital adequacy and its guidelines on financial services provided by banks that prescribe limits for our aggregate investment in financial sector enterprises. All such investments require prior approval of the Reserve Bank of India.

 

Any additional capital requirements of our insurance companies, restrictions on our ability to capitalize them and a requirement that we reduce or increase our shareholding could adversely impact their growth, our future capital adequacy, our financial performance and the prices of their equity shares and our equity shares and ADSs. See also “Business—Overview of Our Products and Services—Insurance” and “—Risks relating to our insurance subsidiary and affiliate—While our insurance businesses are an important part of our business, there can be no assurance of their future rates of growth or levels of profitability.

 

While our insurance businesses are an important part of our business, there can be no assurance of their future rates of growth or levels of profitability.

 

Our life insurance and general insurance businesses are an important part of our business. See also “Business—Overview of Our Products and Services—Insurance”. These businesses have experienced volatility in growth rates in the past and there can be no assurance of their future rates of growth or profitability.

 

The Indian life insurance sector has experienced significant regulatory changes in recent years. See also “Supervision and Regulation—Regulations Governing Insurance Companies”. The regulatory changes, apart from impacting the business strategy, have also resulted in reduced profit margins on life insurance products. Our life insurance subsidiary’s growth and profitability depends on various factors, including the mix of products in its portfolio, its relationship with various partners, regulatory changes and market movements. ICICI Bank is a corporate agent of its insurance subsidiary and accounts for less than 15% of the business volumes of its life insurance subsidiary based on annualised premium equivalent for fiscal 2023. The life insurance subsidiary’s business is well-diversified across its product and distribution mix. While the subsidiary has been making profits since fiscal 2010, there can be no assurance of the continued growth of the subsidiary’s business and profitability, including the business generated by the Bank.

 

We conduct our general insurance business through our general insurance affiliate, ICICI Lombard General Insurance Company. ICICI Lombard General Insurance Company’s growth and profitability depends on various factors, including the proportion of certain profitable products in its portfolio, the maintenance on its relationship with key distribution partners and reinsurers, continuation of support by the Government of India of certain insurance schemes, regulatory changes, climate change factors, changes to tax positions or judgements and market movements. There can be no assurance of the future rates of growth in the insurance business. While this affiliate has been making profits since fiscal 2013, there can be no assurance of the future profitability or rates of growth in the insurance business. See also “—Risks relating to our

 

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insurance subsidiary and affiliate—Additional capital requirements of our insurance entities or our inability to monetize a part of our shareholding in these entities may adversely impact our business and the prices of our equity shares and ADSs.” and “Supervision and Regulation—Regulations Governing Insurance Companies.

 

Further, the Insurance Regulatory Development Authority of India has from time to time proposed changes to the regulations governing distribution of insurance products by corporate agents, including banks. Any future regulatory changes or restrictions may require our insurance subsidiary and affiliate to change its distribution strategies, which may result in increased costs and lower business volumes, as well as impacting ICICI Bank’s distribution of their products and the associated fee income. A slowdown in growth in the Indian economy, the impact from any future catastrophes and epidemics or pandemics, further regulatory changes or customer dissatisfaction with our insurance products could adversely impact the future growth of these businesses. See also “—Risks that arise as a result of our presence in a highly regulated sector— The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal”. Any slowdown in these businesses could have an adverse impact on our business and the prices of our equity shares and ADSs.

 

Actuarial experience and other factors could differ from assumptions made in the calculation of life actuarial reserves and other actuarial information.

 

The assumptions our life insurance subsidiary makes in assessing its life insurance reserves and computing other actuarial information may differ from what it experiences in the future. These assumptions include the assessment of the long-term development of interest rates, investment returns, the allocation of investments between equity, fixed income and other categories, persistency, mortality and morbidity rates, policyholder lapses, policy discontinuation and future expense levels. In addition, there is a risk that the model used to estimate life and health insurance reserves based on such assumptions could be incorrect.

 

Our life insurance subsidiary monitors its actual experience of these assumptions and if any deviation from assumption is expected to continue in the longer term, it refines its long-term assumptions. Changes in any such assumptions may lead to changes in the estimates of life and health insurance reserves and other actuarial information. Such changes may also impact the valuation of our life insurance subsidiary by existing or potential investors, and the valuation at which any future monetization of our shareholding in the life insurance subsidiary may take place, if at all.

 

While our life insurance subsidiary monitors its experience and assumptions, events such as the COVID-19 pandemic are not anticipated in setting life insurance reserves. Higher claims due to any such pandemic in the future would have an adverse impact on the earnings and net worth of the subsidiary.

 

Loss reserves for our affiliate’s general insurance business are based on estimates as to future claims liabilities and adverse developments relating to claims could lead to further reserve additions and materially adversely affect the operation of our general insurance affiliate.

 

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In accordance with the general insurance industry practice and accounting and regulatory requirements, our general insurance company establishes reserves for loss and loss adjustment expenses related to its general insurance business. Reserves are based on estimates of future payments that will be made in respect of claims, including expenses relating to such claims. The estimation of the loss reserves relies on several key actuarial steps and assumptions, for example, selection of the actuarial methods by line of business, groupings of similar product lines and determination of underlying actuarial assumptions like expected loss ratios, loss development factors, and loss cost trend factors. Such estimates are made on both a case-by-case basis of claims that have been reported but not settled, based on the facts and circumstances available at the time the reserves are established, as well as in respect of losses that have been incurred but not reported. These reserves represent the estimated ultimate cost necessary to bring all pending claims to final settlement.

 

Reserves are subject to change due to a number of variables which affect the ultimate cost of claims, such as changes in claims handling procedures, legal environment, social attitudes, results of litigation, costs of repairs, changing trends in medical costs, minimum wages and other factors such as inflation and exchange rates. Our general insurance company’s reserves for environmental and other latent claims are particularly subject to such variables. The results of operations of our general insurance company depend significantly upon the extent to which its actual claims experience is consistent with the assumptions it uses in setting the prices for products and establishing the liabilities for obligations for technical provisions and claims. To the extent that its actual claims experience is less favorable than the underlying assumptions used in establishing such liabilities, it may be required to increase its reserves, which may materially adversely affect its results of operations.

 

Established loss reserves estimates are periodically adjusted in the ordinary course of settlement, using the most current information available to management, and any adjustments resulting from changes in reserve estimates are reflected in current results of operations. Our general insurance company also conducts reviews of various lines of business to consider the adequacy of reserve levels. Based on current information available and on the basis of internal procedures, the management of our general insurance company considers that these reserves are adequate. However, because the establishment of reserves for loss and loss adjustment expenses is an inherently uncertain process, there can be no assurance that ultimate losses will not materially exceed the established reserves for loss and loss adjustment expenses and have a material adverse effect on the results of operations of our general insurance company. Such adverse effect may also impact the valuation of our general insurance company by existing or potential investors, and the valuation at which any future monetization of our shareholding in the general insurance company may take place, if at all. See also “—Risks relating to our insurance subsidiary and affiliate—Additional capital requirements of our insurance entities or our inability to monetize a part of our shareholding in these entities may adversely impact our business and the prices of our equity shares and ADSs”.

 

The financial results of our insurance companies could be materially adversely affected by the occurrence of a catastrophe.

 

Portions of our general insurance business may cover losses from unpredictable events such as hurricanes, windstorms, epidemics, monsoons, earthquakes, fires, industrial explosions, floods, riots and other man-made or natural disasters, including acts of terrorism, and epidemics

 

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or pandemics. The incidence and severity of these catastrophes in any given period are inherently unpredictable. Although reserves are established after an assessment of potential losses relating to catastrophes covered, there is no assurance that such reserves would be sufficient to pay for all related claims.

 

In addition, our life insurance subsidiary’s business may incur losses due to increased mortality and morbidity claims of customers, affected by catastrophes and epidemics or pandemics. In addition, catastrophes could result in losses in the investment portfolios of our life insurance subsidiary due to, among other reasons, the failure of its counterparties to perform their obligations or significant volatility or disruption in the financial markets.

 

Our general insurance company’s operations are exposed to claims relating to catastrophes and epidemics or pandemics. Continuing higher claims related to COVID-19 may adversely impact the profitability of our general insurance company.

 

Although our insurance subsidiary and affiliate monitor their overall exposure to catastrophes and epidemics and other unpredictable events in each geographic region and determine their underwriting limits related to insurance coverage for losses from such events, the insurance subsidiary and affiliate generally seek to reduce their exposure through the purchase of reinsurance, selective underwriting practices and by monitoring risk accumulation. Claims relating to catastrophes and epidemics or pandemics in future may result in unusually high levels of losses and may require additional capital to maintain solvency margins and could have a material adverse effect on our financial position or results of operations.

 

Risks Relating to ADSs and Equity Shares

 

You will not be able to vote your ADSs and your ability to withdraw equity shares from the depositary facility is subject to delays and legal restrictions.

 

Our ADS holders have no voting rights, while holders of our equity shares do have voting rights. The ceiling on voting rights for any individual holder of equity shares is 26.0% of the total voting rights of a bank. See also “Major Shareholders”. If you wish, you may withdraw the equity shares underlying your ADSs and seek to exercise your voting rights under the equity shares you obtain from the withdrawal. However, for foreign investors, this withdrawal process may be subject to delays. For a discussion of the legal restrictions triggered by a withdrawal of the equity shares from the depositary facility upon surrender of ADSs, see also “Restriction on Foreign Ownership of Indian Securities”.

 

Your holdings may be diluted by additional issuances of equity and any dilution may adversely affect the market prices of our equity shares and ADSs.

 

In August 2020, we raised Rs. 150.00 billion (US$ 2.0 billion) of equity capital through a Qualified Institutions Placement. We may in the future conduct additional equity offerings to fund the growth of our business. In addition, up to 10.0% of our issued equity shares from time to time, may be granted in accordance with our Employees Stock Option Scheme and Employees Stock Unit Scheme. We constantly evaluate different financing options and any future issuance of equity shares or ADSs or exercise of employee stock options that would dilute the positions of

 

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investors in equity shares and ADSs and could adversely affect the market prices of our equity shares and ADSs.

 

You may be unable to exercise pre-emptive rights available to other shareholders.

 

A company incorporated in India must offer its holders of equity shares pre-emptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any new equity shares, unless these rights have been waived by at least 75.0% of the company’s shareholders present and voting at a shareholders’ general meeting. United States investors in ADSs may be unable to exercise these pre-emptive rights for equity shares underlying ADSs unless a registration statement under the Securities Act of 1933, as amended (the “Securities Act”) is effective with respect to such rights or an exemption from the registration requirements of the Securities Act is available. Our decision to file a registration statement will depend on the costs and potential liabilities associated with any such registration as well as the perceived benefits of enabling investors in ADSs to exercise their preemptive rights and any other factors we consider appropriate at such time. To the extent that investors in ADSs are unable to exercise pre-emptive rights, their proportional ownership interests in us would be reduced.

 

Your ability to sell in India any equity shares withdrawn from the depositary facility, the conversion of rupee proceeds from such sale into a foreign currency and the repatriation of such foreign currency may be subject to delays if specific approval of the Reserve Bank of India is required.

 

ADS holders seeking to sell in India any equity shares withdrawn upon surrender of ADSs, convert the rupee proceeds from such sale into a foreign currency or repatriate such foreign currency may need the Reserve Bank of India’s approval for each such transaction. See also “Restriction on Foreign Ownership of Indian Securities”. We cannot guarantee that any such approval will be obtained in a timely manner or at terms favorable to the investor. Because of possible delays in obtaining the requisite approvals, investors in equity shares may be prevented from realizing gains during periods of price increases or limiting losses during periods of price declines.

 

Restrictions on reissuance and deposit of equity shares in the depositary facility could adversely affect the price of our ADSs.

 

Under current Indian regulations, an ADS holder who surrenders ADSs and withdraws equity shares may deposit those equity shares again in the depositary facility in exchange for ADSs. An investor who has purchased equity shares in the Indian market may also deposit those equity shares in the ADS program. However, the deposit of equity shares may be subject to securities law restrictions and the restriction that the cumulative aggregate number of equity shares that can be deposited as of any time cannot exceed the cumulative aggregate number represented by ADSs converted into underlying equity shares as of such time. Further, the number of equity shares that can be deposited in exchange of ADSs or the number of reissuances of the ADSs may be restricted subject to any amendment in the overall size of the ADS program. These restrictions increase the risk that the market price of our ADSs will be below that of the equity shares.

 

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The depositary facility pursuant to which the ADSs are issued may be amended. Such amendment could include changes in the size of the ADS program. Any such amendment could adversely affect the market price and liquidity of our equity shares and ADSs or adversely affect the ability to trade the ADSs.

 

Certain shareholders own a large percentage of our equity shares and their actions could adversely affect the prices of our equity shares and ADSs.

 

At March 31, 2023, the Life Insurance Corporation of India held 6.2% of our outstanding equity shares and SBI Mutual Fund along with other entities in the SBI Group held 7.7% of our outstanding equity shares. See also “Major Shareholders”. Any substantial sale of our equity shares by these or other large shareholders could adversely affect the prices of our equity shares and ADSs. The Reserve Bank of India, in exercise of powers conferred by the Banking Regulation Act has notified a ceiling on voting rights in a banking company for a single shareholder of 26.0%. Deutsche Bank Trust Company Americas held 19.1% of our equity shares at March 31, 2023 and must vote these shares as directed by our Board of Directors.

 

Conditions in the Indian securities market may adversely affect the price or liquidity of our equity shares and ADSs.

 

The Indian securities markets are smaller and more volatile than securities markets in developed economies. In the past, the Indian stock exchanges have experienced high volatility and other problems that have affected the market price and liquidity of the listed securities, including temporary exchange closures, broker defaults, settlement delays and strikes by brokers. Following the outbreak of the COVID-19 pandemic in early 2020, the benchmark S&P BSE Sensex declined during the three months ended March 31, 2020 by 28.6%. During this period, several listed securities were impacted, including our securities. The index has subsequently recovered and at June 30, 2023, the S&P BSE Sensex closed at 64,719. Even before the volatility caused by the COVID-19 pandemic, volatility in the Indian stock markets have created temporary concerns regarding our exposure to the equity markets. In recent years, there have been changes in laws and regulations regulating the taxation of dividend income, which have impacted the Indian equity capital markets. See also “Dividends”. Similar problems or changes in the future could adversely affect the market price and liquidity of our equity shares and ADSs.

 

Settlement of trades of equity shares on Indian stock exchanges may be subject to delays.

 

The equity shares represented by ADSs are currently listed on the BSE Limited and the National Stock Exchange of India Limited. Settlement on those stock exchanges may be subject to delays and an investor in equity shares withdrawn from the depositary facility upon surrender of ADSs may not be able to settle trades on such stock exchanges in a timely manner. See also “—Risks Relating to ADSs and Equity Shares—Conditions in the Indian securities market may adversely affect the price or liquidity of our equity shares and ADSs.

 

Because the equity shares underlying ADSs are quoted in rupees in India, you may be subject to potential losses arising out of exchange rate risk on the Indian rupee.

 

Investors who purchase ADSs are required to pay for ADSs in U.S. dollars and are subject to currency fluctuation risk and convertibility risks since the equity shares underlying ADSs are

 

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quoted in rupees on the Indian stock exchanges on which they are listed. Dividends on the equity shares will also be paid in rupees and then converted into U.S. dollars for distribution to ADS investors. Investors who seek to convert the rupee proceeds of a sale of equity shares withdrawn upon surrender of ADSs into foreign currency and repatriate the foreign currency may need to obtain the approval of the Reserve Bank of India for each such transaction. See also “—Risks Relating to ADSs and Equity Shares—Your ability to sell in India any equity shares withdrawn from the depositary facility, the conversion of rupee proceeds from such sale into a foreign currency and the repatriation of such foreign currency may be subject to delays if specific approval of the Reserve Bank of India is required” and “Exchange Controls”.

 

You may be subject to Indian taxes arising out of capital gains.

 

In certain circumstances, capital gains arising on the sale of the underlying equity shares are subject to Indian capital gains tax. Investors are advised to consult their own tax advisors and to carefully consider the potential tax consequences of owning ADSs or underlying equity shares. See also “Taxation—Indian Tax”.

 

There may be less company information available in Indian securities markets than in securities markets in the United States.

 

There is a difference between India and the United States in the level of regulation and monitoring of the securities markets and the activities of investors, brokers and other market participants. The Securities and Exchange Board of India is responsible for improving disclosure and regulating insider trading and other matters for the Indian securities markets. There may however, be less publicly available information about Indian companies than is regularly made available by public companies in the United States.

 

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MAJOR SHAREHOLDERS

 

Shareholding Structure and Relationship with Government of India

 

The following table sets forth, at June 30, 2023, certain information regarding the ownership of our equity shares.

 

   Percentage of Total Equity Shares Outstanding  Number of Equity Shares Held
Government Controlled Shareholders:          
Life Insurance Corporation of India    6.1    429,892,591 
Other Government-controlled institutions, insurance companies, reinsurers, corporations and banks   0.7    50,314,193 
Total government-controlled shareholders   6.9    480,206,784 
           
Other Indian Investors:          
SBI Mutual Fund    5.9    410,693,963 
ICICI Prudential Mutual Fund    3.0    210,909,032 
HDFC Mutual Fund    2.4    170,813,777 
National Pension Scheme Trust    2.1    145,419,837 
UTI Mutual Fund    1.9    134,956,158 
Aditya Birla Sun Life Mutual Fund    1.3    94,180,586 
Kotak Mahindra Mutual Fund    1.3    89,932,811 
Nippon Life India Mutual Fund    1.2    83,381,375 
Axis Mutual Fund   1.0    71,358,162 
SBI Life Insurance Company Limited   1.2    81,786,288 
Mirae Asset Mutual Fund    1.1    76,125,930 
Other mutual funds and alternative investment funds      4.9    345,191,481 
Private sector insurance companies other than SBI Life Insurance Company    2.3    158,507,276 
Other private sector corporations and financial institutions   1.2    87,109,402 
Investor education protection fund    0.1    8,185,782 
Individual domestic investors(1),(2)    6.4    447,603,052 
Total other Indian investors   37.4    2,616,154,912 
Total Indian investors    44.3    3,096,361,696 
           
Foreign investors:          
Deutsche Bank Trust Company Americas, as depositary for American Depositary Shares (ADS) holders    19.3    1,352,219,913 
Government of Singapore    2.7    189,100,025 
Dodge and Cox International Stock Fund    1.1    80,206,480 
Europacific Growth Fund    1.0    73,046,757 
Other foreign institutional investors, foreign banks, overseas corporate bodies, foreign companies, foreign nationals, foreign institutional investors and non-resident Indians(2)    31.5    2,205,715,551 
Total foreign investors    55.7    3,900,288,726 
Total    100.0    6,996,650,422 

 

 
(1)Executive officers and directors (including non-executive directors) as a group held about 0.01% of ICICI Bank’s equity shares at June 30, 2023.

(2)No single shareholder in this group owned 5.0% or more of ICICI Bank’s equity shares as of this date.

 

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The holding of government-controlled shareholders was 6.9% at June 30, 2023 against 7.6% at June 30, 2022 and 7.0% at June 30, 2021. The holding of Life Insurance Corporation of India was 6.1% at June 30, 2023 against 6.7% at June 30, 2022 and 5.9% at June 30, 2021.

 

We operate as an autonomous commercial enterprise and the Indian government has never directly held any of our shares. We are not aware of or a party to any shareholders’ agreement or voting trust relating to the ownership of the shares held by the government-controlled shareholders. We do not have any agreement with our government-controlled shareholders regarding management control, voting rights, anti-dilution or any other matter. Our Articles of Association include a provision for the government of India to appoint, pursuant to the provisions of guarantee agreements between the government of India and ICICI, a representative to our Board. At present, there is no representative of the government of India on our Board. At June 30, 2023, we do not have government guaranteed borrowings outstanding. See also “Management—Directors and Executive Officers” for a discussion of the composition of our Board of Directors.

 

The holding of other Indian investors was 37.4% at June 30, 2023 against 38.9% at June 30, 2022 and 33.5% at June 30, 2021. The total holding of Indian investors was 44.3% at June 30, 2023 against 46.5% at June 30, 2022 and 40.5% at June 30, 2021. The holding of foreign investors was 55.7% at June 30, 2023 against 53.5% at June 30, 2022 and 59.5% at June 30, 2021. The Reserve Bank of India, exercising its powers under the Banking Regulation Act has established a limit of 26% on the voting rights of a single shareholder in a banking company. Deutsche Bank Trust Company Americas holds the equity shares represented by about 676 million American Depositary Receipts outstanding as depositary on behalf of the holders of the American Depositary Shares (ADS). The ADS are listed on the New York Stock Exchange. The Deutsche Bank Trust Company Americas (as depositary) which held 19.3% of our equity shares at June 30, 2023, must vote these shares as directed by our Board of Directors. Our ADS holders themselves have no voting rights unlike holders of our equity shares who have voting rights. Except as stated above, no shareholder has differential voting rights. See also “Supervision and Regulation—Structural Reforms— Amendments to the Banking Regulation Act” and “Supervision and Regulation—Ownership and Voting Restrictions”.

 

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Related Party Transactions

 

In fiscal 2023, we entered into transactions with related parties consisting of (i) associates/other related entities and (ii) key management personnel and their close family members.

 

Related Parties

 

Associates/Other Related Entities

 

For fiscal 2023, the following parties were identified as our associates/other related entities: ICICI Lombard General Insurance Company Limited, Arteria Technologies Private Limited, India Advantage Fund-III, India Advantage Fund-IV, India Infradebt Limited, ICICI Merchant Services Private Limited, I-Process Services (India) Private Limited, NIIT Institute of Finance, Banking and Insurance Training Limited, Comm Trade Services Limited, ICICI Foundation for Inclusive Growth and Cheryl Advisory Private Limited.

 

Key Management Personnel and their Close Family Members

 

Our key management personnel include our executive directors. The following individuals were our key management personnel in fiscal 2023: Mr. Sandeep Bakhshi, Mr. Anup Bagchi, Mr. Sandeep Batra, Mr. Rakesh Jha (with effect from September 2, 2022) and Ms. Vishakha Mulye (up to May 31, 2022). The close family members of the above key management personnel are also our related parties. Close family members in relation to the executive directors mean their spouses, children, children’s spouses, grand children, grand children’s spouses, siblings, sibling’s spouses, parents, maternal grandparents and paternal grandparents. We have applied the Indian GAAP standard and Reserve Bank of India Act, 1934 in determining the close family members of the executive directors.

 

Related Party Transactions

 

The following are the material transactions between us and our associates/other related entities or our key management personnel or their close family members.

 

For additional details, see also “Management—Compensation and Benefits to Directors and Officers—Loans” and note 2 - “Related Party Transactions” of Schedule 18 to the consolidated financial statements included herein.

 

Insurance Services

 

During fiscal 2023, we received insurance premiums from our associates/other related entities amounting to Rs. 55 million, from key management personnel of the Bank amounting to Rs. 3 million and from the close family members of key management personnel amounting to Rs. 1 million. The premiums received were towards cover for life insurance and investment linked insurance plans. The material transactions during fiscal 2023 included Rs. 54 million of premium received from ICICI Lombard General Insurance Company Limited.

 

During fiscal 2023, we paid insurance premiums amounting to Rs. 3.5 billion to ICICI Lombard General Insurance Company Limited. The premiums paid were towards cover for health insurance, personal accident and miscellaneous items.

 

During fiscal 2023, we paid claims including maturity, annuity and policy surrender value to our associates/other related entities amounting to Rs. 19 million and to key management personnel of the

 

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Bank amounting to Rs. 1 million. The material transactions during fiscal 2023 included Rs. 16 million paid to ICICI Lombard General Insurance Company Limited.

 

During fiscal 2023, we received claims towards health, personal accident, fire, motor and other miscellaneous items amounting to Rs. 163 million from ICICI Lombard General Insurance Company Limited.

 

Income from services rendered

 

During fiscal 2023, we earned income from services rendered to our associates/other related entities amounting to Rs. 1.4 billion, from key management personnel of the Bank amounting to Rs. 1 million and from the close family members of key management personnel amounting to Rs. 2 million. These transactions primarily arose from marketing and promotion fee, sponsorship and banking service fee, arranger fees and bank charges. The material transactions during fiscal 2023 included Rs. 1.3 billion of income from services received from ICICI Lombard General Insurance Company Limited.

 

Income from Shared Services

 

During fiscal 2023, we recovered cost towards sharing of premises, corporate infrastructure facilities and technology services from our associates/other related entities amounting to Rs. 327 million. The material transactions during fiscal 2023 included recovery of Rs. 262 million from ICICI Lombard General Insurance Company Limited and recovery of Rs. 37 million from ICICI Foundation for Inclusive Growth.

 

Expenses for shared services and other payments

 

During fiscal 2023, we paid cost towards sharing of premises, corporate infrastructure facilities and technology services to our associates/other related entities amounting to Rs. 1 million.

 

Expenses for services received

 

During fiscal 2023, we paid brokerage, fees and other expenses to our associates/other related entities amounting to Rs. 15.7 billion. These transactions primarily pertain to availing manpower services for certain activities of the Bank and expenses towards providing basic banking services. The material transactions during fiscal 2023 included Rs. 10.4 billion in expenses for services paid to I-Process Services (India) Private Limited and Rs. 5.2 billion in expenses for services paid to ICICI Merchant Services Private Limited.

