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    0.63    233,886    5,890    2.52 
Total other short term borrowings   177,889    4,100    2.30    203,867    5,550    2.72    362,472    14,156    3.91 
Short term borrowings:                                             
Rupee   511,674    18,601    3.64    306,883    11,749    3.83    402,809    23,367    5.80 
Foreign currency   135,945    1,030    0.76    108,023    813    0.75    240,882    6,148    2.55 
Total short term borrowings   647,619    19,631    3.03    414,906    12,562    3.03    643,691    29,515    4.59 
Total borrowings:                                             
Rupee    1,196,852    72,463    6.05    1,029,966    65,043    6.32    1,387,943    93,673    6.75 
Foreign currency    680,068    16,929    2.49    497,833    10,491    2.11    550,291    16,996    3.09 
Total borrowings    1,876,920    89,392    4.76    1,527,799    75,534    4.94    1,938,234    110,669    5.71 
Interest-bearing liabilities:                                             
Rupee    8,992,298    400,665    4.46    10,208,804    396,602    3.88    11,765,119    479,902    4.08 
Foreign currency    1,268,659    25,922    2.04    1,025,231    15,064    1.47    1,086,350    25,532    2.35 
Total interest-bearing liabilities    10,260,957    426,588    4.16    11,234,035    411,666    3.66    12,851,469    505,434    3.93 
Other liabilities    2,880,817              3,041,905              3,400,782           
Total liabilities    13,141,774    426,588         14,275,940    411,666         16,252,251    505,434      
Stockholders’ equity    1,434,483              1,668,098              1,976,138           
Total liabilities and stockholders’ equity   Rs.14,576,257   Rs.426,588        Rs.15,944,038   Rs.411,666        Rs.18,228,389   Rs.505,434      

126 

 

(1)Previous period figures have been re-grouped/re-classified where necessary to conform to current period classification.

 

Analysis of Changes in Interest Earned and Interest Expended: Volume and Rate Analysis

 

The following table sets forth, for the periods indicated, the changes in the components of net interest income. The changes in net interest income between periods have been reflected as attributed either to volume or rate changes. For the purpose of this table, changes which are due to both volume and rate have been allocated solely to volume.

 

   Fiscal 2022 vs. Fiscal 2021  Fiscal 2023 vs. Fiscal 2022
  

Increase (decrease) due to

 

Increase (decrease) due to

  

Net change

 

Change in average volume

 

Change in average rate

 

Net change

 

Change in average volume

  Change in average rate
   (in millions)
Interest earned:                              
Advances:                              
Rupee   Rs.75,994   Rs.113,157   Rs.(37,163)  Rs.194,704   Rs.159,852   Rs.34,852 
Foreign currency    (9,744)   (2,470)   (7,274)   15,719    (661)   16,380 
Total advances    66,250    110,687    (44,437)   210,423    159,191    51,232 
Investment:                              
Investment in Government securities:                              
Rupee   7,216    10,334    (3,118)   53,335    44,144    9,191 
Foreign currency   (75)   (38)   (37)   494    61    433 
Total investment in Government securities   7,141    10,296    (3,155)   53,829    44,205    9,624 
Other investments:                              
Rupee   (19,637)   (12,203)   (7,434)   3,686    (85)   3,771 
Foreign currency   (255)   327    (582)   1,646    (1,649)   3,295 
Total other investments   (19,892)   (11,876)   (8,016)   5,332    (1,734)   7,066 
Total investments:                              
Rupee    (12,421)   (4,167)   (8,254)   57,021    43,286    13,735 
Foreign currency    (330)   239    (569)   2,140    (1,327)   3,467 
Total investments    (12,751)   (3,928)   (8,823)   59,161    41,959    17,202 
Other interest-earning assets:                              
Lending with the Reserve Bank of India:                              
Rupee   (612)   (1,856)   1,244    (8,372)   (11,952)   3,580 
Foreign currency                         ..       ..    ..    ..    ..    .. 
Total lending with the Reserve Bank of India   (612)   (1,856)   1,244    (8,372)   (11,952)   3,580 

127 

   Fiscal 2022 vs. Fiscal 2021  Fiscal 2023 vs. Fiscal 2022
  

Increase (decrease) due to

 

Increase (decrease) due to

  

Net change

 

Change in average volume

 

Change in average rate

 

Net change

 

Change in average volume

  Change in average rate
   (in millions)
Repo lending:                  
Rupee   440    63    377    2,387    1,277    1,110 
Foreign currency                         ..       ..    ..    ..    ..    .. 
Total repo lending   440    63    377    2,387    1,277    1,110 
Deposits in other banks:                              
Rupee   141    352    (211)   1,154    886    268 
Foreign currency   71    139    (68)   7,249    (455)   7,704 
Total deposits in other banks   212    491    (279)   8,403    431    7,972 
Other assets:                              
Rupee   (2,044)   2,038    (4,082)   (2,333)   683    (3,016)
Foreign currency   (156)   37    (193)   4,422    (444)   4,866 
Total other assets   (2,200)   2,075    (4,275)   2,089    239    1,850 
Other interest-earning assets:                              
Rupee    (2,075)   2,283    (4,358)   (7,164)   (3,538)   (3,626)
Foreign currency    (85)   178    (263)   11,671    (930)   12,601 
Total other interest earning assets    (2,160)   2,461    (4,621)   4,507    (4,468)   8,975 
Other interest income:                              
Rupee    11,835    ..    11,835    (15,549)   ..    (15,549)
Foreign currency    (721)   

..

    (721)   (1,955)   

..

    (1,955)
Other interest income    11,114    ..    11,114    (17,504)   ..    (17,504)
Total interest earned:                              
Rupee    73,333    111,273    (37,940)   229,012    199,600    29,412 
Foreign currency    (10,880)   (2,053)   (8,827)   27,575    (2,918)   30,493 
Total interest earned    62,453    109,220    (46,767)   256,587    196,682    59,905 
Interest expense:                              
Savings account deposits:                              
Rupee    17,703    18,146    (443)   13,203    12,722    481 
Foreign currency    (482)   (73)   (409)   384    (216)   600 
Total savings account deposits    17,221    18,073    (852)   13,587    12,506    1,081 
Time deposits:                              
Rupee    (14,346)   26,114    (40,460)   41,467    31,053    10,414 
Foreign currency    (3,938)   (1,261)   (2,677)   3,579    468    3,111 
Total time deposits    (18,284)   24,853    (43,137)   45,046    31,521    13,525 
Total deposits:                              
Rupee    3,357    44,260    (40,903)   54,670    43,775    10,895 
Foreign currency    (4,420)   (1,334)   (3,086)   3,963    252    3,711 
Total deposits    (1,063)   42,926    (43,989)   58,633    44,027    14,606 
Borrowings:                              
Long term borrowings:                              
Rupee   (568)   2,794    (3,362)   17,012    18,702    (1,690)
Foreign currency   (6,221)   (3,831)   (2,390)   1,170    (2,819)   3,989 
Total long term borrowings   (6,789)   (1,037)   (5,752)   18,182    15,883    2,299 

128 

   Fiscal 2022 vs. Fiscal 2021  Fiscal 2023 vs. Fiscal 2022
  

Increase (decrease) due to

 

Increase (decrease) due to

  

Net change

 

Change in average volume

 

Change in average rate

 

Net change

 

Change in average volume

  Change in average rate
   (in millions)
Borrowings under liquidity adjustment facility with the Reserve Bank of India:                  
Rupee   (4,467)   (4,284)   (183)   54    43    11 
Foreign currency                         ..       ..    ..    ..    ..    .. 
Total borrowings under liquidity adjustment facility with the Reserve Bank of India   (4,467)   (4,284)   (183)   54    43    11 
Repo borrowings                              
Rupee   (4,030)   (5,138)   1,108    8,202    3,749    4,453 
Foreign currency   (22)   (47)   25    91    49    42 
Total repo borrowings   (4,052)   (5,185)   1,133    8,293    3,798    4,495 
Other short term borrowings:                              
Rupee   1,645    2,527    (882)   3,362    1,740    1,622 
Foreign currency   (195)   (166)   (29)   5,244    3,313    1,931 
Total other short term borrowings   1,450    2,361    (911)   8,606    5,053    3,553 
Short term borrowings:                              
Rupee   (6,852)   (6,895)   43    11,618    5,532    6,086 
Foreign currency   (217)   (213)   (4)   5,335    3,362    1,973 
Total short term borrowings   (7,069)   (7,108)   39    16,953    8,894    8,059 
Total borrowings:                              
Rupee    (7,420)   (10,539)   3,119    28,630    24,160    4,470 
Foreign currency    (6,438)   (3,840)   (2,598)   6,505    1,620    4,885 
Total borrowings    (13,858)   (14,379)   521    35,135    25,780    9,355 
Total interest expended:                              
Rupee    (4,063)   33,721    (37,784)   83,300    67,935    15,365 
Foreign currency    (10,858)   (5,174)   (5,684)   10,468    1,872    8,596 
Total interest expended    (14,921)   28,547    (43,468)   93,768    69,807    23,961 
Net interest income:                              
Rupee    77,396    77,552    (156)   145,712    131,665    14,047 
Foreign currency    (22)   3,121    (3,143)   17,107    (4,790)   21,897 
Total net interest income  Rs.77,374   Rs.80,673   Rs.(3,299)  Rs.162,819   Rs.126,875   Rs.35,944 

 

Investment portfolio

 

Maturity profile wise yields on debt securities

 

The following table sets forth, at the date indicated, the maturity profile wise yields of our investments in debt securities classified as available-for-sale. This maturity profile is based on repayment dates and does not reflect re-pricing dates of floating rate investments.

 

129 

  At March 31, 2022 At March 31, 2023
  Up to one year One to five years Five to ten years More than ten years Up to one year One to five years Five to ten years More than ten years
Corporate debt securities 6.4% 6.7% 5.0% 6.1% 7.3% 7.1% 5.9% 3.8%
Government securities 4.5 5.2 4.5 5.2 6.7 6.7 7.3 7.1
Other securities 5.3 6.2 5.5 7.1 7.8 8.5 8.4 8.4
Total debt securities1 4.8% 5.9% 4.7% 5.5% 6.9% 7.1% 6.8% 7.2%

 

(1)Includes securities denominated in different currencies

 

(2)Weighted average yield is the ratio of interest earned on available-for-sale debt securities to average available-for-sale debt securities.  

 

(3)The maturity is computed based on the contractual maturity of the portfolio.

 

The following table sets forth, at the date indicated, the maturity profile-wise yields of our investments in debt securities classified as held-to-maturity. This maturity profile is based on repayment dates and does not reflect re-pricing dates of floating rate investments.

 

  At March 31, 2022 At March 31, 2023
  Up to one year One to five years Five to ten years More than ten years Up to one year One to five years Five to ten years More than ten years
Corporate debt securities 5.9% 6.6% 7.4% 7.5% 7.0% 7.1% 7.6% 7.7%
Government securities 7.7 6.6 6.8 6.4 7.0 6.8 7.4 7.6
Other securities 4.2 .. .. .. 7.8 .. .. ..
Total debt securities1 6.7% 6.6% 6.9% 6.4% 7.1% 6.8% 7.4% 7.6%

 

(1)Includes securities denominated in different currencies

 

(2)Weighted average yield is the ratio of interest earned on held-to-maturity debt securities to average held-to-maturity securities.

 

(3)The maturity is computed based on the contractual maturity of the portfolio.

 

Investment portfolio of our overseas branches and banking subsidiaries

 

The following table sets forth a summary of the investment portfolio of our overseas branches and banking subsidiaries based on the category of investments.

 

   At March 31
Category 

2022

 

2023

   (in millions)
Bonds      
Banks and financial institutions   Rs.26,065   Rs.19,460 
Corporate    33,591    43,284 
Total bonds    59,656    62,744 
Asset backed securities                      ..    .. 
Others(1)    4,925    5,341 
Total   Rs.64,581   Rs.68,085 

 

 

(1)Includes investments in certificates of deposits.

 

Investment in India-linked securities of corporate entities was 50.0% at year-end fiscal 2023 as compared to 43.2% at year-end fiscal 2022.

 

The investments in these securities are governed by the respective investment policies of ICICI Bank and its banking subsidiaries. To mitigate significant concentrations in credit risk, the investment policy

 

130 

lays down a number of limits that need to be adhered to before investments can be made. The investment policy lays down rating and issuer wise investment limits at each of these units. Further, there are counterparty limits for individual banks and financial institutions. Country exposure limits have also been established for various countries. In addition, ICICI Bank monitors the credit spread risk arising out of such investments while ICICI Bank UK PLC has instituted credit spread sensitivity limits on its portfolio. Any exceptions to the above limits are made with due approvals from the appropriate forums. ICICI Bank has not bought credit protection against any of its international investments.

 

Investments in corporate and financial sector debt securities by our overseas branches and banking subsidiaries

 

The following table sets forth, at the date indicated, investments in corporate and financial sector debt securities and mortgage and asset backed securities by our overseas branches and banking subsidiaries by region and the mark-to-market and realized losses thereon.

 

   At March 31, 2023   
  

Bonds(1),(2)

  Others  Total         
   Trading  Available-for-sale and held-to-maturity  Trading 

Available-for-sale and held-to-maturity

  Trading  Available-for-sale and held-to-maturity  Mark-to-market gain/ (loss) in fiscal 2023  Realized gain/(loss)/ Impairment loss in income statement for fiscal 2023  Mark-to-market gain/ (loss) at March 31, 2023
   (Rs. in millions)
U.S.    ..    3,468    ..    ..    ..    3,468    (103)   7    (221)
Canada    ..    18,229    ..    ..    ..    18,229    ..    1    .. 
Europe    ..    754    ..    ..    ..    754    (7)   ..    (43)
India    163    38,817    ..    ..    163    38,817    (450)   (363)   (486)
Rest of Asia    ..    1,313    ..    5,341    ..    6,654    (5)   (11)   (27)
Total portfolio    163    62,581    

..

    5,341    163    67,922    (565)   (374)   (777)

 

 

(1)Includes bonds classified under loans and receivable by our UK subsidiary including those transferred in fiscal 2009 from investment to loans and receivables pursuant to Accounting Standard Board issuing amendments to FRS 26 – ‘Financial Instruments: Recognition and Measurement’ which permitted reclassification of financial assets in certain circumstances from ‘held-for-trading’ and ‘available-for-sale categories’ to the ‘loans and receivables’ category.

 

(2)Includes corporate bonds classified under loans and receivables by our Canadian subsidiary.

 

131 

   At March 31, 2022   
  

Bonds(1),(2)

  Others  Total         
   Trading  Available-for-sale and held-to-maturity  Trading  Available-for-sale and held-to-maturity  Trading  Available-for-sale and held-to-maturity  Mark-to-market gain/ (loss) in fiscal 2022  Realized gain/(loss)/ Impairment loss in income statement for fiscal 2022  Mark-to-market gain/ (loss) at March 31, 2022
   (Rs. in millions)
U.S.    ..    1,809    ..    ..    ..    1,809    (130)   33    (106)
Canada    ..    17,480    ..    ..    ..    17,480    ..    130    .. 
Europe    ..    716    ..    ..    ..    716    89    (0)   (33)
India    1,491    37,034    ..    ..    1,491    37,034    (672)   91    (95)
Rest of Asia    ..    1,126    ..    4,925    ..    6,051    (124)   58    (20)
Total portfolio    1,491    58,165    

..

    4,925    1,491    63,090    (837)   312    (254)
 

(1)Includes bonds classified under loans and receivable by our UK subsidiary including those transferred in fiscal 2009 from investment to loans and receivables pursuant to Accounting Standard Board issuing amendments to FRS 26 – ‘Financial Instruments: Recognition and Measurement’ which permitted reclassification of financial assets in certain circumstances from ‘held-for-trading’ and ‘available-for-sale categories’ to the ‘loans and receivables’ category.

 

(2)Includes corporate bonds classified under loans and receivables by our Canadian subsidiary.

 

Funding

 

Our funding operations are designed to ensure stability of funding, minimize funding costs and effectively manage liquidity. Our primary source of domestic funding is deposits raised from both retail and corporate customers. We also raise funds through short-term rupee borrowings, refinance borrowings and domestic or overseas bond offerings. Our domestic bond borrowings include long-term bond borrowings for financing infrastructure projects and affordable housing in accordance with the Reserve Bank of India guidelines. See also “Business—Overview of Our Products and Services—Commercial Banking for Retail Customers—Retail Deposits”.

 

Maturity profile of deposits

 

The following table sets forth, at the date indicated, the contractual maturity profile of deposits, by type of deposit at March 31, 2023.

 

    
   Up to one year  After one year and within three years  After three years  Total
   (in millions)
Interest-bearing deposits:                    
Savings deposits(1)   Rs.3,848,299     ..       ..      Rs.3,848,299 
Time deposits    4,341,123    1,827,859    432,713    6,601,695 
Non-interest-bearing deposits:                    
Other demand deposits(1)    1,658,328    

..

    

..

    1,658,328 
Total deposits   Rs.9,847,750   Rs.1,827,859   Rs.432,713   Rs.12,108,322 

 

132 

 

(1)Savings and other demand deposits are payable on demand and hence are classified in the ‘Up to one year’ category.

 

The following table sets forth, at the date indicated, the contractual maturity profile of deposits, by type of deposit at March 31, 2022.

 

   Up to one year  After one year and within three years  After three years  Total
   (in millions)
Interest-bearing deposits:                    
Savings deposits(1)   Rs.3,670,306     ..       ..      Rs.3,670,306 
Time deposits    3,895,554    1,256,777    456,834    5,609,165 
Non-interest-bearing deposits:                    
Other demand deposits(1)    1,634,187    

..

    

..

    1,634,187 
Total deposits   Rs.9,200,047   Rs.1,256,777   Rs.456,834   Rs.10,913,658 

 

 

(1) Savings and other demand deposits are payable on demand and hence are classified in the ‘Up to one year’ category.

 

Uninsured deposits

 

The following table sets forth, for the periods indicated, the estimated amount of time deposits that exceed the insurance limit, segregated by remaining maturity and the estimated amount of total deposits that are otherwise uninsured:

 

   At March 31, 2023
   3 months or less  Over 3 months through 6 months  Over 6 months through 12 months  Over 12 months  Total
Uninsured time deposits  (in millions)
India  Rs.1,395,233   Rs.823,917   Rs.1,494,583   Rs.1,801,960   Rs.5,515,693 
Outside India   40,410    31,385    40,918    38,278    150,991 
Total uninsured time deposits  Rs.1,435,643   Rs.855,302   Rs.1,535,501   Rs.1,840,238   Rs.5,666,684 

 

   At March 31, 2022
   3 months or less  Over 3 months through 6 months  Over 6 months through 12 months  Over 12 months  Total
Uninsured time deposits  (in millions)
India  Rs.1,262,407   Rs.736,621   Rs.1,373,221   Rs.1,439,422   Rs.4,811,671 
Outside India   22,484    11,989    19,441    11,443    65,357 
Total uninsured time deposits  Rs.1,284,891   Rs.748,610   Rs.1,392,662   Rs.1,450,865   Rs.4,877,028 

 

133 

Total uninsured deposits at March 31, 2022 were Rs. 8,315,811 million and at March 31, 2023 were Rs. 9,314,637 million.

 

The classification between “in India” and “outside India” is based on the domicile of the booking unit. In India, the insured deposit calculations are based on guidelines prescribed by Deposit Insurance and Credit Guarantee Corporation. The insured amount limit prescribed by Deposit Insurance and Credit Guarantee Corporation is up to a maximum amount of Rs. 500,000 per depositor (included all type of deposits), per insured bank. The standard insurance amount for time deposits outside India is based on the insurance limits approved by the regulator in the respective foreign jurisdiction. The insurance coverage is allocated first to savings account deposits, then to current account deposits and lastly to time deposits of a depositor. For time deposits, the highest residual maturity buckets are considered for allocation of insurance coverage.

 

Risk Management

 

Asset liability gap

 

The following table sets forth, at the date indicated, our asset-liability gap position.

 

  

At March 31, 2023(1)

   Less than or equal to one year  Greater than one year and up to five years  Greater than five years  Total
   (in millions)
Advances (loans), net   Rs.9,282,075   Rs.1,453,703   Rs.102,885   Rs.10,838,663 
Investments    1,283,292    1,403,243    3,708,985    6,395,520 
Other assets(2)    794,512    124,827    1,325,773    2,245,112 
Total assets   Rs.11,359,879   Rs.2,981,773   Rs.5,137,643   Rs.19,479,295 
Capital    ..    ..    2,144,978    2,144,978 
Borrowings    1,032,692    584,913    273,013    1,890,618 
Deposits    5,611,378    6,481,420    15,523    12,108,321 
Other liabilities    27,686    1,259    3,412,042    3,440,987 
Total liabilities    6,671,756    7,067,592    5,845,556    19,584,904 
Total gap before risk management positions    4,688,123    (4,085,819)   (707,914)   (105,610)
Off-balance sheet positions(3)    (179,307)   285,840    (114,413)   (7,880)
Total gap after risk management positions   Rs.4,508,816   Rs.(3,799,979)  Rs.(822,327)  Rs.(113,490)
 
(1)Includes investments in the nature of equity, cash and cash equivalents and miscellaneous assets and liabilities. Assets and liabilities are classified into the applicable categories based on residual maturity or re-pricing whichever is earlier. Classification methodologies are generally based on asset liability management guidelines, including behavioral studies, as per local policy/regulatory norms of the entities. Items other than current and savings account deposits that neither re-price nor have a defined maturity are included in the ‘greater than five years’ category. Fixed assets (other than leased assets) have been excluded from the above table. Current and savings account deposits are classified based on behavior study.

 

(2)Includes cash and balances with the Reserve Bank of India, balances with banks and money at call and short notice and other assets.

 

(3) Off-balance sheet positions comprises net notional amount of derivatives, including foreign exchange forward contracts.

 

134 

   At March 31, 2022(1)
   Less than or equal to one year  Greater than one year and up to five years  Greater than five years  Total
   (in millions)
Advances (loans), net   Rs.7,937,695     Rs  1,189,111   Rs.76,275   Rs.9,203,081 
Investments    1,271,030    1,362,786    3,037,161    5,670,977 
Other assets(2)    1,246,050    158,385    1,145,081    2,549,516 
Total assets    10,454,775    2,710,282    4,258,517    17,423,574 
Capital    ..    ..    1,820,525    1,820,525 
Borrowings    739,947    613,594    262,486    1,616,027 
Deposits    5,133,624    5,764,171    15,863    10,913,658 
Other liabilities(3)    96,553    7,084    3,072,527    3,176,164 
Total liabilities    5,970,124    6,384,849    5,171,401    17,526,373 
Total gap before risk management positions    4,484,651    (3,674,567)   (912,884)   (102,799)
Off-balance sheet positions(4)    (88,581)   26,799    42,866    (18,917)
Total gap after risk management positions   Rs.4,396,070   Rs.(3,647,768)  Rs.(870,018)  Rs.(121,716)
 
(1)Includes investments in the nature of equity, cash and balances with the Reserve Bank of India, balances with banks and money at call and short notice and miscellaneous assets and liabilities. Assets and liabilities are classified into the applicable categories based on residual maturity or re-pricing whichever is earlier. Classification methodologies are generally based on asset liability management guidelines, including behavioral studies, as per local policy/regulatory norms of the entities. Items other than current and savings account deposits that neither re-price nor have a defined maturity are included in the ‘greater than five years’ category. Fixed assets (other than leased assets) have been excluded from the above table. Current and savings account deposits are classified based on behavior study.

 

(2)Includes cash and balances with the Reserve Bank of India, balances with banks and money at call and short notice and other assets.

 

(3)Includes minority interest, liabilities on policy in force, and other liabilities and provisions.

 

(4)Off-balance sheet positions comprises net notional amount of derivatives, including foreign exchange forward contracts.

 

Loan portfolio - fixed-floating interest rate

 

The following table sets forth, at the date indicated, the amount of our loans with residual contractual maturities greater than one year that had fixed and variable interest rates.

 

   At March 31, 2023
   Fixed
rate loans
  Variable
rate loans
  Total
   (in millions)
Commercial loans  Rs.111,986   Rs.1,420,577   Rs.1,532,563 
Consumer loans and credit card receivable   1,412,339    3,352,737    4,765,076 
Lease financing   33    ..    33 
Total loans   Rs.1,524,358   Rs.4,773,314   Rs.6,297,672 

 

 

   At March 31, 2022
   Fixed
rate loans
  Variable
rate loans
  Total
   (in millions)
Commercial loans  Rs.133,270   Rs.1,273,869   Rs.1,407,139 
Consumer loans and credit card receivable   1,126,546    2,817,494    3,944,040 
Lease financing   187    ..    187 
Total loans   Rs.1,260,003   Rs.4,091,363   Rs.5,351,366 

 

135 

Impact of interest rate movement on loan portfolio

 

The following table sets forth, using the balance sheet at year-end fiscal 2023 as the base, one possible prediction of the impact of adverse changes in interest rates on net interest income for fiscal 2024, assuming a parallel shift in the yield curve at year-end fiscal 2023.

 

   At March 31, 2023
   Change in interest rates (in basis points)
   (100)  (50)  50  100
   (in millions)
Rupee portfolio  Rs.(38,337)  Rs.(19,169)  Rs.19,169   Rs.38,337 
Foreign currency portfolio   (1,737)   (869)   869    1,737 
Total  Rs.(40,075)  Rs.(20,037)  Rs.20,037   Rs.40,075 

 

The following table sets forth, using the balance sheet at year-end fiscal 2022 as the base, one possible prediction of the impact of adverse changes in interest rates on net interest income for fiscal 2023, assuming a parallel shift in the yield curve at year-end fiscal 2022.

 

   At March 31, 2022
   Change in interest rates (in basis points)
   (100)  (50)  50  100
   (in millions)
Rupee portfolio  Rs.(35,655)  Rs.(17,827)  Rs.17,827   Rs.35,655 
Foreign currency portfolio   (1,893)   (946)   946    1,893 
Total  Rs.(37,548)  Rs.(18,774)  Rs.18,774   Rs.37,548 

 

Sensitivity analysis, which is based upon static interest rate risk profile of assets and liabilities, is used for risk management purposes only and the model above assumes that during the course of the year no other changes are made in the respective portfolios. Actual changes in net interest income will vary from the model.

 

Price Risk (Trading Book)

 

The following table sets forth, using the fixed income portfolio at year-end fiscal 2023 as the base, one possible prediction of the impact of changes in interest rates on the value of our fixed income held-for-trading portfolio, assuming a parallel shift in interest rate curve.

 

   At March 31, 2023
   Change in interest rates (in basis points) - Rupee
   Portfolio Size  (100)  (50)  50  100
   (in millions)
Indian government securities   Rs.270,091   Rs.4,667   Rs.2,344   Rs.(2,323)  Rs.(4,630)
Rupee corporate debt securities    112,437    1,620    815    (810)   (1,613)
Total   Rs.382,528   Rs.6,287   Rs.3,159   Rs.(3,133)  Rs.(6,243)

 

136 

   At March 31, 2023
   Change in interest rates (in basis points) – Foreign currency
   Portfolio Size  (100)  (50)  50  100
   (in millions)
Foreign government securities  Rs.38,802   Rs.53   Rs.26   Rs.(26)   Rs.(53) 
Foreign corporate debt securities   483    1    ..    ..    (1) 
Total  Rs.39,285   Rs.54   Rs. 26   Rs.(26)   Rs. (54) 

 

The following table sets forth, using the fixed income portfolio at year-end fiscal 2022 as the base, one possible prediction of the impact of changes in interest rates on the value of our fixed income held-for-trading portfolio, assuming a parallel shift in interest rate curve.

 

   At March 31, 2022
   Change in interest rates (in basis points) - Rupee
   Portfolio Size  (100)  (50)  50  100
   (in millions)
Indian government securities  Rs.176,474   Rs.2,421   Rs.1,206   Rs.(1,206)  Rs.(2,421)
Rupee corporate debt securities   60,011    677    339    (339)   (675)
Total  Rs.236,485   Rs.3,099   Rs.1,545   Rs.(1,544)  Rs.(3,096)

 

  

At March 31, 2022

  

Change in interest rates (in basis points) – Foreign currency

  

Portfolio Size

 

(100)

 

(50)

 

50

 

100

   (in millions)
Foreign government securities   Rs.90,181   Rs.157   Rs.78   Rs.(78)  Rs.(157)
Foreign corporate debt securities   1,491    93    46    (46)   (93)
Total   Rs.91,672   Rs.250   Rs.124   Rs.(124)  Rs.(250)

  

Value at risk on equity shares (Proprietary trading book)

 

ICICI Bank computes value-at-risk using historical simulation model for limit monitoring purposes. The value-at-risk is calculated using the previous one-year market data at a 99% confidence level and a holding period of one day.

 

The following table sets forth the high, low, average and period-end value-at-risk for the equities portfolio of the proprietary trading group of ICICI Bank for fiscal 2022 and fiscal 2023.

 Rs. in million

   Fiscal 2022  At March   Fiscal 2023  At March
   High  Low  Average  31, 2022  High  Low  Average   31, 2023
Value-at-risk   234.9    6.8    90.9    54.1    149.0    0.0    34.0    0.0 

 

  

 

137 

We monitor the effectiveness of the value-at-risk model by regularly back-testing its performance. Statistically, we would expect to see losses in excess of value-at-risk only 1% of the time over a one-year period. During fiscal 2023, there were three instances of hypothetical loss exceeding the value-at-risk estimates for the equities portfolio of the proprietary trading group.

 

The following table sets forth a comparison of the hypothetical daily profit/(loss), computed on the assumption of no intra-day trading, and value-at-risk calculated using the historical simulation model during fiscal 2022 and fiscal 2023.

 

            Rs. in million
   Fiscal 2022  At March   Fiscal 2023  At March
   Average  31, 2022  Average  31, 2023
Hypothetical daily profit(loss)   9.0    14.8    (0.1)   0.0 
Value-at-risk   90.9    54.1    34.0    0.0 

 

The high and low hypothetical daily profit/(loss) during fiscal 2023 was Rs. 37.4 million and Rs. (88.8) million respectively.

 

While value-at-risk is an important tool for measuring market risk under normal market conditions, it has inherent limitations that should be taken into account, including its inability to accurately predict future losses when extreme events are affecting the markets, because it is based on the assumption that historical market data is indicative of future market performance. Moreover, different value-at-risk calculation methods use different assumptions and hence may produce different results, and computing value-at-risk at the close of the business day would exclude intra-day risk. There is also a general possibility that the value-at-risk model may not fully capture all the risks present in the portfolio.

 

Derivative and Foreign Exchange Risk (Trading)

 

The following table sets forth, using the outstanding notional principal of trading derivatives and foreign exchange portfolio at year-end as the base, one possible prediction of the impact of changes in interest rates on the value of our trading derivatives and foreign exchange portfolio, assuming a parallel shift in interest rate curve.

 

   At March 31, 2023
   Change in interest rates (in basis points)
   Portfolio Size(1)  (100)  (50)  50  100
   (in millions)
Interest rate derivatives  Rs.30,733,302   Rs.(13,657)  Rs.(6,828)  Rs.6,828   Rs.13,656 
Currency derivatives(2)   1,661,178    1,176    588    (588)   (1,176)
Foreign exchange   14,512,948    (3)    (2)   2    3 
Total  Rs.46,907,428   Rs.(12,484)  Rs.(6,242)  Rs.6,242   Rs.(12,483)

 

1.Notional principal

2.Includes futures, options and cross currency interest rate swaps

 

138 

  At March 31, 2022
   Change in interest rates (in basis points)
   Portfolio Size(1)  (100)  (50)  50  100
   (in millions)
Interest rate derivatives  Rs.31,560,088   Rs.(8,341)  Rs.(4,170)  Rs.4,170   Rs.8,339 
Currency derivatives(2)   1,193,153    2,313    1,156    (1,156)   (2,313)
Foreign exchange   9,769,228    (42)   (21)   21    42 
Total  Rs.42,522,469   Rs.(6,070)  Rs.(3,035)  Rs.3,035   Rs.6,068 

 

1.Notional principal

2.Includes futures, options and cross currency interest rate swaps

 

The following table sets forth the possible prediction of the impact of change in foreign exchange rates on the value of the net open position of the Group.

 

    At March 31, 2023
    Change in forex rates on the value of the net open position (in basis points)
    Net open position   (100)   100
        (in millions)
Total open position for the Group   Rs. 6,221   Rs. 3,862     Rs. 492

 

   

At March 31, 2022

   

Change in forex rates on the value of the net open position (in basis points)

   

Net open position

 

(100)

 

100

      (in millions)
Total open position for the Group   Rs. 6,654   Rs. (1,294 )   Rs. 7,653

  

Credit spread risk

 

The following table sets forth, using our held-for-trading portfolio at year-end as the base, one possible prediction of the impact of changes in credit spreads on the value of the trading portfolio, assuming a parallel shift in credit spreads.

 

  

    At March 31, 2023
    Change in credit spread (in basis points)
    Portfolio Size   (100)   (50)   50   100
      (in millions)
Corporate debt securities   Rs. 112,920   Rs. 1,621     Rs. 815     Rs. (810 )   Rs. (1,614 )
                                       

 

At March 31, 2022
    Change in credit spread (in basis points)
    Portfolio Size   (100)   (50)   50   100
      (in millions)
Corporate debt securities   Rs. 61,502   Rs. 770     Rs. 386     Rs. (385 )   Rs. (768 )
                                       

  

  

139 

Loan Concentration

 

We follow a policy of portfolio diversification and evaluate our total financing exposure to a particular industry in the light of our forecasts of growth and profitability for that industry. ICICI Bank’s policy is to limit its portfolio to any particular industry (other than retail loans) to 15.0% of its total exposure. In addition, we have a framework for managing concentration risk with respect to single borrower and group exposures, based on the internal rating and track- record of the borrowers. See also -“Risk Management—Credit Risk”. The exposure limits for lower rated borrowers and groups are substantially lower than the regulatory limits.

 

The following table sets forth, at the dates indicated, the composition of our gross advances.

 

   At March 31,
   2022  2023
   Amount  As a %  Amount  Amount  As a %
   (in millions, except percentages)
Retail finance(1)  Rs.5,040,347    53.2%  Rs.6,013,563       US$ 73,167    54.2%
Rural finance   795,064    8.4    902,084    10,976    8.1 
Services—finance   716,294    7.6    804,240    9,785    7.2 
Wholesale/retail trade    296,358    3.1    448,962    5,462    4.0 
Roads, port, telecom, urban development & other infrastructure    308,905    3.3    329,564    4,010    3.0 
Services—non finance    202,096    2.1    245,057    2,982    2.2 
Power    202,294    2.1    188,950    2,299    1.7 
Construction    155,286    1.6    178,219    2,168    1.6 
Manufacturing products (excluding metal)    121,190    1.3    173,477    2,111    1.6 
Iron and steel (including iron and steel products)    150,757    1.6    162,007    1,971    1.5 
Electronics & engineering   130,558    1.4    154,612    1,881    1.4 
Crude petroleum/
refining & petrochemicals
   132,908    1.4    137,118    1,668    1.2 
Textile   100,791    1.1    124,967    1,520    1.1 
Others(2)     1,122,259    11.8    1,232,134    14,992    11.2 
Gross advances (loans)    9,475,107    100.0%   11,094,954    134,992    100.0%
Allowance for advances (loan) losses    (272,025)        (256,291)   (3,118)     
Net advances (loans)   Rs.9,203,082        Rs.10,838,663    US$ 131,873      

 ______________________ 

(1)Includes home loans, automobile loans, commercial business loans, dealer financing and personal loans, credit cards, two wheeler loans and loans against securities.

(2)Primarily include developer financing portfolio, gems and jewellery, mining, cement, drugs and pharmaceuticals, shipping metal and metal products (excluding iron and steel), food & beverages, chemicals and fertilizers, automobiles and fast moving consumer goods.

 

Our capital allocation is focused on building a granular portfolio and sustainably improving our portfolio quality. We are focused on capitalizing on opportunities in retail lending, including cross-selling additional products to our existing customers and growing our lending to small businesses, while adopting a selective approach to corporate lending. Given the focus on the above priorities, gross retail finance advances increased by 19.3% in fiscal 2023 compared to an increase of 17.1% in total gross advances in fiscal 2023. As a result, retail finance increased from 53.2% of gross loans at year-end fiscal 2022 to 54.2% of gross loans at year-end fiscal 2023.

 

140 

At year-end fiscal 2023, our 20 largest borrowers accounted for 6.9% of our gross loan portfolio, with the largest borrower accounting for 1.9% of our gross loan portfolio. The largest group of companies under the same management control accounted for 1.3% of our gross loan portfolio at year-end fiscal 2023.

 

At year-end fiscal 2023, our exposure to largest single counterparty accounted for 12.8% of our Tier I capital fund. The exposure to largest group of connected counterparties accounted for 27.1% of our Tier I capital fund at year-end fiscal 2022.

 

Maturity profile of loans

 

The following table sets forth, for the periods indicated, the maturity profile of loans

 

   March 31, 2023
   Due within 1 year  Due between 1 to 5 year  Due between 5 to 15 years  Due in more than 15 years  Total
   (in millions)
Commercial loans  Rs.2,951,977   Rs.1,017,840   Rs.512,516   Rs.2,207   Rs.4,484,540 
Consumer loans   1,588,996    2,100,469    1,714,291    950,316    6,354,072 
Lease financing   18    33    ..    ..    51 
Total  Rs.4,540,991   Rs.3,118,342   Rs.2,226,807   Rs.952,523   Rs.10,838,663 

 

 

   March 31, 2022
   Due within 1 year  Due between 1 to 5  year  Due between 5 to 15 years  Due in more than 15 years  Total
   (in millions)
Commercial loans  Rs.2,221,031   Rs.881,662   Rs.523,871   Rs.1,606   Rs.3,628,170 
Consumer loans   1,630,457    1,948,475    1,670,240    325,325    5,574,497 
Lease financing   230    187    ..    ..    417 
Total  Rs.3,851,718   Rs.2,830,324   Rs.2,194,111   Rs.326,931   Rs.9,203,084 

  

Directed Lending

 

The Reserve Bank of India requires banks to lend to certain sectors of the economy. Such directed lending comprises priority sector lending and export credit. ICICI Bank is required to comply with the priority sector lending requirements prescribed by the Reserve Bank of India from time to time. As prescribed in the Reserve Bank of India guideline, the Bank’s priority sector lending achievement is computed on quarterly average basis. During fiscal 2023, the Bank purchased Priority Sector Lending Certificates amounting to Rs. 716.5 billion (fiscal 2022: Rs. 715.1 billion) and sold Priority Sector Lending Certificates amounting to Rs. 741.3 billion (fiscal 2022: Rs. 1,014.4 billion). See also “Supervision and Regulation—Regulations Relating to Advancing Loans—Directed Lending—Priority Sector Lending”.

 

141 

The following table sets forth, for the periods indicated, ICICI Bank’s average priority sector lending:

 

   Fiscal 2022  Fiscal 2023
   Amount % of adjusted net bank credit  Amount  % of adjusted net bank credit  Target (% of adjusted net bank credit)
   (in billions, except percentages)
Agriculture Sector  Rs.1,226.5  17.80%  Rs.1,423.6  US$ 17.3   17.74%   18.00%

- Small and marginal

farmers

   636.4  9.20   794.7   9.7   9.90   9.50 
     - Non-corporate farmers   873.8  12.70   1,068.2   13.0   13.31   13.78 
Micro, small and medium enterprises   1,473.7  ..   1,729.0   21.0   ..   .. 
     - Micro enterprises   550.7  8.00   661.2   8.0   8.24   7.50 
Other priority sector   145.2  ..   178.3   2.2   ..   .. 
Total priority sector lending  Rs.2,845.4  41.30%  Rs.3,330.9  US$40.5   41.50%   40.00%
    - Weaker sections  Rs.762.0  11.10%  Rs.910.2  US$11.1   11.34%   11.50%

 

1.The above includes the impact of Priority Sector Lending Certificate purchased/sold by the Bank.

 

The priority sector lending master circular issued by the Reserve Bank of India requires that banks having any shortfall in lending to priority sector shall be allocated amounts for contribution to the Rural Infrastructure Development Fund established with National Bank for Agriculture and Rural Development and other Funds as decided by the Reserve Bank of India from time to time. The Bank may be required by the Reserve Bank of India to deposit with the Rural Infrastructure Development Fund and other related funds, certain amounts as specified by the Reserve Bank of India in the coming year due to the shortfall in the above-mentioned sub-categories of priority sector lending targets. At year-end fiscal 2023, our total investment in funds of government sponsored development banks due to shortfall in lending to priority sectors was Rs. 216.2 billion, which was fully eligible for consideration in overall priority sector achievement.

 

Export Credit

 

The Reserve Bank of India requires banks to make loans to exporters at concessional interest rates, as part of directed lending. Export credit is provided for pre-shipment and post-shipment requirements of exporter borrowers in rupees and foreign currencies. Export credit in the agriculture, micro, small and medium enterprises sectors is permitted to be categorised as priority sector lending. Additionally, the Export credit is extended as priority sector lending basis the classification criteria specified by the Reserve Bank of India. The interest income earned on export credits is supplemented through fees and commissions earned from these exporter customers from other fee-based products and services taken by them from us, such as foreign exchange products and bill handling. As at March 31, 2023, ICICI Bank’s export credit was Rs. 147.0 billion, which amounted to 1.75% of the Bank’s adjusted net bank credit.

 

142 

Non-performing loans

 

The following table sets forth, at the dates indicated, gross (net of write-offs, interest suspense and derivatives income reversal) non-performing loans by borrowers’ industry or economic activity and as a percentage of total non-performing loans.

 

  

At March 31,  

  

2022

 

2023

  

Amount

 

As a percentage of non-performing loans

 

Amount

 

Amount

 

As a percentage of non-performing loans

  

(in millions, except percentages)

Retail finance(1)   Rs.87,383    25.3%  Rs.76,738    US$ 934     24.6%
Construction    55,217    16.0    51,538    627    16.5 
Rural Retail    37,080    10.7    37,294    454    11.9 
Crude petroleum/
refining and petrochemicals
   25,051    7.3    25,066    305    8.0 
Power    31,671    9.2    22,044    268    7.1 
Roads, ports, telecom, urban development & other infrastructure   14,488    4.2    12,727    155    4.1 
Electronics and engineering    16,045    4.6    12,705    155    4.1 
Services—non finance   14,203    4.1    12,402    151    4.0 
Mining    10,934    3.2    11,781    143    3.8 
Wholesale/retail trade    6,501    1.9    7,908    96    2.5 
Manufacturing products (excluding metal)    5,311    1.5    5,827    71    1.9 
Iron/steel and products   5,918    1.7    5,236    64    1.7 
Gems & jewellery   3,154    0.9    4,028    49    1.3 
Other Industries(2)    32,558    9.4    27,176    330    8.5 
Gross non-performing loans (3)   Rs.345,514    100.0%  Rs.312,470    

US$ 3,802

    100.0%
Aggregate provision for loan losses    (269,105)        (254,507)   (3,097)     
Net non-performing loans   Rs.76,409        Rs.57,963    

US$ 705

      

_____________________

(1)   Includes home loans, commercial business loans, rural loans, automobile loans, business banking, credit cards, personal loans, loans against securities and dealer financing portfolio. 

(2)    Other industries primarily include developer financing portfolio, automobiles, cement, shipping, food and beverages, chemical and fertilizers, textile, drugs and pharmaceuticals, metal and products (excluding iron and steel) services – finance and fast moving consumer goods.

 

See“Operating and Financial Review and Prospects—Executive Summary—Certain Factors Affecting Our Results of Operations—Trends in fiscal 2022”.

 

143 

Restructurd loans

 

The following table sets forth, at the dates indicated, gross restructured loans by borrowers’ industry or economic activity and as a percentage of total gross restructured loans.

 

  

At March 31,

  

2022

 

2023

  

Amount

 

As a percentage of restructured loans

 

Amount

 

Amount

 

As a percentage of restructured loans

  

(in millions, except percentages)

Retail finance  Rs.69,073    74.1%  Rs.44,643    US$ 543    85.0%
Power   6,106    6.5    ..    ..    .. 
Roads, port, telecom, urban development & other infrastructure   2,851    3.1    2,793    34    5.3 
Construction   1,924    2.1    1,599    19    3.0 
Others(1)   13,312    14.2    3,479    43    6.7 
Gross restructured loans   Rs.93,266    100.0%  Rs.52,514    

US$ 639

    100.0%
Aggregate provision for loan losses   (2,914)        (1,779)   (22)     
Net restructured loans  Rs.90,352        Rs.50,735    

US$ 617

      

 

(1)Others primarily include automobile, textiles, food and beverages, wholesale/retail trade, services-non finance, manufacturing products (excluding metal) and gems and jewellery.

 

(2)In addition, the Bank holds general provision amounting to Rs. 12.8 billion at year-end fiscal 2023 (year-end fiscal 2022: Rs. 23.6 billion) on these restructured loans, subject to minimum provisioning requirement as per the guidelines issued by the Reserve Bank of India.

 

Key ratios-Asset quality

 

The following table sets forth, for the periods indicated, our key ratios on asset quality.

 

  

At or for the year ended March 31, 

   2022 

  2023 

   (Rs. in millions, except percentages) 

Gross restructured loans as a percentage of gross loans   0.98%   0.47%
-Gross restructured loans   93,266    52,514 
-Total gross loans   9,475,107    11,094,954 
Gross non-performing loans as a percentage of gross loans   3.65    2.82 
-Gross non-performing loans   345,514    312,470 
-Total gross loans   9,475,107    11,094,954 
Net restructured loans as a percentage of net loans   0.98    0.47 
-Net restructured loans   90,352    50,735 
-Total net loans   9,203,081    10,838,663 
Net non-performing loans as a percentage of net loans (1)   0.83    0.53 
-Net non-performing loans   76,409    57,963 
-Total net loans   9,203,081    10,838,663 
Provision on restructured loans as a percentage of gross restructured loans (2)    3.12    3.39 
-Provision on restructured loans   2,914    1,779 
-Gross restructured loans   93,266    52,514 
Provision on non-performing loans as a percentage of gross non-performing loans    77.89    81.45 
-Provision on non-performing loans   269,105    254,507 
-Gross non-performing loans   345,514    312,470 
Provision as a percentage of gross loans(3)    4.45%   4.08%
-Provisions   421,315    452,185 
-Total gross loans   9,475,107    11,094,954 
          

_______________________

(1)Includes loans identified as non-performing/impaired in line with the guidelines issued by regulators of the respective subsidiary.

(2)In addition, the Bank holds 25% general provision on restructured assets (including general provision required as per the guidelines issued by the Reserve Bank of India).

(3)Includes general provision on standard assets.

 

144 

Net loan write-offs and Provision on non-performing loans

 

The table presents net loan write-offs and percentage of average loans for the periods indicated.

 

   March 31, 2022  March 31, 2023
Average loan portfolio  Net loan charge-offs1  % of average gross loans  Net loan charge-offs1  % of average gross loans
   (in millions, except percentages)
Commercial loans  Rs.42,528    1.17%  Rs.8,287    0.20%
Consumer loans   52,712    1.03    19,076    0.31 
Lease financing   1    0.10    ..    .. 
                     
Total loans  Rs.95,241    1.09%  Rs.27,363    0.27%

  

(1)Net loan write offs is the difference between gross loan write-offs and recoveries from write-offs.

 

Net loan write-offs as a percentage of our average total loan portfolios were 0.27% in the fiscal 2023 as compared to 1.09% in the fiscal 2022.

 

The following table shows an allocation of the Group’s total provision on non-performing loans and the percentage of loans in each category to total gross loans for the periods indicated.

 

   March 31, 2022  March 31, 2023
   Amount  % of loans in each category to total gross loans  Amount  % of loans in each category to total gross loans
   (in millions, except percentages)
Commercial loans  Rs.203,023    41.8%   189,176    39.6%
Consumer loans   66,082    58.2    65,331    60.4 
Lease financing   ..    0.0    ..    0.0 
                     
Total loans  Rs.269,105    100%   254,507    100%

    

 

145 

Operating and Financial Review and Prospects

 

You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements. The following discussion is based on our audited consolidated financial statements and accompanying notes prepared in accordance with Indian GAAP, which varies in certain significant respects from U.S. GAAP. For a reconciliation of net income and stockholders’ equity to U.S. GAAP, a description of significant differences between Indian GAAP and U.S. GAAP and certain additional U.S. GAAP information, see notes 21 and 22 to our consolidated financial statements included herein.

 

Executive Summary

 

Introduction

 

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 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 India’s leading corporations, middle market companies and small and medium enterprises. We also offer agricultural and rural banking products.

Our international franchise focusses 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 for maximizing 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 and granularity of business.

 

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 and affiliates. 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 associate ICICI Lombard General Insurance Company provides a wide range of general insurance products. 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 receipt of necessary regulatory approvals.

 

Our subsidiaries ICICI Securities Limited and ICICI Securities Primary Dealership Limited are engaged in equity underwriting and securities broking and primary dealership in government securities and fixed income market operations, respectively. Our private equity fund management subsidiary ICICI Venture manages funds that make private equity investments.

 

146 

Certain Factors Affecting Our Results of Operations

 

Our loan portfolio, financial condition and results of operations have been and, in the future would be, influenced by economic conditions in India, global economic developments affecting our customers such as changes in commodity prices and geo-political risks, conditions in global financial markets, economic conditions in the United States and in foreign countries where we have a significant presence or which impact the Indian economy and global markets, evolving global and domestic regulations, and global and regional natural calamities and health epidemics such as COVID-19. For ease of understanding the following discussion of our results of operations, you should consider these macroeconomic factors and other key developments.

 

Trends in fiscal 2023

 

The global gross domestic product grew by 2.7% in calendar year 2022 compared to a 5.9% increase in calendar year 2021. The gross domestic product of advanced economies grew by 2.6% and the gross domestic product of emerging economies grew by 2.8% in calendar 2022, compared to 5% growth in advanced economies and 6.5% for emerging economies in calendar year 2021. The fall in global growth reflected the adverse effects of the commodity price shock that took place in response to the Russia-Ukraine war, monetary tightening delivered by global central banks and stringent lockdowns that were imposed in China to combat the spread of COVID-19. Global energy prices rose sharply in the first half of calendar year 2022 reflecting concerns about supply. However, a sharp correction occurred in the second half of calendar year 2022 in response to weakening global demand. Global inflation surged in calendar year 2022 which was more prominent in advanced economies such as the U.S., Euro-zone and the UK. Global central banks had to front-load interest rate hikes, led by the U.S. Federal Reserve and the European Central Bank as well as other central banks. Given the pressures on the exchange rate and elevated inflation levels, several emerging market central banks also tightened rates. The People’s Bank of China was an exception that kept monetary policy accommodative in response to weakening economic activity. At the same time, higher interest rates have had an impact on the U.S. regional banking sector which in-turn is likely to impact global growth. Overall, there are significant headwinds to global growth given that the lagged effect of monetary tightening should work to slow economic activity and uncertainty about the state of the U.S. regional banking sector could persist.

 

After India’s real gross domestic product contracted by 5.8% during fiscal 2021 due to the COVID-19 pandemic, growth bounced back strongly in fiscal 2022, supported by accommodative monetary and fiscal policies and vaccine coverage. India’s gross domestic product grew 7.2% in fiscal 2023 compared with the 9.1% first revised estimates in fiscal 2022. Growth is underpinned by government led investment. The services sector has rebounded with travel and hospitality along with financial services and real estate sectors witnessing growth momentum. While a weaker global growth environment will impact India’s goods exports, services exports have been resilient. With oil prices easing from the earlier highs, India’s external sector outlook has improved as seen in the reduction in the current account deficit.

 

Inflation in India as measured by Consumer Price index came down from 7.0% in March 2022 to 5.7% in March 2023. However, the average inflation during fiscal 2023 was higher at 6.7% as compared to 5.5% in fiscal 2022. Inflation momentum was primarily driven by higher global and domestic food prices (food and beverages inflation was approximately 6.7% in fiscal 2023). At the same time, the higher global commodity, energy and metal prices and incomplete pass-through of input costs led to elevated core inflation (6.1% in fiscal 2022).

 

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As a measure to combat the impact of the first wave of COVID-19 pandemic, the Reserve Bank of India reduced the repo rate by 75 basis points to 4.40% in March 2020 and further by 40 basis points to 4.00% in May 2020. The policy rate was kept unchanged till April 2022. The Monetary Policy Committee maintained an accommodative stance through fiscal 2022 with a view to sustain growth and mitigate the impact of the pandemic on the economy. However, with inflationary pressures emerging due to geo-political developments, in fiscal 2023 there was a series of repo rate hikes and absorption of excess liquidity. Reserve Bank of India increased the repo rate by 250 basis points from April 2022 to February 2023 and thereafter, there has been a pause on repo rate.

 

On April 8, 2022, the Reserve Bank of India introduced the standing deposit facility rate as the floor of the liquidity adjustment facility corridor from reverse repo rate and narrowed the width of corridor to 50 basis points from 90 basis points earlier by raising the floor rate by 40 basis points to 3.75% from 3.35% earlier. The Reserve Bank of India indicated that the balances held by banks with it under the standing deposit facility shall be eligible for statutory liquidity ratio and shall not be eligible for cash reserve ratio maintenance. Notably, the stance was changed to ‘withdrawal of accommodation’ from ‘accommodative’.

 

On May 4, 2022, in an off-cycle meeting, the Monetary Policy Committee announced an increase in the repo rate by 40 basis points from 4.00% to 4.40%. Accordingly, the standing deposit facility rate was revised to 4.15% and the marginal standing facility rate to 4.65%. In line with the decision to withdraw liquidity, the cash reserve ratio was increased by 50 basis points from 4.00% to 4.50% of net demand and time liabilities. On June 8, 2022, the Monetary Policy Committee announced a further 50 basis point increase in the repo rate to 4.90%. Accordingly, the standing deposit facility rate was revised to 4.65% and the marginal standing facility rate to 5.15%.

 

Through the fiscal year, policy interest rates were raised as seen in the August 2022 meeting when the repo rate was increased by a larger quantum of 50 basis points to 5.4%. Accordingly, the Standing Deposit Facility rate was revised to 5.15% and the marginal standing facility rate was revised to 5.65%. Even in September 2022, the repo rate was raised by 50 basis points to 5.9%. Consequently, the standing deposit facility rate and marginal standing facility rate were revised to 5.65% and 6.15% respectively. The pace of rate hike was moderated to 35 basis points in December 2022 thus bringing the repo rate to 6.25%. In February 2023, the quantum of repo rate hike was reduced to 25 basis points to 6.5%. Consequently, the standing deposit facility rate and marginal standing facility rate was revised to 6.25% and 6.75% respectively. The stance in the fiscal year was maintained at ‘withdrawal of accommodation’.

 

However, in its April 2023 meeting, the Monetary Policy Committee kept the repo rate unchanged at 6.5%. Consequently, the standing deposit facility and marginal standing facility rates remained unchanged. The stance of ‘withdrawal of accommodation’ also remained unchanged.

 

In line with its policy stance, the Reserve Bank of India absorbed surplus liquidity during fiscal 2023, mainly through Open Market Operations such as Variable Reverse Repo Rate auctions and intervention in the foreign exchange market to support the rupee. Liquidity declined sharply to a surplus of approximately Rs. 1.5 trillion towards the end of the fiscal year from a surplus of approximately Rs. 7.2 trillion as on March 31, 2022.

 

India’s merchandise exports increased by 6.0% to US$ 447.5 billion in fiscal 2023 compared with US$ 422.0 billion in fiscal 2022. Merchandise imports too rose by 16.5% to US$ 714.2 billion in fiscal 2023 as compared to US$ 613.1 billion in fiscal 2022. The trade deficit widened to US$ 266.8 billion in fiscal 2023 compared with a trade deficit of US$ 191.1 billion in fiscal 2022. However, India’s services exports have seen a sharp rebound in fiscal 2023 at US$ 322.7 billion as compared to US$ 254.5 billion in fiscal 2022. This along with an increase in remittances has ensured that higher trade deficits are not resulting in equally high current account deficits. Thus, as a proportion of India’s gross domestic product, the current account deficit is estimated at 1.9% in fiscal 2023 (1.2% in fiscal 2022). Gross foreign direct investment inflows into India were US$ 70.7 billion during April to March 2023, while there was a net inflow of US$ 28.5 billion during the same period.

 

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The equity market benchmark S&P BSE Sensex index increased by 2% in fiscal 2023. The rupee depreciated by 8.4% from Rs. 75.79 per U.S. dollar as on March 31, 2022 to Rs. 82.18 per U.S. dollar as on March 31, 2023. In fiscal 2023, the yields on the benchmark 10-year government securities increased from 6.84% as on March 31, 2022 to 7.31% as on March 31, 2023.

 

In the banking sector, non-food credit grew by 15.4% year-on-year as on March 24, 2023 compared to 8.7% as on March 25, 2022, with incremental credit off-take of approximately Rs. 18.2 trillion during fiscal 2023. Sector-wise deployment of credit as on March 24, 2023 shows broad-based growth. Retail loans grew by 20.6% year-on-year, credit to industry by 5.7%, credit to the services sector by 19.8% and to the agriculture sector by 15.4%. Deposit growth was relatively muted, with growth of 9.6% year-on-year as on March 24, 2023 compared to 8.9% as on March 25, 2022.

 

According to the Reserve Bank of India’s Financial Stability Report of December 2022, non-performing assets of scheduled commercial banks continued the declining trend, with the gross non-performing assets ratio at 5.0% and net non-performing assets ratio at 1.3% as on September 30, 2022 compared to gross non-performing assets ratio of 6.9% and net non-performing assets ratio of 2.3% as on September 30, 2021.

 

In the budget for fiscal 2024, the Indian government announced several banking sector specific measures including the revamped Credit Guarantee Trust for Micro and Small Enterprises scheme, promotion of the newly introduced Digital Rupee by the Reserve Bank of India and setting up of National Financial Information Registry and the Credit Guarantee Scheme for Micro and Small enterprises to receive an additional credit of Rs. 2.0 trillion. Additionally the budget included provisions for promotion of Gujarat International Finance Tech-City International Financial Services Centre including permitting acquisition financing by International Financial Services Centre Banking Units of foreign banks and establishing a subsidiary of EXIM Bank for trade re-financing. The budget also seeks to establish an Urban Infrastructure Development Fund through use of investments made by banks in lieu of priority sector lending shortfall, which will be managed by the National Housing Bank, and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities.

 

Key regulatory measures announced in fiscal 2023 were:

 

·The Reserve Bank of India through its circular dated April 7, 2022 has introduced the concept of Digital Banking Units (“DBU”). Some of the key points of the circular include - establishment of DBUs, offering both liabilities and assets product services, and to ensure provision of regular on-site and off-site monitoring system covering all aspects of the guidelines.

 

·The Reserve Bank of India also increased the limit under held to maturity category to 23% of net demand and time liabilities from 19.5% previously to enable banks to better manage their investment portfolios. It further allowed banks to include securities acquired between April 1, 2022 and March 31, 2023 under the enhanced limit. With a view to enable banks to better manage their investment portfolios, the Reserve Bank of India decided to extend the dispensation of enhanced held to maturity limit of 23% up to March 31, 2024. The held to maturity limits would be restored from 23% to 19.5% in a phased manner starting from the quarter ending June 30, 2024.

 

·Pursuant to an earlier discussion paper on climate-related financial risks, the Reserve Bank of India decided to issue guidelines for regulated entities on (i) a broad framework for acceptance of green deposits (ii) a disclosure framework on climate-related financial risks and (iii) guidance on climate scenario analysis and stress testing.

 

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Business Overview

 

While assessing our performance, we monitor key financial variables such as the movement in profit before tax, excluding treasury income and return on equity. We also look at movement in yield on assets, cost of funds and net interest margin, movement in fee income and cost ratios. We also monitor key business indicators such as deposit growth, funding mix, loan growth and loan delinquency trends. We re-evaluate underwriting norms and risk management on an ongoing basis, and assess the financial impact of events on our capital, revenue and credit costs. We analyze changes in economic indicators such as interest rates, liquidity, exchange rates and the performance of various sectors and sub-sectors of the economy. In addition to these indicators, we monitor other non-financial indicators such as quality of customer service and the extent and nature of customer complaints, cyber threats, data security and preparedness to address them and estimates of market share in key areas of business. We continue to evaluate impact of climate change risks on the portfolio and the environmental, social and governance profile of our large borrowers. We also continuously look at improving capabilities that may be required to respond to crisis related events.

 

The growth in India’s gross domestic product of 7.2% in fiscal 2023 reflects the continuous recovery in economic activity after a contraction in fiscal 2021 due to the COVID-19 pandemic. The improvement in underlying economic activity was visible across sectors ranging from higher electricity generation to fuel consumption to automobile sales and travel along with higher credit off-take. The government tax collections have been buoyant and so has been the case with services exports. Government led investment cycle has also continued in the year.

 

Financial conditions remained relatively stable as the Reserve Bank of India raised policy rates to bring down the inflationary pressures visible in the economy. It also intervened in the foreign exchange market to ensure that the rupee did not see any sharp volatility. The Indian banking sector maintained improvements in asset quality, profitability and capital adequacy ratios during fiscal 2023. Growth in banking system non-food credit saw substantial improvement during fiscal 2023, with growth being driven by retail and service sector loans. Growth in deposits was stable as interest rates on term deposits remained stable in the first half of fiscal 2023 with an increase in rates only towards the second half of fiscal 2023. Lending rates saw a substantial rise during fiscal 2023, with the average lending rate on fresh rupee loans approved by banks increased by 169 basis points.

 

During the three months ended March 31, 2023, the global business environment changed because of the U.S. regional banking crisis which resulted in risk aversion and concerns about a possible hit to credit markets. However, counterparty risk has been managed by ring-fencing the depositors by U.S. policymakers. Global central banks opened the U.S. dollar swap window. However, global merchandise trade remains weak reflecting subdued global growth. The re-opening of the Chinese economy has not had a substantial effect in terms of improving trade flows. At the same time, the central banks of advanced economies have indicated that they will keep policy in restrictive territory to tackle inflation pressures that will continue to work as a headwind for the global economy. Adverse global developments impact Indian economy via both trade and financial channels. India’s foreign exchange reserves and well capitalized financial sector should mitigate the impact of the global developments on domestic economy.

 

See also “—Executive Summary—Certain Factors Affecting Our Results of Operations—Trends in fiscal 2023”.

 

In this environment, we continue to focus on maintaining a resilient balance sheet and strong capital levels.

 

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We believe that our healthy deposit franchise and competitive funding costs, along with strengthened risk management practices enable us to pursue growth opportunities profitably. In general, trends in systemic liquidity, interest rates and inflation influence deposit growth, especially with respect to low cost savings and current account deposits. Our ability to grow our deposit base may be impacted by increasing competition for such deposits from existing banks and new entrants. Regulatory developments like the introduction of a digital currency by the Reserve Bank of India may also impact our ability to raise low cost deposits in the medium to long term. We have focused on maintaining and enhancing our deposit franchise, including by leveraging technology. We have focused on capitalizing on opportunities in retail lending, including by cross-selling additional products to our existing customers, and growing our lending to small businesses, while adopting a selective approach to corporate lending, in order to build a more granular portfolio and sustainably improve portfolio quality. We aim to provide a complete range of financial products and services to meet personal and business needs of our customers and their ecosystems.

 

We continue to focus on maintaining capital adequacy ratios that are higher than regulatory requirements. We aim to grow the loan portfolio in a granular manner with a focus on risk and reward. Our provisioning policy for non-performing assets has been made more conservative, and as of March 31, 2023, we also held contingency provisions on a prudent basis, with a view to further strengthen the balance sheet.

 

A discussion of our financial performance in fiscal 2023 is given below:

 

Profit before tax excluding treasury income increased by 46.0% from Rs. 294.9 billion in fiscal 2022 to Rs. 430.6 billion in fiscal 2023.

 

Operating profit before provisions increased by 23.1% from Rs. 432.2 billion in fiscal 2022 to Rs. 532.0 billion in fiscal 2023 primarily due to an increase in net interest income and other income, offset, in part, by an increase in operating expenses.

 

Net interest income increased by 30.0% from Rs. 542.4 billion in fiscal 2022 to Rs. 705.2 billion in fiscal 2023 reflecting an increase of 15.4% in the average volume of interest-earning assets and an increase in net interest margin by 50 basis points.

 

Other income increased by 5.1% from Rs. 628.8 billion in fiscal 2022 to Rs. 661.1 billion in fiscal 2023 primarily due to an increase in commission, exchange and brokerage income and net earned premium and other operating income relating to insurance business, offset, in part, by a decrease in income from treasury related activities. Commission, exchange and brokerage income increased by 13.7% from Rs. 172.9 billion in fiscal 2022 to Rs. 196.5 billion in fiscal 2023. Premium and other operating income relating to insurance business increased by 5.6% from Rs. 389.6 billion in fiscal 2022 to Rs. 411.4 billion in fiscal 2023, primarily reflecting an increase in business volume. Income from treasury-related activities decreased from Rs. 55.1 billion in fiscal 2022 to Rs. 41.9 billion in fiscal 2023.

 

Operating expenses increased by 12.7 % from Rs. 731.5 billion in fiscal 2022 to Rs. 824.4 billion in fiscal 2023 due to an increase in payments to and provision for employees, other operating expenses and expenses related to insurance business.

 

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Provisions and contingencies (excluding provision for tax) decreased by 22.7% from Rs. 89.8 billion in fiscal 2022 to Rs. 69.4 billion in fiscal 2023 primarily due to a decrease in provision on non-performing and other assets, offset, in part, by an increase in other provisions and contingencies. The provision on non-performing and other assets decreased from a provision of Rs. 63.8 billion in fiscal 2022 to a write-back of Rs. 3.7 billion in fiscal 2023. During fiscal 2023, there were higher recoveries and upgrades from non-performing assets resulting in net write-back of provision, offset, in part, by an increase in provisioning rate for certain non-performing asset categories. In fiscal 2022, the provision for non-performing and other assets also included provision for loans restructured under Resolution Framework for COVID-19-related Stress. The provision coverage ratio increased from 77.9% at March 31, 2022 to 81.5% at March 31, 2023. During fiscal 2023, the Bank made contingency provision amounting to Rs. 56.5 billion on a prudent basis, to further strengthen the balance sheet.

 

Gross non-performing loans (net of write-offs) decreased from Rs. 345.5 billion at year-end fiscal 2022 to Rs. 312.5 billion at year-end fiscal 2023. Net non-performing loans decreased from Rs. 76.4 billion at year-end fiscal 2022 to Rs. 58.0 billion at year-end fiscal 2023. The net non-performing loan ratio decreased from 0.8% at year-end fiscal 2022 to 0.5% at year-end fiscal 2023. 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.”

 

Income tax expense increased from Rs. 84.6 billion in fiscal 2022 to Rs. 117.9 billion in fiscal 2023 primarily due to an increase in profit before tax and an increase in effective tax rate. The effective tax rate increased from 24.2% in fiscal 2022 to 25.0% in fiscal 2023 due to change in composition of income.

 

As a result of the above, the profit after tax increased by 35.5% from Rs. 251.1 billion in fiscal 2022 to Rs. 340.4 billion in fiscal 2023.

 

Net worth (equity share capital and reserves and surplus) increased from Rs. 1,820.5 billion at year-end fiscal 2022 to Rs. 2,145.0 billion at year-end fiscal 2023 primarily due to accumulation of retained earnings. Total assets and liabilities increased by 11.7% from Rs. 17,526.4 billion at year-end fiscal 2022 to Rs. 19,584.9 billion at year-end fiscal 2023. Total advances increased by 17.8% from 9,203.1 billion at year-end fiscal 2022 to Rs. 10,838.7 billion at year-end fiscal 2023. Total deposits increased by 10.9% from Rs. 10,913.7 billion at year-end fiscal 2022 to Rs. 12,108.3 billion at year-end fiscal 2023.

 

The changes in capital adequacy ratios of ICICI Bank on an unconsolidated basis (after deducting the proposed dividend for fiscal 2023 from capital funds) in accordance with the Reserve Bank of India’s guidelines on Basel III were as follows: common equity Tier 1 risk-based capital ratio decreased from 17.60% in fiscal 2022 to 17.12% is fiscal 2023; Tier 1 risk-based capital ratio decreased from 18.35% in fiscal 2022 to 17.60% in fiscal 2023; and total risk-based capital ratio decreased from 19.16% in fiscal 2022 to 18.34% in fiscal 2023. The decrease in total risk-based capital ratio is primarily due to an increase in the credit risk exposure and market risk exposure. Credit risk exposure increased primarily due to an increase in advances and off balance sheet exposures. Market risk exposure increased primarily due to an increase in investment in government securities and an increase in notional amount of interest rate swaps and forward rate agreements during the year. The changes in our capital adequacy ratios on a consolidated basis in accordance with the Reserve Bank of India’s guidelines on Basel III, at year-end fiscal 2023 were as follows: common equity Tier 1 risk-based capital ratio decreased from 17.34% in fiscal 2022 to 16.88% in fiscal 2023; Tier 1 risk-based capital ratio decreased from 18.02% in fiscal 2022 to 17.33% in fiscal 2023; and total risk-based capital ratio decreased from 18.87% in fiscal 2022 to 18.09% in fiscal 2023.

 

Business Outlook

 

Uncertainties in the global economy have increased considerably following the global geo-political environment, stress in the United States regional banking sector and elevated inflation pressures in developed economies such as the United States, Euro-zone and the United Kingdom. As the Russia-Ukraine war continues, upside risks to the energy price outlook continue. At the same time, any further deterioration or signs of stress in the U.S. regional banking sector could pose substantial downside risks to the United States and, subsequently, global growth outlook. Elevated inflation in several developed economies would require continued tight monetary policy. This might restrict capital flows into India and other emerging economies. The spill-over of these risks to the Indian economy needs to be monitored carefully. Slower global growth is likely to pose a headwind to India’s growth by way of lower exports. However, lower global commodity prices are also likely to benefit India in several ways: by keeping inflation low, improving corporate profitability, lowering import bill and reducing pressure on Indian rupee.

 

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Over the medium term, the outlook for Indian economy remains positive. India recently overtook China as the most populous country in the world, supporting its large domestic market and the potential for consumption growth. Investments are also likely to increase because of the strong infrastructure push by the government, improved balance sheets of corporations and banks, and rising capacity utilization. Lastly, the net imports, includes merchandise and services, which typically posed a headwind for the Indian economy could have less impact on growth if the recent momentum witnessed in services exports is sustained.

 

Our long-term strategy will continue to focus on growing our core operating profit less provisions within the guardrails of risk and compliance. We focus on creating holistic value propositions for our customers by adopting a 360-degree customer-centric approach and capturing opportunities across customer ecosystems, leveraging internal synergies, building partnerships and simplifying processes. Cross-functional collaboration among teams has been facilitated to tap into key customer and market segments, enabling 360-degree coverage of customers and increasing wallet share. We have also streamlined our organisation structure and empowered teams at the local level to create flexibility and agility in capturing business opportunities. This improves our ability to connect with customers and respond to their needs.

 

Technology is core to our business strategy. We are creating digital experiences and aim to offer personalised and customized solutions to customers to suit their life-stage and business needs. We partner with technology companies and platforms to leverage opportunities for growth and enhancing service delivery and customer experience. We leverage technology and analytics for deeper insights into market opportunities, customer needs and behavior. We continue to invest in technology to enhance our offerings to customers as well as the scalability, flexibility and resilience of our technology architecture.

 

We have over the years re-balanced our deposit profile, improved the credit rating profile of our portfolio and reduced concentration risks. We also improved cost efficiency, scaled up retail loan growth, calibrated corporate loan growth and maintained high capital adequacy ratios. We have repositioned our international franchise to focus on non-resident Indians for deposits, wealth and remittances businesses and deepen relationships with well-rated Indian corporates in international markets and multinational companies for maximizing the India-linked trade, transaction banking and lending opportunities within our risk management framework. Our gross non-performing loans ratio has decreased and the provisioning coverage on non-performing loans has increased in fiscal 2023. See also, “Business—Strategy.”

 

Our success will be determined by our ability to respond to the evolving economic environment, maintain a strong balance sheet with adequate buffers of liquidity and capital, strong risk management and business continuity planning, as well as the behavior of our loan portfolio vis-à-vis comparable banks and finance companies. Generally, the success of our strategy depends on several factors, including our ability to grow our deposit base, grow our loan book profitably, contain non-performing loans, resolve stressed assets at an early stage, maintain regulatory compliance in an evolving regulatory environment, address regulators’ assessments of and observations on our operations, and compete effectively in the Indian corporate and retail financial services market. Regulations governing the financial sector in India, including banking, insurance and asset management, continue to evolve, with a potential impact on the growth and profitability of financial services groups such as us. The success of our strategy is also subject to the overall regulatory and policy environment in which we operate including the direction of monetary policy. Our ability to execute our strategy will also depend on the liquidity and interest rate environment. See also “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”. With regard to our overseas banking subsidiaries, the impact on the global economy due to geopolitical factors, inflation and monetary policy and other global developments are expected to impact economic growth in Canada and the United Kingdom, which in turn could impact the business of our banking subsidiaries in these countries. 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.”

 

For a detailed discussion of risks that we face in our business please refer to “Risk Factors”.

 

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Operating Results Data

 

The following table sets forth, for the periods indicated, our summary results data.

 

   Year ended March 31,
   2022  2023  2023(1)
   (in millions, except per common share data)
Selected income statement data:         
Interest earned(2)  Rs.954,069   Rs.1,210,668   US$14,730 
Interest expended   (411,667)   (505,434)   (6,150)
Net interest income   542,402    705,234    8,580 
Other income   621,295    651,120    7,922 
Net total income   1,163,696    1,356,354    16,502 
Operating expenses               
Payments to and provisions for employees   (123,416)   (152,342)   (1,854)
Expenses pertaining to insurance business   (398,763)   (416,551)   (5,068)
Other operating expenses(3)   (209,338)   (255,497)   (3,109)
Total operating expenses   (731,517)   (824,390)   (10,031)
Operating profit before provisions   432,179    531,964    6,471 
Provisions and contingencies (excluding provision for tax)   (89,766)   (69,399)   (844)
Share of profit in associates   7,544    9,983    121 
Profit before tax   349,957    472,548    5,748 
Provision for tax   (84,574)   (117,934)   (1,435)
                
Profit after tax   265,383    354,614    4,313 
Minority interest   (14,282)   (14,248)   (173)
Net profit (after minority interest)   251,101    340,366    4,140 
                
Profitability:               
Net profit (after minority interest) as a percentage of:               
  Average total assets   1.57%   1.87%     
  Average stockholders’ equity   15.05    17.22      
Per common share:               
Earnings-basic(4)    Rs.36.21   Rs.48.86   US$0.59 
Earnings-diluted(5)   35.44    47.84    0.58 
Book value(6)   Rs.250.41   Rs.296.12   US$ 3.6 
Dividend payout ratio(7)   13.84%   16.41%     
Cost-to-income ratio(8)   62.86    60.78      
Cost-to-average assets ratio(9)   4.59    4.52      
Capital               
Average stockholders’ equity as a percentage of average total assets(10)   10.46%   10.84%     

 

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(1)Rupee amounts for fiscal 2023 have been translated into U.S. dollars using the exchange rate of Rs. 82.19 = US$ 1.00 as set forth in the H.10 statistical release of the Federal Reserve Board at year-end fiscal 2023.

(2)Interest earned includes interest on income tax refunds of Rs. 2.4 billion and Rs. 1.2 billion for fiscal 2022 and 2023 respectively.