 

Investments in Securities Issued by Related Parties

 

During fiscal 2023, we invested Rs. 1.9 billion in securities issued by India Infradebt Limited.

 

Issuance of Securities to Related Parties

 

During fiscal 2023, we issued securities amounting to Rs. 1.0 billion to ICICI Lombard General Insurance Company Limited.

 

Redemption/buyback of Investments

 

During fiscal 2023, we paid Rs. 1.6 billion to ICICI Lombard General Insurance Company Limited on account of redemption of bonds.

 

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Purchase of Investments

 

During fiscal 2023, we purchased securities of Rs. 1.6 billion from ICICI Lombard General Insurance Company Limited.

 

Interest Expenses

 

During fiscal 2023, we paid interest on bond borrowings and deposits accepted to our associates/other related entities amounting to Rs. 205 million, to our key management personnel amounting to Rs. 15 million and to the close family members of key management personnel amounting to Rs. 5 million. The material transactions during fiscal 2023 included Rs. 141 million of interest paid to ICICI Lombard General Insurance Company Limited and Rs. 26 million of interest paid to ICICI Merchant Services Private Limited.

 

Interest Earned

 

During fiscal 2023, we received interest on investments in bonds and loans from our associates/other related entities amounting to Rs. 435 million and from our key management personnel amounting to Rs. 3 million. The material transaction during fiscal 2023 included Rs. 421 million of interest received from India Infradebt Limited.

 

Purchase of Fixed assets

 

During fiscal 2023, we purchased fixed assets from our associates/other related entities amounting to Rs. 3 million.

 

Dividend Income

 

During fiscal 2023, we received dividend income from our associates/other related entities amounting to Rs. 2.3 billion. The material transaction during fiscal 2023 was Rs. 2.2 billion of dividend received from ICICI Lombard General Insurance Company Limited.

 

Gain/(loss) on Foreign Exchange and Derivative Transactions (Net)

 

During fiscal 2023, we earned income on foreign exchange and derivative transactions from ICICI Lombard General Insurance Company Limited amounting to Rs. 51 million.

 

CSR related reimbursement of expenses

 

During fiscal 2023, we reimbursed expenses to ICICI Foundation for Inclusive Growth amounting to Rs. 4.4 billion for corporate social responsibility related activities.

 

Dividend Paid

 

During fiscal 2023, we paid dividends to our key management personnel, amounting to Rs. 3.2 million and to the close family members of key management personnel, amounting to Rs. 0.7 million.

 

Value of ESOPs exercised

 

During fiscal 2023, our key management personnel exercised ESOPs amounting to Rs. 306 million. The value of ESOPs exercised during fiscal 2023 by Mr. Sandeep Bakhshi was Rs. 27 million, by Mr. Anup

 

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Bagchi was Rs. 183 million, by Mr. Sandeep Batra was Rs. 22 million and by Ms. Vishakha Mulye was Rs. 74 million.

 

Sale of Investments

 

During fiscal 2023, we sold securities to our associates/other related entities amounting to Rs. 31.7 billion. The material transactions during fiscal 2023 included Rs. 24.6 billion of securities sold to ICICI Lombard General Insurance Company Limited and Rs. 7.0 billion of securities sold to India Infradebt Limited. Sale of securities included government securities and corporate bonds/debentures in secondary market.

 

Donations Given

 

During fiscal 2023, we gave donations to ICICI Foundation for Inclusive Growth amounting to Rs. 565 million.

 

Sale of Fixed assets

 

During fiscal 2023, we sold fixed assets to our key management personnel amounting to Rs. 0.2 million.

 

Related Party Balances

 

The following table sets forth, at the date indicated, our balance payable to/receivable from our associates/other related entities:

 

Items  At year-end fiscal 2023
    (in million) 
Deposits from related parties held by us   Rs.2,603 
Payables to related parties    3,717 
Our investments in related parties    24,864 
Investments of related parties in the Group    1,600 
Loans and advances to related parties(2)    191 
Receivables from related parties    1,539 
Guarantees issued by us for related parties    63 

 

The following table sets forth, at the date indicated, the balance payable to/receivable from the key management personnel:

 

Items  At year-end fiscal 2023
    (in million) 
Deposits from key management personnel   Rs.261 
Payables to key management personnel    0.4 
Investments in our shares held by key management personnel    1 
Loans and advances to key management personnel(3)    86 

 

The following table sets forth, at the date indicated, the balance payable to/receivable from the close family members of key management personnel:

 

Items  At year-end fiscal 2023
    (in million) 
Deposits from close family members of key management personnel   Rs.96 
Payables to close family members of key management personnel    1 

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Items  At year-end fiscal 2023
    (in million) 
Investments in our shares held by close family members of key management personnel    0.2 
Loans and advances to close family members of key management personnel(2)    0.4 

 

The following table sets forth, for the period indicated, the maximum balance payable to/receivable from the key management personnel:

 

Items  At year-end fiscal 2023
    (in million) 
Deposits from key management personnel   Rs.421 
Payables to key management personnel    0.4 
Investments in our shares held by key management personnel    2 
Loans and advances to key management personnel(3)    139 

 

The following table sets forth, for the period indicated, the maximum balance payable to/receivable from the close family members of key management personnel:

 

Items  At year-end fiscal 2023
    (in million) 
Deposits from close family members of key management personnel   Rs.267 
Payables to close family members of key management personnel    1 
Investments in our shares held by close family members of key management personnel    0.3 
Loans and advances to close family members of key management personnel(2)    2 

 

 
(1)Insignificant amount.

 

(2)The loans and advances (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and (c) did not involve more than the normal risk of collectability or present other unfavorable features.

 

(3)The loans and advances (a) were made in the ordinary course of business and were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons or (b) were made on the same terms, including interest rates and collateral, as those prevailing at the time for other employees as part of employee loan scheme, and (c) did not involve more than the normal risk of collectability or present other unfavorable features.

 

Joint Ventures and Affiliates

 

From fiscal 2008, I-Process Services (India) Private Limited and NIIT Institute of Finance Banking and Insurance Training Limited were accounted as equity affiliates in consolidated financial statements.

 

From fiscal 2010, ICICI Merchant Services Private Limited was accounted as an equity affiliate in the consolidated financial statements.

 

From fiscal 2013, India Infradebt Limited was accounted as an equity affiliate. From fiscal 2015, India Advantage Fund-III and India Advantage Fund-IV were accounted as equity affiliates. From fiscal 2019, Arteria Technologies Private Limited was accounted as an equity affiliate. From April 1, 2021, ICICI Lombard General Insurance Company Limited ceased to be a subsidiary and was accounted as an equity affiliate.

 

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Business

 

Overview

 

We are a diversified financial services group offering a wide range of banking and financial services to corporate and retail customers through a variety of delivery channels. Apart from banking products and services, we offer life and general insurance, asset management, securities broking, and private equity products and services through our specialized subsidiaries and affiliates. Our consolidated total assets at year-end fiscal 2023 were Rs. 19,584.9 billion. Our consolidated capital and reserves and surplus including employees’ stock options outstanding at year-end fiscal 2023 were Rs. 2,145.0 billion and our consolidated net profit (after minority interest) for fiscal 2023 was Rs. 340.4 billion.

 

Our primary business consists of commercial banking operations for retail and corporate customers. Our commercial banking operations for retail customers consist of retail lending, deposit taking, distribution of insurance and investment products and other fee-based products and services. We provide a range of commercial banking products and services, including loan products, fee and commission-based products and services, deposit products and foreign exchange and derivatives products to large corporations, middle market companies and small and medium enterprises. We also offer agricultural and rural banking products. We earn interest and fee income from our commercial banking operations. We deliver our products and services through a variety of channels, including bank branches, ATMs, call centers, internet and mobile phones. We had a network of 5,900 branches and 16,650 ATMs and cash recycler machines in India at year-end fiscal 2023.

 

Our international franchise focuses on four strategic pillars, namely the (a) non-resident Indian ecosystem comprising deposits, remittances, investments and asset products; (b) multinational corporation ecosystem comprising foreign multinational companies investing in India, Indian companies present in overseas markets, and back-offices of multinational companies located in India; (c) trade ecosystem, comprising primarily India-linked trade transactions; and (d) funds ecosystem, to capture foreign investment flows into India . At year-end fiscal 2023, we had banking subsidiaries in the United Kingdom and Canada, branches in China, Singapore, Dubai International Finance Centre, Hong Kong, the United States (New York),Bahrain, Offshore Banking Unit located in the Santacruz Electronic Exports Promotion Zone, Mumbai and IFSC Banking Unit, Gandhinagar, Gujarat. At year-end fiscal 2023, we had representative offices in the United Arab Emirates (Dubai, Abu Dhabi and Sharjah), Bangladesh, Nepal, Malaysia, United States (Texas and California), Sri Lanka and Indonesia. Our subsidiary in the United Kingdom has a branch in Germany. See also “Risk factors—Risks Relating to Our Business—The exposures of our international branches and banking subsidiaries could generally affect our business, financial condition and results of operations”.

 

Our treasury operations include the maintenance and management of regulatory reserves, proprietary trading in equity and fixed income and a range of foreign exchange and derivatives products and services for corporate customers, such as forward contracts and interest rate and currency swaps.

 

We are also engaged in insurance, asset management, securities broking business and private equity fund management through specialized subsidiaries. Our subsidiaries, ICICI Prudential Life Insurance Company and ICICI Prudential Asset Management Company, provide a wide range of life insurance and asset management products respectively.

 

Our affiliate, ICICI Lombard General Insurance Company Limited provides a wide range of general insurance products. The Bank’s holding in ICICI Lombard General Insurance Company Limited was 48.0% at March 31, 2023. In May 2023, the board of directors of ICICI Bank Limited approved acquisition of up to 4.0% of ICICI Lombard General Insurance Company Limited's shareholding, to make it a subsidiary of the Bank, subject to regulatory approvals.

 

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Our subsidiary ICICI Securities Limited is engaged in equities underwriting, securities broking and distribution of financial products. Our subsidiary ICICI Securities Primary Dealership Limited is engaged in underwriting and primary dealership of government securities. Our private equity fund management subsidiary ICICI Venture, manages funds that make private equity investments. On June 29, 2023, the boards of directors of ICICI Bank Limited and ICICI Securities Limited approved a draft scheme of arrangement for delisting of equity shares of ICICI Securities Limited by issuing equity shares of ICICI Bank to the public shareholders of ICICI Securities Limited in lieu of cancellation of their equity shares in ICICI Securities Limited, thereby making ICICI Securities a wholly-owned subsidiary of ICICI Bank Limited, subject to requisite approvals. The public shareholders of ICICI Securities Limited will be allotted 67 equity shares of ICICI Bank Limited for every 100 equity shares of ICICI Securities Limited.

 

Our legal name is ICICI Bank Limited, but we are known commercially as ICICI Bank. We were incorporated on January 5, 1994 under the laws of India as a limited liability corporation. The duration of ICICI Bank is unlimited. Our principal corporate office is located at ICICI Bank Towers, Bandra-Kurla Complex, Mumbai 400 051, India, our telephone number is +91 22 2653 6173 and our website address is www.icicibank.com. None of the contents of our and our subsidiaries’ websites are incorporated in this annual report. Our agent for service of process in the United States is Mr. Akshay Chaturvedi, Country Head, ICICI Bank Limited, New York Branch, 575 Fifth Avenue, 26th floor, Suite 2600, New York, New York 10017.

 

History

 

ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and Indian industry representatives. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. Until the late 1980s, ICICI primarily focused its activities on project finance, providing long-term funds to a variety of industrial projects. With the liberalization of the financial sector in India in the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services provider that, along with its subsidiaries and other group companies, offered a wide variety of products and services. ICICI Bank was incorporated in 1994 as a part of the ICICI group. ICICI and ICICI Bank merged in 2002.

 

Strategy

 

In fiscal 2023, we maintained our strategic focus on profitable growth in business within the guardrails of risk and compliance. We grew our credit portfolio with a focus on granularity and saw healthy growth across our retail and business banking and wholesale portfolios. We continued to focus on holistically serving our clients and their ecosystems. We sought to maintain and enhance our liability franchise. We focused on maintaining a strong balance sheet, with robust liquidity, prudent provisioning and healthy capital adequacy. Our capital adequacy ratios were significantly above regulatory requirements at March 31, 2023.

 

Going forward, we will continue with our strategic focus on growing the profit before tax excluding treasury income i.e. the core operating profit less provisions in a risk-calibrated manner. Our Risk Appetite and Enterprise Risk Management framework sets out our risk appetite, including a limit framework for various risk categories. We will focus on growing our loan portfolio in a granular manner based on risk and reward, with focus on return of capital and containment of provisions within targeted levels. We have no specific targets for loan mix or segment-wise loan growth. We will aim to continue to grow our deposit franchise, maintain a stable and healthy funding profile and our competitive advantage in cost of funds.

 

We see significant opportunities for profitable growth across various sectors of the Indian economy.

 

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The key elements of our strategy to maximize our share of these opportunities are:

 

360-degree customer centric approach

 

We leverage our branch network, digital channels, partnerships and presence across various ecosystems to expand our customer base. Using ICICI STACK, the Bank offers solutions to its customers to suit their life-stage and business needs. We plan to continue to focus on maximizing the total life-cycle value of the relationship with the customer.

 

Focus on ecosystems

 

We aim to serve all financial requirements of customers and their ecosystems. Using ICICI STACK for Corporates, we offer customized solutions to corporates and their network of employees, vendors, dealers and other parts of their ecosystems. We focus on capturing the fund flows in the corporate’s supply chain with dealers and vendors by offering various digital solutions. Our ecosystem branches house multi-functional teams required to grow customer relationships and bring the entire bouquet of services of the Bank to clients and their ecosystems. Our “Merchant Stack” provides a wide range of banking and value added services to the merchant ecosystem comprising retailers, online businesses and large e-commerce firms.

 

Focus on micro markets

 

The Bank follows a micro-market-based approach to create an efficient distribution and resource allocation strategy. Our data analytics capabilities enable us to analyze relevant geographical, demographic and economic data combined with internal data to identify locally relevant opportunities. This also includes allocating appropriate resources and strengthening the branch network where required.

 

Internal cross-functional collaboration and external partnerships

 

The Bank has focused on increasing collaboration to provide solutions that meet the complete banking requirements of customers. Cross-functional teams have been created to tap into various ecosystems, enabling 360-degree coverage of customers and increasing wallet share.

 

Partnerships with technology companies and platforms with large customer bases and transaction volumes offer unique opportunities for acquiring new customers and enhancing service delivery and customer experience. We have also set up a start-up investment and partnerships team to collaborate with and invest in fintech startups and co-develop products aligned with our digital roadmap.

 

Process decongestion and operating flexibility

 

Our strategy emphasizes decongestion of internal process to make customer onboarding and service delivery frictionless, thereby improving the customer experience. We have reduced the layers of management in our organization structure and empowered operating teams, to create flexibility and agility in capturing business opportunities while operating within the guardrails of compliance and risk.

 

Leveraging technology and digital across businesses

 

The Bank has embarked on a journey to transform from Bank to BankTech, with a focus on creating an enterprise architecture framework across digital platforms, data and analytics, micro services based architecture, cloud computing, cognitive intelligence and other emerging technologies. This is based on

 

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the key pillars of scalability, modularity, flexibility, agility, resilience and reliability, and creating delightful and digitally native customer experiences to enable sustainable profitable growth.

 

We extensively leverage data analytics for deeper insights into customer needs and behavior and create unique propositions for customer and market segments. Our various digital platforms such as iMobile Pay, internet banking platforms, InstaBIZ and Trade Online provide end-to-end seamless digital journeys, personalized solutions and value added features to customers and enable effective data driven cross-sell and up-sell. The open architecture feature of iMobile Pay and InstaBIZ helps us to acquire new customers in a frictionless manner. We have taken a number of initiatives to offer a convenient and frictionless experience to customers by digitizing the credit underwriting process, with instant loan approvals. We will continue to enhance our cyber security and invest in technology to enhance our offerings to customers as well as the scalability, flexibility and resilience of our technology architecture.

 

Risk and compliance culture

 

The Bank recognizes the importance of establishing an effective framework and supporting processes so that all employees seek to exhibit desired behaviours aligned to the Risk and Compliance Culture Policy. The Bank aims to uphold a strong risk and compliance culture throughout the Bank. The Risk and Compliance Culture Policy establishes the risk and compliance culture guiding principles and the framework for implementation of the same. The Bank has identified five guiding principles for risk and compliance culture across the organization:

 

i)Fair to Customer, Fair to Bank,

 

ii)One Bank, One Team,

 

iii)Return of Capital is Paramount,

 

iv)Agile Risk Management,

 

v)Compliance with Conscience.

 

The effective implementation of the policy includes a governance framework with roles and responsibilities of the Board, Managing Director & Chief Executive Officer and Executive Directors and the Risk and Compliance Culture Council.

 

We are focused on the principles of “Return of Capital” emphasizing the need to conserve capital as paramount, “One Bank, One Team, One RoE” emphasizing the need to maximize our share of the target opportunity across all products and services, and the principle of “Fair to Customer, Fair to Bank” emphasizing the goal of delivering fair value to customers, while creating value for shareholders. The Bank-level core operating profit and containing the total provisions within a certain level of core operating profit of the Bank are key performance indicators for the Bank’s leadership team. We seek to sell products and offer services which meet societal needs and are in the interest of our customers. We focus on building a culture where every employee upholds this principle and serves customers with humility. We aim to be the trusted financial services provider of choice for our customers.

 

Overview of Our Products and Services

 

Commercial Banking for Retail Customers

 

Our commercial banking operations for retail customers consist of retail lending and deposits, and fee based products and services like credit, debit and prepaid cards, depositary share accounts and distribution of third party investment and insurance products.

 

Retail Lending Activities

 

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Our retail lending activities include home loans, automobile loans, commercial business loans, personal loans, credit cards, consumer durable goods financing, loans against time deposits and loans against securities. We also fund dealers who sell automobiles and commercial vehicles. Up to fiscal 2020, we reported business banking and various products of our rural portfolio such as loans against jewellery, kisan credit card as a part of our retail lending activities. From fiscal 2022, we started presenting business banking and products of rural portfolio separately.

 

Our suite of products and services for retail customers includes savings, investment, credit and protection products, along with convenient payment and transaction banking services. Our retail portfolio consists largely of secured lending, with growth based on proprietary data and analytics in addition to credit bureau checks. Our deposit franchise enables us to offer competitive pricing. We also leverage our existing customer database for sale of key retail asset products through cross-sell and up-sell. Our underwriting process involves a combination of key variables to assess the cash flow and repayment ability of the customer like income, leverage, customer profile, affluence markers, credit bureau data and demographics. We utilize multiple data points including liability and asset relationships, transaction behavior and bureau behavior along with proprietary machine learning and statistical models for making credit decisions.

 

The following table sets forth, at the dates indicated, the breakdown of the Group’s gross retail finance portfolio.

 

   At March 31,
   2022  2023  2023  2023
   (Rs. in billions)  (% share)  (US$ in millions)
Home loans   Rs.3,323.8   Rs.3,782.8    62.9%  US$46,024 
Automobile loans    406.5    499.8    8.3    6,081 
Commercial business loans(1)    266.0    278.6    4.6    3,391 
Others(2)    129.9    151.9    2.5    1,849 
Total secured retail finance portfolio    4,126.2    4,713.1    78.3    57,345 
Personal loans    632.8    883.2    14.7    10,745 
Credit card receivables    254.7    384.2    6.4    4,674 
Others(3)    26.7    34.9    0.6    425 
Total unsecured retail finance portfolio    914.2    1,302.3    21.7    15,844 
Total retail finance portfolio   Rs.5,040.4   Rs.6,015.4    100%  US$73,189 

 

 

(1)Includes commercial vehicles and construction equipment.

 

(2)Includes two-wheeler loans, loan against securities and dealer financing.

 

(3)Primarily includes dealer financing.

 

Home Loans

 

Our home loan portfolio includes loans for purchase and construction of homes and by mortgaging residential or commercial properties. We also offer instant top-up on home loans   to existing home loan customers. Our policies for home loans are based on certain stipulated ratios such as the loan-to-value ratio and the ratio of fixed debt obligations to a borrower’s income. The initial repayment term of home loans is 15 to 20 years with payments in the form of equal monthly installments. The credit process includes cashflow assessment of the borrower as well as evaluating the property being mortgaged against the legal and technical standards defined at the Bank.

 

We follow robust credit appraisal processes for loan-against-property. The average loan-to-value ratios of the loan-against-property portfolio are lower compared to our home loan portfolio. Lending is

 

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based on cash flows of borrowers and not just the value of the collateral. We also provide loans to customers belonging to economically weaker sections and customers buying homes in the low-cost affordable housing segment. Our initiatives to digitize the entire underwriting process with instant approvals have been one of the drivers of growth in our home loan portfolio. See also “Technology” and “Risk Factors—Risks Relating to Our Business—Our banking and trading activities are particularly vulnerable to interest rate risk and volatility in interest rates could adversely affect our net interest margin, the value of our fixed income portfolio, our income from treasury operations, the quality of our loan portfolio and our financial performance”.

 

Our home loans primarily have floating interest rates linked to the repo rate of the Reserve Bank of India. Home loans are repaid in equated monthly installments over the tenor of the loan. An increase in the repo rate will increase the interest rate on home loans and a decrease in the repo rate will decrease the interest rate on home loans. When interest rates on home loans increase, the tenor of the loan is extended and in instances where this is not possible, the equated monthly installments of the loan are increased. Borrowers are given options to increase their installments instead of tenure. When interest rates on home loans decrease, the tenor of the loan is reduced leaving the equated monthly installments unchanged, unless borrowers opt to reduce the installment amount. See also “Risk factorsOur banking and trading activities are particularly vulnerable to interest rate risk and volatility in interest rates could adversely affect our net interest margin, the value of our fixed income portfolio, our income from treasury operations, the quality of our loan portfolio and our financial performance”.

 

We offer home loan products primarily in India through ICICI Bank and our wholly owned subsidiary, ICICI Home Finance Company Limited. The loan portfolio of our housing finance subsidiary includes home loans, loans-against-property and loans to developers among others. The loan portfolio of ICICI Home Finance Company Limited increased by 21% from Rs. 145.0 billion at March 31, 2022 to Rs. 175.4 billion at March 31, 2023. The total assets under management, including securitized assets, increased from Rs. 178.7 billion at March 31, 2022 to Rs. 220.4 billion at March 31, 2023. ICICI Home Finance Company Limited raises funds through term loans from banks (including external commercial borrowings), bonds and debentures, commercial papers, fixed deposits and refinance from National Housing Bank. At March 31, 2023, ICICI Home Finance Company Limited had a branch network of 200 branches.

 

Our banking subsidiary in Canada offers residential mortgages in the local market. ICICI Bank Canada held total residential mortgages amounting to CAD 3,741 million (Rs. 227.0 billion) at year-end fiscal 2023 as compared to CAD 3,692 million (Rs. 223.3 billion) at year-end fiscal 2022. This includes mortgages of CAD 2,336 million (Rs. 141.7 billion) at year-end fiscal 2023 as compared to CAD 2,400 million (Rs. 145.2 billion) at year-end fiscal 2022 securitized under the Canadian National Housing Act —Mortgage Backed Securities program or through participation in the Canada Mortgage Bonds program. Further, the total residential mortgages also include conventional mortgages of CAD 1,356 million (Rs. 82.3 billion) at year-end fiscal 2023 as compared to CAD 1,223 million (Rs. 74.0 billion) at year-end fiscal 2022 and insured mortgages of CAD 52 million (Rs. 3.2 billion) at year-end fiscal 2023 as compared to CAD 69 million (Rs. 4.2 billion) at year-end fiscal 2022.

 

Automobile loans

 

We finance the purchase of new and used automobiles. Automobile loans are fixed rate products repayable in equal monthly installments. The interest rate is based on factors such as bureau score, customer relationship, car segment and tenure of loan, among others, for new automobiles and asset age car segment coupled with product variant like top-up or refinance, for used automobiles.

 

Commercial business loans

 

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We finance the purchase of commercial vehicles and equipment. Commercial business loans are fixed rate products repayable in equal monthly installments. Our commercial business customers include individuals to large fleet operators, contractors, hirers as well as captive customers. Our commercial vehicles portfolio is not concentrated, with the top 20 customers contributing approximately 2.5% of the commercial vehicles portfolio at year-end fiscal 2023.

 

Personal loans and credit cards

 

We also offer unsecured products such as personal loans and credit cards to our customers. Personal loans and credit card receivables have fixed interest rates. We offer a range of instant personal loans and credit cards that are accessible entirely through our digital channels. Our average personal loan size is about Rs 0.7 million with average tenor about 4.5 years and average yields about 12.0%.  

 

Retail Deposits

 

Our retail deposit products include time deposits and savings account deposits. We offer these products with special features targeted at specific customer segments such as high net worth individuals, defense personnel, trusts and business owners. We also offer real-time account opening and activation to savings account customers, through enhanced system-driven validations. We also offer corporate salary account products and current account (i.e., checking accounts for businesses) products to our small enterprise customers, who maintain balances with us. At year-end fiscal 2023, we had a debit card base of approximately 33 million cards compared to 37 million cards at year-end fiscal 2022. The decline was due to closure of dormant and inactive accounts during fiscal 2023.