(3)Includes depreciation on fixed assets and other general office expenses.

(4)Earnings per share is computed based on the weighted average number of shares and represents net profit/(loss) per share before dilutive impact.

(5)Earnings per share is computed based on the weighted average number of shares and represents net profit/(loss) per share adjusted for full dilution. Options to purchase 24,643,450 and 24,312,910 equity shares granted to employees at a weighted average exercise price of Rs. 570.4 and Rs. 748.0 were outstanding at year-end fiscal 2022 and 2023 respectively, but were not included in the computation of diluted earnings per share as these options were anti-dilutive.

(6)Represents capital, employees’ stock options outstanding and reserves and surplus reduced by deferred tax asset and goodwill.

(7)Represents the ratio of total dividends paid on equity share capital as a percentage of net profit (after minority interest). Dividends for a fiscal year are normally paid in the following year.

(8)Represents the ratio of operating expenses to total income. Total income represents the sum of net interest income and non-interest income.

(9)Represents the ratio of operating expenses to average total assets.

(10)Represents the ratio of average stockholders’ equity to average total assets. Average stockholders’ equity represents average capital, employees’ stock options outstanding and reserves and surplus reduced by preference share capital. Average total assets represents total of average interest-earning assets and average non-interest earning assets.

 

Consolidated Income Information

 

Net Interest Income

 

The following table sets forth, for the periods indicated, the principal components of net interest income.

 

   Year ended March 31,
  

2022

 

2023

 

2023

 

2023/2022
% change

   (in millions, except percentages)
Interest earned(1)   Rs.954,069   Rs.1,210,668   US$     14,730    26.9% 
Interest expense    (411,667)   (505,434)   (6,150)   22.8 
Net interest income   Rs.542,402   Rs.705,234    US$

8,580

    30.0% 

_______________________ 

(1)Tax exempt income has not been re-calculated on a tax-equivalent basis.

 

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Yields, Spreads and Margins

 

The following table sets forth, for the periods indicated, the yields, spreads and net interest margins on interest-earning assets.

 

   Year ended March 31,
   2022  2023
   (in millions, except percentages)
Interest earned(1)   Rs.954,115   Rs.1,210,702 
Average interest-earning assets    13,743,590    15,859,535 
Interest expense    411,666    505,434 
Average interest-bearing liabilities    11,234,035    12,851,469 
Average total assets    15,944,038    18,228,389 
Average interest-earning assets as a percentage of average total assets    86.20%    87.00% 
Average interest-bearing liabilities as a percentage of average total assets    70.46    70.50 
Average interest-earning assets as a percentage of average interest-bearing liabilities    122.34    123.41 
Yield    6.94    7.63 
Rupee    7.71    8.11 
Foreign currency    1.48    3.32 
Cost of funds    3.66    3.93 
Rupee    3.88    4.08 
Foreign currency    1.47    2.35 
Spread(2)    3.28    3.70 
Rupee    3.82    4.03 
Foreign currency    0.01    0.97 
Net interest margin(3)    3.95    4.45 
Rupee    4.42    4.75 
Foreign currency    0.59%    1.71% 

___________________

(1)We have re-calculated tax-exempt income on a tax-equivalent basis. The impact of re-calculation of tax-exempt income on a tax equivalent basis was Rs. 34 million for fiscal 2023 as compared to Rs. 27 million for fiscal 2022.

(2)Spread is the difference between yield on average interest-earning assets and cost of average interest-bearing liabilities. Yield on average interest-earning assets is the ratio of interest earned to average interest-earning assets. Cost of average interest-bearing liabilities is the ratio of interest expended to average interest-bearing liabilities.

(3)Net interest margin is the ratio of net interest income to average interest-earning assets. The difference in net interest margin and spread arises due to the difference in amount of average interest-earning assets and average interest-bearing liabilities. If average interest-earning assets exceed average interest-bearing liabilities, net interest margin is greater than the spread and if average interest-bearing liabilities exceed average interest-earning assets, net interest margin is less than the spread.

(4)Previous period figures have been re-grouped/re-classified where necessary to conform to current period classification.

 

Net interest income increased by 30.0% from Rs. 542.4 billion in fiscal 2022 to Rs. 705.2 billion in fiscal 2023, reflecting an increase of 15.4% in the average volume of interest-earning assets and an increase in net interest margin by 50 basis points.

 

156 

Net interest margin

 

Net interest margin on the rupee portfolio increased by 33 basis points from 4.42% in fiscal 2022 to 4.75% in fiscal 2023 and net interest margin on the foreign currency portfolio increased by 112 basis points from 0.59% in fiscal 2022 to 1.71% in fiscal 2023. Overall net interest margin increased by 50 basis points from 3.95% in fiscal 2022 to 4.45% in fiscal 2023. The yield on average interest-earning assets increased by 69 basis points from 6.94% in fiscal 2022 to 7.63% in fiscal 2023. The cost of funds increased by 27 basis points from 3.66% in fiscal 2022 to 3.93% in fiscal 2023.

 

The yield on the rupee portfolio increased by 41 basis points from 7.71% in fiscal 2022 to 8.11% in fiscal 2023 primarily due to the following:

 

·The yield on rupee advances increased by 48 basis points from 8.84% in fiscal 2022 to 9.32% in fiscal 2023. The yield on rupee investments increased by 38 basis points from 6.13% in fiscal 2022 to 6.51% in fiscal 2023. The yield on rupee other interest-earning assets decreased by 32 basis points from 2.54% in fiscal 2022 to 2.22% in fiscal 2023.

 

·The yield on rupee advances increased primarily due to re-pricing of existing floating rate loans linked to the repo rate and the Bank’s marginal cost of funds based lending rate and new lending at higher rates due to significant increase in the repo rate.

 

The Reserve Bank of India increased the repo rate by 250 basis points from 4.00% in May 2022 to 6.50% in February 2023. The Bank increased the 1-year marginal cost of funds based lending rate by 150 basis points in phases during fiscal 2023. The impact of increase in repo rates from May 2022 started reflecting in overall yield through repricing of repo and treasury bill linked portfolio from second quarter of fiscal 2023. For marginal cost of funds based lending rate linked loans, the effect on the yields started reflecting from the respective reset dates of underlying loans. At March 31, 2023, of the total domestic loan book of ICICI Bank on a standalone basis, 30% had fixed interest rates, 45% had interest rates linked to repo rate, 20% had interest rates linked to the marginal cost of funds based lending rate and other older benchmarks and 5% had interest rates linked to other external benchmarks. See also “Business—Loan portfolio—Loan pricing”.

 

·The yield on interest earning rupee government securities increased primarily due to reset of yields on floating rate bonds linked to treasury bills at higher rates pursuant to a significant increase in treasury bill yields and new investment in government securities at higher yields. The yield on investments, other than government securities, increased primarily due to an increase in yield on bonds and debentures.

 

·The yield on other interest-earning rupee assets decreased by 32 basis points from 2.54% in fiscal 2022 to 2.22% in fiscal 2023 primarily due to a decrease in interest income on funding swaps, a decrease in interest earning liquidity adjustment facility lending to Reserve Bank of India and an increase in average balance with the Reserve Bank of India (cash reserve ratio) which does not earn any interest. During first quarter of fiscal 2023, the Reserve Bank of India had increased the cash reserve ratio from 4% to 4.5%.

 

·Interest on income tax refunds decreased from Rs. 2.4 billion in fiscal 2022 to Rs. 1.2 billion in fiscal 2023. The receipt, amount and timing of such income depend on the nature and timing of determinations by tax authorities and hence are neither consistent nor predictable.

 

157 

The cost of funds for the rupee portfolio increased by 20 basis points from 3.88% in fiscal 2022 to 4.08 % in fiscal 2023 primarily due to the following factors:

 

·The cost of rupee deposits increased by 11 basis points from 3.61% in fiscal 2022 to 3.72% in fiscal 2023 due to an increase in cost of term deposits.

 

The cost of rupee term deposits increased by 20 basis points from 4.64% in fiscal 2022 to 4.84% in fiscal 2023 primarily due to an increase in retail term deposits rates during fiscal 2023. The peak rate for retail term deposits of the Bank increased significantly from 5.75% in May 2022 to 7.10% in March 2023 in phases during fiscal 2023 on account of significant increase in repo rate by the Reserve Bank of India. The full impact of the rise in interest rates on deposits will be reflected in fiscal 2024. The cost of savings account deposits increased from 3.15% in fiscal 2022 to 3.17% in fiscal 2023. The average rupee current account and savings account deposits as a percentage of total average rupee deposits were 44.7% in fiscal 2023 as compared to 44.5% in fiscal 2022.

 

·The cost of rupee borrowings increased by 43 basis points from 6.32% in fiscal 2022 to 6.75% in fiscal 2023 primarily due to an increase in the cost of rupee borrowings of ICICI Bank and ICICI Securities Primary Dealership. The cost of rupee borrowings of ICICI Bank increased primarily due to an increase in cost of short term money market borrowings and refinance borrowings, offset, in part, by a decrease in cost of bond borrowings.

 

The total average rupee deposits of the Bank as a percentage of total average rupee funding decreased from 92.7% in fiscal 2022 to 91.4% in fiscal 2023.

 

Net interest margin on the foreign currency portfolio increased by 112 basis points from 0.59% in fiscal 2022 to 1.71% in fiscal 2023. Average interest-earning foreign currency assets decreased by 6.2% from Rs. 1,688.2 billion in fiscal 2022 to Rs. 1,583.2 billion in fiscal 2023. Average interest-bearing foreign currency liabilities increased by 6.0% from Rs. 1,025.2 billion in fiscal 2022 to Rs. 1,086.4 billion in fiscal 2023. During fiscal 2022 and fiscal 2023, the Bank converted a part of the excess rupee liquidity into foreign currency and deployed the same in foreign currency placements/investments. This has resulted in average foreign currency assets being significantly higher than average foreign currency liabilities.

 

The yield on our foreign currency portfolio increased by 184 basis points from 1.48% in fiscal 2022 to 3.32% in fiscal 2023 primarily due to the following:

 

·The yield on average foreign currency interest-earning assets of ICICI Bank increased by 206 basis points from 1.12% in fiscal 2022 to 3.18% in fiscal 2023 primarily due to an increase in the yield on average advances. The yield on average advances increased by 198 basis points from 1.52% in fiscal 2022 to 3.50% in fiscal 2023 primarily due to repricing of floating rate/maturing advances on account of the rate hike cycle by the U.S. Federal Reserve. The yield on average advances was also positively impacted due to higher interest collection on non-performing assets.

 

·The yield on average interest-earning assets of ICICI Bank UK PLC increased primarily due to an increase in yield on average advances and an increase in yield on average investments primarily due to increase in benchmark interest rates.

 

·The yield on average interest-earning assets of ICICI Bank Canada increased primarily due to an increase in yield on average advances and an increase in average investments. The yield on average advances and average investments increased due to an increase in benchmark interest rates.

 

158 

The cost of funds for the foreign currency portfolio increased by 88 basis points from 1.47% in fiscal 2022 to 2.35% in fiscal 2023, due to the following factors:

 

·The cost of funds for ICICI Bank’s foreign currency funding increased in fiscal 2023 as compared to fiscal 2022 primarily due to an increase in cost of term borrowings on account of rate hike cycle by the US Federal Reserve.

 

·The cost of funds of ICICI Bank UK PLC increased in fiscal 2023 as compared to fiscal 2022 primarily due to an increase in cost of deposits. The cost of deposits increased primarily due to an increase in interest rates offered on deposits on account of higher benchmark interest rates.

 

·The cost of funds of ICICI Bank Canada increased in fiscal 2023 as compared to fiscal 2022 primarily due to an increase in cost of deposits. The cost of deposits increased primarily due to an increase in rates offered on term deposits mobilized and an increase in the rates offered for savings deposits.

 

Our yield on advances, interest earned, net interest income and net interest margin are impacted by systemic liquidity conditions, movements in interest rates, the competitive environment, the level of additions to non-performing loans, regulatory developments, monetary policy and economic and geo-political factors. These developments may have an adverse impact on the net interest margin. The timing and quantum of recoveries and interest on income tax refund is uncertain.

 

Interest rates on approximately 49.9% of ICICI Bank’s domestic loans are linked to external market benchmarks. The differential movements in the external benchmark rates compared to cost of funds impact our net interest income and net interest margin.

 

Interest-earning assets

 

The average volume of interest-earning assets increased by 15.4% from Rs. 13,743.6 billion in fiscal 2022 to Rs. 15,859.5 billion in fiscal 2023. The increase in average interest-earning assets was primarily due to an increase in average advances by Rs. 1,697.7 billion and average investments by Rs. 612.6 billion, offset, in part, by a decrease in average other interest-earning assets by Rs. 194.4 billion.

 

The average volume of rupee interest-earning assets increased by 18.4% from Rs. 12,055.4 billion in fiscal 2022 to Rs. 14,276.4 billion in fiscal 2023 primarily due to an increase in average advances and average investments, offset, in part, by a decrease in average other interest-earning assets. Average rupee advances increased by 23.4% from Rs. 7,334.0 billion in fiscal 2022 to Rs. 9,059.7 billion in fiscal 2023. Average rupee investments increased by 18.7% from Rs. 3,558.9 billion in fiscal 2022 to Rs. 4,223.4 billion in fiscal 2023 primarily due to an increase in average investments in Indian government securities. Average other rupee interest-earning assets decreased by 13.8% from Rs. 1,152.6 billion in fiscal 2022 to Rs. 993.3 billion in fiscal 2023 primarily due to a decrease in lending to the Reserve Bank of India under liquidity adjustment facility, offset, in part, by an increase in balances with the Reserve Bank of India to maintain cash reserve ratio.

 

159 

The average volume of foreign currency interest-earning assets decreased by 6.2% from Rs. 1,688.2 billion in fiscal 2022 to Rs. 1,583.2 billion in fiscal 2023. Average foreign currency advances decreased by 1.8% from Rs. 975.1 billion in fiscal 2022 to Rs. 957.1 billion in fiscal 2023. Average foreign currency investments decreased by 25.1% from Rs. 207.0 billion in fiscal 2022 to Rs. 155.1 billion in fiscal 2023 primarily due to a decrease in investments in treasury bills by ICICI Bank Canada, offset, in part, by an increase in investments in banker’s acceptances and bonds by ICICI Bank Canada. Average other foreign currency interest-earning assets decreased by 6.9% from Rs. 506.0 billion in fiscal 2022 to Rs. 470.9 billion in fiscal 2023 primarily due to a decrease in balances with banks outside India.

 

Interest-bearing liabilities

 

Average interest-bearing liabilities increased by 14.4% from Rs. 11,234.0 billion in fiscal 2022 to Rs. 12,851.5 billion in fiscal 2023 primarily due to an increase in average deposits by Rs. 1,207.0 billion and average borrowings by Rs. 410.4 billion.

 

Average interest-bearing rupee liabilities increased by 15.2% from Rs. 10,208.8 billion in fiscal 2022 to Rs. 11,765.1 billion in fiscal 2023. Average rupee time deposits increased by 12.6% from Rs. 5,094.1 billion in fiscal 2022 to Rs. 5,735.6 billion in fiscal 2023. Average rupee current account and savings account deposits increased by 13.6% from Rs. 4,084.7 billion in fiscal 2022 to Rs. 4,641.6 billion in fiscal 2023. Average rupee borrowings increased by 34.8% from Rs. 1,030.0 billion in fiscal 2022 to Rs. 1,387.9 billion in fiscal 2023. Average borrowings of ICICI Bank increased primarily due to an increase in bond borrowings, refinance borrowings and repo borrowings.

 

Average interest-bearing foreign currency liabilities increased by 6.0% from Rs. 1,025.2 billion in fiscal 2022 to Rs. 1,086.4 billion in fiscal 2023 due to an increase in borrowings. Average foreign currency borrowings increased by 10.5% from Rs. 497.8 billion in fiscal 2022 to Rs. 550.3 billion in fiscal 2023 primarily due to an increase in borrowings of ICICI Bank, offset, in part, by a decrease in borrowings of ICICI Bank UK PLC and ICICI Bank Canada. Average borrowings of ICICI Bank increased primarily due to an increase in term money borrowings. Average borrowings of ICICI Bank UK PLC decreased primarily due to maturity of long-term borrowings. Average borrowings of ICICI Bank Canada decreased primarily due to reduction in treasury and securitized borrowings. Average foreign currency deposits increased by 1.6% from Rs. 527.4 billion in fiscal 2022 to Rs. 536.1 billion in fiscal 2023. Average deposits of ICICI Bank increased primarily due to an increase in foreign currency non-resident deposits. Average deposits of ICICI Bank UK PLC decreased primarily due to a decrease in term deposits and retail savings deposits, offset, in part, by an increase in current deposits. Average foreign currency deposits of ICICI Bank Canada increased primarily due to an increase in term deposits.

 

See also “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”.

 

160 

Other Income

 

The following table sets forth, for the periods indicated, the principal components of other income.

  

   Year ended March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Commission, exchange and brokerage   Rs.172,884   Rs.196,485   US$2,391    13.7% 
Income from treasury-related activities (net)   55,060    41,921    510    (23.9)
- Profit/(loss) on exchange/derivative transactions (net)   29,933    30,509    371    1.9 
-Profit/(loss) on other treasury-related activities(1)   25,127    11,412    139    (54.6)
Profit/(loss) on sale of land, buildings and other assets (net)    57    543    7    —   
Premium and other operating income from insurance business    389,596    411,368    5,005    5.6 
Miscellaneous income    11,242    10,786    131    (4.1)
- Share of profit in associates   7,544    9,983    121    32.3 
-Others   3,698    803    10    (78.3)
Total other income (including share of profit in associates)   Rs.628,839   Rs.661,103   US$

8,044

    5.1% 

 _____________________

(1)Includes profit/(loss) on the sale of investments and on revaluation of investments.

 

Other income primarily includes income pertaining to our insurance business, commission, exchange and brokerage income, profit/(loss) on treasury-related activities and other miscellaneous income. This analysis of other income should be read against the backdrop of global and Indian economic developments, financial market activities, the competitive environment, client activity levels and our strategy, as detailed in earlier sections.

 

Other income increased by 5.1% from Rs. 628.8 billion in fiscal 2022 to Rs. 661.1 billion in fiscal 2023 primarily due to an increase in commission, exchange and brokerage income and net earned premium and other operating income relating to insurance business, offset, in part, by a decrease in income from treasury related activities.

 

Commission, exchange and brokerage

 

Commission, exchange and brokerage income primarily includes fees from our banking business as well as fee and brokerage income of our securities broking, asset management and private equity fund management subsidiaries. The fee income of our banking business primarily includes fees from corporate clients, such as lending linked fees, and transaction banking fees such as fees on cash management services, commission on bank guarantees, letters of credit and bills discounting. The fee income of our banking business also includes fees from retail customers such as lending linked fees and transaction banking fee such as credit card related fees, debit card related fees and service charges on retail deposit accounts.

 

Commission, exchange and brokerage income increased from Rs. 172.9 billion in fiscal 2022 to Rs. 196.5 billion in fiscal 2023 primarily due to an increase in transaction banking fees, lending linked fees, and fund management fees. Transaction banking fees increased from Rs. 78.9 billion in fiscal 2022 to Rs. 98.8 billion in fiscal 2023 primarily due to an increase in fee income from credit cards and debit cards. Lending linked fees increased from Rs. 33.0 billion in fiscal 2022 to Rs. 39.6 billion in fiscal 2023. Fund management fees increased from Rs. 24.7 billion in fiscal 2022 to Rs. 27.5 billion in fiscal 2023. Securities brokerage income decreased from Rs. 15.5 billion in fiscal 2022 to Rs. 12.6 billion in fiscal 2023. Third party products distribution fees increased from Rs. 9.4 billion in fiscal 2022 to Rs. 10.3 billion in fiscal 2023.

 

161 

Income from Treasury-Related Activities (Net)

 

Income from treasury-related activities includes income from the sale of investments and the revaluation of investments on account of changes in unrealized profit/(loss) in the fixed income, equity and preference share portfolio, units of venture capital and private equity funds, units of mutual funds and security receipts issued by asset reconstruction companies. Further, it also includes income from foreign exchange transactions, consisting of various foreign exchange and derivatives transactions with clients, including options and swaps.

 

Income from treasury-related activities decreased from Rs. 55.1 billion in fiscal 2022 to Rs. 41.9 billion in fiscal 2023.

 

Income from our equity portfolio decreased from Rs. 16.9 billion in fiscal 2022 to Rs. 10.7 billion in fiscal 2023.

 

There was a loss from our government securities portfolio and other fixed income positions of Rs. 1.5 billion in fiscal 2023 due to unfavourable market conditions, as compared to a gain of Rs. 5.6 billion in fiscal 2022. The yields on the benchmark 10-year government securities increased from 6.84% at March 31, 2022 to 7.31% at March 31, 2023.

 

Income from foreign exchange transactions, including transactions with clients and margins on derivatives transactions with clients, increased from Rs. 29.9 billion in fiscal 2022 to Rs. 30.5 billion in fiscal 2023.

 

Premium and other operating income from insurance business

 

Premium and other operating income from insurance business includes net premium income, fee and commission income, surrender charges and income on foreclosure of policies.

 

Premium and other operating income from our life insurance business increased by 5.6% from Rs. 389.6 billion in fiscal 2022 to Rs. 411.4 billion in fiscal 2023. Net premium income of our life insurance subsidiary increased by 6.3% from Rs. 362.1 billion in fiscal 2022 to Rs. 385.0 billion in fiscal 2023. The premium income (gross of premium on reinsurance ceded) of ICICI Prudential Life Insurance Company increased by 6.6% from Rs. 374.6 billion in fiscal 2022 to Rs. 399.3 billion in fiscal 2023 primarily due to an increase in group premium and retail renewal premium. Group premium increased by 28.1% from Rs. 67.3 billion in fiscal 2022 to Rs. 86.2 billion in fiscal 2023. Retail renewal premium increased by 4.4% from Rs. 214.4 billion in fiscal 2022 to Rs. 223.8 billion in fiscal 2023. Retail new business premium decreased by 3.8% from Rs. 93.0 billion in fiscal 2022 to Rs. 89.4 billion in fiscal 2023. Fee and other life insurance related income of our life insurance subsidiary decreased by 4.2% from Rs. 27.5 billion in fiscal 2022 to Rs. 26.4 billion in fiscal 2023.

 

Miscellaneous income

 

Miscellaneous income decreased from Rs. 11.2 billion in fiscal 2022 to Rs. 10.8 billion in fiscal 2023. The share of profit of ICICI Lombard General Insurance Company Limited, accounted as an affiliate, increased from Rs. 7.5 billion in fiscal 2022.to Rs. 10.0 billion in fiscal 2023. Other miscellaneous income decreased from Rs. 3.7 billion in fiscal 2022 to Rs. 0.8 billion in fiscal 2023.

 

162 

Operating Expense

 

The following table sets forth, for the periods indicated, the principal components of operating expense.

 

   Year ended March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Payments to and provisions for employees   Rs.123,416   Rs.152,342   US$1,854    23.4% 
Depreciation on own property    13,112    14,946    182    14 
Auditor’s fees and expenses    220    249    3    13.2 
Expenses pertaining to insurance business    398,763    416,551    5,068    4.5 
Other operating expenses    196,007    240,302    2,924    22.6 
Total operating expenses   Rs.731,518   Rs.824,390   US$

10,031

    12.7% 

 

Operating expense primarily includes expenses relating to our insurance business, payment to and provision for employees and other operating expenses. Operating expenses increased by 12.7% from Rs. 731.5 billion in fiscal 2022 to Rs. 842.4 billion in fiscal 2023 primarily due to an increase in payments to and provisions for employees and other operating expenses.

 

Payments to and provisions for employees

 

Employee expenses increased by 23.4% from Rs. 123.4 billion in fiscal 2022 to Rs. 152.3 billion in fiscal 2023. Our employee base, including sales executives, employees on fixed term contracts and interns, increased from 130,542 at year-end fiscal 2022 to 157,799 at year-end fiscal 2023.

 

The employee expenses of ICICI Bank increased by 24.7% from Rs. 96.7 billion in fiscal 2022 to Rs. 120.6 billion in fiscal 2023. Employee expenses increased primarily due to an increase in salary cost, higher provision for retirement benefit obligations and provision for performance bonus and performance-linked retention pay. Salary cost increased primarily due to annual increments and promotions and due to an increase in average staff strength. The average employee base of ICICI Bank, including sales executives, employees on fixed term contracts and interns, increased by 12.3% from 101,233 employees in fiscal 2022 to 113,664 employees in fiscal 2023.

 

The employee expenses of ICICI Bank Canada increased by 32.9% from Rs. 1.1 billion in fiscal 2022 to Rs. 1.5 billion in fiscal 2023. The employee expenses of ICICI Home Finance Company increased by 28.9% from Rs. 1.7 billion in fiscal 2022 to Rs. 2.3 billion in fiscal 2023. The employee expenses of ICICI Prudential Asset Management Company increased by 22.4% from Rs. 3.3 billion in fiscal 2022 to Rs. 4.0 billion in fiscal 2023. The employee expenses of ICICI Prudential Life Insurance Company increased by 20.6% from Rs. 12.0 billion in fiscal 2022 to Rs. 14.5 billion in fiscal 2023. The employee expenses of ICICI Securities Limited increased by 3.3% from Rs. 6.6 billion in fiscal 2022 to Rs. 6.8 billion in fiscal 2023.

 

Depreciation

 

Depreciation on owned properties increased by 14.0% from Rs. 13.1 billion in fiscal 2022 to Rs. 14.9 billion in fiscal 2023.

 

Other operating expenses

 

163 

Other operating expenses primarily include rent, taxes and lighting, advertisement and publicity, repairs and maintenance, direct marketing agency expenses, premium on purchase of priority sector lending certificates and other expenditures. Other operating expenses increased by 22.6% from Rs. 196.0 billion in fiscal 2022 to Rs. 240.3 billion in fiscal 2023.

 

Other operating expenses of ICICI Bank increased by 22.7% from Rs. 158.8 billion in fiscal 2022 to Rs. 194.8 billion in fiscal 2023 primarily due to an increase in branch and ATM network and retail business volumes.

 

Other operating expenses of our life insurance subsidiary increased from Rs. 24.5 billion in fiscal 2022 to Rs. 30.8 billion in fiscal 2023 primarily due to an increase in advertisement and sales related expenses.

 

Other operating expenses of our home finance subsidiary increased from Rs. 1.8 billion in fiscal 2022 to Rs. 2.7 billion in fiscal 2023 primarily due to increase in customer acquisition expenses, professional and legal expenses and other operating expenses on account of normalcy of business.

 

Other operating expenses of our asset management subsidiary increased from Rs. 3.3 billion in fiscal 2022 to Rs. 4.0 billion in fiscal 2023.

 

Other operating expenses of our securities subsidiary increased from Rs. 6.2 billion in fiscal 2022 to Rs. 6.5 billion in fiscal 2023.

 

Expenses related to our insurance business

 

Expenses related to our insurance business include claims and benefit payouts, commission expenses and reserves for actuarial liability (including the investible portion of the premium on unit-linked policies of our life insurance business). Expenses relating to our insurance business increased by 4.5% from Rs. 398.8 billion in fiscal 2022 to Rs. 416.6 billion in fiscal 2023.

 

The expenses related to our life insurance subsidiary increased by 4.4% from Rs. 399.5 billion in fiscal 2022 to Rs. 417.0 billion in fiscal 2023 primarily due to an increase in provisions for policy holder liabilities (non-linked) from Rs. 135.0 billion in fiscal 2022 to Rs. 169.1 billion in fiscal 2023.

 

The reserves for the actuarial liability of the life insurance business for the investible portion of the premium on unit-linked policies decreased by 7.7% from Rs. 194.0 billion in fiscal 2022 to Rs. 179.0 billion in fiscal 2023 primarily due to decrease in linked premium income. The investible portion of the premium on linked policies of our life insurance business represents the amount of premium, including renewal premium received on linked policies of life insurance business invested, after deducting charges and the premium for risk coverage, in the underlying fund.

 

See also “Business—Overview of Our Products and Services—Insurance”.

 

Provisions and Contingencies (Excluding Provision For Tax)

 

Provisions for Non-Performing Loans and Restructured Loans

 

ICICI Bank classifies its assets, including those in overseas branches, as performing and non-performing in accordance with the Reserve Bank of India guidelines. The Bank’s home finance subsidiary classifies its loans and other credit facilities in accordance with the guidelines of the Reserve Bank of India. Loans in the Bank’s United Kingdom subsidiary are classified as impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the loan (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the loans that can be reliably estimated. Loans in the Bank’s Canadian subsidiary are considered credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that loan have occurred. Under the Reserve Bank of India guidelines, non-performing assets are classified into sub-standard, doubtful and loss assets based on certain pre-defined criteria. Loans held at the overseas branches that are identified as impaired as per host country regulations but which are standard as per the extant Reserve Bank of India guidelines are identified as non-performing assets to the extent the loan amount is outstanding in the host country.

 

164 

A loan is classified as restructuring, where a concessionary modification such as changes in repayment period, principal amount, repayment installment and reduction in rate of interest has been made and downgraded to non-performing. The restructuring of loans in the event of a natural calamity, restructuring involving deferment of date of commencement of commercial operations for projects under implementation and restructuring for certain medium and small medium enterprises continues to be classified as standard restructured loans. Further, the Reserve Bank of India through its guideline on ‘Resolution Framework for COVID-19-related Stress’ dated August 6, 2020 and May 5, 2021, provided a prudential framework to implement a resolution plan in respect of eligible borrowers, while classifying such exposures as standard, subject to specified conditions.

 

The Bank has enhanced internal controls, relating to the review of loan accounts which satisfy certain threshold parameters, primarily relating to size, credit rating and days-past-due, for identification of non-performing assets.

 

ICICI Bank makes provisions on standard, sub-standard and doubtful and loss assets as per internal provisioning norms, subject to minimum provisioning requirements of the Reserve Bank of India. Loss assets and the unsecured portion of doubtful assets are fully provided For or written off as required by the Reserve Bank of India guidelines. For loans and advances of overseas branches, the Bank makes provisions as per internal provisioning norms or host country regulations, whichever is higher. The Bank holds specific provisions against non-performing loans and advances and against certain performing loans and advances in accordance with the Reserve Bank of India directions. The Bank’s United Kingdom subsidiary maintains provision for loan losses at a level that management considers adequate to absorb identified credit related losses as well as losses that have occurred but are not yet identifiable. The Bank’s Canadian subsidiary maintains provision for all financial assets using expected credit loss model. The expected credit loss for impaired financial assets is computed based on individual assessment of expected cash flows from such assets.

 

In respect of non-retail loans reported as frauds to the Reserve Bank of India and classified in the doubtful category, the entire amount, without considering the value of security, is provided for over a period not exceeding four quarters starting from the quarter in which fraud has been detected. In respect of non-retail loans where there has been a delay in reporting the fraud to the Reserve Bank of India or which are classified as loss accounts, the entire amount is provided immediately. In the case of fraud in retail accounts, the entire amount is provided immediately. We make provisions on restructured/rescheduled loans and advances in accordance with the applicable Reserve Bank of India guidelines on restructuring of loans and advances by banks.

 

In addition to the specific provision on non-performing assets, we maintain a general provision on standard loans and advances and restructured/rescheduled loans and advances at rates prescribed by the Reserve Bank of India. For standard loans and advances in overseas branches, we hold a general provision at the higher of host country regulatory requirements and the Reserve Bank of India requirements. The Bank also makes additional general provision on loans to specific borrowers in specific stressed sectors, exposures to step-down subsidiaries of Indian companies, incremental exposure to borrowers identified under the framework for large exposure of the Reserve Bank of India. The Bank may create floating provision for the year, in excess of the specific and general provision, as per Board approved policy. The floating provision can only be utilized, with the approval of the Board and the Reserve Bank of India. Further, the Reserve Bank of India guidelines on “Resolution Framework for COVID-19-related Stress” provide a prudential framework for resolution plan of certain loans. The Reserve Bank of India circular requires the banks to hold minimum 10% provision on these loans. The Bank makes general provision on such loans at rates equal or higher than requirements stipulated in Reserve Bank of India circulars.

 

165 

The Bank, on a prudent basis, has made contingency provision on certain loan portfolios, including borrowers who had taken moratorium at any time during fiscal 2021 under the extant Reserve Bank of India guidelines related to the COVID-19 regulatory package. The Bank also makes additional contingency provision on certain standard assets. The contingency provision is included in ‘Other Liabilities and Provisions’.

 

Non-Performing Loans Strategy

 

In respect of unviable non-performing loans, where borrowers have lost financial viability, we adopt an aggressive approach aimed at out-of-court settlements, enforcing collateral, driving consolidation and seeking resolution under the Insolvency and Bankruptcy Code under specific circumstances, which among other measures includes recovery through the sale of a borrower’s assets in a time-bound manner. Our focus is on time value of recovery and a pragmatic approach towards settlements. The collateral against our loan assets is the critical factor towards the success of our recovery efforts. In certain accounts where the value of collateral against our loan has been eroded we undertake charge-offs against loan loss allowances held. However, we continue to pursue recovery efforts in these accounts, either jointly along with other lenders or individually through legal recourse and settlements. 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. In addition, we focus on proactive management of accounts under supervision. Our strategy is aimed at early stage solutions to incipient problems.

 

The Bank’s strategy for the resolution of stressed corporate assets involves referring these cases for resolution under the Insolvency and Bankruptcy Code with the National Company Law Tribunal. The Insolvency and Bankruptcy Code, 2016, provides for a time-bound revival and rehabilitation mechanism to resolve stressed assets. Further, the filing for resolution by various stakeholders, including financial creditors and any other participant as may be eligible, could impact our provisioning and credit loss. In addition, the requirement to complete the resolution process within the stipulated timeline to avoid liquidation of the borrower, may impact recoveries from these stressed accounts. In the event borrowers go into liquidation, the additional credit losses may be significant. In April 2021, the Government of India passed another ordinance introducing a pre-packaged insolvency resolution process for micro, small and medium enterprises.

 

Our strategy for resolution of non-performing assets includes sales of financial assets to asset reconstruction companies in exchange for receipt of securities in the form of pass-through instruments issued by asset reconstruction companies, wherein payments to holders of the securities are based on the actual realized cash flows from the transferred assets. Under Indian GAAP, these instruments are valued at the net asset values as declared by the asset reconstruction companies in accordance with the Reserve Bank of India guidelines. Under U.S. GAAP, the assets we sell in exchange for security receipts are not accounted for as sales either because transfers do not qualify for sale accounting under FASB ASC Topic 860, “Transfers and servicing”, or transfers were impacted by FASB ASC Subtopic 810-10, “Consolidation – overall”, whereby, because the Bank is the ‘primary beneficiary’ of certain of these funds/trusts, it is required under U.S. GAAP to consolidate these entities. These assets are considered restructured assets under U.S. GAAP. “Supervision and Regulation—Loan Loss Provisions and Non-Performing Assets”.

 

166 

We monitor trends in the credit ratings of our borrowers to enable us to take proactive remedial measures. We review the industry outlook and analyze the impact of changes in the regulatory and fiscal environment. Our periodic review system helps us to monitor the health of accounts and to take prompt remedial measures. We may seek to recover loans through enforcement of our rights in collateral. However, recoveries may be subject to delays of up to several years, due to the long legal process in India. This leads to delay in enforcement and realization of collateral. We may also take as security a pledge of financial assets, including marketable securities, and obtain corporate guarantees and personal guarantees of 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. Covenants involving equity shares have top-up mechanisms based on price triggers. We maintain the non-performing assets on our books for as long as the enforcement process is ongoing. Accordingly, a non-performing asset may continue for a long time in our portfolio until the settlement of a loan account or realization of collateral, which may be longer than that for U.S. banks under similar circumstances. See also “Business—Loan portfolio—Collateral—Completion, Perfection and Enforcement”.

 

Secured loans to retail customers are secured by the assets financed (predominantly property and vehicles). We are entitled in terms of our security documents to repossess security comprising assets such as plants, equipment and vehicles without reference to the courts or tribunals unless a client makes a reference to such courts or tribunals to stay our actions. In respect of our retail loans, we adopt a standardized collection process designed to ensure prompt action for follow-up on overdue loans and recovery of defaulted amounts.

 

Non-performing Loans

 

The following table sets forth, for the periods indicated, the change in our gross (net of write-offs, interest suspense and derivatives income reversal) non-performing loan portfolio(1).

 

    At March 31,
Particulars   2022   2023   2023
    (in millions)
A. Consumer loans and credit card receivables(2)                        
Non-performing loans at the beginning of the fiscal year   Rs. 142,923     Rs. 113,271     US$ 1,378  
Addition: New non-performing loans during the year     161,399       124,751       1,518  
Less: Upgrade(3)     (80,544 )     (54,558 )     (664 )
Recoveries (excluding recoveries made from upgraded accounts)     (48,103 )     (43,226 )     (526 )
Write-offs     (62,404 )     (37,697 )     (459 )
Non-performing loans at the end of the fiscal year   Rs. 113,271     Rs. 102,541     US$ 1,247  
B. Commercial(4)                        
Non-performing loans at the beginning of the fiscal year   Rs. 284,106     Rs. 232,243     US$ 2,826  
Addition: New non-performing loans during the year     41,815       67,050       816  
Less: Upgrade(3)     (24,406 )     (36,192 )     (440 )
Recoveries (excluding recoveries made from upgraded accounts)     (22,930 )     (43,914 )     (534 )
Write-offs     (46,342 )     (9,258 )     (113 )
Non-performing loans at the end of the fiscal year   Rs. 232,243     Rs. 209,929     US$ 2,555  
C. Leasing and related activities                        
Non-performing loans at the beginning of the fiscal year   Rs.     Rs.     US$  
Addition: New non-performing loans during the year                  
Less: Upgrade(3)                  
Recoveries (excluding recoveries made from upgraded accounts)                  
Write-offs                  
Non-performing loans at the end of the fiscal year   Rs.     Rs.     US$  
D. Total non-performing loans (A+B+C)                        
Non-performing loans at the beginning of the fiscal year   Rs. 427,029     Rs. 345,514     US$  4,204  
Addition: New non-performing loans during the year     203,214       191,801       2,334  
Less: Upgrade(3)     (104,950 )     (90,750 )     (1,104 )
Recoveries (excluding recoveries made from upgraded accounts)     (71,033 )     (87,140 )     (1,060 )
Write-offs     (108,746 )     (46,955 )     (572 )
Non-performing loans at the end of the fiscal year(4)   Rs. 345,514     Rs. 312,470     US$ 3,802  

 

 

 

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 ____________________

(1)Includes loans identified as impaired in accordance with guidelines issued by regulators of the respective subsidiaries.

(2)Includes home loans, automobile loans, commercial business loans, two-wheeler loans, personal loans, credit card receivables, jewel loans, farm equipment loans and other rural loan products.

(3)Represents accounts that were previously classified as non-performing but have been upgraded to performing.

(4)Includes working capital finance.

 

Gross additions to non-performing consumer loans decreased from Rs. 161.4 billion in fiscal 2022 to Rs. 124.8 billion in fiscal 2023. In fiscal 2023, we upgraded non-performing consumer loans of Rs. 54.6 billion as compared to Rs. 80.5 billion in fiscal 2022. In fiscal 2023, we made recoveries against non-performing consumer loans of Rs. 43.3 billion (fiscal 2022: Rs. 48.1 billion) and wrote off non-performing loans amounting to Rs. 37.7 billion (fiscal 2022: Rs. 62.4 billion). Gross non-performing consumer loans decreased from Rs. 113.3 billion at year-end fiscal 2022 to Rs. 102.5 billion at year-end fiscal 2023.

 

The gross additions to non-performing commercial loans increased from Rs. 41.8 billion in fiscal 2022 to Rs. 67.1 billion in fiscal 2023. In fiscal 2023, we upgraded non-performing commercial loans amounting to Rs. 36.2 billion as compared to Rs. 24.4 billion in fiscal 2022 and made recoveries of non-performing commercial loans amounting to Rs. 43.9 billion in fiscal 2023 as compared to Rs. 23.0 billion in fiscal 2022. In fiscal 2023, commercial loans amounting to Rs. 9.3 billion were written-off, as compared to Rs. 46.3 billion in fiscal 2022, based on a borrower- specific evaluation of the probability of recovery and collectability of the loans. Gross non-performing commercial loans decreased from Rs. 232.2 billion at year-end fiscal 2022 to Rs. 209.9 billion at year-end fiscal 2023.

 

168 

As a result of the above, our gross non-performing loans decreased by 9.6% from Rs. 345.5 billion at year-end fiscal 2022 to Rs. 312.5 billion at year-end fiscal 2023. Our net non-performing loans decreased by 24.1% from Rs. 76.4 billion at year-end fiscal 2022 to Rs. 58.0 billion at year-end fiscal 2023. The net non-performing loans ratio decreased from 0.8% at year-end fiscal 2022 to 0.5% at year-end fiscal 2023.

 

The total non-fund based outstanding to borrowers classified as non-performing was Rs. 37.8 billion at March 31, 2023 as compared to Rs. 36.4 billion at March 31, 2022.

 

Restructured Loans

 

The following table sets forth, at the dates indicated, information regarding roll-forward and average balances of standard restructured loans.

 

   At March 31,
   2022  2023  2023 

2023/2022

% change

   (in millions, except percentages)
Opening balance (gross restructured loans)  Rs.38,776   Rs.93,266   US$1,135    140.5% 
Add: Loans restructured during the year   81,546    766    9    (99.1)
Add: Increase in loans outstanding in respect of previously restructured loans/borrowers   352    1,379    17    290.1 
Less: Loans upgraded to standard category during the year    —      (3,956)   (48)   —   
Less: Loans downgraded to non-performing category during the year    (14,379)   (20,717)   (252)   44.1 
Less: Repayments/change in management/conversion to equity shares during the year    (13,029)   (18,224)   (222)   39.9 
Gross restructured loans   Rs.93,266   Rs.52,514   US$

639

    (43.7%)
Provisions for restructured loans    (2,914)   (1,779)   (22)   (39.0%)
Net restructured loans   Rs.90,352   Rs.50,735   US$

617

    (43.8%)
Average balance of net restructured loans(1)   Rs.80,793   Rs.72,506   US$ 882    (10.3%)
Gross loans   Rs.9,475,107   Rs.11,094,954   US$134,992    17.1% 
Net loans   Rs.9,203,081   Rs.10,838,663   US$131,873    17.8% 
Gross restructured loans as a percentage of gross loans    1.0%    0.5%           
Net restructured loans as a percentage of net loans    1.0%    0.5%           

_________________

(1)The average balance is the average of quarterly balances outstanding at the end of March of the previous year and June, September, December and March of the current year.

(2)In addition, the Bank holds general provision amounting to Rs. 12,825 million at year-end fiscal 2023 (year-end fiscal 2022: Rs. 23,562 million) on these restructured loans, subject to minimum provisioning requirement as per the guidelines issued by the Reserve Bank of India.

 

169 

In fiscal 2023, we restructured loans of borrowers classified as standard, as well as made additional disbursements to borrowers whose loans had been restructured in prior years, aggregating to Rs. 0.8 billion. Further, in fiscal 2023, restructured standard loans amounting to Rs. 20.7 billion were classified as non-performing due to failure of borrowers to perform as per restructured debt terms. The gross outstanding standard restructured loans decreased from Rs. 93.3 billion at year-end fiscal 2022 to Rs. 52.5 billion at year-end fiscal 2023 and the net outstanding restructured loans decreased from Rs. 90.4 billion at year-end fiscal 2022 to Rs. 50.7 billion at year-end fiscal 2023. In addition, the Bank holds general provision amounting to Rs. 12.8 billion at year-end fiscal 2023 on these restructured loans, subject to minimum provisioning requirement as per the guidelines issued by the Reserve Bank of India.

 

ICICI Bank’s outstanding non-fund based facilities to borrowers whose loans were classified as restructured were Rs. 3.3 billion at year-end fiscal 2023.

 

The aggregate gross non-performing and standard restructured loans decreased by Rs. 73.8 billion, or 16.8%, from Rs. 438.8 billion at year-end fiscal 2022 to Rs. 365.0 billion at year-end fiscal 2023. The aggregate net non-performing and restructured loans decreased by Rs. 58.1 billion, or 34.8%, from Rs. 166.8 billion at year-end fiscal 2022 to Rs. 108.7 billion at year-end fiscal 2023.

 

The Reserve Bank of India had issued guidelines permitting banks to refinance long-term project loans to infrastructure and other core industries at periodic intervals without such refinancing being considered as restructuring. At year-end fiscal 2023, the loan amounting to Rs. 7.7 billion (at year-end fiscal 2022: Rs. 8.9 billion) was classified as standard.

 

The Bank’s Canadian subsidiary adopted International Financial Reporting Standards 9 (IFRS 9) – Financial instruments from April 1, 2018 and measures impairment loss on all financial assets using expected credit loss model based on a three-stage approach. At March 31, 2023, the Bank’s Canadian subsidiary classified exposure of Rs. 63.5 billion as Stage-2 (March 31, 2022: Rs. 14.0 billion) (financial assets, that are not credit impaired, but which have experienced significant increase in credit risk since origination), with allowance for expected credit loss of Rs. 0.9 billion (March 31, 2022: Rs. 0.8 billion) in fiscal 2023. The Stage-2 assets increased primarily in the mortgage portfolio due to decline in bureau scores of borrowers.

 

Provisions and contingencies (excluding provision for tax)

 

The following table sets forth, for the periods indicated, the composition of provisions and contingencies, excluding provisions for tax.

 

   Year ended March 31,
   2022  2023  2023 

2023/2022

% change

   (in millions, except percentages)
Provision for investments (net)   Rs.5,412   Rs.13,917   US$     169    —   
Provision for non-performing and other assets    63,775    (3,654)   (44)   N/M 
Provision for standard assets    4,065    4,899    60    20.5% 
Others(1)   16,514    54,237    660    —   
Total provisions and contingencies (excluding provision for tax)   Rs.89,766   Rs.69,399   US$

845

    (22.7)% 

 

N/M – Not meaningful

 

(1)Includes contingency provision amounting to Rs. 56.5 billion on a prudent basis for fiscal 2023.

 

170 

Provisions and contingencies (excluding provision for tax) decreased by 22.7% from Rs. 89.8 billion in fiscal 2022 to Rs. 69.4 billion in fiscal 2023 primarily due to a decrease in provision on non-performing and other assets, offset, in part, by an increase in other provisions and contingencies.

 

Provision for non-performing and other assets decreased from a provision of Rs. 63.8 billion in fiscal 2022 to a write-back of Rs. 3.7 billion in fiscal 2023. During fiscal 2023, there were lower additions, higher recoveries and upgrades from non-performing assets resulting in net write-back of provision, offset, in part, by an increase in provisioning rate for certain non-performing asset categories. During fiscal 2023, the Bank changed its provisioning norms on non-performing assets to make them more conservative. In fiscal 2022, the provision for non-performing and other assets also included provision for loans restructured under Resolution Framework for COVID-19-related Stress. The provision coverage ratio (i.e., specific provisions against non-performing loans as a percentage of gross non-performing loans) increased from 77.9% at March 31, 2022 to 81.5 % at March 31, 2023.

 

Provision for investments increased from a provision of Rs. 5.4 billion in fiscal 2022 to Rs. 13.9 billion in fiscal 2023 primarily due to an increase in provision on debentures, equity shares and security receipts.

 

Provision for standard assets increased from Rs. 4.1 billion in fiscal 2022 to Rs. 4.9 billion in fiscal 2023 primarily due to an increase in provision for standard assets of ICICI Bank. Provision for standard assets of ICICI Bank increased from Rs. 4.5 billion in fiscal 2022 to Rs. 5.8 billion in fiscal 2023.

 

Other provisions increased from Rs. 16.5 billion in fiscal 2022 to Rs. 54.2 billion in fiscal 2023. Provision for non-fund outstanding of ICICI Bank decreased from a provision of Rs. 11.7 billion in fiscal 2022 to a write-back of Rs. 5.2 billion in fiscal 2023. During fiscal 2023, the Bank made a contingency provision amounting to Rs. 56.5 billion (fiscal 2022: write-back of Rs. 0.3 billion), on a prudent basis, to further strengthen the balance sheet.

 

Provision for Tax

 

The provision for income tax expense increased from Rs. 84.6 billion in fiscal 2022 to Rs. 117.9 billion in fiscal 2023 primarily due to an increase in profit before tax and an increase in effective tax rate. The effective tax rate increased from 24.2% in fiscal 2022 to 25.0 % in fiscal 2023 primarily due to change in composition of income.

 

171 

Financial Position

 

Assets

 

The following table sets forth, at the dates indicated, the principal components of assets.

 

   At March 31
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Cash and cash equivalents (1)   Rs.1,831,260   Rs.1,364,565   US$16,602    (25.5)%
Investments    5,670,977    6,395,520    77,814    12.8 
Advances (net of provisions)    9,203,082    10,838,663    131,873    17.8 
Fixed assets    106,054    109,690    1,335    3.4 
Other assets   713,988    875,454    10,652    22.6 
Goodwill on consolidation   1,013    1,013    12    —   
Total assets   Rs.17,526,374   Rs.19,584,905   US$

238,288

    11.7% 

 _________________

(1)Includes cash and balances with Reserve Bank of India, balances with banks and money at call and short notice

 

Our total assets increased by 11.7% from Rs. 17,526.4 billion at year-end fiscal 2022 to Rs. 19,584.9 billion at year-end fiscal 2023 primarily due to an increase in net advances and investments, offset, in part, by a decrease in cash and cash equivalents.

 

Cash and cash equivalents

 

Cash and cash equivalents decreased by 25.5% from Rs. 1,831.3 billion at year-end fiscal 2022 to Rs. 1,364.6 billion at year-end fiscal 2023 primarily due to a decrease in short term lending to the Reserve Bank of India under liquidity adjustment facility and term money lent in foreign currency, offset, in part, by an increase in standing deposit facility lending to the Reserve Bank of India and balances with Reserve Bank of India to maintain cash reserve ratio.

 

Investments

 

Total investments increased by 12.8% from Rs. 5,671.0 billion at year-end fiscal 2022 to Rs. 6,395.5 billion at year-end fiscal 2023.

 

Investments of ICICI Bank increased from Rs. 3,102.4 billion at year-end fiscal 2022 to Rs. 3,623.3 billion at year-end fiscal 2023 primarily due to an increase in investments in Indian government securities, bonds and debentures and pass through certificates, offset, in part, by a decrease in investment in foreign government securities.

 

Investments of ICICI Prudential Life Insurance Company increased from Rs. 2,337.5 billion at year-end fiscal 2022 to Rs. 2,426.6 billion at year-end fiscal 2023. Investments held to cover linked liabilities decreased from Rs. 1,508.7 billion at year-end fiscal 2022 to Rs. 1,440.6 billion at year-end fiscal 2023 primarily attributable to unrealised losses due to equity market performance and net outflows during the year due to maturity/withdrawal of linked policies , offset, in part, by an increase in new linked policies. Investments, other than investments held to cover linked liabilities, increased from Rs. 828.9 billion at year-end fiscal 2022 to Rs. 986.0 billion at year-end fiscal 2023 primarily attributable to net inflows into the fund.

 

Investments of ICICI Securities Primary Dealership Limited increased from Rs. 158.6 billion in fiscal 2022 to Rs. 247.8 billion in fiscal 2023 primarily due to an increase in investments in Indian government securities.

 

Investments of ICICI Bank UK PLC increased from Rs. 39.5 billion at year-end fiscal 2022 to Rs. 52.1 billion at year-end fiscal 2023 primarily due to an increase in investments in treasury bills and corporate bonds.

 

Investments of ICICI Bank Canada decreased marginally from Rs. 35.8 billion at year-end fiscal 2022 to Rs. 34.7 billion at year-end fiscal 2023.

 

Our total investment in Indian government securities increased by 21.7 % from Rs. 3,255.0 billion at year-end fiscal 2022 to Rs. 3,960.6 billion at year-end fiscal 2023.

 

172 

At year-end fiscal 2023, ICICI Bank had an outstanding net investment of Rs. 2.1 billion in security receipts issued by asset reconstruction companies as compared to Rs. 8.1 billion at year-end fiscal 2022. See also “Business—Overview of Our Products and Services—Investment Banking—Treasury”.

 

Classification of investments

 

Held-to-maturity

 

The amortized cost of our held-to-maturity portfolio increased from Rs. 2,777.6 billion at year-end fiscal 2022 to Rs. 3,418.1 billion at year-end fiscal 2023 primarily due to an increase in investment in government securities and equity securities. Net unrealized gain on the held-to-maturity portfolio decreased from Rs. 311.9 billion at year-end fiscal 2022 to Rs. 193.0 billion at year-end fiscal 2023. Interest earned on the held-to-maturity debt portfolio increased from Rs. 165.5 billion in fiscal 2022 to Rs. 204.4 billion in fiscal 2023 primarily due to an increase in average portfolio and yield of government securities.

 

Available-for-sale

 

The amortized cost of our available-for-sale portfolio increased from Rs. 1,065.1 billion at year-end fiscal 2022 to Rs. 1,131.1 billion at year-end fiscal 2023. The investment in government securities increased from Rs. 615.6 billion at year-end fiscal 2022 to Rs. 624.8 billion at year-end fiscal 2023. The investments in corporate debt securities increased from Rs. 167.9 billion at year-end fiscal 2022 to Rs. 217.2 billion at year-end fiscal 2023. Investments in other debt securities increased from Rs. 113.7 billion at year-end fiscal 2022 to Rs. 126.3 billion at year-end fiscal 2023. Investments in equity shares decreased from Rs. 124.1 billion at year-end fiscal 2022 to Rs. 123.7 billion at year-end fiscal 2023. At year-end fiscal 2023, equity shares classified as available for sale amounting to Rs. 75.9 billion were held by ICICI Prudential Life Insurance Company Limited and Rs. 40.4 billion were held by ICICI Bank. Other investments (primarily include mutual fund units, security receipts, venture fund units and preference shares) increased from Rs. 37.7 billion at year-end fiscal 2022 to Rs. 39.1 billion at year-end fiscal 2023.

 

Net unrealized gain on debt investments decreased from Rs. 5.5 billion at year-end fiscal 2022 to a net unrealized loss of Rs. 0.9 billion at year-end fiscal 2023 primarily due to net unrealized loss on corporate debt securities and government securities. Net unrealized gain on equity securities increased from Rs. 50.8 billion at year-end fiscal 2022 to Rs. 53.9 billion at year-end fiscal 2023.

 

Net unrealized gain on other investments decreased from Rs. 0.6 billion at year-end fiscal 2022 to a net unrealized loss of Rs. 1.0 billion at year-end fiscal 2023 primarily due to decrease in unrealized gain of Rs. 0.4 billion on equity mutual fund investments and increase in unrealized loss of Rs. 1.3 billion on security receipts.

 

Held-for-trading

 

Investments in held-for-trading debt securities increased from Rs. 307.8 billion at year-end fiscal 2022 to Rs. 400.1 billion at year-end fiscal 2023 primarily due to an increase in investment in government securities, certificate of deposits, commercial paper and corporate bonds. Net unrealized gain on the held-for-trading portfolio decreased from Rs. 1.9 billion at year-end fiscal 2022 to Rs. 0.1 billion at year-end fiscal 2023 primarily due to a decrease in unrealized gain on the trading portfolio of ICICI Securities Primary Dealership Limited in fiscal 2023 as compared to fiscal 2022.

 

173 

Advances

 

Net advances increased by 17.8% from Rs. 9,203.1 billion at year-end fiscal 2022 to Rs. 10,838.7 billion at year-end fiscal 2023 primarily due to an increase in retail advances of ICICI Bank.

 

Net advances of the Bank increased by 18.7% from Rs. 8,590.2 billion at year-end fiscal 2022 to Rs. 10,196.4 billion at year-end fiscal 2023. Net retail advances of the Bank increased by 22.7% from Rs. 4,546.4 billion at year-end fiscal 2022 to Rs. 5,578.2 billion at year-end fiscal 2023. Net advances of the Bank’s overseas branches decreased by 17.4% from Rs. 412.7 billion at year-end fiscal 2022 to Rs. 341.1 billion at year-end fiscal 2023. See also “Business – Loan Portfolio”.

 

Net advances of ICICI Home Finance increased by 20.6% from Rs. 142.2 billion at year-end fiscal 2022 to Rs. 171.5 billion at year-end fiscal 2023.

 

Net advances of ICICI Bank UK PLC decreased by 14.3% from Rs. 95.2 billion at year-end fiscal 2022 to Rs. 81.5 billion at year-end fiscal 2023 primarily due to prepayment and sell down of loans.

 

Net advances of ICICI Bank Canada increased by 4.2% from Rs. 302.0 billion at year-end fiscal 2022 to Rs. 314.9 billion at year-end fiscal 2023 primarily due to increase in corporate loans, offset, in part, by decrease in insured mortgages.

 

Fixed and other assets

 

Fixed assets include premises, furniture and fixtures, assets given on lease and other fixed assets. Fixed assets increased by 3.4% from Rs. 106.1 billion at year-end fiscal 2022 to Rs. 109.7 billion at year-end fiscal 2023.

 

Other assets increased from Rs. 714.0 billion at year-end fiscal 2022 to Rs. 875.5 billion at year-end fiscal 2023 primarily due to an increase in mark-to-market on foreign exchange and derivative transactions, interest accrued on loans and investments and trade receivables, offset, in part, by a decrease in rural infrastructure development fund and other related deposits. The Bank is an active participant in the interest and foreign exchange derivative market. While the positive mark-to-market on such transactions are accounted in ‘Other Assets’, the negative mark-to-market on offsetting transactions are accounted in ‘Other Liabilities’.

 

Liabilities and Stockholders’ Equity

 

The following table sets forth, at the dates indicated, the principal components of liabilities and stockholders’ equity.

 

   At March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Deposits   Rs.10,913,658   Rs.12,108,322   US$147,321    10.9% 
Borrowings(1)    1,616,027    1,890,618    23,003    17.0 
Other liabilities    3,116,355    3,374,120    41,053    8.3 
Total liabilities    15,646,040    17,373,060    211,377    11.0 
Minority interest    59,809    66,867    813    11.8 
Capital    13,900    13,968    170    0.5 
Reserves and surplus(2)    1,806,625    2,131,010    25,928    18.0 
Total liabilities and stockholders’ equity  Rs.17,526,374   Rs.19,584,905   US$ 238,288    11.7% 

_________________

(1)Includes subordinated debt.

(2)Includes employees’ stock options outstanding.

 

174 

Our total liabilities (including capital and reserves and surplus) increased by 11.7% from Rs. 17,526.4 billion at year-end fiscal 2022 to Rs. 19,584.9 billion at year-end fiscal 2023, primarily due to an increase in deposits and borrowings.

 

Deposits

 

Deposits increased by 10.9% from Rs. 10,913.7 billion at year-end fiscal 2022 to Rs. 12,108.3 billion at year-end fiscal 2023.

 

Deposits of the Bank increased by 10.9% from Rs. 10,645.7 billion at year-end fiscal 2022 to Rs. 11,808.4 billion at year-end fiscal 2023. Term deposits increased by 17.1% from Rs. 5,461.4 billion at year-end fiscal 2022 to Rs. 6,395.8 billion at year-end fiscal 2023. Savings account deposits increased by 5.5% from Rs. 3,599.6 billion at year-end fiscal 2022 to Rs. 3,797.8 billion at year-end fiscal 2023 and current account deposits increased by 1.9% from Rs. 1,584.8 billion at year-end fiscal 2022 to Rs. 1,614.9 billion at year-end fiscal 2023. The current account and savings account deposits increased by 4.4% from Rs. 5,184.4 billion at year-end fiscal 2022 to Rs. 5,412.6 billion at year-end fiscal 2023. Deposits of overseas branches increased from Rs. 98.1 billion at year-end fiscal 2022 to Rs. 147.8 billion at year-end fiscal 2023. The total deposits of the Bank remained at a similar level at 90.8% of its funding (i.e., deposits and borrowings) at March 31, 2022 and March 31, 2023. See also “Selected Statistical Information—Funding”.

 

Deposits of ICICI Bank Canada increased from Rs. 172.8 billion at year-end fiscal 2022 to Rs. 193.2 billion at year-end fiscal 2023 primarily due to an increase in term and demand deposits.

 

Deposits of ICICI Bank UK PLC increased from Rs. 116.9 billion at year-end fiscal 2022 to Rs. 132.2 billion at year-end fiscal 2023 primarily due to an increase in term deposits and exchange rate movements.

 

Average savings account deposits increased by 12.3% from Rs. 3,108.9 billion in fiscal 2022 to Rs. 3,492.0 billion in fiscal 2023. Average current account deposits increased by 13.5% from Rs. 1,212.3 billion in fiscal 2022 to Rs. 1,376.2 billion in fiscal 2023. Average current account and savings account deposits increased by 12.7% from Rs. 4,321.2 billion in fiscal 2022 to Rs. 4,868.2 billion in fiscal 2023. The average current account and savings account ratio was at 44.6% at year-end fiscal 2023 as compared to 44.5% at year-end fiscal 2022. Average current account and savings account deposits were 37.9% of the funding (i.e., deposits and borrowings) for fiscal 2023 as compared to 38.5% for fiscal 2022.

 

Borrowings

 

Borrowings increased by 17.0% from Rs. 1,616.0 billion at year-end fiscal 2022 to Rs. 1,890.6 billion at year-end fiscal 2023.

 

Borrowings of ICICI Bank increased by 11.3% from Rs. 1,072.3 billion at year-end fiscal 2022 to Rs. 1,193.3 billion at year-end fiscal 2023, primarily due to an increase in refinance borrowings and bond borrowings, offset, in part, by a decrease in subordinated debt, foreign currency term money borrowings and foreign currency bond borrowings. Net borrowings of overseas branches decreased from Rs. 319.2 billion at year-end fiscal 2022 to Rs. 258.1 billion at year-end fiscal 2023.

 

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Borrowings of ICICI Securities Primary Dealership Company increased from Rs. 159.6 billion at year-end fiscal 2022 to Rs. 302.8 billion at year-end fiscal 2023 primarily due to an increase in repurchase borrowings.

 

Borrowings of ICICI Home Finance Company increased from Rs. 126.4 billion at year-end fiscal 2022 to Rs. 147.3 billion at year-end fiscal 2023 primarily due to an increase in term, bond borrowing, fixed deposits and commercial papers, offset, in part, by prepayment of external commercial borrowings.

 

Borrowings of ICICI Securities Limited increased from Rs. 77.4 billion at year-end fiscal 2022 to Rs. 92.9 billion at year-end fiscal 2023 primarily due to an increase in short-term borrowings.

 

Borrowings of ICICI Bank UK PLC decreased from Rs. 25.5 billion at year-end fiscal 2022 to Rs. 10.7 billion at year-end fiscal 2023 primarily due to maturity of long-term borrowings.

 

Borrowings of ICICI Bank Canada decreased from Rs. 148.8 billion at year-end fiscal 2022 to Rs. 140.1 billion at year-end fiscal 2023, primarily due to reduction in term money and securitized borrowings.

 

Other liabilities

 

Other liabilities primarily consist of sundry creditors, bills payable and liabilities on insurance policies in force pertaining to our insurance subsidiary. Other liabilities increased by 8.3% from Rs. 3,116.4 billion at year-end fiscal 2022 to Rs. 3,374.1 billion at year-end fiscal 2023. Liabilities on policies in force of our life insurance business increased by 4.4% from Rs. 2,288.3 billion at year-end fiscal 2022 to Rs. 2,388.7 billion at year-end fiscal 2023. Other liabilities of the Bank increased by 20.8% from Rs. 689.8 billion at year-end fiscal 2022 to Rs. 833.3 billion at year-end fiscal 2023 primarily due to an increase in mark-to-market on foreign exchange and derivative transactions and contingency provision made on prudent basis, to further strengthen the balance sheet.

 

Capital and reserves and surplus

 

Capital and reserves and surplus increased from Rs. 1,820.5 billion at year-end fiscal 2022 to Rs. 2,145.0 billion at year-end fiscal 2023 primarily due to the annual accretion to reserves and surplus out of profit, offset, in part, by payment of dividend.

 

Consolidated Cash Flow Statement

 

Please refer to “Consolidated financial Statements—Consolidated cash flow statements”.

 

Cash and cash equivalents decreased by 25.5% from Rs. 1,831.3 billion at year-end fiscal 2022 to Rs. 1,364.6 billion at year-end fiscal 2023.

 

There was a net cash outflow from operating activities of Rs. 37.7 billion in fiscal 2023 as compared to a net cash inflow of Rs. 581.1 billion in fiscal 2022 primarily due to an increase in advances, other assets and lower increase in deposits in fiscal 2023 as compared to fiscal 2022.

 

The net cash outflow from investing activities increased from Rs. 393.2 billion in fiscal 2022 to Rs. 680.1 billion in fiscal 2023 primarily due to higher net purchase of held-to-maturity securities.

 

The net cash inflow from financing activities increased from Rs. 174.5 billion in fiscal 2022 to Rs. 247.9 billion in fiscal 2023 primarily due to a net increase in proceeds in long-term borrowings, offset, in part, by net decrease in proceeds in short-term borrowings in fiscal 2023 as compared to fiscal 2022.

 

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For a discussion of our results in fiscal 2022 compared to fiscal 2021 and certain comparative numbers in fiscal 2022, please refer to “Part I — Item 5. Operating and Financial Review and Prospects” contained in our Annual Report on Form 20-F for fiscal 2022 filed with the U.S Securities and Exchange Commission on July 29, 2022.

 

Off Balance Sheet Arrangements

 

Foreign Exchange and Derivatives Contracts

 

We enter into foreign exchange forwards, options, swaps and other derivatives products to enable customers to transfer, modify or reduce their foreign exchange and interest rate risks and to manage our own interest rate and foreign exchange positions. These instruments are used to manage foreign exchange and interest rate risk relating to specific groups of on-balance sheet assets and liabilities. For additional details, see also note 13 to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Guarantees

 

We have issued bank guarantees to support business requirements of certain of our clients. Guarantees represent irrevocable assurances that the Bank will pay in the event a customer fails to fulfill its financial or performance obligations. The guarantees are generally for a period not exceeding 10 years. We enter into guarantee arrangements after conducting appropriate due diligence on our clients. We generally review these facilities on an annual basis. If a client’s risk profile deteriorates to an unacceptable level, we may choose not to renew the guarantee upon expiry or may require additional security sufficient to protect our exposure.

 

Upon default by a client under the terms of the guarantee, the beneficiary may exercise its rights under the guarantees, and we are obligated to honor payments to the beneficiaries. Banks and financial institutions are beneficiaries for some of our financial guarantees, so as to enable clients to receive financial assistance from these banks and financial institutions. If our clients default on such loans, the banks and financial institutions may exercise their rights under the guarantee and we are obligated to honor payments to them.

 

For additional details, see also note 22(o) to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Commitments

 

Securitization

 

The Bank primarily securitizes retail loans through securitization transactions involving special purpose entities, usually constituted as trusts. Post securitization of the loans, we continue to act as the servicing agent and maintain customer account relationships and service these set of loans transferred to the securitization trusts.

 

The Bank acts in different capacities and under different contracts for a consideration including as originator, liquidity facility provider, servicing agent credit enhancement provider, underwriter, and senior contributor. The Bank has provided credit enhancements (first loss and second loss enhancement) on securitized pools originated by the Bank and guarantees (second loss enhancement) provided to the pools originated by a third party.

 

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The total outstanding first loss credit enhancements at year-end fiscal 2023 were Rs. 0.7 billion and second loss credit enhancements were Rs. 0.7 billion for securitized pools originated by the Bank. With respect to the second loss guarantees provided to the third party originated pools, the outstanding at year-end fiscal 2023 was Rs. 1.9 billion.

 

Loan Commitments

 

We have outstanding undrawn commitments to provide loans and financing to customers. Further, the commitments have fixed expiration dates and are generally contingent upon the borrower’s ability to maintain specific credit standards. For additional details, see also note 11 to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Capital Commitments

 

We are obligated under a number of capital contracts. Capital contracts are job orders of a capital nature, which have been committed. For additional details, see also note 12 to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Long-term Debt Obligations

 

Long-term debt represents debt with an original contractual maturity greater than one year. Maturity distribution is based on contractual maturity, or the date at which the debt is callable at the option of the holder, whichever is earlier.

 

For additional details, see also note 3 to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Time Deposits

 

Time deposits represent deposits with fixed maturity terms. Most of the time deposits can be withdrawn by the depositors any time before maturity, subject to certain prepayment charges.

 

For additional details, see also note 2 to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Life Insurance Obligations

 

Life insurance obligations primarily include liabilities for life insurance policies, including both unit-linked and non-linked policies.

 

A unit-linked life insurance policy is a policy in which the cash value of the policy varies according to the net asset value of units (i.e., shares) in investment assets chosen by the policyholder. The unit liability is equal to the net asset value of the units in each policy as of the valuation date. The non-unit liability for linked insurance policies and the liability for non-linked life insurance policies is calculated using the gross premium method using assumptions for interest, mortality, expense and inflation. For participating policies, the assumptions are also made for future bonuses, together with allowances for taxation and allocation of profits to shareholders. These assumptions are determined as prudent estimates at the date of valuation with allowances for adverse deviations.

 

Total life insurance obligation at year-end fiscal 2023 was amounting to Rs. 5,205.8 billion.

 

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Gratuity Obligations

 

We provide gratuity, a defined benefit retirement plan covering all employees who retire or resign after a minimum prescribed period of continuous service. The plan provides a lump sum payment to eligible employees at retirement or termination of employment based on the respective employee’s salary and years of employment with us.

 

For additional details, see also note 22(j) to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Pension Obligations

 

The Bank provides pensions—deferred retirement plans—covering certain employees of the former Bank of Madura, Sangli Bank and Bank of Rajasthan. The plans provide for monthly pension payments to these employees when they retire and are based on the respective employees’ years of service with the Bank and applicable salary and include a cost of living adjustment.

 

For additional details, see also note 22(j) to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Operating and Finance Lease Obligations

 

We have commitments under long-term operating leases and finance leases principally for premises and office equipment.

 

For additional details, see also note 22(k) to our “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Capital Resources

 

We actively manage our capital to meet regulatory norms and current and future business needs, considering the risks in our businesses, expectations of rating agencies, shareholders and investors, and the available options of raising capital. Our capital management framework is administered by the Finance Group and the Risk Management Group under the supervision of the Board and the Risk Committee. The capital adequacy position and assessment is reported to the Board and the Risk Committee periodically.

 

Regulatory Capital

 

ICICI Bank is subject to the Basel III capital adequacy guidelines stipulated by the Reserve Bank of India effective from April 1, 2013, which was to begin to be implemented in a phased manner by March 31, 2019 as per the transitional arrangement provided by the Reserve Bank of India. On January 10, 2019, the Reserve Bank of India extended the transition period for implementing the last tranche of 0.625% under Capital Conservation Buffer to March 31, 2020 and thereafter further extended to October 1, 2021.

 

The Basel III rules on capital consist of measures on improving the quality, consistency and transparency of capital, enhancing risk coverage, introducing a supplementary leverage ratio, reducing pro-cyclicality and promoting counter-cyclical buffers and addressing systemic risk and inter-connectedness.

 

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At year-end fiscal 2023, ICICI Bank was required to maintain a minimum Common Equity Tier-1 capital ratio of 8.20%, minimum Tier-1 capital ratio of 9.70% and minimum total capital ratio of 11.70%. The minimum total capital requirement includes a capital conservation buffer of 2.50% and a capital surcharge of 0.20% on account of the Bank being designated as a Domestic Systemically Important Bank. Under Pillar 1 of the Reserve Bank of India guidelines on Basel III, the Bank follows the standardized approach for measurement of credit risk, the standardized duration method for measurement of market risk and the basic indicator approach for measurement of operational risk.

 

Unconsolidated capital adequacy position

 

The following table sets forth, at the dates indicated, regulatory capital, risk-weighted assets and risk-based capital ratios computed in accordance with the Reserve Bank of India’s Basel III guidelines and based on ICICI Bank’s unconsolidated financial statements prepared in accordance with Indian GAAP.

 

    As per the Reserve Bank of India’s Basel III guidelines
    At year-end fiscal 2022(1)   2023(1)   2023
    (in millions, except percentages)
Tier 1 capital   Rs. 1,621,207       1,884,171     US$ 22,925  
Of which: Common equity Tier 1 capital     1,555,000       1,832,771       22,299  
Tier 2 capital     71,923       78,652       957  
Total capital   Rs. 1,693,130       1,962,823     US$ 23,882  
Credit risk: risk-weighted assets   Rs. 7,357,431       8,936,530     US$ 108,730  
Market risk: risk-weighted assets     550,360       688,087       8,372  
Operational risk: risk-weighted assets     928,119       1,080,534       13,147  
Total risk-weighted assets   Rs. 8,835,910       10,705,151     US$ 130,249  
Common equity Tier 1 risk-based capital ratio     17.6%       17.1%          
Tier 1 risk-based capital ratio     18.4%       17.6%          
Tier 2 risk-based capital ratio     0.8%       0.7%          
Total risk-based capital ratio     19.2%       18.3%          

_________________

(1)Post appropriation of proposed dividend

 

In fiscal 2023, capital funds (net of deductions) increased by Rs. 269.7 billion from Rs. 1,693.1 billion at year-end fiscal 2022 to Rs. 1,962.8 billion at year-end fiscal 2023 primarily due to an increase in retained earnings.

 

Risk-weighted assets relating to credit risk increased by Rs. 1,579.1 billion from Rs. 7,357.4 billion at year-end fiscal 2022 to Rs. 8,936.5 billion at year-end fiscal 2023 primarily due to an increase of Rs. 1,319.6 billion in risk-weighted assets for on-balance sheet assets and an increase of Rs. 259.5 billion in risk-weighted assets for off-balance sheet exposures. On-balance sheet risk-weighted assets increased primarily due to growth in advances during the year and off-balance sheet risk-weighted assets increased primarily due to an increase in non-fund exposures.

 

Risk-weighted assets relating to market risk increased by Rs. 137.7 billion from Rs. 550.4 billion at year-end fiscal 2022 to Rs. 688.1 billion at year-end fiscal 2023 primarily due to an increase in investments in Government securities and notional amount of interest rate swaps and forward rate agreements during the year.

 

Risk-weighted assets relating to operational risk increased by Rs. 152.4 billion from Rs. 928.1 billion at March 31, 2022 to Rs. 1,080.5 billion at March 31, 2023. The operational risk capital charge is computed based on 15% of the average of the previous three financial years’ gross income and is revised on an annual basis at June 30. Risk-weighted assets are arrived at by multiplying the capital charge by 12.5.

 

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Consolidated capital adequacy position

 

Consolidation for regulatory capital calculations is based on the consolidated financial statements of ICICI Bank and its subsidiaries, in line with the standards on consolidated prudential reporting issued by the Reserve Bank of India. The entities considered for consolidation for regulatory capital calculations include subsidiaries, associates and joint ventures of the Bank, which carry on activities of a banking or of a financial nature as stated in the reporting guidelines prescribed by the Reserve Bank of India. Entities engaged in the insurance business and businesses not pertaining to financial services are excluded from consolidation for capital adequacy calculation. As per Basel III guidelines stipulated by the Reserve Bank of India, equity and other regulatory capital investments in the unconsolidated insurance and non-financial subsidiaries are deducted from consolidated regulatory capital of the group.