 

Fee-Based Products and Services

 

Through our distribution network, we offer various products including Government of India savings bonds, sovereign gold bonds, insurance policies, bullion and public offerings of equity shares and debt securities by Indian companies. We offer several card-based products such as credit cards, debit cards, prepaid cards, travel cards and commercial cards. We also offer a variety of mutual fund products. We levy services charges on deposit accounts. We also offer foreign exchange products to retail customers including sale of currency notes, traveler’s checks and travel cards. We also facilitate retail inward remittances from foreign geographies.

 

As a depositary participant of the National Securities Depository Limited and Central Depository Services (India) Limited, we offer depositary share accounts to settle securities transactions in a dematerialized mode. Further, we are one of the banks designated by the Reserve Bank of India for issuing approvals to non-resident Indians and overseas corporate bodies to trade in shares and convertible debentures on the Indian stock exchanges and operating their banking and custody accounts.

 

Retail lending for rural customers

 

The Bank’s rural banking operations aim to meet the financial requirements of customers in rural and semi-urban locations. Our products in this segment include working capital loans for growing crops, financing of post-harvest activities, loans against gold jewellery along with personal loans, financing against warehouse receipts, farm equipment loans and affordable housing finance and auto and two-wheeler loans. We also provide consumption loans for low-income customers. We offer financial solutions to micro-finance institutions, self-help groups, co-operatives constituted by farmers, corporations and medium enterprises engaged in agriculture-linked businesses. The rural banking

 

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portfolio of the Bank grew by 13.5% from Rs. 795.1 billion at year-end fiscal 2022 compared to Rs. 902.1 billion at year-end fiscal 2023.

 

The following table sets forth, at the dates indicated, the breakdown of the Bank’s gross rural finance portfolio.

 

   At March 31,
   2022  2023  2023  2023
   (in billion)  % share  (US$ in million)
Farmer finance1  Rs.241.0   Rs.252.2    28.0%  US$3,068 
Loans against jewellery   208.2    229.8    25.5    2,796 
Rural business credit   193.8    231.5    25.7    2,816 
Others2   152.1    188.6    20.8    2,296 
Rural advances  Rs.795.1   Rs.902.1    100%  US$10,976 

 

1. Includes kisan credit card

 

2. Includes term loans for farm equipment, self-help groups, loans to microfinance institutions for on-lending to individuals and inventory funding.

 

Our rural banking operations primarily focus on four main ecosystems identified in the rural market, which include farmers, dealers, self-employed persons and micro-entrepreneurs.

 

The farmer ecosystem includes participants such as farmers, seed producers, agri-input dealers, warehouses, agri-equipment dealers, commodity traders and agri processors. Products offered include working capital loans through the kisan credit card and gold loan products, and term loans for farm equipment, dairy livestock purchase and farm development. See also “Selected Statistical Information—Loan Concentration—Directed Lending”.

 

The dealer ecosystem comprises dealers/distributors of farm equipment, white goods, and pharmaceutical manufacturers. Similarly, the self-employed ecosystem comprises of rural entrepreneurs who are engaged into trading and manufacturing activities based out of commercial and industrial areas in the rural market dealing with both agriculture and non-agriculture related products. The micro-lending space includes women from the lower-income strata of the population, non-government organizations and other institutions working at the grass-root level in the rural economy.

 

We have scaled-up funding of electronic negotiable warehousing receipts, which provides an opportunity for farmers to access credit quickly and with ease. Farmers can use electronic negotiable warehousing receipts to get loans against underlying commodities. This protects the farmers from volatility and gives opportunities to avail better prices for their produce. Apart from meeting the financial requirements for business purposes, we also offer products to meet the personal requirements of customers in the rural ecosystem.

 

Our reach in rural areas comprises a network of branches, ATMs and field staff, and business correspondents providing last-mile access in remote areas. As at year-end fiscal 2023, we had a network of 5,900 branches, of which 51.4% were in rural and semi-urban areas with 651 branches in villages that were previously unbanked. As at March 31, 2023, we had 4,299 ATMs and cash recycler machines in rural areas. See also, “Risk Factors—Risks Relating to Our Business—Entry into new businesses or rapid growth in existing loan portfolios may expose us to increased risks that may adversely affect our business”. At year-end fiscal 2023, more than 9,500 customer service points were enabled through our business correspondent network.

 

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See also “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector—We are subject to the directed lending requirements of the Reserve Bank of India, which may also involve buying related certificates at a premium to meet the annual targets, and any shortfall in meeting these requirements may be required to be invested in Government of India schemes that yield low returns, thereby impacting our profitability. We may also experience a higher level of non-performing assets in our directed lending portfolio, which could adversely impact the quality of our loan portfolio, our business and the prices of our equity shares and ADSs.”

 

Commercial Banking for Small and Medium Enterprises and Business Banking

 

Our business banking and small and medium enterprises customers include proprietorship firms, partnership firms and public/private limited companies. We offer a wide spectrum of banking products and solutions to address their evolving business needs. This involves customized offerings, faster turnaround time, transaction convenience, timely access to capital and cross-border trade and foreign exchange. Our focus in this segment is on using digital channels and ensuring granularity, obtaining adequate collateral and robust monitoring. More than 90% of our business banking portfolio has collateral covering more than 100% of the outstanding value of the loan. The loans are generally secured by collateral in the form of property apart from a charge on current assets. Our small and medium enterprise portfolio consists of enterprises with a turnover of up to Rs. 2.5 billion. We offer a wide spectrum of banking products and solutions to small and medium enterprises to address their evolving business needs. This involves customized offerings, faster turnaround time, transaction convenience, timely access to capital and cross-border trade and foreign exchange. We offer digital solutions for on-boarding, payments and collections, lending and cross-border transactions. We focus on providing parameterized and programme-based lending for small and medium enterprises, which is granular, adequately-collateralized and regularly monitored. The loans are generally secured by collateral in the form of property apart from a charge on current assets. The small and medium enterprises portfolio of the Bank grew by 19.2% from Rs. 404.5 billion at year-end fiscal 2022 compared to Rs. 482.2 billion at year-end fiscal 2023. The business banking portfolio grew by 34.9% from Rs. 534.4 billion at year-end fiscal 2022 compared to Rs. 721.1 billion at year-end fiscal 2023.

 

We are focused on growing this portfolio by leveraging our distribution network and through various digital channels and platforms, tapping corporate ecosystems and ongoing efforts towards process decongestion.

 

Following the COVID-19 pandemic, we have provided financial assistance to clients based on various Government of India schemes, which includes providing moratorium on loan repayment and emergency credit lines to eligible small and medium enterprise customers. We had disbursed about Rs. 204.6 billion to our retail and micro, small and medium enterprises customers under the Government of India’s Emergency Credit Line Guarantee Scheme until year-end fiscal 2023.

 

Commercial Banking for Corporate Customers

 

Our product suite for corporate customers includes working capital and term loan products and transaction banking services, fee and commission-based products and services, deposits and foreign exchange and derivatives products across trade, treasury, bonds, commercial papers, channel financing, supply chain solutions, and various other activities. Our approach has been to deepen our partnership and support to clients through their life cycle. Our corporate customer base includes top business houses, large and medium private and public sector companies, financial institutions, banks, non-bank finance companies, private equity funds and financial sponsors. We have established relationships with multinational companies operating in India, and financial sponsors, including private equity funds and their investee companies. We offer transaction banking services to corporates to meet the day-to-day needs for smooth functioning of their businesses. The transaction banking services offered include

 

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account related services, payment and collection services, domestic and cross border trade finance, working capital finance and supply chain finance. We offer integrated cash management and trade finance solutions to our customers. Our transaction banking solutions are delivered to our customers through physical and digital channels and a team of account managers. In addition to leveraging the physical branch network, we have expanded our capabilities for providing transaction banking services to our customers from 211 locations at year-end fiscal 2022 to 225 locations at year-end fiscal 2023. Many of these expanded branch capabilities are in the factory/township premises of certain large conglomerates in the country.

 

Corporate Loan Portfolio

 

Our corporate loan portfolio consists of term loan products and working capital financing in the form of cash credit facilities, overdraft, demand loans and non-fund based facilities including bill discounting, letters of credit and guarantees. The domestic corporate portfolio of the Bank grew by 20.7% from Rs. 1,903.6 billion at year-end fiscal 2022 compared to Rs. 2,298.2 billion at year-end fiscal 2023. For further details on our loan portfolio, see “Selected Statistical Information—Loan Concentration”. For a description of our credit rating and approval system, see “—Risk Management—Credit Risk”.

 

We also provide financing by way of investment in marketable instruments such as fixed rate and floating rate debentures. We generally have a security interest on the fixed assets of the borrower although some of our financing is also extended on an unsecured basis.

 

Fee and Commission-Based Activities

 

We generate fee income through our lending, transaction banking, syndication and foreign exchange related solutions provided to our corporate customers. We also offer our corporate customers a wide variety of fee and commission-based products and services including documentary credits, standby letters of credit (called guarantees in India), collection and payment of export/import bills and cash management services, including collection, payment and remittance services.

 

Further, we are one of the banks designated by the Reserve Bank of India for issuing approvals to non-resident Indians and overseas corporate bodies to trade in shares and convertible debentures on the Indian stock exchanges and operating their banking and custody accounts. We also offer services such as escrow, trust and retention account facilities, online payment facilities, custodial services and tax filing and collection services on behalf of the Government of India and the governments of Indian states.

 

At year-end fiscal 2023, total assets held in custody on behalf of our clients (mainly foreign institutional investors, offshore funds, overseas corporate bodies and depositary banks for Global Depository Receipts (“GDR”) investors were Rs. 19,566.0 billion. As a registered depositary participant of National Securities Depository Limited and Central Depository Services (India) Limited, the two securities depositaries operating in India, we also provide electronic depositary facilities to investors.

 

Corporate Deposits

 

We offer a variety of deposit products to our corporate customers including current accounts, time deposits and certificates of deposits. For more information on the type, cost and maturity profile of our deposits, see “Selected Statistical Information—Funding”.

 

Foreign Exchange and Derivatives

 

We provide customer specific products and services, which cater to risk hedging needs of corporations at domestic and international locations, arising out of currency and interest rate fluctuations.

 

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The products and services include:

 

·Foreign Exchange Products

 

Products include cash, tom, spot and forwards transactions. We offer customized hedging and trading solutions to clients, on the basis of their business needs. These products are offered in India and across our international locations.

 

·Derivatives

 

We offer derivative products including interest rate swaps, currency swaps and options in all major currencies.

 

Commercial Banking for Government and Institutions

 

We provide a range of banking services including customized products and services for enhancing e-governance and financial management to government departments and bodies across various levels such as central, state, district and local bodies which include municipalities and gram panchayats. We assist the government for collection of central taxes, state taxes and goods and services tax payments through authorized branches and digital channels. Our integrated banking platforms provide simple online tax payment options to customers. Statutory payments like Employees’ Provident Fund Organization and Employees’ State Insurance Corporation dues can be done online through our platforms. These efforts also result in deposit balances for the Bank.

 

We have on-boarded a number of central and state government departments to ensure quick disbursement of funds and benefits to beneficiaries and implementing agencies through the Public Financial Management System of the Government of India. We are also assisting state level nodal agencies and last mile implementing agencies for adopting efficient release of Government of India scheme funds.

 

We also provide financial services to other institutions, including educational institutions, hospitals and cooperative societies, among others and offer a range of technology driven collections and payment solutions.

 

Commercial Banking for International Customers

 

Our international franchise focuses on four strategic pillars, namely (a) the non-resident Indian ecosystem comprising deposits, remittances, investments and asset products; (b) multinational corporation ecosystem comprising foreign multinational companies investing in India, Indian companies present in overseas markets, and back-offices of multinational companies located in India; (c) trade ecosystem, comprising primarily India-linked trade transactions; and (d) funds ecosystem, to capture foreign investment flows into India. During fiscal 2023, we continued to progress in our strategic objective of reducing the non-India linked exposures in a planned manner. Further, our overseas banking subsidiaries continue to serve local markets selectively with a focus on risk mitigation and granularity of business.

 

Many of the products that we offer through our overseas branches and subsidiaries, as well as to international customers from our domestic network, such as debt financing, trade finance and letters of credit, are similar to the products offered to our customers in India.

 

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Total assets (net of inter-office balances) of ICICI Bank’s overseas branches at year-end fiscal 2023 were Rs. 731.9 billion and total advances were Rs. 341.1 billion compared to total assets of Rs. 866.0 billion and total advances were Rs. 412.8 billion at year-end fiscal 2022. The year-on-year decrease in our overseas branches loan portfolio was primarily due to decline in the India-linked trade finance portfolio. Our overseas branches are funded by bond issuances, bilateral/syndicated loans from banks, loans from export credit agencies, money market borrowings, deposits and refinance from banks. The overseas loan portfolio of ICICI Bank was 3.3% of the overall loan portfolio at year-end fiscal 2023. The corporate fund and non-fund outstanding, net of cash/bank/insurance backed lending, was US$ 2.7 billion at March 31, 2023. Out of US$ 2.7 billion, 88.7% of the outstanding was to Indian corporates and their subsidiaries and joint ventures and 7.4% of the outstanding was to non-India companies with Indian or India-linked operations and activities and this portfolio is generally well-rated and the Indian operations of these companies are our target customers for deposit and transaction banking franchise. The Bank will continue to pursue risk calibrated opportunities in this segment. Out of US$ 2.7 billion, approximately 2.1% of the outstanding was to companies owned by non-resident Indians/person of Indian origins and 1.9% of the outstanding was to other non-India companies which is less than 0.5% of the total portfolio of the Bank. The non-India linked corporate portfolio reduced by 52.3% from about US$ 641 million year-on-year to US$ 306 million at March 31, 2023. See also, “Risk Factors—Risks Relating to Our Business—Our funding is primarily short-term and if depositors do not roll over deposited funds upon maturity, our business could be adversely affected”.

 

Our subsidiaries in the United Kingdom and Canada are full service banks offering retail, business banking, corporate banking and treasury services. These subsidiaries provide services to its customers through robust digital channels through internet and mobile banking. Our subsidiary in the United Kingdom is primarily focused on India linked business and towards meeting the banking needs of the Indian community in the United Kingdom and Germany. The core services include meeting local banking requirements, remittance services to India, and facilitating banking requirements in India. Our subsidiary in Canada originates residential mortgages, primarily insured and qualifying for insurance by either the Canadian federal government agency or insurance companies back-stopped by the Canadian federal government, and offers loans to both Canadian and US corporations as well as Indian corporations seeking to develop their business overseas.

 

At year-end fiscal 2023, ICICI Bank UK PLC had seven branches in the United Kingdom and a branch in Germany. At year-end fiscal 2023, the total assets of ICICI Bank UK PLC were US$ 2.1 billion. ICICI Bank UK PLC made a net profit of US$ 13 million during fiscal 2023, compared to US$ 11 million during fiscal 2022. At year-end fiscal 2023, loans and advances of ICICI Bank UK PLC were US$ 0.9 billion and investments were US$ 0.6 billion.

 

At year-end fiscal 2023, ICICI Bank Canada had seven branches and total assets of CAD 6.0 billion. ICICI Bank Canada earned a net profit of CAD 46 million in fiscal 2023 as compared to a net profit of CAD 29 million in fiscal 2022. At year-end fiscal 2023, net advances (net loans) of ICICI Bank Canada were CAD 5.2 billion and investments were CAD 0.6 billion.

 

See also “Risk Factors—Risks Relating to India and Other Economic and Market Risks—Financial instability in other countries, particularly countries where we have established operations, could adversely affect our business” and “Risk Factors—Risks Relating to Our Business—The exposures of our international branches and banking subsidiaries could generally affect our business, financial condition and results of operations.”

 

Branch and ATM network and call centers

 

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We deliver our products and services through a variety of channels, ranging from traditional bank branches to ATMs, cash recycler machines and call centers. In addition, our digital channels and platforms have become increasingly important to our customers. See “Technology”. At year-end fiscal 2023, we had a network of 5,900 branches across several Indian states. The branch network serves as an integrated channel for deposit mobilization and selected retail asset origination. Our focus is to create fully digital branches and touch points for customer experience in order to maximize customer engagement time for solutions. Branches with higher number of customer visits, multi-service kiosks are deployed with touch-screen self-service devices, which allow customers to use banking services like deposit cheque, get quick account credit, update passbook, transfer funds instantly to ICICI and other bank customers and more than 50 fully digital other “Do-it-yourself” services, which help reduce customer wait times.

 

The following table sets forth the breakdown of the number of branches by area for the periods indicated.

 

   At March 31, 2022  At March 31, 2023
Branch by area(1) 

Number of branches and extension counters

  % of total 

Number of branches and extension counters

  % of total
Metropolitan    1,567    28.9%   1,709    29.0%
Urban    1,074    19.8    1,160    19.7%
Semi-urban    1,599    29.5    1,712    29.0%
Rural    1,178    21.7    1,319    22.3%
Total branches and extension counters    5,418    100.0%   5,900    100.0%

 

(1)Classification of branches as per population census 2011.

 

At March 31, 2023, we had 16,650 ATMs and cash recycler machines across India. Our ATMs have additional value added services such as instant fund transfer, cardless cash withdrawal and update of mobile numbers for ICICI Bank customers.

 

Our phone banking operations across locations at Thane, Hyderabad, Guwahati, Indore, Bhubaneshwar and Chennai are operational around the clock and are equipped with interactive voice response systems, voice bot solution, voice biometric authentications, automatic call distribution, telephony integration and voice recorders. We seek to use the latest technology to provide an integrated view of customer information to the agents to get a complete overview of the customer’s relationship with us. We have a virtual relationship management platform, which provides superior and seamless connect that caters to the transaction and product needs of customers through human interface powered by artificial intelligence, which builds robust customer relationships. We have implemented a customer relationship management solution for the automation of customer service requests in all key banking products. The solution helps in tracking and timely resolution of various customer queries and issues. The solution has been deployed at the phone banking as well as at a large number of branches.

 

Investment Banking

 

Our investment banking operations principally consist of ICICI Bank’s treasury operations and the operations of ICICI Securities Primary Dealership Limited and of ICICI Securities Limited.

 

Treasury

 

Through our treasury operations, we seek to manage our balance sheet, including the maintenance of required regulatory reserves, and to optimize profits from our trading portfolio by taking advantage of market opportunities. Our domestic trading and securities portfolio includes our regulatory reserve

 

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portfolio, as there is no restriction on active management of our regulatory reserve portfolio. Our treasury operations include a range of products and services for corporate and small enterprise customers, such as forward contracts and interest rate and currency swaps, and foreign exchange products and services. See also “—Commercial Banking for Corporate Customers—Foreign Exchange and Derivatives”.

 

Our treasury undertakes liquidity management by seeking to maintain an optimum level of liquidity, complying with the cash reserve ratio requirement and seeking to maintain the smooth functioning of all our branches. We maintain a balance between interest-earning liquid assets and cash to optimize earnings and undertake reserve management by maintaining statutory reserves, including the cash reserve ratio and the statutory liquidity ratio. At year-end fiscal 2023, ICICI Bank was required to maintain the statutory liquidity ratio requirement percentage at 18% of its domestic net demand and time liabilities by way of approved securities such as Government of India securities and state government securities. We maintain the statutory liquidity ratio through a portfolio of government of India securities that we actively manage to optimize the yield and benefit from price movements. Further, as a prudent liquidity management strategy, we generally maintain excess investments in securities eligible for classification under the statutory liquidity ratio requirement. We maintain the liquidity coverage ratio and net stable funding ratio, as required under Basel III, both on a standalone basis and at the group level. The minimum requirement is 100%. The liquidity coverage ratio requirement is met by investment in high quality liquid assets, which are primarily in the form of government securities and better-rated corporate bonds. Our average liquidity coverage ratio for the three months ended March 31, 2023 was 124.13% on a standalone basis and was 121.76% on a consolidated basis. Both of these ratios were higher than the regulatory requirement of 100%. See also “Supervision and Regulation—Legal Reserve Requirements”.

 

ICICI Bank engages in investments and foreign exchange operations from Mumbai and overseas branches. As a part of our treasury activities, we also maintain proprietary trading portfolios in domestic debt and equity securities and in foreign currency assets. Our treasury manages our foreign currency exposures and the foreign exchange and risk hedging derivative products offered to our customers and engages in market making and proprietary trading in currency and interest rate market. Our investment and market risk policies are approved by the Board of Directors.

 

In general, we pursue a strategy of active management of our equity portfolio to maximize our return on investment. To reinforce compliance with the Securities and Exchange Board of India’s insider trading regulations, all dealings in our equity and debt investments in listed companies are undertaken by our treasury’s equity and corporate bonds dealing desks, which are segregated from both the other groups and desks in the treasury and from our other business groups, and which do not have access to unpublished price sensitive information about these companies that may be available to us as a lender.

 

We deal in several major foreign currencies and take deposits from non-resident Indians in major foreign currencies. We also manage onshore accounts in foreign currencies. The foreign exchange treasury manages our portfolio through money market and foreign exchange instruments to optimize yield and liquidity.

 

We provide a variety of risk management solutions to our clients, including foreign currency forward contracts, currency and interest rate swaps and options. We monitor and control the market risk and credit risk on our foreign exchange portfolio through counterparty limits, position limits, stop-loss limits and limits on the loss of the entire foreign exchange trading operations and exception reporting. See also “—Risk Management—Market Risk—Exchange Rate Risk”.

 

Securities broking and investment banking

 

ICICI Securities Limited is a financial services company operating across capital market segments including retail and institutional equity, financial product distribution, private wealth management and

 

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investment banking. As at March 31, 2023, ICICI Securities Limited served 9 million customers. ICICI Securities Limited has an online securities broking platform. ICICI Securities Limited assists its customers like retail investors, corporates, financial institutions, high net worth individuals and ultra-high networth individuals in meeting their financial goals by providing them with research, advisory and execution services. ICICI Securities Limited has a subsidiary in the United States, ICICI Securities Holdings Inc., which in turn has a subsidiary in the United States, ICICI Securities Inc., which is registered as a broker-dealer with the Securities and Exchange Commission and is a member of the Financial Industry Regulatory Authority in the United States. ICICI Securities Inc. also has a branch office in Singapore that is registered with the Monetary Authority of Singapore, where it holds a capital markets services license for dealing in capital market products in Singapore.

 

The consolidated profit after tax of ICICI Securities Limited was Rs. 11.4 billion in fiscal 2023 as compared to Rs. 14.0 billion in fiscal 2022. ICICI Securities Limited was listed on the National Stock Exchange of India Limited and BSE Limited on April 4, 2018 following an offer for sale in an initial public offering of the company. Our share ownership in ICICI Securities Limited was 74.85% at March 31, 2023.

 

On June 29, 2023, the boards of directors of ICICI Bank Limited and ICICI Securities Limited approved a draft scheme of arrangement for delisting of equity shares of ICICI Securities Limited by issuing equity shares of ICICI Bank to the public shareholders of ICICI Securities Limited in lieu of cancellation of their equity shares in ICICI Securities Limited, thereby making ICICI Securities a wholly-owned subsidiary of ICICI Bank Limited, subject to requisite approvals. The public shareholders of ICICI Securities Limited will be allotted 67 equity shares of ICICI Bank Limited for every 100 equity shares of ICICI Securities Limited.

 

I-Process Services

 

I-Process Services (India) Private Limited (“iProcess”) is an associate company of ICICI Bank. iProcess has a service provider agreement only with the Bank to provide business auxiliary services across sales, marketing, data entry, operations and collection functions. At March 31, 2023, the Bank held 19.0% of the shareholding of iProcess. In February 2023, the Board of Directors of the Bank approved a proposal for making iProcess a wholly-owned subsidiary of the Bank, subject to receipt of requisite regulatory and statutory approvals.

 

Primary dealership

 

ICICI Securities Primary Dealership is engaged in the primary dealership of Indian government securities. It also deals in other fixed income securities and interest rate derivatives. In addition to this, it also undertakes money market operations, underwriting, portfolio management services and placement of debt. ICICI Securities Primary Dealership earned a net profit of Rs. 1.3 billion in fiscal 2023 compared to a net profit of Rs. 3.3 billion in fiscal 2022. The revenues of the business are directly linked to conditions in the fixed income market.

 

Private Equity

 

Our subsidiary ICICI Venture is a diversified specialist alternative asset manager with a presence across private equity, real estate, infrastructure and special situations. During fiscal 2023, ICICI Venture concluded a total of seven new investments involving an aggregate capital outlay of approximately Rs. 22.2 billion. In the same period, ICICI Venture concluded six exit/liquidity transactions involving aggregate realization of Rs. 4.8 billion.

 

Asset Management

 

We provide asset management services through our subsidiary, ICICI Prudential Asset Management Company. ICICI Prudential Asset Management Company is a joint venture with Prudential PLC of the United Kingdom. We have 51.0% interest in the entity and Prudential PLC owns 49.0%. ICICI Prudential Asset Management Company also provides portfolio management services and advisory services to clients. ICICI Prudential Asset Management Company had average mutual fund assets under management of Rs. 4,823.4 billion during fiscal 2023. ICICI Prudential Asset Management Company earned a net profit of Rs. 15.1 billion during fiscal 2023 compared to a net profit of Rs. 14.4 billion during fiscal 2022.

 

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Insurance

 

We provide a wide range of insurance products and services through our subsidiary ICICI Prudential Life Insurance Company Limited and our affiliate ICICI Lombard General Insurance Company Limited. ICICI Prudential Life Insurance Company Limited is a joint venture with Prudential Corporation Holding Limited. Both ICICI Prudential Life Insurance Company Limited and ICICI Lombard General Insurance Company Limited are listed on relevant Indian stock exchanges.

 

ICICI Prudential Life Insurance Company Limited has a wholly owned subsidiary, ICICI Prudential Pension Funds Management Company Limited, which distributes products under the National Pension System and is a registered pension fund manager.

 

Our share ownership in ICICI Prudential Life Insurance Company Limited was 51.27% at March 31, 2023.

 

ICICI Prudential Life Insurance Company Limited had assets under management greater than Rs. 2.5 trillion at March 31, 2023 and had a market share of 6.5% on retail-weighted new business received premium in fiscal 2023 based on data published by the Life Insurance Council. The market share within the private sector was 9.9% in fiscal 2023. The total premium increased by 6.6% from Rs. 374.6 billion in fiscal 2022 to Rs. 399.3 billion in fiscal 2023. Within product segments, for fiscal 2023, there was an increase in the contribution of protection, annuity and non-linked savings products to the business of our life insurance subsidiary. While unit-linked products still contribute significantly to the business, the demand for unit linked products may be influenced by any volatility or downturn in capital markets. Our life insurance subsidiary is primarily focused on the growth in the absolute value of new business, as a key profitability metric which measures the present value of future profits from the new business written during the period. The value of new business of ICICI Prudential Life Insurance Company Limited increased from Rs 21.6 billion in fiscal 2022 to Rs. 27.7 billion in fiscal 2023, a year-on-year growth of 27.8%. The value of new business margin improved from 28.0% in fiscal 2022 to 32.0% in fiscal 2023. The profit after tax of ICICI Prudential Life Insurance Company Limited was Rs. 8.1 billion in fiscal 2023 as compared to Rs. 7.5 billion in fiscal 2022.

 

See also “Risk Factors—Risks relating to our insurance subsidiaries—Additional capital requirements of our insurance entities or our inability to monetize a part of our shareholding in these entities may adversely impact our business and the prices of our equity shares and ADSs” and “Risk Factors—Risks relating to our insurance subsidiaries—While our insurance businesses are an important part of our business, there can be no assurance of their future rates of growth or levels of profitability” and “Operating and Financial Review and Prospects—Segment Revenues and Assets—Life Insurance”.

 

ICICI Lombard General Insurance Company Limited’s gross direct premium income was Rs. 210.3 billion in fiscal 2023 as compared to Rs. 179.8 billion in fiscal 2022. During fiscal 2023, ICICI Lombard General Insurance Company Limited was ranked second general insurance company in the country with a market share of 8.2% based on gross direct premium as per the data published by the General Insurance Council. ICICI Lombard General Insurance Company Limited earned a net profit of Rs. 17.3 billion in fiscal 2023 as compared to a net profit of Rs. 12.7 billion in fiscal 2022.

 

ICICI Lombard General Insurance Company Limited was formed as a joint venture with Fairfax Financial Holdings of Canada. The joint venture was terminated on July 3, 2017. During fiscal 2021, the Board of ICICI Lombard General Insurance Company Limited approved the Scheme of arrangement for demerger of the general insurance business of Bharti AXA General Insurance Company Limited to ICICI Lombard General Insurance Company Limited with an appointed date of April 1, 2020. ICICI Lombard General Insurance Company Limited received the approval from National Company Law Tribunal

 

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through its order dated May 13, 2021 and the Insurance Regulatory and Development Authority of India granted its final approval on September 3, 2021. The merger came into effect at September 8, 2021. As consideration towards the merger, ICICI Lombard General Insurance Company Limited issued new equity shares to shareholders of Bharti AXA General Insurance Company Limited whereby the shareholding of the Bank in ICICI Lombard General Insurance Company Limited was reduced to less than 50% resulting in ICICI Lombard General Insurance Company Limited ceasing to be a subsidiary of the Bank.

 

As per the Banking Regulation Act, 1949, as amended, a bank can hold either less than 30.0% or more than 50.0% in a company. Following the transaction of ICICI Lombard General Insurance Company Limited, the Bank’s shareholding in ICICI Lombard General Insurance Company Limited has gone below 50.0%. The Bank’s holding in ICICI Lombard General Insurance Company Limited was 48.0% at March 31, 2023. The Bank had initially been granted until September 2023, that was extended till September 2024, to reduce its shareholding in ICICI Lombard General Insurance to 30.0%, to comply with the requirements under the Banking Regulation Act, 1949. In May 2023, the Board of the Bank approved acquisition of up to 4.0% of ICICI Lombard General Insurance Company Limited's shareholding, to make it a subsidiary of the Bank, subject to regulatory approvals.

 

The Insurance Regulatory and Development Authority of India issued regulations on registration of corporate agents for the sale of insurance products. As per the regulations, banks can partner with three insurance companies each in life, non-life and health insurance sectors. We have entered into an agreement with our insurance subsidiaries, ICICI Prudential Life Insurance Company Limited and ICICI Lombard General Insurance Company Limited, and operate as a corporate agent for these companies and distribute general insurance and selective life insurance products through our branches, phone banking and digital channels and earn commissions and fees from these subsidiaries.

 

Risk Management

 

As a financial intermediary, we are exposed to risks that are particular to our lending, transaction banking and trading businesses and the environment within which we operate. Our goal in risk management is to ensure that we understand, measure, monitor and manage the various risks that arise and that the organization adheres to the policies and processes, which are established to address these risks.

 

The key principles underlying our risk management framework are as follows:

 

·The Board of Directors has oversight of all the risks assumed by us.

 

·Specific committees of the Board have been constituted to facilitate focused oversight of various risks. For a discussion of these and other committees, see “Management”.

 

·Credit Committee: The responsibilities of the Credit Committee include review of developments in key industrial sectors, major credit portfolios and approval of credit proposals as per the authorization approved by the Board.

 

·Audit Committee: The Audit Committee provides direction to the audit function and monitors the quality of internal and statutory audit. The responsibilities of the Audit Committee include examining the financial statements and auditors’ report and overseeing the financial reporting process to ensure fairness, sufficiency and credibility of financial statements.

 

·Information Technology Strategy Committee: The responsibilities of the Committee are to approve information technology strategy and policy documents, review information technology

 

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risks, ensure alignment of information technology strategy with business strategy, review information technology investments by overseeing funding of information technology, review contribution of information technology to business, review future readiness of technology platforms, review progress on key projects and performance of critical systems, review key risk indicators pertaining to technology and Information Security teams, review compliance with regulatory audit observations and oversee activities of the digital council. The digital council is an internal forum to measure the Bank’s performance against the digital adoption targets set by the Government of India’s Ministry of Electronics and Information Technology. Key digital initiatives taken up by the Bank are discussed in this forum, along with measures to enhance performance.

 

·Risk Committee: The responsibilities of the Committee are to review ICICI Bank's risk management policies pertaining to credit, market, liquidity, operational, outsourcing, reputation risks, business continuity plan and disaster recovery plan and approve Broker Empanelment Policy and any amendments thereto. The Committee is also responsible for setting limits on any industry or country; reviewing the Enterprise Risk Management framework, Risk Appetite framework, stress testing framework, Internal Capital Adequacy Assessment Process and framework for capital allocation; and reviewing of the status of compliance with the Basel framework, risk dashboard covering various risks, outsourcing activities and the activities of the Asset Liability Management Committee. The Committee has oversight on risks of subsidiaries covered under the Group Risk Management Framework. The Committee also carries out cyber security risk assessment.

 

·Policies approved from time to time by the Board of Directors form the governing framework for each type of risk. The business activities are undertaken within this policy framework.

 

·Independent groups and sub-groups have been constituted across our organization to facilitate independent evaluation, monitoring and reporting of various risks. These groups function independent of the business groups/sub-groups.

 

The risk management framework forms the basis for developing consistent risk principles across the Bank and its overseas banking subsidiaries. The Board of Directors approves the Enterprise Risk Management and Risk Appetite Framework and thresholds/limits structure under which various business lines operate.

 

We are primarily exposed to credit risk, market risk, liquidity risk, operational risk, technology risk, compliance risk, cyber security risk and reputation risk. We have centralized groups, the Risk Management Group, the Compliance Group, the Legal Group, the Financial Crime Prevention and Reputation Risk Management Group and the Internal Audit Group with a mandate to identify, assess and monitor all of our principal risks in accordance with well-defined policies and procedures. In addition, the Lending Services Operations Group, Treasury and Securities Services Group and the Operations Group monitor operational adherence to regulations, policies, terms of limit approved and other internal approvals.

 

The Risk Management Group is further organized into the Credit Risk Management Group, Market Risk Management Group, Operational Risk Management Group, Credit Monitoring Group and Information Security Group. The Risk Management Group reports to the Risk Committee of the Board of Directors. The Compliance Group and the Internal Audit Group report to the Audit Committee of the Board of Directors. The Risk Management Group, Compliance Group and Internal Audit Group have administrative reporting to the Executive Director. Treasury and Securities Services Group, Lending Services Operations Group and Operations Group report to the Executive Director. These groups are independent of the business units.

 

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Credit Risk

 

Credit risk is the risk of loss that may occur from the failure of any party to abide by the terms and conditions of any contract, principally the failure to make required payments of amounts due to us. In its lending operations, ICICI Bank is principally exposed to credit risk.

 

Credit risk is governed by the Credit and Recovery Policy (“Credit Policy”) approved by the Board of Directors. The Credit Policy outlines the type of products that can be offered, customer categories and the credit approval process, credit administration, credit limits and other relevant matters.

 

ICICI Bank measures, monitors and manages credit risk at an individual borrower level and at the portfolio level for retail borrowers. ICICI Bank has a structured and standardized credit approval process, which includes a well-established procedure of credit appraisal.

 

The Bank has established a risk appetite and limit structure, with respect to credit risk, and specifically concentration risk, which includes the following measures:

 

·limits for group and borrower exposures based on rating and track record;

 

·rating-based limits with respect to incremental asset origination in the corporate portfolio;

 

·portfolio limits for buyout and securitization;

 

·establishment of a separate credit monitoring group to enhance focus on monitoring of borrowers and to facilitate proactive action wherever required; and

 

·enhanced monitoring of retail product portfolios through periodic reviews and vintage curve analysis.

 

The Credit Committee of the Board reviews the portfolio and large exposure groups. The Bank has a dedicated group, namely the Financial Crime Prevention Group, overseeing and handling the fraud prevention, detection, investigation, monitoring and reporting, as well as fraud awareness activities.

 

Credit Approval Authorities

 

The Board of Directors/Credit Committee has delegated credit approval authority to various committees, forums and individual officers under the credit approval authorization policy. The credit approval authorization policy is based on the level of risk and the quantum of exposure, and is designed to ensure that transactions with higher exposure and higher levels of risk are sent to a correspondingly higher forum/committee for approval.

 

The Bank has established several levels of credit approval authorities for its corporate banking activities - the Credit Committee, the Committee of Executive Directors, the Committee of Senior Management, the Committee of Executives, and the Corporate Lending Forum. For certain exposures under programs, approval under a joint authorization framework has been established.

 

Retail credit facilities must comply with approved product policies. All products policies are approved by the Committee of Executive Directors. The individual credit proposals are evaluated and approved by individual officers/forums on the basis of the product policies.

 

Credit Risk Assessment Methodology for Standalone Entities

 

All credit proposals other than retail products, program lending, score card-based lending to small and medium enterprises and agricultural businesses and certain other specified products are rated internally by the Credit Risk Management Group, prior to approval by the appropriate forum.

 

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The Credit Risk Management Group rates proposals, carries out industry analysis (through a centralized industry team), tracks the quality of the credit portfolio with regular rating reviews and reports periodically to the Credit Committee and the Risk Committee. The Bank also has a credit monitoring group, which monitors individual accounts jointly with the business and Risk Management Group on a regular basis including stock statements, bank statements and stock audit reports. For non-retail exposures, the Lending Services Operations Group verifies adherence to the terms of the approval prior to the commitment and disbursement of credit facilities. The Bank also manages credit risk through various limit structures, which are in line with the Reserve Bank of India’s prudential guidelines. The Bank has set up various exposure limits, including the single borrower exposure limit, the group borrower exposure limit, the industry exposure limit, the unsecured exposure limit, and limits on exposure to sensitive sectors such as capital markets, non-banking finance companies and real estate. Based on rating and tracking of the borrower and group, limits on incremental exposures have also been put in place. Limits on countries and bank counterparties have also been stipulated.

 

ICICI Bank has an established credit analysis procedure leading to appropriate identification of credit risk both at the individual borrower and the portfolio level. Appropriate appraisal and credit rating methodologies have been established for various types of products and businesses. The methodology involves assessment of quantitative and qualitative parameters. For example, for any large corporate borrower, the rating methodology entails a comprehensive evaluation of the industry, borrower’s business position in the industry (benchmarking), financial position and projections, quality of management, impact of projects being undertaken by the borrower and structure of the transaction.

 

After conducting an analysis of a specific borrower’s risk, the Credit Risk Management Group assigns a credit rating to the borrower. We have a scale of 12 ratings ranging from AAA to B. A borrower’s credit rating is a vital input for the credit approval process. The borrower’s credit rating and the default pattern corresponding to that credit rating, form an important input in the risk-based pricing framework of the Bank. Every proposal for a financing facility is prepared by the relevant business unit and reviewed by the Credit Risk Management Group before being submitted for approval to the appropriate approval authority other than retail products, program lending, score card-based lending to small and medium enterprises and agri-businesses and certain other specified products. The approval process for non-fund facilities is similar to that for fund-based facilities.

 

On our current rating scale, ratings of below BBB- (i.e., BB and B ratings) are considered to be relatively high-risk categories. Our current credit policy does not expressly provide a minimum rating required for a borrower to be considered for a loan. All corporate loan proposals for fresh/incremental exposure with an internal rating of below BBB- are sent to our Credit Committee for its approval. See also “Consolidated financial Statements—Schedules forming part of the consolidated financial statements—Additional Notes—Note 7—Credit quality indicators of loans”.

 

The appraisal process involves an in-depth study of the industry, financial, commercial, technical and managerial aspects of the borrower. An assessment of the financial requirements of the client is made in order to arrive at the amount of credit to be considered by the Bank. Each credit proposal is thereafter prepared in an appropriate appraisal format and placed before the approving authority as prescribed by the Board of Directors/ Credit Committee from time to time.

 

The following sections detail the risk assessment process for various business segments:

 

Assessment of Project Finance Exposures

 

For better risk identification, allocation and mitigation to minimize risk in project finance transactions, the Bank carries out detailed evaluation of technical and financial aspects of the project and

 

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the sponsor’s financial strength. Project finance loans are generally fully secured, and cash flows are routed through an escrow account. We may also take security interest in relevant project contracts such as concession agreements, off-take agreements and construction contracts as part of the security package. Funds are disbursed based on project progress. Project completion is considered upon satisfactory commencement of operations of the project. We continue to monitor the credit exposure until loans are fully repaid. We have adopted a more cautious and selective approach to project financing in recent years.

 

Assessment of Corporate Finance Exposures (Term loans/fixed maturity loans)

 

As part of the corporate loan approval procedures, ICICI Bank carries out a detailed analysis of funding requirements, including normal capital expenses, long-term working capital requirements, and acquisition finance. ICICI Bank’s funding of long-term requirements is assessed on the basis of detailed review of the underlying transaction and an analysis of cash flows.

 

Our analysis enables us to identify risks in these transactions. To mitigate risks, we use various credit enhancement techniques, such as collateralization, cash collateralization, creation of escrow accounts and debt service reserves. Rating review of these exposures is done based on asset quality review framework of the Bank. The Credit Monitoring Group jointly monitors these exposures along with the business and Risk Management Group.

 

Corporate finance loans can be secured by fixed assets (which normally consists of property, plant and equipment), pledge of financial assets (such as marketable securities or at times non-marketable securities) and we may obtain contractual credit enhancements such as corporate guarantees or personal guarantees from the sponsors wherever appropriate. In certain cases, the terms of financing include covenants relating to sponsors’ shareholding in the borrower and restrictions on the sponsors’ ability to sell all or part of their shareholding. We also provide unsecured loans to higher rated, well-established corporate borrowers.

 

With respect to financing of cross-border corporate mergers and acquisitions, we carry out detailed due diligence on the acquirer as well as the target’s business profile.

 

We emphasize environmental and social risk assessment for new project and corporate financing proposals subject to certain criteria. These proposals are reviewed under a social and environmental management framework that integrates analysis of the environmental and social risk assessment into the overall credit appraisal process. We are also in the process of incorporating environmental, social and governance and climate risk aspects as part of the credit evaluation process. Borrower level environmental, social and governance scores from external agencies are considered during the evaluation of a proposal. We have developed sector-specific environmental, social and governance checklists for borrower-level evaluation and a framework for assessment of climate-related physical and transition risk that a borrower could be exposed to in certain sectors. The Bank has also developed a Framework for Sustainable Financing, which provides guidance on eligibility criteria for Sustainable/Sustainability Linked Lending, guidance on assessment of facilities, monitoring & reporting of such facilities. As part of our Internal Capital Adequacy Assessment Process (“ICAAP”), we have carried out stress testing to address risks emanating from climate change on the critical infrastructure resources that support Bank’s operations. Further, the Bank considers stress testing for climate risk as part of scenario based stress testing under ICAAP. The same incorporates the impact of physical risk as well as transition risk on the borrowers.

 

Assessment of Working Capital Finance Exposures

 

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We carry out a detailed analysis of borrowers’ working capital requirements. Once credit limits are approved, we may calculate the amounts that can be lent on the basis of review of monthly stock statements provided by the borrower and the margins stipulated. Credit limits are reviewed on a periodic basis.

 

Working capital facilities are generally secured by inventories, receivables and other current assets. Additionally, in certain cases, we obtain contractual credit enhancements such as personal guarantees or corporate guarantees from sponsors, or subordinated security interests in the tangible assets of the borrower including plant and machinery.

 

Assessment of Retail Loans

 

The origination and approval of retail credit exposures are segregated to ensure independence.

 

The Credit and Policy Group is responsible for preparing credit policies and operating policies. The Credit Risk Management Group oversees the credit risk issues for retail assets including the review of all credit policies and operating policies proposed for approval by the Board or forums authorized by the Board. These groups are involved in portfolio monitoring of all retail assets and in suggesting and implementing policy changes. The Data Science and Analytics Group is responsible for devising customer-segment specific strategies, portfolio tracking and monitoring, analytics, score card development and database management. The credit team is independent from the business unit and is organized geographically to support the retail sales and service structure.

 

The Bank’s credit officers evaluate credit proposals on the basis of operating policies approved by the Committee of Executive Directors. The criteria vary across product segments but typically include factors such as the borrower’s income, the loan-to-value ratio and demographic parameters. External agencies such as field investigation agencies facilitate a comprehensive due diligence process including visits to offices and homes of borrowers whenever required. The Bank also draws upon a centralized database on delinquent loans and reports from the credit bureaus to review the borrower’s profile. Except for personal loans and credit cards, the Bank generally requires a contribution from the borrower and its loans are secured by the asset financed. For mortgage loans and used vehicle loans, a valuation agency or an in-house technical team carries out the valuations. For certain products, the Bank has implemented a credit-scoring, which forms one of the criteria for loan evaluation.

 

As part of digital credit lending, ICICI Bank has scaled up offerings to bank customers over a period of time. As part of its strategy, the Bank uses multi-factor credit filters by using data-sets to mitigate risk. The portfolio build-up strategy is based on utilizing the pre-approved customer database for origination of key retail asset products wherein major incremental origination is from existing liability customer relationships.

 

The Bank undertakes portfolio buyouts of various retail assets products. The portfolio is selected by applying selection filters like tenure, size, loan to value ratio and location, and meeting regulatory requirements with regard to minimum holding period and minimum retention requirement by the seller. The buyouts are in the form of direct assignment or by way of investment in pass through certificates.

 

The Bank has established centralized operations to manage operational risk in the back-office processes of its retail assets business and also has decentralized operations to improve turnaround time for customers. A separate team under the Credit and Policy Group undertakes review and audits of credit quality and processes across different products. The Bank has a debt services management group independent of business group to manage debt recovery. The group operates under the guidelines of a standardized recovery process.

 

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Assessment Procedures for Small Enterprises Loans and Business Banking

 

The Bank finances small enterprises, which include individual entities and financing dealers and vendors of companies. Small enterprise credit also includes financing extended directly to small enterprises as well as lending based on parameterized product-based credit facilities, which involves a cluster-based approach wherein a lending program is implemented for a homogenous group of individuals/business entities, which comply with certain laid-down parameterized norms. Further, programs can also be made for diverse group of individuals/business entities/ industries having common target market norms and go-no-go parameters as approved by the Committee of Executive Directors. The risk assessment of such a cluster involves the identification of appropriate credit norms for the target market, the use of scoring models for enterprises that satisfy these norms and a comprehensive appraisal of those enterprises, which are awarded a minimum required score in the scoring model.

 

ICICI Bank has lending programs for business banking customers, based on various financial and non-financial parameters and target market norms. The program criteria are approved by the Committee of Executive Directors and individual credit proposals are assessed by the credit team based on these approved criteria.

 

For large ticket size loans (maximum up to Rs. 400 million), an in-house developed statistical scoring model is being used for assessment of majority of cases in small and medium enterprises programs. The underwriting process integrates various digital tools like bank statement analyzer, automatic fetching of bureau reports and enhanced business rule engine to generate probability of default scores for score-based analysis. A detailed appraisal is performed based on the financial as well as non-financial parameters to assess the creditworthiness of the enterprise in all the cases. A similar approach is being followed for lending to borrowers in mid-corporate group for a maximum limit up to Rs. 500 million.

 

The Bank also finances dealers and vendors linked to large and medium entities by implementing structures to enhance the base credit quality of the vendor or dealer. The process involves an analysis of the base credit quality of the vendor or dealer and an analysis of the linkages that exist between the vendor or dealer and the company. The approval of limits to dealers and vendors takes place manually as well as digitally.

 

The risk management policy also includes setting up of portfolio control norms, continuous monitoring renewal norms as well as stringent review and exit triggers to be followed while financing such clusters or communities.

 

Assessment Procedures for Rural and Agricultural Loans

 

The rural and agricultural portfolio consists of loans to individuals and non-individuals engaged in agriculture and related activities. These loans are extended to meet crop production and maintenance, consumption, asset purchase and income generating requirements of borrowers.

 

The sales and credit decision-making functions are segregated. The Credit and Policy Group is responsible for preparing credit policies/operating policies. The Credit Risk Management Group oversees the credit risk and portfolio monitoring related issues along with the review of credit/operating policies and changes thereto pertaining to retail agricultural assets for approval by competent authorities. The credit team oversees the underwriting function and is organized geographically in line with the rural sales and service structure.

 

Rural and agriculture credit also includes financing extended on a cluster-based approach to borrowers with a homogeneous profile. The risk assessment of such cluster includes identification

 

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of appropriate credit norms, the use of scoring models for enterprises and stipulating suitable collateral norms.

 

For loans against gold ornaments and gold coins, the credit norms focus on establishing ownership and authenticity (purity and weight) of the underlying jewellery with the help of Bank appointed external appraisers. Norms with respect to loan-to-value ratio have been laid down in accordance with regulatory guidelines.

 

For loans against pledge of agricultural commodities, the credit norms focus on the quality, quantity and price volatility of the underlying commodity. A dedicated group evaluates, directly or through the agencies appointed by it at the time of funding and undertakes periodic post disbursements checks. Norms with respect to price monitoring and loan-to-value ratio have been laid down.

 

See also “Risk Factors—Risks Relating to Our Business—Entry into new businesses or rapid growth in existing loan portfolios may expose us to increased risks that may adversely affect our business”.

 

Risk Monitoring and Portfolio Review

 

We monitor credit facilities through a risk-based asset review framework under which the frequency of asset review is higher for cases with higher exposure balances and/or lower credit ratings. For corporate, small and medium enterprises, the Lending Services Operations Group verifies adherence to the terms of the credit approval prior to disbursement/limit set up.

 

The Credit Monitoring Group jointly with the business and Risk Management Group monitors corporate and business banking borrower accounts to identify triggers on the basis of account conduct and behavior. These triggers are highlighted to risk and business teams and are included in the appraisal and portfolio review process, which helps to take timely action on the exposures.

 

An analysis of our portfolio composition based on internal ratings is carried out and submitted to the Risk Committee of the Board on a quarterly basis as part of the risk dashboard. This facilitates the identification and analysis of trends in the portfolio credit risk.

 

The Credit Committee of the Bank, apart from approving proposals, regularly reviews the credit quality of the portfolio and various sub-portfolios. A summary of the reviews carried out by the Credit Committee is submitted to the Board for its information.