 

At year-end fiscal 2023, our total risk-based capital ratios at the consolidated level as per Basel III guidelines stipulated by the Reserve Bank of India were common equity Tier 1 risk-based capital ratio of 16.88%, Tier 1 risk-based capital ratio of 17.33% and total risk-based capital ratio of 18.09% against the current requirement of minimum common equity Tier 1 capital ratio of 8.20%, a minimum Tier 1 capital ratio of 9.70% and a minimum total capital ratio of 11.70% respectively.

 

Internal assessment of capital

 

Our capital management framework includes a comprehensive internal capital adequacy assessment process conducted annually which determines the adequate level of capitalization required to meet regulatory norms and current and future business needs. Adequate stress testing, as determined by several stress scenarios, is also done. The internal capital adequacy assessment process is undertaken at both the stand alone bank level and the consolidated group level. The internal capital adequacy assessment process encompasses capital planning for a four-year time horizon, assessment of material risks and the relationship between risk and capital.

 

The capital management framework is complemented by our risk management framework, which covers the policies, processes, methodologies and frameworks established for the management of material risks. Stress testing, which is a key aspect of the internal capital adequacy assessment process and the risk management framework, provides an insight into the impact of extreme but plausible scenarios on the risk profile and capital position. Based on our Board-approved stress testing framework, we conduct stress tests on our various portfolios and assess the impact on our capital ratios and the adequacy of our capital buffers for current and future periods. We periodically assess and refine our stress testing framework in an effort to ensure that the stress scenarios capture material risks as well as reflect possible extreme market moves that could arise as a result of market conditions and the operating environment. The business and capital plans and the stress testing results of the ICICI Bank entities are integrated into the internal capital adequacy assessment process.

 

Based on the internal capital adequacy assessment process, we determine the level of capital that needs to be maintained by considering the following in an integrated manner:

 

·strategic focus, business plan and growth objectives;

·regulatory capital requirements as per the Reserve Bank of India guidelines;

·assessment of material risks and impact of stress testing;

·perception of shareholders and investors;

·future strategy with regard to investments or divestments in subsidiaries; and

 

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·evaluation of options to raise capital from domestic and overseas markets, as permitted by the Reserve Bank of India from time to time.

 

We continue to monitor relevant developments and believe that our current robust capital adequacy position and demonstrated track record of access to domestic and overseas markets for capital raising will enable us to maintain the necessary levels of capital as required by regulations while continuing to grow our business.

 

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 actively monitor our liquidity position and attempt to maintain adequate liquidity at all times. Most of our incremental funding requirements are met through short-term funding sources, primarily in the form of deposits including inter-bank deposits. However, a large portion of our assets, primarily the corporate and home loan portfolio, have medium or long-term maturities, creating a potential for funding mismatches.

 

The Bank seeks to establish a continuous information flow and an active dialogue between the funding and borrowing divisions of the Bank to enable optimal liquidity management. A separate group is responsible for liquidity management. ICICI Bank is required to submit gap reports in rupee and other major currencies for domestic operations on a fortnightly basis to the Reserve Bank of India. The Bank prepares a daily maturity gap analysis for the overseas operations and rupee book for the domestic operations. Our static gap analysis is also supplemented by a short-term dynamic cash-flow analysis, in order to provide the liability raising units with a fair estimate of our funding requirements in the near-term. In addition, the Bank monitor certain liquidity ratios on a fortnightly basis. ICICI Bank also monitors its liquidity coverage ratio on a daily basis. ICICI Bank has a liquidity contingency plan in place, through which the Bank monitors key indicators that could signal potential liquidity challenges, to enable us to take necessary measures to ensure sufficient liquidity.

 

Sources of Funding and Liquidity

 

The Bank maintains diverse sources of liquidity to facilitate flexibility in meeting funding requirements. Incremental operations in India are principally funded by accepting deposits from retail and corporate depositors. These deposits are augmented by issuance of Certificate of Deposits, borrowings in the short-term inter-bank market, through refinance agencies and through the issuance of bonds. The Bank also has recourse to the liquidity adjustment facility and marginal standing facility, which are short-term funding arrangements provided by the Reserve Bank of India. The Bank generally maintains a substantial portfolio of high quality liquid securities that may be sold on an immediate basis to meet our liquidity needs. ICICI Bank also has the option of managing liquidity by borrowing in the inter-bank market on a short-term basis. The overnight market, which is a significant part of the inter-bank market, is susceptible to volatile interest rates. These interest rates on certain occasions have reached highs of 100.0% and above. To curtail reliance on such volatile funding, our Asset Liability Management policy has stipulated daily limits for borrowing and lending in this market. ICICI Securities Primary Dealership, also, relies on the repo market and inter-bank market for its funding requirements. It is therefore also exposed to similar risk of volatile interest rates. However, ICICI Securities Primary Dealership being a primary dealer, also has access to standing liquidity facility and term liquidity adjustment facility from the Reserve Bank of India.

 

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Our gross liquid assets consist of cash, nostro balances, overnight and other short-term money market placements, government bonds and treasury bills (including investments eligible for reserve requirements and net of borrowings on account of repurchase agreements, the liquidity adjustment facility and the marginal standing facility), corporate bonds (rated AA and above), other money market investments such as commercial papers and certificates of deposits and mutual fund investments. The Bank deducts short-term money-market borrowings (borrowings with contractual maturity up to 30 days) from the aggregate of these assets to determine net liquid assets.

 

The Bank maintains a significant portion of our demand and time liabilities in forms required pursuant to regulatory reserve requirements laid down by the Reserve Bank of India. The Reserve Bank of India stipulates a cash reserve ratio applicable to Indian banks, which requires us to maintain an average percentage of our demand and time liabilities as a cash balance deposited with the Reserve Bank of India over 14-day period. At year-end fiscal 2023, the cash reserve ratio requirement percentage specified by the Reserve Bank of India was 4.5% of a bank’s net demand and time liabilities. In addition, cash reserves may not fall below 90% of the required cash reserve ratio on any day during any 14-day reporting period.

 

The Reserve Bank of India also stipulates a statutory liquidity ratio applicable to Indian banks, which requires us to maintain a certain percentage of demand and time liabilities in prescribed investments. At year-end fiscal 2023, the statutory liquidity ratio requirement percentage was 18.0%. Banks are permitted to avail liquidity facility against eligible securities under a special facility under the ‘Facility to Avail Liquidity for Liquidity Coverage Ratio’. Further, banks can borrow funds at their discretion by dipping into their statutory liquidity ratio to the extent allowed under the marginal standing facility. As per the Reserve Bank of India guidelines, the carve-out from statutory liquidity ratio under facility to avail liquidity for liquidity coverage ratio was 15.0% of net demand and time liabilities at year-end fiscal 2022 which was further increased to 16.0% of net demand and time liabilities from April 18, 2022. For marginal standing facility, it is 2.0% of net demand and time liabilities.

 

The Reserve Bank of India has issued guidelines on the Basel III framework on liquidity standards including the liquidity coverage ratio, liquidity risk monitoring tools and liquidity coverage ratio disclosure standards. As per the Reserve Bank of India guidelines, the liquidity coverage ratio has been made applicable to Indian banks on a standalone as well as consolidated basis with a minimum requirement of 100.0% at year-end fiscal 2023. The liquidity coverage ratio disclosure for the three months ended March 31, 2023, is based on a simple average of daily observations. The liquidity coverage ratio of the Group, for the three months ended March 31, 2023 was 121.8%.

 

The Reserve Bank of India has issued guidelines on the Basel III framework on liquidity standards – net stable funding ratio. These guidelines ensure reduction in funding risk over a longer time horizon by requiring banks to fund their activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress. As per the guidelines, the net stable funding ratio should be equal to at least 100% on an ongoing basis. The net stable funding ratio of the Group, at the year-end fiscal 2023 was 126.9%.

 

The Bank maintain liquid assets in addition to statutory liquidity ratio and cash reserve ratio requirements. Throughout fiscal 2023, the Bank maintained adequate reserves as per the regulatory requirements mentioned above.

 

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The following table sets forth the components of the ICICI Bank’s average and balance sheet date liquid assets.

 

    At March 31, 2022   Fortnightly average for fiscal 2023   At March 31, 2023
    (in billions)
Statutory liquidity ratio eligible investments and other government securities, net of borrowings on account of repurchase agreement, liquidity adjustment facility and collateralized borrowings   Rs. 2,671.2     Rs. 2,771.7     Rs. 3,105.5  
Balance with central banks and current accounts with other banks     832.9       906.1       883.8  
Other liquid assets     935.7       404.1       593.6  
Gross liquid assets     4,439.8       4,081.9       4,582.9  
(Less) Short-term borrowings     —         0.7       10  
Net liquid assets   Rs. 4,439.8     Rs. 4,081.2     Rs. 4,572.9  

 

ICICI Bank held net liquid assets totaling to Rs. 4572.9 billion at year-end fiscal 2023, compared to Rs. 4,439.8 billion at year-end fiscal 2022. In fiscal 2023, the Bank held fortnightly average net liquid assets of Rs. 4,081.1 billion. In addition to the amounts included in net liquid assets above, at year-end fiscal 2023, the Bank also held other fixed income non-government securities totaling to Rs. 4.4 billion compared to Rs. 12.6 billion at year-end fiscal 2022.

 

In compliance with local regulations, some overseas branches of the Bank are required to maintain a ‘net due’ position with other group entities (i.e., those branches need to be a net borrower above a specified amount or they cannot be a net lender beyond a specified amount). Accordingly, surplus liquidity maintained at those branches can be utilized at other group entities only to the extent of buffer available in the ‘net due’ position. At year-end fiscal 2023, such overseas branches of the Bank held net liquid assets of Rs. 276.9 billion (equivalent), which are included in our overall net liquid assets of the Bank of Rs. 4,572.9 billion.

 

ICICI Bank also has access to other reliable sources of liquidity. The Reserve Bank of India conducts repurchase and reverse repurchase transactions with banks through its liquidity adjustment facility and marginal standing facility to carry out monetary policy and manage liquidity for the Indian banking system. The Reserve Bank of India stipulates an interest rate applicable to fixed rate repurchase, fixed rate reverse repurchase agreements and marginal standing facility, known as the repo rate, reverse repo rate and marginal standing facility rate respectively. In addition, Reserve Bank of India also conducts variable rate repurchase or reverse repurchase auctions, rates for which are arrived through competitive bidding. On April 8, 2022, the Reserve Bank of India operationalized a new standing deposit facility, which replaced the fixed rate reverse repo as the floor of the liquidity adjustment facility corridor at 25 basis points below the policy repo rate. At year-end fiscal 2023, the Reserve Bank of India repo rate, fixed rate reverse repo rate, standing deposit facility and marginal standing facility rate were 6.5%, 3.35%, 6.25% and 6.75% respectively. The liquidity adjustment facility and marginal standing facility are available throughout the year. At year-end fiscal 2023, under the marginal standing facility, in addition to the eligible securities a bank holds in excess of the statutory requirement, the banks could borrow overnight up to 2.0% of their net demand and time liabilities outstanding at the end of the second preceding 14-day period. Further, there is a liquid market for repurchase transactions with other market counterparties. Banks may enter into repurchase transactions with the Reserve Bank of India or other market counterparties against the statutory liquidity ratio eligible securities that hold in excess of the statutory requirement.

 

At year-end fiscal 2023, ICICI Bank had government securities amounting to Rs. 1,175.7 billion eligible for borrowings through the liquidity adjustment facility and marginal standing facility from the Reserve Bank of India.

 

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The loan portfolio at the Bank’s overseas branches as a proportion of the total portfolio has declined from 4.8% at year-end fiscal 2022 to 3.3% at year-end fiscal 2023. ICICI Bank has a well-defined borrowing program for the overseas operations. The incremental wholesale borrowings are primarily in the form of inter-bank and money market borrowings. The Bank also raises refinancing from other banks against eligible trade assets. Those loans that meet the Export Credit Agencies’ criteria are refinanced as per the agreements entered into with these agencies. The Bank also mobilizes deposit liabilities, in accordance with the regulatory framework at the host country.

 

ICICI Bank has the ability to use its rupee liquidity in India to meet refinancing needs at its overseas branches, although this may be at a relatively high cost based on swap and exchange rates prevailing at the time of such refinancing. The terms of the Bank’s bond issuances and loans from other financial institutions and export credit agencies contain cross-default clauses, restrictions on its ability to merge or amalgamate with another entity and restrictions on the Bank’s ability to prematurely redeem or repay such bonds or loans. The terms of the Bank’s subordinated debt issuances eligible for inclusion in Tier 1 or Tier 2 capital include the suspension of interest payments in the event of losses or capital deficiencies, and a prohibition on redemption, even at maturity or on specified call option dates, without the prior approval of the Reserve Bank of India. The Bank is currently not, and does not expect to be, in breach of any material covenants of the Bank’s borrowings that would be construed as events of default under the terms of such borrowings.

 

The successful management of credit, market and operational risk is an important consideration in managing the liquidity because it affects the evaluation of our credit ratings by rating agencies. Rating agencies may reduce or indicate their intention to reduce the ratings at any time.

 

Rating agencies can also decide to withdraw their ratings of the Bank, which may have the same effect as a reduction in our ratings. 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 transactions) and derivatives transactions, or retain our customers. See also “Risk Factors—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.

 

In respect of the Bank’s domestic operations, ICICI Bank may enter into collateralized borrowings in the form of repurchase transactions with the Reserve Bank of India or through Clearing Corporation of India Limited, a centralized clearing counterparty or with the market counterparties, against the statutory liquidity ratio eligible securities to meet expected and unexpected borrowings requirements. In general, the market value of collateral given for any such loan is higher than the value of the loan, the difference being referred to as a haircut. The Reserve Bank of India has stipulated the haircut for all such securities for borrowings from itself. In case of borrowings from products settled through Clearing Corporation of India Limited, members of Clearing Corporation of India Limited’s repo segment are required to maintain margin contributions in relation to their borrowing/lending obligation at any point of time, which acts as a cushion against any fall in the value of the underlying collateral.

 

Further, the Bank is also a member in the triparty repo segment and it may enter into collateralized borrowings in the form of repurchase transactions on the Triparty Repo Order Matching Platform provided by Clearcorp Dealing Systems (India) Ltd., a wholly owned subsidiary of Clearing Corporation of India Limited. Clearing Corporation of India Limited also performs the roles and responsibilities of a Triparty Repo Agent, in terms of Repurchase transactions (Repo) (Reserve Bank) Directions, 2018 as amended from time to time. The triparty repo agent has stipulated the haircuts for the eligible securities for borrowing through its platform and the market value of collateral required for any such loan is higher than the value of the loan.

 

185 

The Bank holds sufficient securities in our account to meet additional collateral requirements if required and systems and processes are in place to ensure sufficient balance in our Principal-Securities General Ledger account, Repo Constituent - Securities General Ledger account, Clearing Corporation of India Limited Securities Guarantee Fund and Tri-party repo margin account, resulting in smooth settlement of transactions.

 

Further, in case of any emergency requirement, additional securities may be transferred to our Securities Guarantee Fund/collateralized borrowing and lending obligations margin account on a T+0 basis. In case of corporate bond repo, the value of the securities is computed after applying the minimum haircut as stipulated by the clearing house or bilaterally agreed upon by counterparties depending upon the credit rating of the underlying security. The Bank also deals with central counterparties for settlement of government securities outright and repo transactions, foreign exchange transactions, interest rate and currency derivatives for which it needs to contribute towards margin obligations. The Bank may be required to post additional collateral in case of downgrade in the external credit rating of the Bank under letter of credit, stand-by letter of credit, bank guarantee and unfunded risk participation agreements.

 

In respect of overseas branch operations, generally, the collateral requirements are applicable for transactions which are cleared through clearing houses, bilateral transactions executed under International Swaps and Derivatives Asoociation Credit Support Annex and International Swaps and Derivatives Asoociation Global Master Repo Agreement. The Asset Liability Management Committee has approved a framework for accepting covenants, linked to a credit rating downgrade of the Bank and a breach in thresholds of certain financial covenants as a part of borrowing agreements. A stress scenario has been formulated, which is linked to potential outflows due to a breach of rating downgrade covenants.

 

Off-balance sheet items including funding commitments impact the liquidity of the Bank. The Bank analyzes the behavioral profile of various components of the off-balance sheet items. The behavioral analysis includes potential cash flows from off-balance sheet activities, such as draw down under loan commitments, contingent liabilities and market related transactions. The impact of the same is considered by us in various liquidity risk reports.

 

In view of the margin rules for non-centrally cleared derivative transactions issued by the Basel Committee on Banking Supervision and discussion paper issued by the Reserve Bank of India, derivative transactions are subject to margin-reset and consequent collateral exchange is governed by the Credit Support Annex. The Bank has entered into a Credit Support Annex, which would require maintenance of collateral. The Bank considers the increased liquidity requirement on account of valuation changes in the transactions settled through qualified central counterparties including the clearing corporation of India and other exchange houses as well as for transactions covered under the Credit Support Annex. The potential outflows on account of such transactions have been considered based on the look-back approach prescribed in the Reserve Bank of India guidelines.

 

Volatility in the international debt markets may constrain our international borrowings. As of March 31, 2023, the Bank did not have any borrowing linked to credit downgrade covenants which would require the Bank to pay an increased interest rate on the borrowing.

 

There are restrictions on the use of liquidity maintained by the UK and Canada subsidiaries of the Bank to meet their overall liquidity needs. The Office of the Superintendent of Financial Institutions of Canada has prescribed a limit of 100% of Tier 1 and Tier 2 capital (as defined under Canadian regulations) on the credit exposure to any single entity or a group of connected entities. ICICI Bank Canada has internally capped this credit exposure at CAD 150 million (37.9% of the limit specified by the Office of the Superintendent of Financial Institutions, except with respect to exposure to the ICICI Bank). The limit of CAD 150 million can be increased to a maximum of 75% of capital depending on the credit quality of the Group or Connection. In fiscal 2023, ICICI Bank Canada has complied with both regulatory and their internal limits on exposures to any single entity, including to ICICI Bank.

 

186 

As per the Capital Requirements Regulation guidelines applicable for ICICI Bank UK PLC, a bank shall not incur an exposure, after taking into account the effect of the credit risk mitigation, to a client or group of connected clients the value of which exceeds 25% of its Tier 1 capital. Where that client is an institution or where a group of connected clients includes one or more institutions, that value shall not exceed 25% of the bank’s Tier 1 capital or GBP 130 million, whichever the higher. ICICI Bank UK PLC has a total capital base of US$ 372 million at year-end fiscal 2023 which was higher than the regulatory requirement. Additionally, ICICI Bank UK PLC stipulates various internal limits to manage exposure concentrations within the Bank. The key parameters of risk concentrations measured include sectoral, country, rating category based, counterparty and large exposures.

 

Capital Expenditure

 

The following tables set forth, for the periods indicated, certain information related to capital expenditure by category of fixed assets.

 

   Fiscal 2021
   Cost at year-end fiscal 2021  Additions/transfers/
revaluation
  Deletions/
transfers
  Depreciation  Net assets at year-end fiscal 2021
   (in millions)
Premises  Rs.94,290   Rs.1,891(1)  Rs.(399)  Rs.(21,855)  Rs73,927   US$899 
Other fixed assets (including furniture and fixtures)   85,815    15,087    (3,764)   (66,259)   30,878    376 
Assets given on lease   17,054    681    —      (14,448)   3,287    40 
Total  Rs.197,159   Rs.17,659   Rs.(4,163)  Rs.(102,562)  Rs.108,093   US$

1,315 

 

 

(1)       Includes gain on revaluation recorded through reserve of Rs. 500 million.

 

   Fiscal 2022
   (in millions)
   Cost at year-end fiscal 2022  Additions/transfers/
revaluation
  Deletions/
transfers
  Depreciation  Net assets at year-end fiscal 2022
   (in millions)
Premises  Rs.95,782   Rs.3,335(1)  Rs.(4,771)  Rs.(23,514)  Rs.70,832   US$ 862 
Other fixed assets (including furniture and fixtures)   97,137    15,252    (13,605)   (66,817)   31,968    389 
Assets given on lease   17,735    156    —      (14,636)   3,255    40 
Total  Rs.210,654   Rs.18,743   Rs.(18,376)  Rs.(104,967)  Rs.106,055   US$

1,290 

 

 ______________ 

(1)Includes gain on revaluation recorded through reserve of Rs. 1,743 million.

 

187 

   Fiscal 2023
   Cost at year-end fiscal 2023 

Additions/

transfers/revaluations 

 

Deletions/

transfers 

  Depreciation  Net assets at year-end fiscal 2023
   (in millions)
Premises  Rs.94,346   Rs.2,793(1) Rs.(2,799)  Rs.(25,545)  Rs.68,795   US$837 
Other fixed assets (including furniture and fixtures)   98,785    18,437    (6,220)   (73,174)   37,828    460 
Assets given on lease   17,891    12    —      (14,836)   3,067    37 
Total  Rs.211,022   Rs.21,242   Rs.(9,019)  Rs.(113,555)  Rs.109,690   US$

1,334 

 

 

(1)Includes gain on revaluation recorded through reserve of Rs. 812 million.

 

Significant Changes

 

Except as otherwise stated in this annual report, we have experienced no significant changes since the date of fiscal 2023 consolidated financial statements contained in this annual report.

 

Segment Revenues and Assets

 

The Reserve Bank of India in its guidelines on “segmental reporting” has stipulated specified business segments and their definitions, for the purposes of public disclosures on business information for banks in India.

 

The consolidated segmental report for fiscal 2023, based on the segments identified and defined by the Reserve Bank of India, has been presented as follows:

 

·Retail Banking includes our exposures which satisfy the four qualifying criteria of “regulatory retail portfolio” as stipulated by the Reserve Bank of India’s Basel III guidelines. These criteria are as follows:

 

(i)Orientation criterion: The exposure is to an individual person or persons or to a small business; person under this clause would mean any legal person capable of entering into contracts and would include but not be restricted to an individual, Hindu Undivided Family, partnership firm, trust, private limited companies, public limited companies, or co-operative societies. A small business is defined as one where the three-year average annual turnover is less than Rs. 500 million.

 

(ii)Product criterion: All exposures should take the form of any of the following:

·revolving credits and lines of credit (including overdrafts);

·term loans and leases (e.g. installment loans and leases, student and educational loans); and

·small business facilities and commitments.

 

(iii)Low value of individual exposures: The maximum aggregate retail exposure to one counterparty should not exceed the absolute threshold limit of Rs. 75 million.

 

(iv)Granularity criterion: The regulatory retail portfolio should be sufficiently diversified to a degree that reduces the risks in the portfolio. The aggregate exposure to one counterparty should not exceed 0.2% of the overall retail portfolio.

 

188 

·Wholesale Banking includes all advances to trusts, partnership firms, companies and statutory bodies by the Bank which are not included in the Retail Banking segment, as per the Reserve Bank of India guidelines for the Bank.

 

·Treasury includes the entire investment and derivative portfolio of the Bank and ICICI Strategic Investments Fund.

 

·Other Banking includes leasing operations and other items not attributable to any particular business segment of the Bank. It also includes the Bank’s banking subsidiaries, i.e., ICICI Bank UK PLC and ICICI Bank Canada.

 

·Life Insurance represents results of ICICI Prudential Life Insurance Company Limited.

 

·Others include ICICI Home Finance Company Limited, ICICI Venture, ICICI International Limited, ICICI Securities Primary Dealership Limited, ICICI Securities Limited, ICICI Securities Holdings Inc., ICICI Securities Inc., ICICI Prudential Asset Management Company Limited, ICICI Prudential Trust Limited, ICICI Investment Management Company Limited, ICICI Trusteeship Services Limited and ICICI Prudential Pension Funds Management Company Limited.

 

·Unallocated includes items such as income tax paid in advance net of provision for tax, deferred tax and provisions to the extent reckoned at entity level.

 

Framework for Transfer Pricing

 

Liabilities of retail banking and wholesale banking segments are transfer priced to a central treasury unit, which pools all funds and lends to the business units at appropriate rates based on the relevant maturity of assets being funded after adjusting for regulatory reserve requirements and specific charge on account of directed lending to certain sectors categorized as priority sector. Current account and savings account deposits are transfer priced at rates, linked to interest rate on savings account deposits. For term deposits and borrowings, the transfer pricing is primarily based on the categories specified in the Transfer Pricing Policy. Transfer pricing to our asset creation units is based on the incremental cost of deposits (blended for current account and savings account deposits) and borrowings adjusted for the maturity of the asset (term premium) and regulatory reserve requirements. The allocated capital is also considered as a source of funding for the purpose of segmental reporting.

 

Fiscal 2023 compared with Fiscal 2022

 

The following table sets forth, for the periods indicated, profit before tax of various segments.

 

    Year ended March 31,
    2022   2023   2023   2023/2022
% change
    (in millions, except percentages)
Retail Banking   Rs. 114,004     Rs. 175,337     US$ 2,134       53.8%  
Wholesale Banking     90,529       157,858       1,921       74.4  
Treasury     96,745       140,372       1,709       45.1  
Other Banking     6,271       10,014       122       59.7  
Life Insurance     7,906       8,969       109       13.4  
Others     43,500       42,024       511       (3.4 )
Inter-Segment adjustments     (16,792 )     (15,509 )     (189 )     (7.6 )
Share of profit from associates(1)     7,544       9,983       121       32.3  
Unallocated expenses     250       (56,500 )     (687 )     N/M  
Profit before tax   Rs. 349,957     Rs. 472,548     US$ 5,751       35.0%  

 

N/M – Not meaningful

 

1.Effective April 1, 2021, ICICI Lombard General Insurance Company Limited ceased be a subsidiary of the Bank and was accounted as an equity affiliate under Accounting Standard – 23 – “Accounting for Investments in Associates” in consolidated financial statements.

 

189 

Retail Banking

 

The following table sets forth, for the periods indicated, the principal components of profit before tax.

 

    Year ended March 31,
    2022   2023   2023   2023/2022
% change
    (in millions, except percentages)
Net interest income   Rs. 259,120     Rs. 317,100     US$ 3,858       22.4%  
Other income     104,298       121,877       1,483       16.9  
Total income     363,418       438,977       5,341       20.8  
Operating expenses     194,668       240,344       2,924       23.5  
Profit before provisions     168,750       198,633       2,417       17.7  
Provisions     54,746       23,296       283       (57.4)  
Profit before tax   Rs. 114,004     Rs. 175,337     US$ 2,134       53.8%  

 

The following table sets forth, for the periods indicated, the outstanding balances of key assets and liabilities.

 

   Outstanding balance at March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Advances  Rs.4,704,559   Rs.5,765,239   US$  70,145      22.5% 
Deposits   7,616,264    8,587,318    104,481    12.7 

 

The profit before tax of the retail banking segment increased by 53.8% from Rs. 114.0 billion in fiscal 2022 to Rs. 175.3 billion in fiscal 2023, primarily due to an increase in net interest income, non-interest income and a decrease in provisions, offset, in part, by an increase in operating expenses.

 

Net interest income increased by 22.4% from Rs. 259.1 billion in fiscal 2022 to Rs. 317.1 billion in fiscal 2023 primarily due to growth in the average loan portfolio and an increase in yield.

 

Other income increased by 16.9% from Rs. 104.3 billion in fiscal 2022 to Rs. 121.9 billion in fiscal 2023 primarily due to an increase in fees from credit card portfolio and lending linked fees.

 

Operating expenses increased by 23.5% from Rs. 194.7 billion in fiscal 2022 to Rs. 240.3 billion in fiscal 2023 primarily due to an increase in employee expenses, direct marketing agency expenses, advertisement and sales promotion expenses and technology related expenses.

 

190 

Provisions (net of write-back) decreased from Rs. 54.7 billion in fiscal 2022 to Rs. 23.3 billion in fiscal 2023. During fiscal 2023, there were higher recoveries and upgrades from non-performing assets resulting in lower provisioning requirement. During fiscal 2022, the provision for non-performing and other assets also included provision on loans restructured under ‘Resolution Framework for COVID-19-related Stress’ guidelines issued by the Reserve Bank of India. See also “Business – Risk management – Credit risk – Assessment of Retail Loans.”

 

Wholesale Banking

 

The following table sets forth, for the periods indicated, the principal components of profit before tax.

 

 

   Year ended March 31,
   2022  2023  2023 

2023/2022

% change

   (in millions, except percentages)
Net interest income  Rs.126,158   Rs.150,003   US$1,825    18.9% 
Other income   47,578    55,492    675    16.6 
Total income   173,736    205,495    2,500    18.3 
Operating expenses   55,357    67,489    821   21.9 
Profit before provisions   118,379    138,006    1,679   16.6 
Provisions   27,850    (19,852)   (242)   N/M 
Profit before tax  Rs.90,529   Rs.157,858    US$

1,921

    74.4% 

 

N/M – Not meaningful

 

The following table sets forth, for the periods indicated, the outstanding balances of key assets and liabilities.

 

   Outstanding balance at March 31,
   2022  2023  2023 

2023/2022

 % change

   (in millions, except percentages)
Advances  Rs.3,928,994   Rs.4,146,135   US$50,446    5.5% 
Deposits   3,022,194    3,209,497    39,050    6.2 

 

The profit before tax of the wholesale banking segment increased by 74.4% from Rs. 90.5 billion in fiscal 2022 to Rs. 157.9 billion in fiscal 2023 primarily due to an increase in net interest income, non-interest income and a decrease in provisions, offset, in part, by an increase in operating expenses.

 

Net interest income increased by 18.9% from Rs. 126.2 billion in fiscal 2022 to Rs. 150.0 billion in fiscal 2023 primarily due to a growth in average loan portfolio and increase in yield.

 

Other income increased by 16.6% from Rs. 47.6 billion in fiscal 2022 to Rs. 55.5 billion in fiscal 2023 primarily due to an increase in income from lending linked fees and income from foreign exchange and derivative transactions.

 

Operating expenses increased by 21.9% from Rs 55.4 billion in fiscal 2022 to Rs. 67.5 billion in fiscal 2023 primarily due to an increase in employee expenses and technology related expenses.

 

There was a write-back of provision of Rs. 19.9 billion in fiscal 2023 as compared to a provision of Rs. 27.9 billion in fiscal 2022. During fiscal 2023, there were higher recoveries and upgrades from non-performing assets resulting in net write-back of provision, offset, in part, by an increase in provisioning rate for certain non-performing asset categories. See also “Operating and Financial Review and Prospects—Other Income—Provisions and contingencies (excluding provision for tax)”.

 

191 

Treasury

 

The following table sets forth, for the periods indicated, the principal components of profit before tax.

 

   Year ended March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Net interest income  Rs.84,890   Rs.147,901   US$1,800    74.2% 
Other income   38,177    26,516    323    (30.5)
Total income   123,067    174,417    2,123    41.7 
Operating expenses   15,370    17,905    218    16.5 
Profit before provisions   107,697    156,512    1,905    45.3 
Share of profit from associates   7,544    9,983    121    —   
Provisions   3,408    6,157    75    80.7 
Profit before tax  Rs.96,745   Rs.140,372   US$

1,709

    45.1% 

 

 

 

The following table sets forth, for the periods indicated, the closing balances of key assets and liabilities.

    Closing balance at March 31,
    2022   2023   2023   2023/2022
% change
    (in millions, except percentages)
Investments   Rs. 3,140,040     Rs. 3,667,972     US$ 44,628       16.8%  
Borrowings     1,072,314       1,193,255       14,518       11.3  

 

 

 

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, such as forward contracts, swaps and options.

 

The profit before tax of the treasury segment increased by 45.1% from Rs. 96.7 billion in fiscal 2022 to Rs. 140.4 billion in fiscal 2023 primarily due to an increase in net interest income, offset, in part, by a decrease in non-interest income and an increase in provisions and operating expenses.

 

Net interest income increased by 74.2% from Rs. 84.9 billion in fiscal 2022 to Rs. 147.9 billion in fiscal 2023 primarily due to an increase in average investment portfolio and increase in yields.

 

Other income decreased by 30.5% from Rs. 38.2 billion in fiscal 2022 to Rs. 26.5 billion in fiscal 2023. The dividend from subsidiaries/joint ventures was Rs. 17.8 billion in fiscal 2023 as compared to Rs. 18.3 billion in fiscal 2022. There was a realised/unrealised loss of Rs. 0.5 billion from treasury portfolio in fiscal 2023 as compared to a realised/unrealised gain of Rs. 9.0 billion in fiscal 2022.

 

Operating expenses increased by 16.5% from Rs. 15.4 billion in fiscal 2022 to Rs. 17.9 billion in fiscal 2023 primarily due to an increase in premium paid towards purchase of priority sector lending certificates.

 

Provisions on investments increased from Rs. 3.4 billion in fiscal 2022 to Rs. 6.2 billion in fiscal 2023 primarily due to provision on debentures, equity shares and security receipts.

 

192 

Other Banking

 

The following table sets forth, for the periods indicated, the principal components of profit before tax.

 

   Year ended March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Net interest income  Rs.10,316   Rs.15,793   US$192    53.1% 
Other income   3,418    4,240    52    24.0 
Total income   13,734    20,033    244    45.9 
Operating expenses   7,245    8,899    108    22.8 
Profit before provisions   6,489    11,134    136    71.6 
Provisions   218    1,120    14    —   
Profit before tax  Rs.6,271   Rs.10,014   US$

122

    59.7% 

 

The following table sets forth, for the periods indicated, the outstanding balances of the key assets and liabilities.

 

   Outstanding balance on March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Advances  Rs.553,824   Rs.681,405   US$8,291    23.0% 
Investments   75,292    86,751    1,055    15.2 
Deposits   296,919    337,012    4,100    13.5 
Borrowings  Rs.174,350   Rs.150,749   US$1,834    (13.5)%

 

 

Other banking business includes our leasing operations, our overseas banking subsidiaries and other items not attributable to any particular business segment of the Bank.

 

The profit before tax of the other banking segment increased by 59.7% from Rs. 6.3 billion in fiscal 2022 to Rs. 10.0 billion in fiscal 2023 primarily due to an increase in net interest income and other income, offset, in part, by an increase in operating expenses and provisions.

 

Net interest income increased by 53.1% from Rs. 10.3 billion in fiscal 2022 to Rs. 15.8 billion in fiscal 2023. Net interest income of ICICI Bank Canada increased from Rs. 2.8 billion in fiscal 2022 to Rs. 5.3 billion in fiscal 2023 primarily due to higher interest income on trade finance, commercial loans and residential mortgages on account of increase in benchmark interest rates and lower interest expense on term deposits. Net interest income of ICICI Bank UK PLC increased from Rs. 3.0 billion in fiscal 2022 to Rs. 4.2 billion in fiscal 2023 primarily due to an increase in yield on interest earning assets, offset, in part, by an increase in interest expenses due to higher benchmark interest rates. Net interest income of the Bank’s other banking business increased from Rs. 4.5 billion in fiscal 2022 to Rs. 6.3 billion in fiscal 2023.

 

Other income increased by 24.0% from Rs. 3.4 billion in fiscal 2022 to Rs. 4.2 billion in fiscal 2023, primarily due to an increase in other income of other banking segment of the Bank. Other income of other banking segment of the Bank increased from Rs. 0.8 billion in fiscal 2022 to Rs. 2.1 billion in fiscal 2023. Other income of ICICI Bank Canada increased from Rs. 1.5 billion in fiscal 2022 to Rs. 1.6 billion in fiscal 2023. Other income of ICICI Bank UK PLC decreased from Rs. 1.0 billion in fiscal 2022 to Rs. 0.6 billion in fiscal 2023.

 

193 

Operating expenses increased by 22.8% from Rs. 7.2 billion in fiscal 2022 to Rs. 8.9 billion in fiscal 2023 primarily due to an increase in operating expenses of the Bank. Operating expenses of other banking segment of the Bank increased from Rs. 1.9 billion in fiscal 2022 to Rs. 3.0 billion in fiscal 2023. Operating expenses of ICICI Bank Canada increased from Rs. 2.3 billion in fiscal 2022 to Rs. 2.9 billion in fiscal 2023. Operating expenses of ICICI Bank UK PLC increased from Rs. 2.9 billion in fiscal 2022 to Rs. 3.0 billion in fiscal 2023.

 

Provisions increased from Rs. 0.2 billion in fiscal 2022 to Rs. 1.1 billion in fiscal 2023. The increase in provision was primarily due to increase in provision by ICICI Bank Canada. Provisions of our other banking segment of the Bank increased from Rs. 281 million in fiscal 2022 to Rs. 555 million in fiscal 2023. ICICI Bank Canada made a provision of Rs. 147 million in fiscal 2023 as compared to a write-back of Rs. 345 million is fiscal 2022. Provisions of our subsidiary in the UK increased from Rs. 231 million in fiscal 2022 to Rs. 513 million in fiscal 2023.

 

The impact on the economy due to global developments, including inflation trajectory and on-going rate hike cycle by the regulators of developed countries, trade-related disputes and geo-political conflicts, including the conflict between Russia and Ukraine, may impact economic conditions in Canada and the United Kingdom, which in turn could impact the business of our banking subsidiaries in these countries. Further, the Group is targeting reduction in the non-India linked corporate loan portfolio of ICICI Bank, ICICI Bank UK PLC and ICICI Bank Canada.

 

Life Insurance

 

The following table sets forth, for the periods indicated, the principal components of profit before tax.

 

   Year ended March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Premium earned  Rs.374,580   Rs.399,328   US$4,859    6.6% 
Premium on re-insurance ceded and accepted   (11,367)   (13,732)   (167)   20.8 
Net premium earned   363,213    385,596    4,692    6.2 
Other income   28,453    27,698    337    (2.7)
Investment income   60,227    64,544    785    7.2 
Total income   451,893    477,838    5,814    5.7 
Commission paid   16,729    18,639    227    11.4 
Claims/benefits paid   59,038    53,427    650    (9.5)
Operating expenses   39,294    48,683    592    23.9 
Total expenses   115,061    120,749    1,469    4.9 
Transfer to linked funds   193,959    179,008    2,178    (7.7)
Provisions for policy holder liabilities (non-linked)   134,967    169,112    2,058    25.3 
Profit before tax  Rs.7,906   Rs.8,969   US$

109

    13.5% 

 

   

194 

The following table sets forth, for the periods indicated, the outstanding balance of key assets and liabilities.

 

    Outstanding balance on March 31,
    2022   2023   2023   2023/2022
% change
    (in millions, except percentages)
Investments   Rs. 828,880     Rs. 986,010     US$ 11,997       19.0%  
Assets held to cover linked liabilities     1,508,663       1,440,581       17,527       (4.5)  
Liabilities on life policies   Rs. 2,288,272     Rs. 2,388,674     US$ 29,063       4.4%  

 

The profit before tax of ICICI Prudential Life Insurance Company increased by 13.5% from Rs. 7.9 billion in fiscal 2022 to Rs. 9.0 billion in fiscal 2023 primarily due to an increase in premium earned and a decrease in claims incurred.

 

The total premium income of ICICI Prudential Life Insurance Company increased by 6.6% from Rs. 374.6 billion in fiscal 2022 to Rs. 399.3 billion in fiscal 2023 primarily due to an increase in retail renewal premium and group premium. Retail renewal premium increased by 4.4% from Rs. 214.4 billion in fiscal 2022 to Rs. 223.8 billion in fiscal 2023. Group premium increased by 28.1% from Rs. 67.3 billion in fiscal 2022 to Rs. 86.2 billion in fiscal 2023.

 

Other income of ICICI Prudential Life Insurance Company decreased by 2.7% from Rs. 28.5 billion in fiscal 2022 to Rs. 27.7 billion fiscal 2023.

 

Investment income of ICICI Prudential Life Insurance Company increased by 7.2% from Rs. 60.2 billion in fiscal 2022 to Rs. 64.5 billion in fiscal 2023 primarily due to an increase in interest income, offset, in part, by a decrease in profit on sale of investment.

 

Commission expenses of ICICI Prudential Life Insurance Company increased by 11.4% from Rs. 16.7 billion in fiscal 2022 to Rs. 18.6 billion in fiscal 2023 primarily due to an increase in new business commission and renewal commission.

 

Claims and benefit payouts of ICICI Prudential Life Insurance Company decreased by 9.5% from Rs. 59.0 billion in fiscal 2022 to Rs. 53.4 billion in fiscal 2023 primarily due to a decrease in death claims (net of reinsurance), offset, in part, by an increase in surrenders.

 

Transfer to linked funds including the investible portion of the premium on linked policies of ICICI Prudential Life Insurance Company decreased by 7.7% from Rs. 194.0 billion in fiscal 2022 to Rs. 179.0 billion in fiscal 2023 primarily due to a decrease in linked premium. The investible portion of the premium on linked policies of life insurance represents the premium income including renewal premium received on linked policies of life insurance business invested, after deducting charges and premium for risk coverage, in the underlying asset or index chosen by the policy holder. Provision for policyholder liabilities increased from Rs. 135.0 billion in fiscal 2022 to Rs. 169.1 billion in fiscal 2023.

 

Employee expenses increased from Rs. 12.0 billion in fiscal 2022 to Rs. 14.5 billion in fiscal 2023. Other operating expenses increased from Rs. 27.3 billion in fiscal 2022 to Rs. 34.2 billion in fiscal 2023 primarily due to increases in advertisement and publicity expenses.

 

195 

Others

 

The “Others” segment mainly includes ICICI Prudential Asset Management Company Limited, ICICI Venture, ICICI Securities Limited, ICICI Securities Primary Dealership Limited and ICICI Home Finance Company Limited.

 

ICICI Prudential Asset Management Company manages the ICICI Prudential Mutual Fund, a leading mutual fund in India.

 

ICICI Securities Limited and ICICI Securities Primary Dealership Limited are engaged in equity underwriting and brokerage and primary dealership in government securities respectively. ICICI Securities Limited owns icicidirect.com, a leading online brokerage platform and is engaged in equities underwriting, securities broking and distribution of financial products.

 

The following table sets forth, for the periods indicated, the principal components of profit before tax.

 

   Year ended March 31,
   2022  2023  2023  2023/2022
% change
   (in millions, except percentages)
Net interest income  Rs.14,709   Rs.15,281   US$186    3.9% 
Other income   56,930    57,004    694    0.1 
Total income   71,639    72,285    880    0.9 
Operating expenses   25,823    29,630    361    14.7 
Operating profit before provisions and tax   45,816    42,655    519    (6.9)
Provision and contingencies   2,316    631    8    (72.8)
Profit before tax  Rs.43,500   Rs.42,024   US$

511

    (3.4)%

 

The profit before tax of the “Others” segment decreased by 3.4% from Rs. 43.5 billion in fiscal 2022 to Rs. 42.0 billion in fiscal 2023 primarily due to a decrease in profit before tax of ICICI Securities Limited and ICICI Securities Primary Dealership Limited, offset, in part, by an increase in profit before tax of ICICI Home Finance Company Limited and ICICI Prudential Asset Management Company Limited.

 

Net interest income increased by 3.9% from Rs. 14.7 billion in fiscal 2022 to Rs. 15.3 billion in fiscal 2023 primarily due to an increase in net interest income of our securities broking subsidiary and housing finance subsidiary, offset, in part, by a decrease in net interest income of our primary dealership subsidiary.

 

Other income increased marginally from Rs. 56.9 billion in fiscal 2022 to Rs. 57.0 billion in fiscal 2023.

 

Operating expenses increased by 14.7% from Rs. 25.8 billion in fiscal 2022 to Rs. 29.6 billion in fiscal 2023 primarily due to an increase in other operating expenses of our housing finance subsidiary and asset management subsidiary.

 

The profit before tax of ICICI Securities Limited decreased from Rs. 18.7 billion in fiscal 2022 to Rs. 15.2 billion in fiscal 2023 primarily due to a decrease in fee income.

 

The profit before tax of ICICI Prudential Asset Management Company Limited increased from Rs. 19.1 billion in fiscal 2022 to Rs. 20.1 billion in fiscal 2023 primarily due to an increase in income from fund operations, offset, in part, by an increase in staff cost and other administrative expenses. Income from fund operations increased primarily due to an increase in management fees from equity and hybrid schemes.

 

196 

The profit before tax of ICICI Securities Primary Dealership Limited decreased from Rs. 4.4 billion in fiscal 2022 to Rs. 1.7 billion in fiscal 2023 primarily due to a decrease in net interest income and trading income.

 

The profit before tax of ICICI Home Finance Company Limited increased from Rs. 1.2 billion in fiscal 2022 to Rs. 4.9 billion in fiscal 2023 primarily due to an increase in net interest income and fee income and decrease in provision, offset, in part, by an increase in operating expenses.

 

The profit before tax of ICICI Venture increased from Rs. 16 million in fiscal 2022 to Rs. 79 million in fiscal 2023 primarily due to an increase in fee income and investment income, offset, in part, by increase in staff cost.

 

Unallocated Expenses

 

During fiscal 2023, the Bank on a prudent basis made an additional contingency provision of Rs. 56.5 billion, to further strengthen the balance sheet as compared to a write-back of Rs. 0.3 billion in fiscal 2022. The contingency provision was not allocated to any segment and included in unallocated.

 

For a discussion of our results in fiscal 2023 compared to fiscal 2022 and certain comparative numbers in fiscal 2022, please refer to “Part I — Item 5. Operating and Financial Review and Prospects” contained in our Annual Report on Form 20-F for fiscal 2022 filed with the U.S Securities and Exchange Commission on July 29, 2022.

 

Reconciliation of Net Profit (after minority interest) between Indian GAAP and U.S. GAAP

 

Our consolidated financial statements are prepared in accordance with Indian GAAP, which differs in certain significant aspects from U.S. GAAP. The following discussion explains the significant adjustments to our consolidated profit after tax under Indian GAAP in fiscal 2023, fiscal 2022 and fiscal 2021 that would result from the application of U.S. GAAP instead of Indian GAAP.

 

Consolidated net income attributable to the shareholders of ICICI Bank under U.S. GAAP decreased from Rs. 511.8 billion in fiscal 2022 to Rs. 250.0 billion in fiscal 2023, while consolidated profit after tax attributable to the shareholders of ICICI Bank under Indian GAAP increased from Rs. 251.1 billion in fiscal 2022 to Rs. 340.4 billion in fiscal 2023. The decrease in the consolidated net income attributable to the shareholders of ICICI Bank under U.S. GAAP was primarily due to gain amounting to Rs. 255.0 billion recognized on deconsolidation in fiscal 2022, and impairment allowance amounting to Rs. 122.0 billion recognized in fiscal 2023, on our general insurance affiliate.

 

The merger of ICICI Lombard General Insurance Company Limited and general insurance business of Bharti AXA General Insurance Company Limited was approved by the Insurance Regulatory and Development Authority of India with effect from September 8, 2021. Under U.S. GAAP, the Bank has accounted its investment in ICICI Lombard General Insurance Company Limited as an affiliate with effect from September 8, 2021. Under U.S. GAAP, the retained interest in ICICI Lombard General Insurance Company Limited was fair valued on the date of loss of control based on the closing quoted price of the common stock of ICICI Lombard General Insurance Company Limited in the stock exchange. This resulted in a gain of Rs. 255.0 billion on deconsolidation under U.S. GAAP in fiscal 2022. Under Indian GAAP, the retained interest in ICICI Lombard General Insurance Company Limited was accounted at carrying value. During fiscal 2023, considering the significant and continuous decline in market price of equity shares of ICICI Lombard General Insurance Company Limited, the Bank has recognized an impairment loss of Rs. 122.0 billion and recorded the carrying value of its investment in ICICI Lombard General Insurance Company Limited at the closing quoted price of the common stock on the stock exchange.

 

197 

The difference in accounting for the allowances of credit losses resulted in a higher net income by Rs. 15.6 billion in fiscal 2023 (fiscal 2022: Rs. 22.9 billion) under U.S. GAAP as compared to Indian GAAP. This was primarily due to differences in the methodology of computing credit loss allowances between Indian GAAP and U.S. GAAP, resulting in timing differences in the recognition of such allowances.

 

Further, during fiscal 2023, the Bank increased the provisioning rates on certain loans on a conservative basis under Indian GAAP. This also resulted in higher provision under Indian GAAP as compared to U.S. GAAP in fiscal 2023.

 

Under Indian GAAP, the Bank, on prudent basis, held contingency provisions amounting to Rs. 131.0 billion at March 31, 2023 to strengthen the balance sheet.

 

The geopolitical factors and the uncertain consequences, macroeconomic environment including the outlook on growth across the world and India may have an impact on the results of the Bank and the Group. The Group makes adjustments to appropriately address these economic circumstances over and above the model output under U.S. GAAP by increasing the probability of default estimates based on management judgement. Accordingly, the Bank made management overlay on loan exposures under U.S. GAAP at March 31, 2023.

 

The allowance for credit loss on loans and other financial assets under amortized cost was lower by Rs. 38.8 billion at March 31, 2023 (March 31, 2022: Rs. 23.3 billion) under U.S. GAAP as compared to Indian GAAP. Further, under Indian GAAP, specific provision is made on loans where strategic debt restructuring was invoked/implemented as prescribed by the Reserve Bank of India. The Bank has opted for fair value accounting for such loans and guarantees through income statement under U.S. GAAP. Accordingly, the impact of accounting on these loans is accounted in "Allowance for loan losses" for Indian GAAP and in the line item “Valuation of debt and equity securities” for U.S. GAAP. The Bank held fair value loss of Rs. 12.2 billion at March 31, 2023 under U.S. GAAP in the line item under “Valuation of debt and equity securities” on such loans.

 

See also note 21(a) to our Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

The difference in accounting for the valuation of debt and equity securities resulted in lower net income by Rs. 0.1 billion in fiscal 2023 as compared to higher income of Rs. 10.9 billion in fiscal 2022 under U.S. GAAP, as compared to Indian GAAP.

 

Under Indian GAAP unrealized losses on held-for-trading and available-for-sale securities are taken to profit and loss account, while net unrealized gains on investments by category are ignored. Under U.S. GAAP, unrealized gains or losses on trading assets are recognized in the profit and loss account and unrealized gains or losses on debt securities classified as ‘available-for-sale’, which include all securities classified as ‘held-to-maturity’ under Indian GAAP, are recognized in other comprehensive income under stockholders’ equity except for the unrealized losses on debt securities identified as credit loss which are recognized in profit and loss account. The impact of difference in mark-to-market accounting for investment securities between U.S. GAAP and Indian GAAP resulted in a higher net income by Rs. 7.9 billion under U.S. GAAP in fiscal 2023 (fiscal 2022: Rs. 9.3 billion). The impairment allowance on the debt investments under U.S. GAAP resulted in lower net income by Rs. 2.3 billion in fiscal 2023 (fiscal 2022: Rs. 2.1 billion). Further, there was a negative impact of other adjustments of Rs. 4.5 billion in fiscal 2023 as compared to negative impact of Rs. 1.6 billion on net income in fiscal 2022 under U.S. GAAP. These primarily include difference due to premium/discount amortization on debt securities and difference in gain on debt securities sold during the year, between Indian GAAP and U.S. GAAP. Under U.S. GAAP, available-for-sale debt securities include all securities classified as ‘held-to-maturity’ under Indian GAAP. The First-In-First-Out method of accounting is applied on aggregate ‘available-for-sale’ securities under U.S. GAAP, resulting in difference in realized gain/(loss) on sale of securities between Indian GAAP and U.S. GAAP.

 

198 

We earn fees and incur costs on the origination of loans which are recognized upfront under Indian GAAP but are amortized under U.S. GAAP. Amortization of loan origination fees and costs resulted in higher income by Rs. 6.5 billion in fiscal 2023 (fiscal 2022: higher by Rs. 3.9 billion) under U.S. GAAP as compared to Indian GAAP. Retirement benefit cost was lower by Rs. 1.2 billion in fiscal 2023 (fiscal 2022: higher by Rs. 2.0 billion) under U.S. GAAP as compared to Indian GAAP. While under Indian GAAP, actuarial gain or loss is recognized in the profit and loss account, under U.S. GAAP, the actuarial gain/loss is recognized through other comprehensive income and thereafter amortized through the income statement. During fiscal 2023, there was lower amortization of actuarial loss from other comprehensive income under U.S. GAAP as compared to actuarial loss recognized in other comprehensive income, resulting in retirement benefit costs being lower under U.S. GAAP in fiscal 2023 as compared to Indian GAAP. See also “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes -Note 21(e)” included herein.

 

The difference in accounting for consolidation resulted in negative impact on net income by Rs. 123.5 billion in fiscal 2023 as compared to positive impact on net income by Rs. 248.3 billion in fiscal 2022 under U.S. GAAP, as compared to Indian GAAP. This was primarily due to impairment allowance amounting to Rs. 122.0 billion recognized in fiscal 2023, and gain amounting to Rs. 255.0 billion recognized on deconsolidation in fiscal 2022, on our general insurance affiliate under U.S. GAAP. In fiscal 2023, our life insurance affiliate made a net income of Rs. 11.4 billion (fiscal 2022: net loss: Rs. 1.8 billion) under U.S. GAAP as compared to net profit of Rs. 8.1 billion (fiscal 2022: Rs. 7.5 billion) under Indian GAAP. The higher net income was primarily on account of lower policyholders’ liabilities and unallocated policyholders’ surplus, net of amortization of deferred acquisition cost and lower marked-to-market loss on trading portfolio and equity securities. See also note 22(h) to our Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes” included herein.

 

Deferred tax expenses were lower by Rs. 10.9 billion in fiscal 2023 (fiscal 2022: higher by Rs. 21.7 billion) under U.S. GAAP, as compared to Indian GAAP.

 

Deferred taxes are recognized on temporary differences related to investments in subsidiaries, branches and affiliates under U.S. GAAP while under Indian GAAP, no deferred taxes are recognized on temporary differences related to investments in subsidiaries, branches and affiliates. In fiscal 2023, there was reduction in deferred tax assets by Rs. 2.1 billion under US GAAP as compared to increase in deferred tax assets by Rs. 9.3 billion in fiscal 2022.

 

The Bank and its housing finance subsidiary create a Special Reserve through appropriation of profits, in order to avail the tax benefits as per the Income Tax Act, 1961. Under Indian GAAP, deferred tax liability has been recognized on such Special Reserve in accordance with the guidelines issued by Reserve Bank of India. Under U.S. GAAP, deferred taxes are recognized and measured based on the expected manner of recovery and deferred taxes are not recognized if the expected manner of recovery does not give rise to tax consequences. Accordingly, a deferred tax liability was not created on the Special Reserve based on the Group’s continuing intention to not ever withdraw/utilize such Special Reserve and based on an opinion from the legal counsel about non-taxability of such Special Reserve in the scenario of liquidation. In fiscal 2023, deferred tax expenses were lower by Rs. 6.6 billion (fiscal 2022: Rs. 3.7 billion) under U.S. GAAP as compared to Indian GAAP.

 

Further, there was a difference due to the positive tax impact of Rs. 8.6 billion in fiscal 2023 on U.S. GAAP adjustments over Indian GAAP as compared to the negative tax impact of Rs. 36.9 billion in fiscal 2022. See also “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes—Note 21(i)” included herein.

 

199 

Consolidated net income attributable to the shareholders of ICICI Bank of Rs. 511.8 billion in fiscal 2022 under U.S. GAAP was higher than the profit after tax attributable to the shareholders of ICICI Bank of Rs. 251.1 billion under Indian GAAP. In fiscal 2022, the net income under U.S. GAAP was higher primarily due to gain on deconsolidation of our former general insurance subsidiary, lower loan loss provisioning under U.S. GAAP as compared to Indian GAAP, the positive impact of amortization of loan processing fees net of costs and higher income on accounting for debt and equity securities under U.S. GAAP as compared to Indian GAAP, offset, in part, by net loss of our life insurance affiliate under U.S.GAAP as compared to net gain under Indian GAAP, higher deferred tax expenses under U.S. GAAP as compared to Indian GAAP and the impact of differences in accounting for compensation costs under U.S. GAAP.

 

Consolidated net income attributable to the shareholders of ICICI Bank of Rs. 213.7 billion in fiscal 2021 under U.S. GAAP was higher than the profit after tax attributable to the shareholders of ICICI Bank of Rs. 183.8 billion under Indian GAAP. In fiscal 2021, the net income under U.S. GAAP was higher primarily due to lower loan loss provisioning under U.S. GAAP as compared to Indian GAAP, higher net income of our life insurance affiliate as compared to Indian GAAP and the positive impact of amortization of loan processing fees, net of costs, offset, in part, by lower income due to the impact of the differences in accounting for debt and equity securities under U.S. GAAP as compared to Indian GAAP, higher deferred tax expenses under U.S. GAAP as compared to Indian GAAP and the impact of differences in accounting for compensation costs under U.S. GAAP.

 

For a further description of significant differences between Indian GAAP and U.S. GAAP, a reconciliation of net income and stockholders’ equity to U.S. GAAP and certain additional information required under U.S. GAAP, see notes 21 and 22 to our consolidated financial statements included herein.

 

Research and Development

 

We focus on strengthening our technological capabilities, with key priorities being technology platforms, embedded banking, cloud adoption and real time data analytics.

 

Critical Accounting Policies and Estimates

 

In order to understand our financial condition and the results of operations, it is important to understand our critical accounting policies and estimates and the extent to which we use judgments and estimates in applying those policies. Our accounting and reporting policies are in accordance with Indian GAAP and conform to standard accounting practices relevant to our products and services and the businesses in which we operate. Indian GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported income and expenses in the reported period. Accordingly, we use a significant amount of judgment and estimates based on assumptions for which the actual results are uncertain when we make the estimation. See also “Consolidated Financial Statements—Schedule 17—Significant Accounting Policies” included herein.

 

ICICI Bank Limited

 

Revenue recognition

 

Interest income is recognized in the profit and loss account as it accrues, except in the case of non-performing assets where it is recognized upon realization as per the income recognition and asset classification norms of the Reserve Bank of India. Income on discounted instruments is recognized over the tenure of the instrument on a constant yield basis. Dividend income is accounted on accrual basis when the right to receive the dividend is established. Commission received on guarantees and letters of credit and annual/renewal fee on credit cards, debit cards and prepaid cards are amortized over the contractual period of the fees. Fees paid/received for priority sector lending certificates is amortized on straight-line basis over the period of the certificate. All other fees are accounted for as and when they become due where the Bank is reasonably certain of ultimate collection.

 

200 

The revenue recognition involve uncertainties and are significantly affected by the assumptions used and judgments made for collectibility of the income. Changes in assumptions could significantly affect these estimates and the resulting recognition.

 

Accounting for Investments

 

ICICI Bank follows the trade date method of accounting for the purchase and sale of investments, except for Government of India and state government securities, for which the settlement date method of accounting is followed as per the Reserve Bank of India guidelines.

 

The Bank accounts for its investments in accordance with the guidelines on investment classification and valuation issued by the Reserve Bank of India. Investments are classified into the following categories: (a) held-to-maturity, (b) available-for-sale and (c) held-for-trading. Under each classification, we further categorize investments into (a) government securities, (b) other approved securities, (c) shares, (d) bonds and debentures, (e) subsidiaries and joint ventures and (f) others (commercial papers, certificate of deposits, mutual funds, pass through certificates, venture units, security receipts, etc.).

 

Investments that are held principally for resale within 90 days from the date of purchase are classified as held-for-trading securities. Investments which the Bank intends to hold until maturity are classified as held-to-maturity securities. Investments which are not classified in either of the above categories are classified under available-for-sale securities. Investments in the equity of subsidiaries/joint ventures are categorized as held-to-maturity or available for sale in accordance with the Reserve Bank of India guidelines.

 

Costs, including brokerage and commission pertaining to investments paid at the time of acquisition and broken period interest (the amount of interest from the previous interest payment date until the date of purchase of instruments) on debt instruments, are charged to the profit and loss account.

 

The Bank computes the market value of its securities, under the available-for-sale and held-for-trading categories, scrip-wise (that is, by individual securities) and the depreciation/appreciation on securities, other than those acquired by way of conversion of outstanding loans is aggregated for each category. Net appreciation in each category under each investment classification, if any, is ignored, as it is unrealized while net depreciation is provided. Depreciation on securities acquired by way of conversion of outstanding loan is fully provided. Non performing investments are identified based on the Reserve Bank of India guidelines.

 

Held-to-maturity securities are carried at their acquisition cost or at the amortized cost, if acquired at a premium over the face value. Any premium over the face value of the fixed rate and floating rate securities acquired is amortized over the remaining period to maturity on a constant yield basis and straight line basis respectively.

 

Available-for-sale and held-for-trading securities of the Bank are valued in accordance with the guidelines issued by the Reserve Bank of India. The Bank amortizes the premium, if any, over the face value of its fixed and floating rate investments in government securities classified as available-for-sale over the remaining period to maturity on a constant yield basis and straight line basis respectively. The market value of quoted investments is based on the closing quotes on recognized stock exchanges or prices declared by the Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association/Financial Benchmark India Private Limited, periodically.

 

201 

The Bank computes the market value of its unquoted government securities which are in the nature of statutory liquidity ratio securities included in the available-for-sale and held-for-trading categories in accordance with rates published by the Financial Benchmark India Private Limited.

 

The Bank computes the market value of unquoted non-government fixed income securities, including Pass Through Certificates, wherever linked to the yield-to-maturity rates, with a mark-up, reflecting associated credit risk, over the yield to maturity rates for government securities published by the Fixed Income Money Market and Derivatives Association. The sovereign foreign securities and non-INR India linked bonds are valued on the basis of prices published by the sovereign regulator or counterparty quotes.

 

Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost.

 

The units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund.

 

The Bank computes the market value of its unquoted equity shares at the break-up value, if the latest balance sheet is available. If such a balance sheet is not available, the unquoted equity shares are valued at Re. 1 in accordance with the Reserve Bank of India guidelines.

 

The units of Venture Capital Funds are valued at the net asset value declared by the Venture Capital Fund. If the latest balance sheet is not available continuously for more than 18 months, the units of Venture Capital Fund are valued at Rs. 1, in accordance with the Reserve Bank of India guidelines.

 

The Bank values the securities receipts at the net asset value provided by asset reconstruction companies. The Bank makes additional provisions on the security receipts based on the remaining period for the resolution period to end. The security receipts which are outstanding and not redeemed as at the end of the resolution period are treated as loss assets and are fully provided for.

 

The Bank assesses investments in subsidiaries for any other than temporary diminution in value and appropriate provisions are made.

 

Depreciation/provision on non-performing investments is made as per internal provisioning norms, subject to minimum provisioning requirements of the Reserve Bank of India.

 

Gain/loss on sale of investments is recognized in the profit and loss Account. Cost of investments is computed based on the First-In-First-Out method. The profit from sale of investment under held-to-maturity category, net of taxes and transfer to statutory reserve is transferred to “Capital Reserve” in accordance with the Reserve Bank of India guidelines.

 

The Bank undertakes short sale transactions in dated central government securities in accordance with Reserve Bank of India guidelines. The short positions are categorized under held-for-trading category and are marked to market. The mark-to-market loss is charged to profit and loss account and gain, if any, is ignored as per Reserve Bank of India guidelines.

 

202 

The Bank accounts for repurchase, reverse repurchase and transactions with Reserve Bank of India under Liquidity Adjustment Facility as borrowing and lending transactions in accordance with the Reserve Bank of India guidelines.

 

The valuation methodologies for investment involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values.

 

Provisions/Write-offs on Loans and Other Credit Facilities

 

Loans and advances are classified into performing and non-performing loans as per Reserve Bank of India guidelines. Under Reserve Bank of India guidelines, an asset is generally classified as non-performing if any amount of interest or principal remains overdue for more than 90 days, in respect of term loans. In respect of overdraft or cash credit, an asset is classified as non-performing if the account remains out of order for a period of 90 days and in respect of bills, if the account remains overdue for more than 90 days. Loans held at the overseas branches that are identified as impaired as per host country regulations, but which are standard as per the extant Reserve Bank of India guidelines, are classified as non-performing loans to the extent of the amount outstanding in the respective host country. Non-performing loans and advances are classified as standard, substandard, doubtful and loss assets based on number of days overdue. Interest on non-performing advances is transferred to an interest suspense account and not recognized in profit and loss account until received.

 

The Bank considers an account as restructured, where for economic or legal reasons relating to the borrower’s financial difficulty, the Bank grants concessions to the borrower, that the Bank would not otherwise consider. The moratorium granted to the borrowers based on Reserve Bank of India guidelines is not accounted as restructuring of loan. The Reserve Bank of India guidelines on ‘Resolution Framework for COVID-19-related Stress’ provide a prudential framework for resolution plan of certain loans. The borrowers where resolution plan was implemented under these guidelines are classified as standard restructured.

 

Provisions are generally made by the Bank on standard, substandard, doubtful and loss assets as per internal provisioning norms, subject to minimum provisioning requirements of the Reserve Bank of India. The Bank holds specific provisions against non-performing loans and a general provision against standard loans. The Bank also makes specific provision on certain performing loans as per the direction of the Reserve Bank of India. Loss assets and unsecured portions of doubtful assets are fully provided. For impaired loans held in overseas branches, which are performing as per Reserve Bank of India guidelines, provisions are made as per the host country regulations. For loans held in overseas branches, which are non-performing loans as per the Reserve Bank of India guidelines and as per host country regulations, provisions are made at the higher of the provisions required as per internal provisioning norms and host country regulations. In respect of borrowers classified as non-cooperative borrowers or willful defaulters, the Bank makes accelerated provisions as per Reserve Bank of India guidelines. The Bank held specific provisions for non-performing retail loans that are higher than the minimum regulatory requirements.

 

In respect of non-retail loans reported as fraud to the Reserve Bank of India, the entire amount, is provided for over a period not exceeding four quarters starting from the quarter in which fraud has been detected. In respect of non-retail loans where there has been a delay in reporting the fraud to the Reserve Bank of India or which are classified as loss accounts, the entire amount is provided immediately. In the case of fraud in retail accounts, the entire amount is provided immediately. In respect of borrowers classified as non-cooperative borrowers or willful defaulters, the Bank makes accelerated provisions as per Reserve Bank of India guidelines.

 

203 

The Bank makes provision on restructured loans subject to minimum requirements as per Reserve Bank of India guidelines. Provision due to diminution in the fair value of restructured/rescheduled loans and advances is made in accordance with the applicable Reserve Bank of India guidelines. Non-performing and restructured loans are upgraded to standard as per the extant Reserve Bank of India guidelines or host country regulations, as applicable. Banks are required to disclose the aggregate fund-based credit facilities of borrowers whose loans were restructured.

 

In terms of Reserve Bank of India guidelines, the non-performing advances are written-off in accordance with the Bank’s policy. Amounts recovered against bad debts written-off are recognized in the profit and loss account.

 

The Bank also creates general provisions on performing loans based on the guidelines issued by the Reserve Bank of India including provisions on loans to borrowers having unhedged foreign currency exposure, provisions on loans to specific borrowers in specific stressed sectors, provision on exposure to step-down subsidiaries of Indian companies and provision on incremental exposure to borrowers identified as per Reserve Bank of India’s large exposure framework. For performing loans in overseas branches, the general provision is made at higher of aggregate provision required as per host country regulations and the Reserve Bank of India requirement.

 

Additionally, the Bank creates provisions on individual country exposures including indirect country risk (other than for home country exposure). The countries are categorized into seven risk categories: insignificant, low, moderately low, moderate, moderately high, high and very high and provisioning is made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 25%. For exposures with a contractual maturity of less than 180 days, provision is required to be held at 25% of the rates applicable to exposures exceeding 180 days. The indirect exposure is reckoned at 50% of the exposure. If the Bank’s net funded exposure in respect of a country is less than 1% of its total assets, no provision is required for such country exposure.

 

The Bank makes additional provisions as per Reserve Bank of India guidelines for the cases where viable resolution plan has not been implemented within the timelines prescribed by the Reserve Bank of India, from the date of default. These additional provisions are written-back on satisfying the conditions for reversal as per Reserve Bank of India guidelines.

 

The Bank, on prudent basis, has made contingency provision on loan portfolio, including borrowers who had taken moratorium at any time during fiscal 2021 under the extant Reserve Bank of India guidelines related to COVID-19 regulatory package. The Bank also makes additional contingency provision on certain standard assets. The contingency provision is included in ‘Other Liabilities and Provisions’.

 

The Bank has a Board approved policy for making floating provision for the year which is in addition to the specific and general provisions made by the Bank. The floating provision can only be utilized, with the approval of Board and the Reserve Bank of India, in case of contingencies which do not arise in the normal course of business and are exceptional and non-recurring in nature and for making specific provision for impaired loans as per the requirement of extant Reserve Bank of India guidelines or any regulatory guidance/instructions. The floating provision is netted-off from loans.

 

The provisions on loans involve uncertainties and are significantly affected by the assumptions used and judgments made for provisions on non-performing loans and on performing loans and other credit exposures. Changes in assumptions could significantly affect these estimates and the resulting provisions.

 

204 

ICICI Prudential Life Insurance Company

 

Premium for non-linked policies is recognized as income (net of goods and service tax) when due from policyholders. For unit-linked business, premium is recognized as income when the associated units are created. Premium on lapsed policies is recognized as income when such policies are reinstated.

 

Reinsurance premium ceded is accounted in accordance with the terms and conditions of the relevant treaties with the reinsurer. Profit commission on reinsurance ceded is netted off against premium ceded on reinsurance.

 

Death and rider claims are accounted for on receipt of intimation. Survival, maturity and annuity benefits are accounted when due. Withdrawals and surrenders under non-linked policies are accounted on the receipt of intimation and for unit-linked policies are accounted when the associated units are cancelled. Reinsurance claims are accounted for in the period in which the claim is intimated.

 

Income from unit-linked policies, which includes fund management charges, policy administration charges, mortality charges and other charges, if any, are recovered from the unit-linked funds in accordance with terms and conditions of policies issued and are recognized when due.

 

Acquisition costs are costs that vary with and are primarily related to acquisition of insurance contracts. It consists of costs like commission, stamp duty, policy issuance, employee cost and other related costs pertaining to the acquisition of insurance contracts. These costs are expensed in the period in which they are incurred.

 

The actuarial liabilities, for all in-force policies and policies where premiums are discontinued but a liability exists as at the valuation date, are calculated in accordance with the accepted actuarial practice, requirements of Insurance Act, 1938, as amended from time to time, regulations notified by the Insurance Regulatory and Development Authority of India, relevant Guidance notes and Actuarial Practice Standards of the Institute of Actuaries of India. The unit liability in respect of linked business is the value of the units standing to the credit of policyholders, using the net asset value prevailing at the valuation date.

 

The actuarial liability in respect of both participating and non-participating policies is calculated using the gross premium method, using assumptions for interest, mortality, morbidity, expenses and inflation, and in the case of participating policies, future bonuses together with allowance for taxation and allocation of profits to shareholders. These assumptions are determined as prudent estimates at the date of valuation including allowances for possible adverse deviations.

 

The Funds for Future Appropriations, in the participating segment represents the surplus, which is not allocated to policyholders or shareholders as at the Balance Sheet date.

 

Investments are made and accounted for in accordance with the Insurance Act, 1938, Insurance Regulatory and Development Authority of India (Investment) Regulations, 2016, Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002, Investments – Master circular, Investment Policy of the Company and various other circulars/notifications issued by the Insurance Regulatory and Development Authority of India in this context from time to time.

 

Unclaimed amount of policyholders’ liability is determined on the basis of net asset value of the units outstanding as at the valuation date. Income on unclaimed amount of policyholders is accreted to the unclaimed fund and is accounted for on an accrual basis, net of fund management charges.

 

Borrowing costs are charged to the Profit and Loss Account in the period in which these are incurred.

 

205 

Fair Value Measurements

 

We determine the fair values of our financial instruments based on the fair value hierarchy established in ASC Topic 820. The standard describes three levels of inputs that may be used to measure fair value.

 

The valuation of Level 1 instruments is based upon the unadjusted quoted prices of identical instruments traded in active markets.

 

The valuation of Level 2 instruments is based upon the quoted prices for similar instruments in active markets, the quoted prices for identical or similar instruments in markets that are not active, prices quoted by market participants and prices derived from valuation models which use significant inputs that are observable in active markets. Inputs used include interest rates, yield curves, volatilities and credit spreads, which are available from public sources such as Reuters, Bloomberg, Foreign Exchange Dealers Association of India, Financial Benchmark India Private Limited and the Fixed Income Money Markets and Derivatives Association of India.

 

The valuation of Level 3 instruments is based on valuation techniques or models which use significant market unobservable inputs or assumptions. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable or when the determination of the fair value requires significant management judgment or estimation.

 

The valuation methodologies adopted by us for valuing our investments and derivatives portfolio are summarized below. A substantial portion of the portfolio is valued based on the unadjusted quoted or traded prices or based on models using market observable inputs such as interest rates, yield curves, volatilities and credit spreads available from public sources like Fixed Income Money Markets and Derivatives Association of India, Foreign Exchange Dealers Association of India, Financial Benchmark India Private Limited Reuters, Bloomberg and stock exchanges.

 

 The rupee denominated fixed income portfolio, which includes all rupee investments in government securities and corporate bonds, is valued based on guidelines for market participants established by the Fixed Income Money Market and Derivatives Association. The Fixed Income Money Market and Derivatives Association is an association of scheduled commercial banks, public financial institutions, primary dealers and insurance companies and is a voluntary market body for bonds, derivatives and money markets in India. The international investments portfolio is generally valued on the basis of quoted prices. In certain markets, due to illiquidity, we use alternate valuation methodologies based on our own assumptions and estimates of the fair values. 

 

A substantial part of the derivatives portfolio is valued using market observable inputs like swap rates, foreign exchange rates, volatilities and forward rates. The valuation of derivatives is carried out primarily using the market quoted swap rates and foreign exchange rates. Certain structured derivatives are valued based on counterparty quotes. The exposure regarding derivative transactions is computed and is marked against the credit limits approved for the respective counterparties.

 

 We also hold investments and derivatives that have been valued based on unobservable inputs or that involve significant assumptions made by the management in arriving at their fair values. Such instruments are classified under Level 3 as per the classification defined in FASB ASC Topic 820 “Fair Value Measurements and Disclosures”.

 

206 

A description of the valuation methodologies of Level 3 investments under U.S. GAAP

 

Our total investment in Level 3 instruments amounted to Rs. 111.8 billion at year-end fiscal 2023. Out of the total Level 3 investments, investments amounting to Rs. 108.9 billion were India-linked and investments amounting to Rs. 2.9 billion were non-India linked. India-linked investments consisted of pass through certificates of Rs. 98.7 billion, corporate bonds of Rs. 2.1 billion, equity shares of Rs. 7.9 billion and other securities of Rs. 0.2 billion. Non-India linked investments consisted of mortgage backed securities of Rs. 2.8 billion and equity shares of Rs. 0.1 billion at year-end fiscal 2023.

 

The valuation of Indian pass through certificates is dependent on the estimated cash flows that the underlying trust would pay out. The underlying trust makes assumptions with regards to various variables to arrive at the estimated cash flows. The cash flows for pass through certificates are discounted at the yield-to-maturity rates and credit spreads published by Financial Benchmark India Private Limited and Fixed Income Money Market and Derivatives Association on month ends.

 

Bonds that have been identified as illiquid and valued on the basis of a valuation model are classified as Level 3 instruments, only if the input used to value those securities is collected from unobservable market data or if the bonds were valued after making adjustment to the market observable data. The investment in bonds of Rs. 2.1 billion were valued at the amortized cost net of impairment or using significant management estimates and assumptions or based on market value of the underlying collateral.

 

Due to illiquidity in the asset backed and mortgage backed security markets, a substantial part of these securities are classified as Level 3 and valuation models are used to value these securities.

 

Our Canadian subsidiary holds retained interest, largely representing the excess spread of mortgage interest over the rate of return on the mortgaged backed securities, which has been recorded as available-for-sale securities in the balance sheet at fair value of Rs. 2.8 billion determined using an internal model.

 

Non-India linked equity shares of Rs. 0.1 billion were valued by applying discount to the market price of same company.

 

The methodologies we use for validating the valuation model of products which are valued with reference to market observable inputs include comparing the outputs of our models with counterparty quotes, in comparison with pricing from third party pricing tools, replicating the valuation methodology used in the model or other methods used on a case-by-case basis. The valuation is also carried out under various scenarios and are checked for consistency. However, for products where there are no reliable market prices or market observable inputs available, valuation is carried out using models developed using alternate approaches and incorporating proxies wherever applicable. The independent validation of valuation models is performed by an entity/unit independent of the risk management group.

 

Recently Issued Accounting Pronouncements under U.S. GAAP

 

Long-Duration Insurance Contracts

 

In August 2018, the FASB issued Accounting Standard Update No. 2018-12, Financial Services—Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts, which changes the existing recognition, measurement, presentation and disclosures for long-duration contracts issued by an insurance company. The guidance improves the timeliness of recognizing changes in the liability for future policy benefits and prescribes the rate used to discount future cash flows for long-duration insurance contracts. It simplifies the accounting for certain market-based options or guarantees associated with deposit contracts and the amortization of deferred acquisition costs. The Guidance introduces additional quantitative and qualitative disclosures. The Bank has insurance subsidiary/affiliate that issue long-duration insurance contracts that will be impacted by the requirements of ASU 2018-12.

 

207 

The effective date of ASU No. 2018-12 was deferred for all insurance entities by Accounting Standard Update No. 2019-09, Finance Services—Insurance: Effective Date and by Accounting Standard Update No. 2020-11, Financial Services—Insurance: Effective Date and Early Application. The Accounting Standard Update will be applicable to the Group from fiscal 2024.

 

Troubled debt restructurings and vintage disclosures

 

In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures which eliminates the accounting guidance for the Troubled debt restructurings carried out by creditors, while enhancing the disclosure requirements for certain loan refinancings and restructurings undertaken by the creditors when a borrower is experiencing financial difficulty. Further, this update requires entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost.

 

This update would be applicable from fiscal year beginning after December 15, 2022. Accordingly, for this Accounting Standard Update will be applicable to the Group from fiscal 2024 and this amendment is not likely to have any material impact on the transition date.

 

Convergence of Indian Accounting Standards with International Financial Reporting Standards

 

In 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), converged with International Financial Reporting Standards, for scheduled commercial banks, insurance companies and non-banking financial companies. However, currently the implementation of Ind AS for banks and insurance companies has been deferred until further notice pending the consideration of some recommended legislative amendments by the Government of India. We are in an advanced stage of preparedness for implementation of Ind AS, as and when these are made applicable to the Indian banks. Further, there may be regulatory guidelines and clarifications in some critical areas of Ind AS application, which we will need to suitably incorporate in our implementation project as and when those are issued.

 

Financial statements prepared under Ind AS may diverge significantly from the financial statements and other financial information included or incorporated by reference in this annual report. The major areas of differences include classification and mark-to-market accounting of financial assets, impairment of financial assets and allowance for expected credit losses, accounting of loan processing fees and costs, amortization of premium or discount on purchase of financial assets, consolidation accounting and deferred taxes.

 

Separately, during fiscal 2022, Reserve Bank of India, issued a discussion paper on “Review of prudential norms on classification, valuation and operations of investment portfolio of commercial banks”, which is broadly based on the principles of the International Financial Reporting Standard 9. Further, during fiscal 2023, Reserve Bank of India, through its discussion paper on “Introduction of Expected Credit Loss framework for provisioning by banks” has proposed to adopt an expected credit loss framework based on the approach used in International Financial Reporting Standard 9, supplemented by regulatory backstops wherever necessary. The major areas of differences include classification and mark-to-market accounting of financial assets, impairment of financial assets and allowance for expected credit losses, accounting of loan processing fees and costs, and amortization of premium or discount on purchase of financial assets.

 

208 

MANAGEMENT

 

Directors and Executive Officers

 

Our Board of Directors is responsible for the management of our business. Our organizational documents provide for a minimum of three directors and a maximum of 15 directors, excluding the Government Director and the Debenture Director (defined below), if any. We may, subject to the provisions of our organizational documents and the Companies Act, 2013 change the maximum number of directors by a special resolution, subject to approval by our shareholders. Approval of a special resolution requires that the votes cast by shareholders in favor of the resolution are not less than three times the number of the votes, if any, cast against the resolution. In addition, under the Banking Regulation Act, 1949, the Reserve Bank of India may require us to convene a meeting of our shareholders for the purposes of appointing new directors to our Board of Directors.

 

The Banking Regulation Act requires that at least 51% of our directors should have special knowledge or practical experience in banking and areas relevant to banking including accountancy, agriculture and rural economy, co-operation, economics, finance, law, small scale industry, information technology, payment and settlement systems, human resources, risk management and business management. All our directors possess special knowledge in more than one area specified in the Banking Regulation Act and applicable regulations. The appointment of the chairman and executive directors requires the approval of the Reserve Bank of India, in addition to the approval of our shareholders that is generally required for the appointment of all directors (other than the Government Director and the Debenture Director, if any). In classifying our directors as independent, we have relied on the declaration of independence provided by the independent directors as prescribed under the Companies Act and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended from time to time, which were also placed before the Board at its meeting held on April 22, 2023. The Companies Act, 2013 excludes the Government Director from the definition of independent director. Our directors are also subject to ‘fit and proper’ criteria as prescribed by the Reserve Bank of India to be considered while appointing persons as directors of banking companies. Our directors (other than the Government Director) are required to make declarations confirming their ongoing compliance of the ‘fit and proper’ criteria. Our Board Governance, Remuneration & Nomination Committee and Board of Directors have reviewed the declarations received from all the existing directors in this regard and determined that all our directors satisfy the ‘fit and proper’ criteria and can continue on the Board. Further, pursuant to the Reserve Bank of India guidelines, a person is eligible for appointment as non-executive director, if he or she is between 35 and 75 years of age. After attaining the age of 75 years, no person can continue in this position. Our organizational documents also provide that we may execute trust deeds in respect of our debentures under which the trustee or trustees may appoint a director, known as the Debenture Director. The debenture director is not subject to retirement by rotation and may only be removed as provided in the relevant trust deed. Currently, we do not have a Debenture Director on our Board of Directors.

 

Of our 11 directors as at June 30, 2023, three directors are in our whole-time employment (one Managing Director & CEO, and two Executive Directors) and the remaining eight directors are independent directors. The eight independent directors include retired public servants, corporate executives, advisors and chartered accountants. Of the eight independent directors, three have specialized knowledge in respect of agriculture and rural economy and three in small scale industry.

 

The Companies Act provides that an independent director shall not hold office for more than two consecutive terms of up to five years each provided that the director is re-appointed by passing a special resolution on completion of the first term. In line with the Reserve Bank of India guidelines, the total tenure of non-executive director, continuously or otherwise, on the board of a bank, shall not exceed eight years. After completing eight years on the board of a bank the person, may be considered for re-appointment only after a minimum gap of three years. The Companies Act provides that in respect of banking companies, the provisions of the Companies Act shall apply except in so far as they are inconsistent with the provisions of the Banking Regulation Act.

 

209 

Pursuant to the provisions of the Companies Act, at least two-thirds of the total number of our non-independent directors are subject to retirement by rotation. The Government Director and the debenture director are not subject to retirement by rotation as per our organizational documents. One-third of the directors liable to retire by rotation must retire from office at each annual general meeting of shareholders. A retiring director is eligible for re-election.

 

Mr. Girish Chandra Chaturvedi was appointed as an independent director from July 1, 2018 to June 30, 2021. Subsequently, he was appointed as non-executive (part-time) Chairman effective July 17, 2018 to June 30, 2021. Mr. Girish Chandra Chaturvedi was re-appointed for the second term as an independent director and as non-executive (part-time) Chairman for a period of three years effective from July 1, 2021 to June 30, 2024.

 

Mr. Sandeep Bakhshi was appointed as a wholetime director and Chief Operating Officer (Designate) by the Board of Directors at its meeting held on June 18, 2018. The Reserve Bank of India and shareholders approved his appointment as a wholetime director effective from July 31, 2018. The Board of Directors at its meeting held on October 4, 2018 approved the appointment of Mr. Sandeep Bakhshi as Managing Director and Chief Executive Officer for a period of five years, subject to the approval of Reserve Bank of India and shareholders. The Reserve Bank of India on October 15, 2018 initially approved his appointment as Managing Director and Chief Executive Officer for a period of three years effective from October 15, 2018 and subsequently on August 24, 2021 approved his re-appointment from October 15, 2021 till October 3, 2023. The shareholders at the annual general meeting held on August 9, 2019 have approved the appointment of Mr. Sandeep Bakhshi as Managing Director and Chief Executive Officer of the Bank for a period effective from October 15, 2018 to October 3, 2023. The Board of Directors of the Bank at its meeting held on October 22, 2022 approved the re-appointment of Mr. Sandeep Bakhshi as Managing Director and Chief Executive Officer of the Bank for a period of three years with effect from October 4, 2023 to October 3, 2026, subject to approval of the Reserve Bank of India and shareholders of the Bank. The approval of Reserve Bank of India is awaited while the approval of the shareholders would be sought at the Annual General Meeting scheduled on August 30, 2023.

 

Mr. Anup Bagchi who was appointed as an Executive Director on the Board of the Bank from February 1, 2017, resigned from the Board with effect from the close of the business hours on April 30, 2023.

 

Mr. Sandeep Batra was appointed as a wholetime director (designated as an Executive Director) by the Board of Directors at its meeting held on May 6, 2019 for a period of five years effective from May 7, 2019 or the date of approval of his appointment by the Reserve Bank of India, whichever is later. The shareholders at the Annual General Meeting held on August 9, 2019 approved the appointment of Mr. Sandeep Batra as a wholetime director (designated as an Executive Director) for a period of five years effective from May 7, 2019 or the date of approval from the Reserve Bank of India, whichever is later. In line with a Reserve Bank of India letter dated October 30, 2019, the Board of Directors at its meeting held on September 16, 2020 approved the filing of a fresh application to the Reserve Bank of India for the purpose of approval of appointment of Mr. Sandeep Batra as a wholetime director (designated as Executive Director) of the Bank, for a period of five years or date of retirement, whichever is earlier, effective from September 17, 2020 or the date of approval of appointment by Reserve Bank of India, whichever is later. The Reserve Bank of India has approved the appointment of Mr. Sandeep Batra as an Executive Director of the Bank for a period of three years from the date of his taking charge as an Executive Director. The Board of Directors through a circular resolution dated December 23, 2020 recorded December 23, 2020 as the effective date of appointment and taking charge by Mr. Sandeep Batra as a wholetime director (designated as an Executive Director) of the Bank. The Board of Directors of the Bank at its meeting held on May 28, 2023 approved the re-appointment of Mr. Sandeep Batra as Executive Director of the Bank for a further period of two years with effect from December 23, 2023 to December 22, 2025, subject to the approval of Reserve Bank of India. This renewed term of two years is within the five years term as previously approved by the shareholders.

 

210 

The Board of Directors at its meeting held on April 23, 2022 approved the appointment of Mr. Rakesh Jha as an additional director and wholetime director (designated as Executive Director) of the Bank for a period of five years effective from May 1, 2022 or the date of approval of his appointment by the Reserve Bank of India, whichever is later. The shareholders at the Annual General Meeting held on August 30, 2022 approved the appointment of Mr. Rakesh Jha as a Director and Wholetime Director (designated as Executive Director) for a period of five years effective May 1, 2022 or the date of approval of his appointment by the Reserve Bank of India, whichever is later. The Reserve Bank of India vide its letter dated September 2, 2022 has communicated its approval for the appointment of Mr. Rakesh Jha as an Executive Director of the Bank for a period of three years from the date of its approval i.e. September 2, 2022.

 

The Board of Directors of the Bank at its meeting held on June 28, 2022 and the shareholders at the Annual General Meeting held on August 30, 2022 approved the re-appointment of the following Directors:

 

·Ms. Neelam Dhawan as an independent director of the Bank for a second term commencing from January 12, 2023 to January 11, 2026;

·Mr. Uday Chitale as an independent director of the Bank for a second term commencing from January 17, 2023 to October 19, 2024;

·Mr. Radhakrishnan Nair as an independent director of the Bank for a second term commencing from May 2, 2023 to May 1, 2026.

 

The Board of Directors of the Bank at its meeting held on May 28, 2023 approved the re-appointment of the following independent directors, subject to the approval of the shareholders:

 

·Mr. Hari Mundra as an independent director of the Bank for a second term commencing from October 26, 2023 to October 25, 2024;

·Mr. B. Sriram as an independent director of the Bank for a second term commencing from January 14, 2024 to January 13, 2027;

·Mr. S. Madhavan as an independent director of the Bank for a second term commencing from April 14, 2024 to April 13, 2027.

 

Our Board had the following members at June 30, 2023:

 

Name,
designation and profession 

Age

Date of first Appointment

Particulars of other Directorship(s) at June 30, 2023 

Mr. Girish Chandra Chaturvedi

Non-Executive Independent

Director 

Profession: Advisor

70

July 1, 2018 

(appointed as part-time Chairman effective July 17, 2018)

 

Chairperson 

National Stock Exchange of India Limited

 

   

 

211 

Name,
designation and profession

Age

Date of first Appointment

Particulars of other Directorship(s) at June 30, 2023

Mr. Uday Chitale

Non-Executive Independent Director
Profession: Advisor

73 January 17, 2018

Director

ICICI Lombard General Insurance Company Limited

Indian Council for Dispute Resolution

       

Ms. Neelam Dhawan

Non-Executive Independent Director
Profession: Advisor

63 January 12, 2018

Chairperson

Capillary Technologies India Limited

 

Director

Yatra Online Limited

Yatra Online Inc

Capita PLC

Fractal Analytics Private Limited

Nudge Lifeskills Foundation

       

Mr. Subramanian Madhavan

Non-Executive Independent Director
Profession: Advisor

66 April 14, 2019

Director

Transport Corporation of India Limited

HCL Technologies Limited

Procter & Gamble Health Limited

CBIX Technology Solutions Private Limited

Shopkhoj Content Private Limited

Lifestyle International Private Limited

Sterlite Technologies Limited

       

Mr. Hari L. Mundra

Non-Executive Independent Director
Profession: Advisor

73 October 26, 2018

Director

Tata Autocomp Systems Limited

  

 

 

 

212 

Name,
designation and profession

Age

Date of first Appointment

Particulars of other Directorship(s) at June 30, 2023

Mr. Radhakrishnan Nair

Non-Executive Independent Director
Profession: Advisor

68 May 2, 2018

Director

Axis Mutual Fund Trustee Limited

ICICI Securities Primary Dealership Limited

ICICI Prudential Life Insurance Company Limited

Geojit Financial Services Limited

Geojit Credits Private Limited

Brickwork Ratings India Private Limited

Inditrade Capital Limited

 

Independent Member

Kerala Infrastructure Investment Fund Board

       

Mr. Balasubramanyam Sriram

Non-Executive Independent Director

Profession: Advisor

64 January 14, 2019

Director

TVS Credit Services Limited

Nippon Life India Asset Management Limited

IndiaIdeas Com Limited

TVS Supply Chain Solutions Limited

TVS SCS Singapore Pte Limited

National Bank for Financing Infrastructure and Development (NaBFID)

TVS Motor Company Limited

Dreamplug Technologies Private Limited

   

 

213 

Name,
designation and profession

Age

Date of first Appointment

Particulars of other Directorship(s) at June 30, 2023

Ms. Vibha Paul Rishi

Non-Executive Independent Director

Profession: Company Director

63

January 23, 2022

Director

Tata Chemicals Limited

Asian Paints Limited

ICICI Prudential Life Insurance Company Limited

Pratham Education Foundation

Tata Chemicals North America Inc., USA

TCE Group Limited, UK

Valley Holdings Inc., USA

Gusiute Holdings (UK) Limited, UK

Piramal Pharma Limited

       

Mr. Sandeep Bakhshi

Managing Director and CEO
Profession: Company Executive

63 October 15, 2018 None
       

Mr. Sandeep Batra
Executive Director
Profession: Company Executive

57 December 23, 2020

Chairperson

ICICI Venture Funds Management Company Limited

ICICI Prudential Asset Management Company Limited

 

Director

ICICI Prudential Life Insurance Company Limited

ICICI Lombard General Insurance Company Limited

       

Mr. Rakesh Jha

Executive Director
Profession: Company Executive

51 September 2, 2022

Director

ICICI Venture Funds Management Company Limited

ICICI Lombard General Insurance Company Limited

ICICI Securities Limited

ICICI Home Finance Company Limited

Mastercard Asia/ Pacific Pte. Ltd (Director – Mastercard Asia Pacific Advisory Board)

 

 

214 

 

 

Our executive officers as at March 31, 2023, who received executive remuneration in fiscal 2023, were as follows:

 

Name

Age

Designation and Responsibilities

Years of Work Experience

Total remuneration in Fiscal 2023 (in Rupees) (1)

Bonus Paid in Fiscal 2023 (in Rupees) (2)

Stock Options Granted during Fiscal 2022

Stock Options Granted during Fiscal

2023

Total Stock Options
Granted
through
March 31,
2023

Total Stock Options Outstanding at March 31, 2023(3)

Shareholding
at March 31,
2023(4)

Mr. Sandeep Bakhshi 63 Managing Director and CEO 40 74,369,260 21,350,000 394,850 317,800 9,695,100 6,459,400 275,000

Mr. Anup Bagchi

52 Executive Director 31 67,875,485 18,650,000 305,350 249,100 7,318,375 4,096,200 ..
Mr. Sandeep Batra 57 Executive Director 35 66,696,291 18,650,000 305,350 249,100 4,894,500 3,695,500 148,000
Mr. Rakesh Jha(5) 51 Executive Director 27 52,701,843 13,908,217 305,350 249,100 6,073,825 4,101,250 65,000
Mr. Anindya Banerjee(6) 47 Group Chief Financial Officer 25 29,617,634 6,102,216 90,600 89,200 2,638,800 1,743,900 152,500

  

(1)The remuneration for the Managing Director and Chief Executive Officer and Executive Directors for fiscal 2022 was approved by the Reserve Bank of India during fiscal 2023. Hence, remuneration for fiscal 2023 include arrear payments (wherever applicable) pertaining to fiscal 2022. The above includes salary, other benefits and ICICI Bank’s contribution to provident and gratuity funds paid for fiscal 2023.

(2)Represents bonus amounts paid during fiscal 2023. It includes the non-deferred portion of the bonus pertaining to fiscal 2022 and the amount paid from the deferred portion of the bonus approved in earlier years. For the Managing Director and Chief Executive Officer and Executive Directors, the bonus is paid after approval of the Reserve Bank of India. The amount of bonus is proportionate to the period of employment in the Bank during fiscal 2023.

(3)Each stock option, once exercised, would be equivalent to one equity share of the Bank. See also “—Compensation and Benefits to Directors and Officers—Employee Stock Option Scheme” for a description of the other terms of these stock options.

(4)Executive officers and Directors (including non-executive directors) as a group held 0.01% of the Bank’s equity shares at March 31, 2023.

(5)Mr. Rakesh Jha was appointed as Executive Director effective September 2, 2022. The above remuneration is his full year salary.

(6)Mr. Anindya Banerjee was appointed as the Group Chief Financial Officer of the Bank with effect from May 1, 2022. The above remuneration is his full year salary.

 

The profile of our non-executive directors as at June 30, 2023 was as follows:

 

Mr. Girish Chandra Chaturvedi has masters’ degrees in physics and social policy in developing countries from the University of Allahabad and the London School of Economics respectively. He joined the Indian Administrative Service in 1977, serving at various levels across a number of sectors, including banking, insurance, pension, health, family welfare and petroleum and natural gas. He also served as a government nominee director on the boards of several banks, insurance companies and financial institutions. He retired in 2013 as the secretary of the Ministry of Petroleum and Natural Gas. Currently, he is also the Chairman of the National Stock Exchange of India Limited.

 

215 

Mr. Uday Chitale is a chartered accountant with professional standing of over 45 years and was a senior partner of M. P. Chitale & Co, chartered accountants. He is also active in the field of arbitration and conciliation of commercial disputes. He has served on the boards of several companies and was a board member of the Bank from 1997-2005 as well. He served on the global board of directors and as Vice President-Asia Pacific of the worldwide association of accounting firms DFK International. He is also a member of the Board of Governors of National Institute of Securities Markets promoted by Securities and Exchange Board of India.

 

Ms. Neelam Dhawan is an economics graduate from St Stephen’s College, Delhi University and has a master in business administration degree from the Faculty of Management Studies, Delhi University. Ms. Dhawan has over 38 years of experience in the information technology industry. Starting from 1982, she has held various positions across Hindustan Computers Limited, IBM, Microsoft and Hewlett Packard Enterprise. She has been Managing Director and leader of the country businesses for 11 years for Microsoft and later Hewlett Packard in India. Her last executive assignment was in Hewlett Packard Enterprise that of as Vice President for Global Industries, Strategic Alliances, and Inside Sales for Asia Pacific and Japan.

 

Mr. Subramanian Madhavan is a chartered accountant and holds a post graduate diploma in business management from the Indian Institute of Management, Ahmedabad. He started his career with Hindustan Unilever Limited. He had thereafter established a highly successful tax practice and served large Indian and multinational clients. He was then a senior partner and Executive Director in PricewaterhouseCoopers Private Limited. He has around 38 years of experience in accountancy, economics, finance, law, information technology, human resources, risk management, business management and banking.

 

Mr. Hari L. Mundra has a bachelor of arts degree and a post graduate degree in business management from the Indian Institute of Management, Ahmedabad. He began his career in 1971 in Hindustan Unilever Limited and was the youngest member of its board as the Vice President and Executive Director in charge of exports at the time he left in 1995. He subsequently held leadership positions in major Indian industrial conglomerates, in areas including pharmaceuticals and healthcare, and petrochemicals. He has 50 years of extensive industrial experience, both in India and Indonesia.

 

Mr. Radhakrishnan Nair holds degrees in science, securities laws, management and law. He has around 40 years of experience in banking industry and in the field of securities and insurance regulation. He started his banking career with Corporation Bank and also served as the Managing Director of Corporation Bank Securities Limited. He was Executive Director at Securities and Exchange Board of India from 2005 to 2010 and Member (Finance and Investment) in the Insurance Regulatory and Development Authority of India from 2010 to 2015. He has been a member of various committees of International Organization of Securities Commissions and the International Association of Insurance Supervisors.

 

Mr. Balasubramanyam Sriram is a Certificated Associate of the Indian Institute of Banking Finance (formerly known as The Indian Institute of Bankers) and holds diplomas in international law and diplomacy from the Indian Academy of International Law & Diplomacy and management from the All India Management Association. He has bachelors and masters degrees in science (physics) from St. Stephen’s College, Delhi University. Mr. Sriram worked with State Bank of India for about 37 years. Mr. Sriram was Managing Director of State Bank of Bikaner & Jaipur from 2013 to 2014, Managing Director of State Bank of India from 2014 to 2018 and Managing Director & Chief Executive Officer of IDBI Bank Limited from June-September 2018. He is a part time member of the Insolvency and Bankruptcy Board of India.

 

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Ms. Vibha Paul Rishi is an economics graduate from Lady Shri Ram College, Delhi University and also has a masters in business administration with a specialisation in marketing from the Faculty of Management Studies, University of Delhi. She has worked at senior positions in branding, strategy, innovation and human capital around the world. She started her career with the Tata Group and was part of the core team for launching Titan watches. She was thereafter associated with PepsiCo for 17 years in leadership roles in the areas of marketing and innovation in India, U.S. and UK. She was one of the founding team members of PepsiCo when it started operations in India. Ms. Rishi serves on the boards and board committees of several reputed companies.

 

The profile of our executive officers as at June 30, 2023 was as follows:

 

Mr. Sandeep Bakhshi is an engineer and has a masters’ degree in business administration. Mr. Sandeep Bakhshi joined ICICI Limited in the year 1986. Over the years he has worked in various assignments at ICICI Limited, ICICI Lombard General Insurance Company Limited, ICICI Bank Limited and ICICI Prudential Life Insurance Company Limited. He joined ICICI Bank Limited on June 19, 2018 as Chief Operating Officer (Designate) and was appointed as Managing Director and Chief Executive Officer of ICICI Bank Limited effective October 15, 2018.

 

Mr. Sandeep Batra is a chartered accountant and a company secretary by qualification. He joined as Chief Financial Officer of ICICI Prudential Life Insurance Company Limited in the year 2000 and subsequently has held positions as Group Compliance Officer of ICICI Bank Limited, Executive Director of ICICI Prudential Life Insurance Company Limited and President at ICICI Bank Limited. He was appointed as Executive Director of ICICI Bank Limited effective December 23, 2020 and is currently responsible for technology, credit, corporate communications, data science and analytics, finance, operations and customer service, legal, human resources and secretarial functions and has administrative oversight over risk management, internal audit and compliance functions. He also serves on the board of ICICI Prudential Life Insurance, ICICI Lombard General Insurance, ICICI Prudential Asset Management and ICICI Venture.

 

Mr. Rakesh Jha is an engineering graduate from the Indian Institute of Technology at Delhi and a post-graduate in management from the Indian Institute of Management, Lucknow. He joined ICICI in 1996 and has worked in various areas. He was the Group Chief Financial Officer in his previous role. He was appointed as an Executive Director on the Board of ICICI Bank with effect from September 2, 2022. He is responsible for the retail, small enterprises and corporate banking businesses of the Bank. He also serves on the board of ICICI Lombard General Insurance Company Limited, ICICI Securities Limited, ICICI Home Finance Company Limited and ICICI Venture.

 

Mr. Anindya Banerjee is a chartered accountant. He joined ICICI Group in 1998 and initially worked in the area of corporate banking before moving to planning and strategy function in the corporate office. He was appointed as the Group Chief Financial Officer of the Bank with effect from May 1, 2022. His current responsibilities include financial reporting, planning and strategy and asset-liability management.

 

Corporate Governance

 

Our corporate governance policies recognize the accountability of the Board and the importance of making the Board transparent to all our constituents, including employees, customers, investors and the regulatory authorities, and for demonstrating that our shareholders are the ultimate beneficiaries of our economic activities.

 

Our corporate governance framework is based on an effective majority independent Board, the separation of the Board’s supervisory role from the executive management and the constitution of Board committees, generally comprising a majority of independent directors and most of the Committees being chaired by independent directors, to oversee critical areas and functions of executive management.

 

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Our corporate governance philosophy encompasses regulatory and legal requirements, such as the compliance with the provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, aimed at a high level of business ethics, effective supervision and enhancement of value for all stakeholders.

Securities and Exchange Board of India through its notification dated June 14, 2023 (published in e-gazette on June 15, 2023) issued Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2023 amending the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The amendments are effective from July 14, 2023, except few, which were effective from June 15, 2023. Through the same notification; Securities and Exchange Board of India has also amended Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 by prescribing the materiality thresholds for determination of materiality of events/ information for disclosure to the stock exchange(s).

 

Our Board’s role, functions, responsibility and accountability are clearly defined. In addition to its primary role of monitoring corporate performance, the functions of our Board include:

 

·approving corporate philosophy and mission;

·participating in the formulation of strategic and business plans;

·reviewing and approving financial plans and budgets;

·monitoring corporate performance against strategic and business plans, including overseeing operations;

·ensuring ethical behavior and compliance with laws and regulations;

·reviewing and approving borrowing limits;

·formulating exposure limits; and

·keeping shareholders informed regarding plans, strategies and performance.

 

To enable our Board of Directors to discharge these responsibilities effectively, executive management provides detailed reports on its performance to the Board on a quarterly basis.

 

Our Board functions either as a full board or through various committees constituted to oversee specific operational areas. These Board committees meet regularly. The quorum of the Board committees was increased from at least two members to at least three members with effect from June 30, 2019, to transact business at any Board Committee meeting and in case where the Committee comprises of two members only or where two members are participating, then any Independent Director may attend the meeting to fulfil the requirement of three members. The constitution and main functions of the various committees are given below.

 

Audit Committee

 

On the date of filing of this annual report, the Audit Committee comprises of three independent directors - Mr. Uday Chitale, Mr. Subramanian Madhavan and Mr. Radhakrishnan Nair. Mr. Uday Chitale is the Chairman of the Committee. Mr. Uday Chitale, Mr. Subramanian Madhavan and Mr. Radhakrishnan Nair qualify as Audit Committee financial experts.

 

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, review of the quarterly and annual financial statements before submission to the Board, review of management’s discussion and analysis, recommendation of appointment, terms of appointment, remuneration and removal of central and branch statutory auditors and chief internal auditor, approval of payment to statutory auditors for other permitted services rendered by them, reviewing and monitoring with the management the auditor’s independence and the performance and effectiveness of the audit process, approval of transactions with related parties or any subsequent modifications and utilization of loans and/or advances from/investment by the Bank in its subsidiaries. The Audit Committee also reviews the functioning of the Whistle-Blower Policy, adequacy of internal control systems and the internal audit function, compliance with inspection and audit reports and reports of statutory auditors, findings of internal investigations, management letters/letters on internal control weaknesses issued by statutory auditors/internal auditors, investment in shares and advances against shares. The Audit Committee responsibilities also include reviewing with the management the statement of uses/application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for the purposes other than those stated in the offer document/prospectus/notice and the report submitted by the monitoring agency, monitoring the utilization of proceeds of a public or rights issue and making appropriate recommendations to the Board to take steps in this matter, discussion on the scope of audit with external auditors, examination of reasons for substantial defaults, if any, in payment to stakeholders, valuation of undertakings or assets, evaluation of risk management systems and scrutiny of inter-corporate loans and investments. The Audit Committee is also empowered to appoint/oversee the work of any registered public accounting firm, establish procedures for receipt and treatment of complaints received regarding accounting, internal accounting controls and auditing matters and engage independent counsel as also provide for appropriate funding for compensation to be paid to any firm/advisors. In addition, the Audit Committee also exercises oversight on the regulatory compliance function of the Bank. The Committee also considers and comments on rationale, cost-benefits and impact of schemes involving merger/demerger/amalgamation etc., on the Bank and its shareholders. The Audit Committee is also empowered to approve the appointment of the Chief Financial Officer (i.e. the whole-time Finance Director or any other person heading the finance function or discharging that function) after assessing the qualifications, experience and background, etc. of the candidate.

 

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Board Governance, Remuneration & Nomination Committee

 

On the date of filing this annual report, the Board Governance, Remuneration & Nomination Committee comprises of three independent directors - Ms. Neelam Dhawan, Mr. Girish Chandra Chaturvedi and Mr. Balasubramanyam Sriram. Ms. Neelam Dhawan is the Chairperson of the Committee.

 

The functions of the Committee include recommending appointments of directors to the Board, identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down and recommending to the Board their appointment and removal, formulate a criteria for the evaluation of the performance of the wholetime/independent directors and the Board and to extend or continue the term of appointment of independent directors on the basis of the report of performance evaluation of independent directors, recommending to the Board a policy relating to the remuneration for the directors, key managerial personnel and other employees, recommending to the Board the remuneration (including performance bonus and perquisites) to wholetime directors and senior management personnel. The functions also include approving the policy for and quantum of bonus payable to the members of the staff including senior management and key managerial personnel, formulating the criteria for determining qualifications, positive attributes and independence of a Director, framing policy on Board diversity, framing guidelines for the Employees Stock Option Scheme/Employee Stock Unit Scheme and decide on the grant of options/units to employees and wholetime directors of the Bank and its subsidiary companies.

 

Corporate Social Responsibility Committee

 

On the date of filing this annual report, the Corporate Social Responsibility Committee comprises of five directors - Mr. Girish Chandra Chaturvedi, Mr. Radhakrishnan Nair, Ms. Vibha Paul Rishi, Mr. Uday Chitale and Mr. Rakesh Jha. Mr. Girish Chandra Chaturvedi, an independent director and non-executive part-time Chairman of the Bank is the Chairman of the Committee.

 

The functions of the Committee include review of corporate social responsibility initiatives undertaken by the ICICI Group and the ICICI Foundation for Inclusive Growth, formulation and recommendation to the Board of a corporate social responsibility policy indicating the activities to be undertaken by the Company and recommendation of the amount of the expenditure to be incurred on such activities, identifying the focus, from among the themes specified in Schedule VII of the Companies Act, 2013 (the Act), for initiatives to be undertaken by the Bank, reviewing and recommending the annual corporate social responsibility plan to the Board with details of projects and schedule of implementation, making recommendations to the Board with respect to the corporate social responsibility initiatives, policies and practices of the ICICI Group, monitoring the corporate social responsibility activities, implementation and compliance with the corporate social responsibility policy, reviewing the submissions to be made to the Board with respect to implementation of the annual corporate social responsibility action plan including the disbursement of funds for the purposes and manner as approved, implementation of on-going projects as per approved timelines and year-wise allocation of funds, any modifications to be suggested to on-going projects, earmarking unspent corporate social responsibility amount, if any, in subsequent periods as prescribed in the Act and suggest deployment of any amount spent in excess of the requirement for set-off in subsequent years, reviewing impact assessment of projects, and reviewing and implementing, if required, any other matter related to corporate social responsibility initiatives as recommended/suggested by the Reserve Bank of India or any other body.

 

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Credit Committee

 

On the date of filing of this annual report, the Credit Committee comprises of four directors - Mr. Sandeep Bakhshi, Mr. Balasubramanyam Sriram, Mr. Hari L. Mundra and Mr. Rakesh Jha. Mr. Sandeep Bakhshi, Managing Director and CEO, is the Chairman of the Committee.

 

The functions of the 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.

 

Customer Service Committee

 

On the date of filing of this annual report, the Customer Service Committee comprises of four directors - Ms. Vibha Paul Rishi, Mr. Hari L. Mundra, Mr. Sandeep Bakhshi and Mr. Rakesh Jha. Ms. Vibha Paul Rishi, an independent director, is the Chairperson of the Committee.

 

The functions of the Committee include review of customer service initiatives, overseeing the functioning of the Standing Committee on Customer Service (Customer Service Council) and evolving innovative measures for enhancing the quality of customer service and improvement in the overall satisfaction level of customers.

 

Fraud Monitoring Committee

 

On the date of filing of this annual report, the Fraud Monitoring Committee comprises of five directors - Mr. Radhakrishnan Nair, Mr. Subramanian Madhavan, Ms. Neelam Dhawan, Mr. Sandeep Bakhshi and Mr. Rakesh Jha. Mr. Radhakrishnan Nair, an independent director, is the Chairman of the Committee.

 

The Committee monitors and reviews all the frauds involving an amount of Rs. 10 million and above with the objective of identifying the systemic lacunae, if any, that facilitated perpetration of the fraud and put in place measures to rectify the same. The functions of this Committee include identifying the reasons for delay in detection, if any, and reporting to the top management of the Bank and Reserve Bank of India on the same. The progress of investigation and recovery position is also monitored by the Committee. The Committee also ensures that staff accountability is examined at all levels in all the cases of frauds and action, if required, is completed quickly without loss of time. The role of the Committee is also to review the efficacy of the remedial action taken to prevent recurrence of frauds, such as strengthening of internal controls.

 

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Information Technology Strategy Committee

 

On the date of filing of this annual report, the Information Technology Strategy Committee comprises of four directors – Mr. Balasubramanyam Sriram, Ms. Neelam Dhawan, Mr. Sandeep Batra and Mr. Rakesh Jha. Mr. Balasubramanyam Sriram, an independent director, is the Chairman of the Committee.

 

The functions of the Committee are to approve the strategy for information technology and policy documents, ensure that the information technology strategy is aligned with business strategy, review information technology risks, ensure proper balance of information technology investments for sustaining the Bank’s growth, oversee the aggregate funding of information technology at Bank-level, ascertain if the management has resources to ensure the proper management of information technology risks, review contribution of information technology to business, oversee the activities of the Digital Council, review technology from a future readiness perspective, overseeing key projects progress and critical information technology systems performance, review of special information technology initiatives, review cyber risk, consider the Reserve Bank of India inspection report/directives received from time to time by the Bank in the areas of information technology and cyber security and to review the compliance of various actionables arising out of such reports/directives as may be deemed necessary from time to time.

 

Risk Committee

 

On the date of filing of this annual report, the Risk Committee comprises of four directors - Mr. Subramanian Madhavan, Mr. Girish Chandra Chaturvedi, Ms. Vibha Paul Rishi and Mr. Sandeep Batra. Mr. Subramanian Madhavan, an independent director, is the Chairman of the Committee.

 

The functions 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 functions of the Committee also include setting limits on any industry or country, review of the Enterprise Risk Management framework, risk appetite for the Bank, stress testing framework, internal capital adequacy assessment process and framework for capital allocation; review of 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. The appointment, removal and terms of remuneration of the Chief Risk Officer is subject to review by the Committee. The Committee keeps the Board of Directors informed about the nature and content of its discussions, recommendations and actions to be taken. The Committee coordinates its activities with other committees, in instances where there is any overlap with activities of such committees, as per the framework laid down by the Board of Directors.

 

Stakeholders Relationship Committee

 

On the date of filing of this annual report, the Stakeholders’ Relationship Committee comprises of three directors - Mr. Hari L. Mundra, Mr. Uday Chitale and Mr. Sandeep Batra. Mr. Hari L. Mundra, an independent director, is the Chairman of the Committee.

 

The functions of the Committee include approval and rejection of transmission of shares, bonds, debentures, issue of duplicate certificates, allotment of securities from time to time, redressal and resolution of grievances of security holders, delegation of authority for opening and operation of bank accounts for payment of interest/dividend.

 

Review Committee for Identification of Wilful Defaulters/Non Co-operative Borrowers

 

The Managing Director and CEO is the Chairman of this Committee and any two independent directors comprise the remaining members.

 

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The function of the Committee is to review the order of the Committee for identification of wilful defaulters/non co-operative borrowers (a Committee comprising wholetime directors and senior executives of the Bank to examine the facts and record the fact of the borrower being a wilful defaulter/non co-operative borrower) and confirm the same for the order to be considered final.

 

Code of Ethics

 

We have adopted a Group Code of Business Conduct and Ethics for our directors and all our employees. This code aims at ensuring consistent standards of conduct and ethical business practices across the constituents of the Company and is reviewed on an annual basis. We have not granted a waiver from any provision of the code to any of our directors or executive officers. All directors and members of the senior management have confirmed compliance with Group Code of Business Conduct and Ethics for fiscal 2023.

 

Principal Accountant: Fees and Services

 

The total fees to our principal accountant relating to the audit of consolidated financial statements for fiscal 2022 and fiscal 2023 and the fees for other professional services billed in fiscal 2022 and fiscal 2023 are as follows:

 

   Year ended March 31,
   2022  2023  2023
   (in millions)  (in thousands)
Audit         
Audit of ICICI Bank Limited and our subsidiaries  Rs.177   Rs.183   US$2,227 
Audit-related services   ..    ..    .. 
Opinion on non-statutory accounts   ..    ..    .. 
Others   9    9    110 
Sub-total   186    192    2,337 
Non-audit services               
Tax compliance   1    1    12 
Other services   3    

.. 

    

.. 

 
Sub-total   4    1    12 
Total  Rs.190   Rs.193   US$

2,349 

 

  

Fees for “others” under the audit services category are principally fees related to certification services. Our Audit Committee approved the fees paid to our principal accountant relating to audit of consolidated financial statements for fiscal 2023 and fees for other professional services billed in fiscal 2023. Our Audit Committee pre-approves all assignments undertaken for us by our principal accountant.

 

Summary Comparison of Corporate Governance Practices

 

The following is a summary comparison of significant differences between our corporate governance practices and those required by the New York Stock Exchange for United States issuers.

 

Independent Directors

 

A majority (eight of 11 as at June 30, 2023) of our Board are independent directors, as defined under applicable Indian legal requirements. Section 149 of the Companies Act, 2013 as amended from time to time and Regulation 16 the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended from time to time, have defined an independent director and specified the eligibility criteria for a director to be classified as independent. All independent directors have given declarations that they meet the criteria of independence as laid down under Section 149 of the Companies Act, 2013 as amended and Regulation 16 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (SEBI Listing Regulations) which have been relied on by the Bank and were placed at the Board Meeting held on April 22, 2023. The Board has accordingly determined the independence of these directors. Pursuant to the Companies Act, the director nominated by Government of India would not be classified as independent. Although the judgment on independence must be made by our Board as required under the Companies Act, 2013, there is no requirement that our Board affirmatively make such determination, in accordance with the independence test as required by the New York Stock Exchange rules.

 

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Non-Management Directors Meetings

 

Independent directors are required to meet at least once in a financial year without the non-independent directors and members of the management. At such meetings, the independent directors are required to review the performance of the Chairman of the Board, non-independent directors, Board Committees, and the Board as a whole. The independent directors met on April 22, 2023 to carry out these reviews. Prior to this, the independent directors had met on April 23, 2022, separately to carry out similar reviews.

 

Board Governance, Remuneration & Nomination Committee and Audit Committee

 

All members of our Board Governance, Remuneration & Nomination Committee are independent, as defined under applicable Indian legal requirements. All members of our Audit Committee are independent under Rule 10A-3 under the Exchange Act. The constitution and main functions of these committees as approved by our board are described above and comply with the spirit of the New York Stock Exchange requirements for United States issuers.

 

Corporate Governance Guidelines

 

Under New York Stock Exchange rules, United States issuers are required to adopt and disclose corporate governance guidelines addressing matters such as standards of director qualification, responsibilities of directors, director compensation, director orientation and continuing education, management succession and annual performance review of the Board of Directors. While as a foreign private issuer, we are not required to adopt such guidelines, under the home country regulations, pursuant to the notification of the Companies Act, the Bank has disclosed the policy on director appointments and remuneration including criteria for determining qualifications and independence of a director in its Indian annual report to shareholders for fiscal 2023. The Bank is also required to provide a statement indicating the manner in which formal annual evaluation has been made by the board of its own performance and that of its committees and individual directors and this statement has been included in the Indian annual report.

 

Controls and Procedures

 

We have carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) at year-end fiscal 2023.

 

As a result, it has been concluded that, as of the end of the period covered by this report, the disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required.

 

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However, as a result of our evaluation, we noted certain areas where our processes and controls, including information technology related processes and controls, could be improved. The Audit Committee monitors the resolution of any identified significant process and control improvement opportunities to a satisfactory conclusion. We are committed to continuing to implement and improve internal controls and our risk management processes, and this remains a key priority for us. We also have a process whereby business and financial officers throughout the Bank attest to the accuracy of reported financial information as well as the effectiveness of disclosure controls, procedures and processes.

 

There are inherent limitations to the effectiveness of any system, especially of disclosure 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 or deploying emerging technologies. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

 

We have experienced significant growth in a fast-changing environment, and management is aware that this may pose significant challenges to the control framework. See also “Risk Factors—Risks Relating to Our Business—There is operational risk associated with the financial industry which, when realized, may have an adverse impact on our business”.

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). Our internal control over financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial reporting 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.

 

Management maintains an internal control system intended to ensure that financial reporting provides reasonable assurance that transactions are executed in accordance with the authorizations of management and directors, assets are safeguarded and financial records are reliable.

 

Our internal control over financial reporting includes policies and procedures that:

 

·pertain to the maintenance of records that accurately and fairly reflect in reasonable detail the transactions and dispositions of our assets;

·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in accordance with authorizations of management and the executive directors; and

·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

All internal control over financial reporting systems, no matter how well-designed, have inherent limitations, and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

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Management assessed the effectiveness of our internal control over financial reporting at year-end fiscal 2023 based on criteria set by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). Based on the assessment, management concluded that our internal control over financial reporting was effective at year-end fiscal 2023. Effectiveness of our internal control over financial reporting at year-end fiscal 2023 has been audited by KPMG Assurance and Consulting Services LLP (formerly known as KPMG), an independent registered public accounting firm, as stated in their attestation report, which is included herein.

 

Change in Internal Control Over Financial Reporting

 

No change in our internal control over financial reporting occurred during the period covered by this annual report that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

 

Compensation and Benefits to Directors and Officers

 

Remuneration

 

Under our organizational documents, each of our non-executive directors, except the government director, is entitled to receive remuneration for attending each meeting of our Board or of a Board committee. The amount of remuneration payable to non-executive directors is set by our Board from time to time in accordance with the limits prescribed by the Companies Act and the rules thereunder. The Board of Directors has approved the payment of Rs. 100,000 as sitting fee for attending each meeting of the Board or a Board committee. 

 

In line with the Reserve Bank of India guidelines, payment of fixed remuneration of Rs. 2,000,000 per annum was approved by shareholders for each non-executive Director of the Bank (other than part-time Chairman and the Government Nominee Director). The Reserve Bank of India has approved a remuneration of Rs. 3,500,000 per annum for the non-executive chairman. In addition, we reimburse our directors for travel and related expenses in connection with attending Board and Committee meetings and related matters. If a director is required to perform services for us beyond attending meetings, we may remunerate the director as determined by our Board of Directors which remuneration may be either in addition to or as substitution for the remuneration discussed above. Non-executive directors are not entitled to the payment of any benefits at the end of their terms of office.

 

Our Board or a Committee thereof, may fix the salary and supplementary allowance payable to the wholetime directors. We are required to obtain specific approval of the Reserve Bank of India for the actual monthly salary, supplementary allowance, annual performance bonus and employee stock options paid each year to our wholetime directors.

 

In addition to the basic salary and supplementary allowance, our executive directors are entitled to certain perquisites (evaluated as per Indian Income-Tax rules wherever applicable, and otherwise at actual cost to the Bank in other cases) including the benefit of the Bank’s furnished accommodation, gas, electricity, furnishings, club fees, personal and group insurance, use of car, running and maintenance of cars including drivers, telephone or IT assets at residence or reimbursement of expenses in lieu thereof, payment of income tax on perquisites by Bank to the extent permissible under the Income Tax Act, 1961 and rules framed thereunder, medical reimbursement, leave and leave travel concession, education and other benefits, staff home loans, provident fund, superannuation fund, gratuity and other retirement benefits, in accordance with the scheme(s) and rule(s) applicable from time to time to retired wholetime directors of the Bank or the members of the Staff.

 

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There are no service contracts with our wholetime directors providing for benefits upon termination of their employment.

 

The total compensation paid by the Bank to its directors and executive officers during fiscal 2023 was Rs. 370 million.

 

Bonus

 

Each year, our Board of Directors awards discretionary bonuses to employees and whole-time directors on the basis of the Bank’s performance and individual performance. The aggregate amount of bonuses and performance linked retention pay to all eligible employees of ICICI Bank for fiscal 2023 was Rs. 20 billion.

 

Employee Stock Option Scheme

 

ICICI Bank has an Employees Stock Option Scheme - 2000 (Scheme 2000) which was instituted in fiscal 2000 to enable the employees and Wholetime Directors of ICICI Bank and its subsidiaries to participate in future growth and financial success of the Bank. The Scheme 2000 aims at achieving the twin objectives of aligning employee interest to that of the shareholders and retention. Through employee stock option grants, the Bank seeks to foster a culture of long-term sustainable value creation. The Scheme 2000 is in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (the SEBI SBEB & SE Regulations). The options are granted by the Board Governance, Remuneration & Nomination Committee and noted/approved by the Board as the case maybe. Pursuant to the Scheme 2000, as amended from time to time, up to 10.0% of the aggregate of issued equity shares of the Bank at the time of the grant of stock options can be allocated under the employee stock option scheme. The stock options entitle eligible employees to apply for equity shares. At March 31, 2023, this 10.0% limit was equivalent to 698.28 million shares, of which the Bank has granted 612.29 million options under the Scheme 2000. Employees and Directors of the Bank, its subsidiaries and its holding company are eligible employees for grants of stock options. The Bank has no holding company. The maximum number of options granted to any eligible employee in a year is restricted to 0.05% of the Bank’s issued equity shares at the time of the grant.

 

Options granted after April 1, 2014 vest in a graded manner over a three-year period, with 30%, 30% and 40% of the options vesting on each of first three anniversaries of the grant date respectively, except as follows:

 

·For 275,000 options granted in April 2014, 50% vested on April 30, 2017 and the balance 50% vested on April 30, 2018.

·For 34,362,900 options granted in September 2015, 50% vested on April 30, 2018 and the balance 50% vested on April 30, 2019.

·For 300,000 options granted in January 2018, 100% vested at the end of four years from the date of grant.

·For 188,000 options granted in May 2018, 50% vested on May 7, 2021 and the balance 50% vested on May 7, 2022.

 

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Options granted prior to April 1, 2014 vested in a graded manner over a four-year period, with 20%, 20%, 30% and 30% of the options vesting on each of the first four anniversaries of the grant date, except as follows:

 

·Options granted in April 2009 vested in a graded manner over a five-year period with 20%, 20%, 30% and 30% of the grant vesting in each year, commencing from the end of 24 months from the date of the grant.

·For the options granted in February 2011, 50% of the options vested on April 30, 2014 and 50% vested on April 30, 2015.

·Options granted in September 2011 vested in a graded manner over a five-year period with 15%, 20%, 20% and 45% of the grant vesting in each year, commencing from the end of 24 months from the date of grant.

 

The price for options granted is equal to the closing price on the stock exchange which recorded the highest trading volume preceding the date of grant of options. Options granted in February 2011 were granted at an exercise price which was approximately 3.0% below the closing price preceding the date of grant of options.

 

Pursuant to the approval of shareholders in June 2017, the exercise period is such period not exceeding ten years from the date of vesting of options as may be determined by the Board of Governance, Remuneration & Nomination Committee for each grant. In September 2018, the shareholders approved the change in exercise period to not exceeding five years from the date of vesting of options as may be determined by the Board Governance, Remuneration & Nomination Committee for all future grants effective May 2018.

 

The following table sets forth certain information regarding the stock option grants made to employees under the Scheme 2000 at March 31, 2023. The Bank granted all of these stock options at no cost to its employees. Options granted include grants to wholetime directors and employees of subsidiaries of the Bank. The Bank has not granted any stock options to its non-executive directors.

 

The following table sets forth certain information regarding the options granted by the Bank at March 31, 2023.

 

Particulars

 

ICICI Bank

Options granted (net of lapsed)    612,293,716 
Options vested    586,787,157 
Options exercised    387,267,913 
Options forfeited/lapsed    110,647,798 
Amount realized by exercise of options   Rs.52,052,123,872 
Total number of options in force    225,025,803 
Weighted average exercise price of options in force   Rs.361.60 

 

 

See also “Consolidated financial statements—Schedules forming part of the consolidated financial statements—Additional notes—Note 18” under U. S. GAAP included herein.

 

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ICICI Prudential Life Insurance Company has an employees stock option scheme, which allows that the aggregate number of shares issued or issuable since March 31, 2016 pursuant to the exercise of any options granted to eligible employees, shall not exceed a figure equivalent to 3.54% of the number of shares issued at March 31, 2016. The maximum number of options granted to any eligible employee in a financial year shall not exceed 0.1% of the issued shares of the Company at the time of grant of options. ICICI Prudential Life Insurance Company had 23,942,115 stock options outstanding (net of forfeited or lapsed options) at year-end fiscal 2023.

 

ICICI Lombard General Insurance Company has an employee stock option scheme, which allows up to 7.0% of the issued capital to be allocated to employee stock options. The maximum number of options granted to any eligible employee in a financial year shall not exceed 0.1% of the issued shares of the Company at the time of grant of options. ICICI Lombard General Insurance Company had 12,646,890 employee stock options outstanding (net of forfeited or lapsed options) at year-end fiscal 2023.

 

ICICI Securities Limited has an employees stock option scheme, which allows up to 5.0% of the issued capital to be allocated to employee stock options. The maximum number of options granted to any eligible employee in a financial year shall not exceed 0.1% of the issued shares of the Company at the time of grant of options. ICICI Securities Limited had 4,146,544 employee stock options outstanding (net of forfeited or lapsed options) at year-end fiscal 2023.

 

Employees Stock Unit Scheme

 

The Board of Directors of ICICI Bank Limited at its meeting held on June 28, 2022, approved the adoption of Employees Stock Unit Scheme - 2022 (Scheme 2022), which was subsequently approved by the members at the annual general meeting held on August 30, 2022.

 

The key objectives of the Scheme 2022 are to deepen the co-ownership amongst the (i) mid level and front-line managers, and (ii) employees of Bank’s select unlisted wholly owned subsidiaries with the following key considerations:

 

i.to enable employees’ participation in the business as an active stakeholder to usher in an ”Owner-Manager” culture and to act as a retention mechanism;

ii.to enhance motivation of employees; and

iii.to enable employees to participate in the long term growth and financial success of the Bank.

 

The Scheme 2022 is in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

 

Maximum of 100,000,000 Units, shall be granted in one or more tranches over a period of seven years from the date of approval of the Scheme 2022 by the shareholders, which shall entitle the Unit holder one fully paid-up equity share of face value of Rs. 2 of the Bank (as adjusted for any changes in capital structure of the Bank) against each Unit exercised and accordingly, up to 100,000,000 equity shares of face value of Rs. 2 each shall be allotted to all eligible employees taken together under the Scheme 2022.

 

Units granted under the Scheme 2022 shall vest not later than the maximum vesting period of four years. Exercise price shall be the face value of equity shares of the Bank i.e. Rs. 2 for each unit (as adjusted for any changes in capital structure of the Bank).

 

The Bank had not granted any units under employees stock unit scheme to its employees during fiscal 2023.

 

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Loans

 

The Bank has internal rules for grant of loans to employees and executive directors to acquire certain assets such as property, vehicles and other consumer durables at significantly lower interest rates than the market rate. The Bank’s loans to employees have been made at interest rates ranging from 2.5% to 3.5% per annum and are repayable over fixed periods of time. The loans are generally secured by the assets acquired by the employees. Pursuant to the Banking Regulation Act, the Bank’s non-executive directors are not eligible for any loans. At year-end fiscal 2023, outstanding loans to the Bank’s employees totaled Rs. 10.7 billion compared to Rs. 9.5 billion at year-end fiscal 2022. This amount included loans to certain executive directors amounting to Rs. 85.4 million at year-end fiscal 2023 compared to Rs. 137.6 million at year-end fiscal 2022, made on the same terms, including as to interest rates and collateral, as loans to other employees. Loans to executive directors are given after approval by the Reserve Bank of India. See also “Related Party Transactions”.

 

Gratuity

 

The Bank pays gratuity to employees who retire or resign after a minimum prescribed period of continuous service and, in the case of employees at overseas locations, in accordance with the rules in force in the respective countries. The Bank makes contributions to gratuity funds for employees which are administered by ICICI Prudential Life Insurance Company Limited.

 

Actuarial valuation of the gratuity liability for all the above funds is determined by an actuary appointed by the Bank. Actuarial valuation of gratuity liability is determined based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit method.

 

The accounts of the fund are audited by independent auditors. The total corpus of the fund at year-end fiscal 2023 based on its audited financial statements was Rs. 14.0 billion compared to Rs. 13.6 billion at year-end fiscal 2022.

 

Superannuation Fund

 

The Bank contributes upto 15% of the total annual basic salary and dearness allowance (if applicable) to a superannuation fund in respect of the employees to whom it applies. The Bank’s employees may elect on retirement or resignation to receive one-third or one-half, depending on the tenure of service, of the total balance as commutation and a periodic pension based on the remaining balance. In the event of the death of an employee, his or her beneficiary receives the remaining accumulated balance, if eligible. The Bank also gives a cash option to its employees, allowing them to receive the amount that would otherwise be contributed by the Bank in their monthly salary during their employment. The superannuation fund is administered by Life Insurance Corporation of India and ICICI Prudential Life Insurance Company Limited. Employees have the option to choose between funds administered by the Life Insurance Corporation of India and ICICI Prudential Life Insurance Company Limited. The total corpus of the superannuation fund was Rs. 5.3 billion at year-end fiscal 2023 compared to Rs. 5.0 billion at year-end fiscal 2022.

 

Provident Fund

 

The Bank is statutorily required to maintain a provident fund as part of its retirement benefits to its employees. The provident fund, to which both ICICI Bank and its employees contribute a defined amount, is a savings scheme under which ICICI Bank at present is required to pay to employees a minimum annual return as specified from time to time, which was specified at 8.15% for fiscal 2023. If such return is not generated internally by the fund, ICICI Bank is liable for the difference. There are separate provident funds for employees inducted from merged entities (Bank of Madura, The Bank of Rajasthan and Sangli Bank) and for other employees of the Bank. These funds are managed by in-house trustees. Each employee contributes 12.0% of his or her basic salary and dearness allowance (if applicable) and the Bank contributes an equal amount to the funds. Out of the 12% of employer contribution, 8.33% subject to a maximum of Rs. 1,250 contributed per employee to the Employee Pension Scheme with Employee Provident Fund Organization. Pursuant to Supreme Court judgement in November 2022, certain eligible employees are given an option to contribute the entire 8.33% to employee pension scheme with Employee Provident Fund Organization. The investments of the funds are made according to rules prescribed by the Government of India. The accounts of the funds are audited by independent auditors. The total corpuses of the funds for employees inducted from merged entities and other employees of the Bank at year-end fiscal 2023, based on their audited financial statements, amount to Rs. 1.8 billion and Rs. 47.7 billion respectively, as compared to Rs. 2.2 billion and Rs. 42.2 billion, respectively, at year-end fiscal 2022.

 

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Pension Fund

 

The Bank provides for pension, a deferred retirement plan covering certain employees of the former Bank of Madura, Sangli Bank and Bank of Rajasthan. The plan provides for pension payments, including dearness relief, on a monthly basis to these employees on their retirement based on the respective employee’s salary and years of service with the Bank. For the former Bank of Madura, Sangli Bank and Bank of Rajasthan employees in service, funds are managed by the trust and the liability is funded as per actuarial valuation. The trust purchases annuities from the Life Insurance Corporation of India and ICICI Prudential Life Insurance Company Limited as part of its master policies for payment of pension to retired employees of the former Bank of Madura, Sangli Bank and Bank of Rajasthan. Employees covered by the pension plan are not eligible for employer’s contribution under the provident fund plan. The corpus, based on audited financial statements at year-end fiscal 2023 was Rs. 17.7 billion compared to Rs. 18.9 billion at year-end fiscal 2022.

 

National Pension Scheme

 

National Pension Scheme is a voluntary, defined contribution retirement savings scheme. The Bank contributes up to 10% of basic salary to National Pension Scheme for employees who opt to participate in the scheme. These funds are invested by Pension Fund Regulatory and Development Authority and are regulated by professional fund managers as per the investment option selected by the respective employees. At the time of retirement, up to 60% of the accumulated contributions (including returns thereon) can be withdrawn as lump-sum by the employee. The residual accumulated contributions need to be used for the purchase of a life annuity from a Pension Fund Regulatory and Development Authority empaneled life insurance company. The Bank has contributed Rs. 279.8 million for fiscal 2023 (fiscal 2022: Rs. 224.8 million) to National Pension Scheme for employees who opted for the scheme.

 

Interest of Management in Certain Transactions

 

Except as otherwise stated in this annual report, no amount or benefit has been paid or given to any of our directors or executive officers.

 

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Supervision and Regulation

 

The following description is a summary of certain sector-specific laws and regulations in India that are applicable to us. The information detailed in this chapter has been obtained from publications available in the public domain. The regulations set out below are not exhaustive, and are only intended to provide general information.

 

The key legislation governing banking companies in India is the Banking Regulation Act, 1949. The provisions of the Banking Regulation Act are in addition to and not, save as expressly provided in the Banking Regulation Act, in derogation of the Companies Act and any other law currently in force. Other important laws which govern banking companies in India include the Reserve Bank of India Act, 1934 and Foreign Exchange Management Act, 1999, Payment and Settlement System Act, 2007, Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Negotiable Instrument Act, 1881 and Insolvency and Bankruptcy Code 2016 as amended from time to time. Additionally, the Reserve Bank of India, from time to time, issues guidelines to be followed by banks. Compliance with all regulatory requirements is evaluated with respect to financial statements under Indian GAAP. Banking companies in India are also governed by the provisions of the Companies Act, 2013 and if such companies are listed on a stock exchange in India, then various regulations of the Securities and Exchange Board of India additionally apply to such companies.

 

Reserve Bank of India Regulations

 

The Banking Regulation Act requires a company to obtain a license from the Reserve Bank of India to carry on banking business in India. This license is subject to such conditions as the Reserve Bank of India may choose to impose, such as, but not limited to, the bank having adequate capital and earnings prospects, the bank having the ability to pay its present and future depositors in full as their claims accrue, and that the affairs of the bank will not be or are not likely to be conducted in a manner detrimental to the interests of present or future depositors. The Reserve Bank of India can cancel the license if the bank, at any point, fails to meet the required conditions or if the bank ceases to carry on banking operations in India.

 

ICICI Bank is regulated and supervised by the Reserve Bank of India because it is licensed as a banking company. The Reserve Bank of India requires us to furnish statements and information relating to our business. It has issued, among others, guidelines for commercial banks relating to banking activities and prudential guidelines relating to recognition of income, classification of assets, provisioning, exposure norms on concentration risk, valuation of investments and maintenance of capital adequacy. The Reserve Bank of India carries out its risk assessment of banks, under its risk based supervision exercise, on an annual basis. The Reserve Bank of India has also set up a Board for Financial Supervision (“BFS”), under the chairmanship of the Governor of the Reserve Bank of India. The primary objective of BFS is to undertake consolidated supervision of the financial sector comprising Scheduled Commercial and Co-operative Banks, All India Financial Institutions, Local Area Banks, Small Finance Banks, Payments Banks, Credit Information Companies, Non-Banking Finance Companies and Primary Dealers.

 

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Requirements of the Banking Regulation Act

 

Prohibited Business

 

The Banking Regulation Act specifies the business activities in which a bank may engage. Banks are prohibited from engaging in business activities other than the specified activities.

 

Reserve Fund

 

Any bank incorporated in India is required to create a reserve fund to which it must transfer not less than 25.0% of its annual profits before dividends. A bank is required to report any appropriation from this account to the Reserve Bank of India within 21 days, explaining the circumstances leading to such appropriation. The Government of India may, on the recommendation of the Reserve Bank of India, exempt a bank from requirements relating to its reserve fund.

 

Restriction on Share Capital

 

Banks were earlier permitted to issue only ordinary shares. In 2013, the Banking Regulation Act was amended to, inter alia, permit banks to also issue preference shares. However, guidelines governing the issuance of preference shares are yet to be issued.

 

Ownership and Voting Restrictions

 

The Government of India regulates foreign ownership in Indian banks. Foreign investors (including indirect foreign investment) may own up to 74.0% of the equity share capital of a private sector bank in India subject to rules and regulations issued by the Government of India and the Reserve Bank of India from time to time. While foreign investment of up to 49.0% in private sector banks is under automatic route and does not require any specific approval, foreign investments beyond 49.0% and up to 74.0% require prior approval of the Government of India, unless such investments are otherwise exempted from the requirement for approval. Investments by foreign investors exempted from the requirement for Government of India approval include certain aggregate foreign portfolio investments up to 49.0% or the relevant sectoral cap (whichever is lower) that do not result in the transfer of ownership or control from Indian residents to non-resident investors, and foreign investment through rights and bonus issues fulfilling certain conditions. Additionally, in the case of proposals requiring prior approval of the Government of India, such proposals involving total foreign equity inflow of more than Rs. 50.0 billion, also require approval of the Cabinet Committee on Economic Affairs.

 

In January 2023, Reserve Bank of India has issued Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies with regard to shareholding in banking company. As per the guidelines, banks are required to have board approved fit and proper criteria for major shareholders (shareholders holding 5.0% or more of the paid up share capital, along with relatives, associate enterprises and persons acting in concert) and continuously monitor the fit and proper status of major shareholders including the information on change in Significant Beneficial Owner (SBO) of its major shareholder. If aggregate holding of a major shareholder falls below 5%, fresh Reserve Bank of India approval to be sought for raising it again to 5% or above.

 

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Voting rights are capped at 26.0% for a single shareholder. However, any acquisition of shareholding/voting rights of 5.0% or more will require the prior approval of the Reserve Bank of India.

 

Regulatory Reporting and Examination Procedures

 

The Reserve Bank of India is responsible for supervising the Indian banking system under various provisions of the Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934. The supervision framework is evolving over a period of time and the Reserve Bank of India has been progressively moving in line with Basel “Core Principles for Effective Banking Supervision”. The existing supervisory framework has been modified towards establishing a risk based supervision framework.

 

This framework is intended to make the supervisory process for banks more efficient and effective, with the Reserve Bank of India applying differentiated supervision to each bank based on its risk profile. A detailed qualitative and quantitative assessment of the bank’s risk is conducted by the supervisor on an ongoing basis and a Risk Assessment Report is issued by the Reserve Bank of India. The Reserve Bank of India has designated a senior supervisory manager for the banks under this framework who will be the single point of contact for a designated bank.

 

We have been subject to supervision under this framework since fiscal 2013. The Reserve Bank of India also discusses the report with our management team, including the Chairman of the Bank, the Chairman of the Audit Committee, and the Managing Director and CEO. The risk assessment report, along with the report on actions taken by us, has to be placed before our Board of Directors. On approval by our board of directors, we are required to submit the report on actions taken by us to the Reserve Bank of India. See also, “—Loan Loss Provisions and Non-Performing Assets—Asset Classification.”

 

Appointment and Remuneration of the Chairman, Managing Director and Other Directors

 

We are required to obtain prior approval of the Reserve Bank of India before we appoint our chairman, managing director and any other executive directors and fix their remuneration. The Reserve Bank of India is authorized to remove an appointee from the posts of chairman, managing director and other executive directors on the grounds of public interest, interest of depositors or to ensure our proper management. Further, the Reserve Bank of India may order meetings of our Board of Directors to discuss any matter in relation to us, appoint observers to such meetings and in general may make such changes to the management as it may deem necessary and may also order the convening of a general meeting of our shareholders to elect new directors. We cannot appoint as a director any person who is a director of another banking company. The Reserve Bank of India has issued guidelines on “fit and proper” criteria for directors of banks. Our directors must satisfy the requirements of these guidelines.

 

The Reserve Bank of India has issued guidelines on the compensation of wholetime directors/chief executive officers/risk takers and control function staff of private sector and foreign banks operating in India. The guidelines include principles for effective governance of compensation, alignment of compensation with risk taking and effective supervisory oversight and engagement by stakeholders. The guidelines also specify the proportion of cash and non-cash components that may be included in the variable pay. Banks are also required to put in place appropriate modalities to incorporate a malus and clawback mechanism with respect to misconduct and risk, as well as mandatory imposition in the case of divergence in non-performing assets and provisioning beyond the Reserve Bank of India prescribed thresholds for public disclosure.

 

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The Reserve Bank of India has issued guidelines on compensation of non-executive directors of private sector banks. According to the guidelines, the Board of Directors, in consultation with its remuneration committee, should formulate and adopt a comprehensive compensation policy for the non-executive directors (other than the part-time, non-executive chairman). In the policy, the Board may provide for the payment of compensation in the form of a profit-related commission, subject to the bank making profits. Such compensation should not exceed Rs. 1 million per annum for each director. Further, as per Reserve Bank of India guideline on Corporate Governance in Banks - Appointment of Directors and Constitution of Committees of the Board dated April 26, 2021, in addition to sitting fees and expenses related to attending meetings of the board and its committees as per extant statutory norms, the bank may provide for payment of compensation to non-executive directors in the form of a fixed remuneration commensurate with an individual director’s responsibilities and demands on time and which are considered sufficient to attract qualified competent individuals. However, such fixed remuneration for a non-executive director, other than the chair of the board, shall not exceed Rs. 2.0 million per annum. Further, private sector banks have to obtain prior approval of the Reserve Bank of India for granting remuneration to the part-time, non-executive chairman under Section 10B(1A)(i) and 35B of the Banking Regulation Act, 1949.

 

The Reserve Bank of India has also issued guidelines on minimum qualifications and experience required while inviting application for the position of Chief Financial Officer and Chief Technology Officer in banks.

 

Penalties

 

The Reserve Bank of India may impose penalties on banks and their employees in case of infringement of regulations under the Banking Regulation Act. The penalty may be a fixed amount or may be related to the amount involved in any contravention of the regulations. The penalty may also include imprisonment.

 

Assets to be Maintained in India

 

Every bank is required to ensure that its assets in India (including import-export bills drawn in India and the Reserve Bank of India approved securities, even if the bills and the securities are held outside India) are not less than 75.0% of its demand and time liabilities in India.

 

Restriction on Creation of Floating Charge

 

Prior approval of the Reserve Bank of India is required for creating floating charge on our undertaking or property. Currently, all of our borrowings, including bonds, are unsecured.

 

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Maintenance of Records

 

Banks are required to maintain books, records and registers. The Banking Regulation Act specifically requires banks to maintain books and records in a particular manner and file the same with the Registrar of Companies on a periodic basis. The provisions for production of documents and availability of records for inspection by shareholders as stipulated under the Companies Act and the rules thereunder would apply to us as in the case of any company. The Know Your Customer Guidelines framed by the Reserve Bank of India also provide for certain records to be updated at regular intervals. As per the Prevention of Money Laundering Act, 2002, records of a transaction are to be preserved for five years from the date of the transaction between a customer and the bank. The Know-Your-Customer records are required to be preserved for a period of five years from the date of cessation of relationship with the customer. The Banking Companies (Period of Preservation of Records) Rules, 1985 requires such records to be preserved for eight years. The Banking Companies (Period of Preservation of Records) Rules, 1985 requires a bank’s records of books, accounts and other documents relating to stock and share registers to be maintained for a period of eight years.

 

The Reserve Bank of India has advised system providers to ensure that data relating to payment systems operated by them are stored only in a system located in India. The data should include the full end-to-end transaction details/information collected/carried/processed as part of the message/payment instruction. For the foreign leg of the transaction, if any, the data can also be stored in the foreign country, if required. For directions notified by CERT-In relating to obligation on maintenance of logs of the information and communications technology systems, see Information Technology and Cyber Security.”

 

Governance of Banks

 

As part of steps taken to strengthen risk management in banks, the Reserve Bank of India has issued guidelines which aim to separate the credit risk management function from the credit approval process and also bring uniformity in the approach followed by banks. As per the guidelines, a board approved policy defining the role and responsibilities of the Chief Risk Officer has to be established, with clearly defined reporting lines either to the Managing Director/Chief Executive Officer or the risk management committee of the bank. The Chief Risk Officer should not have a dual role, report into any business vertical or be given any business targets. The Chief Risk Officer can be removed or transferred only with the approval of the Board. In April 2021, the Reserve Bank of India issued instructions with regard to the Chair and meetings of the board, composition of certain committees of the board, age, tenure and remuneration of directors, and appointment of wholetime directors of banks. The instructions are applicable to private sector banks including small finance banks and wholly owned subsidiaries of foreign banks. As per the guidelines, the Chair of the board has to be an independent director, and the quorum of the board meetings shall be one-third of the total strength of the board or three directors, whichever is higher. The audit committee and the nomination and remuneration committee shall be constituted with only non-executive directors and the risk management committee shall be constituted with majority of non-executive directors. The upper age limit for non-executive directors, including the Chair, is 75 years and the total tenure of a non-executive director on the board of a bank cannot exceed eight years. A re-appointment of the director after completing eight years can be considered after a minimum gap of three years. A wholetime director cannot continue in the post after 15 years, and any reappointment can be considered only after a gap of three years.

 

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In 2020, the Reserve Bank of India advised that as part of a robust compliance system, banks are required to have an effective compliance culture, independent compliance function and a strong compliance risk management programme. As per the guidelines, banks shall have a board-approved compliance policy explaining its compliance philosophy, expectations on compliance culture, role of Chief Compliance Officer (“CCO”), processes for managing and reporting on compliance risk throughout the bank. Banks are required to develop and maintain a quality assurance and improvement program covering all aspects of the compliance function and such programs are subject to an independent external review periodically (at least once in every three years). The policy shall be reviewed at least once a year. The selection of the candidate for the post of the COO shall be done on the basis of a well-defined selection process and recommendations made by the senior executive level selection committee constituted by the Board for this purpose. The COO shall be appointed for a minimum fixed tenure of not less than three years.

 

Appointment of auditors

 

The appointment of the statutory auditors of banks is subject to the approval of the Reserve Bank of India. In April 2021, the Reserve Bank of India issued revised guidelines for the appointment of statutory auditors and statutory central auditors, of Commercial Banks (excluding Regional Rural Banks), Primary (Urban) Co-operative Banks and Non-Banking Finance Companies including Housing Finance Companies (hereinafter referred to as the entities). The appointment tenure reduced from four years to three years. An audit firm would not be eligible for reappointment in the same entity for six years (two tenures) after completion of full or part of one term of the audit tenure. The time gap between any non-audit works (services mentioned at Section 144 of Companies Act, 2013, Internal assignments, special assignments) by the statutory auditors and statutory central auditors for the Entities or any audit/non-audit works for its Reserve Bank of India regulated group entities should be at least one year, before or after its appointment as statutory auditors and statutory central auditors. However, if an audit firm engaged with audit/non-audit works for the group entities (which are not regulated by the Reserve Bank of India) is being considered by any of the Reserve Bank of India regulated Entities in the Group for appointment as statutory auditors and statutory central auditors, it would be the responsibility of the Board of the concerned Reserve Bank of India regulated entity to ensure that there is no conflict of interest and independence of auditors is ensured, and this should be suitably recorded in the minutes of the meetings of board.

 

Further, for entities with an asset size of Rs. 150.0 billion and above, the statutory audit will have to be conducted under joint audit by at least two audit firms. The Reserve Bank of India can direct a special audit in the interest of the depositors or in the public interest. The Reserve Bank of India has also put in place a graded enforcement action framework to enable appropriate action in respect of statutory auditors where any lapses in conducting a bank’s statutory audit have been observed. Lapses that would be considered for invoking the enforcement framework include misstatement of a bank’s financial statements, wrong certifications, wrong information given in the Long Form Audit Report, and variances in audited financial statements found during the Reserve Bank of India’s inspection and non-adherence to instructions and guidelines issued by the Reserve Bank of India.

 

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Restrictions on Payment of Dividends

 

The Banking Regulation Act requires banks to completely write off capitalized expenses and transfer 20.0% of the disclosed yearly profit to a reserve account before declaring a dividend. Banks have to comply with prudential requirements to be eligible to declare dividends.

 

Capital Adequacy Requirements

 

We are required to comply with the Reserve Bank of India’s capital adequacy guidelines. The Reserve Bank of India’s Basel III guidelines prescribe a minimum common equity Tier 1 risk-weighted capital ratio of 5.5%, a minimum Tier 1 risk-based capital ratio of 7.0% and a minimum total risk-based capital ratio of 9.0%. The guidelines require banks to maintain 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.

 

We were declared a systemically important bank in India by the Reserve Bank of India in 2015, and have continued to be categorized as a systemically important bank in India in subsequent years. The additional common equity Tier 1 requirement for us is 0.20% of risk-weighted assets.

 

The Reserve Bank of India requires maintenance of a minimum leverage ratio of 4.0% for domestic systemically important banks.

 

The Reserve Bank of India released the final guidelines on implementation of the counter-cyclical capital buffer for Indian banks in 2015. These guidelines would impose higher capital requirements on banks during periods of high economic growth. The Reserve Bank of India would pre-announce the buffer at least four quarters prior to implementation. The Reserve Bank of India will also announce guidance regarding the treatment of the surplus capital when the counter-cyclical capital buffer returns to zero. At present, the Reserve Bank of India has not activated the counter-cyclical capital buffer.

 

See also “Risk Factors— Risks that arise as a result of our presence in a highly regulated sector – 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” and “ – Risks that arise as a result of our presence in a highly regulated sector – We are subject to liquidity requirements of the Reserve Bank of India, 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.”