 

The Bank’s Enterprise Risk Management framework defines benchmark vintage curves as delinquency triggers for key retail products. Actual delinquencies for these products are monitored against these benchmark vintage curves, to enable analysis and directed collection strategies as well as review of origination norms, where required. As part of the Enterprise Risk Management framework, a threshold on incremental origination for customers with low bureau score has also been stipulated for retail portfolio.

 

Market Risk

 

Market risk is the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates, credit spreads and other asset prices. Our exposure to market risk is a function of our trading and asset-liability management activities and our role as a financial intermediary in customer-related transactions. These risks are mitigated by the limits stipulated in the Investment Policy (which includes the Derivatives Policy) and Asset Liability Management Policy, which are approved and reviewed by the Board of Directors.

 

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Market Risk Management Procedures

 

The Asset Liability Management Policy stipulates liquidity and interest rate risk limits at an aggregate level and the Asset Liability Management Committee reviews adherence to limits and determines the strategy in light of the current and expected environment. The Investment Policy addresses issues related to investments in various treasury products and includes the Derivatives Policy which is formulated in line with the comprehensive guidelines issued by Reserve Bank of India on derivatives for banks. The policies are designed to ensure that operations in the securities and foreign exchange and derivatives areas are conducted in accordance with sound and acceptable business practices and current regulatory guidelines, laws governing transactions in financial securities and the financial environment. The policies contain the limit structures that govern transactions in financial instruments. The Board has authorized the Asset Liability Management Committee and Committee of Executive Directors (Borrowing, Treasury and Investment Operations) to grant certain approvals related to treasury activities, within the broad parameters laid down by policies approved by the Board.

 

The Asset Liability Management Committee, comprising the Managing Director and Chief Executive Officer, wholetime directors and senior executives, meets periodically and reviews the positions of trading groups, interest rate and liquidity gap positions, sets deposit and benchmark lending rates, reviews the pricing methodologies for various categories of advances, reviews the valuation methodologies for various treasury products, the business profile and its impact on asset liability management and determines the asset liability management strategy, as deemed fit, taking into consideration the current and expected business environment. The Asset Liability Management Policy provides guidelines to manage liquidity risk and interest rate risk in the banking book.

 

The Market Risk Management Group is responsible for the identification, assessment and measurement of market risk. Risk limits including position limits and stop loss limits are reported on a daily basis by the Treasury and Securities Services Group and reviewed periodically. Foreign exchange risk is monitored through the net overnight open foreign exchange limit. Interest rate risk in banking book is measured through the use of re-pricing gap/ duration analysis. Interest rate risk is further monitored through interest rate risk limits approved by the Board of Directors.

 

Interest Rate Risk

 

Our core business is deposit taking, borrowing and lending in both Indian rupees and foreign currencies as permitted by the Reserve Bank of India. These activities expose us to interest rate risk.

 

Our balance sheet consists of Indian rupee and foreign currency assets and liabilities, with a predominantly higher proportion of rupee-denominated assets and liabilities. Thus, movements in Indian interest rates are our main source of interest rate risk.

 

Interest rate risk is measured through earnings at risk from an earnings perspective and through duration of equity from an economic value perspective. Further, exposure to fluctuations in interest rates is also measured by way of gap analysis, providing a static view of the maturity and re-pricing characteristics of balance sheet positions. We monitor interest rate risk through the above measures on a fortnightly basis. The duration gap analysis and interest rate sensitivity gap statements for standalone Bank are submitted to the Reserve Bank of India on a monthly basis. Additionally, the interest rate gap statements for overseas branches are submitted to the host regulator based on applicable guidelines. We also monitor sensitivities of our interest rate options portfolio.

 

ICICI Bank’s primary source of funding is deposits and, to a smaller extent, borrowings. In the rupee market, most of our deposit taking is at fixed rates of interest. We accept deposits for

 

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fixed periods, except for savings account deposits and current account deposits, which do not have any specified maturity and can be withdrawn on demand. Current account deposits in the domestic operations are non-interest bearing. Our borrowings are usually for a fixed period, with certain borrowings qualifying as capital instruments having European call options attached to them, exercisable by us only on specified dates, subject to regulatory approvals. On the asset side, we have a mix of floating and fixed interest rate assets. Our term loans are generally repaid gradually, with principal repayments being made over the life of the loan.

 

Pursuant to regulatory reserve requirements, we maintain a large part of our assets in government of India securities and in interest-free balances with the Reserve Bank of India, which are funded mainly by deposits and borrowings. This exposes us to the risk of differential movement in the yield earned on statutory reserves and the related funding cost.

 

Almost all the long tenor foreign currency loans in the overseas branches of the Bank are floating rate loans. These loans are generally funded with foreign currency borrowings and deposits in our overseas branches. We generally convert the long tenor foreign currency borrowings into floating rate dollar liabilities through the use of interest rate and currency swaps with leading international banks. Our overseas subsidiaries in the UK and Canada have fixed rate retail term deposits and fixed/floating rate wholesale borrowings as their funding sources; with the UK subsidiary additionally having floating rate savings deposits and non-interest bearing current deposits. They also have fixed and floating rate assets. Interest rate risk is generally managed by increasing/decreasing the duration of investments and government securities portfolio and/or by entering into interest rate derivatives whenever required. We are an active participant in the interest rate swap market and are one of the largest swap counterparties in India. For risks related to the transition from LIBOR, see “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector—The transition from LIBOR to other alternative reference rates may adversely affect our income and also bring about the vagaries that such alternative reference rates may have”.

 

As a part of the transition from LIBOR to alternate risk-free rates, the Bank has a cross-functional working group to monitor the developments internationally, and to oversee the LIBOR transition. The working group addresses matters primarily pertaining to exposure and impact assessment, contracts remediation, system upgrades, valuation and accounting implications and conduct and reputational risks.

 

As part of the transition plan for legacy on-balance sheet items, the Bank has amended documentation in order to transition away from LIBOR to alternate risk free rates. With respect to off balance-sheet transactions through derivatives, the Bank has adopted the International Swaps and Derivatives Association 2020 IBOR Fallbacks Protocol and has transitioned contracts with certain counterparties actively. Derivative exposures linked to INR MIFOR (which is dependent on LIBOR), were transitioned with all counterparties to alternate benchmark Modified MIFOR. The Bank has actively engaged with its customers to inform them about the transition and the options available for smooth transition. The Bank has published frequently asked questions on its website and has set up a centralized desk to handle client queries. At June 30, 2023, the Bank completed the contract remediation for most of the loans and also transitioned affected derivative contracts successfully.

 

The Bank has upgraded its systems to manage the transition. The progress with respect to the transition both on internal status as well as external developments is updated to the Bank’s Asset Liability Committee and to the Risk Committee of the Board on a periodic basis. The Board of Directors is also briefed about the LIBOR transition program periodically. See also “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector—The transition from LIBOR to other alternative reference rates may adversely affect our income and also bring about the vagaries that such alternative reference rates may have”.

 

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For a discussion of our vulnerability to interest rate risk, see “Risk Factors—Risks Relating to Our Business—Our banking and trading activities are particularly vulnerable to interest rate risk and volatility in interest rates could adversely affect our net interest margin, the value of our fixed income portfolio, our income from treasury operations, the quality of our loan portfolio and our financial performance” and “Risk Factors—Risks Relating to Our Business—Our inability to effectively manage credit, market and liquidity risk and inaccuracy of our valuation models and accounting estimates may have an adverse effect on our earnings, capitalization, credit ratings and cost of funds”.

 

Equity Risk

 

We assume equity risk both as part of our investment book and our trading book. At year-end fiscal 2023, we had a total equity investment portfolio (excluding investment in affiliates) of Rs. 193.8 billion, primarily comprising Rs. 42.8 billion of investments by ICICI Bank and Rs. 105.8 billion of investments by our insurance subsidiary. The Bank also acquires equity investments from loan conversion and also investment in unlisted equity which are long-term in nature. We also invest in alternate investment funds/ venture capital funds, primarily those managed by our subsidiary ICICI Venture. These funds primarily invest in equity and equity linked and non-convertible instruments. Our investments in these funds are similar in nature to our other equity investments and are subject to the same risks. In addition, they are also subject to risks in the form of changes in regulation and taxation policies applicable to such equity funds. ICICI Securities and ICICI Securities Primary Dealership also have a small portfolio of equity derivatives. For further information on our trading and available-for-sale investments, see “—Overview of Our Products and Services—Investment Banking—Treasury”.

 

The risk in the equity portfolio of the proprietary trading group, which manages the equity trading book of ICICI Bank, is controlled through position limits, value-at-risk approach and stop loss limits, as stipulated in the Investment Policy. The portfolio includes investments in listed equities, equity mutual funds and infrastructure and real estate investment trusts, as well as application money paid for new offerings of such investments. Value-at-risk measures the statistical risk of loss from a trading position, given a specified confidence level and a defined time horizon, see “—Selected Statistical Information”.

 

Exchange Rate Risk

 

We offer instruments like foreign exchange forwards, options, swaps and combinations thereof to clients, which are primarily banks and corporate customers. We use cross currency swaps, forwards, and options to hedge against risks arising out of these transactions and for foreign currency loans that are originated in currencies different from the currencies of borrowings supporting them. Some of these transactions may not meet the hedge accounting requirements and are subject to mark-to-market accounting. Trading activities in the foreign currency markets expose us to exchange rate risks. This risk is mitigated by setting counterparty limits, stipulating foreign exchange overnight and intra-day position limits, greek limits for options, daily/quarterly/yearly cumulative stop-loss limits and engaging in exception reporting.

 

Derivative Instruments Risk

 

The Bank offers various derivative products, including forwards, options, swaps and combinations thereof in foreign exchange and interest rates to clients for their risk management purposes. Profits or losses on account of market movements on these transactions are borne by the clients. For the transactions, which are not covered in the inter-bank market, the Bank runs open positions within the limits prescribed in its Investment Policy. The derivative transactions are subject to counterparty risk to the extent particular obligors are unable to make payment on contracts when due.

 

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In view of the margin rules for non-centrally cleared derivative transactions issued by the Basel Committee on Banking Supervision, guidelines issued by the Reserve Bank of India and guidelines issued by overseas regulators, certain derivative transactions are subject to margining and collateral exchange in accordance with a Credit Support Annex. Reserve Bank of India has permitted the Bank to post and collect margin for permitted derivative contracts with covered entities outside India. The Bank has also implemented International Swaps and Derivatives Association prescribed Standardized Initial Margin Model for estimating the initial margin requirements for some of the non-centrally cleared derivatives. The requirements are currently applicable for the overseas branches. The Bank settles certain derivative transactions through qualified central counterparties such as Clearing Corporation of India Limited and London Clearing House Limited and posts collateral in line with the margin regulations stipulated by qualified central counterparties.

 

The Bank also enters into interest rate and currency derivative transactions for the purpose of hedging interest rate and foreign exchange risk and also engages in trading of derivative instruments on its own account.

 

Credit Spread Risk

 

Credit spread risk arises out of investments in fixed income securities. Hence, volatility in the level of credit spreads would impact the value of these portfolios held by the Bank. We closely monitor our portfolio and risk is monitored by setting investment limits, rating-wise limits, single issuer limit, maturity limits and stipulating daily and cumulative stop-loss limits.

 

Liquidity Risk

 

Liquidity risk is the current and prospective risk arising out of an inability to meet financial commitments as they fall due, through available cash flows or through the sale of assets at fair market value. It includes both the risk of unexpected increases in the cost of funding an asset portfolio at appropriate maturities and the risk of being unable to liquidate a position in a timely manner at a reasonable price.

 

We manage liquidity risk in accordance with our Asset Liability Management Policy. This policy is based on applicable regulatory guidelines and is approved by the Board of Directors. The Asset Liability Management Committee of the Bank formulates and reviews strategies and provides guidance for management of liquidity risk within the framework laid out in the Asset Liability Management Policy. The Risk Committee of the Board has oversight of the Asset Liability Management Committee.

 

The Bank uses various tools for the measurement of liquidity risk including the statement of structural liquidity, dynamic liquidity cash flow statements, liquidity ratios and stress testing through scenario analysis. The statement of structural liquidity is used as a standard tool for measuring and managing net funding requirements and the assessment of a surplus or shortfall of funds in various maturity buckets in the future. The utilization against gap limits laid down for each bucket is reviewed by the Bank’s Asset Liability Management Committee.

 

We also periodically present to the Asset Liability Management Committee the dynamic liquidity cash flow statements, which in addition to scheduled cash flows, considers the liquidity requirements pertaining to incremental business and the funding thereof. As a part of the stock and flow approach, we monitor various liquidity ratios, and limits as laid down for these ratios in the Asset Liability Management Policy.

 

The Bank has diverse sources of liquidity to allow for flexibility in meeting funding requirements. For the domestic operations, this includes current accounts and savings deposits payable on demand and

 

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retail term deposits, augmented by wholesale deposits, issuance of Certificate of Deposits, borrowings and through the issuance of bonds and subordinated debt from time to time. Loan maturities and sale of investments also provide liquidity. The Bank holds unencumbered, high quality liquid assets and has certain mitigating measures to protect against stress conditions.

 

The Bank maintains prudential levels of liquid assets in the form of cash, balances with the central bank and government securities, money market and other fixed income securities. As stipulated by the regulator, banks in India are required to maintain statutory liquidity ratio at a level of 18.0% of their net demand and time liabilities in India and cash reserve ratio at a level of 4.5% of their net demand and time liabilities in India, each as of March 31, 2023  . The Bank generally holds additional securities over and above the stipulated statutory liquidity ratio requirement.

 

Banks in India are required to maintain a liquidity coverage ratio at a minimum of 100.0% on a standalone as well as consolidated basis. During fiscal 2023, the Bank maintained a liquidity coverage ratio above the stipulated level. The liquidity coverage ratio requirement is met by investments in high quality liquid assets. It primarily includes government securities, in excess of mandatory statutory liquidity ratio and better-rated corporate bonds. High quality liquid assets also includes specified portion of mandatory statutory liquidity ratio requirement held in the form of government securities under the "facility to avail liquidity for liquidity coverage ratio” and “marginal standing facility” as specified by the Reserve Bank of India from time to time.

 

At March 31, 2023, the entire statutory liquidity ratio requirement of 18.00% of net demand and time liabilities in India, 16.00% for securities eligible for the “facility to avail liquidity for liquidity coverage ratio”, and 2.00% for securities eligible for the marginal standing facility was counted towards the high quality liquid assets under the liquidity coverage ratio. On April 18, 2022, the Reserve Bank of India revised the “facility to avail liquidity for liquidity coverage ratio” within the mandatory statutory liquidity ratio requirement to up to 16.0%, an increase from the previous ratio of up to 15.0% of the net demand and time liabilities.

 

Banks in India are also required to maintain a net stable funding ratio at a minimum of 100.0% on a standalone as well as consolidated basis. The net stable funding ratio ensures resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding. During fiscal 2023, the Bank maintained net stable funding ratio above the stipulated level.

 

We have a Board approved liquidity stress-testing framework, under which we estimate the Bank’s liquidity position under a range of stress scenarios, and consider possible measures we could take to mitigate the outflows under each scenario. During fiscal 2023, the results of each of the stress scenarios were within the Board-approved limits.

 

The Risk Committee of the Board has approved a liquidity contingency plan, which lays down a framework for ongoing monitoring of potential liquidity contingencies and an action plan to meet such contingencies. The liquidity contingency plan lays down several liquidity indicators, which are monitored on a pre-defined (daily or weekly) basis and also defines the protocol and responsibilities of various teams in the event of a liquidity contingency.

 

Similar frameworks to manage liquidity risk have been established at each of the overseas banking subsidiaries of the Bank addressing the risks they run as well as incorporating host country regulatory requirements as applicable.

 

Our subsidiary in the United Kingdom has access to diverse sources of liquidity to allow for flexibility in meeting its funding requirements. In line with local regulatory requirements, ICICI Bank UK has an Internal Liquidity Adequacy Assessment Process document, which is approved by its Board of

 

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Directors. The Internal Liquidity Adequacy Assessment Process outlines the stress testing framework and liquidity and funding risk limits. These limits are monitored by Asset Liability Management Committee of ICICI Bank UK, at least on monthly basis. ICICI Bank UK has complied with these requirements throughout fiscal 2023. It maintained liquidity coverage ratio above the stipulated level of 100.0% during fiscal 2023 and complied with Pillar 2 liquidity requirements, as stipulated to it by the Prudential Regulation Authority.

 

In Canada, the liquidity coverage ratio guidelines from the Office of the Superintendent of Financial Institutions expect banks to ensure that the value of the liquidity coverage ratio be no lower than 100.0%, in the absence of financial stress. At March 31, 2023, ICICI Bank Canada maintained liquidity coverage ratio above the regulatory minimum of 100%. The Office of the Superintendent of Financial Institutions expects each Canadian bank to have an internal liquidity policy articulating and defining the role of liquid assets within the bank’s overall liquidity management system and establishing minimum targets for liquid asset holdings. ICICI Bank Canada has a Liquidity Management Policy and Market Risk Management Policy, which are approved by its Board of Directors. These limits are monitored by the Asset Liability Management Committee of ICICI Bank Canada, at least on monthly basis. ICICI Bank Canada has complied with these guidelines throughout fiscal 2023.

 

In addition, Net Cumulative Cash Flow information on a monthly basis is shared with the Office of Superintendent of Financial Institutions consisting details of maturity pattern of assets and liabilities and net cash flows.

 

See also “Operating and Financial Review and Prospects—Market Risk—Liquidity Risk”.

 

Operational Risk

 

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Operational risk includes legal risk but excludes strategic and reputational risks. Legal risk includes, but is not limited to, exposure to fines, penalties or punitive damages resulting from supervisory actions, as well as private settlements.

 

The management of operational risk is governed by the Operational Risk Management Policy approved by the Board of Directors. The Policy is applicable across the Bank including overseas branches, ensuring a clear accountability and responsibility for management and mitigation of operational risk, developing a common understanding of operational risk and assisting the business and operation groups to improve internal controls. The Board has constituted an Operational Risk Management Committee for reviewing risks associated with the various business activities of the Bank. The Operational Risk Management Committee reviews the risk profile of various key functions, the tools used for management of operational risk and implementation of the operational risk management policies as approved by the Board. The Board has also approved a framework for approval of products and processes, which requires the products and processes pertaining to products/product variants to be assessed from an operational risk perspective.

 

The key elements in the operational risk management process in the Bank are risk identification and assessment, risk measurement, risk monitoring and risk mitigation.

 

The Bank seeks to mitigate operational risk by maintaining a comprehensive system of internal controls, establishing systems and procedures to monitor transactions, maintaining key back-up procedures and undertaking regular contingency planning.

 

Operational controls and procedures at the Bank are summarized below.

 

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Operational Controls and Procedures in Retail Banking

 

The Bank has well-defined products, sales, credit and operations structures for customer sales, evaluation, servicing and monitoring. The Bank offers retail and transaction banking products to customers through various channels such as branches, phone banking, digital/online, business correspondents, and empaneled service providers. Banking transactions relating to customer accounts are processed based on built-in system checks and authorization procedures and transactions are also subjected to enhanced due-diligence based on certain criteria. The Bank has designated centralized and regional processing centers located at various cities across the country as well as contact centers in multiple cities for extending banking services to customers through phone banking.

 

Operational Controls and Procedures for Wholesale and Transaction Banking

 

The credit risk of the Wholesale banking business is independently evaluated by the credit risk management group. The legal group reviews, the security structure and documentation aspects and the operations group conducts verification and scrutiny of the loan documents vis-à-vis terms of limit approved, monitoring important covenants of the terms of limit approved, monitoring creation of the security interest and other important aspects for the facility extended by the Bank.

 

Operational Controls and Procedures in Treasury

 

The Bank has internal controls with respect to its treasury operations, which include the segregation of duties between the treasury front-office and treasury and securities services groups, certain control procedures, monitoring procedures through detailed reporting statements, and a well-defined code of conduct for dealers. The Bank has also set up limits in respect of treasury operations including deal size limits and product limits. In order to mitigate the potential risk of mis-selling, a customer suitability and appropriateness policy has been implemented. Similarly, in order to mitigate potential contractual risks over-the-counter deal execution-related conversations are recorded. Some of the control measures include independence of deal validation, deal confirmation, documentation, limits monitoring, treasury accounting, settlement, reconciliation and regulatory compliance. Further, there is monitoring for unconfirmed, unsettled deals if any, delay in settlement or confirmation, and other potential issues.

 

Operational Controls and Procedures for Information Technology

 

The Bank has a governance framework for information technology and security with oversight by the Information Technology Strategy Committee which is a Board-level committee chaired by an independent director. The security strategy at the Bank is based on the principle of defense in depth and the Information Technology risk framework of the Bank enunciates three lines of defense with clearly defined roles and responsibilities. The Bank has dedicated units responsible for information security and financial crime prevention, which are independent of the business units. In striving to provide high availability and continuity of services to its customers, including high availability of customer facing Information Technology systems, the Bank has a Business Continuity Management and Disaster Recovery Policy for timely recovery of its Information Technology systems in the event of any disaster or contingency.

 

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To monitor the systems, the Bank has an IT Command Center (which includes Network Operation Center). This is supported by the resilience in the design and redundancy at every layer in Bank’s Information Technology infrastructure (servers, storage and network). The Bank has processes for change management, identity management, access management and security operations, and these processes are periodically reviewed and refined to keep them abreast of emerging risks and to implement commensurate controls to mitigate such risks. The Bank has a fully equipped disaster recovery setup in place at remote location(s), which is subject to periodic disaster recovery drills. Further, stringent gating controls are followed at the time of introducing new applications.

 

The Bank continuously reviews and takes measures to enhance its IT resilience in terms of application architecture, network and infrastructure.

 

Outsourcing risk

 

The Board has approved an Outsourcing Policy to oversee the governance around outsourcing activities. Based on the Policy, the Board and senior management are responsible for outsourcing operations and for managing risks inherent in such outsourcing activities. The Board has constituted an Outsourcing Committee, which approves new outsourcing activities, undertakes periodic reviews and implementation of the Outsourcing Policy, and performs other functions in support of the Outsourcing Policy.

 

See also “Risk Factors—Risks Relating to Technology—We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion or data corruption attempts, and identity theft that could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal and financial exposure”.

 

Anti-Money Laundering Controls

 

The Bank has implemented Know Your Customer/Anti-Money Laundering/Combating of Financing of Terrorism guidelines in accordance with the provisions under Prevention of Money Laundering Act, 2002, rules promulgated thereunder and guidelines issued by the regulators from time to time.

 

Implementation of these guidelines includes the formulation of a Group Anti-Money Laundering Policy which establishes the standards of Anti-Money Laundering/Combating of Financing of Terrorism compliance and is applicable to all activities of the Bank including its Strategic Business Units in India, overseas branches and banking & non-banking subsidiaries; oversight by the Audit Committee on the implementation of the Anti-Money Laundering framework; appointment of a senior level officer as the Principal Officer who has the day-to-day responsibility for implementation of the Anti-Money Laundering framework; implementation of adequate Know Your Customer

 

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procedures, screening of names of customers with negative lists issued by the regulators and customer risk categorization for classifying the customers as high, medium and low risk; risk-based transaction monitoring and regulatory reporting procedures through automated applications; implementing appropriate mechanisms to train employees’ and to creating customer awareness on this subject. With an objective to identify, assess and understand the money laundering and terrorist financing risks faced and adopt effective risk mitigation measures following the risk based approach, the Bank has formulated a Money Laundering/Terrorists Financing Risk Assessment Framework covering performance of Money Laundering/Terrorists Financing risk assessment.

 

See also “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector—The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal.” and “Risk Factors—Risks Relating to Our Business—Negative publicity could damage our reputation and adversely impact our business and financial results and the prices of our equity shares and ADSs.” See also “Legal and Regulatory Proceedings.” See also “Supervision and Regulation — Regulations Relating to Know Your Customer and Anti-Money Laundering.”

 

Cyber Security

 

We have taken a comprehensive approach pertaining to cyber security and have laid down policies, standards and guidelines addressing security against cyber threats. The triad of confidentiality, integrity and availability are at the center of our comprehensive information security framework. The approach covers all aspects of prevention, detection and response. Keeping customer priorities in mind, we follow a defense in depth approach in implementing the cyber security solutions. The Bank also emphasizes customer protection aspects with adaptive authentication and awareness initiatives. We have been enabling customers to easily configure control parameters related to their cards such as limits, international access and other parameters on a self-service and real-time basis from the internet and mobile channels of the Bank. This enables customers to protect their cards from misuse. Additionally, we have devised multiple key risk indicators and dashboards to review system stability, continuity and availability and network uptime. The Bank’s Information Security Policy, Cyber Security Policy and Information Security Standards and Procedures are based on various industry standards, regulatory requirements of various jurisdictions in which the Bank operates and other inputs like internal audits and benchmarking exercises. As part of our Secure by Design philosophy, we aim to ensure that every new piece of infrastructure or application inducted is put through rigorous security testing. The Bank has a 24x7 Security Operation Centre for monitoring and surveillance of information technology systems. Considering the criticality and vitality of data protection, we have deployed a Data Leakage/Loss Prevention system with data protection rules for sensitive data exposure from the Bank’s endpoints, emails and web gateways. We also conduct and participate in cyber security drills and table top exercises to continuously fine tune our response mechanisms. See also “Risk Factors—Risks Relating to Our Technology—We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion or data corruption attempts, and identity theft that could result in the disclosure of confidential information, adversely affect our business or reputation, and create significant legal and financial exposure”.

 

Audit

 

The Internal Audit Group, governed by a Group Audit Charter and Internal Audit Policy approved by the Board of Directors, provides independent, objective assurance on the effectiveness of internal controls, risk management and corporate governance and suggests improvements. It helps us accomplish our objectives by evaluating and improving the effectiveness of risk management, internal controls and governance processes, through a systematic and disciplined approach. The Internal Audit Group acts as an independent entity and reports to the Audit Committee of the Board.

 

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The Internal Audit Group maintains staff with sufficient knowledge, skills, experience and professional certifications. It deploys audit resources with expertise in audit execution and adequate understanding of business activities. An assessment of the quality of assurance provided by the Internal Audit Group is conducted through an independent external firm once every three years. The processes within the Internal Audit Group are certified under ISO 9001-2015.

 

The Internal Audit Group has adopted a risk based audit methodology in accordance with the Reserve Bank of India guidelines. The risk based audit methodology is outlined in the Internal Audit Policy. An annual risk based audit plan is drawn up based on the risk-based audit methodology and is approved by the Audit Committee of the Board. Accordingly, the Internal Audit Group undertakes a comprehensive audit of all branches, business groups and other functions in accordance with the risk based audit plan. Resources required for implementing the risk based audit plan are also approved by the Audit Committee.

 

The Internal Audit Group also has a dedicated team responsible for information technology and information security (including cyber security) audits. The annual audit plan covers various components of information technology including applications, infrastructure, information technology governance/risk management and information technology general controls. Cyber security is a key focus area for audit, and activities undertaken by the information security function are also subjected to audit.

 

The Reserve Bank of India requires banks to have a process of concurrent audits of risk sensitive areas identified as per specific business models. Centralized Processing Centres are required to be under purview of concurrent audit. The coverage of branches/business areas under purview of concurrent audit and scope of work to be entrusted to concurrent auditors are required to be approved by the Audit Committee. In adherence with the requirements, the Internal Audit Group has put in place a systematic and structured approach for concurrent audit covering a review of high risk financial transactions originated by domestic retail liability branches, throughout India. Additionally, domestic retail liability branches having high volume of high risk financial transactions are under purview of separate concurrent audit. Various other areas including treasury related functions and trade finance transactions are also under purview of concurrent audit. Concurrent audits are also carried out at centralized and regional processing centers and at centralized operations units with a focus on areas that are identified as needing transaction testing and also to test the existence of and adherence to internal controls. Some of the head office functions are also under purview of continuous audit. The details of the concurrent audit coverage are outlined in the annual risk based audit plan, approved by the Audit Committee.

 

The audit of overseas banking subsidiaries and domestic non-banking subsidiaries is carried out by a dedicated team of resident auditors attached to the respective subsidiaries. These audit teams functionally report to the Audit Committees of the respective subsidiary and to the Internal Audit Group of the Bank. The audit of overseas branches and representative offices is carried out by audit teams consisting of auditors from India as well as a resident auditor based at the Singapore branch. International operations outsourced to India are audited by a team of internal auditors in India.

 

Legal and Regulatory Risk

 

We are involved in various litigations and are subject to a wide variety of banking and financial services laws and regulations in each of the jurisdictions in which we operate. We are also subject to a large number of regulatory and enforcement authorities in each of these jurisdictions. Any uncertainty as to the enforceability of the obligations of our customers and counter-parties, including the enforcement of collateral, creates legal risk.

 

Changes in laws and regulations could adversely affect us. Legal risk is higher in new areas of business where the law is often untested by the courts. We seek to minimize legal risk by our Legal Group providing legal, security or other documentation, identifying, mitigating and advising on legal risks for our transactions, products and services, assessing legal

 

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compliance requirements of the various business, operations and other functions, assessing legal cases or claims against the Bank for provisioning (when case or claim assessed as probable) and reporting as part of contingent liabilities in the financial statements (when case or claim assessed as possible), employing procedures designed to ensure that transactions are properly authorized and consulting internal and external legal advisors. We are also adopting an online dispute resolution mechanism (entailing mediation, conciliation or arbitration or combination thereof administered by an independent institution) for speedy resolution of claims and disputes of certain retail assets and services as an alternative to approaching courts or tribunals. Such online dispute resolution mechanism and its continuing usage will be subject to changes in law or court decisions. See also “Risk Factors—Risks Relating to Our Business—We are involved in various litigations. Any final judgment awarding material damages against us could have a material adverse impact on our future financial performance and our stockholders’ equity”, “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector—The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal.” and “—Legal and Regulatory Proceedings”.

 

Risk Management Framework for International Operations

 

We have adopted a risk management framework for our international banking operations, including overseas branches, our International Financial Services Centre Banking Unit and Offshore Banking Unit. Under the framework, the Bank’s credit, investment, asset liability management and anti-money laundering policies apply to all the overseas branches, our International Financial Services Centre Banking Unit and Offshore Banking Unit, with modifications to meet local regulatory or business requirements. These modifications may be made with the approval of our Board of Directors or the committees designated by the Board of Directors. The Board of Directors or a designated committee of the Board approve their respective risk management policies, based on applicable laws and regulations as well as the Bank’s corporate governance and risk management framework. Policies at the overseas banking subsidiaries are approved by Board of Directors of the respective subsidiaries and are framed in consultation with the related groups in the Bank as per the risk management framework.

 

The Compliance Group oversees regulatory compliance at the overseas branches, its International Financial Services Centre Banking Unit and Offshore Banking Unit. Compliance risk assessment along with the key risk indicators pertaining to our domestic are presented to the Risk Committee of our Board of Directors on a periodic basis. Management of regulatory compliance risk is considered as an integral component of the governance framework at the Bank and its subsidiaries along with the internal control mechanisms.

 

Risk Management in Certain Subsidiaries and Affiliates

 

ICICI Bank UK PLC

 

The key risks to which ICICI Bank UK PLC is exposed to include credit risk, market risk, liquidity risk, interest rate risk, operational risk and information security risk.

 

The Board of Directors of ICICI Bank UK PLC are responsible for oversight and control of the functioning of ICICI Bank UK PLC and approves all major policies and procedures. The Board is assisted by its sub-committees, the Audit Committee, Governance Committee, Risk Committee, Conduct Risk Committee and Credit Committee which have been constituted to facilitate focused oversight on various risks. ICICI Bank UK PLC’s risk appetite and policies approved by the Board/or the Board’s committees form the governing framework for each type of risk. Business activities are undertaken within the approved risk appetite and policy framework.

 

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All credit risk related issues are governed by ICICI Bank UK PLC’s Credit Risk Management Policy. ICICI Bank UK PLC takes a two-tier approach to assessment of credit risk. The first review is carried out by the commercial officer proposing the transaction and the second review comprises of an independent assessment and evaluation by an officer from the risk team. Credit risk is also managed at the portfolio level by monitoring key parameters of risk concentration such as industry exposures, country exposures, internal rating category based exposures, impact of climate related risks and large exposures.

 

ICICI Bank UK PLC has a Board approved Internal Liquidity Adequacy Assessment process document, which outlines the liquidity management process of ICICI Bank UK PLC. ICICI Bank UK PLC uses various tools for measurement of liquidity risk including the statement of structural liquidity, liquidity ratios and stress testing through scenario analysis. In line with its liquidity risk appetite, ICICI Bank UK PLC maintains adequate high quality liquid assets/central bank reserves to cover projected stressed outflows under various scenarios. High quality liquid assets are maintained to comply with the liquidity coverage requirements stipulated by the Prudential Regulation Authority.

 

ICICI Bank UK PLC has Board or Board committee approved policies for managing market risk such as its treasury policy manual and mandate, interest rate risk in the banking book management policy, valuation policy, model validation policy and independent price verification policy. For monitoring and managing market risk, it uses various risk metrics, including the duration of equity, delta net interest income, delta economic value of equity, portfolio limits, price value of one basis point change in interest rate, price value of one basis point change in credit spread, stop loss limits and value at risk limits.

 

The management of operational risk (including fraud risk) is governed by the Operational Risk Management Policy approved by the Board Risk Committee. Operational risk elements include operational incident management, techniques for risk identification and measurement, monitoring through key risk indicators and risk mitigation techniques. ICICI Bank UK PLC has also implemented an outsourcing and third party risk management policy, reviewed and approved by the Board Risk Committee on an annual basis, to mitigate outsourcing and third party risks and ensure the application of a standardized approach for all outsourcing and third party arrangements.

 

ICICI Bank UK PLC’s Conduct Risk Appetite Framework is approved by the Board of ICICI Bank UK PLC and reviewed on an annual basis by the Board Risk Committee as part of the overall risk appetite framework of the Bank. ICICI Bank UK PLC’s Conduct Risk Appetite is closely aligned to the Financial Conduct Authority requirements and expectations. It balances the need of all stakeholders by acting as both a governor of risk and driver of current and future business strategy, with particular focus on delivering fair outcomes to the customers of ICICI Bank UK PLC. ICICI Bank UK PLC has also established a Conduct Risk Policy, which is aligned with the Conduct Risk Appetite Framework and ensures that effective governance arrangements are in place for managing and monitoring conduct risk exposure of ICICI Bank UK PLC.

 

ICICI Bank UK PLC has implemented an integrated approach to IT security and established information security governance through monitoring at the Information Technology and Security Committee. Additionally, periodic presentations are provided to the Board Risk Committee on cyber threat landscape and the measures like periodic vulnerability and penetration testing, Application security life cycle assessment, information security awareness programs and cyber incident management undertaken to mitigate risks. At March 31, 2023, ICICI Bank UK PLC had obtained the “Cyber Essentials” certificate and badge which demonstrates that ICICI Bank UK PLC’s information security processes and procedures meet the UK baseline standards.

 

 

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ICICI Bank Canada

 

ICICI Bank Canada is exposed to risks such as credit risk, market risk, operational risk, structural interest rate risk, liquidity risk, compliance and reputation risk. ICICI Bank Canada has developed an Enterprise Risk Management Framework designed to ensure that the risks are identified, measured and monitored effectively. The framework also requires the establishment of policies and procedures to monitor and mitigate the risks.

 

The Board of Directors of ICICI Bank Canada has oversight on all risks assumed by ICICI Bank Canada. The Board has established committees and assigned specific mandates to the committees for providing oversight for the various risks facing it. The policies approved by the Board create the governing framework for managing various risks faced by ICICI Bank Canada. Business activities are undertaken within this policy framework.

 

The Risk Committee of the Board has delegated the operational responsibility for credit risk management to the Management Credit Committee within the broad parameters and limits laid down in the Corporate and Commercial Credit and Recovery Policy, Retail Credit Recovery Policy, and Residential Mortgage Underwriting Policy. The Management Credit Committee approves credit proposals before recommending them to Risk Committee, which manages the credit risk on a portfolio basis and reviews asset quality and portfolio quality on a monthly basis.

 

The Risk Committee has delegated operational responsibility for market risk management, structural interest rate risk management and liquidity risk management to the Asset Liability Committee within the broad parameters and limits laid down in the Market Risk Management Policy and Liquidity Management Policy respectively. The Asset Liability Committee reviews matters pertaining to Investment and Treasury operations and the implementation of risk mitigation measures and recommends major policy changes governing treasury activities to the Risk Committee. Asset Liability Committee reviews adherence to market risk and liquidity risk requirements of the Office of the Superintendent of Financial Institutions, internal control guidelines and limits.

 

The Risk Committee has delegated operational responsibility for management of operational risk to the Non-Financial Risk Committee under the Management Committee. Non-Financial Risk Committee is responsible for managing operational risks in the day-to-day operations of ICICI Bank Canada, Fraud Risk and Compliance related risk. The Non-Financial Risk Committee under the oversight of Management Committee reviews the Operational, Compliance and Fraud Risk Management implementation and risk profiles on a monthly basis.

 

ICICI Securities Primary Dealership

 

ICICI Securities Primary Dealership is a primary dealer and has Government of India securities as a significant proportion of its portfolio. The Corporate Risk Management Group at ICICI Securities Primary Dealership has developed comprehensive risk management policies which seek to manage the risks generated by the activities of the organization. The Corporate Risk Management Group develops and maintains models to assess market risks which are constantly updated to capture the dynamic nature of the markets. The Corporate Risk Management Group also participates in the evaluation and introduction of new products and business activities.

 

ICICI Securities Primary Dealership has an internal Risk Management and Information Technology Strategy Committee which is chaired by an Independent Director and comprises members of its Board of Directors. The Risk Management and Information Technology Strategy Committee is responsible for analyzing and monitoring the risks associated with the different business activities of ICICI Securities Primary Dealership and overseeing adherence to the risk and investment limits set by its Board of Directors.

 

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ICICI Prudential Life Insurance Company

 

The risk governance structure of ICICI Prudential Life Insurance Company consists of the Board, Board Risk Management Committee, Product Management Committee, Executive Risk Committee and its sub-committees. The Board, on the recommendation of the Board Risk Management Committee, has approved the risk policy which covers the identification, measurement, monitoring and control standards relating to various individual risks, namely investment (market, credit and liquidity), insurance, reputation and operational (including legal, compliance, outsourcing, customer dissonance, business continuity, information and cyber security) risks. The Board periodically reviews the potential impact of strategic risks such as changes in macro-economic factors, government policies, regulatory environment and tax regime on the business plan of the ICICI Prudential Life Insurance Company.

 

In addition to these risks, the life insurance industry faces sustainability risks related to environmental, social and governance issues, including climate change. The risk management framework of the ICICI Prudential Life Insurance Company seeks to identify, measure and control its exposures to all these risks within its overall risk appetite. Accordingly, sustainability risks, including climate-related risks are integrated in the risk management framework of ICICI Prudential Life Insurance Company.

 

The risk policy sets out the governance structure for risk management at ICICI Prudential Life Insurance Company. The Board Risk Management Committee, which consists of non-executive directors, formulates the risk management policy, including asset liability management, monitors all risks across various lines of business and establishes appropriate systems to mitigate such risks. The Board Risk Management Committee also defines ICICI Prudential Life Insurance Company’s risk appetite, review its risk profile, oversees the effective operation of the risk management system and advises the Board on key risk issues.

 

During the year, a Product Management Committee has been constituted as per Insurance Regulatory and Development Authority of India regulations to review and approve products/riders in line with Board approved policy on product management and pricing.

 

The Executive Risk Committee, which comprises senior management, is responsible for assisting the Board and the Board Risk Management Committee in their risk management duties by guiding, coordinating and overseeing compliance with the risk management policies and, in particular, is jointly responsible along with the Product Management Committee for the approval of all new products launched by ICICI Prudential Life Insurance Company.

 

The risk management model of ICICI Prudential Life Insurance Company comprises a four-stage continuous cycle, namely identification and assessment, measurement, monitoring and control of risks. ICICI Prudential Life Insurance Company’s risk policy details the strategy and procedures adopted to follow the risk management cycle at the enterprise level. A risk report detailing the key risk exposures faced by ICICI Prudential Life Insurance Company and mitigation measures is placed before the Board Risk Management Committee on a quarterly basis.

 

ICICI Lombard General Insurance Company

 

ICICI Lombard General Insurance Company is principally exposed to risks arising out of the nature of business underwritten and credit risk on its total investment assets as well as the credit risk it carries on its reinsurers. In respect of business risk, ICICI Lombard General Insurance Company seeks to diversify its insurance business across product classes, industry sectors and geographical regions with focus on achieving a balance between the corporate and retail business mix to achieve favorable claim ratio and risk diversification. ICICI Lombard General Insurance Company has a risk retention and reinsurance policy whereby tolerance levels are set as per the organizational risk appetite. ICICI Lombard General Insurance Company also has the ability to limit its risk exposure by way of re-insurance and co-insurance arrangements.

 

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Investments of the ICICI Lombard General Insurance Company are governed by the investment policy approved by its Board of Directors within the norms stipulated by the Insurance Regulatory and Development Authority of India.

 

ICICI Lombard General Insurance Company also has various subcommittees to monitor risks related to environmental and social governance, product management, operational, market, outsourcing risks and other risks. ICICI Lombard General Insurance Company continues to closely watch the evolving situation for appropriate risk mitigation and management.

 

Loan Portfolio

 

Our gross loan portfolio increased by 17.1% from Rs. 9,475.1 billion at year-end fiscal 2022 to Rs. 11,095.0 billion at year-end fiscal 2023. At year-end fiscal 2023, 90.2% of our gross loans were rupee loans. See also “Operating and Financial Review and Prospects—Financial Condition—Assets—Advances”.

 

Collateral —Completion, Perfection and Enforcement

 

Our loan portfolio largely consists of corporate finance and working capital loans to corporate borrowers, loans to retail customers, including home loans, automobile loans, commercial business loans, personal loans and credit card receivables and agricultural financing. Our unsecured loans primarily include personal loans, credit card receivables and loans to higher-rated corporate borrowers. For loans which are secured, we generally stipulate that the loans should be collateralized at the time of loan origination. However, it should be noted that obstacles within the Indian legal system can create delays in enforcing collateral. See also “Risk Factors—Risks Relating to Our Business—If the level of our non-performing assets increases and the overall quality of our loan portfolio deteriorates, our business will suffer”. In India, there are no regulations stipulating loan-to-collateral limits, except in the case of home loans and loan against gold ornaments and jewellery.

 

Secured consumer loan portfolio

 

Secured consumer loans for the purchase of assets, such as mortgage loans and automobile loans are secured by the assets being financed (predominantly property and vehicles).

 

Depending on the type of borrower and the asset being financed, the borrower may also be required to contribute towards the cost of the asset. Accordingly, the security value is generally higher than the loan amount at the date of loan origination.

 

For other secured consumer loans, such as loans against property and property overdrafts, we generally require collateral of 125.0% of the loan amount at origination.

 

Commercial loans

 

The Bank generally requires collateral at origination for commercial loans. We may also extend unsecured facilities in certain circumstances. Such circumstances may include working capital limits outside consortium, short term requirements of the borrower, regulatory norms/restrictions on taking security and facilities where adequate structural comforts are available to mitigate the envisaged credit risks and retail loans such as credit cards and personal loans. We also provide unsecured loans to higher rated, well-established corporates.

 

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The collateral for project and other corporate loans are usually immovable assets which are typically mortgaged in the Bank’s favor, or movable assets, which are typically hypothecated or pledged in the Bank’s favor, except for projects such as road/airport and other concession based projects. These security interests must be perfected by the registration of these interests within time limits stipulated under the Companies Act with the Registrar of Companies pursuant to the provisions of the Companies Act, 2013 when borrowers are constituted as companies. Security interests upon immovable property are generally required to be registered with the relevant Sub- Registrar in terms of the Registration Act, 1908. This registration amounts to a constructive public notice of the security interests. We may also take security of a pledge of financial assets like marketable securities, and obtain corporate guarantees and personal guarantees and sponsors wherever appropriate. In certain cases, the terms of financing include covenants relating to sponsor shareholding in the borrower and restrictions on the sponsors’ ability to sell all or part of their shareholding. Covenants involving equity shares generally have a top-up mechanism based on price triggers. See also “Risk Factors—Risks Relating to Our Business—The value of our collateral may decrease or we may experience delays in enforcing our collateral when borrowers default on their obligations to us which may result in failure to recover the expected value of collateral security exposing us to a potential loss”.

 

The Bank generally requires collateral value at 150.0% of the outstanding loan amounts for loans to real estate companies and lease rental discounting facilities. Our lease rental discounting facility is a loan facility offered to borrowers where the loans are granted against confirmed future lease rental payments to be received by the borrowers. Further, the Bank has also laid down limits for unsecured exposures which restrict the exposure to unsecured facilities.

 

For working capital facilities, the current assets of borrowers are generally taken as collateral. Each borrower is required to declare the value of current assets periodically. The borrower’s credit limit is subject to an internally approved ceiling that applies to all borrowers. We calculate a borrower’s credit limits as a certain percentage of the value of the collateral, which is intended to provide us with an adequate margin, should the borrower default.

 

Additionally, in some cases, we may take further security on fixed assets, a pledge of financial assets like marketable securities, or obtain corporate guarantees and personal guarantees of sponsors wherever appropriate. We also accept post-dated checks or cash (by way of term deposits of the Bank duly lien marked our favor) as additional comfort for the facilities provided to various entities.The Bank has an internal framework for updating the collateral values of commercial loans on a periodic basis. In the case of lending under consortium banking arrangement, a valuation report is obtained as per the timelines stipulated by the lead bank. The Bank is generally entitled, by the terms of security documents, to enforce security and appropriate the proceeds towards the borrower’s loan obligations without reference to the courts or tribunals unless a client makes a reference to such courts or tribunals to challenge such enforcement. As per the credit policy of the Bank, we comply with the extant regulatory guidelines with respect to collateral valuation in the case of non-performing accounts.

 

In case of consumer installment loans, we obtain direct debit mandates or post-dated checks towards repayment on pre-specified dates. Post-dated checks, if dishonored, may entitle us on occurrence of certain events to initiate criminal proceedings against the issuer of the checks. We are also adopting online dispute resolution mechanism (entailing mediation, conciliation or arbitration or combination thereof administered by an independent institution) for speedy resolution of claims and disputes of certain retail assets and services as an alternative to approaching courts or tribunals. Such online dispute resolution mechanism and its continuing usage will be subject to changes in law or court decisions.

 

We recognize that our ability to realize the full value of the collateral in respect of current assets is affected adversely by, among other things, delays on our part in taking immediate action, delays in bankruptcy proceedings, defects in the perfection of collateral (including due to

 

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inability to obtain approvals that may be required from various persons, agencies or authorities) and fraudulent transfers by borrowers and other factors, including current legislative provisions or changes thereto and past or future judicial pronouncements. The value and time to dispose the collateral could also be impacted by policy decisions. In addition, the Bank generally has a right of set-off for amounts due to us on these facilities. The Bank generally requires its working capital loan customers to submit data on their working capital position on a regular basis, so that we can take any actions required before the loan becomes impaired. On a case-by-case basis, we may also stop or limit the borrower from drawing further credit from its facility.

 

Loan Pricing

 

Based on the guidelines of the Reserve Bank of India, all rupee loans extended by Banks and credit limits renewed with effect from April 1, 2016 are required to be priced with reference to marginal cost of funds based lending rate. As required by the guidelines, we publish the ICICI Bank marginal cost of funds based lending rate for various tenures on a monthly basis.

 

The Reserve Bank of India, through its circular dated September 4, 2019 and February 26, 2020, amended the Master Direction – Interest Rate on advances and mandated banks to link all new floating rate personal or retail loans (e.g., housing loans or auto loans) and floating rate loans to micro, small and medium enterprises extended by banks to specified external benchmarks. The interest rate of external benchmark linked floating rate loans shall be reset at least once in three months. For borrowers other than retail and micro, small and medium enterprises, the Bank has the option to offer floating rate loans linked to external benchmark or marginal cost of funds based lending rate. Currently, ICICI Bank links its external benchmark linked floating rate loans to the Reserve Bank of India repo rate and treasury bill rates as published by Financial Benchmarks India Pvt. Ltd.

 

Subsidiaries, Associates and Joint Ventures

 

The following table sets forth certain information relating to our subsidiaries, joint ventures and consolidated entities at year-end fiscal 2023.

 

Name

Year of formation

Activity

Ownership interest

Total income(1)

Net worth(2)

Total assets(3)

        (in millions, except percentages)  
ICICI Venture Funds
Management Company Limited
January 1988 Private Equity/venture capital fund management  100.00%               Rs. 886           Rs. 2,474            Rs. 3,017
             
ICICI Securities Primary Dealership Limited(4) February 1993 Securities investment, trading and underwriting  100.00%  13,743  15,822  344,631
             
ICICI Prudential Asset Management Company Limited(4) June 1993

Asset management company for ICICI

Prudential Mutual Fund 

 51.00%  28,382  23,131  28,048
             

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Name

Year of formation

Activity

Ownership interest

Total income(1)

Net worth(2)

Total assets(3)

ICICI Prudential Trust Limited June 1993 Trustee company for ICICI Prudential Mutual Fund  50.80%  12  17  20
             
ICICI Securities Limited(4) March 1995 Securities broking & Merchant Banking  74.85%  34,223  28,251  155,365
             
ICICI International Limited January 1996 Asset management  100.00%  43  122  129
             
ICICI Trusteeship Services Limited April 1999 Trusteeship Services  100.00%  2  9  9
             
ICICI Home Finance Company Limited(4) May 1999 Housing Finance  100.00%  19,508  28,070  189,449
             
ICICI Investment Management Company Limited March 2000 Asset management and investment advisory  100.00%  124  187  238
             
ICICI Securities Holdings Inc.(4)(5) June 2000 Holding company  100.00%  3  133  134
             
ICICI Securities Inc.(4)(5) June 2000 Securities Broking  100.00%  222  365  435
             
ICICI Prudential Life Insurance Company Limited July 2000 Life insurance  51.27%  509,292  100,918(6)  2,558,472
             
ICICI Bank UK PLC February 2003 Banking  100.00%  6,750  26,158  176,013
             
ICICI Bank Canada September 2003 Banking  100.00%  14,060  25,256  363,465
             
ICICI Prudential Pension Funds Management Company Limited(7) April 2009 Pension fund management and Points of Presence  100.00%              164                577               652
             
ICICI Strategic Investments Fund(8) February 2003 Venture capital fund  100.00%  Rs. 9  Rs. 119  Rs. 153

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(1)Total income represents gross income from operations and other income of the entity.