 

With respect to computation of risk-weighted assets for capital adequacy purposes, we follow the standardized approach for the measurement of credit and market risks and the basic indicator approach for the measurement of operational risk.

 

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Under Pillar 2 of the Basel framework, banks are required to develop and put in place, with the approval of their boards, an Internal Capital Adequacy Assessment Process commensurate with their size, level of complexity, risk profile and scope of operations. The Reserve Bank of India has also issued guidelines on stress testing to advise banks to put in place appropriate stress testing policies and frameworks, including “sensitivity tests” and “scenario tests”, for the various risk factors, the details and results of which are included in the Internal Capital Adequacy Assessment Process. As per Reserve Bank of India guidelines on stress testing, banks have to carry out stress tests for credit risk and market risk to assess their ability to withstand shocks. The guidelines relate to the overall objectives, governance, design and implementation of stress-testing program. Banks are required to carry out risk factor-based stress testing, scenario-based stress testing and stress testing by employing shocks on a bank’s portfolio at a standalone and group level. In addition, banks are also required to create a reverse stress testing framework. Banks are classified into three categories based on size of risk-weighted assets. Complex and severe stress testing would be carried out by banks with risk-weighted assets of more than Rs. 2,000.0 billion.

 

Prompt Corrective Action by the Reserve Bank of India

 

The Prompt Corrective Action framework is a framework under which banks with weak financial condition are put under watch by the Reserve Bank of India and subject to restrictions on operations and business. As per the guidelines, a bank may be placed under the framework at any point in time, if it is found to breach any of the parameters prescribed. In November 2021, the Reserve Bank of India reviewed and revised the existing Framework on Prompt Corrective Action (“PCA”). The key criteria for invocation of the PCA include (i) falling below a capital adequacy ratio of 10.25% and/or below a common equity Tier 1 ratio of 6.75%, (ii) exceeding net non-performing asset ratio of 6.0%, or (iii) a leverage ratio of below 4.0%.

 

Depending upon the extent of breach, the bank may be classified into three risk thresholds and will be accordingly restricted from business expansion and other mandatory action for resolution. Depending on the risk threshold, the actions may include restriction on capital expenditure (other than for technological upgradation within Board approved limits). A bank breaching the risk threshold where the common equity Tier 1 falls below 3.625% could be considered for resolution through tools like amalgamation, reconstruction and winding-up.

 

Discretionary Corrective Actions now include resolution of the bank by amalgamation or reconstruction (Ref. Section 45 of Banking Regulation Act 1949); a prohibition on expansion of credit/ investment portfolios, other than investment in government securities and other high quality liquid investments; restrictions on or reduction in variable operating costs; and restrictions on or reduction of outsourcing activities and new borrowings.

 

Exit from being subject to prompt corrective action and withdrawal of restrictions may be considered in the following scenario: (i) if no breaches in risk thresholds in any of the parameters are observed as per four continuous quarterly financial statements, one of which should be an audited annual financial statement (subject to assessment by Reserve Bank of India), or (ii) based on supervisory comfort of the Reserve Bank of India, including an assessment on sustainability of profitability of the bank.

 

Legal Reserve Requirements

 

Cash Reserve Ratio

 

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A bank is required to maintain a specified percentage of its net demand and time liabilities, excluding interbank deposits, by way of cash reserve with itself and by way of balance in current account with the Reserve Bank of India. In May 2022, the Reserve Bank of India increased the cash reserve ratio by 50 basis points from 4.00% to 4.50% of net demand and time liabilities, effective from the reporting fortnight beginning May 21, 2022.

 

Statutory Liquidity Ratio

 

In addition to the cash reserve ratio, a bank is required to maintain a specified percentage of its net demand and time liabilities by way of liquid assets like cash, gold or approved unencumbered securities. Investments in sovereign gold bonds are also allowed to be considered in the calculation of statutory liquidity ratio. Currently, the statutory liquidity ratio is at 18.0%, effective since April 2020.

 

Liquidity Coverage Ratio

 

In line with the Basel III framework, banks in India are required to maintain a minimum liquidity coverage ratio which is a ratio of the stock of high quality liquid assets to total net cash outflows over the next 30 calendar days under certain prescribed stressed conditions. The liquidity coverage ratio is designed to ensure that a bank maintains an adequate level of unencumbered high quality liquid assets to meet any acute liquidity requirements over a hypothetical stressed period lasting 30 days and the requirement was phased in over time. A minimum liquidity coverage ratio requirement of 100.0% is required.

 

Further, as per guidelines issued on liquidity standards, the Reserve Bank of India allows banks, under certain stressed conditions, to avail themselves of a special liquidity facility against certain securities classified as level one high quality liquid assets. The facility, called the Facility to Avail Liquidity for Liquidity Coverage Ratio, is operated by the Reserve Bank of India.

 

Banks are allowed to avail of funds under the marginal standing facility by dipping into the statutory liquidity ratio upto an additional 2% of a bank’s net demand and time liabilites.

 

The Reserve Bank of India has permitted the banks to include government securities as Level 1 high quality liquid assets under the facility to avail liquidity for liquidity coverage ratio within the mandatory statutory liquidity ratio requirement of up to 16% of the Bank’s net demand and time liabilites and government securities, to the extent allowed under the marginal standing facility in addition to other eligible assets.

 

Net Stable Funding Ratio (NSFR)

 

The Reserve Bank of India has issued guidelines on net stable funding ratio. The ratio promotes resilience over a longer time horizon by requiring banks to fund their activities with more stable sources on an ongoing basis. The net stable funding ratio is defined as the amount of available stable funding relative to the amount of required stable funding. Banks are required to maintain a ratio of at least 100.0% on an ongoing basis.

 

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Regulations Relating to Advancing Loans

 

The provisions of the Banking Regulation Act govern the advancing of loans by banks in India. The Reserve Bank of India also issues directions covering the loan activities of banks. These directions and guidelines issued by the Reserve Bank of India have been consolidated in the Master Circular on “Loans and Advances—Statutory and Other Restrictions.”

 

Banks are free to determine their own lending rates but each bank must disclose its minimum interest rate which takes into consideration all elements of lending rates that are common across borrowers.

 

Interest rates on all new floating rate retail loans and loans to micro, small and medium enterprises extended by banks are required to be linked to an external benchmark. The external benchmark include the Reserve Bank of India policy repo rate, Government of India 91-day treasury bill yield, Government of India 182-day treasury bill yield or any other benchmark market interest rate produced by Financial Benchmarks India Private Limited.

 

Banks are free to offer floating rate loans to other types of borrowers (i.e., corporate borrowers) either on external benchmark or marginal cost of funds based lending rate which is the internal benchmark for such purposes. Banks have to review and publish their marginal cost of funds based lending rate every month on a preannounced date for different maturities, ranging from overnight rate up to one year basis methodology, prescribed by Reserve Bank of India for computation of marginal cost of funds based lending rate.

 

There shall be no lending below the benchmark rate for a particular maturity for all loans linked to that benchmark.

 

Under Section 20(1) of the Banking Regulation Act, a bank cannot grant any loans and advances against the security of its own shares and a banking company is prohibited from entering into any commitment for granting any loans or advances to or on behalf of any of its directors, or any firm in which any of its directors is interested as partner, manager, employee or guarantor, or any company (not being a subsidiary of the banking company or a company registered under Section 25 of the Companies Act, 1956 or a government company) of which, or the subsidiary or the holding company of which any of the directors of the bank is a director, managing agent, manager, employee or guarantor or in which he holds substantial interest, or any individual in respect of whom any of its directors is a partner or guarantor. There are certain exemptions in this regard as the explanation to the section provides that “loans or advances” shall not include any transaction which the Reserve Bank of India may specify by general or special order as not being a loan or advance for the purpose of this section.

 

There are guidelines on loans against equity shares in respect of amount, margin requirement and purpose. The Reserve Bank of India has issued guidelines requiring banks to put in place a policy for exposure to real estate with the approval of their boards. The Reserve Bank of India has also permitted banks to extend financial assistance to Indian companies for acquisition of equity in overseas joint ventures or wholly owned subsidiaries or in other overseas companies, new or existing, as strategic investment. Banks are not permitted to finance acquisitions by companies in India.

 

  

 

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The Reserve Bank of India has issued instructions regarding sharing of information relating to credit, derivatives and unhedged foreign currency exposures among banks and to put in place an effective mechanism for information sharing. Under this framework, approval of fresh loans and renewal of loans to new and existing borrowers should be done only after obtaining/sharing necessary information.

 

The Reserve Bank of India guidelines for delivery of bank credit require that for borrowers having an aggregate fund-based working capital limit of Rs. 1.5 billion and above from the banking system, a minimum loan component of 60.0% on the fund-based working capital limits is applicable. Drawing in excess of the minimum loan component threshold would be allowed in the form of cash credit/overdraft facility. The amount and tenor of the loan component may be fixed by banks in consultation with the borrowers, subject to the tenor of the loan component not being less than seven days.

 

Based on the “Recommendations of the Working group on Digital Lending – Implementation” dated August 10, 2022, Reserve Bank of India issued “Guidelines on Digital Lending” on September 2, 2022. The requirements of the guidelines include calculation of Annual Percentage Rate (APR) and displaying the same in the prescribed format of Key Fact Statement (KFS), providing KFS to the customer, appointing Nodal Grievance Redressal Officer for dealing with complaints/issues related to digital lending, providing cooling off /look up periods during which the borrower can foreclose the loan without paying any penalty, providing digitally signed documents to the borrowers and other requirements. To provide clarity on certain aspects of the guidelines, Reserve Bank of India issued Frequently Asked Questions (FAQ) on Digital Lending Guidelines (DLG) on February 14, 2023.

 

Directed Lending

 

Priority Sector Lending

 

The guidelines on lending to priority sector require commercial banks to lend a certain percentage of bank credit to specific sectors (the priority sectors) such as agriculture, small, micro and medium enterprises, education, housing sector, social infrastructure, renewable energy and loans to start-ups.

 

The Reserve Bank of India’s total priority sector target is 40.0% of adjusted net bank credit (“ANBC”) or of the credit equivalent amount of off-balance sheet exposure (“CEOBE”), whichever is higher, with sub-targets of 7.5% to micro enterprises within the overall target of 18.0% in agriculture. The target for lending to small and marginal farmers has been increased from 9.0% in fiscal 2022, to 9.5% in fiscal 2023 and will be increased further to 10.0% in fiscal 2024. The target for lending to identified weaker sections of society has been increased from 11.0% in fiscal 2022, to 11.5% in fiscal 2023 and will be increased further to 12.0% in fiscal 2024.

 

The Reserve Bank of India has notified a new criterion for classifying an enterprise as micro, small and medium from July 2020. Udyam Registration Certificate (“URC”) is necessary for lending to micro, small and medium enterprises to qualify for priority sector. In July 2021, retail and wholesale traders were permitted to register online and obtain URC, resulting in them continuing to qualify under priority sector lending.

 

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Investments by banks in securitized assets, outright purchases of loans and assignments are eligible for classification under priority sector if the underlying assets themselves qualified for such treatment. The interest rates charged to ultimate borrowers by the originating entities in such transactions are capped for such transactions to be classified as priority sector.

 

The Reserve Bank of India has allowed banks to sell and purchase priority sector lending certificates in the event of excess/shortfall in meeting priority sector targets, which may 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.

 

The Reserve Bank of India allows banks to issue long-term bonds for financing infrastructure and low-cost housing. The amount raised by way of these bonds is permitted to be excluded from adjusted net bank credit for the purpose of computing priority sector lending targets, except to the extent that the lending against these bonds is included in priority sector lending.

 

Banks falling short of their priority sector lending targets are required to contribute allocated amounts to specific Government of India funds (i.e., Rural Infrastructure Development Fund (“RIDF”)), established with National Bank for Agriculture and Rural Development (“NABARD”) and other funds with NABARD/ National Housing Bank (“NHB”)/ Small Industries Development Bank of India (“SIDBI”)/ Micro Units Development & Refinance Agency (“MUDRA”) Limited. The interest rates on contribution to RIDF or any other funds, tenure of deposits, and other features are fixed by the Reserve Bank of India from time to time. The interest rates on these contributions are below market rates.

 

Export Credit

 

The Reserve Bank of India allows exporters to avail short-term working capital financing at internationally comparable interest rates. Export credit is available both in rupee as well as in foreign currency. This enables exporters to have access to an internationally competitive financing option. The Reserve Bank of India has allowed exporters with a satisfactory track record of at least three years to receive long-term export advance at concessional rates for execution of long-term supply contracts up to a maximum period of 10 years.

 

Regulations governing overseas direct investment

 

In August 2022, Reserve Bank of India along with the Central Government has issued a new Overseas Investment regime (i.e., Foreign Exchange Management (Overseas Investment) Rules, Regulations and Directions) to promote the ease of doing business, to cover wider economic activity and significantly reduce the need for seeking specific approvals from the Reserve Bank of India. The new regime has introduced the Late Submission Fee (LSF) for reporting delays and also the specific guidelines have been prescribed for Overseas Investment in IFSC by persons resident in India.

 

Regulations on International Trade Settlement in Indian Rupees (“INR”)

 

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In July 2022, Reserve Bank of India has notified an additional arrangement for invoicing, payment, and settlement of exports/imports in INR in order to promote growth of global trade with emphasis on exports from India and to support the interest of global trading community in INR. The broad framework for cross border trade transactions in INR is as follows:

 

a)All exports and imports trade transactions to be denominated, invoiced and settled in INR.

 

b)AD bank in India may open Special INR VOSTRO of correspondent bank/s of the partner trading country for settlement of trade transactions with any country after obtaining Reserve Bank of India approval.

 

c)The balance in Special INR VOSTRO can be used for Payments for projects and investments, Export/Import advance flow management and Investment in Government Treasury Bills, Government securities and other assets.

 

Credit Exposure Limits

 

As a prudential measure aimed at better risk management and avoidance of concentration of credit risks, the Reserve Bank of India has prescribed credit exposure limits for banks and long-term lending institutions in respect of their lending to individual borrowers and to all companies in a single group (or sponsor group).

 

The Reserve Bank of India requires banks to fix internal limits of exposure to specific sectors. These limits are subject to periodic review by the banks.

 

Under Reserve Bank of India guidelines, a borrower having an aggregate fund-based credit limit of Rs. 100.0 billion will be considered a specified borrower. The normally permitted lending limit for specified borrowers is defined as an amount that is 50.0% of the incremental funds raised over and above the aggregate fund-based credit limit. The general provision required on the incremental exposure above the normally permitted lending limit would be 3.0% and the additional risk weight for such exposure over and above the applicable risk weight would be 75.0%.

 

Further, the Reserve Bank of India has issued guidelines on large borrowers which prescribe a limit of 20.0% and 25.0% of the eligible capital base in respect of exposures to single counterparty and groups of connected counterparties with effect from April 2019. The eligible capital base is defined as the Tier 1 capital of the bank as against the earlier norm of total capital funds. Exposure to a single non-banking finance company or a group of connected non-banking finance companies is restricted to 15.0% and 25.0%, respectively, of the eligible capital base. The definition of exposure for large borrowers includes off-balance sheet items converted into credit exposure equivalents through the use of credit conversion factors used for assessing credit risk under the standardized approach for risk based capital requirements. In June 2019, the Reserve Bank of India introduced an economic inter-dependence criterion in the definition of connected counterparties, which has been applicable since April 2020.

 

Corporate borrowers having total exposure of Rs. 250 million (100 million from April 2024 onwards and 50 million from April 2025 onwards) and above in the banking system are required to obtain a legal entity identifier registration. A borrower who does not obtain the legal entity identifier is not eligible for renewal or enhancement of credit facilities.

 

Capital Market Exposure Limits

 

The Reserve Bank of India guidelines on capital market exposures stipulate that a bank’s exposure to capital markets in all forms (both fund-based and non-fund-based) by way of investments in shares, convertible bonds/debentures, units of equity oriented mutual funds, loans against shares, and secured and unsecured advances to stock brokers, should not exceed 40.0% of its net worth on both a stand-alone and consolidated basis as of March 31 of the previous year.

 

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Limits on intra-group transaction and exposures

 

The Reserve Bank of India guidelines on management of intra-group transactions and exposures for financial conglomerates prescribe quantitative limits for intra-group financial transactions and prudential measures for non-financial transactions. The Reserve Bank of India has prescribed a single group entity exposure limit of 5.0% of paid-up capital and reserves of the bank for non-financial companies and unregulated financial services companies and 10.0% in the case of regulated financial entities. The aggregate group exposure cannot exceed 20.0% of paid-up capital and reserves and surplus in case of all group entities (financial and non-financial) taken together and 10.0% in the case of all non-financial companies and unregulated financial services companies taken together. Banks’ exposures to other banks/financial institutions in the group in the form of equity and other capital instruments are exempted from above limits. If the exposure exceeds the permissible limits, the excess amount would be deducted from common equity Tier 1 capital of the bank.

 

Master Direction on Transfer of Loan Exposure

 

In order to provide banks with options to manage liquidity, rebalance their exposure or strategic sales and resolve their non-performing assets, the Reserve Bank of India issued Master Direction – Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 on September 24, 2021. Under these guidelines, the board of directors of a bank must establish a policy for transfer of loans. Originators need to satisfy the Minimum Holding Period requirement (3 months and 6 months) and Minimum Retention Ratio (5% and 10%) as mentioned in extant guideline.

 

Securitisation involves transactions where credit risk in assets are redistributed by repackaging them into tradeable securities with different risk profiles which may give investors of various classes access to exposures which they otherwise might be unable to access directly. Reserve Bank of India issued the Master Direction (Securitisation of Standard Assets) Directions, 2021 on September 24, 2021.

 

The securitisation and Transfer of Loan exposure transactions can be executed by Lenders who are Scheduled commercial banks, Primary (Urban) Co-operative Banks/State Co-operative Banks/ Central Co-operative Banks (only for transfer of loan exposures), All India Term Financial Institutions, Small Finance Banks, NBFCs, and HFCs.

 

Credit Information Bureaus

 

Pursuant to the Credit Information Companies (Regulation) Act, 2005, every credit institution, including a bank, has to become a member of a credit information bureau and furnish to it such credit information as may be required of the credit institution by the credit information bureau about individuals or groups who enjoy a credit relationship with it. Banks are also required to share information on investments in commercial paper and unhedged foreign currency exposures of borrowers to the credit information companies. Other credit institutions, credit information bureaus and such other persons as the Reserve Bank of India specifies may access such disclosed credit information. Seeking to strengthen the coverage and use of credit information, the Reserve Bank of India standardized the data formats for furnishing of credit information to credit information companies, common classification of credit scores and best practices to be followed by credit information companies.

 

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Loan Loss Provisions and Non-Performing Assets

 

The Reserve Bank of India’s Master Circular on “Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances” dated April 1, 2023 as amended, provides consolidated instructions and guidelines relating to income recognition, asset classification and provisioning standards.

 

Asset Classification

 

In particular, an advance is a non-performing asset where interest and/or installment of principal remains overdue for a period of more than 90 days in respect of a term loan; the account remains “out-of-order” (as defined below) in respect of an overdraft or cash credit; the bill remains overdue for a period of more than 90 days in case of bills purchased and discounted; installment of principal or interest remains overdue for two crop seasons for short duration crops or for one crop season for long duration crops; the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitization transaction.

 

In respect of derivative transactions, the overdue receivables related to positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment; or in respect of credit card transactions, if the minimum amount due, as mentioned in the statement, remains overdue for a period of more than 90 days from the payment due date mentioned in the statement. Interest in respect of non-performing assets is not recognized or credited to the income account unless collected. Non-performing assets are classified as described below.

 

Sub-Standard Assets. Assets that are non-performing assets for a period not exceeding 12 months. Such an asset has well-defined credit weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the bank will sustain some loss, if deficiencies are not corrected.

 

Doubtful Assets. Assets that have remained sub-standard for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that are classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

 

Loss Assets. Assets on which losses have been identified by the bank or internal or external auditors during the performance of their audit procedures or during the Reserve Bank of India inspection but the amount has not been written off fully.

 

There are separate guidelines for classification of loans for projects under implementation which are based on the date of commencement of commercial production and date of completion of the project as originally envisaged at the time of financial closure.

 

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The Reserve Bank of India, under its risk-based supervision exercise, carries out the risk assessment of banks on an annual basis. As a part of this assessment, the Reserve Bank of India separately reviews asset classification and provisioning of credit facilities given by banks to its borrowers. This assessment is initiated subsequent to the completion of the annual audit and the publication of audited financial statements for the given financial year. Any divergences in classification or provisioning arising out of the supervisory process are given effect in the financial statements in subsequent periods after conclusion of the exercise. Such divergences are required to be disclosed by banks in their financial statements if either the additional provisioning requirement assessed by the Reserve Bank of India exceeds 10.0% (5% from fiscal 2024 onwards) of the published profits before provisions and contingencies for the period, or the additional gross non-performing assets identified by the Reserve Bank of India exceeds 10.0% (5% from fiscal 2024 onwards) of the published incremental gross non-performing assets for the reference period, or both. The assessment of divergence in asset classification and provisioning conducted by the Reserve Bank of India for ICICI Bank in fiscal 2020, fiscal 2021 and fiscal 2022 did not require any additional disclosures.

 

Restructured loans

 

Standard restructured loans are subject to higher standard asset provisioning requirements and higher risk weights for capital adequacy purposes. The higher risk weights and provision shall continue until satisfactory performance under the revised payment schedule has been established for the specified period. If the restructured account is overdue as per the revised schedule for a period beyond the minimum period prescribed for classification of a loan as non-performing, it is required to be downgraded to non-performing status with reference to the pre-restructuring payment schedule.

 

See also “Risk Factors—Risks Relating to Our Business—The future trajectory of the COVID-19 pandemic is uncertain and could adversely affect our business, the quality of our loan portfolio and our financial performance”.

 

Provisioning and write-offs

 

Provisions under Indian GAAP are based on guidelines specific to the classification of the assets. The following guidelines apply to the various asset classifications:

 

Standard Assets: The allowances on the performing portfolios are based on guidelines issued by the Reserve Bank of India. The provisioning requirement is a uniform rate of 0.4% for all standard assets except certain advances which require provision in the range of 0.25% to 2%:

 

Reserve Bank of India guidelines require banks to maintain provisions for standard assets at rates higher than the regulatory requirement in respect of advances to stressed sectors of the economy. For assets referred to the National Company Law Tribunal under the Insolvency and Bankruptcy Code, banks have to make provisions to the extent of 50.0% of the secured portion and 100.0% of the unsecured portion of the outstanding loans.

 

Sub-standard Assets: A provision of 15.0% is required for all substandard assets as compared to the previous requirement of 10.0%. A provision of 25.0% is required for accounts that are unsecured. Unsecured infrastructure loan accounts classified as substandard require provisioning of 20.0%.

 

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Doubtful Assets: A 100.0% provision/write-off is required against the unsecured portion of a doubtful asset and is charged against income. For the secured portion of assets classified as doubtful, a 25.0% provision is required for assets that have been classified as doubtful for a year, a 40.0% provision is required for assets that have been classified as doubtful for one to three years and a 100.0% provision is required for assets classified as doubtful for more than three years. The value assigned to the collateral securing a loan is the amount reflected on the borrower’s books or the realizable value determined by third-party appraisers.

 

Loss Assets: The entire asset is required to be written off or provided for.

 

Under the Banking Regulation Act, banking companies in India are required to comply with the directions of the Reserve Bank of India, including guidelines issued with respect to asset identification, asset classification and provisioning by banking companies. While preparing the financial statements under Indian GAAP, banking companies are required to comply with all regulatory requirements, including such directions issued by the Reserve Bank of India. The Reserve Bank of India issued a circular in 2016 instructing all scheduled commercial banks in India to comply with the Indian Accounting Standards (“Ind AS”) for financial statements. In 2019 the Reserve Bank of India deferred the implementation of the Ind AS until further notice as legislative amendments recommended were still under the consideration of the Government of India. In fiscal 2023, 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. The draft guidelines on the expected credit loss framework is awaited from Reserve Bank of India.

 

Framework for Compromise Settlements and Technical Write-offs

 

In June 2023, Reserve Bank of India issued guideline on Framework for Compromise Settlements and Technical Write-offs requiring Bank to put a board approved policy for setting necessary condition precedents such as minimum ageing, deterioration in collateral value and certain other parameters including staff accountability, delegation of power, cooling period etc. for taking fresh exposure. Further, the guideline requires that in case of partial technical write-offs, the prudential requirements in respect of residual exposure, including provisioning and asset classifications shall be with reference to the original exposure. 

 

Automation of income recognition, asset classification and provisioning process in banks

 

In 2020 the Reserve Bank of India issued a circular for automation of income recognition, asset classification and provisioning processes in banks. As per this circular, all borrower accounts and investments of the bank should be covered in the automated IT based system for asset classification, upgradation and provisioning processes. The asset classification rules should be configured in the system in compliance with the regulatory requirements. The system based asset classification should be an ongoing exercise for upgrades and downgrades of borrower accounts.

 

Guidelines Relating to Use of Recovery Agents by Banks

 

The Reserve Bank of India has asked banks to put in place a due diligence process for the engagement of recovery agents, structured to cover, among others, individuals involved in the recovery process. Banks are expected to communicate details of recovery agents to borrowers and have in place a grievance redressal mechanism pertaining to the recovery process. The Reserve Bank of India has advised banks to initiate a training course for current and prospective recovery agents to support prudent recovery practices. In August 2022, the Reserve Bank of India advised that the Regulated Entities (“REs") shall strictly ensure that they or their agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/ or anonymous calls, persistently calling the borrower, or other similar acts.

 

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Legislative Framework for Enforcement of Security by Banks for Non-performing Assets/Recovery of debts due to Banks

 

The SARFAESI Act provides that a secured creditor may, in respect of loans classified as non-performing in accordance with the Reserve Bank of India guidelines, give notice in writing to the borrower requiring it to discharge its liabilities within 60 days, failing which the secured creditor may, inter alia, take possession of the assets constituting the security for the loan, take over the management of the business of the borrower, appoint a person to manage the secured assets taken in possession and the like with the ultimate objective of recovering the money due to the bank. Additionally, under SARFAESI, a central registry has been established, known as the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (“CERSAI”), to register the security interst of banks on the borrower’s assets and only if the banks register their security interest with CERSAI that the remedy under SARFAESI shall be available to them. The SARFAESI Act also provides for setting up of asset reconstruction companies regulated by the Reserve Bank of India to acquire stressed assets from banks and financial institutions. In 2021, National Asset Reconstruction Company Limited (“NARCL”), a government entity, was incorporated and registered with the Reserve Bank of India as an asset reconstruction company under SARFAESI for aggregation and resolution of non-performing assets in the banking industry.

 

See also “—Regulations Relating to Sale of Assets to Asset Reconstruction Companies”.

 

The SARFAESI Act focuses on improving the rights of banks and financial institutions and other specified secured creditors as well as asset reconstruction companies by providing that such secured creditors can take over management control of a borrower company upon default and/or sell assets without the intervention of courts, in accordance with the provisions of the SARFAESI Act.

 

The Recovery of Debts and Bankruptcy Act, 1993 provides for establishment of Debt Recovery Tribunals for expeditious adjudication and recovery of debts due to any bank or Public Financial Institution or to a consortium of banks and Public Financial Institutions. Under this Act, the procedures for recoveries of debt have been simplified and time frames have been fixed for speedy disposal of cases. Upon establishment of the Debt Recovery Tribunal, no court or other authority can exercise jurisdiction in relation to matters covered by this Act, except the higher courts in India in certain circumstances.

 

Resolution of Stressed Assets

 

Insolvency and Bankruptcy Code, 2016

 

The Insolvency and Bankruptcy Code, 2016, provides a time-bound revival and rehabilitation mechanism. The corporate insolvency resolution process can be initiated by the creditors on occurrence of a default above a specific threshold amount. It classifies the creditors into financial creditors (which have extended financial debts) and operational creditors (which have provided goods and services). Other key features include specific timelines for dealing with insolvency resolution applications. The insolvency resolution plan has to be approved by a majority of financial creditors, which requires approval by the adjudicating authority and, if rejected, the adjudicating authority may pass an order for liquidation. The National Company Law Tribunal has been set up as the adjudicating authority, the National Company Law Appellate Tribunal has been set up to hear appeals on the orders of the adjudicating authority with jurisdiction over companies and limited liability entities, and the Insolvency and Bankruptcy Board of India has been set up as the new insolvency regulator overseeing insolvency professionals, information utilities and promote transparency.

 

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Regulations Relating to Sale of Assets to Asset Reconstruction Companies

 

The Reserve Bank of India has issued guidelines to banks on the process to be followed for sales of financial assets to asset reconstruction companies in the Master Direction on Transfer of Loans. These guidelines provide that a bank may sell financial assets to an asset reconstruction company provided the asset is a non-performing asset. These assets are to be sold on a “without recourse” basis, only. The banks selling financial assets should seek to ensure that there is no known liability devolving on them and that they do not assume any operational, legal or any other type of risks relating to the financial assets sold. Further, banks may not sell financial assets at a contingent price with an agreement to bear a part of the shortfall on ultimate realization.

 

Banks can also invest in security receipts or pass-through certificates issued by the asset reconstruction company or trusts set up by it to acquire the financial assets. The Reserve Bank of India has also issued guidelines governing the affairs of asset reconstruction companies. The guideline provides norms relating to period of realization of assets by asset reconstruction company, mandatory holding of security receipts, period for formulating plan of recovery, and other norms. Asset reconstruction companies are not permitted to acquire any non-performing financial assets from their sponsor banks on a bilateral basis. However, they may participate in auctions of non-performing assets by their sponsor banks.

 

Framework for Early Identification of Stress and Information Sharing

 

The Reserve Bank of India has issued a “Framework for Revitalizing Distressed Assets in the Economy.” The framework outlined an action plan for early identification of problem cases, creating a central repository of information on large credits, timely restructuring of accounts which were considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts. Accounts have to be categorized into “special mention accounts” based on specified criteria. The Reserve Bank of India issued the Prudential Framework for Resolution of Stressed Assets in 2019. The framework additionally required banks to undertake a review of the borrower within 30 days of a default in the borrower account and enter into an inter-creditor agreement during the 30-day review period to decide rules for finalization and implementation of the resolution plan.

 

See also “Supervision and Regulation—Legislative Framework for Recovery of Debts due to Banks” and “Supervision and Regulation—Legislative Framework for Recovery of Debts due to Banks— Resolution of Stressed Assets—The Banking Regulation (Amendment) Ordinance, 2017”.

 

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Reserve Bank of India guidelines provide a framework for dealing with loan frauds. The guidelines relate to detection, reporting and monitoring of fraud accounts and prescribe continuous monitoring and red flagging of accounts based on early warning signals for accounts above Rs. 30 million. The guidelines also require reporting frauds on the Reserve Bank of India’s central repository of information on large credits for dissemination to other banks and enabling decision-making among banks in case of consortium or multiple banking arrangements. The framework also illustrates checks/investigations during the different stages of the loan life cycle and timelines have been defined to complete the due diligence for evaluation of an account. Restructuring or grant of additional facilities would not be available in case of fraud or red-flagged accounts. There are provisioning guidelines relating to fraud accounts that require banks to make a provision.

 

Regulations Relating to the Opening of Branches

 

Opening of branches and relocation of existing branches are governed by the provisions of Section 23 of the Banking Regulation Act.

 

Banks are permitted to open banking outlets in Tier 1 to Tier 6 centers without the prior approval of the Reserve Bank of India, subject to certain requirements. Banks are mandated to allocate 25.0% of the total number of new banking outlets opened during a year to unbanked rural centers. An unbanked rural center is defined as an area classified as Tier 5 and Tier 6 centers that does not have core banking system enabled banking outlets.

 

A banking outlet is a fixed point service delivery unit, manned by either a bank’s staff or its business correspondent, and where services of acceptance of deposits, encashment of checks/cash withdrawal or lending of money are provided for a minimum of four hours per day for at least five days a week.

 

With an aim to increase the reach of digital banking services, the Reserve Bank of India issued guidelines on setting up of Digital Banking Units by commercial banks. These are fixed point business units having minimum digital infrastructure to offer digital banking products and services. These digital banking units will be treated as banking outlets.

 

Regulations Governing Use of Business Correspondents

 

To increase the outreach of banking and promote greater financial inclusion, the Reserve Bank of India allows banks to engage business correspondents for providing banking and financial services at locations other than a bank branch. Business correspondents offer a limited range of banking services at low cost, as setting up a brick and mortar branch may not be viable in all areas. Banks are required to take full responsibility for the acts of omission and commission of the business correspondents that they engage and to conduct due diligence for minimizing agency risks. The entities permitted to act as business correspondents included individuals such as retired bank employees, retired teachers, individual owners of small, independent grocery stores, medical and fair price shops and certain other individuals. The non-individual entities include non-government organizations or microfinance institutions set up under societies/trust acts, societies registered under mutually aided cooperative societies acts of various states, or the Cooperative Societies Acts of various states, not-for-profit companies and post offices. Banks are also allowed to engage companies with large and widespread retail outlets and registered under the Companies Act and non-deposit taking non-banking financial companies as business correspondents. Further, with a view to scale up the business correspondent channel, the Reserve Bank of India requires the board of banks to review the operations and payment of remuneration to business correspondents at least once every six months. The Reserve Bank of India has also proposed to create a registry of business correspondents.

 

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Regulations Relating to Deposits

 

The Reserve Bank of India permits banks to independently determine interest rates offered on term deposits. However, banks cannot pay interest on current account deposits. Interest rates payable on savings deposits are not regulated. However, a uniform interest rate on savings deposits must be paid on deposits up to Rs. 100,000 and differential rates can be paid on deposits of over Rs. 100,000. The payment of interest on savings deposits is calculated on daily product basis.

 

Domestic time deposits and rupee-denominated non-resident ordinary accounts have a minimum maturity of seven days. Rupee denominated non-resident external rupee accounts have a minimum maturity of one year and foreign currency denominated for non-resident Indians have a minimum maturity of one year and a maximum maturity of five years.

 

Banks are allowed to offer differential rates of interests on domestic term deposits and for bulk term deposits are of Rs. 20 million and above.

 

The Reserve Bank of India allows banks to offer early withdrawal facility in a term deposit as a distinguishing feature for offering differential rates of interest. All term deposits of individuals of Rs. 1.5 million and below should, necessarily, have premature withdrawal facility. For all other term deposits, customers should be given the option to choose between term deposits either with or without premature withdrawal facility. Banks will be required to disclose in advance the schedule of interest rates payable on deposits.

 

Banks are free to determine the interest rates on non-resident (external) rupee deposits and ordinary non-resident accounts. However, the interest rates cannot exceed the rate offered by the bank on comparable domestic rupee deposits.

 

In view of the impending discontinuance of certain tenors of US$-LIBOR as a benchmark rate, the interest rates on foreign currency non-resident (B) deposits shall be linked to a widely accepted overnight alternative reference rate for the respective currency.

 

With a view to increasing the availability of financial services across regions and population segments, the Reserve Bank of India has advised banks to make available a basic savings bank deposit account without having the requirement of any minimum balance.

 

The Reserve Bank India’s Framework for acceptance of Green Deposits came into effect from June 1, 2023.The purpose of the framework is to encourage REs to offer green deposits to customers, protect the interests of the depositors, aid customers to achieve their sustainability agenda, address greenwashing concerns and help augment the flow of credit to green activities and projects.

 

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Regulations Relating to Payments

 

On January 5, 2021, the Reserve Bank of India decided to introduce the Legal Entity Identifier system for single payment transactions of value Rs.500 million and above undertaken by non-individual entities using centralised payment systems like real time gross settlement (RTGS) and national electronic funds transfer (NEFT). These directions were effective from April 1, 2021.

 

In January 2020, the Reserve Bank of India advised banks to issue or re-issue, all cards (physical and virtual) and enable them for use only at contact based points of usage like ATMs and point of sale (“PoS”) devices within India. The banks shall provide cardholders a facility for enabling card-not-present (for domestic and international online transactions) transactions, card-present (for international transactions) transactions and contactless transactions. For existing cards, issuers may decide whether to disable the card-not-present (domestic and international) transactions, card-present (international) transactions and contactless transaction rights. Existing cards that have never been used for online (card not present) / international / contactless transactions shall be mandatorily disabled for this purpose.

 

On August 6, 2020, the Reserve Bank of India advised that authorised payment system operators (including banks and non-banks) and their participants to implement an online dispute resolution system for resolving customer disputes and grievances pertaining to digital payments, using a system-driven and rule-based mechanism with zero or minimal manual intervention by January 2021. The payment system operators shall provide access to such a system to its participating members via payment system participants.

 

In February 2021, the Reserve Bank of India issued master directions on digital payment security controls, which provides necessary guidelines for the regulated entities to set up a robust governance structure and implement common minimum standards of security controls for channels like internet, mobile banking, card payments, among others. This is to create an enhanced environment for customers to use digital payment products in more safe and secure manner. The guidelines have been effective since August 18, 2021.

 

The Reserve Bank of India in its circular dated September 7, 2021 has enhanced applicability of card tokenisation services to Card-on-File Tokenisation services as well. Further, card issuers have been permitted to offer card tokenisation services as Token Service Providers. Further, the Reserve Bank of India in its circular dated January 3, 2022 has issued a framework for carrying out digital payments in offline mode using cards, wallets, mobile devices, and other modes of digital payments.

 

Regulations Relating to Customer Service and Customer Protection

 

Enhancing customer service and customer protection is a focus area for the Reserve Bank of India and has regularly emphasized on offering efficient, fair and speedy customer service. In this regard, the Reserve Bank of India has issued several guidelines.

 

The Reserve Bank of India has issued a charter of customer rights, which provides the broad overarching principles for the protection of bank customers. The charter describes five basic rights of bank customers which are the right to fair treatment, the right to transparency, fair and honest dealing, the right to suitability, the right to privacy and the right to grievance redress and compensation.

 

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The Reserve Bank of India has issued procedural guidelines for redressal of grievances by an internal ombudsman. Internal Ombudsman Scheme covers appointment/tenure, roles and responsibilities, procedural guideline and oversight mechanism for the internal Ombudsman. Internal Ombudsman examine all customer grievances including complaints of deficiency in service on the part of the bank as also those listed under Clause 8 of the Banking Ombudsman Scheme, 2006 (as amended from time to time) received by banks and which are partly or wholly rejected by bank's internal grievance redressal mechanism. In order to further strengthen the customer grievance redressal mechanism in banks, the Reserve Bank of India has decided to put in place a comprehensive framework including enhanced disclosures by banks on customer complaints, recovery of cost of redressal from banks for the maintainable complaints received against them in Offices of Banking Ombudsman in excess of the peer group average, and undertaking intensive review of the grievance redressal mechanism and supervisory action against banks that fail to improve their redressal mechanism in a time bound manner.

 

The Reserve Bank of India has integrated all the existing three Ombudsman schemes, which were (i) the Banking Ombudsman Scheme, 2006; (ii) the Ombudsman Scheme for Non-Banking Financial Companies, 2018; and (iii) the Ombudsman Scheme for Digital Transactions, 2019, into a single scheme known as the Integrated Ombudsman Scheme, 2021.

 

The Reserve Bank of India has issued directions to banks for determining customer liability in case of Unauthorized Electronic Banking Transaction. The facility of electronic transactions (other than ATM cash withdrawals) may not be offered to customers who do not provide mobile numbers. The Reserve Bank of India has advised banks to clearly define the rights and obligations of customers in case of unauthorized transactions in specified scenarios. Further, banks are required to formulate/revise their customer relations policy, with approval of their Boards, to cover aspects of customer protection, including the mechanism of creating customer awareness on the risks and responsibilities involved in electronic banking transactions and customer liability in cases of unauthorized electronic banking transaction. The Reserve Bank of India has extended the customer protection framework to prepaid payment instruments (PPIs) as well. In March 2020, the Reserve Bank of India issued guidelines to regulate the activities of payment aggregators and has also provided baseline technology-related recommendations to payment gateways.

 

The Reserve Bank of India does not allow entities regulated by it, including banks, to deal in virtual currencies or to provide services facilitating any person or entity in dealing with or settling virtual currencies. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/sale of virtual currencies.

 

Personal Data Protection and Privacy

 

ICICI Bank is committed to protecting the privacy of individuals whose personal data it holds, and processing such personal data in a way that is consistent with applicable laws. It is important for employees and businesses to protect customer data and follow the applicable privacy laws in India and overseas locations to ensure safety and security of data. We believe that the data privacy framework should be in line with the evolving regulatory changes and digital transformation.

 

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The Bank has a global presence in several overseas jurisdictions including Hong Kong, Singapore, United States, United Kingdom, Canada, China, Dubai International Financial Centre and Bahrain. We are committed to ensuring compliance with applicable laws across these jurisdictions. We have an integrated and centralized strategy for achieving data privacy compliance across all jurisdictions. A set of principles have been defined with respect to handling customer data. There is a mechanism in place for reporting any form of personal data incident which is accessible to all employees in the Bank.  Any kind of personal data related incidents reported through the service request undergoes a detailed investigation and report of same is shared by Data Protection Officer (DPO) with senior members of the Bank from the Information Security Group, Operational Risk Management Group, Fraud Management Group, Human Resources, Compliance and the Legal Team on a monthly basis.

 

The Bank periodically updates its Personal Data Protection Standard to cover the personal data protection regulatory requirements for the Bank and its overseas offices to reflect the changes in data protection laws and regulations. The Personal Data Protection Standard of the Bank was reviewed by an international law firm and was further updated and strengthened in fiscal 2022.

 

Privacy regulations require the personal data of customers to be protected throughout its entire lifecycle. Accordingly, the Bank has undertaken several comprehensive measures such as categorizing all personal data and sensitive personal data as ‘Confidential Information’, keeping record of all its processing activities, entering into non-disclosure and confidentiality agreements with employees and third parties who are privy to personal data of the customers and providing customers the option to exercise various rights which they enjoy under applicable data protection regulations and incident handling procedures.

 

Regulations Governing Mobile Banking

 

The Reserve Bank of India permits Indian banks to offer mobile banking services to their customers. Transactions involving a debit to the customer’s account should have a two-level authentication to execute the transaction. The Reserve Bank of India has issued guidelines requiring banks to provide easy registration for mobile banking services, including generation of the personal identification number through multiple channels. While use of mobile banking services for cross-border transactions was previously restricted, the restriction was subsequently removed. Services on mobile applications can now be used for both rupee based transaction in the domestic market and for undertaking cross-border transactions.

 

Regulations Governing Prepaid Payment Instruments

 

The Reserve Bank of India has issued master directions on issuance and operation of prepaid payment instruments. Issuers are required to have Board approved policy for issuance of various types/categories of prepaid instruments, engaging agents, co-branding arrangement, re-validation of gift instruments and all related activities. Pre-paid instruments (or minimum-detail Prepaid Payment Instruments) in small amounts up to Rs. 10,000 can be issued by accepting minimum details and are required to be converted into full-KYC Prepaid Payment Instruments within 24 months from the date of issuance if facility of cash loading / reloading is provided. Prepaid Payment Instruments up to Rs. 200,000 can be issued after completing KYC of the Prepaid Payment Instrument holder. Gift instrument can be issued up to a maximum value of Rs. 10,000. Prepaid Payment Instruments (other than gift Prepaid Payment Instruments and Mass Transit System Prepaid Payment Instruments) shall necessarily have additional factor of authentication. The aspects of co-branded prepaid instruments, fraud prevention, customer protection, grievance handling and information system audit are also highlighted in the directions.

 

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Deposit Insurance

 

Demand and time deposits accepted by Indian banks must be insured with the Deposit Insurance and Credit Guarantee Corporation, a wholly owned subsidiary of the Reserve Bank of India. The limit on insurance coverage for depositors in insured banks was raised from Rs. 100,000 to Rs. 500,000 per depositor from February 4, 2020. Banks are required to pay the insurance premium for the eligible amount to the Deposit Insurance and Credit Guarantee Corporation on a semi-annual basis. The cost of the insurance premium cannot be passed on to the customer. Under the Companies Act, 2013, deposit insurance is mandatory for companies accepting deposits.

 

The Depositor Education and Awareness Fund Scheme, 2014—Section 26A of the Banking Regulation Act, 1949

 

The Reserve Bank of India has advised that banks shall calculate the cumulative balances in all eligible accounts which are unclaimed for more than 10 years along with interest accrued, and the amount due in each calendar month shall be transferred on the last working day of the subsequent month.

 

Borrowings by Banks in India

 

The Reserve Bank of India has permitted banks to borrow and lend in Call, Notice and Term Money Markets as per the internal board approved limits within the prescribed prudential limits for inter-bank liabilities (“IBL”).

 

(a)The IBL of a bank should not exceed 200% of its net worth as on March 31 of the previous year. However, individual banks may, with the approval of their Boards of Directors, fix a lower limit for their inter-bank liabilities, keeping in view their business model.

 

(b)The banks whose CRAR is at least 25% more than the minimum CRAR (9%) (i.e., 11.25%) as on March 31, of the previous year, are allowed to have a higher limit up to 300% of the net worth for IBL.

 

(c)The limit prescribed above will include only fund based IBL within India (including inter-bank liabilities in foreign currency to banks operating within India). In other words, IBL outside India are excluded.

 

The Reserve Bank of India has allowed banks to borrow funds from their overseas branches and correspondent banks (including borrowings for financing export credit, external commercial borrowings and overdrafts from their head office/nostro account) up to a limit of 100.0% of unimpaired Tier 1 capital or US$10 million, whichever is higher.

 

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The aforesaid limit applies to the aggregate amount availed of by all the offices and branches in India from all their branches or correspondents abroad and also includes overseas borrowings in gold for funding domestic gold loans. Capital funds raised by issue of innovative perpetual debt instruments and other overseas borrowings with the specific approval of the Reserve Bank of India will continue to be outside the limit of 100.0% of unimpaired Tier 1 capital.

 

Banks are permitted to raise funds through issuance of rupee denominated bonds overseas. The Reserve Bank of India has permitted banks to issue perpetual debt instruments that can qualify for inclusion as additional Tier 1 capital and debt capital instruments that can qualify for inclusion as Tier 2 capital, by way of rupee denominated bonds in the overseas market, and long-term bonds for financing infrastructure and affordable housing projects.

 

Gold Monetization Scheme and Sovereign Gold Bonds

 

As per the gold monetization scheme of the Reserve Bank of India, banks are allowed to mobilize gold deposits and provide loans against these deposits. The minimum deposit under the gold deposit scheme at any one time is 10 grams of raw gold. The short-term bank deposits are allowed for a minimum of one to three years, and treated as on-balance sheet liability, and medium-term deposits of five to seven years and long-term of 12-15 years. The medium and long-term deposits will be the liability of the Indian central government. The redemption of medium and long-term deposits, at the option of the depositor, can be either in the Indian rupee equivalent of the value of the deposited gold or in the gold itself.

 

The Reserve Bank of India has also issued guidelines on sovereign gold bonds with investments in such bonds being eligible for statutory liquidity ratio calculations. The investment in sovereign gold bond is restricted based on the investor type. The bonds could also be used as collateral for loans.

 

Regulations Relating to Know Your Customer and Anti-Money Laundering

 

The Prevention of Money Laundering Act (“PMLA”), 2002, seeks to prevent and criminalize money laundering and terrorist financing in line with recommendations made by the Financial Action Task Force. This Act lays down the obligations on designated entities (including banks) for maintaining records and reporting certain transactions to the Financial Intelligence Unit. It also lists out the predicate offences, appointment of the Designated Director and Principal Officer and their respective obligations under the Act. Prevention of Money Laundering Rules (“PMLR”), 2005 have also been framed under this Act. Both the PMLA and PMLR are amended from time to time.

 

Reserve Bank of India has also provided directions in line with the PMLA and PMLR. It cover key aspects including customer acceptance policy, customer due-diligence procedures, monitoring of transactions risk management, regulatory reporting, training of employees and independent audit of AML/KYC framework. These directions are updated from time to time.

 

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Pursuant to recent amendments to the PMLA and PMLR, changes have also been made in the Reserve Bank of India Master Direction on KYC, 2016. Major amendments include: identification of Beneficial Owner exemptions; threshold changes for new and legacy cases; amended definitions of Group, Politically Exposed Person, Non-Profit Organisation and Shell banks; increases in the scope of record management; removal of the positive confirmation requirement in case current address and address in Aadhar is different; adoption of artificial intelligence and machine learning for effective monitoring; introduction of Aadhaar OTP based e-KYC in non-face to face mode for periodic updation; defined procedures for implementation of section 12A of the Weapons of Mass Destruction and their Delivery Systems (Prohibited of Unlawful Activities) Act, 2005; and deletion of the words “adverse action against the customers should be avoided” from “Periodic updation of KYC” clause.

 

Regulations Relating to Investments

 

Banks are required to undertake investment activities as per the terms and conditions specified in the extant Reserve Bank of India guideline on Classification, Valuation and Operation of Investment Portfolio of Commercial Banks. Banks are required to adopt a Board approved comprehensive investment policy.

 

The entire investment portfolio (including SLR securities and non-SLR securities) is to be classified under three categories: ‘Held to Maturity’ (“HTM”), ‘Available for Sale’ (“AFS”) and ‘Held for Trading’ (“HFT”). The category of the investment shall be decided by the bank at the time of acquisition.

 

Investments under HTM category shall not exceed 25% of the bank’s total investments except for certain investments as stipulated by Reserve Bank of India.

 

Securities eligible for HTM category are SLR securities, Non-SLR securities (with certain conditions), Recapitalisation Bonds, Equity of subsidiaries and joint ventures, Long-term bonds issued by Infrastructure companies, Unquoted shares/bonds/units of Category I and II Alternative Investment Funds (“AIFs”) for initial period of three years.

 

The securities acquired with the intention to trade by taking advantage of the short term price/interest rate movements shall be classified under HFT. The investments classified under HFT shall be sold within 90 days. The securities which do not fall under HTM or HFT categories shall be classified under AFS.

 

Shifting of investments

 

Banks shall have the freedom to shift investments to/from HTM with the approval of the Board of Directors once at the beginning of the accounting year. Banks shall have the freedom to shift investments from AFS to HFT with the approval of their Board of Directors/ ALCO (Asset Liability Committee) / Investment Committee. Shifting of investments from HFT to AFS shall be permitted only in exceptional circumstances where the bank is not in a position to sell the security within 90 days due to tight liquidity conditions, or extreme volatility, or market becoming unidirectional.

 

In case of sales/transfers to/from HTM category exceeds 5% of the book value of investment held in HTM at the beginning of the year, banks shall disclose in the ‘Notes to Accounts’ to the Financial Statements the market value of the investments held in the HTM category. Banks shall also disclose the excess of book value over market value for which provision is not made.

 

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Bank’s investment in unlisted non-SLR securities shall not exceed 10 percent of its total investment in non-SLR securities as on March 31 of the previous year.

 

Limit on Transactions through Individual Brokers

 

A limit of 5% of total transactions through brokers (both purchase and sales) entered into by a bank during a financial year shall be treated as the aggregate upper contract limit for each of the approved brokers. If for any reason it becomes necessary to exceed the aggregate limit for any broker, banks shall record in writing the specific reasons for such breach and the Board shall subsequently be informed.

 

Income recognition

 

(i) Banks shall recognize income on accrual basis for the following: 

a)Securities of corporate bodies/public sector undertakings in respect of which the payment of interest and repayment of principal have been guaranteed by the Central Government or a State Government, provided interest is serviced regularly and as such is not in arrears.

b)Shares of corporate bodies provided dividend has been declared by the corporate body in its Annual General Meeting and the owner's right to receive payment is established.

c)Government Securities and bonds and debentures of corporate bodies, where interest rates on these instruments are predetermined and provided interest is serviced regularly and is not in arrears.

 

(ii) Income from units of mutual funds shall be recognized on cash basis.

 

The criterion used to classify an asset as Non-Performing Asset (“NPA”) shall be used to classify an investment as a Non-Performing Investment (“NPI”) (i.e., an NPI is one where interest/ instalment, including maturity proceeds is due and remains unpaid for more than 90 days). In the case of equity shares, in the event the investment in the shares of any company is valued at Re.1 per company on account of the non-availability of the latest balance sheet, those equity shares shall be classified as NPI.

 

Subsidiaries and Other Financial and Non-Financial Sector Investments

 

In terms of Section 19(2) of the Banking Regulation Act, banks should not hold shares in any company except as provided in subsection (1) of that Act, whether as pledgee, mortgagee or absolute owner, of an amount exceeding 30.0% of the paid-up share capital of that company or 30.0% of its own paid-up share capital and reserves and surplus, whichever is less. Further, in terms of Section 19(3) of the Banking Regulation Act, banks should not hold shares, whether as pledgee, mortgagee or absolute owner, in any company in the management of which any managing director or manager of the bank is in any manner concerned or interested.

 

Banks need prior permission of the Reserve Bank of India to incorporate or acquire a subsidiary. Banks are required to maintain an “arm’s-length” relationship with subsidiaries.

 

Under the Reserve Bank of India guidelines, a bank’s equity investments in a subsidiary company, or a financial services company (including a financial institution, a stock or other exchange or a depository) which is not a subsidiary, should not exceed 10.0% of the bank’s paid-up share capital and reserves and the total investments made in all subsidiaries and all non-subsidiary financial services companies should not exceed 20.0% of the bank’s paid-up share capital and reserves.

 

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For non-financial services

 

The aggregate equity investments made in all subsidiaries and other entities engaged in financial services and non-financial services, including overseas investments shall not exceed 20% of the bank’s paid-up share capital and reserves.

 

Regulations on Asset Liability Management

 

Liquidity can be measured through stock and flow approaches.

 

Flow approach measurement involves comprehensive tracking of cash flow mismatches. For measuring and managing net funding requirements, the format prescribed by the Reserve Bank of India (i.e., the statement of structural liquidity under ALM System for measuring cash flow mismatches at different time bands) should be adopted. The cash flows are required to be placed in different time bands based on the residual maturity of the cash flows or the projected future behaviour of assets, liabilities and off-balance sheet items. The difference between cash inflows and outflows in each time period thus becomes a starting point for the measure of a bank’s future liquidity surplus or deficit, at a series of points of time.

 

Under the Stock approach certain critical ratios in respect of liquidity risk management and their significance for banks are prescribed by Reserve Bank of India, including Core deposits to Total Assets and Temporary Assets/Total Assets. Banks monitor these ratios by putting in place an internally defined limit approved by the Board for these ratios.

 

Banks also adhere to the various regulatory limits prescribed to reduce the extent of concentration on the liability side of the banks such as Inter-bank Liability (IBL) Limit, Call Money Borrowing and lending limits.

 

Intraday Liquidity Management

 

The Bank has an intra-day liquidity strategy that allows it to monitor and measure expected daily gross liquidity inflows and outflows and ensure that arrangements to acquire sufficient intraday funding to meet its intraday needs is in place and it has the ability to deal with unexpected disruptions to its liquidity flows.

 

Stress Testing

 

Stress testing is an integral part of the overall governance and liquidity risk management culture in banks. A stress test is commonly described as an evaluation of the financial position of a bank under a severe but plausible scenario to assist in decision making within the bank. Stress testing alerts a bank’s management to adverse unexpected outcomes as it provides forward looking assessment of risk and facilitates better planning to address the vulnerabilities identified.

 

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Guidelines on Banks’ Asset Liability Management Framework – Interest Rate Risk

 

In February 17, 2023, the Reserve Bank of India released guideline on ‘Governance, measurement and management of Interest Rate Risk in Banking Book’. Till the time date for implementation is communicated by Reserve Bank of India, the Bank is required to submit the disclosures in the prescribed format to the Department of Regulation, Reserve Bank of India on quarterly basis with effect from the quarter end March 2023. Features of the guideline include:

 

·The framework is applicable only to the Banking Book i.e. trading book excluded from the framework;

·The ‘Outlier’ test is to be considered under six different prescribed interest rate shock scenarios. Banks which generate a decline in Economic Value of Equity (“EVE”) (i.e., ΔEVE) of more than 15% of its Tier 1 capital shall be treated as ‘outliers’; and

·Qualitative and quantitative disclosures are to be made annually in the prescribed format.

 

Information Technology and Cyber Security

 

The Reserve Bank of India’s guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds (G.Gopalakrishna Committee) broadly cover nine subject areas relating to information technology, including information technology governance, information security, IT operations, IT services outsourcing, information systems audit, cyber frauds, business continuity planning, customer education and legal issues. The implementation of the guidelines is to be monitored by the top management on an ongoing basis.

 

In April 2023, the Reserve Bank of India issued Master Direction on Outsourcing of Information Technology Services. Banks have been extensively leveraging Information Technology (“IT”) and IT enabled services (ITeS) to support their business models, products and services offered to their customers. Banks also outsource substantial portion of their IT activities to third parties, which expose them to various risks. Banks intending to outsource any of its IT activities shall put in place a comprehensive Board approved IT outsourcing policy. The policy shall incorporate, inter alia, the role and responsibilities of the Board, Committees of the Board, if any, and Senior Management, IT function, business function, as well as oversight & assurance functions in respect of outsourcing of IT services.

 

Banks shall put in place a Risk Management framework for Outsourcing of IT Services that shall comprehensively deal with the processes and responsibilities for identification, measurement, mitigation/ management and reporting of risks associated with Outsourcing of IT Services arrangements.

 

The Reserve Bank of India’s Cyber Security Framework in Banks requires banks to put in place a cyber-security policy containing an appropriate approach to combat cyber threats given the level of complexity of business and acceptable levels of risk. The cyber security policy should be separate and distinct from the broader IT policy and the aspects that need to be covered in the aforementioned strategy include an arrangement for continuous surveillance, IT architecture should be conducive to security, comprehensive network and database security, protection of customer information, cyber crisis management plan, strengthening cyber security, organizational arrangements and awareness about cyber security among senior/top management.

 

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In April 2022, the Indian Computer Emergency Response Team (“CERT-In”), a nodal agency for responding to computer security incidents set up by the Government of India, issued directions on information security practices, procedure, prevention, response and reporting of cybersecurity incidents for Safe and Trusted Internet. As per the directions issued, amongst other obligations, corporates including banks are mandated to report all cyber incidents to CERT-In within 6 hours of noticing such incidents or being brought to their notice about such incidents. Companies are required to maintain logs of all their information and communications technology (“ICT”) systems for 180 days in India. A copy of ICT logs may be stored outside India also as long as the obligation to produce logs to CERT-In is adhered to by the entities in a reasonable time.

 

Various critical sectors such as power & energy; banking, financial services & insurance; telecom; transport; government and strategic & public enterprises and subsequently their information technology infrastructure have been identified as critical information infrastructure through a gazette notification by the Government of India. In June 2022, the computer resources of ICICI Bank relating to the Core Banking Solution, Real Time Gross Settlement and National Electronic Fund Transfer comprising Structured Financial Messaging Server, were declared as critical information infrastructure, and the computer resources of the Bank’s associated dependencies to be protected systems under the Information Technology Act, 2000. All organisations having protected systems are required to comply with certain rules notified by the Government of India and any incapacitation or destruction of protected system would cause a debilitating impact on national security, governance, economy and social well-being of a nation.

 

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”.

 

Foreign Currency Dealership

 

The Reserve Bank of India has granted us a full-fledged authorized dealers’ license to deal in foreign exchange through our designated branches. Under this license, we have been granted permission to:

 

engage in foreign exchange transactions in all currencies;

open and maintain foreign currency accounts abroad;

raise foreign currency and rupee-denominated deposits from non-resident Indians;

grant foreign currency loans to onshore and offshore corporations;

open documentary credits;

grant import and export loans;

handle collection of bills, and funds transfer services;

issue guarantees; and

enter into derivative transactions and risk management activities that are incidental to our normal functions authorized under our organizational documents and as permitted under the provisions of the Banking Regulation Act.

 

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Further, banks are permitted to hedge foreign currency loan exposures of Indian corporations in the form of interest rate swaps, currency swaps and forward rate agreements, subject to certain conditions. Banks in the authorized dealer category may become trading or clearing members of the currency derivatives segment to be set up by stock exchanges recognized by the Securities and Exchange Board of India, subject to their fulfilling the requirements of (i) minimum net worth of Rs. 5.0 billion, (ii) minimum capital adequacy ratio of 10.0%, (iii) net non-performing assets not exceeding 3.0% and (iv) net profit for the previous three years.

 

Our foreign exchange operations are subject to the guidelines specified by the Reserve Bank of India. As an authorized dealer, we are required to enroll as a member of the Foreign Exchange Dealers Association of India, which prescribes the rules relating to foreign exchange business in India. We are also among banks that submit data to regulatory authorities/bodies for the setting of financial benchmarks wherever we are nominated. Banks submitting data have to implement an internal board approved policy on governance of the benchmark submission process and periodically submit a confirmation on compliance with the guidelines. Further, the Financial Benchmarks India Private Limited (“FBIL”) has been set up which administers the overnight interbank rate and is based on the actual traded rate every morning. In March 2018, the Reserve Bank of India advised the Financial Benchmarks India Private Limited to take over the responsibility of computing and disseminating of the reference rate for US$/Rupee and the exchange rate of other major currencies, and the FBIL began the process from July 2018. Authorized dealers, like us, are required to determine our limits on open positions and maturity gaps in accordance with the Reserve Bank of India guidelines and these limits are approved by the Reserve Bank of India.

 

Statutes Governing Foreign Exchange and Cross-Border Business Transactions

 

Foreign exchange and cross-border transactions undertaken by banks are subject to the provisions of FEMA. Banks are required to monitor transactions of customers based on predefined rules using a risk-based approach which envisages identification of unusual transactions, undertaking due diligence on such transactions and, if confirmed as suspicious, reporting to the Financial Intelligence Unit of the respective jurisdiction. Our transaction monitoring system is periodically reviewed and is being supplemented with appropriate anti-money laundering software technology solutions.

 

The Reserve Bank of India issues guidelines on External Commercial Borrowings (“ECB”) and Trade Credits from time to time. The framework comprises of two components: Foreign currency denominated ECB (“FCY ECB”) and rupee denominated ECB (“INR ECB”). Lending by overseas branches and subsidiaries of Indian banks is permitted only for FCY ECB with the exception of convertible bonds and exchangeable bonds in foreign currency. Financial intermediaries including Banks are not permitted to issue any type of guarantees related to ECB.

 

The all in-cost ceiling for new FCY ECB and TC is fixed at 500 basis points and 300 basis points, respectively, over the benchmark rates and for ECB and TC linked to LIBOR whose benchmarks are changed to an alternative reference rate, the all-in cost ceiling has been revised to 550 basis points and 350 basis points, respectively, over the alternative reference rate.

 

For INR ECB, the benchmark is set to the prevailing yield of the Government of India securities of corresponding maturity. The minimum average maturity period for ECB is three years. Tenors of trade credit are restricted to three years, and tenors longer than three years are to be treated as external commercial borrowing.

 

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Utilization of ECB are restricted for capital market investment or real estate investment or purchase of land and working capital purposes amongst others with some exceptions. Borrowers are also permitted to raise external commercial borrowings for the purpose of refinancing an existing external commercial borrowing. Partial refinance of existing external commercial borrowings is also permitted subject to certain conditions. Indian banks are permitted to participate as arrangers/underwriters, market makers and traders in rupee-denominated bonds issued overseas subject to prudential norms.

 

The Reserve Bank of India issued directions in April 2020 on facilities for hedging exchange risk by residents and non-residents. According to the directions, derivative products can be offered to any person resident in India or resident outside India having foreign exchange risk on anticipated or contracted basis in line with issued guideline. This has been applicable since September 2020.

 

The Reserve Bank of India has permitted non-residents to undertake transactions in the rupee interest rate derivatives markets for the purpose of hedging interest rate risk or otherwise.

 

For the purpose of other than hedging, non-residents, other than individuals are permitted to take overnight index swaps transactions directly with market makers in India or by way of back to back arrangements through a foreign branch/parent/group entity of the market maker.

 

The Reserve Bank of India has issued the Electronic Trading Platforms Directions, 2018. As per the directions, an Electronic Trading Platform (“ETP”) is any electronic system, other than a recognized stock exchange, on which transactions in eligible instruments including securities, money market instruments, foreign exchange instruments, derivatives, or other instruments as may be specified by the Reserve Bank of India are contracted. In June 2019, the Reserve Bank of India introduced an electronic trading platform for buying/selling foreign exchange by retail customers of banks. This is aimed at enhancing transparency, competition and better pricing for retail customers. The platform can be accessed by any customer of a bank who has a need to purchase or sell US dollar against the rupee for delivery on cash basis, tom basis or spot basis subject to certain conditions.

 

In July 2021, the Reserve Bank of India issued guidelines on “Roadmap for LIBOR transition.” Banks were encouraged to cease, and also encourage their customers to cease, entering into new financial contracts that reference LIBOR as a benchmark and instead use any widely accepted Alternative Reference Rate, as soon as practicable and in any case by December 31, 2021. The publication of US$ LIBOR and MIFOR ceased after June 30, 2023.

 

In September 2021, the Reserve Bank of India issued revised guidelines for offering over-the-counter derivatives. It has prescribed broad principles to be adhered to by market makers with respect to governance frameworks, introduction of new products, user dealing conduct, pricing and valuation, risk management, internal control, and internal audit.

 

In June 2022, the Reserve Bank of India issued Master Directions for exchange of variation margin to minimize the counterparty credit risk arising out of dealing in Non Centrally Cleared Derivatives (NCCDs). As per the directions, a Domestic covered Entity shall exchange Variation Margin with a counterparty to an NCCD transaction if the counterparty is a Domestic Covered Entity or a Foreign Covered Entity. The guideline became effective from May 1, 2023.

 

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In March 2020, Reserve Bank of India had permitted AD Category-1 bank operating International Financial Services Centre (“IFSC”) Banking Units (“IBUs”), to offer non-deliverable derivative contracts (“NDDC”) involving the Rupee, or otherwise, to persons not resident in India. Banks can undertake such transactions through their branches in India, through their IBUs or through their foreign branches (in case of foreign banks operating in India, through any branch of the parent bank). Further, starting in June 2023, Reserve Bank of India has permitted AD Cat-I banks operating IBUs to offer NDDCs involving INR to resident non-retail users for the purpose of hedging, such transactions shall be cash settled in INR and the flexibility of cash settlement of NDDCs transactions between two AD Cat-I banks, and between an AD Cat-I bank and a person resident outside India in INR or any foreign currency.

 

In December 2022, the Reserve Bank of India issued directions for hedging of commodity price risk and freight risk on the overseas market through which eligible entities having exposure to commodity price risk for any eligible commodity may hedge such exposure in overseas markets using any of the permitted products and may hedge exposure to price risk of gold only on exchanges in the IFSC recognised by the International Financial Services Centres Authority (“IFSCA”). Banks may permit eligible entities to hedge commodity price risk and freight risk overseas, including IFSC, using permitted products and may remit foreign exchange in respect of such transactions.

 

Moratorium, Reconstruction and Amalgamation of Banks

 

The Reserve Bank of India can apply to the Government of India to suspend the business of a banking company. The Government of India, after considering the application of the Reserve Bank of India, may order a moratorium staying commencement of action or proceedings against such company for a maximum period of six months. During such period of moratorium, the Reserve Bank of India may prepare a scheme for the reconstruction of the bank or merger of the bank with any other bank only if: (a) in the public interest; (b) in the interest of the depositors; (c) in order to secure the proper management of the bank; or (d) in the interests of the banking system of the country as a whole. In circumstances entailing reconstruction of the bank or merger of the bank with another bank, the Reserve Bank of India invites suggestions and objections on the draft scheme prior to placing the scheme before the Government of India for its approval. The Indian central government may approve the scheme with or without modifications. The law does not require consent of the shareholders or creditors of such banks. The Reserve Bank of India has consolidated all regulations relating to amalgamation of private sector banks in the Master Direction—Amalgamation of Private Sector Banks, Directions, 2016.

 

Regulations on Amalgamation between Private Sector Banks and between Banks and Non-Banking Finance Companies

 

The Reserve Bank of India has issued guidelines on amalgamation between private sector banks and between banks and non-banking finance companies. The guidelines particularly emphasize the examination of the rationale for mergers, the systemic benefits arising from it and the advantages accruing to the merged entity. With respect to a merger between two private sector banks, the guidelines require the draft scheme of merger to be approved by the shareholders of both banks with a two-thirds majority after approval by the boards of directors of the two banks concerned. The draft scheme should also consider the impact of the merger on the valuation, profitability and capital adequacy ratio of the amalgamating bank and verify that the reconstituted board conforms to the Reserve Bank of India norms. The approved scheme needs to be submitted to the Reserve Bank of India for valuation and approval in accordance with the Banking Regulation Act, along with other documentation such as the draft document of proposed merger, copies of all relevant notices and certificates, swap ratio, share prices, and other key information. With respect to a merger of a bank and a nonbanking company, where the non-banking company is proposed to be amalgamated with the bank, the banking company has to obtain the approval of the Reserve Bank of India after the scheme of amalgamation is approved by its Board and the Board of the non-banking finance company, but before it is submitted to the tribunal for approval. See also “—Other Statutes—Competition Act.”

 

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Financial Stability and Development Council and Financial Sector Legislative Reforms Commission

 

The Financial Stability and Development Council is an independent body established by the Government of India that oversees regulation and strengthens mechanisms for maintaining financial stability. The institution monitors macro-prudential supervision of the economy and the functioning of large financial conglomerates, addresses inter-regulatory coordination issues and focuses on financial literacy and financial inclusion activities. The Government of India has also set up a Financial Sector Legislative Reforms Commission to review the financial sector laws and to bring them in line with the requirements of the sector.

 

In view of the growing significance of financial technology innovations and their interface with the financial sector, the sub-committee of the Financial Stability and Development Council has set up a working group to look into aspects and developments in fintech. Accordingly, the Reserve Bank of India set up a working group with representatives from various regulatory bodies, rating agencies and select banks. The group has recommended introducing an appropriate framework for a ‘regulatory sandbox’ within a well-defined space and duration. In fiscal 2021, the Reserve Bank of India introduced a thematic approach to regulatory sandbox in the fintech sector. The first cohort was launched in 2019 focusing on retail payments as its theme, the second cohort was launched in 2020 with the theme cross border payments,the third cohort focused on lending to micro, small and medium enterprises and the fourth cohort launched in 2021 on prevention and mitigation of financial frauds. Reserve Bank of India announced the fifth cohort in September 2022 under regulatory sandbox which was themed 'Neutral' wherein innovative products/ services/ technologies cutting across various functions in the Reserve Bank’s regulatory domain would be eligible to apply. Cohorts are in the various phases of the testing & implementation intended for the purpose of fostering innovation, with few success stories.

 

Income Computation and Disclosure Standards

 

The Central Board of Direct Taxes Income Computation and Disclosure Standards (“ICDS”) provides guidelines for computation of taxable income. These guidelines are not for the purpose of maintaining the books of accounts. These guidelines are applicable to all taxpayers, including us, that follow the accrual system of accounting for the purpose of computation of income. In case there is a conflict between the provisions of the Income Tax Act, 1961 (the “Indian Income Tax Act”) and the income computation and disclosure standards prescribed by the tax authority, the provisions of the Indian Income Tax Act shall prevail. The broad areas covered by the guidelines issued by the tax authority include valuation of inventories, construction contracts, revenue recognition, tangible fixed assets, effects of changes in foreign exchange rates, government grants, securities, borrowing costs, contingent liabilities and assets, and relating to accounting policies.

 

Structural Reforms

 

Amendments to the Banking Regulation Act

 

The Government of India enacted the Banking Regulation (Amendment) Act 2017, which is deemed to have come into force on May 4, 2017. This amendment added two sections to the Banking Regulation Act that enable the Government to authorize the Reserve Bank of India to direct banking companies to resolve specific stressed assets by initiating an insolvency resolution process, where required. The Reserve Bank of India has also been empowered to issue other directions for resolution, and appoint or approve for appointment, authorities or committees to advise banking companies for stressed asset resolution.

 

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The Government of India has also enacted the Banking Regulation (Amendment) Act 2020 which, among other things, brought co-operative banks under the supervision of the Reserve Bank of India. The amendment also allows the Reserve Bank of India to prepare a scheme for the reconstruction or amalgamation of a banking company without the necessity of first making an order of moratorium.

 

Other Statutes

 

Companies Act

 

Companies in India, including banks, in addition to the sector-specific statutes and the regulations and guidelines prescribed by the sectoral regulators, were required to comply with relevant provisions of the Companies Act 1956. The Companies Act includes provisions to make independent directors more accountable, improve corporate governance practices and make corporate social responsibility mandatory for companies above a certain size and require them to spend a minimum of 2.0% of the average net profits of the preceding three years for corporate social responsibility initiatives. Any shortfall in this regard must be explained in the annual report. In January 2021, the government made amendments to the corporate social responsibility rules, and made it mandatory to spend the minimum requirement of 2.0% of average net profits of preceding three years. Any excess amount spend over and above the requirement for that year may be set off against the requirement to spend for succeeding financial years. Any unspent amount in case of ongoing project has to be transferred to the Unspent Corporate Social Responsibility Account and spent as stipulated under the Companies Act, 2013 and in other cases transfer such unspent amount to the fund specified under Schedule VII of the Act within the stipulated period.

 

Competition Act

 

The Competition Act, 2002 established the Competition Commission of India with the objective of promoting competition, preventing unfair trade practices and protecting the interest of consumers. The Competition Act, 2002 prohibits anti-competitive agreements and abuse of market dominance, and requires the approval of the Competition Commission for mergers and acquisitions involving companies above a certain size.

 

Secrecy Obligations

 

The obligations of banks relating to maintaining secrecy arise out of common law principles governing relationships with customers. Banks cannot disclose any information to third parties except under clearly defined circumstances. The following are the exceptions to this general rule:

 

where disclosure is required to be made under any law;

where there is an obligation to disclose to the public;

where we need to disclose information in its interest; and

where disclosure is made with the express or implied consent of the customer.

 

  

 

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Banks are also required to disclose information if ordered to do so by a court. The Reserve Bank of India may, in the public interest, publish the information obtained from the bank. Under the provisions of the Banker’s Books Evidence Act, a copy of any entry in a bankers’ book, such as ledgers, day books, cash books and account books certified by an officer of the bank may be treated as prima facie evidence of the transaction in any legal proceeding.

 

Consolidated Supervision Guidelines

 

Key features of the Reserve Bank of India guidelines for consolidated accounting and consolidated supervision of banks are:

 

Consolidated Financial Statements: Banks are required to prepare consolidated financial statements intended for public disclosure.

 

Consolidated Prudential Returns: Banks are required to submit to the Reserve Bank of India consolidated prudential returns reporting their compliance with various prudential norms on a consolidated basis, excluding insurance subsidiaries and group companies engaged in businesses not pertaining to financial services.

 

See also “Selected Statistical Information—Loan Concentration.”

 

Regulations and Guidelines of the Securities and Exchange Board of India

 

The Securities and Exchange Board of India was established to protect the interests of investors in securities and to promote the development of and to regulate the Indian securities market. We and our subsidiaries and affiliates are subject to the Securities and Exchange Board of India regulations for public capital issuances, private placements as well as underwriting, custodian, designated depository participant, merchant banker, depository participant, investment advisory, private equity, trading member, clearing member, asset management, portfolio management, banker to the issue, research analyst and debenture trusteeship activities. These regulations provide for our/our subsidiaries registration with the Securities and Exchange Board of India for each of these activities, functions and responsibilities. We and our subsidiaries are required to adhere to codes of conduct applicable for these activities.