 

(2)Net worth represents share capital, share application money and reserves and surplus of the entity.

 

(3)Total assets represent fixed assets, advances, investments and gross current assets (including cash and bank balances) of the entity.

 

(4)Number as per respective entity Ind AS financial statements pursuant to migration to Ind AS by these entities.

 

(5)ICICI Securities Holdings Inc. and ICICI Securities Inc. are a wholly owned subsidiary of ICICI Securities Limited.

 

(6)Includes share capital, share application money-pending allotment, securities premium and fair value reserve.

 

(7)ICICI Prudential Pension Funds Management Company Limited is a wholly owned subsidiary of ICICI Prudential Life Insurance Company Limited.

 

(8)This entity has been consolidated as per Accounting Standard 21 – Consolidated Financial Statements.

 

The following table sets forth certain information on our affiliates whose results were included in the consolidated financial statements under Indian GAAP at year-end fiscal 2023.

 

Name(1)

Year of formation

Activity

Ownership interest

Total income(2)

Net worth(3)

Total assets(4)

        (in millions, except percentages)  
ICICI Lombard General Insurance Company Limited October 2000 General insurance  48.02%  Rs. 262,483  Rs. 106,061(5)  Rs. 550,862
             
I-Process Services (India) Private Limited April 2005 Services related to back end operations  19.00%  9,576  471  1,525
             
NIIT Institute of Finance,
Banking and Insurance
Training Limited
June 2006 Education and training in banking, finance and insurance  18.79%  193  161  245
             
ICICI Merchant Services
Private Limited
July 2009 Merchant acquiring and  servicing  19.01%  6,617  6,334  9,509
             
India Infradebt Limited October 2012 Infrastructure finance  42.33%  16,321  28,063  193,017
             
India Advantage Fund-III June 2005 Venture capital fund  24.10%  2  624  908
             
India Advantage Fund-IV August 2005 Venture capital fund  47.14%  1  569  576
             
Arteria Technologies Private Limited February 2007 Software company  19.98%  Rs. 364  Rs. 333  Rs. 624

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(1)These entities have been accounted for as per the equity method as prescribed by AS 23 on ‘Accounting for Investments in Associates in Consolidated Financial Statements’.

 

(2)Total income represents gross income from operations and other income of the entity.

 

(3)Net worth represents share capital/unit capital (in case of venture capital funds) and reserves and surplus of the entity.

 

(4)Total assets represent fixed assets, advances, investments and gross current assets (including cash and bank balances) of the entity.

 

(5)Includes share capital, share application money-pending allotment, securities premium and fair value reserve.

 

At year-end fiscal 2023, all of our subsidiaries and joint ventures were incorporated in India, except the following five companies:

 

·ICICI Securities Holdings Inc., incorporated in the United States;

 

·ICICI Securities Inc., incorporated in the United States;

 

·ICICI Bank UK PLC, incorporated in the United Kingdom;

 

·ICICI Bank Canada, incorporated in Canada;

 

·ICICI International Limited, incorporated in Mauritius.

 

ICICI Securities Holdings Inc. is a wholly owned subsidiary of ICICI Securities Limited and ICICI Securities Inc. is a wholly owned subsidiary of ICICI Securities Holdings Inc. ICICI Securities Holdings Inc. and ICICI Securities Inc. are consolidated in ICICI Securities’ Limited’s financial statements.

 

Technology

 

Technology organization

 

Dedicated technology teams are responsible for the implementation and support of technology platforms and solutions used across various business functions. Besides the business facing technology teams, there are technology operations and technology infrastructure teams responsible for providing. monitoring and maintaining the technology solutions including data center and cloud infrastructure of the Bank. The Technology Management Group is a team which is responsible for the technology strategy of the Bank including implementation of enterprise architecture. Our startup engagement and investment team seeks to leverage innovation in the startup and technology ecosystem.

 

Digital platforms and journeys for retail customers

 

We use artificial intelligence and machine learning based engines to develop customer profiles and curate personalized offerings for them. We offer various solutions such as account opening, payment solutions, home loans, automobile loans, personal loans, credit cards, term life insurance, health insurance and investment solutions to our customers suiting their life-stage needs through our digital channels –via our retail internet banking platform and our mobile banking application, iMobile Pay. Our retail internet banking platform offers users a native dashboard, semantic and personalized search options and an interface that can be personalized by them to suit their requirements and preferences. The open architecture based feature of iMobile Pay allows users to make payments using unified payments interface even if they do not have an account with us. The features ‘Pay to contact’ and ‘Scan to Pay’ continued to drive payments growth in fiscal 2023. These features have led to an increase in adoption of iMobile Pay. We continuously seek to improve user experience on iMobile Pay to attract more customers. Other features introduced on iMobile Pay include the personal finance management solution, a unique personal finance, expense and budget management tool to engage with customers digitally and help them manage their finances effectively. The app also introduced a ‘One view card’, a dedicated card in the app, where customers can see all pre-approved loans and card offers in one click. There are over 400 services on the app, with a voice search that makes navigation across these services quick and convenient.

 

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We use video interaction for carrying out Know Your Customer while onboarding new customers. We offer instant home loan approvals, car loan disbursements, personal loan disbursements and credit cards that are accessible entirely through our retail internet banking platform and iMobile Pay. The processing of loans is digitized, enabling instant disbursement to pre-approved customers. We also offer an instant digital credit facility, PayLater, on iMobile Pay which enables pre-approved customers to access instant credit for buying small ticket items through unified payments interface. iLens is an integrated, digital lending solution for mortgages which covers all facets of loan lifecycle starting from sales till disbursement, including property appraisal. It is a single interface for employees, third party agencies and distribution channels with the objective of providing smooth transaction experience and enhanced operational efficiency. iLens has an inbuilt customer interface “TrackMyLoan” through which the customers can track real time status of their loan application, submit documents, respond to queries and access various communications and documents like an approval letter or fees acknowledgment. Mortgage is the first retail product which went live on iLens platform and other retail products are in the process of being on-boarded. This is expected to further enable the Bank to provide enhanced customer experience and increase its ability to capture the entire customer 360° ecosystem in a frictionless and digital way, thereby creating value for customer and the Bank.

 

Digital payments and partnerships

 

We have continued to strengthen our position in the digital payments ecosystem by designing seamless journeys for customers, facilitating higher volumes and prompting recurrent transactions. Our strategy is to participate in unified payments interface, which is a funds transfer system that enables real-time movement of funds, both directly through our own platforms, and partner with third party players in the peer-to-peer and peer-to-merchant space.

 

FASTag is an electronic toll collection system in India operated by the National Highways Authority of India through prepaid radio frequency identification tags. We are one of the leading banks in electronic toll collection on highways through FASTag. We have not only pioneered the usage of FASTag for toll payments at various national and state highway but also expanded the usage of FASTag for parking payments at airports, malls, hospitals and tech parks across the country.

 

We have partnerships such as with Amazon Pay, a leading global ecommerce company, and MakeMyTrip, a leading Indian online travel portal, Emirates Skywards and others to offer co-branded credit cards. We offer these credit cards to our customers as well as non-ICICI Bank account holders. Amazon Pay credit cards continued to see healthy traction with over 4.0 million Amazon Pay credit cards were issued until year-end fiscal 2023. We aim to provide comprehensive solutions to the new-to-bank customers that have been acquired through Amazon Pay credit cards. The growth in credit card transactions was driven by higher activation rate through digital onboarding of customers, including Amazon Pay credit cards, and automated and effective portfolio management.

 

Digital platforms and solutions for rural customers

 

We use imagery from observation satellites to measure an array of parameters related to the land, irrigation and crop patterns which is used in combination with demographic and financial parameters to make expeditious lending decisions for farmers. This has helped in reducing the time taken for credit assessment.

 

Technology in debt service management

 

Our Debt Servicing practice has been built on the core of leveraging on technology and advanced data analytics that enables us to reach Right Customer at the Right Time using non-intrusive channel at an optimal cost. We collect over 40% of our early defaults through Machine Learning Technology (“MLT”)

 

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based risk models using contactless channel i.e. interactive voice bot, intelligent Interactive Voice Response (“IVR”) and Short Messaging Service (“SMS”) in more than 13+ languages. We have been using various digital payment solution that helps in collecting over 90% of payment digitally. For our Rural portfolio we use satellite based images and data algorithms to enhance the collection efficiencies.

 

Digital platforms and journeys for business banking customers, small and medium enterprise customers, merchant ecosystem and ecommerce ecosystem

 

Our digital platform, InstaBIZ, is a one stop solution for all banking needs catering to small and medium enterprises, individuals, proprietors and merchants. We have seen an increase in the engagement level of customers on the InstaBIZ app. In line with evolving trends of shift towards open architecture, the InstaBIZ app is interoperable and is available to both ICICI Bank customers and non-ICICI Bank customers for availing the multiple product offerings. Any customer can now open current account instantly through Know Your Customer Video (video KYC) in a seamless paperless manner which leverages our Application Programme Interfaces that auto fill the account opening form and validate the identity of the merchant instantly using Permanent Account Number/Aadhaar number. Through ‘InstaOD Plus’, customers of any bank can avail an overdraft up to Rs. 2.5 million instantly. Our customers can activate the overdraft facility into their current account instantly, while customers of other banks can do so after opening of a current account with us digitally by using Know Your Customer video. The ‘Manage and Grow your business’ section within InstaBIZ is powered by multiple banking partners for accounting, taxation, analytics and networking. Customers can use auto-reconciliation with accounting partners, which gives the customer a single click experience for all his business needs without having to manage between different platforms.

 

Our Trade Online platform allows customers to perform most of their trade finance and foreign exchange transactions, such as regularization of bill of entry and export bills, accessing letters of credit and fixed deposit backed bank guarantees, accessing export credit, and facilitating import and export bill collections digitally. The platform also enables clients to manage regulatory compliances. With a view to meet the working capital requirements of exporters, we have launched Insta Export Packing Credit (Insta EPC), a digital solution, which offers instant export finance to customers. The process automates the entire scrutiny cycle through integrations with various internal and external applications.

 

During fiscal 2023, we launched APIs for trade finance, a solution that establishes a direct communication channel by linking the customer’s enterprise resource planning (“ERP”) and the Bank’s internal systems in a secure and seamless manner. Trade APIs enable end-to-end encryption of data and real-time updates. It helps in streamlining the flow of information from the customers’ ERP to the Bank’s systems. Electronic Bank Guarantee (“eBG”) is an Application Programming Interface (“API”) based digital workflow, which eliminates physical issuance, stamping, authentication and paper intensive record maintenance of bank guarantees.

 

Our strategy in the merchant ecosystem space involves onboarding merchants through acquiring platforms or by providing them payment gateways and then cross-selling other financial products and services seamlessly. Our “Merchant STACK” offers an array of banking and value-added services to retailers, online businesses and large e-commerce firms. The main pillars of the Merchant STACK include a zero-balance Super Merchant Current Account which offers various benefits such as digital account opening and instant overdraft facilities based on point-of-sale transactions. Current accounts for individuals and sole proprietors can now be opened swiftly through the video KYC process. Throughout fiscal year 2023, we have continued our investment efforts in enriching the product offerings for merchants by introducing new functionalities such as e rupee redemption, voice notification of quick response (“QR”) transactions on the Instabiz app, acceptance of Rupay credit card on QR, customized settlement cycles and more. Merchants can also perform instant reconciliation by using the Connected

 

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Banking services, which integrates banking with the merchants’ accounting system. The Merchant STACK also offers a digital store management feature for invoicing, inventory and collections management.

 

The e-commerce ecosystem lends significant opportunities for us to offer digital solutions to customers and merchants selling their goods through e-commerce websites. Our ‘Cardless Equated Monthly Instalment (“EMI”)’ facility enables our pre-approved customers to convert their transactions into equated monthly installments at the check-out section of the e-commerce website or mobile application. Some key solutions offered to e-commerce entities and their sellers include an overdraft facility, composite pay Application Programme Interfaces enabling payments through various channels, foreign currency fixed deposit, working capital and easy payment solutions. For customers utilizing e-commerce platforms, we offer solutions such as digital wallets, prepaid cards, co-branded credit cards, and instantaneous credit through the Bank's PayLater solution.

 

Digital platforms and solutions for corporate and institutional customers and their ecosystems

 

“ICICI STACK for Corporates” offering comprehensive solutions to corporates and their ecosystem like channel partners, dealers, vendors, employees and other stakeholders, thus bringing the full range of banking services to the customer. ICICI STACK for Corporates offers customized services to companies in over 20 key industries and their entire ecosystem. Armed with the Bank’s state-of-the art digital platforms, these services can further be tailor-made for companies within an industry. The four main pillars of ‘ICICI STACK for Corporates’ are (1) digital banking solutions for corporates; (2) digital supply chain management solutions; (3) digital banking services for employees; and (4) curated services for senior client personnel. Platforms offered to corporate customers as a part of ICICI STACK for Corporates include Corporate Internet Banking, Trade Online and FX Online, and other platforms. Trade Emerge, an online platform for cross-border trade, is a one stop solution for all the trade related needs of exporters and importers. It eliminates the need for companies to coordinate with multiple touchpoints. Trade Emerge has also been integrated with Corporate Internet Banking and InstaBIZ and Trade Online to ensure that all banking and other needs of exporters and importers are fulfilled inside the ICICI ecosystem. Since the launch of Trade Emerge in fiscal 2022, the platform has witnessed an encouraging response from both ICICI and non-ICICI customers. During fiscal year 2023, we increased the scope of services being offered on Trade Emerge platform by partnering with service providers who are industry leaders. These additional services include warehousing, inland logistics, logistics documentation and regulatory information. We have also enabled instant and hassle free current account opening on Trade Emerge and have set up a dedicated phone banking team, which will help us in catering to customer needs more quickly.

 

Our solutions to meet the needs of customers and their ecosystems are supported by robust online channels and Application Programme Interfaces that aim to impart convenience and efficiency to our clients.

 

Supply chain financing is an integral part and a focus area towards deepening our coverage of the corporate ecosystem. Our wide range of supply chain and structured trade products offers a one stop solution to corporate clients and their supply chain partners helping in optimizing their working capital needs and increasing efficiencies in their ecosystem. These supply chain solutions are offered digitally through our platforms namely OneSCF, FSCM, CorpConnect and DigitalLite, wherein corporates can seamlessly manage their supply chain requirements of payments, collection, data reconciliation and customized dashboards in a convenient and paperless environment thereby bringing in efficiencies in the corporates supply chain management. Our digital approving engine assess the credit eligibility of the corporate’s dealers and vendors for credit through business rule engine, Goods and Services Tax returns, intelligent algorithm with automated bureau checks, dedupe checks.

 

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We have a strong focus on integrating banking with corporate ERP system using API not only for financial transactions but also for non-financial transactions. Few of these are fixed deposit creation, bank reconciliations, holding collections then validating with ERP and confirming before crediting to corporate bank accounts. To give a one-stop solution for all statutory requirements of the customer, we facilitated online payment of customs duty along with direct taxes, Goods and Services Tax and various others tax payments.

 

Our treasury-trading infrastructure has an internet protocol telephony based architecture. We have enhanced our existing process of automation in the treasury business, thus reducing trading risks and enhancing market competitiveness. The iTreasury feature on our corporate internet banking platforms offers a unified, intuitive, one-view dashboard to corporates to meet their treasury requirements. We have centralized the processing systems of treasuries of all our overseas branches and banking subsidiaries. As a result, the processing of transactions as well as the applications used for deal entry are now centrally located and maintained in India.

 

Transforming into BankTech

 

In fiscal 2023, we continued to progress on our journey from Bank to BankTech and invested in key technology solutions which provide us competitive edge across business and operational capabilities. From a business perspective, the priorities driving our technology focus include improving customers’ digital experiences across various touch points and enabling sales and cross-selling of products and services with data serving as the foundation for informed decision-making leading to the creation of comprehensive value propositions for customers. We constantly upgrading and strengthening the technology infrastructure with a goal to build a secure, stable and resilient technology infrastructure and improving operational efficiency. Business process optimisation through adoption of intelligent automation platforms including robotic processes have enabled efficiency across business and operational functions. These have brought about faster turnaround time besides enabling increased capacity for handling transaction volumes and customer requirements. As part of our technology strategy, we focus on creating an enterprise architecture framework across digital platforms, data and analytics, micro services-based architecture, cloud computing, cognitive intelligence and other emerging technologies. This is based on the founding pillars of scalability, modularity, flexibility and agility, resilience and reliability, and creating delightful and digitally native customer experiences to enable sustainable profitable growth. The key priorities that dominate our technology requirements include our technology platforms, embedded banking, cloud adoption and data platforms and analytics.

 

We have a dedicated data science and analytics team that works across business areas on projects relating to business analytics, decision strategies, forecasting models, machine learning, rule engines and performance monitoring. We maintain a comprehensive enterprise wide data warehouse and employ statistical and modelling tools for leading-edge analytics.

 

In driving an innovation and start-up mindset, we have set up an Innovation Centre to collaborate with and invest in fintech startups and co-develop products aligned with the Bank’s digital roadmap. The engagements with the startups are focused on payments, digital lending, customer experience, risk management and platforms.

 

Data Center and Disaster Recovery System

 

We have a data center at Hyderabad, which is designed to optimize energy efficiency and accommodate high server densities. We also have a disaster recovery data center at Jaipur. We are also creating additional capacity through new data centers in Mumbai. We have developed business continuity plans, which would help facilitate continuity of critical businesses in the event of a disaster. These plans are tested periodically and have been prepared in line with the guidelines issued by the Reserve Bank of

 

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India and have been approved by our Board of Directors. The Bank has also equipped itself with state-of-the-art infrastructure management systems which leverage Internet of Things based technology at its data center for optimal utilization of energy and reduction of operational costs.

 

Competition

 

We face competition in all our principal areas of business from Indian and foreign commercial banks, housing finance companies, non-banking financial companies, new differentiated banks in the private sector such as payments banks and small finance banks, non-bank entities offering retail payments and other services, mutual funds and investment banks. We seek to gain competitive advantage over our competitors by offering innovative products and services, using technology, building customer relationships and developing a team of highly motivated and skilled employees. We evaluate our competitive position separately in respect of our products and services for retail and corporate customers.

 

Commercial banks in India meet the short-term financial needs, or working capital requirements, of industry, trade and agriculture, provide long-term financing to sectors like infrastructure and provide retail loan products. At March 31, 2023, there were approximately 139 scheduled commercial banks in the country, with a network of approximately 1,55,063 branches serving approximately Rs. 184.3 trillion in deposit accounts. Scheduled commercial banks are banks that are listed in the second schedule of the Reserve Bank of India Act, 1934, and are further categorized as public sector banks, private sector banks and foreign banks. Scheduled commercial banks have a presence throughout India, with approximately 63.2% of bank branches located in rural or semi-urban areas of the country.

 

Commercial Banking Products and Services for Retail Customers

 

In the retail markets, competition has traditionally been from foreign and Indian commercial banks, non-banking financial companies and housing finance companies. In recent years, competition is also emerging from new types of banks that have entered the financial market such as small finance banks and payments banks and non-bank entities offering payments and other services.

 

Non-financial companies, particularly international technology companies including large e-commerce players and internet-based service providers, are increasing their presence in the financial sector and are offering payment platforms and select services. We are currently partnering with some of these entities to jointly offer payment and credit products and services. Some or all of these entities, which have substantially more resources than us and other Indian banks, may eventually seek a larger share of the banking and financial services market in India. ICICI Bank is also undertaking various initiatives in developing a strong technology architecture like focus on platforms and digitization, continuous investments in innovations and security features to be able to respond to the needs of customers with agility.

 

We seek to compete in this market through a comprehensive product portfolio and effective distribution channels, which include digital channels, branches and partnerships. We seek to build a localised understanding of market requirements through analytics and develop an efficient distribution and resource allocation strategy. We offer a comprehensive suite of products and services to customers. These include savings, investment, credit and protection products based on customer needs, along with convenient payment and transaction banking services. We continuously strive to adopt a ‘Fair to Customer, Fair to Bank’ approach across all our businesses.

 

Commercial Banking Products and Services for Agricultural and Rural Customers

 

In our commercial banking operations for agricultural and rural customers, we face competition from public sector banks that have large branch networks in rural India. Other private sector banks and non-

 

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banking finance companies have also increased their focus on rural markets. We also face competition from specialized players such as rural-focused financial institutions and micro-finance companies. The Reserve Bank of India has issued licenses to specialized small finance banks, which have higher directed lending targets compared to banks and will compete in the rural and unorganized sectors. We seek to compete in this business based on our product strategy, capturing ecosystems, technological capabilities and having multiple channels and an approach to holistically meet the financial needs of customers in this segment.

 

Commercial Banking Products and Services for Corporate Customers

 

We seek to compete in this segment based on our service and prompt turnaround time that we believe are significantly faster than public sector banks, as well as the significant improvement in our funding base and funding cost in recent years which enables us to participate profitably in higher rated corporate credit. We seek to compete with the large branch networks of the public sector banks through our multi-channel distribution, ecosystem branches and technology-driven delivery capabilities.

 

We compete with foreign banks in cross-border trade finance based on our wider geographical reach in India relative to foreign banks and our technology-based customized trade financing solutions enabling most transactions to be undertaken digitally. We have leverage our balance sheet size, wider branch network, strong technological capabilities and our international presence to compete in treasury-related products and services.

 

Other private sector banks also compete in the corporate banking market on the basis of efficiency, service delivery and technology. However, we believe that our size, capital base, strong corporate relationships, wider geographical reach and ability to use technology to provide innovative, value-added products and services provide us with a competitive edge.

 

Commercial Banking Products and Services for International Customers

 

In our international operations, we face competition from Indian public sector banks with overseas operations, foreign banks with products and services targeted at non-resident Indians and Indian businesses and other service providers such as remittance services. Foreign banks have become more competitive in providing financing to Indian businesses leveraging their strength of access to lower cost foreign currency funds. We are seeking to position ourselves as an Indian bank offering products and services focused on non-resident Indians, capturing the ecosystem of multi-national corporates and India-linked trade and funds corridors with an extensive distribution network in India, to gain competitive advantage. We seek to leverage our technology capabilities developed in our domestic businesses to offer convenience and efficient services to our international customers. We also seek to leverage our strong relationships with Indian corporations in our international business.

 

Insurance and Asset Management

 

Our insurance and asset management businesses face competition from existing dominant public sector players as well as new private sector players. We believe that our subsidiaries, ICICI Prudential Life Insurance Company Limited and ICICI Prudential Asset Management Company Limited and our affiliate, ICICI Lombard General Insurance Company Limited, have built strong product, distribution and risk management capabilities, achieving strong market positions in their respective businesses. We believe that the ability to leverage ICICI Bank’s retail franchise and distribution network is a key competitive advantage for our insurance and asset management subsidiaries.

 

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Employees

 

At year-end fiscal 2023, we had 157,799 employees, including sales executives, employees on fixed term contracts and interns. Of these, ICICI Bank employed 129,020 employees at year-end fiscal 2023. Of our 157,799 employees at year-end fiscal 2023, 89,197 were professionally qualified, holding degrees in management, accountancy, engineering, law, computer science, economics or banking.

 

We dedicate a significant amount of senior management time in ensuring that employees remain highly motivated and are aligned to the organization’s core employee proposition. Employee compensation is linked to performance of the Bank and we encourage the involvement of our employees in the overall performance and profitability of the Bank. Performance and succession planning systems have been instrumental in assisting management in career development. Management believes that it has good working relationships with its employees.

 

ICICI Bank pays performance linked retention pay to its front-line employees and junior management and performance bonus to its middle and senior management. Performance linked retention pay aims to reward front-line and junior managers mainly on the basis of skill maturity attained through experience and continuity in role which is a key differentiator for customer services. The Bank uses a higher proportion of variable pay at senior levels and lower variable pay at front-line staff and junior management levels. The quantum of bonus for an employee does not exceed a certain percentage of the total fixed pay in a year. Within this percentage, if the bonus exceeds a predefined limit, a part of the bonus is deferred and paid over a period. Senior managers and employees in senior management are also given employee stock options as variable pay. The deferred portion of variable pay pertaining to the assessment year or previous years (as defined in the policy) is subject to malus, under which the Bank prevents vesting of all, part or none of the unvested variable pay in the event of assessed divergence in the Bank’s provisioning for non-performing assets exceeding the prescribed threshold, in the event of a reasonable evidence of deterioration in financial performance, in the event of gross misconduct and/or in the event of other acts as mentioned in the policy. In such cases (other than assessed divergence), variable pay already paid out may also be subjected to claw back arrangements, as applicable. See also “Management—Compensation and Benefits to Directors and Officers—Employee Stock Option Scheme”.

 

ICICI Bank has training centers, where various training programs designed to meet the changing skill requirements of its employees are conducted. These training programs include orientation sessions for new employees and management development programs for mid-level and senior executives. The training centers regularly offer courses conducted by faculty, both national and international, drawn from industry, academia and ICICI Bank’s own organization. Training programs are also conducted for developing functional as well as managerial skills. Products and operations training are also conducted through web-based training modules. ICICI Bank has focused on providing blended learning solutions to the employees. Digital and behavioral learning interventions have been introduced along with functional trainings (including on risk and compliance) for various business groups in retail, wholesale, transaction banking and others. These programs are customized and presented after detailed need analysis based on role, vintage and functions. The Bank has worked for creating a structure where every role under each business unit has suitable learning programs.