 

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Income Tax Benefits

 

As a banking company, the Bank is entitled to certain tax benefits under the Indian Income Tax Act. We are allowed a deduction of up to 20.0% of the profits derived from the business of providing long-term finance (defined as loans and advances extended for a period of not less than five years) for industrial or agricultural development, development of infrastructure facility in India or development of housing in India, computed in the manner specified under the Indian Income Tax Act and carried to a Special Reserve Account. The deduction is allowed subject to the aggregate of the amounts transferred to the Special Reserve Account for this purpose from time to time not exceeding twice our paid-up share capital and general reserves. The amount withdrawn from such a Special Reserve Account would be chargeable to income tax in the year of withdrawal, in accordance with the provisions of the Indian Income Tax Act. In accordance with the guidelines issued by the Reserve Bank of India in December 2013, banks are required to create deferred tax liability on the special reserve on a prudent basis. The deferred tax liability is permitted to be charged through the profit and loss account. In India, while computing taxable income, provision on non-performing loans is allowed as a deduction from income only up to 8.5% of the total income and 10.0% of the aggregate average advances made by the rural branches of the bank. The balance of the provisions, which comprises a significant majority of the provision, is allowed as a deduction from the taxable income at the time of write-off of the loans.

 

Regulations Governing Insurance Companies

 

The Insurance (Amendment) Act, 2021, was passed by the Indian Parliament and notified in March 2021. The Act, amongst other things, raised the foreign investment limit in the insurance sector from 49.0% to a composite limit of 74.0%. An earlier amendment to the law eliminated the requirement that promoters of an insurance company reduce their stake to 26.0% after 10 years.

 

ICICI Prudential Life Insurance Company Limited and ICICI Lombard General Insurance Company Limited, our subsidiary/associate and affiliate offering life insurance and general insurance products, respectively, are subject to the provisions of the Insurance Act, 1938 and subsequent rules and amendments notified, and the various regulations prescribed by the Insurance Regulatory and Development Authority of India (IRDAI or Authority). These regulate and govern, among other things, registration as an insurance company, investment, solvency margin requirements, licensing/ registration of insurance agents and other insurance intermediaries, advertising, sale and distribution of insurance products and services and protection of policyholders’ interests.

 

The governance framework for insurance companies includes the board of directors, key management personnel, constitution of various committees such as the policyholder protection committee, define the role of appointed actuaries, appointment of auditors and relationship with stakeholders. The Insurance Regulatory and Development Authority of India has also issued regulations on payment of commissions to agents and insurance intermediaries and on expenses of management. The Authority also issued guidelines on insurance e-commerce allowing an insurer or an insurance intermediary to set up an electronic platform for online sales and servicing.

 

The Insurance Regulatory and Development Authority of India periodically issues guidelines pertaining to life insurance business. The Insurance Regulatory and Development Authority of India has issued regulations relating to unit-linked life insurance products, non-linked life insurance products and health insurance products. The key regulations on linked and non-linked products include a minimum sum assured at seven times the annual premium; liquidity option for financial exigencies; lapse of policies and surrender values and increase in revival period to three years for ULIPs and five years for traditional products. IRDAI has also issued Guidelines on Use and File for certain categories of products (new products/riders (except individual saving, pension, annuity, group non-linked), modifications to existing products), under which the Product Management Committee will be responsible for review and approval of the filing documents and for ensuring systems, procedures, manuals, essential infrastructure for product launch and maintenance of insurance policies. IRDAI has issued regulations specifying the licensing and registration requirements for agents and intermediaries for the purpose of soliciting insurance products. IRDAI has amended the Corporate Agents Regulations to allow them to partner with up to nine insurance companies each in life, non-life and health insurance sectors. Composite corporate agents may partner with up to 27 insurers.

 

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The foreign investment rules shall be as prescribed by the Government. In 2020, the Insurance Regulatory and Development Authority of India permitted insurance intermediaries including insurance brokers, re-insurance brokers, corporate agents, third-party administrators and such others to receive 100.0% foreign direct investment under the automatic route. IRDAI has also done away with the prior approval required for raising Other Forms of Capital. The limit for raising other forms of capital has been increased from 25% to 50% of paid-up equity capital and securities premium.

 

Regulations Governing Mutual Funds

 

ICICI Prudential Asset Management Company Limited (the AMC), our asset management subsidiary, is regulated by Securities and Exchange Board of India (“SEBI”) for its asset management activity. The AMC is primarily governed by SEBI (Mutual Funds) Regulations 1996, SEBI (Portfolio Managers) Regulations, 2020 and SEBI (Alternative Investment Funds) Regulations 2012 and circulars issued under the respective regulations. These regulations, among other things, provides for the requirements of registration , restrictions on business activities of asset management companies, process/requirements for launching funds/portfolios, requirements for valuation policies and disclosures and reporting requirements. Further, the respective regulations provide for investment restrictions applicable to the funds/portfolios.

 

The key changes implemented and announced by SEBI in the aforesaid regulations during fiscal 2023 are as follows:

 

·Revised Risk Management Framework implementation by Asset Management Companies (“AMC”).

·Revision in mutual fund distributors code of conduct.

·Alignment of interest of AMC with the Unitholders of the Mutual Fund Schemes. AMCs were required to invest seed capital in scheme(s) of the mutual fund, based on the risk associated with the scheme.

·Circular on development of passive mutual fund schemes which covered various subjects such as Index constitution norms, Norms for Market Making Framework for ETFs, Direct transaction in ETFs through AMCs and Tracking Error and Tracking Difference of passive schemes.

·Discontinuation of bundled products - no existing schemes or any new schemes which are proposed to be launched shall have bundled products (e.g., insurance features with respect to scheme investments, such as SIP-Insure and other programs).

·Disclosure Norms for ESG Mutual Fund Schemes.

·Effective October 2022, nomination becomes mandatory for investors investing in schemes of mutual fund. New investor should mandatorily opt in or opt out of nomination while subscribing to mutual fund units.

·Two factor authentication for all digital transactions in mutual fund units made mandatory.

·Effective January 2023, revisions in timelines for transfer of dividend and redemption proceeds to unitholders of mutual fund schemes.

·Introduction of credit risk based single issuer limit for investment by mutual fund schemes in debt and money market instruments.

·Revision or updation of scope for cyber security and vulnerability and penetrative testing parameters for AMCs.

 

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·Norms for alternative investment funds which included timelines for declaration of first close, calculation of tenure of the funds, providing co-investment management services.

·Performance benchmarking norms for portfolios managed by the asset management companies.

·Introduction of investment limits for investments in associates by the portfolios managed by the asset management companies.

 

Regulations Governing International Operations

 

Our international operations are governed by regulations in the countries in which we have a presence. Further, the Reserve Bank of India has notified that foreign branches/foreign subsidiaries of Indian banks/AIFIs can deal in financial products, including structured financial products, which are not available or are not permitted by the Reserve Bank in the domestic market without prior approval of Reserve Bank, subject to compliance with certain conditions. Also, the branches/subsidiaries of Indian banks/AIFIs operating in IFSCs including those operating out of GIFT City can also deal in financial products, including structured financial products, which are not available or are not permitted by the Reserve Bank in the domestic market subject to compliance with all applicable laws/regulations and conditions including those prescribed by the host regulator.

 

Overseas Banking Subsidiaries

 

Our wholly owned subsidiary in the United Kingdom, ICICI Bank UK PLC, is authorized and regulated by the Prudential Regulation Authority and Financial Conduct Authority. Our subsidiary in the United Kingdom has seven branches located in the United Kingdom and one branch in mainland Europe, located in Eschborn, Germany.

 

Our wholly owned subsidiary in Canada, ICICI Bank Canada (a Schedule II Bank in Canada), is regulated by the Office of the Superintendent of Financial Institutions. Our subsidiary in Canada has 12 branches including the two I-lounges and three customer service centers.

 

Offshore Branches

 

The Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, as amended, and rules issued thereunder, permit a branch located outside India of a bank incorporated or constituted in India to borrow in foreign currency in the normal course of its banking business outside India, subject to the directions or guidelines issued by the Reserve Bank of India from time to time and the regulatory authority of the country where the branch is located.

 

Our Singapore branch is currently engaged in corporate and institutional banking, private banking, retail banking and treasury-related activities. The Singapore branch has Qualified Full Banking privileges which entitles us to take retail deposits. In Bahrain, we have a retail branch, regulated by the Central Bank of Bahrain. The Bahrain branch is permitted to transact banking business with approved financial institutions, and offer banking services to individuals and institutions in Bahrain and outside Bahrain. It is also permitted to offer banking services to non-resident Indians in Bahrain. Hong Kong Monetary Authority is the prudential regulator for Hong Kong branch of ICICI Bank. Our branch in the Dubai International Financial Centre (“DIFC”) is regulated by the Dubai Financial Services Authority and is licensed to accept deposits, provide credit, arrange credit or deal in investments and advise on financial products or credit. Our branch in New York is regulated by the Federal Reserve Board and the Office of the Comptroller of the Currency. Our branch in China is regulated by the China Banking and Insurance Regulatory Commission. In addition, we also have an Offshore Banking Unit located in the Santacruz Electronic Exports Promotion Zone, Mumbai and an IFSC Banking Unit at Unit No 408, 4th Floor, Brigade International Financial Centre, GIFT Multi Services SEZ, Gandhinagar 382 344, Gujarat, India.

 

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In December 2021, the Reserve Bank of India released a circular regarding infusion of capital in overseas branches and subsidiaries and retention/repatriation/transfer of profits in these centers by banks incorporated in India. As per the circular, prior approval of the Reserve Bank of India would not be required for capital infusion/ transfers (including retention/repatriation of profits) for banks which meet the regulatory capital requirements (including capital buffers). Banks shall however seek the approval of their boards for the same. Banks are required to report all such instances of infusion of capital and/retention/transfer/repatriation of profits in overseas branches and subsidiaries to the Reserve Bank of India.

 

Regulations Governing Banking Units in International Financial Services Centres in India

 

As per guidelines issued by the Reserve Bank of India, public and private sector banks dealing in foreign exchange are permitted to set up one banking unit in each international financial services center in India. Banks will have to take prior approval of the Reserve Bank of India for opening a banking unit, and this will be treated on par with a foreign branch of an Indian bank. In April 2020, the Government established the International Financial Services Centres Authority, a unified authority for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre. In November 2020, the International Financial Services Centres Authority announced regulations for banking and investment activities in the IFSC. Banking units were permitted to undertake additional activities, subject to compliance with the terms and conditions or guidelines as specified by the Authority.

 

With a view to further enhancing 'ease of doing banking business', the International Financial Services Centres Authority has issued the International Financial Services Centres Authority Banking Handbook which is a compendium of directions of the Authority to the IBU operating in GIFT IFSC and to the banking companies incorporated in India or outside India looking to set up an IBU as a branch in GIFT IFSC. The Handbook is organised in three components, including: (a) General directions, (b) Conduct of Business directions, and (c) Prudential Directions applicable to IBUs. The provisions of International Financial Services Centres Authority Banking Handbook has been effective since January 1, 2022. These respective handbooks are updated from time to time by the International Financial Services Centres Authority to incorporate amendments.

 

In April 2022, the International Financial Services Centres Authority released a guidance framework on sustainable and sustainability linked lending by financial institutions in IFSC. As per the framework, international banking units shall develop a board approved policy on sustainable lending by March 31, 2023. From financial year beginning April 1, 2023, entities shall have at least 5% of their gross loans in the form of lending to green/social/sustainable/sustainability-linked sectors/facilities. The 5.0% target shall be computed on incremental loans and advances in a financial year.

 

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Regulations Governing Offshore Banking Units

 

The Government of India and the Reserve Bank of India have permitted banks to set up offshore banking units in Special Economic Zones, which are specially delineated duty-free enclaves deemed to be foreign territory for the purpose of trade operations, duties and tariffs. We have an offshore banking unit located in the Santacruz Electronic Exports Promotion Zone, Mumbai. Offshore banking units are required to adopt liquidity and interest rate risk management policies prescribed by the Reserve Bank of India in respect of overseas branches of Indian banks as well as within the overall risk management and asset and liability management framework of the bank subject to monitoring by the bank’s board of directors at prescribed intervals. Offshore banking units may raise funds in convertible foreign currency as deposits and borrowings from non-residents including non-resident Indians but excluding overseas corporate bodies.

 

Representative Offices

 

We have representative offices in various jurisdictions that are regulated by the respective regulatory authorities.

 

Foreign Account Tax Compliance Act

 

The Government of India entered into a Model 1 inter-governmental agreement with respect to the Foreign Account Tax Compliance Act with the United States. ICICI Bank is registered with the Internal Revenue Service in the United States. In addition, the United States has entered into Model 1 inter-governmental agreements with respect to the Foreign Account Tax Compliance Act with the United Kingdom, Canada, Germany, Singapore, the United Arab Emirates, South Africa, Bahrain and reached a similar agreement in substance with China, Malaysia and Indonesia, and a Model 2 inter-governmental agreement with respect to Foreign Account Tax Compliance Act with Hong Kong. ICICI Bank has taken measures to comply with the terms of applicable intergovernmental agreements with respect to the Foreign Account Tax Compliance Act and any regulations issued thereunder.

 

Common Reporting Standards

 

The Common Reporting Standard formally referred to as the Standard for Automatic Exchange of Financial Account Information, is an information standard for the automatic exchange of information, developed in the context of the Organization for Economic Cooperation and Development. In India requirements under the Foreign Account Tax Compliance Act/Common Reporting Standard are implemented by the Central Board of Direct Taxes. The common reporting standard has been adopted by the United Kingdom, Canada, Germany, Hong Kong, Singapore, Malaysia, Indonesia, South Africa, China, the United Arab Emirates and Bahrain.

 

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Exchange Controls

 

Restrictions on Conversion of Rupees

 

There are restrictions on the conversion of rupees into dollars. The Foreign Exchange Management Act, 1999 regulates transactions involving foreign exchange and provides that certain transactions cannot be carried out without the general or special permission of the Reserve Bank of India. The Foreign Exchange Management Act, 1999 has substantially eased the restrictions on current account transactions (with a few exceptions). However, the Reserve Bank of India continues to exercise control over capital account transactions (i.e., those which alter the assets or liabilities, including contingent liabilities, of persons). The Government of India has notified rules and the Reserve Bank of India has issued regulations under the Foreign Exchange Management Act, 1999 to regulate the various kinds of capital account transactions, including certain aspects of the purchase and issuance of shares of Indian companies. The Reserve Bank of India has also permitted authorized dealers to freely allow remittances by individuals up to US$ 250,000 subject to certain restrictions per financial year for any permissible current or capital account transactions or a combination of both, under the Liberalized Remittance Scheme.

 

Restrictions on Sale of the Equity Shares underlying ADSs and Repatriation of Sale Proceeds

 

There are no end-use restrictions on ADR issue proceeds except for the real estate sector and stock markets, in which investment of ADR issue proceeds is prohibited.

 

An ADR holder is entitled to hold or transfer ADRs or redeem them into underlying ordinary shares with the option to continue holding ordinary shares. ADR holders have the same rights in respect of bonus and rights issues as any ordinary shareholder of the company.

 

ADSs issued by Indian companies to non-residents have free convertibility outside India. Under current Indian laws there is a general permission for the sale or transfer of equity shares underlying ADSs obtained after conversion of ADRs by a person not resident in India to a resident of India if the sale is proposed to be made through a recognized stock exchange or when the underlying shares are being sold in terms of an offer made under Securities Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. For all other cases of sale of shares underlying the ADRs, permission of the Reserve Bank of India is required.

 

If a sale of securities has taken place in terms of the rules laid down by the government, Reserve Bank of India guidelines and other applicable regulations, then provided the sale proceeds may be freely remitted as long as (i) the securities were held on repatriation basis, (ii) either the securities has been sold in compliance with the pricing guidelines issued by the Reserve Bank of India or Reserve Bank of India’s approval has been obtained in other cases and (iii) a no objection or tax clearance certificate from the income tax authority has been obtained.

 

A new scheme called ‘Depository Receipts Scheme, 2014’ (DR Scheme, 2014) for facilitating issue of depository receipts outside India has been effective from December 15, 2014 which provides for repeal of extant guidelines for Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 except to the extent relating to foreign currency convertible bonds.

 

The issuance of fresh depositary receipts and any changes or modifications in the existing terms and conditions of ADR/GDR should be in accordance with DR Scheme, 2014 or/and be subject to approval or clarification from Reserve Bank of India or the Securities and Exchange Board of India.

 

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In terms of schedule IX of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 dated October 17, 2019, pertaining to investment in Depository receipts by a person resident outside India, the guidelines are as below:

 

Issue or transfer of eligible instruments to a foreign depository for the purpose of issuance of depository receipts by eligible person(s)-

 

(a)Any security or unit in which a person resident outside India is allowed to invest under these rules shall be eligible instruments for issue of Depository Receipts in terms of DR Scheme, 2014.

 

(b)A person shall be eligible to issue or transfer eligible instruments to a foreign depository for the purpose of issuance of depository receipts in accordance with the DR Scheme, 2014 and guidelines issued by the Central Government in this regard.

 

(c)A domestic custodian may purchase eligible instruments on behalf of a person resident outside India, for the purpose of converting the instruments so purchased into depository receipts in terms of DR Scheme, 2014.

 

(d)The aggregate of eligible instruments which may be issued or transferred to foreign depositories, along with eligible instruments already held by persons resident outside India, shall not exceed the limit on foreign holding of such eligible instruments under the Act, rules or regulations framed there under.

 

(e)The eligible instruments shall not be issued or transferred to a foreign depository for the purpose of issuing depository receipts at a price less than the price applicable to a corresponding mode of issue or transfer of such instruments to domestic investors under the applicable laws.

 

Depository Receipts issued under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 shall be deemed to have been issued under the corresponding provisions of DR Scheme 2014 and have to comply with the provisions specified in this schedule.

 

The Securities and Exchange Board of India, via circular dated October 10, 2019 has provided a framework for the issuance of depositary receipts. As per the circular, only a company incorporated in India and listed on a recognized stock exchange in India may issue permissible securities or their holders may transfer permissible securities, for the purpose of issuing depositary receipts subject to compliance with the eligibility criteria defined by the Securities and Exchange Board of India. Securities and Exchange Board of India has further issued operational guidelines dated October 1, 2020 for monitoring foreign holding in depository receipts. Pursuant to the operational guidelines, every listed company shall appoint one Indian depository as the designated depository for the purposes of monitoring such limits. Subsequently, Securities and Exchange Board of India issued a circular dated December 18, 2020, according to which non-resident indians shall neither subscribe to any further issue nor make any further acquisition of DRs except issue of DRs to non-resident indians pursuant to share based employee benefit schemes or pursuant to bonus issue or rights issue. The Listed Company has the obligation to identify the non-resident indian holders who are issued DRs in terms of employee benefit scheme and provide such information to the designated depository for monitoring limits.

 

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Restriction on Foreign Ownership of Indian Securities

 

The Government of India strictly regulates ownership of Indian companies by foreigners. Foreign investment in securities issued by Indian companies, including the equity shares represented by ADSs, is governed by the Foreign Exchange Management Act, 1999, and rules and regulations thereunder, as amended from time to time (“Act”). The Act authorizes the Reserve Bank of India to impose restrictions on inflow or outflow of foreign exchange and provides that certain transactions cannot be carried out without the general or special permission of the Reserve Bank of India or relevant departments of the Government of India. The Foreign Exchange Management Act, 1999 has eased restrictions on current account transactions. However, the Reserve Bank of India continues to exercise control over capital account transactions (i.e., those which alter the assets or liabilities, including contingent liabilities, of persons). The Government has laid down rules and the Reserve Bank of India has issued regulations under the Foreign Exchange Management Act, 1999 to regulate the various kinds of capital account transactions, including certain aspects of the purchase and issuance of shares of Indian companies.

 

The issue or transfer of any security of an Indian company by a person resident outside of India, foreign investment in equity instruments (equity shares, compulsorily convertible debentures, compulsorily convertible preference shares and share warrants) as well as issuance of rupee denominated shares for issuing ADSs, are all governed by applicable rules and regulations issued under the Foreign Exchange Management Act, 1999 and by the Securities and Exchange Board of India, and may be made only in accordance with the terms and conditions specified under such rules and regulations.

 

The foreign investment limit in Indian companies includes, in addition to foreign direct investments, investment by Foreign Portfolio Investors, Non-Resident Indians, Foreign Currency Convertible Bonds, American Depository Receipts, Global Depository Receipts and convertible preference shares held by foreign entities.

 

The Foreign Exchange Management (Non-debt Instruments) Rules, 2019, as amended (“Rules”) provide for, among other things, the following restrictions on foreign ownership for private sector banks:

 

·Foreign investors (including indirect foreign investment made by foreign portfolio investors) may own up to 74.0% of the equity share capital of a private sector bank in India subject to rules and regulations issued by the Government of India and the Reserve Bank of India from time to time. While foreign investment up to 49.0% in private sector banks does not require any specific approval, foreign investment beyond 49.0% and up to 74.0% requires prior approval of the Government of India, unless such investments are otherwise exempted from the requirement for approval. Investments by foreign investors exempted from the requirement for Government of India approval include aggregate foreign portfolio investment (as defined in the Rules) up to 49.0% of the paid-up capital on a fully diluted basis or a sectoral cap (whichever is lower) that does not result in the transfer of ownership or control of the resident Indian company from resident Indian citizens or transfer of ownership or control to persons resident outside India, and other investments by a person resident outside India shall be subject to the conditions of Government approval and compliance of sectoral conditions as laid down in the Rules. The Rules allow Indian companies to freely issue rights and bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap and fulfilling certain conditions laid out in the applicable laws and statute. The aggregate foreign investment limit of 74.0% includes investments by way of foreign direct investments, ADSs/Global Depositary Receipts (Depository Receipts), Foreign Currency Convertible Bonds (mandatorily and compulsorily convertible) and investment under the Portfolio Investment Scheme by foreign portfolio investors and non-resident Indians/Overseas Citizens of India, and also includes shares acquired by subscription to private placements and public offerings and acquisition of shares from existing shareholders. At least 26.0% of the paid-up capital would have to be held by Indian residents at all times, except in regard to a wholly owned subsidiary of a foreign bank.

 

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·Additionally, in case of proposals requiring prior approval of the Government of India, those proposals involving total foreign equity inflow of more than Rs. 50.0 billion, shall require approval of the Cabinet Committee on Economic Affairs.

 

·An individual non-resident Indian’s holding is restricted to 5.0% of the total paid-up share capital both on repatriation and non-repatriation basis and the aggregate limit of investment by all non-resident Indians cannot exceed 10.0% of the total paid up capital both on repatriation and non-repatriation basis. However, non-resident Indian holdings can be allowed up to 24.0% of the total paid-up capital, both on repatriation and non-repatriation basis, subject to a special resolution to this effect passed by the shareholders of the bank.

 

·Aggregate holding by a person along with his relatives, associate enterprises and persons acting in concert with him, whether directly or indirectly, beneficial or otherwise, of shares or voting rights, of 5% or more of the paid-up share capital or voting rights (“major shareholding”) in a banking company shall require prior approval of the Reserve Bank of India pursuant to Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions dated January 16, 2023. The persons from Financial Action Task Force non-compliant jurisdictions shall not be permitted to acquire major shareholding in a banking company. However, existing major shareholding by persons from Financial Action Task Force non-compliant jurisdiction shall be continued, provided that there shall not be any further acquisition without prior approval of the Reserve Bank. If aggregate holding of a person falls below 5%, fresh Reserve Bank of India approval will be required for raising it again to 5% or above. Additionally, the ceiling on voting rights for a single shareholder is 26.0% of the total voting rights of all shareholders of the bank.

 

Under the Portfolio Investment Scheme:

 

i.Effective from April 1, 2020, foreign portfolio investors, as referred in Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, may hold share capital up to sectoral cap applicable to such Indian company. However, an Indian company may, with the resolution of its board of directors and a special resolution: (i) decrease the aggregate limit before March 31, 2020 to a lower threshold of 24.0% or 49.0% or 74.0% or (ii) increase the aggregate limit to 49.0% or 74.0% or the sectoral cap or any statutory ceiling. However, once the aggregate limit is increased, the limit cannot be reduced later. No single foreign portfolio investor may own 10.0% or more of total paid-up equity capital on behalf of itself or its sub-accounts.

 

ii.Overseas corporate bodies are not permitted to invest under the Portfolio Investment Scheme, although they may continue to hold investments that have already been made under the Portfolio Investment Scheme until such time as these investments are sold on the stock exchange. Overseas corporate bodies are derecognized as a class of investor entity by the Reserve Bank of India under various routes and schemes under the foreign exchange rules and regulations.

 

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Foreign Portfolio Investment Scheme – Purchase of shares or convertible debentures or warrants

 

The Securities and Exchange Board of India issued the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, as amended from time to time. Under the foreign portfolio investment regime, foreign institutional investors, sub-accounts and qualified foreign investors were merged into a new investor class called as foreign portfolio investors. A foreign portfolio investor registered with the Securities and Exchange Board of India can purchase shares or convertible debentures or warrants of an Indian company. The total holding by each foreign portfolio investor or an investor group shall be less than 10.0% of the total paid-up equity capital on a fully diluted basis or less than 10.0% of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company. If the total investment exceeds the aforementioned threshold limit, the foreign portfolio investor shall divest the excess holding within five trading days from the date of settlement of the trades resulting in the breach. In the event of failure to do so, the entire investment in the company by such foreign portfolio investors including its investor group shall be considered as Foreign Direct Investment and the foreign portfolio investor and its investor group shall not make further portfolio investment in that company. The clubbing of investment limit of foreign portfolio investors is based on common ultimate beneficial ownership. Except for the exemptions provided in these regulations, multiple entities registered as foreign portfolio investors and directly or indirectly, having common ownership of more than 50.0% or common control, shall be treated as part of the same investor group and the investment limits of all such entities shall be clubbed at the investment limit as applicable to a single foreign portfolio investor.

 

Transfer of equity instruments by a person resident outside India

 

A person resident outside India (other than a non-resident Indian/overseas citizen of India or a former overseas corporate body) may transfer by way of sale or gift the equity instruments of an Indian company or units held by him or it to any person resident outside India provided that:

 

i.prior government approval shall be obtained for any transfer in case the company is engaged in a sector which requires government approval;

ii.where the equity instruments are held by the person resident outside India on a non-repatriable basis, the transfer by way of sale where the transferee intends to hold the equity instruments on a repatriable basis, shall be in compliance with and subject to the adherence to entry routes, sectoral caps or investment limits, as specified in Rules and attendant conditionalities for such investment, pricing guidelines, documentation and reporting requirements for such transfers, as may be specified by the Reserve Bank of India from time to time.

 

A person resident outside India holding equity instruments of an Indian company or units:

 

i.may transfer the same to a person resident in India by way of gift;

ii.may sell the same to a person resident in India on a recognized stock exchange in India through a registered broker in the manner prescribed by Securities and Exchange Board of India; or

iii.may sell the same to a person resident in India, subject to the adherence to pricing guidelines, documentation and reporting requirements for such transfers as may be specified by the Reserve Bank of India in consultation with the Government from time to time.

 

The Reserve Bank of India guidelines relating to acquisition by purchase or otherwise of shares or voting rights of a banking company, if such acquisition results in any person owning or controlling 5.0% or more of the paid-up share capital or voting rights of the banking company, are also applicable to foreign investment, whether directly or indirectly, beneficial or otherwise. For more details on the Reserve Bank of India guidelines relating to acquisition and holding of shares or voting rights in banking companies, see “Supervision and Regulation—Ownership Restrictions”.

 

Reporting of foreign investments

 

The Reserve Bank of India has issued guidelines on reporting of foreign investments with the objective of integrating different reporting structures for foreign investments in India. As per the guidelines issued on June 7, 2018, a Single Master Form has been introduced that must be filed online. The Single Master Form, as amended from time to time, provides a facility for reporting total foreign investments in an Indian entity as well as investments by persons residing outside India in an investment vehicle.

 

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Indian entities not complying with this pre-requisite will not be able to receive foreign investments (including indirect foreign investments) and will be deemed non-compliant under Foreign Exchange Management Act, 1999 and regulations made thereunder, as amended from time to time.

 

From September 2018, all the reporting prescribed under “Foreign Investment in India”, except if specifically stated otherwise, is required to be done through the Single Master Form, as amended from time to time, available on the Foreign Investment Reporting and Management System platform of the Reserve Bank of India. The Reserve Bank of India through its circular dated January 4, 2023, advised that the forms submitted with respect to reporting of foreign investment in Single Master Form on Firms Portal will be auto-acknowledged and the Authorised Dealer Category-I banks shall verify the same within five working days based on the uploaded documents, as specified. Further, in case of forms filed with delayed reporting of less than or equal to three years, the Authorised Dealer Category-I banks will approve the same, subject to payment of late submission fee. For delayed reporting greater than three years, the Authorised Dealer Category-I bank will approve the forms subject to compounding of contravention. Under the erstwhile provisions, in case of delayed reporting, the case was supposed to be referred to Reserve Bank of India, whereas basis the recent amendment, powers have been given to Authorised Dealer to approve delayed reporting subject to payment of late submission fees/compounding, as the case may be.

 

Currently, an Indian entity or an investment vehicle making a downstream investment in another Indian entity which is considered as indirect foreign investment for the investee Indian entity in terms of Foreign Exchange Management (Non-Debt Instrument) Rules, 2019, shall notify the Secretariat for Industrial Assistance, DIPP, about such investment (including modality of investment in new/existing ventures) within 30 days of such investment, even if shares have not been allotted. Such entity or investment vehicle shall also file Form DI with the Reserve Bank of India within 30 days, from the date of allotment of equity instruments.

 

Issue of ADSs

 

Indian companies are permitted to raise foreign currency resources through the issuance of shares represented by ADSs to foreign investors under the Depository Receipts Scheme, 2014, as amended from time to time. Such issuance is subject to sectoral cap, entry route, minimum capitalization norms, pricing norms, among other things, as applicable as per the rules and regulations established by the Government of India and/or Reserve Bank of India from time to time in this regard.

 

An Indian company issuing ADSs must comply with certain reporting requirements specified by the Reserve Bank of India. An Indian company may issue ADSs if it is eligible to issue shares to persons resident outside India under the foreign direct investment scheme, and shall not exceed the limit on foreign holding of such eligible securities under the extant Foreign Exchange Management Act, 1999 and the rules made thereunder, as amended from time to time. Similarly, an Indian company which is not eligible to raise funds from the Indian capital markets, including a company which has been restricted from accessing the securities market by the Securities and Exchange Board of India, will not be eligible to issue ADSs. As per the Depository Receipts Scheme, 2014, if the issue or purchase of permissible securities underlying the depository receipts does not require approval under the Foreign Exchange Management Act, 1999, no Government of India approval will be required for issuance, purchase or holding of such depository receipts.

 

For disposal of ADSs, investors may need to seek specific approval from Government of India on a case-by-case basis. However, overseas corporate bodies as defined under applicable rules, which are not eligible to invest in India and entities prohibited to buy, sell or deal in securities by the Securities and Exchange Board of India are not eligible to subscribe to ADSs issued by Indian companies. Notwithstanding the foregoing, if any investor were to withdraw its equity shares from the ADS program, its investment would be subject to the general restrictions on foreign ownership noted above and may be subject to the portfolio investment restrictions. Secondary purchases of securities of a banking company in India by foreign direct investors or investments by non-resident Indians, and foreign portfolio investors above the ownership levels set forth above require the Indian government’s approval on a case-by-case basis. It is unclear whether similar case-by-case approvals of ownership of equity shares withdrawn from the depositary facility by non-resident Indians, overseas corporate bodies and foreign institutional investors would be required.

 

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Furthermore, if an investor withdraws equity shares from the ADS program and its direct or indirect holding in a private Indian bank is equal to or exceeds 25.0% of its total equity, or when such holding is or exceeds 25.0% of the total equity and thereafter such investor acquires additional 5.0% equity within any financial year, such investor may be required to make a public offer for acquiring shares of the remaining shareholders under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011, as amended from time to time. For more details on the Reserve Bank of India guidelines relating to acquisition by purchase or otherwise of shares of a private bank, see “Supervision and Regulation—Ownership Restrictions”.

 

Depository Receipts Scheme, 2014

 

An eligible person may now, issue or transfer eligible securities to a foreign depository for the purpose of issuance of depository receipts in terms of Depository Receipts Scheme, 2014, as amended from time to time. However, depository receipts issued under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 shall be deemed to have been issued under the corresponding provisions of the Depository Receipts Scheme, 2014.

 

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Dividends

 

Under Indian law, a company pays dividends upon a recommendation by its Board of Directors and approval by a majority of the shareholders at the annual general meeting of shareholders held within six months from the end of each fiscal year. The shareholders have the right to decrease but not increase the dividend amount recommended by the Board of Directors. Dividends may be paid out of the company’s profits for the fiscal year for which the dividend is declared or out of undistributed profits of prior fiscal years, after excluding amount representing unrealized gains, notional gains or revaluation of assets and any change in carrying amount of an asset or of a liability on measurement of the asset or the liability at fair value. Dividends can also be paid by a company in the interim period, termed “interim dividend” which does not require the approval of the shareholders unless it is combined with the final dividend being recommended by the Board of Directors. The Reserve Bank of India has stipulated that banks may declare and pay dividend out of the profits from the relevant accounting period, without prior approval of the Reserve Bank of India if they satisfy the minimum prudential requirements and subject to the prudential cap on dividend payout ratio prescribed in the guidelines issued in this regard by the Reserve Bank of India. See also “Supervision and Regulation—Restrictions on Payment of Dividends”. Equity shares issued by us are pari passu in all respects including dividend entitlement.

 

We have paid dividends consistently every year from fiscal 1996, the second year of our operations, other than for fiscal 2020, as the Board of Directors did not recommend any dividend in view of the Reserve Bank of India circular ‘Declaration of dividends by banks (Revised)’ dated April 17, 2020, directing banks not to make any dividend payouts from the profits pertaining to fiscal 2020, with the intent that banks conserve capital to retain their capacity to support the economy and absorb losses in an environment of heightened uncertainty caused by COVID-19.

 

The following table sets forth, for the periods indicated, the dividend per equity share and the total amount of dividends paid out on the equity shares during the fiscal year by ICICI Bank, each exclusive of dividend tax. This may be different from the dividend declared for the year.

 

  

Dividend
per
equity share

 

Total amount of dividends paid

   (in Rs.)  (Rs. in billion)
Dividend paid during the fiscal year          
2019    1.50    9.7 
2020    1.00    6.4 
2021         Nil    Nil 
2022   2.00    13.9 
2023   5.00    34.8 

 

From fiscal 2021, dividend income is taxable in the hands of shareholders and companies are not liable to pay dividend distribution tax on distributed profits.

 

For fiscal 2023, the Board of Directors has proposed a dividend, excluding dividend tax, of Rs. 8.00 per equity share, which will be paid during fiscal 2024 after approval by the shareholders in the forthcoming annual general meeting.

 

Future dividends will depend upon our revenues, cash flow, financial condition, the regulations of the Reserve Bank of India and other factors. Owners of ADSs will be entitled to receive dividends payable in respect of the equity shares represented by such ADSs. The equity shares represented by ADSs rank pari passu with existing equity shares. At present, we have equity shares issued in India and equity shares represented by ADSs.

 

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Taxation

 

Indian Tax

 

The following discussion of material Indian tax consequences to investors in ADSs and equity shares who are not resident in India, regardless of whether such investors are of Indian origin or not (each, a “non-resident investor”), is based on the provisions of the Indian Income-tax Act, 1961 (the Income Tax Act), including the special tax regime for ADSs contained in section 115AC of the Income Tax Act, which has been extended to cover additional ADSs that an investor may acquire in a merger or restructuring of the company, and certain regulations implementing the section 115AC regime. The Income-tax Act is amended every year by the Finance Act of the relevant year. Some or all of the tax consequences described herein may be amended or modified by future amendments to the Income-tax Act. This summary is not intended to constitute a complete analysis of the tax consequences under Indian law of the acquisition, ownership and sale of ADSs and equity shares by non-resident investors. Holders should, therefore, consult their own tax advisers regarding the tax consequences of such acquisition, ownership and sale, including the tax consequences under Indian law, the law of the jurisdiction of their residence, any tax treaty between India and their country of residence, and in particular the application of the regulations implementing the section 115AC regime.

 

Residence

 

For the purposes of the Income-tax Act, an individual is a resident of India during any fiscal year if such individual:

 

(a) is in India in that year for 182 days or more or 

(b) is in India for a period or periods aggregating 365 days or more during the four years preceding that fiscal year and periods aggregating 60 days or more in that fiscal year.

 

The period of 60 days is replaced with 182 days (where an individual is having income in India other than foreign source less than Rs. 1.5 million)/replaced with 120 days (where an individual is having income in India other than foreign source more than Rs. 1.5 million) in the case of an Indian citizen or person of Indian origin who, being resident outside India, comes on a visit to India during the fiscal year.

 

The period of 60 days is replaced with 182 days in the case of:

 

·an Indian citizen who leaves India for purposes of employment or

·as a member of the crew of an Indian ship during the fiscal year.

 

A company is resident in India in any fiscal year if it is an Indian company or its place of effective management in that year is in India. A firm or other association of persons is resident in India except where the control and the management of its affairs are situated wholly outside India.

 

Taxation of Distributions

 

As per provision of the income tax laws, dividend received in respect of ADS will be taxable at the rate of 10% and payer of the dividend would be required to deduct tax at the rate of 10%.

 

Taxation on Exchange of ADSs

 

The receipt of equity shares upon the surrender of ADSs by a non-resident investor would not give rise to a taxable event for Indian tax purposes.

 

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Taxation on Sale of ADSs or Equity Shares

 

Any transfer of ADSs outside India by a non-resident investor to another non-resident investor will not give rise to Indian capital gains tax in the hands of the transferor. Gains on the transfer of ADSs by Foreign Institutional Investors to an Indian resident will be subject to capital gains tax.

 

Subject to any relief under any relevant double taxation treaty, gain arising from the sale of an equity share will generally give rise to liability for Indian income tax in the hands of the transferor and tax will be required to be withheld at source. Gains will either be taxable as capital gains or as business income, depending upon the nature of holding. Where the equity share has been held for more than 12 months (measured from the date on which the request for redemption of the ADS was made), the resulting long-term capital gains will be taxable as per the provision of the Income Tax Act, at the rate of 10% (plus the applicable surcharge and education cess) under the provision of the Income Tax Act, if the total long-term capital gain exceeds Rs. 0.1 million and the shares are traded on a recognized stock exchange and the securities transaction tax, described below, is paid on such sale and purchase. For computing capital gains relating to the acquisition made before February 1, 2018, the cost of acquisition shall be higher of actual cost of acquisition or lower of price of equity shares quoted on stock exchange on January 31, 2018 (if no trading then immediately preceding day) or sale price. Further, an additional requirement for payment of securities transaction tax on conversion of ADSs to equity shares has been relaxed subject to certain conditions. If the equity share has been held for 12 months or less, the resulting short-term capital gains will be taxable at a tax rate of 15% (plus the applicable surcharge and education cess). This rate of tax is applicable provided the gains are treated as capital gains and provided the shares are sold on recognized Indian stock exchanges and are subject to securities transaction tax. In other cases, the rate of tax applicable under the provisions of the Income-tax Act varies, subject to a maximum rate of 40% (plus the applicable surcharge and education cess). The actual rate depends on a number of factors, including without limitation the nature of the non-resident investor.

 

The above rate may be reduced under the provisions of the double taxation treaty entered into by the Government of India with the country of residence of the non-resident investors. The double taxation treaty between the United States and India (the “Treaty”) does not provide U.S. residents with any relief from Indian tax on capital gains i.e. it will be taxable as per the local laws of India.

 

Tax on long-term and short-term capital gains, if payable, as discussed above, upon a sale of equity shares,

 

(a)To be deducted at source by the person responsible for paying the non-resident, in accordance with the relevant provisions of the Income Tax Act. As per the provisions of the Income Tax Act, any income by way of capital gains payable to non-residents may be subject to withholding of tax at the rate under the Income Tax Act or the double taxation treaty, whichever is more beneficial to the assessee, unless a lower withholding tax certificate is obtained from the tax authorities.

 

(b)To get the benefit of the applicable double taxation treaty, the non-resident investor must furnish a certificate of his or her residence in a country outside India and such other documents as may be prescribed under the Act such as valid Permanent Account Number issued by the Indian Income Tax authorities or tax identification number issued by the Income Tax authorities country of tax residence along with certain other details such as name, e-mail ID, contact number, address etc.

 

Where Permanent Account Number is submitted, it should be linked to Aadhaar (applicable in case of individuals if Aadhaar is obtained in India) and investor should have filed his income tax returns in India in past one year, otherwise tax will be deducted at the higher rate which may go upto 20% or more.

 

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(c)The non-resident will be entitled to a certificate evidencing such tax deduction in accordance with the provisions of the Income Tax Act.

 

(d)However, as per of the Income Tax Act, no deduction of tax shall be made from capital gain arising from transfer of securities, payable to a Foreign Institutional Investor.

 

For purposes of determining the amount of capital gains arising on a sale of an equity share for Indian tax purposes, the cost of acquisition of an equity share received upon the surrender of an ADS will be the price of the share prevailing on the BSE Limited or the National Stock Exchange of India Limited on the date a request for such redemption was made. The holding period of an equity share received upon the surrender of an ADS will commence on the date on which request for such redemption of the ADS was made.

 

A sale/purchase of equity shares entered into on a recognized stock exchange in India, whether settled by actual delivery or transfer, will be subject to the securities transaction tax in the hands of purchaser and seller at the rate of 0.1% on the value of the transaction at the time of sale. However, when settlement is done other than by actual delivery or transfer, it will be subject to the securities transaction tax in the hands of seller at the rate of 0.025% on the value of the transaction at the time of sale.

 

Rights

 

Distributions to non-resident investors of additional ADSs or equity shares or rights to subscribe for equity shares made with respect to ADSs or equity shares are not subject to Indian income tax in the hands of the non-resident investor.

 

In case of capital gains derived from the extinguishment of rights outside India by a non-resident investor that is not entitled to exemption under a tax treaty, to another non-resident investor, the sale may be deemed by the Indian tax authorities to be situated within India (as our situs is in India), in which case, any gains realized on the sale of the rights will be subject to Indian capital gains taxation, in the manner discussed above under “—Taxation on Sale of ADSs or Equity Shares”.

 

Bonus

 

The holding period in case of bonus shares will commence from the date of allotment of such bonus shares. The cost of acquisition of bonus shares acquired before January 31, 2018 will be the fair market value of the bonus shares as on January 31, 2018 but shall not exceed the sales price. The cost of acquisition of bonus shares acquired after January 31, 2018 will be considered as nil.

 

General Anti Avoidance Rule

 

The provisions for General Anti Avoidance of Tax are effective from April 1, 2017. The powers to invoke provisions under General Anti Avoidance of Tax are bestowed upon the Indian Income Tax Authorities if they allege that the primary motive of a particular transaction or arrangement is to obtain a tax advantage. If provisions under General Anti Avoidance of Tax are invoked by tax authorities, then a tax benefit or benefit under the tax treaty may be denied.

 

Stamp Duty

 

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Pursuant to an amendment to the Indian Stamp Act, 1899 effective July 1, 2020, stamp duty is payable on any issue/ transfer of equity shares in non-physical form. Our equity shares are compulsorily delivered in non-physical form.

 

Upon the issuance of the equity shares underlying ADSs, we, are required to pay a stamp duty of 0.005% of the total market value of the equity shares issued. A transfer of ADSs is not subject to stamp duty under Indian law. However, transfer of equity shares (on delivery basis) by a non-resident investor is subject to stamp duty at the rate of 0.015% of the market value of the equity shares on the trade date. Such stamp duty is payable, (i) by the buyer in case the transfer of equity shares is through a stock exchange and (ii) by the seller in case the transfer of equity shares is other than through a stock exchange or is through a depository or is other than through a depository.

 

Other Taxes

 

At present, there are no taxes on wealth, gifts or inheritance which apply to the ADSs or underlying equity shares.

 

Goods and Services Tax

 

Goods and Services Tax is a single comprehensive tax levied on the manufacture, sale and consumption of goods and services at a national level. It is applicable from July 1, 2017 on all transactions of goods and services on which various indirect taxes levied by the Centre and States is submersed except goods and services outside the purview of Goods and Services Tax and transactions below the threshold limit. Brokerage fees paid to stockbrokers in connection with the sale or purchase of shares which are listed on any recognized stock exchange in India are subject to Goods and Services Tax at a rate of 18%. The stockbroker is responsible for collecting the Goods and Services Tax and paying it to the relevant authority. Sale of the securities including ADS and equity shares is outside the purview of Goods and Services Tax.

 

United States Federal Income Tax

 

The following is a description of material U.S. federal income tax consequences to the U.S. Holders described below of owning and disposing of ADSs or equity shares, but it does not purport to be a comprehensive description of all tax considerations that may be relevant to your decision to own ADSs or equity shares. This discussion applies to you only if you are a U.S. Holder that owns ADSs or equity shares as capital assets for U.S. federal income tax purposes.

 

This discussion does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, including alternative minimum tax consequences, tax consequences of the “Medicare contribution tax” on “net investment income” and tax consequences that may be applicable to you if you are a person subject to special rules, such as:

 

·an insurance company;

·a tax-exempt entity;

·a dealer or trader in securities who uses a mark-to-market method of tax accounting;

·one of certain financial institutions;

·a person who owns ADSs or equity shares as part of an integrated investment (including a straddle or conversion transaction);

·a person whose functional currency is not the U.S. dollar;

·a person who acquired or received ADSs or equity shares pursuant to the exercise of any employee stock option or otherwise as compensation;

 

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·a person holding ADSs or equity shares in connection with a trade or business conducted outside of the United States;

·a person who owns, directly, indirectly or constructively, 10.0% or more of our stock, by vote or value; or

·a partnership or other entity or arrangement classified as a partnership for U.S. federal income tax purposes.

 

If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes owns ADSs or equity shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships owning ADSs or equity shares and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of ADSs or equity shares.

 

This discussion is based on the tax laws of the United States including the Internal Revenue Code of 1986, as amended, (the “Code”), proposed and final Treasury regulations, revenue rulings, judicial decisions and the income tax treaty between the United States and India, or the “Treaty”, all as of the date hereof, which may change, possibly with retroactive effect.

 

You are a “U.S. Holder” if, for U.S. federal income tax purposes, you are a beneficial owner of ADSs or equity shares and:

 

·a citizen or individual resident of the United States;

·a corporation, or other entity taxable as a corporation, created or organized under the laws of the United States, any state therein or the District of Columbia; or

·an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

 

In general, if you own ADSs you will be treated as the owner of the underlying equity shares represented by those ADSs for U.S. federal income tax purposes. Accordingly, you will not recognize gain or loss upon an exchange of ADSs for the underlying equity shares represented by those ADSs.

 

Please consult your tax adviser with regard to the application of U.S. federal income tax laws to ADSs or equity shares in your particular circumstances, including the passive foreign investment company (“PFIC”) rules described below, as well as any tax consequences arising under the laws of any state, local or other taxing jurisdiction.

 

Taxation of Dividends

 

Distributions you receive on ADSs or equity shares, other than certain pro rata distributions of equity shares or rights to acquire equity shares to all holders of equity shares (including holders of ADSs), will generally constitute foreign-source dividend income for U.S. federal income tax purposes. Subject to the PFIC rules described below, the amount of the dividend you will be required to include in income will be based on the U.S. dollar value of the rupees received, calculated by reference to the exchange rate in effect on the date the payment is received by the depositary (in the case of ADSs) or by you (in the case of equity shares) regardless of whether the payment is converted into U.S. dollars on the date of receipt. If the dividend is converted into U.S. dollars on the date of receipt, you should not be required to recognize foreign currency gain or loss in respect of the dividend income. You may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt. If you realize gain or loss on a sale or other disposition of rupees, it will constitute U.S. source ordinary income or loss. The amount of the dividend will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code. Subject to applicable limitations and the PFIC discussion below, if you are a non-corporate U.S. Holder, dividends paid to you may be taxable at the favorable rates applicable to long-term capital gains. If you are a non-corporate U.S. Holder, you should consult your tax adviser to determine whether you are subject to any special rules that limit your ability to be taxed at these favorable rates.

 

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Indian income taxes withheld from cash dividends on the Company shares or ADSs generally will be creditable against a U.S. Holder’s U.S. federal income tax liability, subject to applicable limitations that vary depending upon your circumstances. The rules governing foreign tax credits are complex. For example, Treasury regulations provide that, in the absence of an election to apply the benefits of an applicable income tax treaty, in order for non-U.S. income taxes to be creditable the relevant non-U.S. income tax rules must be consistent with certain U.S. federal income tax principles, and we have not determined whether the Indian income tax system meets these requirements. You should consult your own tax adviser regarding the availability of foreign tax credits in your particular circumstances. Instead of claiming a credit, you may, at your election, deduct such Indian taxes in computing your income, subject to generally applicable limitations under U.S. federal income tax law.

 

Taxation of Capital Gains

 

You will recognize gain or loss for U.S. federal income tax purposes on the sale or exchange of ADSs or equity shares. The gain or loss will generally be U.S. source capital gain or loss, and subject to the PFIC rules discussed below will be long-term capital gain or loss if you have owned such ADSs or equity shares for more than one year. You should consult your tax adviser about the treatment of capital gains, which may be taxed at lower rates than ordinary income for non-corporate taxpayers, and capital losses, the deductibility of which may be limited. The amount of the gain or loss will equal the difference between your tax basis in the ADSs or equity shares disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars.

 

Under certain circumstances as described under “—Indian Tax—Taxation on sale of ADSs or Equity Shares,” you may be subject to Indian tax upon the disposition of equity shares. Under the Code, any gain or loss on the sale or exchange of ADSs or equity shares will generally be U.S. source. However, although the application of the Treaty in this respect is subject to uncertainty, it is possible that under the Treaty your gains from dispositions of equity shares may be treated as foreign source. In that case, you may be able to claim foreign tax credit in respect of any Indian income tax on this gain. Even if Indian income taxes on disposition gains are creditable under the Treaty, Treasury regulations generally preclude you from claiming a foreign tax credit with respect to these taxes if you do not elect to apply the benefits of the Treaty. However, in that case it is possible that any Indian taxes on disposition gains may either be deductible or reduce the amount realized on the disposition. The rules governing foreign tax credits and deductibility of foreign taxes are complex. You should consult your tax adviser with respect to your ability to credit any Indian income taxes on dispositions against your U.S. federal income tax liability, including the uncertainty as to whether Indian taxes on dispositions are generally creditable under the Treaty, the requirement to report Treaty-based return positions and the creditability or deductibility of the Indian tax on disposition gains in your particular circumstances (including any applicable limitations).

 

Any Indian stamp duty paid on the purchase or sale of equity shares will not be creditable against your U.S. federal income tax liability. However, stamp duty may increase your tax basis in the equity shares if you are a buyer of the shares, or reduce the amount of gain (or increase the amount of loss) you recognize on the sale or other disposition of the shares.

 

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Passive Foreign Investment Company Rules

 

In general, a foreign corporation is a PFIC for any taxable year in which (i) 75.0% or more of its gross income consists of passive income (such as dividends, interest, rents, royalties and investment gains) or (ii) 50.0% or more of the average value of its assets (generally determined on a quarterly basis) consists of assets that produce, or are held for the production of, passive income. There are certain exceptions for active business income, including exceptions for certain income earned by foreign active banks and insurance companies. Based upon certain proposed Treasury regulations (the “Active Banks Proposed Regulations”), which were proposed to be effective for taxable years beginning after December 31, 1994, and under current guidance can be relied upon, we do not believe we were a PFIC for our taxable year that ended March 31, 2023. Because there can be no assurance that the Active Banks Proposed Regulations will be finalized in their current form (and the manner of their application is not entirely clear), because the rules applicable to active insurance companies are subject to change (including under certain proposed Treasury regulations), and because the composition of our income and assets will vary over time and our PFIC status for any taxable year will depend, in large part, on the extent to which our income and assets will be considered active under the exceptions for active banks or insurance companies, there can be no assurance that we will not be a PFIC for any taxable year.

 

If we were a PFIC for any taxable year during which you owned ADSs or equity shares, you may be subject to adverse tax consequences. Generally, gain recognized upon a disposition (including, under certain circumstances, a pledge) of ADSs or equity shares by you would be allocated ratably over your holding period for such ADSs or equity shares. The amounts allocated to the taxable year of disposition and to years before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for that taxable year for individuals or corporations, as appropriate, and an interest charge would be imposed on the tax attributable to the allocated amounts. Further, to the extent that distributions received by you on your ADSs or equity shares during a taxable year exceed 125% of the average of the annual distributions on such ADSs or equity shares received during the preceding three taxable years or your holding period, whichever is shorter, the excess distributions would be subject to taxation in the same manner as gain, as described above in this paragraph.

 

If we were a PFIC for any year during which you owned ADSs or equity shares, we generally would continue to be treated as a PFIC with respect to such ADSs or equity shares for all succeeding years during which you owned the ADSs or equity shares, even if we ceased to meet the threshold requirements for PFIC status.

 

Alternatively, if we were a PFIC and if ADSs or equity shares were “regularly traded” on a “qualified exchange,” you could make a mark-to-market election that would result in tax treatment different from the general tax treatment for PFICs described above. ADSs or equity shares would be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of ADSs or equity shares, as the case may be, were traded on a qualified exchange on at least 15 days during each calendar quarter. The New York Stock Exchange, on which our ADSs are listed, is a qualified exchange for this purpose. A foreign exchange is a “qualified exchange” if it is regulated by a governmental authority in the jurisdiction in which the exchange is located and with respect to which certain other requirements are met.

 

If you make the mark-to-market election (assuming the election is available), you generally will recognize as ordinary income any excess of the fair market value of ADSs or equity shares at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of ADSs or equity shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If you make the election, your tax basis in ADSs or equity shares will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition of ADSs or equity shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark-to-market election) and any excess loss will be a capital loss.

 

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In addition, if we were a PFIC or, with respect to you, were treated as a PFIC for the taxable year in which we paid a dividend or for the prior taxable year, the favorable tax rates with respect to dividends paid to certain non-corporate U.S. Holders, described above under “—United States Federal Income TaxTaxation of Dividends”, would not apply.

 

If we are a PFIC for any taxable year during which you owned our ADSs or equity shares, you will generally be required to file IRS Form 8621 with your annual U.S. federal income tax returns, subject to certain exceptions.

 

You should consult your tax adviser regarding whether we are or were a PFIC and the potential application of the PFIC rules.

 

Information Reporting and Backup Withholding

 

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting and to backup withholding, unless (i) you are an exempt recipient or (ii) in the case of backup withholding, you provide a correct taxpayer identification number and certify that no loss of exemption from backup withholding has occurred. The amount of any backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is timely furnished to the Internal Revenue Service.

 

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Presentation of Financial Information

 

Pursuant to the issuance and listing of our securities in the United States under registration statements filed with the United States Securities 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. However, pursuant to a significant expansion of Indian accounting standards, Indian GAAP constitutes a comprehensive body of accounting principles and since fiscal 2006, we have included in the annual report consolidated financial statements prepared according to Indian GAAP, which varies in certain respects from U.S. GAAP. For a reconciliation of net income and stockholders’ equity to U.S. GAAP, a description of significant differences between Indian GAAP and U.S. GAAP and certain additional information required under U.S. GAAP, see notes 21 and 22 to our consolidated financial statements herein.

 

The data for fiscal 2021 through fiscal 2023 have been derived from our consolidated financial statements. The accounting and reporting policies used in the preparation of our financial statements reflect general industry practices and conform with Indian GAAP including the Accounting Standards (AS) issued by Institute of Chartered Accountants of India, guidelines issued by the Reserve Bank of India, the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority as applicable to relevant companies. In the case of foreign subsidiaries, Generally Accepted Accounting Principles as applicable to the respective subsidiaries are followed.

 

Certain subsidiaries of the Bank, namely ICICI Securities Limited, ICICI Securities Primary Dealership Limited, ICICI Prudential Asset Management Company Limited and ICICI Home Finance Limited have adopted Ind AS, revised set of accounting standards issued by The Institute of Chartered Accountants of India (which largely converges the Indian accounting standards with International Financial Reporting Standards). However, for preparation of consolidated financial statements of the Bank, financial statements continued to be as per current Indian GAAP of these entities have been considered. All the numbers reported/considered in this document for these subsidiaries are based on current Indian GAAP.

 

The consolidated financial statements for fiscal 2021 were audited by Walker Chandiok & Co LLP, Chartered Accountants and for fiscal 2022 and fiscal 2023 by joint auditors MSKA & Associates, Chartered Accountants and KKC & Associates LLP (formerly known as Khimji Kunverji & Co LLP), Chartered Accountants under auditing standards issued by the Institute of Chartered Accountants of India. The consolidated financial statements for fiscal 2021 through fiscal 2023 have also been audited by KPMG Assurance and Consulting Services LLP (formerly known as KPMG), an independent registered public accounting firm in India, in accordance with the auditing standards of the United States Public Company Accounting Oversight Board. Our published Indian GAAP consolidated financial statements and disclosures relating to U.S. GAAP net income reconciliation and stockholders’ equity reconciliation as required by U.S. Securities and Exchange Commission and applicable GAAP, audited by KPMG Assurance and Consulting Services LLP (formerly known as KPMG), are set forth at the end of this annual report.

 

Under U.S. GAAP, the consolidation of ICICI’s majority ownership interest in ICICI Prudential Life Insurance Company Limited, had been accounted for by the equity method, because of substantive participative rights retained by the minority shareholders. Under Indian GAAP, ICICI Prudential Life Insurance Company Limited is consolidated on line-by-line basis.

 

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In accordance with the scheme of arrangement between ICICI Lombard General Insurance Company Limited and Bharti AXA General Insurance Company Limited (Bharti AXA), as approved by Insurance Regulatory and Development Authority of India with effect from September 8, 2021, assets and liabilities of Bharti AXA’s general insurance business vested with ICICI Lombard General Insurance Company Limited on September 8, 2021 with effect from the Appointed Date of April 1, 2020. ICICI Lombard General Insurance Company Limited issued two fully paid up equity shares to the shareholders of Bharti AXA for every 115 fully paid up equity shares. Subsequent to issuance of equity shares to Bharti AXA shareholders, the Bank’s shareholding in ICICI Lombard General Insurance Company Limited reduced to below 50.0%. Accordingly, the Bank has accounted its investment in ICICI Lombard General Insurance Company Limited as an equity affiliate under Accounting Standard – 23 – “Accounting for Investments in Associates” in consolidated financial statements with effect from April 1, 2021 under Indian GAAP. Under U.S. GAAP, ICICI Lombard General Insurance Company Limited was consolidated on line-by-line basis until September 7, 2021, and was accounted as an affiliate with effect from September 8, 2021, the date of loss of control.

  

Although we have translated in this annual report certain rupee amounts into dollars for convenience, this does not mean that the rupee amounts referred to could have been, or could be, converted into dollars at any particular rate, the rates stated earlier in this annual report, or at all. Except in the section on “Market Price Information”, all translations from rupees to U.S. dollars are based on the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board at year-end fiscal 2023. The Federal Reserve Bank of New York certifies this rate for customs purposes in a weekly version of the H.10 release. The exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board at year-end fiscal 2023 was Rs. 82.19 per US$ 1.00.

 

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Additional Information

 

Memorandum and Articles of Association

 

Objects and Purposes

 

Pursuant to Clause III.A.1 of ICICI Bank’s Memorandum of Association, ICICI Bank’s main objective is to, among other things, carry on the business of banking in any part of India or outside India.

 

Provisions Relating to Directors

 

Certain provisions of our Articles of Association relating to directors are set forth as follows:

 

·Article 128 of the Articles of Association provides that no director shall be required to hold any qualification shares of the Company.

 

·Article 135 of the Articles of Association provides that no director of ICICI Bank shall, as a director, take any part in the discussion of or vote on any contract or arrangement if such director is directly or indirectly concerned or interested in such contract or arrangement.

 

·Article 137 of the Articles of Association provides that at every Annual General Meeting of the Company, one third of such directors for the time being as are liable to retire by rotation or if their number is neither three nor a multiple of three, then the number nearest to one-third, shall retire from office. The Debenture Directors, the Government Directors and the other Non-Rotational Directors shall not be subject to retirement under the Articles of Association.

 

·Article 138 of the Articles of Association provides that the directors to retire by rotation at every Annual General Meeting shall be those who have been longest in office since their last appointment, but as between persons who became Directors on the same day, those who are to retire shall (unless they otherwise agree among themselves) be determined by lot. There is no provision under the Articles of Association requiring the mandatory retirement of directors at a specified age. Pursuant to the Reserve Bank of India guidelines, a person is eligible for appointment as non-executive director, if he or she is between 35 and 75 years of age. After attaining the age of 75 years, no person can continue in this position. Further, pursuant to the Reserve Bank of India guidelines, no person can continue as Managing Director and Chief Executive Officer or wholetime director beyond the age of 70 years. Within the overall limit of 70 years, individual Bank's Boards are free to prescribe a lower retirement age for the wholetime directors, including the Managing Director and Chief Executive Officer.

 

·Directors have no powers to vote in absence of a quorum.

 

·Article 79 of the Articles of Association provides that the directors may by a resolution passed at a meeting of the Board of Directors, borrow moneys and raise and secure the payment of amounts in a manner and upon such terms and conditions in all respects as they think fit and in particular by the issue of bonds, perpetual or redeemable debentures or debenture stock, or any mortgage or charge or other security on the undertaking or the whole or any part of the property of ICICI Bank (both present and future) including our uncalled capital.

 

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Amendment to Rights of Holders of Equity Shares

 

Any change to the existing rights of the equity holders can be made only by amending the Articles of Association which would require a special resolution of the shareholders, passed by not less than three times the number of votes cast against the resolution.

 

General Meetings of Shareholders

 

We are required to convene our annual general meeting within a period of five months from the date of closing of the financial year. The Board may convene an extraordinary general meeting when necessary or at the request of a shareholder or shareholders holding at least 10% of our paid up capital carrying voting rights. A general meeting of a company may be called by giving not less than clear 21 days notice in the manner prescribed under the applicable laws/regulations.

 

Change in Control Provisions

 

Article 56 of the Articles of Association provides that the Board of Directors may at its discretion decline to register or acknowledge any transfer of any securities in respect of securities upon which we have a lien or while any money in respect of the securities desired to be transferred on any of them remain unpaid. Moreover, the Board of Directors may refuse to register the transfer of any securities if the total nominal value of any securities intended to be transferred by any person would, together with the total nominal value of any securities held in ICICI Bank, exceed 1% of the paid-up equity share capital of ICICI Bank or if the Board of Directors is satisfied that as a result of such transfer, it would result in the change in the Board of Directors or change in the controlling interest of ICICI Bank and that such change would be prejudicial to the interests of ICICI Bank. However, under the Indian Companies Act, the enforceability of such transfer restrictions is unclear.

 

Recent Amendments to Memorandum and Articles of Association

 

In view of the changes in the regulatory provisions, including enactment of the Companies Act, 2013, the repeal of the provisions of the Companies Act, 1956, as amended, and amendments to the Banking Regulation Act, 1949 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, the existing Articles of Association of the Bank required alterations, replacement or deletions. Hence, it was considered necessary to wholly replace the existing Articles of Association with revised Articles of Association. The Board of Directors at its meeting held on May 6, 2019 approved the alterations to Memorandum of Association and the proposed revised Articles of Association of the Bank, subject to the approval of the Shareholders and such regulatory approvals as may be necessary or required. The Shareholders at the annual general meeting held on August 9, 2019:

 

(a) approved the special resolution for alterations to Memorandum of Association of the Bank aligning it with the Companies Act, 2013 and rules made thereunder and

 

(b) approved the special resolution for adoption of revised Articles of Association of the Bank aligning it with the regulatory provisions including the Companies Act, 2013, amendments to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

 

The Reserve Bank of India through its letter dated August 23, 2019 received on August 28, 2019 by the Bank duly noted the amendments to Memorandum of Association and adoption of revised Articles of Association of the Bank with due reference to the applicable provisions under the Banking Regulation Act.

 

For a description of our equity shares and American Depositary Shares, see Exhibit 2.6 to this annual report.

 

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Documents on Display

 

The documents concerning us which are referred to herein may be inspected at the Securities and Exchange Commission (“SEC”). You may read and copy any document filed or furnished by us at the SEC’s public reference rooms in Washington D.C., New York and Chicago, Illinois or obtain them by mail upon payment of prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information. The SEC also maintains a website at www.sec.gov, which contains, in electronic form, each of the reports and other information that we have filed electronically with the SEC. Information about ICICI Bank is also available on the web at www.icicibank.com.

 

Annual Report to Security Holders

 

We intend to submit annual report provided to security holders in electronic format as an exhibit to a current report on Form 6-K.

 

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Exhibit Index

 

Exhibit No.

Description of Document

1.1 ICICI Bank Memorandum of Association, as amended (incorporated herein by reference to Exhibit 1.1 to ICICI Bank’s Annual Report on Form 20-F for the year ended March 31, 2020 filed on July 31, 2020).
1.2 ICICI Bank Articles of Association, as amended (incorporated herein by reference to Exhibit 1.2 to ICICI Bank’s Annual Report on Form 20-F for the year ended March 31, 2020 filed on July 31, 2020).
2.1 Deposit Agreement among ICICI Bank, Deutsche Bank and the holders from time to time of American Depositary Receipts issued thereunder (including as an exhibit, the form of American Depositary Receipt) (incorporated herein by reference to ICICI Bank’s Registration Statement on Form F-1 (File No. 333-30132)*).
2.2 Letter Agreements dated February 19, 2002 and April 1, 2002 (incorporated herein by reference to Exhibit 2.2 to ICICI Bank’s Annual Report on Form 20-F for the year ended March 31, 2002 filed on September 30, 2002), Letter Agreement dated March 8, 2005 (incorporated by reference to Exhibit 4.3 to ICICI Bank’s Registration Statement on Form F-3 (File No. 333-121664)) and Letter Agreement dated November 4, 2011 (incorporated by reference to Exhibit 2.3 to ICICI Bank’s Annual Report on Form 20-F for the year ended March 31, 2012 filed on July 31, 2012) amending and supplementing the Deposit Agreement.
2.3 Letter Agreement dated June 2, 2016, supplementing the Letter Agreement dated November 4, 2011 (incorporated by reference to Exhibit 2.3 to ICICI Bank’s Annual Report on Form 20-F for the year ended March 31, 2016 filed on August 1, 2016).
2.4 Letter Agreement dated October 31, 2017, amending and supplementing the Letter Agreement dated November 4, 2011 (incorporated herein by reference to Exhibit 2.4 to ICICI Bank’s Annual Report on Form 20-F for the year ended March 31, 2018 filed on July 31, 2018).
2.5 ICICI Bank’s Share Certificate Specimen.
2.6 Description of Securities Registered under Section 12 of the Exchange Act.

4.1

ICICI Bank Employee Stock Option Scheme - 2000, as amended (incorporated herein by reference to Exhibit 4.1 to ICICI Bank’s Annual Report on Form 20-F for the year ended March 31, 2019 filed on July 31, 2019).

4.2 ICICI Bank Employees Stock Unit Scheme – 2022.
8.1 List of Subsidiaries (included under “Business–Subsidiaries, Associates and Joint Ventures” herein).
11.1 Code of Business Conduct and Ethics, as amended.
12.1 Certification of the Managing Director and Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act.
12.2 Certification of the Group Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act.
13.1 Certification of periodic financial report pursuant to 18 U.S.C. Section 1350, as mandated by Section 906 of the Sarbanes-Oxley Act.

    

*Paper filing 

 

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SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on our behalf.

 

  For ICICI BANK LIMITED
   
   
  By: /s/ Anindya Banerjee
    Name: Mr. Anindya Banerjee
    Title: Group Chief Financial Officer

Place: Mumbai

Date: July 28, 2023

 

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ICICI Bank Limited and subsidiaries

 

Consolidated Financial Statements

For the year ended March 31, 2022

and March 31, 2023 together

with Auditors’ Report

 

 

Index to Consolidated Financial Statements

 

   
Contents Page
   
Report of Independent Registered Public Accounting Firm F-2
Consolidated balance sheet F-10
Consolidated profit and loss account F-11
Consolidated cash flow statement F-12
Schedules to the consolidated financial statements F-14

 

 

Report of Independent Registered Public Accounting Firm

 

To the Stockholders and Board of Directors

ICICI Bank Limited:

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated balance sheets of ICICI Bank Limited (the ‘Bank’) and subsidiaries (the Company) as of March 31, 2023 and 2022, the related consolidated profit and loss accounts and consolidated cash flows statements for each of the years in the three-year period ended March 31, 2023, and the related notes and financial statement schedules 1 to 18B (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2023, in conformity with generally accepted accounting principles in India.

 

Differences from U.S. Generally Accepted Accounting Principles

 

Accounting principles generally accepted in India vary in certain significant respects from U.S. generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in Note 21 of Schedule 18B to the consolidated financial statements.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

Allowance for Credit Losses

 

As discussed in Note 7 of Schedule 18B to the consolidated financial statements, the Company’s allowance for credit losses under generally accepted accounting principles in India (Indian GAAP) was Rs. 256,291 million as at 31 March 2023 (the March 31, 2023 Indian GAAP ACL). As discussed in Note 21 of Schedule 18B to the consolidated financial statements, the Company’s allowance for credit

 

F-2

losses included in the reconciliation of stockholders’ equity from Indian GAAP to U.S. GAAP as of March 31, 2023 was Rs. 38,841.3 million, which included allowance for credit losses on loans evaluated on a collective basis (the March 31, 2023 collective ACL) and allowance for credit losses on loans evaluated on an individual basis (the March 31, 2023 individual ACL). The March 31, 2023 Indian GAAP ACL, the March 31, 2023 collective ACL and the March 31, 2023 individual ACL are collectively referred to as ‘total ACL’.

 

The March 31, 2023 Indian GAAP ACL for impaired commercial loans (non-performing loans or NPLs) includes ACL on commercial loans identified as NPL through a review of select accounts by evaluation of additional information (other than that relating to the payment record).

 

The March 31, 2023 collective ACL includes the measure of expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. The Company estimated the March 31, 2023 collective ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances. The quantitative calculation of expected credit losses is the product of multiplying the Company’s estimates of probability of default (PD), loss given default (LGD), and individual loan level exposure at default (EAD). For the quantitative calculation, the Company uses models to develop the PD and LGD, which are derived from internal historical default and loss experience, that incorporate the relevant macro-economic scenario over reasonable and supportable forecast periods. The term structure for subsequent periods is built using single year reversion to the long run historical information. All such periods are established for each portfolio segment. The Company estimates the EAD using a model which estimates prepayments over the life of the loans. In order to capture the unique risks of the loan portfolio within the PD, LGD, and EAD models, the Company segments the portfolio into pools, incorporating certain criteria including, but not limited to customer type, risk rating and delinquency status for commercial loans and product type, delinquency status, credit scores and months on book for non-commercial loans. The Company has developed internal models to assign credit risk ratings to borrowers, which are used for the segmentation of commercial loans. The model output for the collective ACL is adjusted by increasing the probability of default estimates to take into consideration model imprecision not yet reflected in the calculation. Judgment is applied in making this adjustment, including taking into account uncertainties associated with the economic conditions, product or portfolio, as well as other relevant internal and external factors affecting the credit quality of the portfolio.

 

The March 31, 2023 individual ACL includes the measure of expected credit losses on an individual basis for those commercial loans that do not share similar risk characteristics with other financial assets in the pools on account of credit deterioration, based on the ability of the borrower to repay the contractual amounts due to the Company, including considerations of both quantitative and qualitative criteria such as the account conduct, future prospects, repayment history and financial performance. The Company estimated the March 31, 2023 individual ACL using either the present value of the expected future cash flows, or in the case of a collateral dependent loan, using the net realizable value of the collateral, net of cost to sell, if any, determined individually for each such loan.

 

We identified the assessment of total ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of total ACL due to significant measurement uncertainty. Identification of NPLs for the March 31, 2023 Indian GAAP ACL involved evaluation of additional information (other than that relating to the payment record), which required complex auditor judgment. Additionally, the assessment of the March 31, 2023 collective ACL (referred to as ‘Collective ACL’) encompassed the evaluation of the Collective ACL methodology, including the methods and models used to estimate the PD, LGD, and EAD and their significant assumptions. Such significant assumptions included portfolio segmentation, the relevant macro-economic scenario, the reasonable and supportable forecast periods, the historical observation period, and credit risk ratings for commercial loans and prepayment estimates. The assessment also included the evaluation of the qualitative factors and their significant assumptions, including selection of relevant macroeconomic variables and consideration of uncertainties due to result of the COVID-19 pandemic and geopolitical uncertainties. The assessment also included an evaluation of the conceptual soundness and performance of the PD, LGD, commercial loan credit risk rating and

 

F-3

EAD models. The March 31, 2023 individual ACL (referred to as ‘individual ACL’) required significant auditor judgment to identify the loans that do not share similar risk characteristics with other financial assets in the pools on account of credit deterioration based on the ability of the borrower to repay the contractual amounts due to the Company, including considerations of both quantitative and qualitative criteria such as the account conduct, future prospects, repayment history and financial performance, and to estimate the recovery on such loans based on either the present value of the expected future cash flows, or in the case of a collateral dependent loan, the net realizable value of the collateral, net of cost to sell, if any, determined individually for each such loan.

 

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to Company’s measurement of the total ACL estimates, including controls over the:

 

-evaluation of additional information (other than that relating to the payment record) required for identification of NPL through a review of select commercial loan accounts

 

-review of the Collective ACL methodology

 

-review of the PD, LGD, commercial loan credit risk rating and EAD models

 

-identification and determination of the significant assumptions used in the PD, LGD, commercial loan credit risk rating and EAD models

 

-determination of the key assumptions and inputs used to estimate the quantitative and qualitative calculation of the Collective ACL, including selection of relevant macroeconomic variables and consideration of future uncertainties such as geopolitical risks, elevated inflation across different countries and resultant higher interest rates and decrease in global growth outlook across the world & India.

 

-validation of the PD, LGD, commercial loan credit risk rating and EAD models for the Collective ACL

 

-identification of the commercial loans that do not share similar risk characteristics with other financial assets in the pools on account of credit deterioration based on the ability of the borrower to repay the contractual amounts due to the Company, including considerations of both quantitative and qualitative criteria such as the account conduct, future prospects, repayment history and financial performance

 

-estimation of recovery on individually assessed loans based on either the present value of expected future cash flows, or in the case of a collateral dependent loan, the net realizable value of the collateral, net of cost to sell.

 

For the March 31, 2023 Indian GAAP ACL, we tested the identification of NPLs using additional information (other than that relating to the payment record) for a selection of commercial loans by evaluating financial performance of the borrower and the other applicable qualitative criteria. We evaluated the Company’s development of the Collective ACL estimates by testing certain sources of data, factors, and assumptions that the Company used and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:

 

-evaluating the Collective ACL methodology for compliance with U.S. generally accepted accounting principles

 

-evaluating judgments made by the Company relative to the development and performance monitoring testing of the PD, LGD, and EAD models by comparing them to relevant Company specific metrics and trends and the applicable industry and regulatory practices

 

-assessing the conceptual soundness and performance testing of the PD, LGD, commercial loan credit risk rating and EAD models by inspecting the model documentation to determine whether the models are suitable for their intended use

 

-evaluating the methodology used to develop and incorporate the relevant macro-economic scenario over the reasonable and supportable forecast periods and underlying assumptions by comparing it to the Company’s business environment and relevant industry practices

 

F-4

-assessing the macro-economic variables through benchmarking to publicly available forecasts, where available

 

-evaluating the length of the historical observation period and reasonable and supportable forecast periods to evaluate the length of each period by comparing them to specific portfolio risk characteristics and trends

 

-determining whether the loan portfolio is segmented by similar risk characteristics by comparing to the Company’s business environment and relevant industry practices

 

-testing the methodology used for estimation of individual credit risk ratings for commercial loans by performing quantitative validation of credit rating models used to assign the credit risk ratings

 

-evaluating the methodology used for estimating the prepayments within the EAD models over the life of the loans

 

-evaluating the methodology used to develop the qualitative factors, including consideration of uncertainties such as geopolitical risks, elevated inflation across different countries and resultant higher interest rates, decrease in global growth outlook across the world and India and the effect of those factors on the Collective ACL compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative calculations.