 

In addition to basic compensation, employees of ICICI Bank are eligible to receive loans from ICICI Bank at subsidized rates and to participate in its provident fund and other employee benefit plans. See also “Management—Compensation and Benefits to Directors and Officers—Employee Stock Option Scheme”.

 

Properties

 

Our existing registered office is located at ICICI Bank Tower, Near Chakli Circle, Old Padra Road, Vadodara 390 007, Gujarat, India. Our corporate headquarters are located at ICICI Bank Towers, Bandra-Kurla Complex, Mumbai 400 051, Maharashtra, India. The Board of Directors at their Meeting held on

 

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May 9, 2020 approved the shifting of registered office to its corporate headquarters. The Shareholders at the Annual General Meeting held on August 14, 2020 also approved the shifting of registered office of the Bank.

 

ICICI Bank had a domestic branch network consisting of 5,900 branches, 16,650 ATMs and cash recycler machines at March 31, 2023 compared to 5,418 branches, 16,609 ATMs and cash recycler machines at March 31, 2022. These facilities are located throughout India. In addition to branches, extension counters and ATMs, ICICI Bank has 54 controlling or administrative offices, including our registered office at Vadodara and our corporate headquarters at Mumbai, 66 processing centers and 46 currency chests.

 

We also provide residential facilities to employees in India. At March 31, 2023, we owned 488 apartments for providing residential facilities to our employees.

 

Legal and Regulatory Proceedings  

 

We are involved in various litigations and are subject to a wide variety of banking and financial services laws and regulations in each of the jurisdictions in which we operate. We are also subject to a large number of regulatory and enforcement authorities in each of these jurisdictions. We are involved in a number of legal proceedings and regulatory relationships in the ordinary course of our business, some of which have resulted in penalties imposed on and paid by us in the past.

 

The following matters have been settled under settlement regulations with the Securities and Exchange Board of India:

 

·In September 2019, Securities and Exchange Board of India imposed a penalty of Rs. 1 million on ICICI Bank Limited and a penalty of Rs. 0.2 million on the former Compliance Officer of ICICI Bank for alleged delayed disclosure of an agreement relating to the merger of ICICI Bank Limited with former Bank of Rajasthan. The former Compliance Officer and the Bank had filed an appeal against the order of Securities and Exchange Board of India with the Securities Appellate Tribunal which converted the monetary penalty imposed on the Bank and former Compliance Officer to a warning.

 

Subsequently, Securities Exchange Board of India filed an appeal with the Supreme Court of India against the order passed by the Securities Appellate Tribunal against the appeal filed by ICICI Bank whereby the monetary penalty imposed on the Bank was modified to a warning. Separately, the Bank also filed an appeal with the Supreme Court of India against the Securities Appellate Tribunal order. These matters were heard by the Supreme Court of India wherein the Supreme Court directed an interim stay on the operation of the orders passed by the Securities Appellate Tribunal. The Bank and former Compliance Officer subsequently filed counter affidavits before the Supreme Court of India. To bring closure to the matter, the former Compliance Officer and the Bank filed the settlement application with Securities and Exchange Board of India under Securities and Exchange Board of India (Settlement Proceedings) Regulations, 2018 pursuant to which former Compliance Officer and the Bank has paid the settlement amount of Rs 3.1 million and Rs 5.5 million, respectively, to Securities and Exchange Board of India. The Supreme Court subsequently disposed off all the appeals in view of the settlement between the parties. Further, in May 2022, Securities and Exchange Board of India communicated to the Bank that in view of the order of the Supreme Court, the matter stands settled in respect of the appeals as mentioned in the said order.

 

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The Bank also adheres to the anti-money laundering requirements as specified by the regulators of respective geographies. The Bank’s anti-money laundering framework is subject to audit by the Internal Audit Department and their observations are reported to the Audit Committee at regular intervals.

 

·In 2017, the Bank received three notices from Unique Identification Authority of India for non-compliance of certain requirements of guidelines under Aadhaar (Authentication) Regulations, 2016. The Bank has responded to these notices and is awaiting further communication from Unique Identification Authority of India in this regard.

 

·On October 3, 2022, ICICI Bank Limited’s New York Branch entered into a consent order with its federal banking supervisor, the Office of the Comptroller of the Currency, which requires the Bank’s New York Branch to enhance certain processes in its Bank Secrecy Act/Anti-Money Laundering program and establish and maintain an effective Sanctions Compliance program. The consent order does not involve any monetary penalty.

 

The observations made by the Office of the Comptroller of the Currency are restricted only to the New York Branch of ICICI Bank Limited which constitutes 0.61% of ICICI Bank’s total assets at June 30, 2022 and the Bank believes that the consent order will not have a material adverse effect on its business, nor does the consent order restrict any of the New York Branch’s existing activities, apart from requiring the corrective actions as specified under the consent order. The Bank’s New York Branch is committed to taking all necessary and appropriate steps to address the aspects identified and implement the corrective actions as approved by the Office of the Comptroller of the Currency.

 

Contingent tax liability

 

At year-end fiscal 2023, our contingent tax liability was assessed at an aggregate of Rs. 82.5 billion (March 31, 2022: Rs. 84.8 billion), mainly pertaining to income tax, service tax, goods and services tax and sales tax/value added tax demands by the Government of India’s tax authorities for past years. We have appealed against each of these tax demands. Based on consultation with counsel and favorable decisions in our own and other similar cases as set out below, management believes that the tax authorities are not likely to be able to substantiate their tax assessments and, accordingly, we have not provided for these tax demands at year-end fiscal 2023. Disputed tax issues that are classified as remote are not disclosed as contingent liabilities by us.

 

Of the contingent tax liability of Rs. 82.5 billion (March 31, 2022: Rs. 84.8 billion):

 

Rs. 72.4 billion (March 31, 2022: Rs. 73.2 billion) related to appeals filed by us or the tax authorities with respect to assessments mainly pertaining to income tax and interest tax, where we were relying on favorable precedent decisions of the appellate authorities and opinions from counsel. The key disputed liabilities were:

 

   

·      Rs. 29.0 billion (March 31, 2022: Rs. 29.6 billion) related to whether interest expenses can be attributed to earning tax-exempt income. We believe that no interest can be allocated as there are no borrowings earmarked for investments in shares/tax free bonds and our interest free funds are sufficient to cover investments in the underlying tax free securities. We have relied on favorable opinion from counsel and past decisions by the appellate authorities in the Group’s own cases and other similar cases;

 

·      Rs. 15.0 billion (March 31, 2022: Rs. 15.0 billion) related to the disallowance of mark-to-market losses on derivative transactions treated by the tax authorities as notional losses. We have relied on favorable opinion from counsel and past decisions by the appellate authorities

  

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in the Group’s own cases and other similar cases, which had allowed the deduction of mark-to-market losses from business income;

 

·        Rs. 5.3 billion (March 31, 2022: Rs. 5.2 billion) related to disallowance of provision for operating expense by the tax authorities treating it as contingent in nature. We have relied on favorable opinion from counsel and past decisions by the appellate authorities in other similar cases;

 

·        Rs. 5.1 billion (March 31, 2022: Rs. 6.0 billion) related to the disallowance of interest paid on perpetual bonds as the tax authorities do not deem these as borrowings and therefore the interest paid on these bonds has not been allowed as a deduction. We have relied on a favorable opinion from legal counsel and past decision by the appellate authorities in the Group’s own case;

 

   

·        Rs. 4.7 billion (March 31, 2022: Rs. 4.7 billion) related to the disallowance of depreciation claims on leased assets, due to treatment of the lease transactions as loan transactions by the tax authorities. We have relied on favorable opinion from counsel and past decisions by the appellate authorities in the Group’s own case and other similar cases;

 

·        Rs. 3.6 billion (March 31, 2022: Rs. 3.6 billion) related to the disallowance of written-off amounts for credit cards for claiming bad debt write-offs. It was disallowed on the ground that the credit card business is neither a banking business nor pertaining to money lending and hence did not fulfill conditions for claim of bad debt write-off. We have relied on a favorable opinion from counsel and past decision by the appellate authorities in the Group’s own case;

 

·        Rs. 3.4 billion (March 31, 2022: Rs. 3.4 billion) relates to interest on non-performing assets de-recognized as per the Reserve Bank of India guidelines after 90 days. Interest income is assessed to tax on the ground that tax provisions have 180 days limit as against 90 days followed by the Bank. We have relied on favorable opinion from counsel and past decisions by the appellate authorities in our own and other similar cases;

 

·        Rs. 1.0 billion (March 31, 2022: Rs. 1.0 billion) related to taxability of amounts withdrawn from the special reserve. The Bank had maintained two special reserve accounts, which included a special reserve created up to assessment year fiscal 1998. Withdrawals from the account were assessed as taxable by the tax authorities for the assessment years fiscal 1999 to fiscal 2001. We have received favorable orders in respect of these assessment years. However, the income tax authorities have preferred further appeal against the favorable orders;

 

 

Rs. 8.9 billion (March 31, 2022: Rs. 10.2 billion) was in respect of service tax and goods and service tax matters which mainly pertain to the demands along with interest and penalty levied by the service tax and goods and service tax authorities wherein we are relying on favorable opinion from counsel. The key disputed liabilities were:

 

·        Rs. 2.1 billion (March 31, 2022: Rs. 2.0 billion) relates to disallowance of input credit on ATM interchange fees paid to acquiring banks and switching fee paid to settlement agency on the basis of monthly statement and 100% penalty on the same. We have relied on favorable opinion from counsel;

 

 

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·        Rs. 1.5 billion (March 31, 2022: Rs. 1.5 billion) relates to service tax and interest on interchange fees received by us as an issuing bank. We have relied on favorable opinion from counsel;

 

·        Rs. 1.1 billion (March 31, 2022: Rs. 1.1 billion) pertaining to ICICI Strategic Investment Fund relates to retention of contribution received by the fund, being treated as income received towards the services rendered by the fund to its contributors. We have relied on favorable opinion from counsel.

 

  Rs. 1.2 billion (March 31, 2022: Rs. 1.3 billion) pertained to sales tax/value added tax demand. The matters mainly relate to procedural issues like submission of statutory forms and adhoc additions in turnover. We have relied on favorable opinions from the counsels and decisions in own/other cases.

 

Based on judicial precedents in our own and other cases, and upon consultation with the tax counsel, we believe that it is more likely that our tax position will be sustained and accordingly, no provision has been made in the accounts.

 

The above contingent liabilities do not include Rs. 34.9 billion (March 31, 2022: Rs. 36.2 billion), considered as remote. Of the total disputed tax demands classified as remote, Rs. 30.5 billion (March 31, 2022: Rs. 30.8 billion) pertained mainly to the deduction of bad debts, broken period interest and levy of penalties which are covered by favorable Supreme Court of India decisions in own/other cases and Rs. 3.6 billion (March 31, 2022: Rs. 4.5 billion) pertained to error requiring rectification by tax authorities. Therefore, they were not required to be disclosed as contingent liability.

 

Litigation

 

A number of litigations and claims against ICICI Bank and its directors are pending in various forums. The claims on ICICI Bank mainly arise in connection with civil cases involving allegations of service deficiencies, property or labor disputes, fraudulent transactions, economic offences and other cases filed in the normal course of business. We are also subject to counterclaims arising in connection with our enforcement of contracts and loans. A provision is created where an unfavorable outcome is deemed probable and in respect of which a reliable estimate can be made. In view of the inherent unpredictability of litigation and for cases where the claim amount sought is substantial, the actual cost of resolving litigations may be substantially different from the provision held.

 

We held a total provision of Rs. 794 million at year-end fiscal 2023 for 677 cases with claims totaling to Rs. 1.7 billion, where an unfavorable outcome was deemed probable and in respect of which a reliable estimate could be made.

 

For cases where an unfavorable outcome is deemed to be reasonably possible but not probable, the amount of claims is included in contingent liabilities. At year-end fiscal 2023, such claims amounted to a total of Rs. 3.0 billion relating to 45 cases. It was not possible to estimate the possible loss or range of possible losses for these cases due to the nature of the cases and other external factors. For cases where the possibility of an unfavorable outcome is deemed remote, we have not made a provision, nor have we included the amount of the claims in these cases in contingent liabilities.

 

In some instances, civil litigants have named our directors as co-defendants in legal proceedings against ICICI Bank. There were 357 such cases at year-end fiscal 2023. Management believes, based on consultation with counsel, that the claims and counterclaims filed against us in the above legal proceedings that are assessed as remote are frivolous and untenable and their ultimate resolution will not have a material adverse effect on our results of operations, financial condition or liquidity. Based on a

 

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review of other litigations by Legal Group, management believes that the outcome of such other matters will also not have a material adverse effect on our financial position, results of operations or cash flows.

 

At year-end fiscal 2023, there were 113 ongoing litigations (including those where the likelihood of our incurring liability is assessed as “probable”, “possible” and “remote”), each involving a claim of Rs. 10 million or more against us, with an aggregate amount of Rs. 771.8 billion (to the extent quantifiable and including amounts claimed jointly and severally from us and other parties).

 

For proceedings filed by the former Managing Director and Chief Executive Officer relating to her termination, see “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector —The board of directors of the Bank has, pursuant to an independent enquiry, taken action against the former Managing Director and CEO. In the event the Bank is found by any of the enquiries in the matter by government and regulatory agencies to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations or financial condition and reputation.”

 

We cannot predict the timing or form of any future regulatory or law enforcement initiatives, which we note are increasingly common for international banks, but we would expect to co-operate with any such regulatory investigation or proceeding.

 

American Depository Receipt Fees and Payments

 

Fees and Charges Payable by Holders of our ADSs

 

The fees and charges payable by holders of our ADSs include the following:

 

i)a fee not in excess of US$ 0.05 per ADS is charged for each issuance of ADSs including issuances resulting from distributions of shares, share dividends, share splits, bonuses and rights distributions;

 

ii)a fee not in excess of US$ 0.05 per ADS is charged for each surrender of ADSs in exchange for the underlying deposited securities;

 

iii)a fee for the distribution of the deposited securities pursuant to the deposit agreement, such fee being an amount equal to the fee for the execution and delivery of ADSs referred to in item (i) above which would have been charged as a result of the deposit of such securities, but which securities were instead distributed by the depositary, Deutsche Bank Trust Company Americas, to ADR holders.

 

Additionally, under the terms of our deposit agreement, the depositary   is entitled to charge each registered holder the following:

 

i)taxes and other governmental charges incurred by the depositary or the custodian on any ADS or an equity share underlying an ADS including any applicable penalties thereon;

 

ii)transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities, including those of a central depository for securities (where applicable);

 

iii)any cable, telex, facsimile transmission and delivery expenses incurred by the depositary; and

 

iv)customary expenses incurred by the depositary in the conversion of foreign currency, including, without limitation, expenses incurred on behalf of registered holders in connection with

 

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compliance with foreign exchange control restrictions and other applicable regulatory requirements, together with all expenses, transfer and registration fees, taxes, duties, governmental or other charges payable by the depositary.

 

In the case of cash distributions, fees, if applicable, are generally deducted from the cash being distributed. Other fees may be collected from holders of ADSs in a manner determined by the depositary with respect to ADSs registered in the name of investors (whether certificated or in book-entry form) and ADSs held in brokerage and custodian accounts (via DTC). In the case of distributions other than cash (i.e., stock dividends, etc.), the depositary charges the applicable ADS record date holder concurrently with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or in book-entry form), the depositary sends invoices to the applicable record date ADS holders.

 

If any tax or other governmental charge is payable by the holders and/or beneficial owners of ADSs to the depositary, the depositary, the custodian or the Bank may withhold or deduct from any distributions made in respect of deposited securities and may sell for the account of the holder and/or beneficial owner any or all of the deposited securities and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, with the holder and the beneficial owner thereof remaining fully liable for any deficiency.

 

Fees and Other Payments Made by the Depositary

 

In March 2020, we agreed to an amendment to an agreement previously entered into with the depositary, Deutsche Bank Trust Company Americas in fiscal 2018. Under this amended agreement, the depositary pays certain amounts to us and waives fees and expenses for services provided in exchange for the Deutsche Bank Trust Company Americas acting as the depositary for the ADR program. We may use these payments to cover annual expenses incurred by the Bank towards investor relations or other expenses directly related to the ongoing maintenance of the ADR program. The amount of payment to us is tied to the amount of fees the depository collects from ADR holders, with certain exceptions. In the three months ended June 30, 2023, we received US$ 4 million relating to the ADR program.

 

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SELECTED STATISTICAL INFORMATION

 

The following information should be read together with our financial statements included in this report as well as “Management Discussion and Analysis of Financial Condition and Results of Operations”.

 

Average Balance Sheet

 

The average balances are the sum of daily average balances outstanding. The yield on average interest-earning assets is the ratio of interest earned to average interest-earning assets. The cost of average interest-bearing liabilities is the ratio of interest expended to average interest-bearing liabilities. The average balances of advances include non-performing advances and are net of allowance for loan losses. We have re-calculated tax-exempt income on a tax-equivalent basis. Other interest income has been bifurcated into rupee and foreign currency amounts in order to facilitate the explanation of movements of rupee and foreign currency spreads and margins. The rupee portion of other interest income primarily includes interest on income tax refunds and income from swaps. The foreign currency portion of other interest income primarily includes income from interest rate swaps in foreign currencies. These interest rate swaps are not part of our trading portfolio and are undertaken by us to manage the market risk arising from our assets and liabilities.

 

The following table sets forth, for the periods indicated, the average balances of the assets and liabilities, which contribute to the major components of interest earned, interest expended and net interest income.

 

   Year ended March 31,
   2021  2022  2023
   Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/
cost
   (in millions, except percentages)
Assets:                           
Advances:                           
Rupee   Rs.6,064,280   Rs.573,393    9.46%  Rs.7,343,983   Rs.649,387    8.84%  Rs.9,059,681   Rs.844,091    9.32%
Foreign currency    1,098,730    29,226    2.66    975,114    19,482    2.00    957,139    35,201    3.68 
Total advances    7,163,010    602,619    8.41    8,319,097    668,869    8.04    10,016,820    879,292    8.78 
Investments:                                             
Investments in Government securities:                                             
Rupee    2,761,476    177,497    6.43    2,925,123    184,713    6.31    3,591,054    238,048    6.63 
Foreign currency    48,668    310    0.64    41,872    235    0.56    45,689    729    1.60 
Total investment in Government securities:   2,810,144    177,807    6.33    2,966,995    184,948    6.23    3,636,743    238,777    6.57 
Other investments                                             
Rupee    865,396    53,021    6.13    633,746    33,384    5.27    632,296    37,070    5.86 
Foreign currency    131,189    1,846    1.41    165,134    1,591    0.96    109,413    3,237    2.96 
                                              

122 

   Year ended March 31,
   2021  2022  2023
   Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/
cost
   (in millions, except percentages)
Total other investments    996,585    54,867    5.51    798,880    34,975    4.38    741,709    40,307    5.43 
Total investments:                                             
Rupee    3,626,872    230,518    6.36    3,558,869    218,097    6.13    4,223,350    275,118    6.51 
Foreign currency    179,857    2,156    1.20    207,006    1,826    0.88    155,102    3,966    2.56 
Total investments    3,806,729    232,674    6.11    3,765,875    219,923    5.84    4,378,452    279,084    6.37 
Other interest-earning assets:                                             
Lending with the Reserve Bank of India                                             
Rupee   448,570    15,470    3.45    398,765    14,858    3.73    140,278    6,486    4.62 
Foreign currency                      ..       ..    ..    ..    ..    ..    ..    ..    .. 
Total lending with the Reserve Bank of India:   448,570    15,470    3.45    398,765    14,858    3.73    140,278    6,486    4.62 
Repo lending                                             
Rupee   47,523    1,195    2.51    49,439    1,635    3.31    72,448    4,022    5.55 
Foreign currency                      ..      ..    ..    ..    ..    ..    ..    ..    .. 
Total repo lending   47,523    1,195    2.51    49,439    1,635    3.31    72,448    4,022    5.55 
Deposits in other banks:                                             
Rupee   36,691    2,381    6.49    42,636    2,522    5.92    56,179    3,676    6.54 
Foreign currency   180,174    347    0.19    269,470    418    0.16    254,380    7,667    3.01 
Total deposits in other banks   216,865    2,728    1.26    312,106    2,940    0.94    310,559    11,343    3.65 
Other assets:                                             
Rupee   529,797    12,264    2.31    661,740    10,220    1.54    724,431    7,887    1.09 
Foreign currency   213,271    536    0.25    236,568    380    0.16    216,547    4,802    2.22 
Total other assets   743,068    12,800    1.72    898,308    10,600    1.18    940,978    12,689    1.35 

123 

   Year ended March 31,
   2021  2022  2023
   Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/
cost
   (in millions, except percentages)
Total other interest-earning assets:                           
Rupee    1,062,581    31,310    2.95    1,152,580    29,235    2.54    993,336    22,071    2.22 
Foreign currency    393,445    883    0.22    506,038    798    0.16    470,927    12,469    2.65 
Total other interest-earning assets    1,456,026    32,193    2.21    1,658,618    30,033    1.81    1,464,263    34,540    2.36 
Other interest income:                                             
Rupee         20,606              32,441              16,892      
Foreign currency        3,570              2,849              894      
Total other interest income         24,176              35,290              17,786      
                                              
Interest-earning assets:                                             
Rupee    10,753,733    855,827    7.96    12,055,432    929,160    7.71    14,276,367    1,158,172    8.11 
Foreign currency    1,672,032    35,835    2.14    1,688,158    24,955    1.48    1,583,168    52,530    3.32 
Total interest-earning assets    12,425,765    891,662    7.18    13,743,590    954,115    6.94    15,859,535    1,210,702    7.63 
                                              
Fixed assets    106,100              103,407              108,042           
Other assets    2,044,392              2,097,041              2,260,812           
Total non-earning assets    2,150,492              2,200,448              2,368,854           
Total assets   Rs.14,576,257   Rs.891,662        Rs.15,944,038   Rs.954,115        Rs.18,228,389   Rs.1,210,702      
                                              
Liabilities:                                             
Savings account deposits:                                             
Rupee   Rs.2,452,568   Rs.77,687    3.17   Rs.3,028,734   Rs.95,390    3.15   Rs.3,430,647   Rs.108,593    3.17 
Foreign currency    98,475    803    0.82    80,149    321    0.40    61,367    705    1.15 
Total savings account deposits    2,551,043    78,490    3.08    3,108,883    95,711    3.08    3,492,014    109,298    3.13 
Time deposits:                                             
Rupee    4,530,836    250,515    5.53    5,094,105    236,169    4.64    5,735,631    277,636    4.84 

124 

   Year ended March 31,
   2021  2022  2023
   Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/
cost
   (in millions, except percentages)
Foreign currency    377,247    8,190    2.17    290,939    4,252    1.46    309,445    7,831    2.53 
Total time deposits    4,908,083    258,705    5.27    5,385,044    240,421    4.46    6,045,076    285,467    4.72 
Other demand deposits:                                             
Rupee    812,042              1,055,999              1,210,898           
Foreign currency    112,869              156,310              165,247           
Total other demand deposits    924,911              1,212,309              1,376,145           
Total deposits:                                             
Rupee    7,795,446    328,202    4.21    9,178,838    331,559    3.61    10,377,176    386,229    3.72 
Foreign currency    588,591    8,993    1.53    527,398    4,573    0.87    536,059    8,536    1.59 
Total deposits    8,384,037    337,196    4.02    9,706,236    336,132    3.46    10,913,235    394,765    3.62 
Long term borrowings:                                             
Rupee   685,178    53,862    7.86    723,083    53,294    7.37    985,134    70,306    7.14 
Foreign currency   544,123    15,899    2.92    389,810    9,678    2.48    309,409    10,848    3.51 
Total long term borrowings   1,229,301    69,761    5.67    1,112,893    62,972    5.66    1,294,543    81,154    6.27 
Short-term borrowings:                                             
Borrowings under liquidity adjustment facility with the Reserve Bank of India                                             
Rupee:   103,528    4,497    4.34    720    30    4.17    1,488    84    5.65 
Foreign currency                      ..       ..    ..    ..    ..    ..    ..    ..    .. 
Total borrowings under liquidity adjustment facility with the Reserve Bank of India:   103,528    4,497    4.34    720    30    4.17    1,488    84    5.65 
Repo borrowings:                                             
Rupee   358,938    10,845    3.02    204,643    6,815    3.33    272,735    15,017    5.51 

125 

   Year ended March 31,
   2021  2022  2023
   Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/cost  Average balance  Interest
income/
expense
  Average yield/
cost
   (in millions, except percentages)
Foreign currency   7,264    189    2.60    5,676    167    2.94    6,996    258    3.69 
Total repo borrowings   366,202    11,034    3.01    210,319    6,982    3.32    279,731    15,275    5.46 
Other short term borrowings                                             
Rupee   49,208    3,259    6.62    101,520    4,904    4.83    128,586    8,266    6.43 
Foreign currency   128,681    841    0.65    102,347    646