 

We performed credit reviews for a selection of commercial loans to test the identification of the loans that do not share similar risk characteristics on account of credit deterioration, based on the ability of the borrower to repay the contractual amounts due to the Company, including considerations of both quantitative and qualitative criteria such as the account conduct, future prospects, repayment history and financial performance. For a selection of individually assessed commercial loans, we tested the measurement of the March 31, 2023 individual ACL by comparing the value of collateral to external appraisals or tested the projections of future cash flows by comparing them to historic performance and assessing them against current economic conditions.

 

Liabilities in respect to life insurance policies and amortization of deferred acquisition cost

 

As given in the consolidated financial statements, liabilities for life insurance policies in force is included in the total liabilities for policies in force of Rs. 2,388,674 million. As discussed in Note (22)(h)(i) of Schedule 18B to the consolidated financial statements, the significant difference between Indian GAAP and US GAAP in case of the life insurance affiliate includes the net income reconciling item on account of difference in policyholders’ liabilities and unallocated policyholders’ surplus, net of amortization of deferred acquisition cost Rs. 8,502.5 million.

 

The liabilities in respect of life insurance policies in force under Indian GAAP are estimated in accordance with accepted actuarial practice, requirements of Insurance Act, 1938, as amended from time to time, regulations notified by the Insurance Regulatory and Development Authority of India (IRDAI) and relevant Guidance Notes / Actuarial Practice Standards of the Institute of Actuaries of India. The actuarial liability for non-linked policies, both participating and non-participating, is calculated by the Company using the gross premium method, that involves assumptions for interest, mortality, morbidity, expenses and inflation, and in the case of participating policies, future bonuses together with allowance for taxation and allocation of future profits to shareholders. These assumptions are determined as prudent estimates updated at the date of valuation, including allowances for possible adverse deviations.

 

Policyholders’ liabilities for non-linked policies under U.S. GAAP are valued using the Net Premium Method as prescribed under U.S. GAAP. These liabilities consist of two parts, namely, policy reserves (comprising benefit reserve and maintenance expense reserve) and deferred profit liability. These liabilities are established based on actuarial assumptions at the time the policies are issued, which are intended to estimate the experience for the period the policy benefits are payable. Significant adverse changes in experience on such contracts may require the establishment of premium deficiency reserves,

 

F-5

which are based on current assumptions. In addition, acquisition costs for non-linked policies under U.S. GAAP which are deferred, are amortized in proportion to premium revenue recognition. The determination of the reserves and the amortization of the deferred acquisition costs considers assumptions that include discount rate, mortality, morbidity, policy lapse and investment returns and these are on a locked in basis. Further, the discount rates used for non-linked products represent best estimates with a provision for adverse deviation. The assumptions change at every financial year end only for the new business sold during the year. The Company applies considerable judgment in evaluating actual experience to determine whether a change in assumptions for new policies is warranted under US GAAP.

 

Policyholders’ liabilities for linked policies under U.S. GAAP consist of two parts, namely, benefit reserves and unearned revenue reserve. In addition, acquisition costs for linked policies under U.S. GAAP which are deferred, are amortized in proportion to estimated gross profits (EGPs). The EGPs consist of margins available from mortality and contract administration, investment earnings spreads, surrender charges and other expected assessments and credits. The Company applies considerable judgment in evaluating emerging actual experience for assumptions used in the determination of reserves and the amortization of deferred acquisition costs, that include discount rate, mortality, morbidity, policy lapse, expenses and investment returns. These assumptions represent best estimates and may change at every financial year end.

 

We identified the assessment of liabilities for life insurance policies in force under Indian GAAP and determination of policyholders’ liabilities and amortization of deferred acquisition cost under US GAAP to be a critical audit matter since it involves a high degree of audit effort, including subjective and complex auditor judgment in evaluating management’s estimate, and use of actuarial professionals with specialized skill and knowledge to assist in performing procedures and evaluating the estimate of such liabilities. Specifically, there is significant judgement in determination of assumptions for all policies in force under Indian GAAP. In case of non-linked policies under US GAAP, there is significant judgement in evaluating the assumptions used for determination of the reserves and the amortization of the deferred acquisition cost for new business sold during the year and whether a change in assumptions is warranted. In case of linked policies under US GAAP, there is significant judgement in evaluating the assumptions used for determination of the reserves and the amortization of the deferred acquisition cost for all policies in force.

 

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to Company’s measurement of liabilities for life insurance policies in force under Indian GAAP and policyholders’ liabilities and amortization of deferred acquisition cost under US GAAP, including controls over the valuation process and underlying data which included assessment and approval of the methods and assumptions adopted over such measurements as well as appropriate access and change management controls over the actuarial models. We involved actuarial professionals with specialized skills and knowledge who assisted in:

 

-assessing the methodology for selecting assumptions by comparing the methodology used against industry standard actuarial practice

 

-assessing the methodology for calculating the liabilities and amortization of deferred acquisition cost by reference to the requirements of the industry standard actuarial practice and assessing the impact of current year changes in methodology on the calculation of policyholder liabilities and amortization of deferred acquisition cost.

 

-evaluating the analysis of the movements in liabilities and deferred acquisition cost during the year, including consideration of whether the movements were in line with the methodology and assumptions adopted

 

-evaluating judgments applied by management in setting assumptions, including evaluating the results of experience studies used as the basis for setting those assumptions

 

-independently re-calculating the liabilities and deferred acquisition cost for a selection of individual policies for select products to assess whether the selected model calibration had been appropriately implemented

 

F-6

-evaluating the appropriateness of the methodology and assumptions used in the Company’s annual premium deficiency tests and assessed the reasonableness of results.

 

We have served as the Company’s auditor since 1999.

 

/s/ KPMG Assurance and Consulting Services LLP

 

Mumbai, Maharashtra, India
July 28, 2023

 

F-7

Report of Independent Registered Public Accounting Firm

 

To the Stockholders and Board of Directors
ICICI Bank Limited:

 

Opinion on Internal Control Over Financial Reporting

 

We have audited ICICI Bank Limited and subsidiaries’ (the Company) internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2023 and 2022, the related consolidated profit and loss accounts and cash flows for each of the years in the three-year period ended March 31, 2023, and the related notes and financial statement schedules 1 to 18B (collectively, the consolidated financial statements), and our report dated July 28th, 2023 expressed an unqualified opinion on those consolidated financial statements.

 

Basis for Opinion

 

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

Definition and Limitations of Internal Control Over Financial Reporting

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the

 

F-8

risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ KPMG Assurance and Consulting Services LLP

 

Mumbai, Maharashtra, India
July 28, 2023

 

F-9

ICICI Bank Limited and subsidiaries

 

Consolidated balance sheet

 

      (Rs. in thousands)
       
      At
  

Schedule

 

 

March 31,

2023

 

March 31,

2022

          
CAPITAL AND LIABILITIES         
          
Capital  1  13,967,750  13,899,662
Employees stock options outstanding  1A  7,608,859  2,664,141
Reserves and surplus  2  2,123,401,284  1,803,961,070
Minority interest  2A  66,867,526  59,808,935
Deposits  3  12,108,321,521  10,913,657,932
Borrowings  4  1,890,618,073  1,616,026,828
Liabilities on policies in force     2,388,673,665  2,288,271,963
Other liabilities and provisions  5  985,446,292  828,083,306
          
TOTAL CAPITAL AND LIABILITIES     19,584,904,970  17,526,373,837
          
ASSETS         
          
Cash and balances with Reserve Bank of India  6  686,489,413  1,096,307,069
 Balances with banks and money at call and short notice  7  678,075,515  734,952,763
Investments  8  6,395,519,671  5,670,977,180
Advances  9  10,838,663,147  9,203,081,390
Fixed assets  10  109,690,036  106,054,107
Other assets  11  875,453,870  713,988,010
Goodwill on consolidation     1,013,318  1,013,318
          
TOTAL ASSETS     19,584,904,970  17,526,373,837
          
Contingent liabilities  12  50,359,511,032  45,523,411,167
Bills for collection     864,576,684  752,325,958
Significant accounting policies and notes to accounts  17 & 18      
          

The Schedules referred to above form an integral part of the Consolidated Balance Sheet.

 

F-10

ICICI Bank Limited and subsidiaries

 

Consolidated profit and loss account

 

      (Rs. in thousands, except per share data)
             
      Year ended
       
   Schedule 

March 31,

2023

 

March 31,

2022

 

March 31,

2021

             
I. INCOME            
Interest earned  13  1,210,668,098  954,068,654  891,626,638
Other income  14  651,119,912   621,294,514  720,295,282
             
TOTAL INCOME     1,861,788,010  1,575,363,168  1,611,921,920
             
             
II. EXPENDITURE            
Interest expended  15  505,433,879    411,666,711  426,590,874
Operating expenses  16  824,390,232  731,517,275  762,716,696
Provisions and contingencies (refer note 18.6)
     187,333,629  174,340,856  220,417,554
             
TOTAL EXPENDITURE     1,517,157,740  1,317,524,842  1,409,725,124
             
             
III.PROFIT/(LOSS)            
Net profit for the year (before share in profit of associates and minority interest)     344,630,270  257,838,326  202,196,796
Add: Share of profit in associates     9,982,876  7,544,279  1,442,857
Net profit for the year before minority interest     354,613,146  265,382,605  203,639,653
Less: Minority interest     14,246,738  14,281,645  19,796,467
Net profit after minority interest     340,366,408  251,100,960  183,843,186
Profit brought forward     508,988,514  385,155,990  267,999,958
             
TOTAL PROFIT/(LOSS)     849,354,922  636,256,950  451,843,144
             
             
IV.  APPROPRIATIONS/TRANSFERS            
Transfer to Statutory Reserve     79,742,000   58,349,000  40,482,000
Transfer to/(from) Reserve Fund     ..  ..  (77,638)
Transfer to Capital Reserve    

878,200

 

15,742,037

 

1,302,300

Transfer to Capital Redemption Reserve     ..  ..  ..
Transfer to/(from) Investment Reserve Account     ..  ..  ..
Transfer to/(from) Investment Fluctuation Reserve     1,043,810  3,828,798  (2,495,799)
Transfer to Special Reserve     26,254,000   15,328,500  10,943,500
Transfer to/(from) Revenue and other reserves     50,255,680   657,420  16,532,790
Dividend paid during the year     34,794,463  13,852,335  ..
Balance carried over to balance sheet     656,386,769    528,498,860  385,155,990
             
  TOTAL     849,354,922  636,256,950  451,843,143
             
Significant accounting policies and notes to accounts  17 & 18         
             
Earnings per share (refer note 18.1)            
Basic (Rs.)     48.86  36.21  27.26
Diluted (Rs.)     47.84  35.44  26.83
Face value per share (Rs.)     2.00  2.00  2.00
             

The Schedules referred to above form an integral part of the Consolidated Profit and Loss Account.

 

F-11

ICICI Bank Limited and subsidiaries

 

Consolidated cash flow statement

 

      (Rs. in thousands)
          
   Year ended
   March 31,
2023
  March 31,
2022
  March 31,
2021
          
Cash flow from/(used in) operating activities         
          
Profit before taxes     458,300,782  335,675,367  240,486,799
             
Adjustments for:            
Depreciation and amortisation     16,455,886  14,794,572  14,713,701
Net (appreciation)/depreciation on investments1     27,053,455  18,320,870  (22,476,697)
Provision in respect of non-performing and other assets     (3,653,501)   63,775,215  110,315,149
General provision for standard assets     4,898,941   4,065,438  1,569,050
Provision for contingencies & others     54,236,861   16,513,472  53,839,684
(Profit)/loss on sale of fixed assets     (542,579)   (56,635)  63,424
Employees stock options expense     5,180,508   2,669,253  77,611
             
     (i)  561,930,353  455,757,552  398,588,721
             
Adjustments for:            
(Increase)/decrease in investments     (158,286,285)   (166,685,392)  90,478,662
(Increase)/decrease in advances     (1,638,931,648)  (1,349,047,011)  (968,932,842)
Increase/(decrease) in deposits     1,194,663,589   1,314,257,752  1,591,555,570
(Increase)/decrease in other assets     (166,076,201)   46,655,269  4,276,368
Increase/(decrease) in other liabilities and provisions     277,742,529   329,993,864  302,522,352
             
   (ii)  (490,888,016)  175,174,482  1,019,900,110
             
Refund/(payment) of direct taxes   (iii)  (108,754,258)  (49,817,733)  (38,335,863)
             
 Net cash flow from/(used in) operating  activities((i)+(ii)+(iii))   (A)  (37,711,921)  581,114,301  1,380,152,968
            
Cash flow from/(used in) investing activities            
Purchase of fixed assets     (24,676,808)  (18,599,746)  (16,882,058)
 Proceeds from sale of fixed assets     2,874,176   1,174,397  121,649
(Purchase)/sale of held to maturity securities     (658,250,590)  (375,789,070)  (613,108,700)
             
Net cash flow from/(used in) investing activities   (B)  (680,053,222)  (393,214,419)  (629,869,109)
             
Cash flow from/(used in) financing activities            
Proceeds from issue of share capital (including ESOPs)     9,420,691   7,979,764  154,600,321
Proceeds from long-term borrowings     417,361,966   356,976,668  294,215,131
Repayment of long-term borrowings     (268,917,978)   (346,030,278)  (527,734,115)
Net proceeds/(repayment) of short-term borrowings     124,836,960   169,436,188  (467,749,038)
Dividend paid     (34,794,463)  (13,852,335)  ..
             
Net cash flow from/(used in) financing activities  (C)  247,907,176  174,510,007  (546,667,701)
             
Effect of exchange fluctuation on translation reserve  (D)  3,163,063  (1,268,443)  (6,440,073)
             

 

F-12

ICICI Bank Limited and subsidiaries

 

Consolidated cash flow statement (Continued)

 

(Rs. in thousands)

          
   Year ended
   March 31,
2023
  March 31,
2022
  March 31,
2021
          

Net increase/(decrease) in cash and cash equivalents

(A) + (B) + (C) + (D)

  (466,694,904)  361,141,446  197,176,085

Cash and cash equivalents at beginning of the year

  1,831,259,832  1,475,705,302  1,278,529,217

Less: Reduction due to discontinuation of ICICI Lombard General Insurance Company Limited from consolidation during the year

     (5,586,916)  ..
Cash and cash equivalents at end of the year  1,364,564,928  1,831,259,832  1,475,705,302
          

1.For the year ended March 31, 2021, includes gain on sale of a part of equity investment in ICICI Lombard General Insurance Company Limited, ICICI Prudential Life Insurance Company Limited and ICICI Securities Limited.

2.Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short notice.

 

F-13

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet

 

SCHEDULE 1 - CAPITAL

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
Authorised capital      
12,500,000,000 equity shares of Rs. 2 each (March 31, 2022: 12,500,000,000 equity shares of Rs. 2 each)  25,000,000  25,000,000
       
       

Equity share capital

Issued, subscribed and paid-up capital

      
6,948,771,375 equity shares of Rs. 2 each (March 31, 2022: 6,915,992,387 equity shares)  13,897,543  13,831,985
Add: 34,044,356 equity shares of Rs. 2 each (March 31, 2022: 32,778,988 equity shares) issued during the year    68,088  65,558
   13,965,631  13,897,543
       
Add: Forfeited equity shares1  2,119  2,119
       
TOTAL CAPITAL  13,967,750  13,899,662
       
       

1.On account of forfeiture of 266,089 equity shares of Rs. 10 each.

 

SCHEDULE 1A - Employees stock options outstanding

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
Opening Balance  2,664,141  31,010
Additions during the year1    5,172,383  2,642,190
Deductions during the year2    (227,665)  (9,059)
Closing Balance  7,608,859  2,664,141

1.Represents cost of stock options amortised over the vesting period recognised during the year.

2.Represents amount transferred to Securities Premium on account of exercise of employee stock options and to General Reserve on lapses of employee stock options during the year.

 

F-14

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet (Continued)

 

SCHEDULE 2 - RESERVES AND SURPLUS

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
I.          Statutory reserve      
Opening balance  356,036,519  297,687,519
Additions during the year  79,742,000  58,349,000
Deductions during the year  ..  ..
       
Closing balance  435,778,519  356,036,519
       
II.        Special reserve      
Opening balance  133,978,000  118,649,500
Additions during the year  26,254,000  15,328,500
Deductions during the year  ..  ..
       
Closing balance  160,232,000  133,978,000
       
III.       Securities premium      
Opening balance  497,645,058  489,694,731
Additions during the year1  9,584,456  7,950,327
Deductions during the year  ..  ..
       
Closing balance  507,229,514  497,645,058
       
IV.       Investment reserve account      
Opening balance  ..  ..
Additions during the year  ..  ..
Deductions during the year  ..  ..
       
Closing balance    ..  ..
       
V.        Investment fluctuation reserve2      
Opening balance   20,714,999  16,886,201
Additions during the year  1,043,810  3,828,798
Deductions during the year  ..  ..
       
Closing balance  21,758,809  20,714,999
       
  VI.       Unrealised investment reserve3      
Opening balance  (358,641)  (56,658)
Additions during the year  3,620   ..
Deductions during the year  (874)  (301,983)
       
Closing balance  (355,895)  (358,641)
       
VII.      Capital reserve      
Opening balance  149,784,353  134,042,316
Additions during the year4,5  878,200  15,742,037
Deductions during the year  ..  ..
       
Closing balance6  150,662,553  149,784,353
       
VIII.    Capital redemption reserve      
Opening balance  3,500,000  3,500,000
Additions during the year  ..  ..
Deductions during the year  ..  ..
       
Closing balance  3,500,000  3,500,000
       

 

F-15

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet (Continued)

 

 

(Rs. in thousands)

   At
   March 31, 2023  March 31, 2022
IX.    Foreign currency translation reserve      
Opening balance  12,431,431  13,699,874
Additions during the year  3,163,063  599,449
Deductions during the year  ..  (1,867,892)
       
Closing balance  15,594,494  12,431,431
       
X.      Revaluation reserve      
Opening balance  32,284,975  31,252,824
Additions during the year7  839,517  1,742,847
Deductions during the year8  (2,206,076)  (710,696)
       
Closing balance  30,918,416  32,284,975
       
       
XI.    Revenue and other reserves      
Opening balance  88,955,862  71,497,594
Additions during the year9  52,795,238  20,297,813
Deductions during the year9  (54,995)  (2,839,545)
       
Closing balance10  141,696,105  88,955,862
       
XII.   Balance in profit and loss account5  656,386,769  528,498,860
Deductions during the year11  ..  (19,510,346)
Balance in profit and loss account  656,386,769  508,988,514
TOTAL RESERVES AND SURPLUS  2,123,401,284  1,803,961,070
       

1.Includes Rs. 9,576.3 million (March 31, 2022: Rs. 7,923.3 million) on exercise of employee stock options.

2.Represents amount transferred by the Bank to Investment Fluctuation Reserve (IFR) on net profit on sale of AFS and HFT investments during the period. The amount not less than the lower of net profit on sale of AFS and HFT category investments during the period or net profit for the period less mandatory appropriations is required to be transferred to IFR, until the amount of IFR is at least 2% of the HFT and AFS portfolio.

3.Represents unrealised profit/(loss) pertaining to the investments of venture capital funds.

4.Includes appropriations made by the Bank for profit on sale of investments in held-to-maturity category, net of taxes and transfer to Statutory Reserve and profit on sale of land and buildings, net of taxes and transfer to Statutory Reserve.

5.The Bank had shifted certain securities from held-to-maturity category to available-for-sale category on May 3, 2017. RBI through its order dated May 3, 2021 has directed the Bank to appropriate the net profit made on sale of these investments during FY2018 to Capital Reserve. Accordingly, an amount of Rs. 15,091.1 million was transferred by the Bank from Balance in Profit and Loss account to Capital Reserve during FY2022.

6.Includes capital reserve on consolidation amounting to Rs. 79.1 million (March 31, 2022: Rs. 79.1 million).

7.Represents gain on revaluation of premises carried out by the Bank and ICICI Home Finance Company Limited.

8.Represents amount transferred from Revaluation Reserve to General Reserve on account of incremental depreciation charge on revaluation, revaluation surplus on premises sold or loss on revaluation on account of certain assets which were held for sale.

9.Includes Rs. 1,482.1 million towards addition in fair value change account (March 31, 2022: reduction amounting to Rs. 2,471.4 million) of ICICI Prudential Life Insurance Company Limited.

10.Includes unrealised profit/(loss), net of tax, of Rs.161.5 million (March 31, 2022: Rs. 206.4 million) pertaining to the investments in the available-for-sale category of ICICI Bank UK PLC.

11.Represents reduction due to discontinuation of ICICI Lombard General Insurance Company Limited from consolidation during FY2022.

 

F-16

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet (Continued)

 

 

SCHEDULE 2A - MINORITY INTEREST

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
Opening minority interest  59,808,935  95,883,393
Subsequent increase/(decrease) during the year1  7,058,591  (36,074,458)
CLOSING MINORITY INTEREST  66,867,526  59,808,935
       

1.FY2022 includes deduction of minority interest of Rs. 39,052.5 million relating to ICICI Lombard General Insurance Company Limited subsequent to ICICI Lombard General Insurance Company Limited being ceased to be a subsidiary.

 

SCHEDULE 3 - DEPOSITS

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
A.   I.  Demand deposits      
  i) From banks  49,978,962  79,321,836
  ii) From others  1,608,349,299  1,554,865,124
    II.  Savings bank deposits  3,848,298,564  3,670,305,566
    III. Term deposits      
  i) From banks  113,475,314  71,532,495
  ii) From others  6,488,219,382  5,537,632,911
       
TOTAL DEPOSITS  12,108,321,521  10,913,657,932
       
       
B .  I. Deposits of branches in India  11,638,079,242  10,527,203,264
    II. Deposits of branches/subsidiaries outside India  470,242,279  386,454,668
       
TOTAL DEPOSITS  12,108,321,521  10,913,657,932
       
       

 

SCHEDULE 4 - BORROWINGS

 

(Rs. in thousands)
       
   At
  

March 31, 2023

 

March 31, 2022

       
I.  Borrowings In India      
i) Reserve Bank of India1  18,899,200   ..
ii) Other banks  71,911,178  50,892,853
iii) Financial institutions2  608,942,331  323,264,820
iv) Borrowings in the form of      
a) Deposits  36,624,470  31,004,597
b) Commercial paper  98,022,849  90,353,072
c) Bonds and debentures (excluding subordinated debt)  506,782,072  430,564,188
  v)  Capital instruments      
a) Innovative Perpetual Debt Instruments (IPDI)
 (qualifying as additional Tier 1 capital)
  51,400,000  66,950,000
b) Unsecured redeemable debentures/bonds (subordinated debt included in Tier 2 capital)  53,206,653  93,504,927
       
TOTAL BORROWINGS IN INDIA  1,445,788,753  1,086,534,457
       
II. Borrowings outside India      
  i) Capital instruments      

 

F-17

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet (Continued)

 

(Rs. in thousands)
       
   At
  

March 31, 2023

 

March 31, 2022

Unsecured redeemable debentures/bonds
(subordinated debt included in Tier 2 capital)
  5,962,274  5,529,406
ii) Bonds and notes  133,419,412  181,504,693
iii) Other borrowings  305,447,634  342,458,272
       
TOTAL BORROWINGS OUTSIDE INDIA  444,829,320  529,492,371
       
 TOTAL BORROWINGS  1,890,618,073  1,616,026,828
       
       

1.    Represents borrowings made under Liquidity Adjustment Facility (LAF) and Standing Liquidity Facility (SLF).

2.    Includes borrowings made by the Group under repo and refinance.

3.    Secured borrowings in I and II above amounting to Rs. 239,969.1 million (March 31, 2022: Rs. 232,515.3 million) other than the borrowings under collateralised borrowing and lending obligation, market repurchase transactions (including tri-party repo) with banks and financial institutions and transactions under liquidity adjustment facility and marginal standing facility.

 

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS

 

      (Rs. in thousands)
      At
      March 31, 2023  March 31, 2022
          
I.  Bills payable  136,037,076  130,686,122
II.  Inter-office adjustments (net)  3,228,016  4,418,106
III  Interest accrued  33,390,137  27,524,211
IV  Sundry creditors  242,830,603  206,506,321
V.  General provision for standard assets  49,946,771  44,586,271
VI.  Unrealised loss on foreign exchange and derivative contracts  183,764,747  112,918,929
VI  Others (including provisions)1  336,248,942  301,443,346
          
   TOTAL OTHER LIABILITIES AND PROVISIONS  985,446,292  828,083,306
          
          

1.Includes contingency provision of the Bank amounting to Rs. 131,000.0 million (March 31, 2022: Rs. 74,500.0 million) and specific provision for standard loans amounting to Rs. 14,946.9 million (March 31, 2022: Rs. 30,203.0 million) by the Bank.

 

SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
I.   Cash in hand (including foreign currency notes)  86,812,982  72,274,785
II.  Balances with Reserve Bank of India      
a)  In current account  480,256,431  530,012,284
b) In other accounts1  119,420,000  494,020,000
       
TOTAL CASH AND BALANCES WITH RESERVE BANK OF INDIA  686,489,413  1,096,307,069
       
       

1.Represents lending under Liquidity Adjustment Facility (LAF) and Standing Deposit Facility (SDF).

 

F-18

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet (Continued)

 

SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
I.  In India      
 i) Balances with banks      
 a) in current accounts  3,103,280  2,150,158
 b) in other deposit accounts  107,287,660  58,739,519
 ii) Money at call and short notice      
 a) with banks  8,217,000  ..
 b) with other institutions1  59,652,392  58,284,515
       
TOTAL  178,260,332  119,174,192
       
II. Outside India      
 i) in current accounts  310,635,743  332,048,410
 ii) in other deposit accounts  26,782,094  179,630,804
 iii) Money at call and short notice  162,397,346  104,099,357
       
TOTAL  499,815,183  615,778,571
       
TOTAL BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE  678,075,515  734,952,763
       
       

1. Includes lending under reverse repo.

 

SCHEDULE 8 - INVESTMENTS

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
I.  Investments in India [net of provisions]      
i)     Government securities  3,960,623,208  3,255,021,732
ii)    Other approved securities  ..  ..
iii)   Shares (includes equity and preference shares)  127,225,123  131,221,761
iv)   Debentures and bonds (including commercial paper and certificate of deposits)  526,539,870  415,992,085
v)    Assets held to cover linked liabilities of life insurance business1  1,440,580,565  1,508,663,020
vi)   Cost of equity investment in associates2  20,040,640  20,040,640
vii)  Others (mutual fund units, pass through certificates, security receipts, and other related investments)3  172,557,780  134,270,515
       
TOTAL INVESTMENTS IN INDIA  6,247,567,186  5,465,209,753
       
II. Investments outside India [net of provisions]      
 i)    Government securities  89,972,472  152,078,246
 ii)   Others (equity shares, bonds and certificate of deposits)  57,980,013  53,689,181
       
TOTAL INVESTMENTS OUTSIDE INDIA  147,952,485  205,767,427
       
       
TOTAL INVESTMENTS  6,395,519,671  5,670,977,180
       
       
A.  Investments in India      
Gross value of investments1  6,275,011,504  5,486,621,394
Less: Aggregate of provision/depreciation/(appreciation)  27,444,318  21,411,641

 

F-19

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet (Continued)

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
  Net investments  6,247,567,186  5,465,209,753
       
B.  Investments outside India      
Gross value of investments  153,368,477  208,954,192
Less: Aggregate of provision/depreciation/(appreciation)  5,415,992  3,186,765
       
  Net investments  147,952,485  205,767,427
       
TOTAL INVESTMENTS  6,395,519,671  5,670,977,180
       
       

1.Includes net appreciation amounting to Rs.169,588.6 million (March 31, 2022: Rs. 244,271.4 million) on investments held to cover linked liabilities of life insurance business.

2.Includes goodwill on consolidation of associates amounting to Rs. 221.9 million (March 31, 2022: Rs. 221.9 million).

3.Includes share in networth of associates as per equity method as prescribed by AS 23.

 

SCHEDULE 9 - ADVANCES (net of provisions)

 

   (Rs. in thousands)
   At
   March 31, 2023 March 31, 2022
       
A.  i)    Bills purchased and discounted1   497,557,667  482,956,949
ii)    Cash credits, overdrafts and loans repayable on demand  2,866,747,206  2,342,314,744
iii)   Term loans  7,474,358,274  6,377,809,697
       
 TOTAL ADVANCES  10,838,663,147  9,203,081,390
       
       
B.  i)     Secured by tangible assets (includes advances against book debts)  7,713,019,424  6,701,716,660
ii)    Covered by bank/government guarantees  159,202,710  185,673,079
iii)   Unsecured  2,966,441,013  2,315,691,651
       
TOTAL ADVANCES  10,838,663,147  9,203,081,390
       
C.  I.  Advances in India      
i)     Priority sector  2,807,812,582  2,491,680,887
ii)    Public sector   516,152,443  483,782,406
iii )  Banks   7,698,171  432,346
iv)   Others   6,769,499,593  5,417,164,764
       
TOTAL ADVANCES IN INDIA  10,101,162,789  8,393,060,403
       
  II.    Advances outside India      
 i)    Due from banks  8,076,480  7,165,905
 ii)   Due from others      
a) Bills purchased and discounted   152,553,948  175,464,049
b) Syndicated and term loans   245,267,859  235,061,192
c) Others   331,602,071  392,329,841
       
TOTAL ADVANCES OUTSIDE INDIA  737,500,358  810,020,987
       
TOTAL ADVANCES  10,838,663,147  9,203,081,390
       
       

1.Net of bills re-discounted amounting to Rs. 10,000.0 million (March 31, 2022: Nil).

 

F-20

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet (Continued)

 

SCHEDULE 10 - FIXED ASSETS

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       

I.    Premises

Gross block

      
At cost at March 31 of preceding year  94,345,827  95,782,081
Additions during the year1  2,793,216  3,334,955
Deductions during the year    (2,798,606)  (4,771,209)
Closing balance  94,340,437  94,345,827
       
Depreciation      
At March 31of preceding year  23,514,011  21,854,971
Charge during the year  2,486,973  2,375,067
Deductions during the year  (455,659)  (716,027)
  Total  depreciation  25,545,325  23,514,011
       
  Net block3  68,795,112  70,831,816
       

II.   Other fixed assets (including furniture and fixtures)

Gross block

      
At cost at March 31 of preceding year  98,784,940  97,137,491
Additions during the year  18,437,437  15,252,194
Deductions during the year  (6,219,745)  (13,604,745)
Closing balance  111,002,632  98,784,940
       
Depreciation      
At March 31 of preceding year  66,817,309  66,259,069
Charge during the year  12,459,081  10,737,093
Deductions during the year  (6,101,926)  (10,178,853)
  Total  depreciation  73,174,464  66,817,309
       
Net block  37,828,168  31,967,631
       

III. Lease assets

Gross block

      
At cost at March 31 of preceding year  17,890,746  17,735,221
Additions during the year  11,660  155,525
Deductions during the year  ..      ..
Closing balance4  17,902,406  17,890,746
       
Depreciation      
At March 31 of preceding year  14,636,086  14,448,172
Charge during the year  199,564  187,914
Deductions during the year   ..    ..
Total depreciation, accumulated lease adjustment and provisions  14,835,650  14,636,086
       
Net block  3,066,756  3,254,660
       
TOTAL FIXED ASSETS  109,690,036  106,054,107
       
       

1.Includes net revaluation gain amounting to Rs. 811.7 million (March 31, 2022: Rs. 1,742.8 million) on account of revaluation carried out by the Bank and its housing finance subsidiary.

2.Including depreciation charge on account of revaluation of Rs. 755.2 million for the year ended March 31, 2023 (year ended March 31, 2022: Rs. 703.1 million).

3.Includes assets amounting to Rs. 428.8 million of the Bank (March 31, 2022: Rs. 558.5 million) which are held for sale.

4.Includes assets taken on lease by the Bank amounting to Rs. 1,187.8 million (March 31, 2022: Rs. 1,176.1 million).

 

F-21

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated balance sheet (Continued)

 

SCHEDULE 11 – OTHER ASSETS

 

     (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
I.       Inter-office adjustments (net)   ..   ..
II.      Interest accrued  151,100,647  108,389,915
III.    Tax paid in advance/tax deducted at source (net)  20,372,701  26,241,723
IV.    Stationery and stamps  379,124  337,907
V.      Non-banking assets acquired in satisfaction of claims1,2  ..    ..
VI.    Advance for capital assets  9,009,963  4,460,876
VII.   Deposits  54,892,587  40,100,556
VIII.  Deferred tax asset (net) (refer note 18.9)  76,194,441  79,484,847
IX.    Deposits in Rural Infrastructure and Development Fund  216,216,187  264,194,161
X.     Unrealised gain on foreign exchange and derivative contracts  178,022,993  105,347,160
XI.    Others  169,265,227  85,430,865
       
TOTAL OTHER ASSETS  875,453,870  713,988,010
       
       

1.No assets were sold by the Bank during the year ended March 31, 2023 (year ended March 31, 2022: Rs. 563.6 million).

2.Net of provision held by the Bank amounting to Rs. 29,011.8 million (March 31, 2022: Rs. 29,011.8 million).

 

SCHEDULE 12 - CONTINGENT LIABILITIES

 

   (Rs. in thousands)
   At
   March 31, 2023  March 31, 2022
       
I.       Claims against the Group not acknowledged as debts   88,006,837  89,527,688
II.      Liability for partly paid investments  4,790,087  7,009,157
III.    Liability on account of outstanding forward exchange contracts1  15,492,543,076  10,757,369,659
IV.    Guarantees given on behalf of constituents      
a) In India  1,102,115,003  877,490,076
b) Outside India  134,004,861  158,594,796
V.      Acceptances, endorsements and other obligations  435,202,811  458,778,736
VI.     Currency swaps1  570,626,929  502,108,785
VII.   Interest rate swaps, currency options and interest rate futures1  32,435,271,591  32,634,035,960
VIII.  Other items for which the Group is contingently liable  96,949,837  38,496,310
       
TOTAL CONTINGENT LIABILITES  50,359,511,032  45,523,411,167
       
       

1.Represents notional amount.

 

F-22

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated profit and loss account

 

SCHEDULE 13 - INTEREST EARNED

 

   (Rs. in thousands)
   Year ended
  

March 31,

2023

 

March 31, 

2022

 

March 31, 

2021

          
I.    Interest/discount on advances/bills  879,292,351   668,865,377  602,616,872
II.   Income on investments (including dividend)  279,050,297  219,906,420  232,642,538
III.  Interest on balances with Reserve Bank of India and other inter-bank funds   23,054,570   18,195,960  18,817,238
IV.  Others1,2   29,270,880   47,100,897  37,549,990
          
TOTAL INTEREST EARNED   1,210,668,098   954,068,654  891,626,638
          
          

1.Includes interest on income tax refunds amounting to Rs. 1,203.2 million (March 31, 2022: Rs. 2,434.3 million).

2.Includes interest and amortisation of premium on non-trading interest rate swaps and foreign currency swaps.

 

SCHEDULE 14 - OTHER INCOME

 

   (Rs. in thousands)
   Year ended
          
  

March 31,

2023

 

March 31,

2022

 

March 31,

2021

          
I.     Commission, exchange and brokerage  196,484,672   172,883,870  140,230,546
II.    Profit/(loss) on sale of investments (net)1  12,730,117  23,145,295  81,257,186
III.  Profit/(loss) on revaluation of investments (net)  (1,317,590)  1,981,586  (1,433,237)
IV.  Profit/(loss) on sale of land, buildings and other assets (net)2  542,579  56,635  (63,424)
V.    Profit/(loss) on exchange/derivative transactions (net)  30,509,008  29,933,143  19,721,169
VI.  Premium and other operating income from insurance business   411,367,848   389,595,741  479,230,586
VII. Miscellaneous income (including lease income)  803,278   3,698,244  1,352,456
          
TOTAL OTHER INCOME  651,119,912  621,294,514  720,295,282
          
          

1.For the year ended March 31, 2021 includes gain on sale of a part of equity investment in ICICI Lombard General Insurance Company Limited, ICICI Prudential Life Insurance Company Limited and ICICI Securities Limited.

2.Includes profit/(loss) on sale of assets given on lease.

 

SCHEDULE 15 - INTEREST EXPENDED

 

   (Rs. in thousands)
   Year ended
          
  

March 31,

2023

 

March 31,

2022

 

March 31,

2021

          
I.     Interest on deposits  394,765,407  336,132,833  337,196,585
II.    Interest on Reserve Bank of India/inter-bank borrowings  13,380,975  4,402,009  12,001,131
III.  Others (including interest on borrowings of erstwhile ICICI Limited)  97,287,497  71,131,869  77,393,158
          
TOTAL INTEREST EXPENDED  505,433,879  411,666,711  426,590,874
          
          

 

F-23

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated profit and loss account (Continued)

 

SCHEDULE 16 - OPERATING EXPENSES  

 

   (Rs. in thousands)
   Year ended
          
  

March 31,

2023

 

March 31,

2022

 

March 31,

2021

          
I.       Payments to and provisions for employees1  152,341,687   123,416,025  110,509,051
II.      Rent, taxes and lighting2  15,846,567  14,085,917  13,829,516
III.     Printing and stationery  2,713,187  2,232,877  2,067,614
IV.     Advertisement and publicity  32,807,911  23,313,796  29,981,392
V.      Depreciation on property  14,946,054  13,112,160  13,266,867
VI.     Depreciation (including lease equalisation) on leased assets  199,538  187,914  133,877
VII.   Directors' fees, allowances and expenses  137,405  123,496  125,453
VIII.  Auditors' fees and expenses  248,666  219,598  295,992
IX.     Law charges  1,771,894  1,707,140  2,076,875
X.      Postages, courier, telephones, etc.  7,475,175  7,092,062  5,884,269
XI.    Repairs and maintenance  34,644,161  26,994,748  21,785,244
XII.   Insurance  14,788,575  13,025,817  9,893,192
XIII.  Direct marketing agency expenses  32,599,179  25,697,664  18,938,669
XIV.  Claims and benefits paid pertaining to insurance business  53,426,955  59,037,802  98,926,518
XV.   Other expenses pertaining to insurance business3  363,124,210  339,724,982  371,586,730
XVI.  Other expenditure4  97,319,068  81,545,277  63,415,437
TOTAL OPERATING EXPENSES  824,390,232  731,517,275  762,716,696
          
          

1.For the year ended March 31, 2022, includes impact of Rs. 2,642.2 million for the Bank due to change in accounting policy from intrinsic value method to fair value method for all stock options granted after March 31, 2021 under the Bank's Employee Stock Option Scheme.

2.Includes lease expense amounting to Rs. 12,512.8 million (March 31, 2022: Rs. 11,389.0 million).

3.Includes commission expenses and reserves for actuarial liabilities (including the investible portion of the premium on the unit-linked policies).

4.Includes expenses on purchase of Priority Sector Lending Certificates (PSLC) for the Bank amounting to Rs. 15,035.2 million (March 31, 2022: Rs. 13,206.1 million).

 

F-24

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

SCHEDULE 17

 

Significant accounting policies

 

Overview

 

ICICI Bank Limited, together with its subsidiaries, joint ventures and associates (collectively, the Group), is a diversified financial services group providing a wide range of banking and financial services including commercial banking, retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking and treasury products and services.

 

ICICI Bank Limited (the Bank), incorporated in Vadodara, India is a publicly held banking company governed by the Banking Regulation Act, 1949.

 

Principles of consolidation

 

The consolidated financial statements include the financials of ICICI Bank, its subsidiaries, associates and joint ventures.

 

Entities, in which the Bank holds, directly or indirectly, through subsidiaries and other consolidating entities, more than 50.00% of the voting rights or where it exercises control, over the composition of board of directors/governing body, are fully consolidated on a line-by-line basis in accordance with the provisions of AS 21 on ‘Consolidated Financial Statements’. Investments in entities where the Bank has the ability to exercise significant influence are accounted for under the equity method of accounting and the pro-rata share of their profit/(loss) is included in the consolidated profit and loss account. Assets, liabilities, income and expenditure of jointly controlled entities are consolidated using the proportionate consolidation method. Under this method, the Bank’s share of each of the assets, liabilities, income and expenses of the jointly controlled entity is reported in separate line items in the consolidated financial statements. The Bank does not consolidate entities where the significant influence/control is intended to be temporary or entities which operate under severe long-term restrictions that impair their ability to transfer funds to parent/investing entity or where the objective of control is not to obtain economic benefit from their activities. All significant inter-company balances and transactions with subsidiaries and entities consolidated as per AS 21 have been eliminated on consolidation.

 

Basis of preparation

 

The accounting and reporting policies of the Group used in the preparation of the consolidated financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) from time to time and the Accounting Standards notified under Section 133 of the Companies Act, 2013 read together with Rule 7 of the Companies (Accounts) Rules, 2014, as applicable to relevant companies and practices generally prevalent in the banking industry in India. In the case of the foreign subsidiaries, Generally Accepted Accounting Principles as applicable to the respective foreign subsidiaries are followed. The Group follows the accrual method of accounting except where otherwise stated, and the historical cost convention. In case the accounting policies followed by a subsidiary or joint venture are different from those followed by the Bank, the same have been disclosed in the respective accounting policy.

 

The preparation of consolidated financial statements requires management to make estimates and assumptions that are considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the consolidated financial statements and the reported income and expenses

 

F-25

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

during the reporting period. Management believes that the estimates used in the preparation of the consolidated financial statements are prudent and reasonable. Actual results could differ from these estimates. The impact of any revision in these estimates is recognised prospectively from the period of change.

 

The consolidated financial statements include the results of the following entities in addition to the Bank.

 

Sr. no. Name of the entity Country of incorporation Nature of relationship Nature of business Ownership interest
1. ICICI Bank UK PLC United Kingdom Subsidiary Banking 100.00%
2. ICICI Bank Canada Canada Subsidiary Banking

100.00%

 

3. ICICI Securities Limited India Subsidiary

Securities broking and

merchant banking

74.85%
4. ICICI Securities Holdings Inc.1 USA Subsidiary Holding company 100.00%
5. ICICI Securities Inc.1 USA Subsidiary Securities broking 100.00%
6. ICICI Securities Primary Dealership Limited India Subsidiary Securities investment, trading and underwriting 100.00%
7. ICICI Venture Funds Management Company Limited India Subsidiary Private equity/venture capital fund management 100.00%
8. ICICI Home Finance Company Limited India Subsidiary Housing finance 100.00%
9. ICICI Trusteeship Services Limited India Subsidiary Trusteeship services 100.00%
10. ICICI Investment Management Company Limited India Subsidiary

Asset management and

Investment advisory

100.00%
11. ICICI International Limited Mauritius Subsidiary Asset management 100.00%
12. ICICI Prudential Pension Funds Management Company Limited2 India Subsidiary Pension fund management and Points of Presence 100.00%
13. ICICI Prudential Life Insurance Company Limited India Subsidiary Life insurance 51.27%
14. ICICI Prudential Asset Management Company Limited India Subsidiary Asset management 51.00%
15. ICICI Prudential Trust Limited India Subsidiary Trusteeship services 50.80%

 

F-26

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

Sr. no. Name of the entity Country of incorporation Nature of relationship Nature of business Ownership interest
16. ICICI Strategic Investments Fund India Consolidated as per AS 21 Venture capital fund 100.00%
17. ICICI Lombard General Insurance Company Limited3 India Associate General insurance

48.02%

 

18. I-Process Services (India) Private Limited3 India Associate Services related to back end operations 19.00%
19. NIIT Institute of Finance Banking and Insurance Training Limited3 India Associate

Education and

training in banking, finance and insurance

18.79%
20. ICICI Merchant Services Private Limited3 India Associate Merchant acquiring and servicing 19.01%
21. India Infradebt Limited3 India Associate Infrastructure finance 42.33%
22. India Advantage Fund-III3 India Associate Venture capital fund 24.10%
23. India Advantage Fund-IV3 India Associate Venture capital fund 47.14%
24. Arteria Technologies Private Limited3 India Associate Software company 19.98%

1.ICICI Securities Holding Inc. is a wholly owned subsidiary of ICICI Securities Limited. ICICI Securities Inc. is a wholly owned subsidiary of ICICI Securities Holding Inc.

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

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

 

Comm Trade Services Limited has not been consolidated under AS 21, since the investment is temporary in nature. Falcon Tyres Limited, in which the Bank holds 26.39% equity shares has not been accounted as per equity method under AS 23, since the investment is temporary in nature.

 

F-27

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

SIGNIFICANT ACCOUNTING POLICIES

 

1.Translation of foreign currency items

 

The consolidated financial statements of the Group are reported in Indian rupees (Rs.), the national currency of India. Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing on the date of the transaction. Income and expenditure items of integral foreign operations (representative offices) are translated at daily closing rates, and income and expenditure items of non-integral foreign operations (foreign branches, offshore banking units, foreign subsidiaries) are translated at quarterly average closing rates.

 

Monetary foreign currency assets and liabilities of domestic and integral foreign operations are translated at closing exchange rates notified by Foreign Exchange Dealers’ Association of India

 

(FEDAI) relevant to the balance sheet date and the resulting gains/losses are recognised in the profit and loss account.

 

Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated at relevant closing exchange rates notified by FEDAI at the balance sheet date and the resulting gains/losses from exchange differences are accumulated in the foreign currency translation reserve until the disposal of the net investment in the non-integral foreign operations. Pursuant to RBI guideline, the Bank does not recognise the cumulative/proportionate amount of such exchange differences as income or expenses, which relate to repatriation of accumulated retained earnings from overseas operations, in the profit and loss account.

 

Contingent liabilities on account of guarantees, endorsements and other obligations denominated in foreign currencies are disclosed at the closing exchange rates notified by FEDAI relevant to the balance sheet date.

 

2.Revenue recognition

 

a)Interest income is recognised in the profit and loss account as it accrues, except in the case of non-performing assets (NPAs) where it is recognised upon realisation, as per the income recognition and asset classification norms of RBI/NHB/other applicable guidelines.

 

b)Income on discounted instruments is recognised over the tenure of the instrument.

 

c)Dividend income is accounted on an accrual basis when the right to receive the dividend is established.

 

d)Loan processing fee is accounted for upfront when it becomes due except in the case of foreign banking subsidiaries, where it is amortised over the period of the loan.

 

e)Project appraisal/structuring fee is accounted for on the completion of the agreed service.

 

f)Arranger fee is accounted for as income when a significant portion of the arrangement is completed and right to receive is established.

 

g)Commission received on guarantees and letters of credit issued is amortised on a straight-line basis over the period of the guarantee/letters of credit.

 

h)Fund management and portfolio management fees are recognised on an accrual basis.

 

F-28

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

i)The annual/renewal fee on credit cards, debit cards and prepaid cards are amortised on a straight line basis over one year.

 

j)All other fees are accounted for as and when they become due where the Group is reasonably certain of ultimate collection.

 

k)Fees paid/received for priority sector lending certificates (PSLC) is amortised on straight-line basis over the period of the certificate.

 

l)Income from securities brokerage activities is recognised as income on the trade date of the transaction. Brokerage income in relation to public or other issuances of securities is recognised based on mobilisation and terms of agreement with the client.

 

m)Life insurance premium for non-linked policies is recognised as income (net of goods and service tax) when due from policyholders. For unit linked business, premium is recognised when the associated units are created. Premium on lapsed policies is recognised as income when such policies are reinstated. Top-up premiums paid by unit linked policyholders’ are considered as single premium and recognised as income when the associated units are created. Income from unit linked policies, which includes fund management charges, policy administration charges, mortality charges and other charges, if any, are recovered from the linked funds in accordance with the terms and conditions of the policy and are recognised when due.

 

n)In case of life insurance business, reinsurance premium ceded/accepted is accounted in accordance with the terms of the relevant treaties/arrangements with the reinsurer/insurer. Profit commission on reinsurance ceded is netted off against premium ceded on reinsurance.

 

3.Stock based compensation

 

The following entities within the group have granted stock options to their employees:

 

ICICI Bank Limited

ICICI Prudential Life Insurance Company Limited

ICICI Securities Limited

 

The Employees Stock Option Scheme (the Scheme) of the Bank provides for grant of options on the Bank’s equity shares to wholetime directors and employees of the Bank and its subsidiaries. The options granted vest in a graded manner and may be exercised within a specified period.

 

Till March 31, 2021, the Bank recognised cost of stock options granted under Employee Stock Option Scheme, using intrinsic value method. Under Intrinsic value method, options cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date.

 

Pursuant to RBI clarification dated August 30, 2021, the cost of stock options granted after March 31, 2021 is recognised based on fair value method. The cost of stock options granted up to March 31, 2021 continues to be recognised on intrinsic value method. The Bank uses Black-Scholes model to fair value the options on the grant date and the inputs used in the valuation model include assumptions such as the expected life of the share option, volatility, risk free rate and dividend yield.

 

The cost of stock options is recognised in the profit and loss account over the vesting period.

 

ICICI Prudential Life Insurance Company Limited and ICICI Securities Limited have also formulated similar stock option schemes for their employees for grant of equity shares of their

 

F-29

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

respective companies. The intrinsic value method is followed by them to account for their stock-based employee compensation plans. Compensation cost is measured as the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date and amortised over the vesting period. The fair market price is the closing price on the stock exchange with the highest trading volume of the underlying shares of the Bank, ICICI Prudential Life Insurance Company Limited and ICICI Securities Limited, immediately prior to the grant date.

 

The banking subsidiaries namely, ICICI Bank UK PLC and ICICI Bank Canada, account for the cost of the options granted to employees by ICICI Bank using the fair value method as followed by the Bank.

 

4.Income taxes

 

Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Group. The current tax expense and deferred tax expense is determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively. Deferred tax adjustments comprise changes in the deferred tax assets or liabilities during the year and change in tax rate.

 

Deferred tax assets and liabilities are recognised by considering the impact of timing differences between taxable income and accounting income for the current year, and carry forward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. The impact of changes in the deferred tax assets and liabilities is recognised in the profit and loss account.

 

Deferred tax assets are recognised and re-assessed at each reporting date, based upon the management’s judgement as to whether their realisation is considered as reasonably certain. However, in case of domestic companies, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets.

 

In the consolidated financial statements, deferred tax assets and liabilities are computed at an individual entity level and aggregated for consolidated reporting.

 

Minimum Alternate Tax (MAT) credit is recognised as an asset to the extent there is convincing evidence that the Group will pay normal income tax during specified period, i.e., the period for which MAT credit is allowed to be carried forward as per prevailing provisions of the Income Tax Act 1961. In accordance with the recommendation contained in the guidance note issued by ICAI, MAT credit is to be recognised as an asset in the year in which it becomes eligible for set off against normal income tax. The Group reviews MAT credit entitlements at each balance sheet date and writes down the carrying amount to the extent there is no longer convincing evidence to the effect that the Group will pay normal income tax during the specified period.

 

5.Claims and benefits paid

 

In the case of life insurance business, benefits paid comprise policy benefits and claim settlement costs, if any. Death and rider claims are accounted for on receipt of intimation. Survival and maturity benefits are accounted when due. Withdrawals and surrenders under non linked policies are accounted on the receipt of intimation. Amount payable on lapsed/discontinued policies are accounted for on expiry of lock-in-period of these policies. Surrenders, withdrawals and lapsation are disclosed at net of charges recoverable. Claim settlement cost, legal and other fees form part of claim cost wherever applicable. Reinsurance claims receivable are accounted for in the period in which the claim is

 

F-30

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

intimated. Repudiated claims and other claims disputed before the judicial authorities are provided for on prudent basis as considered appropriate by the management.

 

6.Liability for life policies in force

 

In the case of life insurance business, the actuarial liabilities for life policies in force and policies where premiums are discontinued but a liability exists as at the valuation date, are calculated in accordance with accepted actuarial practice, requirements of Insurance Act, 1938, as amended from time to time, and regulations notified by the Insurance Regulatory and Development Authority of India, relevant Guidance Notes and Actuarial Practice Standards of the Institute of Actuaries of India.

 

7.Actuarial method and valuation

 

In the case of life insurance business, the actuarial liability on both participating and non-participating policies is calculated using the gross premium method, using assumptions for interest, mortality, morbidity, expense and inflation, and in the case of participating policies, future bonuses together with allowance for taxation and allocation of profits to shareholders. These assumptions are determined as prudent estimates at the date of valuation with allowances for adverse deviations.

 

The liability for the unexpired portion of the risk for the non-unit liabilities of linked business and attached riders is the higher of liability calculated using discounted cash flows and unearned premium reserves.

 

The unit liability in respect of linked business has been taken as the value of the units standing to the credit of policyholders, using the Net Asset Value (NAV) prevailing at the valuation date.

 

An unexpired risk reserve and a reserve in respect of claims incurred but not reported are created, for one year renewable group term insurance.

 

The interest rates used for valuing the liabilities are in the range of 4.99% to 6.58% per annum (previous year – 3.67% to 6.30% per annum).

 

Mortality rates used are based on the published “Indian Assured Lives Mortality (2012-2014) Ult.” mortality table for assurances and “Indian Individual Annuitant’s Mortality Table (2012-15)” table for annuities, adjusted to reflect expected experience while morbidity rates used are based on CIBT 93 table, adjusted for expected experience, or on risk rates supplied by reinsurers.

 

Expenses are provided for at least at current levels, in respect of renewal expenses, with no allowance for future improvements. Per policy renewal expenses for regular premium policies are assumed to inflate at 4.90% per annum (previous year – 4.59%).

 

8.Acquisition costs for insurance business

 

Acquisition costs are those costs that vary with and are primarily related to the acquisition of insurance contracts and are expensed in the period in which they are incurred.

 

9.Employee benefits

 

Gratuity

 

The Group pays gratuity, a defined benefit plan, to employees who retire or resign after a minimum prescribed period of continuous service and in case of employees at overseas locations as per the rules

 

F-31

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

in force in the respective countries. The Group makes contribution to recognised trusts which administer the funds on their own account or through insurance companies.

 

Actuarial valuation of the gratuity liability is determined by an independent actuary appointed by the Group. Actuarial valuation of gratuity liability is determined based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit method. The actuarial gains or losses arising during the year are recognised in the profit and loss account.

 

Superannuation Fund and National Pension Scheme

 

The Bank has a superannuation fund, a defined contribution plan, which is administered by trustees and managed by insurance companies. The Bank contributes 15.0% of the total annual basic salary for certain employees to superannuation funds. ICICI Prudential Life Insurance Company Limited, ICICI Prudential Asset Management Company Limited, ICICI Venture Funds Management Company Limited and ICICI Investment Management Company Limited have accrued for superannuation liability based on a percentage of basic salary payable to eligible employees for the period of service.

 

The Group contributes upto 10.0% of the total basic salary of certain employees to National Pension Scheme (NPS), a defined contribution plan, which is managed and administered by pension fund management companies. The employees are given an option to receive the amount in cash in lieu of such contributions along with their monthly salary during their employment.

 

The amounts so contributed/paid by the Group to the superannuation fund and NPS or to employees during the year are recognised in the profit and loss account. The Group has no liability towards future benefits under superannuation fund and national pension scheme other than its annual contribution.

 

Pension

 

The Bank provides for pension, a defined benefit plan covering eligible employees of erstwhile Bank of Madura, erstwhile Sangli Bank and erstwhile Bank of Rajasthan. The Bank makes contribution to a trust which administers the funds on its own account or through insurance companies. The plan provides for pension payment including dearness relief on a monthly basis to these employees on their retirement based on the respective employee’s years of service with the Bank and applicable salary.

 

Actuarial valuation of the pension liability is determined by an independent actuary appointed by the Bank. Actuarial valuation of pension liability is calculated based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit method.

 

The actuarial gains or losses arising during the year are recognised in the profit and loss account.

 

Employees covered by the pension plan are not eligible for employer’s contribution under the provident fund plan.

 

Provident fund

 

The Group is statutorily required to maintain a provident fund, a defined benefit plan, as a part of retirement benefits to its employees. Each employee contributes a certain percentage of his or her basic salary and the Group contributes an equal amount for eligible employees. The Group makes contribution as required by The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 to Employees’ Pension Scheme administered by the Regional Provident Fund Commissioner and the balance contributions are transferred to funds administered by trustees. The funds are invested according to the rules prescribed by the Government of India. The Group recognises such contribution as an expense in the year in which it is incurred.

 

F-32

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

Interest payable on provident fund should not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952. Actuarial valuation for the interest obligation on the provident fund balances is determined by an actuary appointed by the Group.

 

The actuarial gains or losses arising during the year are recognised in the profit and loss account.

 

The overseas branches of the Bank and its eligible employees contribute a certain percentage of their salary towards respective government schemes as per local regulatory guidelines. The contribution made by the overseas branches is recognised in profit and loss account at the time of contribution.

 

Compensated absences

 

The Group provides for compensated absences based on actuarial valuation conducted by an independent actuary.

 

10.Provisions, contingent liabilities and contingent assets

 

The Group estimates the probability of any loss that might be incurred on outcome of contingencies on the basis of information available upto the date on which the consolidated financial statements are prepared. A provision is recognised when an enterprise has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are determined based on management estimates of amounts required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure to this effect is made in the consolidated financial statements. In case of remote possibility, neither provision nor disclosure is made in the consolidated financial statements. The Group does not account for or disclose contingent assets, if any.

 

The Bank estimates the probability of redemption of customer loyalty reward points using an actuarial method by employing an independent actuary and accordingly makes provision for these reward points. Actuarial valuation is determined based on certain assumptions regarding mortality rate, discount rate, cancellation rate and redemption rate.

 

11.Cash and cash equivalents

 

Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short notice.

 

12.Investments

 

i)Investments of the Bank are accounted for in accordance with the extant RBI guidelines on investment classification and valuation.

 

a.The Bank follows trade date method of accounting for purchase and sale of investments, except for government of India and state government securities where settlement date method of accounting is followed in accordance with RBI guidelines.

 

b.All investments are classified into ‘Held to Maturity’ (HTM), ‘Available for Sale’ (AFS) and ‘Held for Trading’ (HFT) on the date of purchase as per the extant RBI guidelines on investment classification and valuation. Reclassifications, if any, in any category are

 

F-33

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

accounted for as per the RBI guidelines. Under each classification, the investments are further categorised as (a) government securities, (b) other approved securities, (c) shares, (d) bonds and debentures and (e) others.

 

c.Investments that are held principally for resale within 90 days from the date of purchase are classified as HFT securities. Investments which the Bank intends to hold till maturity are classified as HTM securities. Investments which are not classified in either of the above categories are classified under AFS securities.

 

d.Costs including brokerage and commission pertaining to investments paid at the time of acquisition and broken period interest (the amount of interest from the previous interest payment date till the date of purchase of instruments) on debt instruments are charged to the profit and loss account.

 

e.Securities are valued scrip-wise. Depreciation/appreciation on securities, other than those acquired by way of conversion of outstanding loans, is aggregated for each category. Net appreciation in each category under each investment classification, if any, being unrealised, is ignored, while net depreciation is provided. The depreciation on securities acquired by way of conversion of outstanding loans is fully provided. Non-performing investments are identified based on the RBI guidelines.

 

f.HTM securities are carried at their acquisition cost or at amortised cost, if acquired at a premium over the face value. Any premium over the face value of fixed rate and floating rate securities acquired is amortised over the remaining period to maturity on a constant yield basis and straight line basis respectively.

 

g.AFS and HFT securities are valued periodically as per RBI guidelines. Any premium over the face value of fixed rate and floating rate investments in government securities, classified as AFS, is amortised over the remaining period to maturity on constant yield basis and straight line basis respectively. Quoted investments are valued based on the closing quotes on the recognised stock exchanges or prices declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association (FIMMDA)/Financial Benchmark India Private Limited (FBIL), periodically.

 

h.The market/fair value of unquoted government securities which are in the nature of Statutory Liquidity Ratio (SLR) securities included in the ‘AFS’ and ‘HFT’ categories is as per the rates published by FBIL. The valuation of other unquoted fixed income securities, including Pass Through Certificates, wherever linked to the Yield-to-Maturity (YTM) rates, is computed with a mark-up (reflecting associated credit risk) over the YTM rates for government securities published by FIMMDA. The sovereign foreign securities and non-INR India linked bonds are valued on the basis of prices published by the sovereign regulator or counterparty quotes.

 

i.Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost.

 

j.The units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund. Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available, or at Rs. 1, as per RBI guidelines.

 

k.The units of Venture Capital Funds (VCFs) are valued at the net asset value (NAV) declared by the VCF. If the latest balance sheet is not available continuously for more than 18 months, the units of VCF are valued at Rs. 1, as per RBI guidelines.

 

F-34

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

l.At the end of each reporting period, security receipts issued by the asset reconstruction companies are valued in accordance with the guidelines applicable to such instruments, prescribed by RBI from time to time. Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction companies are limited to the actual realisation of the financial assets assigned to the instruments in the concerned scheme, the Bank reckons the net asset value obtained from the asset reconstruction company from time to time, for valuation of such investments at each reporting period end. The Bank makes additional provisions on the security receipts based on the remaining period to end. The security receipts which are outstanding and not redeemed as at the end of the resolution period are treated as loss assets and are fully provided.

 

m.Depreciation/provision on non-performing investments is made as per internal provisioning norms, subject to minimum provisioning requirements of RBI.

 

n.Gain/loss on sale of investments is recognised in the profit and loss account. Cost of investments is computed based on the First-In-First-Out (FIFO) method. The profit from sale of investment under HTM category, net of taxes and transfer to statutory reserve is transferred to “Capital Reserve” in accordance with the RBI Guidelines.

 

o.The Bank undertakes short sale transactions in dated central government securities in accordance with RBI guidelines. The short positions are categorised under HFT category and are marked-to-market. The mark-to-market loss is charged to profit and loss account and gain, if any, is ignored as per RBI guidelines.

 

p.Market repurchase, reverse repurchase and transactions with RBI under Liquidity Adjustment Facility (LAF) are accounted for as borrowing and lending transactions in accordance with the extant RBI guidelines.

 

ii)The Bank’s consolidating venture capital fund carries investments at fair values, with unrealised gains and temporary losses on investments recognised as components of investors’ equity and accounted for in the unrealised investment reserve account. The realised gains and losses on investments and units in mutual funds and unrealised gains or losses on revaluation of units in mutual funds are accounted for in the profit and loss account. Provisions are made in respect of accrued income considered doubtful. Such provisions as well as any subsequent recoveries are recorded through the profit and loss account. Subscription to/purchase of investments are accounted at the cost of acquisition inclusive of brokerage, commission and stamp duty.

 

iii)The Bank’s primary dealership and securities broking subsidiaries classify the securities held with the intention of holding for short-term and trading as stock-in-trade which are valued at lower of cost or market value. The securities classified by primary dealership subsidiary as held-to-maturity, as permitted by RBI, are carried at amortised cost. Appropriate provision is made for other than temporary diminution in the value of investments. Commission earned in respect of securities acquired upon devolvement is reduced from the cost of acquisition.

 

iv)The Bank’s housing finance subsidiary classifies its investments as current investments and long-term investments. Investments that are readily realisable and intended to be held for not more than a year are classified as current investments, which are carried at the lower of cost and net realisable value. All other investments are classified as long-term investments, which are carried at their acquisition cost or at amortised cost, if acquired at a premium over the face value. Any premium over the face value of the securities acquired is amortised over the remaining period to maturity on a constant yield basis. However, a provision for diminution in value is made to recognise any other than temporary decline in the value of such long-term investments.

 

F-35

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

v)The Bank’s overseas banking subsidiaries account for unrealised gain/loss, net of tax, on investment in ‘AFS’/’Fair Value Through Other Comprehensive Income’ (FVOCI) category directly in their reserves. Further unrealised gain/loss on investment in ‘HFT’/’Fair Value Through Profit and Loss’ (FVTPL) category is accounted directly in the profit and loss account. Investments in ‘HTM’/’amortised cost’ category are carried at amortised cost.

 

In the case of life insurance business, investments are made in accordance with the Insurance Act, 1938 (amended by the Insurance Laws (Amendment) Act, 2015), the IRDA (Investment) Regulations, 2016, and various other circulars/notifications issued by the IRDAI in this context from time to time.

 

vi)Valuation of investments (other than linked business) is done on the following basis:

 

a.All debt securities including government securities and redeemable preference shares are considered as ‘held to maturity’ and stated at historical cost, subject to amortisation of premium or accretion of discount over the period of maturity/holding on a constant yield basis.

 

b.Listed equity shares and equity exchange traded funds (ETF) are stated at fair value being the last quoted closing price on the National Stock Exchange (NSE) (or BSE, in case the investments are not listed on NSE). Unlisted equity shares are stated at acquisition cost less impairment, if any. Equity shares lent under the Securities Lending and Borrowing scheme (SLB) continue to be recognised in the Balance Sheet as the Company retains all the associated risks and rewards of these securities. Non-traded and thinly traded equity share are valued at last available price on NSE/BSE or the value derived using valuation principle of net worth per share, whichever is lower.

 

c.Mutual fund units are valued based on the previous day’s net asset value.

 

Unrealised gains/losses arising due to changes in the fair value of listed equity shares and mutual fund units are taken to ’Revenue and other reserves’ and ‘Liabilities on policies in force’ in the balance sheet for Shareholders’ fund and Policyholders’ fund respectively for life insurance business.

 

The Bank’s life insurance subsidiary assess at each balance sheet date whether there is any indication that any investment may be impaired. If any such indication exists, the carrying value of such investment is reduced to its recoverable amount and the impairment loss is recognised in the revenue(s)/profit and loss account. The previously impaired loss is also reversed on disposal/realisation of securities and results thereon are recognised.

 

The total proportion of investments for which subsidiaries have applied accounting policies different from the Bank as mentioned above, is approximately 21.95% of the total investments at March 31, 2023.

 

13.Provisions/write-offs on loans and other credit facilities

 

i)Loans and other credit facilities of the Bank are accounted for in accordance with the extant RBI guidelines as given below:

 

The Bank classifies its loans and investments, including at overseas branches and overdues arising from crystallised derivative contracts, into performing and NPAs in accordance with

 

F-36

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

RBI guidelines. Loans and advances held at the overseas branches that are identified as impaired as per host country regulations but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the respective host country. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Interest on non-performing advances is transferred to an interest suspense account and not recognised in profit and loss account until received.

 

The Bank considers an account as restructured, where for economic or legal reasons relating to the borrower’s financial difficulty, the Bank grants concessions to the borrower, that the Bank would not otherwise consider. The moratorium granted to the borrowers based on RBI guidelines is not accounted as restructuring of loan. The RBI guidelines on ‘Resolution Framework for COVID-19-related Stress’ provide a prudential framework for resolution plan of certain loans. The borrowers where resolution plan was implemented under these guidelines are classified as standard restructured.

 

In the case of corporate loans and advances, provisions are made for sub-standard and doubtful assets as per internal provisioning norms, subject to minimum provisioning requirements of RBI. Loss assets and the unsecured portion of doubtful assets are fully provided. For impaired loans and advances held in overseas branches, which are performing as per RBI guidelines, provisions are made as per the host country regulations. For loans and advances held in overseas branches, which are NPAs both as per RBI guidelines and host country guidelines, provisions are made at the higher of the provisions required as per internal provisioning norms and host country regulations. Provisions on homogeneous non-performing retail loans and advances, subject to minimum provisioning requirements of RBI, are made on the basis of the ageing of the loan. The specific provisions on non-performing retail loans and advances held by the Bank are higher than the minimum regulatory requirements.

 

In respect of non-retail loans reported as fraud to RBI, the entire amount is provided over a period not exceeding four quarters starting from the quarter in which fraud has been detected. In respect of non-retail loans where there has been delay in reporting the fraud to the RBI or which are classified as loss accounts, the entire amount is provided immediately. In case of fraud in retail accounts, the entire amount is provided immediately. In respect of borrowers classified as non-cooperative borrowers or willful defaulters, the Bank makes accelerated provisions as per RBI guidelines.

 

The Bank holds specific provisions against non-performing loans and advances, and against certain performing loans and advances in accordance with RBI directions.

 

The Bank makes provision on restructured loans subject to minimum requirements as per RBI guidelines. Provision due to diminution in the fair value of restructured/rescheduled loans and advances is made in accordance with the applicable RBI guidelines.

 

Non-performing and restructured loans are upgraded to standard as per the extant RBI guidelines or host country regulations, as applicable.

 

In terms of RBI guideline, the NPAs are written-off in accordance with the Bank’s policy. Amounts recovered against bad debts written-off are recognised in the profit and loss account.

 

The Bank maintains general provision on performing loans and advances in accordance with the RBI guidelines, including provisions on loans to borrowers having unhedged foreign currency exposure, provisions on loans to specific borrowers in specific stressed sector,

 

F-37

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

provision on exposures to step-down subsidiaries of Indian companies and provision on incremental exposure to borrowers identified as per RBI’s large exposure framework. For performing loans and advances in overseas branches, the general provision is made at higher of aggregate provision required as per host country regulations and RBI requirement.

 

In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposures including indirect country risk (other than for home country exposure). The countries are categorised into seven risk categories namely insignificant, low, moderately low, moderate, moderately high, high and very high, and provisioning is made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 25%. For exposures with contractual maturity of less than 180 days, provision is required to be held at 25% of the rates applicable to exposures exceeding 180 days. The indirect exposure is reckoned at 50% of the exposure. If the country exposure (net) of the Bank in respect of each country does not exceed 1% of the total funded assets, no provision is required on such country exposure.

 

The Bank makes additional provisions as per RBI guidelines for the cases where viable resolution plan has not been implemented within the timelines prescribed by the RBI from the date of default. These additional provisions are written-back on satisfying the conditions for reversal as per RBI guidelines.

 

The Bank, on prudent basis, has made contingency provision on certain loan portfolios, including borrowers who had taken moratorium at any time during FY2021 under the extant RBI guidelines related to Covid-19 regulatory package. The Bank also makes additional contingency provision on certain standard assets. The contingency provision is included in ‘Schedule 5 - Other Liabilities and Provisions’.

 

The Bank has a Board approved policy for making floating provision, which is in addition to the specific and general provisions made by the Bank. The floating provision is utilised, with the approval of Board and RBI, in case of contingencies which do not arise in the normal course of business and are exceptional and non-recurring in nature and for making specific provision for impaired loans as per the requirement of extant RBI guidelines or any regulatory guidance/instructions. The floating provision is netted-off from advances.

 

ii)In the case of the Bank’s housing finance subsidiary, loans and other credit facilities are classified as per the Master Directions – Non Banking Financial Company – Housing Finance Companies (Reserve Bank) Directions, 2021 issued by Reserve Bank of India (‘Master Direction’). Further, NPAs are classified into sub-standard, doubtful and loss assets based on criteria stipulated in the Master Direction. Additional provisions are made against specific non-performing assets over and above what is stated above, if in the opinion of management, increased provisions are necessary. General provision on restructured loans is made as per RBI guidelines.

 

iii)In the case of the Bank’s UK subsidiary, loans are stated net of allowance for credit losses. Loans are classified as impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition on the loan (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the loans that can be reliably estimated. An allowance for impairment losses is maintained at a level that management considers adequate to absorb identified credit related losses as well as losses that have occurred but have not yet been identified.

 

F-38

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

iv)The Bank’s Canadian subsidiary measures impairment loss on all financial assets using expected credit loss (ECL) model based on a three-stage approach. The ECL for financial assets that are not credit-impaired and for which there is no significant increase in credit risk since origination, is computed using 12-month probability of default (PD), and represents the lifetime cash shortfalls that will result if a default occurs in next 12 months. The ECL for financial assets, that are not credit-impaired but have experienced a significant increase in credit risk since origination, is computed using a life time PD, and represents lifetime cash shortfalls that will result if a default occurs during the expected life of financial assets. A financial asset is considered credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. The allowance for credit losses for impaired financial assets is computed based on individual assessment of expected cash flows from such assets.

 

The total proportion of loans for which subsidiaries have applied accounting policies different from the Bank as mentioned above, is approximately 5.95% of the total loans at March 31, 2023.

 

14.Transfer and servicing of assets

 

The Bank transfers commercial and consumer loans through securitisation transactions. The transferred loans are de-recognised and gains/losses are accounted, only if the Bank surrenders the rights to benefits specified in the underlying securitised loan contract. Recourse and servicing obligations are accounted for net of provisions.

 

In accordance with the RBI guidelines for securitisation of standard assets, with effect from February 1, 2006, the profit/premium arising from securitisation is amortised over the life of the securities issued or to be issued by the special purpose vehicle to which the assets are sold. With effect from May 7, 2012, the RBI guidelines require the profit/premium arising from securitisation to be amortised based on the method prescribed in the guidelines. As per the RBI guidelines issued on September 24, 2021, gain realised at the time of securitisation of loans is accounted through profit and loss account on completion of transaction. The Bank accounts for any loss arising from securitisation immediately at the time of sale.

 

The unrealised gains, associated with expected future margin income is recognised in profit and loss account on receipt of cash, after absorbing losses, if any.

 

Net income arising from sale of loan assets through direct assignment with recourse obligation is amortised over the life of underlying assets sold and net income from sale of loan assets through direct assignment, without any recourse obligation, is recognised at the time of sale. Net loss arising on account of direct assignment of loan assets is recognised at the time of sale. As per the RBI guidelines issued on September 24, 2021, any loss or realised gain from sale of loan assets through direct assignment is accounted through profit and loss account on completion of transaction.

 

The acquired loans is carried at acquisition cost. In case premium is paid on a loan acquired, premium is amortised over the loan tenure.

 

In accordance with RBI guidelines, in case of non-performing loans sold to Asset Reconstruction Companies (ARCs), the Bank reverses the excess provision in profit and loss account in the year in which amounts are received. Any shortfall of sale value over the net book value on sale of such assets is recognised by the Bank in the year in which the loan is sold.

 

F-39

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

The Canadian subsidiary has entered into securitisation arrangements in respect of its originated and purchased mortgages. ICICI Bank Canada either retains substantially all the risk and rewards or retains control over these mortgages, hence these arrangements do not qualify for de-recognition accounting under their local accounting standards. It continues to recognise the mortgages securitised as “Loans and Advances” and the amounts received through securitisation are recognised as “Other borrowings”.

 

15.Fixed assets

 

Fixed assets, other than premises of the Bank and its housing finance subsidiary are carried at cost less accumulated depreciation and impairment, if any. In case of the Bank and its housing finance subsidiary, premises are carried at revalued amount, being fair value at the date of revaluation less accumulated depreciation. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and installation of the asset. Depreciation is charged over the estimated useful life of fixed assets on a straight-line basis. The useful life of the groups of fixed assets for domestic group companies is based on past experience and expectation of usage, which for some categories of fixed assets, is different from the useful life as prescribed in Schedule II to the Companies Act, 2013.

 

Assets purchased/sold during the year are depreciated on a pro-rata basis for the actual number of days the asset has been capitalised.

 

In case of the Bank, assets individually costing up to Rs 5,000/- are depreciated fully in the year of acquisition. Further, profit on sale of premises by the Bank is appropriated to capital reserve, net of transfer to Statutory Reserve and taxes, in accordance with RBI guidelines.

 

In case of revalued/impaired assets, depreciation is provided over the remaining useful life of the assets with reference to revised asset values. In case of premises, which are carried at revalued amounts, the depreciation on the excess of revalued amount over historical cost is transferred from Revaluation Reserve to General Reserve annually.

 

Non-banking assets

 

Non-banking assets (NBAs) acquired in satisfaction of claims are valued at the market value on a distress sale basis or value of loan, whichever is lower. Further, the Bank creates provision on these assets as per the extant RBI guidelines or specific RBI directions.

 

16.Foreign exchange and derivative contracts

 

The forward exchange contracts that are not intended for trading and are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction are effectively valued at closing spot rate. The premium or discount arising on inception of such forward exchange contracts is amortised over the life of the contract as interest income/expense. All other outstanding forward exchange contracts are revalued based on the exchange rates notified by FEDAI for specified maturities and at interpolated rates for contracts of interim maturities. The contracts of longer maturities where exchange rates are not notified by FEDAI are revalued based on the forward exchange rates implied by the swap curves in respective currencies. The resultant gains or losses are recognised in the profit and loss account.

 

The swap contracts entered to hedge on-balance sheet assets and liabilities are structured such that they bear an opposite and offsetting impact with the underlying on-balance sheet items. The impact of such derivative instruments is correlated with the movement of underlying assets and liabilities and accounted pursuant to the principles of hedge accounting. The Group identifies the hedged item (asset or liability) at the inception of the transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically thereafter. Based on RBI circular issued on June 26, 2019,

 

F-40

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

the accounting of hedge relationships established after June 26, 2019 is in accordance with the Guidance note on Accounting for Derivative Contracts issued by ICAI. The swaps under hedge relationships established prior to that date are accounted for on an accrual basis and are not marked to market unless their underlying transaction is marked-to-market. Gains or losses arising from hedge ineffectiveness, if any, are recognised in the profit and loss account except in the case of the Bank’s overseas banking subsidiaries.

 

In overseas subsidiaries, in case of fair value hedge, the hedging transactions and the hedged items (for the risks being hedged) are measured at fair value with changes recognised in the profit and loss account and in case of cash flow hedges, changes in the fair value of effective portion of the cash flow hedge are taken to ‘Revenue and other reserves’ and ineffective portion, if any, are recognised in the profit and loss account.

 

The derivative contracts entered into for trading purposes are marked to market and the resulting gain or loss is accounted for in the profit and loss account. Pursuant to RBI guidelines, any receivables under derivative contracts which remain overdue for more than 90 days and mark-to-market gains on other derivative contracts with the same counter-parties are reversed through the profit and loss account.

 

17.Impairment of assets

 

The immovable fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An asset is treated as impaired when its carrying amount exceeds its recoverable amount. The impairment is recognised by debiting the profit and loss account and is measured as the amount by which the carrying amount of the impaired assets exceeds their recoverable value. The Bank and its housing finance subsidiary follows revaluation model of accounting for its premises and the recoverable amount of the revalued assets is considered to be close to its revalued amount. Accordingly, separate assessment for impairment of premises is not required.

 

For assets other than premises, the Group assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the profit and loss account to the extent the carrying amount of assets exceeds their estimated recoverable amount.

 

18.Lease transactions

 

Lease payments including cost escalations for assets taken on operating lease are recognised as an expense in the profit and loss account over the lease term on straight line basis. The leases of property, plant and equipment, where substantially all of the risks and rewards of ownership are transferred to the Bank are classified as finance lease. Minimum lease payments under finance lease are apportioned between the finance costs and outstanding liability.

 

19.Earnings per share

 

Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding for the year.

 

Diluted earnings per share reflect the potential dilution that could occur if contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share is computed using the weighted average number of equity shares and dilutive potential equity shares issued by the group outstanding during the year, except where the results are anti-dilutive.

 

F-41

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

20.Bullion transaction

 

The Bank deals in bullion business on a consignment basis. The bullion is priced to the customers based on the price quoted by the supplier. The difference between price recovered from customers and cost of bullion is accounted for as commission at the time of sales to the customers. The Bank also deals in bullion on a borrowing and lending basis and the interest expense/income is accounted on accrual basis.

 

21.Share issue expenses

 

Share issue expenses are deducted from Share Premium Account in terms of Section 52 of the Companies Act, 2013.

 

F-42

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

SCHEDULE 18: NOTES FORMING PART OF THE ACCOUNTS

 

A. The following additional disclosures have been made taking into account the requirements of Accounting Standards (ASs) and Reserve Bank of India (RBI) guidelines.

 

1.Earnings per share

 

Basic and diluted earnings per equity share are computed in accordance with AS 20 - Earnings per share. Basic earnings per equity share is computed by dividing net profit/(loss) after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share is computed using the weighted average number of equity shares and weighted average number of dilutive potential equity shares outstanding during the year.

 

The following table sets forth, for the periods indicated, the computation of earnings per share.

 

Rs. in million, except per share data
 

Year ended

March 31, 2023

Year ended

March 31, 2022

Net profit/(loss) attributable to equity share holders

340,366.4

 251,101.0
Nominal value per share (Rs.)  2.00  2.00
Basic earnings per share (Rs.)  48.86 36.21
Effect of potential equity shares (Rs.)  (1.02) (0.77)
Diluted earnings per share (Rs.)1  47.84 35.44
Reconciliation between weighted shares used in computation of basic and diluted earnings per share
Basic weighted average number of equity shares outstanding   6,966,305,957  6,933,652,636
Add: Effect of potential equity shares   138,684,400  142,291,212
Diluted weighted average number of equity shares outstanding   7,104,990,357  7,075,943,848

1. The dilutive impact is due to options granted to employees by the Group.

 

F-43

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

2.Related party transactions

 

The Group has transactions with its related parties comprising associates/other related entities and key management personnel and relatives of key management personnel.

 

I.Related parties

 

Associates/other related entities

 

Sr. no. Name of the entity Nature of relationship
1. ICICI Lombard General Insurance Company Limited Associate
2. Arteria Technologies Private Limited Associate
3. India Advantage Fund-III Associate
4. India Advantage Fund-IV Associate
5. India Infradebt Limited Associate
6. ICICI Merchant Services Private Limited Associate
7. I-Process Services (India) Private Limited Associate
8. NIIT Institute of Finance, Banking and Insurance Training Limited Associate
9. Comm Trade Services Limited Other related entity
10. ICICI Foundation for Inclusive Growth Other related entity
11. Cheryl Advisory Private Limited Other related entity

 

Key management personnel

 

Sr. no. Name of the Key management personnel Relatives of the Key management personnel
1.

Mr. Sandeep Bakhshi

 

   Ms. Mona Bakhshi

   Mr. Shivam Bakhshi

   Ms. Aishwarya Bakshi

   Ms. Esha Bakhshi

   Ms. Minal Bakhshi

   Mr. Sameer Bakhshi

   Mr. Ritwik Thakurta

   Mr. Ashwin Pradhan

   Ms. Radhika Bakhshi

2. Mr. Anup Bagchi

   Ms. Mitul Bagchi

   Mr. Aditya Bagchi

   Mr. Shishir Bagchi

   Mr. Arun Bagchi

3.

Mr. Sandeep Batra

 

   Mr. Pranav Batra

   Ms. Arushi Batra

   Mr. Vivek Batra

   Ms. Veena Batra

4.

Mr. Rakesh Jha

(w.e.f September 2, 2022)

   Mr. Narendra Kumar Jha

   Mr. Navin Ahuja

   Mr. Sharad Bansal

   Ms. Aparna Ahuja

   Ms. Apoorva Jha Bansal

   Ms. Pushpa Jha

   Ms. Sanjali Jha

   Ms. Swati Jha

 

F-44

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

Sr. no. Name of the Key management personnel Relatives of the Key management personnel
5.

Ms. Vishakha Mulye

(upto May 31, 2022)

   Mr. Vivek Mulye

   Ms. Vriddhi Mulye

   Mr. Vighnesh Mulye

   Dr. Gauresh Palekar

   Ms. Shalaka Gadekar

   Dr. Nivedita Palekar

 

II.Transactions with related parties

 

The following table sets forth, for the periods indicated, the significant transactions between the Group and its related parties.

 

    Rs. in million
Particulars Year ended March 31, 2023 Year ended March 31, 2022
Interest income 438.0 516.9
 Associates/others 434.8 510.9
 Key management personnel 3.2 6.0
 
Income from services rendered 1,422.7 1,215.7
 Associates/others 1,419.9 1,214.0
 Key management personnel 0.9 1.2
 Relatives of key management personnel 1.9 0.5
 
Gain/(loss) on forex and derivative transactions (net) 50.8 36.6
 Associates/others 50.8 36.6
 
Income from shared services 326.5 369.2
 Associates/others 326.5 369.2
     
Dividend income 2,347.1 1,993.3
 Associates/others 2,347.1 1,993.3
     
Insurance claims received 163.0 229.6
 Associates/others 163.0 229.6
     
Interest expense 225.7 199.0
 Associates/others 205.2 192.2
 Key management personnel 15.3 4.8
 Relatives of key management personnel 5.2 2.0
     
Expenses for services received 15,702.6 12,297.3
 Associates/others 15,702.6 12,297.3
 
Insurance premium paid 3,544.6 3,222.4
 Associates/others 3,544.6 3,222.4

 

F-45

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars Year ended March 31, 2023 Year ended March 31, 2022
     
Expenses for shared services and other payments 0.8 0.8
 Associates/others 0.8 0.8
 
Insurance claims paid 19.0 42.6
 Associates/others 18.5 42.1
 Key management personnel 0.5 0.5
 
CSR related reimbursement of expenses 4,441.1 2,239.2
 Associates/others 4,441.1 2,239.2
 
Donation given 564.5 486.4
 Associates/others 564.5 486.4
     
Purchase of investments 1,634.0 1,766.5
 Associates/others 1,634.0 1,766.5
 
Sale of Investments 31,667.3 8,286.9
 Associates/others 31,667.3 8,286.9
     
Investments in the securities issued by related parties 1,850.0 1,000.0
 Associates/others 1,850.0 1,000.0
 
Issuance of securities to related parties 1,000.0 ..
 Associates/others 1,000.0 ..
     
Redemption/buyback of Investments 1,615.5 ..
 Associates/others 1,615.5 ..
 
Purchase of fixed assets 3.4 4.8
 Associates/others 3.4 4.8
 
Insurance premium received 58.7 75.8
 Associates/others 55.3 67.1
 Key management personnel 2.6 3.5
 Relatives of key management personnel 0.8 5.2
 
Remuneration to wholetime directors2 336.6 267.6
 Key management personnel 336.6  267.6
     
Dividend paid 3.9 2.5
 Key management personnel 3.2 2.5
 Relatives of key management personnel 0.7 0.0
 
Value of ESOPs exercised 306.2 394.2
Key management personnel 306.2 394.2
 

 

F-46

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars Year ended March 31, 2023 Year ended March 31, 2022
Sale of fixed assets 0.2 ..
 Key management personnel 0.2 ..

1.0.0 represents insignificant amount.

2.Excludes the perquisite value on employee stock options exercised and includes performance bonus paid during the period.

 

III.Material transactions with related parties

 

The following table sets forth, for the periods indicated, the material transactions between the Group and its related parties. A specific related party transaction is disclosed as a material related party transaction wherever it exceeds 10% of all related party transactions in that category.

 

    Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Interest income
1 India Infradebt Limited 421.2 505.4
Income from services rendered
1 ICICI Lombard General Insurance Company Limited 1,267.5 1,066.5
Gain/(loss) on forex and derivative transactions (net)
1 ICICI Lombard General Insurance Company Limited 50.8 36.6
Income from shared services
1 ICICI Lombard General Insurance Company Limited 262.0 314.6
2 ICICI Foundation for Inclusive Growth 37.2 38.7
Dividend income
1 ICICI Lombard General Insurance Company Limited 2,240.5 1,886.8
Insurance Claims received
1 ICICI Lombard General Insurance Company Limited 163.0 229.6
Interest expense
1 ICICI Lombard General Insurance Company Limited 140.5 163.6
2 ICICI Merchant Services Private Limited 25.9 8.3
Expenses for services received
1 I-Process Services (India) Private Limited 10,406.6 8,450.4
2 ICICI Merchant Services Private Limited 5,226.6 3,790.0
Insurance Premium paid
1 ICICI Lombard General Insurance Company Limited 3,544.6 3,222.4
Expenses for shared services and other payments
1 ICICI Lombard General Insurance Company Limited 0.8 0.8
Insurance claims paid
1 ICICI Lombard General Insurance Company Limited 16.2 42.1
2 ICICI Foundation for Inclusive Growth 2.3 ..

 

F-47

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

Rs. in million

Particulars

Year ended

March 31, 2023

 Year ended

March 31, 2022

CSR related reimbursement of expenses
1 ICICI Foundation for Inclusive Growth 4,441.1 2,239.2
Donation given
1 ICICI Foundation for Inclusive Growth 564.5 486.4
Purchase of investments
1 ICICI Lombard General Insurance Company Limited 1,634.0 1,766.5
Sale of Investments
1 ICICI Lombard General Insurance Company Limited 24,647.6 6,776.2
2 India Infradebt Limited 7,019.7 1,510.7
Investments in the securities issued by related parties
1 India Infradebt Limited 1,850.0 1,000.0
Issuance of securities to related parties
1 ICICI Lombard General Insurance Company Limited 1,000.0 ..
Redemption/buyback of investments
1 ICICI Lombard General Insurance Company Limited 1,615.5 ..
Purchase of fixed assets
1 Arteria Technologies Private Limited 3.2 1.7
2 ICICI Lombard General Insurance Company Limited 0.1 3.1
Insurance premium received
1 ICICI Lombard General Insurance Company Limited 54.1 47.9
2 ICICI Foundation for Inclusive Growth 0.7 18.6
Remuneration to wholetime directors2
1 Mr. Sandeep Bakhshi3 95.7 73.7
2 Mr. Anup Bagchi 86.5 66.3
3 Mr. Sandeep Batra3 85.3 64.0
4 Mr. Rakesh Jha 45.9 N.A.
5 Ms. Vishakha Mulye 23.2 63.6
Dividend paid
1 Mr. Sandeep Bakhshi 1.8 0.4
2 Mr. Anup Bagchi 0.0 0.1
3 Mr. Sandeep Batra 0.6 0.2
4 Mr. Rakesh Jha 0.7 N.A.
5 Ms. Vishakha Mulye N.A. 1.8
6 Mr. Shivam Bakhshi 0.4 0.0
Value of ESOPs exercised
1 Mr. Sandeep Bakhshi 27.2 277.1
2 Mr. Anup Bagchi 183.2 56.0
3 Mr. Sandeep Batra 22.0 4.8
4 Ms. Vishakha Mulye 73.8 56.3
Sale of fixed assets
1 Mr. Rakesh Jha 0.1 ..
2 Ms. Vishakha Mulye 0.1 ..

 

F-48

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

1.0.0 represents insignificant amount.

2.Excludes the perquisite value on employee stock options exercised, and includes performance bonus paid during the period.

3.Includes remuneration received from ICICI Prudential Life Insurance Company Limited relating to the period of his service with that company.

 

IV.Related party outstanding balances

 

The following table sets forth, for the periods indicated, the outstanding balances payable to/receivable from related parties.

 

    Rs. in million
Items

At March 31, 2023

At March 31, 2022

Deposits with the Group 2,960.0 3,591.0
 Associates/others 2,603.0 3,424.7
 Key management personnel 260.7 125.1
 Relatives of key management personnel 96.3 41.2
 
Payables 3,718.3 3,482.7
 Associates/others 3,716.9 3,482.6
 Key management personnel 0.4 0.0
 Relatives of key management personnel 1.0 0.1
 
Investments of the Group 24,863.5 24,773.8
 Associates/others 24,863.5 24,773.8
 
Investments of related parties in the Group 1,601.3 2,104.6
Associates/others 1,600.0 2,100.0
 Key management personnel 1.1 2.1
 Relatives of key management personnel 0.2 2.5
 
Advances by the Group 277.4 267.1
 Associates/others 191.3 127.7
 Key management personnel 85.7 139.1
 Relatives of key management personnel 0.4 0.3
 
Receivables 1,538.9 1,927.9
 Associates/others 1,538.9 1,927.9
 
Guarantees issued by the Group 63.1 59.0
 Associates/others 63.1 59.0

1.0.0 represents insignificant amount.

 

V.Related party maximum balances

 

The following table sets forth, for the periods indicated, the maximum balances payable to/receivable from related parties.

 

    Rs. in million
Items

Year ended

March 31, 2023

Year ended

March 31, 2022

Deposits with the Group
 Key management personnel 420.7 277.4

 

F-49

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Items

Year ended

March 31, 2023

Year ended

March 31, 2022

Relatives of key management personnel 266.6 176.5
Payables1
Key management personnel 0.4 0.1
Relatives of key management personnel 1.0 0.1
Investments of related parties in the Group1
Key management personnel 1.9 3.0
Relatives of key management personnel 0.3 2.5
Advances by the Group
Key management personnel 139.2 269.2
Relatives of key management personnel 2.3 1.9

1.Maximum balance is determined based on comparison of the total outstanding balances at each quarter end during the financial year.

 

3.Employee Stock Option Scheme (ESOS)

 

ICICI Bank:

 

In terms of the ESOS, as amended, the maximum number of options granted to any eligible employee in a financial year shall not exceed 0.05% of the issued equity shares of the Bank at the time of grant of the options and aggregate of all such options granted to the eligible employees shall not exceed 10.0% of the aggregate number of the issued equity shares of the Bank on the date(s) of the grant of options in line with SEBI Regulations. Under the stock option scheme, eligible employees are entitled to apply for equity shares. In April 2016, exercise period was modified from 10 years from the date of grant or five years from the date of vesting, whichever is later, to 10 years from the date of vesting. In June 2017, exercise period was further modified to not exceed 10 years from the date of vesting of options as may be determined by the Board Governance, Remuneration & Nomination Committee to be applicable for future grants. In May 2018, exercise period was further modified to not exceed 5 years from the date of vesting of options as may be determined by the Board Governance, Remuneration & Nomination Committee to be applicable for future grants.

 

Options granted after March 2014 vest in a graded manner over a three-year period with 30%, 30% and 40% of the grant vesting in each year, commencing from the end of 12 months from the date of grant other than certain options granted in April 2014 which vested to the extent of 50% on April 30, 2017 and the balance on April 30, 2018 and option granted in September 2015 which vested to the extent of 50% on April 30, 2018 and balance 50% vested on April 30, 2019. Options granted in January 2018 vested at the end of four years from the date of grant. Certain options granted in May 2018, vested to the extent of 50% on May 2021 and balance 50% on May 2022.

 

Options granted prior to March 2014 except mentioned below, vested in a graded manner over a four-year period, with 20%, 20%, 30% and 30% of the grants vesting in each year, commencing from the end of 12 months from the date of grant. Options granted in April 2009 vested in a graded manner over a five-year period with 20%, 20%, 30% and 30% of grant vesting each year, commencing from the end of 24 months from the date of grant. Options granted in September 2011 vested in a graded manner over a five-year period with 15%, 20%, 20% and 45% of grant vesting each year, commencing from the end of 24 months from the date of the grant.

 

The exercise price of the Bank’s options, except mentioned below, is the last closing price on the stock exchange, which recorded highest trading volume preceding the date of grant of options. In February 2011, the Bank granted 16,692,500 options to eligible employees and whole-time Directors of the Bank and certain of its subsidiaries at an exercise price of Rs.175.82. This exercise price was the average

 

F-50

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

closing price on the stock exchange during the six months ended October 28, 2010. Of these options granted, 50% vested on April 30, 2014 and the balance 50% vested on April 30, 2015.

 

The weighted average fair value, based on Black-Scholes model, of options granted during the year ended March 31, 2023 was Rs. 291.15 (year ended March 31, 2022: Rs. 227.75).

 

The following table sets forth, for the periods indicated, the key assumptions used to estimate the fair value of options granted.

 

Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Risk-free interest rate 5.99% to 7.37% 5.34% to 6.53%
Expected term 3.23 to 5.23 years 3.55 to 5.55 years
Expected volatility 34.79% to 38.98% 35.38% to 39.41%
Expected dividend yield 0.27% to 0.72% 0.18% to 0.30%

 

Risk free interest rates over the expected term of the option are based on the government securities yield in effect at the time of the grant. The expected term of an option is estimated based on the vesting term as well as expected exercise behavior of the employees who receive the option. Expected exercise behavior is estimated based on the historical stock option exercise pattern of the Bank. Expected volatility during the estimated expected term of the option is based on historical volatility determined based on observed market prices of the Bank's publicly traded equity shares. Expected dividends during the estimated expected term of the option are based on recent dividend activity.

 

The following table sets forth, for the periods indicated, the summary of the status of the Bank’s stock option plan.

 

  Rs. except number of options
Particulars Stock options outstanding
Year ended March 31, 2023 Year ended March 31, 2022
Number of options

Weighted average exercise price

(Rs. per share) 

Number of options

Weighted average exercise price

(Rs. per share) 

Outstanding at the beginning of the year 237,197,999 310.82  246,590,972 276.14
Add: Granted during the year 25,793,500 747.92 25,550,350 570.43
Less: Lapsed during the year, net of re-issuance 3,921,340 568.36 2,164,335 444.41
Less: Exercised during the year 34,044,356 276.72 32,778,988 243.44
Outstanding at the end of the year 225,025,803

361.60

 237,197,999

310.82

Options exercisable 172,938,533 289.69 177,170,739 264.69

 

The following table sets forth, the summary of stock options outstanding at March 31, 2023.

 

Range of exercise price

(Rs. per share)

Number of options

Weighted average exercise price

(Rs. per share)

Weighted average remaining contractual life (number of years)
60-199 7,202,993 160.84 1.85
200-399 145,129,078 267.52 4.37
400-599 48,347,432 479.32 4.15

 

F-51

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

Range of exercise price

(Rs. per share)

Number of options

Weighted average exercise price

(Rs. per share)

Weighted average remaining contractual life (number of years)
600-799 24,274,900 747.62 6.17
800-899 71,400 862.88 6.58

 

The following table sets forth, the summary of stock options outstanding at March 31, 2022.

 

Range of exercise price

(Rs. per share)

Number of options

Weighted average exercise price

(Rs. per share)

Weighted average remaining contractual life (Number of years)
60-199 11,245,113 160.69 2.52
200-399 171,000,375 267.10 5.30
400-599 54,887,211 477.26 5.11
600-799 46,300 737.63 6.63
800-899 19,000 810.25 6.92

 

The options were exercised regularly throughout the period and weighted average share price as per National Stock Exchange price volume data during the year ended March 31, 2023 was Rs. 832.00 (year ended March 31, 2022: Rs. 703.14).

 

ICICI Life:

 

ICICI Prudential Life Insurance Company has formulated ESOS for their employees. There is no compensation cost for the year ended March 31, 2023 based on the intrinsic value of options.

 

The following table sets forth, for the periods indicated, a summary of the status of the stock option plan of ICICI Prudential Life Insurance Company.

 

  Rs. except number of options
Particulars Stock options outstanding
Year ended March 31, 2023 Year ended March 31, 2022

Number

of options

Weighted average exercise price

(Rs. per share) 

Number

of options

Weighted average exercise price

(Rs. per share) 

Outstanding at the beginning of the year 20,184,630 404.87 17,175,700 389.25
Add: Granted during the year 5,227,730 541.00 5,061,600 453.05
Less: Forfeited/lapsed during the year 199,690 461.18 735,800 412.86
Less: Exercised during the year 1,270,555 384.94 1,316,870 381.95
Outstanding at the end of the year 23,942,115 435.18 20,184,630 404.87
Options exercisable 13,559,815 395.34 7,991,235 390.40

 

F-52

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

The following table sets forth, summary of stock options outstanding of ICICI Prudential Life Insurance Company at March 31, 2023.

 

Range of exercise price

(Rs. per share)

Number of options

Weighted average exercise price

(Rs. per share)

Weighted average remaining contractual life (number of years)
300-399 8,825,615   379.70   3.20
400-499 9,896,370  428.41   5.27
500-599 5,165,630 541.00   6.10
600-699 54,500   619.43   5.06

 

The following table sets forth, summary of stock options outstanding of ICICI Prudential Life Insurance Company at March 31, 2022.

 

Range of exercise price

(Rs. per share)

Number of options Weighted average exercise price (Rs. per share) Weighted average remaining contractual life (number of years)
300-399  10,048,090 379.99 4.20
400-499  10,076,540 428.40 6.30
600-699 60,000 620.05 6.80

 

ICICI Securities:

 

ICICI Securities Limited has formulated ESOS for their employees. There is no compensation cost for the year ended March 31, 2023 based on the intrinsic value of options.

 

The following table sets forth, for the periods indicated, a summary of the status of the stock option plan of ICICI Securities Limited.

 

F-53

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

  Rs. except number of options
Particulars Stock options outstanding

Year ended March 31, 2023

Year ended March 31, 2022

Number

of options

Weighted average exercise price (Rs. per share)

Number

of options

Weighted average exercise price (Rs. per share)
Outstanding at the beginning of the year 2,939,279 342.43 2,528,350 295.92
Add: Granted during the year 1,657,700 624.68 953,000 426.91
Less: Forfeited/lapsed during the year 263,980 514.77 93,000 389.72
Less: Exercised during the year 186,455 305.89 449,071 250.08
Outstanding at the end of the year 4,146,544 445.94 2,939,279 342.43
Options exercisable 1,588,294 306.03 2,041,139 305.12
         

The following table sets forth, summary of stock options outstanding of ICICI Securities Limited at March 31, 2023.

 

Range of exercise price

(Rs. per share)

Number of options Weighted average exercise price (Rs. per share)

Weighted average remaining contractual life

(number of years)

200-249 696,230 221.45 3.10
250-299 37,730 256.55 2.98
350-399 1,127,904 361.00 4.13
400-449 749,880 424.60 5.10
500-549 4,700 512.10 6.81
600-649 1,523,800 625.00 6.05
750-799 6,300 774.60 5.30

 

The following table sets forth, summary of stock options outstanding of ICICI Securities Limited at March 31, 2022.

 

Range of exercise price

(Rs. per share)

Number of options

 

Weighted average exercise price (Rs. per share)

Weighted average remaining contractual life

(number of years)

200-249 790,000 221.45 5.06
250-299 37,730 256.55 4.55
300-399 1,212,149 361.00 6.10
400-449 888,900 424.60 7.06
450-499 4,200 468.10 6.58
750-799 6,300 774.60 7.30

 

F-54

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

4.Fixed assets

 

The following table sets forth, for the periods indicated, the movement in software acquired by the Group, as included in fixed assets.

 

    Rs. in million
Particulars At March 31, 2023 At March 31, 2022
At cost at March 31 of preceding year 33,010.5 35,196.2
Less: Reduction on account of discontinuation of ICICI Lombard General Insurance Company Limited from consolidation .. (6,470.5)
Adjusted cost at March 31 of preceding year 33,010.5 28,725.7
Additions during the year 5,480.1 4,658.3
Deductions during the year (2,258.2) (373.5)
Depreciation to date (26,065.1) (24,086.0)
Net block 10,167.3 8,924.5

 

5.Assets on lease

 

5.1Assets taken under operating lease

 

Operating leases primarily comprise office premises which are renewable at the option of the Group.

 

(i) The following table sets forth, for the periods indicated, the details of liability for premises taken on non-cancellable operating leases.

 

    Rs. in million
Particulars At March 31, 2023 At March 31, 2022
Not later than one year 924.1  681.4
Later than one year and not later than five years 1,443.2  1,501.9
Later than five years 396.2  567.0
Total 2,763.5  2,750.3

 

The terms of renewal are those normally prevalent in similar agreements and there are no undue restrictions in the agreements.

 

(ii) Total of non-cancellable lease payments recognised in the profit and loss account for the year is Rs. 1,064.3 million (Year ended March 31, 2022 Rs. 993.4 million).

 

5.2Assets taken under finance lease

 

The following table sets forth, for the periods indicated, the details of assets taken on finance leases.

 

    Rs. in million
Particulars At March 31, 2023

At March 31,

2022

A.Total minimum lease payments outstanding    
Not later than one year 271.3 269.2
Later than one year and not later than five years 596.1 792.3
Later than five years 14.9 76.4
Total   882.3 1,137.9
B.Interest cost payable    

 

F-55

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars At March 31, 2023

At March 31,

2022

Not later than one year 70.0 92.5
Later than one year and not later than five years 83.3 146.8
Later than five years 0.5 3.8
Total 153.8 243.1
C.Present value of minimum lease payments payable(A-B)    
Not later than one year 201.3 176.7
Later than one year and not later than five years 512.8 645.5
Later than five years 14.4 72.6
Total 728.5 894.8

 

5.3Assets given under finance lease

 

The following table sets forth, for the periods indicated, the details of finance leases.

 

    Rs. in million
Particulars At March 31, 2023

At March 31,

2022

Future minimum lease receipts    
Present value of lease receipts 50.2 416.5
Unmatured finance charges 2.0 13.9
Sub total 52.2 430.4
Less: collective provision (0.2) (0.5)
Total 52.0 429.9
     
Maturity profile of future minimum lease receipts    
-   Not later than one year 19.0 237.8
-   Later than one year and not later than five years 33.2 192.6
-   Later than five years .. ..
Total 52.2 430.4
Less: collective provision (0.2) (0.5)
Total 52.0 429.9

 

Maturity profile of present value of lease rentals

 

The following table sets forth, for the periods indicated, the details of maturity profile of present value of finance lease receipts.

 

    Rs. in million
Particulars At March 31, 2023 At March 31, 2022
Maturity profile of future present value of finance lease receipts    
-   Not later than one year 17.7 229.6
-   Later than one year and not later than five years 32.5 186.9
-   Later than five years .. ..
Total 50.2 416.5

 

F-56

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

Less: collective provision (0.2) (0.5)
Total 50.0 416.0

 

6.Provisions and contingencies

 

The following table sets forth, for the periods indicated, the break-up of provisions and contingencies included in the profit and loss account.

 

    Rs. in million

Particulars

 

Year ended

March 31, 2023

Year ended

March 31, 2022

Provision for depreciation of investments  13,917.0  5,412.3
Provision towards non-performing and other assets (3,653.5)  63,775.2
Provision towards income tax    
- Current  114,564.4  74,044.5
- Deferred  3,370.0  10,529.9
Other provisions and contingencies1,2  59,135.7  20,579.0
Total provisions and contingencies  187,333.6  174,340.9

1.Includes contingency provision made amounting to Rs. 56,500.0 million made by the Bank on a prudent basis (March 31, 2022: write-back of provision of Rs. 250.0 million).

2.Includes general provision made towards standard assets, provision on fixed assets acquired under debt-asset swap and non-fund based facilities.

 

The Group has assessed its obligations arising in the normal course of business, including pending litigations, proceedings pending with tax authorities and other contracts including derivative and long-term contracts. In accordance with the provisions of Accounting Standard - 29 on ‘Provisions, Contingent Liabilities and Contingent Assets’, the Group recognises a provision for material foreseeable losses when it has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. In cases where the available information indicates that the loss on the contingency is reasonably possible or the amount of loss cannot be reasonably estimated, a disclosure to this effect is made as contingent liabilities in the financial statements. The Group does not expect the outcome of these proceedings to have a materially adverse effect on its financial results. For insurance contracts booked in its life insurance subsidiary, reliance has been placed on the Appointed Actuary for actuarial valuation of ‘liabilities for policies in force’. The Appointed Actuary has confirmed that the assumptions used in valuation of liabilities for policies in force are in accordance with the guidelines and norms issued by the IRDAI and the Institute of Actuaries of India in concurrence with the IRDAI.

 

During fiscal 2023, the Directorate General of GST Intelligence initiated an inquiry into goods and service tax (GST) credit availed on certain expenses incurred by the ICICI Prudential Life Insurance Company Ltd. (the Company).

 

Subsequently, in June 2023, the Company received show cause cum demand notice for Rs. 4,920.6 million from the Directorate General of GST Intelligence. The matter largely relates to an industry wide issue of input tax credit and the Company believes that it has availed eligible input GST credit in compliance with the provisions of the Central Goods and Service Tax Act, 2017 and other applicable laws. The Company is in the process of sending a response and will contest the matter.

 

F-57

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

7.Staff retirement benefits

 

Pension

 

The following tables set forth, for the periods indicated, movement of the present value of the defined benefit obligation, fair value of plan assets and other details for pension benefits.

 

    Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Opening obligations  18,661.0 20,265.6
Service cost  151.7 204.6
Interest cost  1,150.6 1,145.3
Actuarial (gain)/loss  758.2 (546.5)
Liabilities extinguished on settlement (2,192.6) (2,289.8)
Benefits paid (99.8) (118.2)
Obligations at the end of year 18,429.1 18,661.0
     
Opening plan assets, at fair value 19,843.3 21,162.2
Expected return on plan assets 1,522.0 1,620.7
Actuarial gain/(loss) (682.0) (331.9)
Assets distributed on settlement (2,436.2) (2,544.2)
Contributions 42.9 54.7
Benefits paid (99.8) (118.2)
Closing plan assets, at fair value 18,190.2 19,843.3
     
Fair value of plan assets at the end of the year 18,190.2 19,843.3
Present value of the defined benefit obligations at the end of the year

(18,429.1)

(18,661.0)

Amount not recognised as an asset (limit in Para 59(b) of AS 15 on ‘employee benefits’)

..

(401.9)

Asset/(liability) (238.9) 780.4
     
Cost1    
Service cost 151.7 204.6
Interest cost 1,150.6 1,145.3
Expected return on plan assets (1,522.0) (1,620.7)
Actuarial (gain)/loss 1,440.2 (214.6)
Curtailments & settlements (gain)/loss 243.6 254.4
Effect of the limit in para 59(b) of AS 15 on ‘employee benefits’ (401.9)

97.1

Net cost 1,062.2 (133.9)
     
Actual return on plan assets 840.0 1,288.8
Expected employer’s contribution next year 1,000.0 2,000.0
     

 

F-58

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Investment details of plan assets    
Government of India securities 41.74% 46.69%
Corporate bonds 48.30% 46.45%
Equity securities in listed companies 7.08% 6.46%
Others 2.88% 0.40%
     
Assumptions    
Discount rate 7.30% 6.30%
Salary escalation rate:    
On Basic pay 1.50% 1.50%
On Dearness relief 8.00% 7.00%
Estimated rate of return on plan assets 7.50% 7.50%

1. Included in line item ‘Payments to and provision for employees’ of Schedule 16- Operating expenses.

 

Estimated rate of return on plan assets is based on the expected average long-term rate of return on investments of the Fund during the estimated term of the obligations.

 

Experience adjustment

 

        Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Year ended

March 31, 2021

Year ended

March 31, 2020

Year ended

March 31, 2019

Plan assets 18,190.2 19,843.3 21,162.2 16,972.1 15,438.8
Defined benefit obligations

(18,429.1)

(18,661.0)

(20,265.6) (19,914.3) (16,540.3)
Amount not recognised as an asset (limit in para 59(b) of AS 15 on ‘employee benefits’)

..

(401.9)

(304.8) .. ..
Surplus/(deficit) (238.9) 780.4 591.8 (2,942.2) (1,101.5)
Experience adjustment on plan assets

(682.0)

(331.9)

521.9 741.1 (125.9)
Experience adjustment on plan liabilities

805.8

809.0

613.4 2,186.1 1,038.6

 

Gratuity

 

The following table sets forth, for the periods indicated, movement of the present value of the defined benefit obligation, fair value of plan assets and other details for gratuity benefits of the Group.

 

    Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Opening obligations 16,895.1  16,954.5

 

F-59

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Add: Adjustment for exchange fluctuation on opening obligation 12.2  6.0
Less: Adjustment1 .. (1,037.6)
Adjusted opening obligations 16,907.3 15,923.1
Service cost  1,643.8 1,581.7
Interest cost  1,166.7 1,058.8
Actuarial (gain)/loss  1,108.1 (114.1)
Past service cost  (72.2) ..
Liability transferred from/to other companies 21.9 (0.1)
Benefits paid (1,877.8) (1,554.3)
Obligations at the end of the year 18,896.8 16,895.1
 
Opening plan assets, at fair value 16,738.3  16,541.6
Less: Adjustment1 ..  (1,080.6)
Adjusted opening plan assets at fair value 16,738.3  15,461.0
Expected return on plan assets  1,197.7  1,116.6
Actuarial gain/(loss)  (577.3)  (33.1)
Contributions  1,544.4  1,748.2
Assets transferred from/to other companies  36.5  (0.1)
Benefits paid  (1,877.8)  (1,554.3)
Closing plan assets, at fair value  17,061.6  16,738.3
 
Fair value of plan assets at the end of the year 17,061.6 16,738.3
Present value of the defined benefit obligations at the end of the year (18,896.8)

(16,895.1)

Amount not recognised as an asset (limit in para 59(b) of AS 15 on ‘employee benefits’) .. ..
Asset/(liability) (1,835.2) (156.8)
 
Cost2    
Service cost  1,643.8  1,581.7
Interest cost  1,166.7  1,058.8
Expected return on plan assets  (1,197.7) (1,116.6)
Actuarial (gain)/loss  1,685.4  (81.0)
Past service cost  (72.2)  ..
Exchange fluctuation loss/(gain)  12.2 6.0
Amount not recognised as an asset (limit in para 59(b) of AS 15 on ‘employee benefits’) .. ..
Net cost 3,238.2 1,448.9
     
Actual return on plan assets  620.4  1,083.4
Expected employer’s contribution next year  1,731.0  1,030.0
 
Investment details of plan assets    
Insurer managed funds 9.97% 18.88%
Government of India securities 30.07% 23.76%
Corporate bonds 42.87% 38.90%

 

F-60

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Special Deposit schemes .. ..
Equity 15.04% 16.75%
Others 2.05% 1.71%
     
Assumptions    
Discount rate  7.30%-7.50%  5.80%-7.30%
Salary escalation rate  7.00%-10.00%  7.00%-10.00%
Estimated rate of return on plan assets  7.00%-8.00%  7.00%-8.00%

1. Represents reduction on account of discontinuation of ICICI Lombard Insurance Company Limited from Consolidation.

2. Included in line item ‘Payments to and provision for employees’ of Schedule 16- Operating expenses.

 

Estimated rate of return on plan assets is based on the expected average long-term rate of return on investments of the Fund during the estimated term of the obligations.

 

Experience adjustment

 

        Rs. in million
Particulars

Year ended

March 31, 2023

Year ended  

March 31, 2022

Year ended  

March 31, 2021

Year ended

March 31, 2020

Year ended

March 31, 2019

Plan assets  17,061.6  16,738.3  16,541.6  13,636.8  12,112.4
Defined benefit obligations  (18,896.8) (16,895.1) (16,954.5) (15,743.6) (13,317.1)
Amount not recognised as an asset (limit in para 59(b) of AS 15 on ‘employee benefits’) .. .. ..  .. ..
Surplus/(deficit) (1,835.2) (156.8) (412.9) (2,106.8) (1,204.7)
Experience adjustment on plan assets

(577.3)

(33.1)

892.1

(167.4)

(62.0)
Experience adjustment on plan liabilities

869.4

464.7

(548.2)

253.6

243.7

 

The estimates of future salary increases, considered in actuarial valuation, take into consideration inflation, seniority, promotion and other relevant factors.

 

Provident Fund (PF)

 

The Group does not have any liability towards interest rate guarantee on exempt provident fund on the basis of actuarial valuation at March 31, 2023 (March 31, 2022: Nil).

 

The following tables set forth, for the periods indicated, movement of the present value of the defined benefit obligation, fair value of plan assets and other details for provident fund of the Group.

 

F-61

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Opening obligations  49,411.5 45,617.9
Less: Adjustments1  (655.3) (711.1)
Adjusted opening balance  48,756.2 44,906.8
Service cost  2,747.6 2,202.0
Interest cost  3,367.1 2,947.1
Actuarial (gain)/loss  1,032.8 (15.9)
Employees contribution  4,707.4 4,049.0
Liability transferred from/to other companies  805.2 546.1
Benefits paid  (6,048.6) (5,223.6)
Obligations at end of the year  55,367.7 49,411.5
     
Opening plan assets  50,656.3 45,615.2
Less: Adjustments1  (407.5) (708.4)
Adjusted opening balance  50,248.8 44,906.8
Expected return on plan assets  4,100.3 3,761.0
Actuarial gain/(loss)  (432.8) 415.0
Employer contributions  2,747.6 2,202.0
Employees contributions  4,707.4 4,049.0
Assets transfer from/to other companies  805.4 546.1
Benefits paid  (6,048.6) (5,223.6)
Closing plan assets  56,128.1 50,656.3
Plan assets at the end of the year 56,128.1 50,656.3
Present value of the defined benefit obligations at the end of the year (55,367.7)

(49,411.5)

Amount not recognised as an asset (limit in para 59(b) of AS-15 on ‘employee benefits’)2 (760.4) (1,244.8)
Asset/(liability) .. ..
     
Cost3    
Service cost  2,747.6 2,202.0
Interest cost  3,367.1 2,947.1
Expected return on plan assets  (4,100.3) (3,761.0)
Actuarial (gain)/loss  1,465.6 (430.9)
Effect of limit in para 59(b)2  (732.4) 1,244.8
Net cost  2,747.6 2,202.0
     
Actual return on plan assets  3,667.5  4,176.0
Expected employer's contribution next year  2,965.9  2,357.2
     
Investment details of plan assets    
Government of India securities 55.20% 53.56%

 

F-62

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars

Year ended

March 31, 2023

Year ended

March 31, 2022

Corporate Bonds 34.83% 35.56%
Special deposit scheme 0.96% 1.07%
Others 9.01% 9.81%
     
Assumptions    
Discount rate 7.35%-7.40% 6.00%-6.85%
Expected rate of return on assets 7.97%-8.76% 7.54%-8.25%
Discount rate for the remaining term to maturity of investments 7.40%-7.60%

6.75%-7.15%

Average historic yield on the investment 8.01%-8.96% 8.25%-8.87%
Guaranteed rate of return 8.15%-8.15% 8.10%-8.10%

1.   a. During the year ended March 31, 2023, ICICI Home Finance Company Limited realised and transferred assets and liabilities of Employee Provident Fund Trust to Central Provident Fund.

b. During the year ended March 31, 2022, ICICI Venture Funds Management Company Limited realised and transferred assets and liabilities of Employee Provident Fund Trust to Central Provident Fund.

2.  Pursuant to revised Guidance Note 29 on “Valuation of Interest Rate Guarantees on Exempt Provident Funds under AS 15 (Revised)” issued by ‘Institute of Actuaries of India’ on February 16, 2022, plan assets held by PF Trust have been fair valued. The amount represents the fair value gain on plan assets.

3.   Included in line item ‘Payments to and provision for employees’ of Schedule 16- Operating expenses.

 

Experience adjustment

 

Rs. in million

Particulars

Year

ended March

31, 2023

Year

ended March

31, 2022

Year

ended March

31, 2021

Year

ended

March

31, 2020

Year

ended

March

31, 2019

Plan assets 56,128.1 50,656.3  45,615.2  38,682.6  33,282.4
Defined benefit obligations

(55,367.7)

(49,411.5)

(45,617.9) (38,703.4) (33,282.4)
Amount not recognised as an asset (limit in para 59(b)) AS 15 on ‘employee benefits’)1

(760.4)

(1,244.8)

.. .. ..
Surplus/(deficit) .. .. (2.7) (20.8) ..
Experience adjustment on plan assets (432.8)

415.1

663.8 (662.0) 13.0
Experience adjustment on plan liabilities 753.2

(684.8)

1,703.3 (129.9) 447.4

1. Pursuant to revised Guidance Note 29 on “Valuation of Interest Rate Guarantees on Exempt Provident Funds under AS 15 (Revised)” issued by ‘Institute of Actuaries of India’ on February 16, 2022, plan assets held by PF Trust have been fair valued. The amount represents the fair value gain on plan assets.

 

The Group has contributed Rs. 4,344.2 million to provident fund including Government of India managed employees provident fund for the year ended March 31, 2023 (year ended March 31, 2022: Rs. 4,018.3 million), which includes compulsory contribution made towards employee pension scheme under Employees Provident Fund and Miscellaneous Provisions Act, 1952.

 

F-63

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

Superannuation Fund

 

The Group has contributed Rs. 321.8 million for the year ended March 31, 2023 (year ended March 31, 2022: Rs. 274.0 million) to Superannuation Fund for employees who had opted for the scheme.

 

National Pension Scheme (NPS)

 

The Group has contributed Rs. 361.1 million for the year ended March 31, 2023 (year ended March 31, 2022: Rs. 291.8 million) to NPS for employees who had opted for the scheme.

 

Compensated absence

 

The following table sets forth, for the periods indicated, cost for compensated absence.

 

    Rs. in million
Particulars Year ended March 31, 2023 Year ended March 31, 2022
Total actuarial liability  3,629.6  3,616.9
Cost1  884.9  874.9
Assumptions    
Discount rate 7.30%-7.55% 5.80%-7.30%
Salary escalation rate 7.00%-10.00% 7.00%-10.00%

1.Included in line item ‘Payments to and provision for employees’ of schedule- 16 Operating expenses.

 

8.Provision for income tax

 

The provision for income tax (including deferred tax) for the year ended March 31, 2023 amounted to Rs. 117,934.4 million (year ended March 31, 2022: Rs. 84,574.4 million).

 

The Group has a comprehensive system of maintenance of information and documents required by transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. The management is of the opinion that all transactions with international related parties and specified transactions with domestic related parties are primarily at arm's length so that the above legislation does not have material impact on the financial statements.

 

9.Deferred tax

 

At March 31, 2023, the Group has recorded net deferred tax asset of Rs. 76,194.4 million (March 31, 2022: Rs. 79,484.8 million), which has been included in other assets.

 

The following table sets forth, for the periods indicated, the break-up of deferred tax assets and liabilities into major items.

 

    Rs. in million
Particulars At  March 31,2023 At  March 31,2022
Deferred tax assets    
Provision for bad and doubtful debts  104,780.1  105,637.7
Provision for operating expenses  4,026.9 ..
Others  11,096.4  11,024.8
Total deferred tax assets  119,903.4 116,662.5

 

F-64

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Particulars At  March 31,2023 At  March 31,2022
Deferred tax liabilities    
Special reserve deduction  37,695.4  31,118.6
Foreign currency translation reserve1  615.0  1,245.6
Mark-to-market gains1  490.0  278.6
Depreciation on fixed assets  4,476.7  4,093.8
Interest on refund of taxes1  206.2  168.4
Others  225.7  272.7
Total deferred tax liabilities  43,709.0  37,177.7
Total net deferred tax assets/(liabilities)  76,194.4  79,484.8

1.These items are considered in accordance with the requirements of Income Computation and Disclosure Standards (ICDS).

 

10.Information about business and geographical segments

 

A.Business Segments

 

Pursuant to the guidelines issued by RBI on AS 17 – Segment Reporting, the following business segments of the Group have been reported

 

i.Retail banking includes exposures of the Bank which satisfy the four criteria of orientation, product, granularity and low value of individual exposures for retail exposures laid down in Basel Committee on Banking Supervision (BCBS) document “International Convergence of Capital Measurement and Capital Standards: A Revised Framework”. This segment also includes income from credit cards, debit cards, third party product distribution and the associated costs.

 

ii.Wholesale banking includes all advances to trusts, partnership firms, companies and statutory bodies, by the Bank which are not included under Retail banking.

 

iii.Treasury primarily includes the entire investment and derivative portfolio of the Bank

 

iv.Other banking includes leasing operations and other items not attributable to any particular business segment of the Bank. Further, it includes the Bank’s banking subsidiaries i.e. ICICI Bank UK PLC and ICICI Bank Canada.

 

v.Life insurance represents results of ICICI Prudential Life Insurance Company Limited.

 

vi.Others includes ICICI Home Finance Company Limited, ICICI Venture Funds Management Company Limited, ICICI International Limited, ICICI Securities Primary Dealership Limited, ICICI Securities Limited, ICICI Securities Holdings Inc., ICICI Securities Inc., ICICI Prudential Asset Management Company Limited, ICICI Prudential Trust Limited, ICICI Investment Management Company Limited, ICICI Trusteeship Services Limited and ICICI Prudential Pension Funds Management Company Limited.

 

vii.Unallocated includes items such as tax paid in advance, net of provision, deferred tax and provisions to the extent reckoned at the entity level.

 

F-65

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated to segments on a systematic basis.

 

All liabilities of the Bank are transfer priced to a central treasury unit, which pools all funds and lends to the business units at appropriate rates based on the relevant maturity of assets being funded after adjusting for regulatory reserve requirements.

 

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are determined based on the transfer pricing mechanism prevailing for the respective reporting periods.

 

F-66

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

The following table sets forth, the business segment results for the year ended March 31, 2023.

 

                  Rs. in million
Sr. no. Particulars Retail banking Wholesale banking Treasury Other banking business Life insurance Others Inter- segment adjustments Total
1 Revenue 1,037,753.4 506,148.5 845,369.2 44,640.0 479,301.7 97,259.8 (1,148,684.6) 1,861,788.0
2 Segment results1 175,336.8 157,857.8 140,372.1 10,014.5 8,968.9 42,023.7 (15,509.2) 519,064.6
3 Unallocated expenses               56,500.0
4 Share of profit from associates               9,982.9
5 Operating profit (2) – (3)+(4)1               472,547.5
6 Income tax expenses (net)/(net deferred tax credit)               117,934.4
7

Net profit2

(5) – (6)

              354,613.1
  Other information                
8 Segment assets 6,039,593.7 4,328,743.5 5,129,405.0 836,960.5 2,556,899.0 711,348.4 (114,612.3) 19,488,337.8
9 Unallocated assets               96,567.2
10

Total assets

(8) + (9)

              19,584,905.0
11 Segment liabilities 8,913,545.4 3,472,764.9 3,344,275.63 564,779.63 2,558,472.03 714,679.83 (114,612.3)3 19,453,905.0
12 Unallocated liabilities               131,000.0
13

Total liabilities

(11) + (12)

              19,584,905.0
14 Capital expenditure 11,682.9 5,251.8 610.6 455.2 1,357.0 1,884.8 .. 21,242.3
15 Depreciation 9,274.5 3,427.2 335.8 405.2 835.1 884.2 (16.4) 15,145.6

1.Profit before tax and minority interest.

2.Includes share of net profit of minority shareholders.

3.Includes share capital and reserves and surplus.

 

F-67

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

The following table sets forth, the business segment results for the year ended March 31, 2022.

 

                  Rs. in million
Sr. no. Particulars Retail banking Wholesale banking Treasury Other banking business Life insurance Others Inter- segment adjustments Total
1 Revenue 846,392.2 399,714.9 673,210.9 27,784.1 453,402.4 87,332.5 (912,473.8) 1,575,363.2
2 Segment results1 114,003.9 90,529.3 96,744.8 6,271.2 7,905.6 43,499.9 (16,792.0) 342,162.7
3 Unallocated expenses               (250.0)
4 Share of profit from associates               7,544.3
5 Operating profit (2) – (3)+(4)1               349,957.0
6 Income tax expenses (net)/(net deferred tax credit)               84,574.4
7

Net profit2

(5) – (6)

              265,382.6
  Other information                
8 Segment assets 4,876,519.3 3,790,918.0 5,218,960.9 682,866.9 2,440,064.2 516,534.8 (105,216.9) 17,420,647.2
9 Unallocated assets               105,726.6
10

Total assets

(8) + (9)

              17,526,373.8
11 Segment liabilities 7,918,942.5 3,213,907.0 2,933,413.93 541,143.13 2,441,543.23 520,286.43 (105,216.9)3 17,464,019.2
12 Unallocated liabilities               62,354.6
13

Total liabilities

(11) + (12)

              17,526,373.8
14 Capital expenditure 9,901.7 4,453.3 623.1 345.7 732.3 943.8 .. 16,999.9
15 Depreciation 8,068.8 3,130.8 399.6 321.9 669.1 726.3 (16.4) 13,300.1

1.Profit before tax and minority interest.

2.Includes share of net profit of minority shareholders.

3.Includes share capital and reserves and surplus.

 

F-68

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

B. Geographical segments

 

The Group reports its operations under the following geographical segments.

 

Domestic operations comprise branches and subsidiaries/joint ventures in India.

 

Foreign operations comprise branches and subsidiaries/joint ventures outside India and offshore banking units in India.

 

The Group conducts transactions with its customers on a global basis in accordance with their business requirements, which may span across various geographies.

 

The following tables set forth, for the periods indicated, the geographical segment results.

 

    Rs. in million
Revenue

Year ended

March 31, 2023

Year ended

March 31, 2022

Domestic operations1  1,819,445.3 1,550,493.6
Foreign operations  52,325.6 32,413.9
Total  1,871,770.9 1,582,907.5

1.Includes share of profit from associates of Rs. 9,982.9 million (March 31, 2022: Rs.7,544.3 million).

 

    Rs. in million
Assets

At

March 31, 2023

At

March 31, 2022

Domestic operations  18,242,212.3 16,060,154.4
Foreign operations 1,246,125.5 1,360,492.8
Total 19,488,337.8 17,420,647.2

Note: Segment assets do not include tax paid in advance/tax deducted at source (net) and deferred tax assets (net).

 

The following table sets forth, for the periods indicated, capital expenditure and depreciation thereon for the geographical segments.

 

    Rs. in million
  Capital expenditure incurred during the Depreciation provided during the
 

Year ended

March 31, 2023

Year ended

March 31, 2022

Year ended

March 31, 2023

Year ended

March 31, 2022

Domestic operations 20,914.1 16,765.8 14,867.2 13,012.5
Foreign operations 328.2 234.1 278.4 287.6
Total 21,242.3 16,999.9 15,145.6 13,300.1

 

11.   Penalties/fines imposed by banking regulatory bodies

 

There was no penalty imposed by RBI and other overseas banking regulatory bodies during the year ended March 31, 2023 (year ended March 31, 2022: Rs. 33.0 million).

 

12.   Additional information to consolidated accounts

 

Additional information to consolidated accounts at March 31, 2023 (Pursuant to Schedule III of the Companies Act, 2013)

 

F-69

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Name of the entity Net assets1 Share in profit or loss
 

% of total

net assets

Amount

% of total

net profit

Amount
Parent        
ICICI Bank Limited 93.6%  2,007,153.8 93.7%  318,965.0
         
Subsidiaries        
Indian        
ICICI Securities Primary Dealership Limited 0.7%  15,815.5 0.4%  1,277.8
ICICI Securities Limited 1.3%  28,219.2 3.3%  11,334.7
ICICI Home Finance Company Limited 1.1%  22,998.6 1.1%  3,653.1
ICICI Trusteeship Services Limited 0.0%2  8.7   0.0%2  0.1  
ICICI Investment Management Company Limited 0.0%2  187.0 (0.0%)2  (58.7)
ICICI Venture Funds Management Company Limited 0.1%  2,473.3 0.0%2  61.9
ICICI Prudential Life Insurance Company Limited 4.7%  100,915.8 2.4%  8,106.6
ICICI Prudential Trust Limited 0.0%2  16.9 0.0%2  2.2
ICICI Prudential Asset Management Company Limited 1.0%  21,478.8 4.4%  15,077.0
ICICI Prudential Pension Funds Management Company Limited 0.0%2  577.5 0.0%2  28.3
Foreign        
ICICI Bank UK PLC 1.2%  26,158.3 0.3%  1,045.9
ICICI Bank Canada 1.2%  25,256.2 0.8%  2,818.9
ICICI International Limited 0.0%2  122.0 0.0%2  8.9
ICICI Securities Holdings Inc. 0.0%2  132.7 0.0%2  2.0
ICICI Securities Inc. 0.0%2  364.8   0.0%2  58.3
         
Other consolidated entities        
Indian        
ICICI Strategic Investments Fund 0.0%2  119.4 0.0%2  3.7
Foreign        
NIL .. .. .. ..
         
Minority Interests (3.1%) (66,867.5) (4.2%)  (14,246.7)
         
Associates        
Indian        
ICICI Lombard General Insurance Company Limited ..  .. 2.4%  8,303.1
I-Process Services (India) Private Limited ..  .. 0.0%2  37.7  
NIIT Institute of Finance Banking and Insurance Training Limited ..  .. 0.0%2  3.3   

 

F-70

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Name of the entity Net assets1 Share in profit or loss
 

% of total

net assets

Amount

% of total

net profit

Amount
ICICI Merchant Services Private Limited ..  .. 0.0%2  63.0
India Infradebt Limited ..  .. 0.5%  1,560.2
India Advantage Fund III ..  .. 0.0%2  0.02
India Advantage Fund IV ..  .. (0.0%)2  (0.2)
Arteria Technologies Private Limited ..  .. 0.0%2  15.7
Foreign        
NIL .. .. .. ..
         
Joint Ventures        
NIL .. .. .. ..
         
Inter-company adjustments (1.8%) (40,153.1) (5.1%)  (17,755.4)
         
TOTAL 100.0%  2,144,977.9 100.0%  340,366.4

1. Total assets minus total liabilities.

2. 0.0 represents insignificant amount.

 

Additional information to consolidated accounts at March 31, 2022 (Pursuant to Schedule III of the Companies Act, 2013)

 

    Rs. in million
Name of the entity Net assets1 Share in profit or loss
  % of total net assets Amount % of total net profit Amount
Parent        
ICICI Bank Limited 93.7%  1,705,119.7 92.9%  233,394.9
         
Subsidiaries        
Indian        
ICICI Securities Primary Dealership Limited 0.9%  15,897.8 1.3%  3,301.6
ICICI Securities Limited 1.3%  24,087.2 5.6%  13,948.1
ICICI Home Finance Company Limited 0.9%  17,038.1 0.4%  934.4
ICICI Trusteeship Services Limited 0.0%2  8.6 0.0%2  0.5
ICICI Investment Management Company Limited 0.0%2  95.8 0.0%2  12.8
ICICI Venture Funds Management Company Limited 0.1%  2,461.3   0.0%2  2.2
ICICI Prudential Life Insurance Company Limited 5.0%  91,630.6   3.0%  7,541.3
ICICI Prudential Trust Limited 0.0%2  17.7 0.0%2  3.7
ICICI Prudential Asset Management Company Limited 1.0%  18,599.4 5.7%  14,363.4

 

F-71

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

    Rs. in million
Name of the entity Net assets1 Share in profit or loss
 

% of total

net assets

Amount

% of total

net profit

Amount
ICICI Prudential Pension Funds Management Company Limited 0.0%2  549.2 0.0%2  50.7
Foreign        
ICICI Bank UK PLC 1.3%  23,940.8 0.3%  812.2
ICICI Bank Canada 1.3%  23,436.9 0.7%  1,737.3
ICICI International Limited 0.0%2  104.1 0.0%2  0.8
ICICI Securities Holdings Inc. 0.0%2  130.8 0.0%2  0.3
ICICI Securities Inc. 0.0%2  303.8 0.0%2  30.0
         
Other consolidated entities        
Indian        
ICICI Strategic Investments Fund 0.0%2  112.1 0.2%  535.9
Foreign        
NIL .. .. .. ..
         
Minority Interests (3.3%) (59,808.9) (5.7%)  (14,281.6)
         
Associates        
Indian        
ICICI Lombard General Insurance Company Limited .. .. 2.4%  6,106.5
I-Process Services (India) Private Limited .. .. 0.0%2  34.3
NIIT Institute of Finance Banking and Insurance Training Limited .. .. 0.0%2  2.3  
ICICI Merchant Services Private Limited .. .. (0.0%)2  (4.6)
India Infradebt Limited .. .. 0.6%  1,396.5
India Advantage Fund III .. .. (0.0%)2  (0.2)
India Advantage Fund IV .. .. (0.0%)2  (2.4)
Arteria Technologies Private Limited .. .. 0.0%2  12.0
Foreign        
NIL .. .. .. ..
         
Joint Ventures        
NIL .. .. .. ..
         
Inter-company adjustments (2.2%) (43,200.1) (7.4%)  (18,831.9)
         
TOTAL 100.0%  1,820,524.9 100.0%  251,101.0

1. Total assets minus total liabilities.

2. Insignificant.

 

F-72

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

13.   Revaluation of fixed assets

 

The Bank and its housing finance subsidiary follows the revaluation model for their premises (land and buildings) other than improvements to leasehold property as per AS 10 – ‘Property, Plant and Equipment’. The Bank had initially revalued its premises at March 31, 2016 and its housing finance subsidiary revalued its premises at March 31, 2017. In accordance with the policy, annual revaluation is carried out through external valuers, using methodologies such as direct sales comparison method and income generation method and the incremental amount has been taken to revaluation reserve. The revalued amount at March 31, 2023 was Rs. 55,500.0 million (March 31, 2022: Rs. 58,090.8 million) as compared to the historical cost less accumulated depreciation of Rs. 24,581.6 million (March 31, 2022: Rs. 25,805.8 million).

 

The revaluation reserve is not available for distribution of dividend.

 

14.   Proposed dividend on equity shares

 

The Board of Directors at its meeting held on April 22, 2023 has recommended a dividend of Rs. 8.00 per equity share for the year ended March 31, 2023 (year ended March 31, 2022: Rs. 5.00 per equity share). The declaration and payment of dividend is subject to requisite approvals.

 

15.   Divergence in asset classification and provisioning for NPAs

 

In terms of the RBI circular no. //DBR.BP.BC.No.32/21.04.018/2018-19 dated April 1, 2019, banks are required to disclose the divergences in asset classification and provisioning consequent to RBI’s annual supervisory process in their notes to accounts to the financial statements, wherever either (a) the additional provisioning requirements assessed by RBI exceed 10% of the reported net profits before provisions and contingencies or (b) the additional gross NPAs identified by RBI exceed 15% of the published incremental gross NPAs for the reference period, or both. Based on the condition mentioned in RBI circular, no disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBI’s supervisory process for the year ended March 31, 2022 and for the year ended March 31, 2021.

 

16.   Disclosure on lending and borrowing activities under Rule 11(e) of the Companies (Audit and Auditors) Rules, 2014

 

The Bank, as part of its normal banking business, grants loans and advances, makes investment, provides guarantees to and accept deposits and borrowings from its customers, other entities and persons. These transactions are part of Bank’s normal banking business, which is conducted ensuring adherence to all regulatory requirements.

 

Other than the transactions described above, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank and other subsidiaries incorporated in India to or in any other persons or entities, including foreign entities (“Intermediaries”) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Bank and other subsidiaries incorporated in India (Ultimate Beneficiaries). The Bank and other subsidiaries incorporated in India have also not received any fund from any parties (Funding Party) with the understanding that the Bank and other subsidiaries incorporated in India shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

 

F-73

ICICI Bank Limited and subsidiaries

 

Schedules forming part of the Consolidated Financial Statements (Continued)

 

17.   Other disclosures

 

Additional statutory information disclosed in the separate financial statements of the Bank and subsidiaries having no material bearing on the true and fair view on the consolidated financial statements and the information pertaining to the items which are not material have not been disclosed in the consolidated financial statements.

 

18.   Comparative figures

 

Figures of the previous year have been re-grouped to conform to the current year presentation.

 

F-74

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

B. Additional Notes

 

1.          Reserves

 

Statutory reserve: Represents reserve created as a percentage of the net profit before any other appropriation as required by the Banking Regulation Act, 1949. Every banking company in India is currently required to transfer not less than 25% of the net profit (before appropriations) to the statutory reserve.

 

Special reserve: Represents reserve maintained under the Income Tax Act, 1961 to avail tax benefits.

 

Securities premium: Represents amount of premium received on issue of share capital, net of expenses incurred on issue of shares.

 

Investment reserve account: Represents provision for depreciation on available for sale and held for trading securities in excess of required amount which is credited to profit and loss account and appropriated to this reserve, net of tax and transfer to statutory reserve.

 

Investment fluctuation reserve: Represents appropriation of net gains on sale of securities classified as available for sale and held for trading, or net profit after mandatory appropriations to other reserves, whichever is lower, until the amount of this reserve is at least 2% of held for trading and available for sale portfolio. Balance in investment fluctuation reserve in excess of 2% of held for trading and available for sale portfolio can be drawn down and transferred to balance in profit and loss account.

 

Unrealized investment reserve: Represents unrealized gains/losses on investments of consolidated venture capital funds.

 

Capital reserve: Represents amount of gains on sale of securities classified as held to maturity and gains on sale of land and building, net of tax and transfer to statutory reserve.

 

Capital redemption reserve: Represents appropriations made from the surplus profit available for previous years on redemption of preference shares by the Bank, as required under the Companies Act, 2013.

 

Foreign currency translation reserve: Represents cumulative exchange differences arising from translation of financial statements of non-integral foreign operations.

 

Revaluation reserve: Represents reserve on revaluation of premises carried out by the Group.

 

Revenue and other reserves: Represents reserves other than capital reserves and those separately classified.

 

Balance in profit and loss account: Represents the balance of profit after appropriations.

 

F-75

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

2.          Deposits

 

Deposits include current account deposits, which are non-interest bearing, savings account deposits and time deposits, which are interest bearing.

 

The following table sets forth the residual contractual maturities of time deposits at March 31, 2023.

 

   Rupees in million
    
Deposits maturing during the year ending March 31,     
2024   4,341,122.6 
2025   1,386,451.5 
2026   441,407.8 
2027   184,018.5 
2028   187,887.7 
Thereafter    60,806.7 
Total time deposits    6,601,694.8 

 

At March 31, 2023, the aggregate of time deposits with individual balances greater than Rs. 5.0 million was Rs. 3,270,106.4 million (March 31, 2022: Rs. 2,789,181.9 million).

 

3.          Long-term debt

 

Long-term debt represents debt with an original contractual maturity of greater than one year. Maturity distribution is based on contractual maturity or the date at which the debt is callable at the option of the holder, whichever is earlier. A portion of the long-term debt bears a fixed rate of interest. Interest rates on floating-rate debt are generally linked to the London Inter-Bank Offer Rate, Secured Overnight Financing Rate or similar money market rates. The segregation between fixed-rate and floating-rate obligations is based on the contractual terms.

 

The following table sets forth a listing of long-term debt at March 31, 2023, by maturity and interest rate profile. 

 

      Rupees in million
   Fixed-rate obligations 

Floating-rate

obligations

  Total
Long-term debt maturing during the year ending March 31,               
2024    313,820.4    22,214.2    336,034.6 
2025    225,366.0    24,440.8    249,806.8 
2026    206,474.9    15,636.2    222,111.1 
2027    106,183.3    20,837.9    127,021.2 
2028    76,034.4    16,281.5    92,315.9 
Thereafter    279,234.5    6,903.5    286,138.0 
Total    1,207,113.5    106,314.1    1,313,427.6 
Less: Unamortized debt issue costs              (1,031.1)
Total              1,312,396.5 

 

Long-term debt is denominated in various currencies. At March 31, 2023, long-term debt comprises Indian rupee debt of Rs. 1,021,393.3 million (March 31, 2022: Rs. 832,170.3 million) and foreign currency debt of Rs. 291,003.2 million (March 31, 2022: Rs. 365,027.8 million).

 

F-76

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Indian rupee debt

 

The following tables set forth, for the periods indicated, a listing of major categories of Indian rupee debt.

 

  Rupees in million
Category  At March 31, 2023
  Amount 

Weighted

average

interest

rate

  Range 

Weighted

average

residual

maturity

(in years)

Bonds issued to institutional/individual investors    611,519.7   7.7%   5.1% to 14.1%   4.4 
Refinance from financial institutions    337,330.8   5.9%   2.8% to 8.4%  1.2 
Borrowings from other banks    40,505.5   8.1%   7.7% to 9.0%  6.2 
Fixed deposits    32,037.3   6.9%   5.1% to 8.8%  2.9 
Total   1,021,393.3   7.1%     3.4 

 

  Rupees in million

Category  At March 31, 2022
  Amount  

Weighted

average

interest

rate

   Range  

Weighted

average

residual

maturity

(in years)

 
Bonds issued to institutional/individual investors    591,019.1    8.0%    4.9% to 14.2%     4.6 
Refinance from financial institutions    198,265.0    4.7%    2.8% to 8.4%    1.9 
Borrowings from other banks    13,846.2    7.0%    5.5% to 7.4%    3.8 
Fixed deposits    29,040.0    7.0%    3.9% to 8.8%    2.8 
Total   832,170.3    7.1%         3.9 

 

Foreign currency debt

 

The following tables set forth, for the periods indicated, a listing of major categories of foreign currency debt.

 

  Rupees in million
Category  At March 31, 2023
  Amount  

Weighted

average

interest

rate

   Range  

Weighted average

residual

maturity

(in years)

 
Bonds   139,381.7    4.2%    3.6% to 6.4%    3.1 
Other borrowings   151,621.5    2.4%    0.0% to 6.6%    2.6 
Total   291,003.2    3.3%         2.8 

  

F-77

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

 

  Rupees in million
Category  At March 31, 2022
  Amount  

Weighted

average

interest

rate

   Range  

Weighted average

residual

maturity

(in years)

 
Bonds   187,034.1    3.6%    0.5% to 5.4%    3.0 
Other borrowings   177,993.7    1.9%    0.0% to 10.4%    2.8 
Total   365,027.8    2.8%         2.9 

 

See note on “Schedule 18B-Additional note-19 Selected information from Indian GAAP financials” for assets pledged as securities for borrowings.

 

4.          Cash and cash equivalents

 

Banks in India are required to maintain with Reserve Bank of India, average daily balance of 4.5% of their net demand and time liabilities by way of cash reserve, for a fortnight period. The banks are allowed to maintain minimum cash reserve of not less than 90% of the required cash reserve on all days during the reporting fortnight, in such a manner that the average of cash reserve maintained daily shall not be less than the requirement prescribed by the Reserve Bank of India.

 

The Bank’s minimum cash reserve requirements for the fortnight period of March 31, 2023 were Rs. 513,102.5 million (March 31, 2022: Rs. 407,243.4 million) which are subject to withdrawal and usage restrictions. Deposits maintained with the Reserve Bank of India were Rs. 480,251.3 million at March 31, 2023 (March 31, 2022: Rs. 530,008.6 million) towards the minimum cash reserve requirements.

 

Deposits with other banks include Rs. 65,115.4 million (March 31, 2022: Rs. 54,309.7 million) in deposits, which have original maturities greater than 90 days.

 

5.          Investments

 

The following table sets forth, for the periods indicated, the portfolio of investments classified as held to maturity. 

 

  Rupees in million
  

At March 31, 2023

  

At March 31, 2022

  

Amortized cost/cost

  

Gross unrealized gain

  

Gross unrealized loss

  

Fair value

  

Amortized cost/cost

  

Gross unrealized gain

  

Gross unrealized loss

  

Fair value

 
Held to maturity                                        
Corporate debt securities    215,081.7    2,161.4    (4,373.0)   212,870.1    177,005.2    5,488.1    (821.1)   181,672.1 
Government securities    3,139,362.1    12,022.6    (47,847.6)   3,103,537.1    2,546,164.0    41,635.4    (23,863.5)   2,563,935.9 
Other debt securities1    7,800.4    

..

    

..

    7,800.4    3,938.9    

..

    

..

    3,938.9 
Total debt securities    3,362,244.2    14,184.0    (52,220.6)   3,324,207.6    2,727,108.1    47,123.5    (24,684.6)   2,749,546.9 
Equity shares2    50,905.5    228,560.2    ..    279,465.7    45,464.5    287,016.9    ..    332,481.4 
Other securities    4,937.8    2,529.5    (81.0)   7,386.2    5,023.3    2,460.6    (24.6)   7,459.3 
Total    3,418,087.5    245,273.7    (52,301.6)   3,611,059.5    2,777,595.9    336,601.0    (24,709.2)   3,089,487.6 

1.Includes certificate of deposit and commercial paper.

2.Interest accrued on held-to-maturity securities amounted to Rs. 55,568.5 million at March 31, 2023 (March 31, 2022: Rs. 44,340.7 million).

 

F-78

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, the portfolio of investments classified as available for sale.

 

  Rupees in million

   At March 31, 2023   At March 31, 2022 
  Amortized cost/cost   Gross unrealized gain   Gross unrealized loss   Fair value   Amortized cost/cost   Gross unrealized gain   Gross unrealized loss   Fair value 
Available for sale                                        
Corporate debt securities   217,228.0    1,081.8    (2,100.0)   216,209.8    167,879.7    5,362.0    (742.9)   172,498.8 
Government securities   624,808.4    1,146.7    (1,571.4)   624,383.7    615,555.5    1,970.2    (1,773.3)   615,752.6 
Other debt securities1   126,326.0    1,202.5    (619.3)   126,909.2    113,652.3    1,318.0    (682.2)   114,288.1 
Total debt securities   968,362.4    3,431.0    (4,290.7)   967,502.7    897,087.5    8,650.2    (3,198.4)   902,539.5 
Equity shares   123,670.2    67,841.2    (13,965.5)   177,545.9    124,059.9    65,347.6    (14,584.0)   174,823.4 
Other securities   39,049.5    6,186.1    (7,171.2)   38,064.4    43,993.6    6,343.7    (5,734.0)   44,603.4 
Total   1,131,082.1    77,458.3    (25,427.4)   1,183,113.1    1,065,141.0    80,341.5    (23,516.4)   1,121,966.3 

1.Includes pass through certificates, certificate of deposit, commercial paper and banker's acceptance.

2.Interest accrued on available for sale securities amounted to Rs. 12,702.5 million at March 31, 2023 (March 31, 2022: Rs. 12,545.8 million).

 

Income from securities available for sale

 

The following table sets forth, for the periods indicated, a listing of income from securities classified as available for sale.

 

  Rupees in million
   Year ended March 31, 
   2023   2022   2021 
Interest    56,073.0    41,719.0    48,297.5 
Dividend    2,320.7    1,023.4    1,719.5 
Total    58,393.7    42,742.4    50,017.0 
                
Gross realized gain    19,961.4    22,227.6    73,793.0 
Gross realized loss.   (7,090.2)   (1,772.1)   (10,817.4)
Total    12,871.2    20,455.5    62,975.6 

  

Income from securities held for trading

 

The following table sets forth, for the periods indicated, a listing of income from securities classified as held for trading.

 

  Rupees in million
   Year ended March 31, 
   2023   2022   2021 
Interest and dividend    16,416.4    11,713.9    14,954.8 
Realized gain/(loss) on sale of trading portfolio    958.8    (648.7)   5,749.2 
Unrealized gain/(loss) on trading portfolio    133.8    1,952.6    340.7 
Total    17,509.0    13,017.8    21,044.7 

 

 

F-79

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Maturity profile of debt securities

 

The following table sets forth a listing of each category of held to maturity debt securities at March 31, 2023, by maturity.

 

  Rupees in million

  

Amortized cost

  

Fair value

 
Corporate debt securities          
Less than one year    16,706.2    16,653.1 
One to five years    71,085.5    70,693.8 
Five to ten years    81,969.1    81,147.2 
Greater than ten years    45,320.9    44,376.0 
Total corporate debt securities    215,081.7    212,870.1 
Government securities          
Less than one year    54,073.0    54,510.7 
One to five years    988,104.5    977,452.6 
Five to ten years    1,074,454.5    1,069,492.7 
Greater than ten years    1,022,730.1    1,002,081.1 
Total government securities    3,139,362.1    3,103,537.1 
Other debt securities          
Less than one year    7,800.4    7,800.4 
One to five years    ..    .. 
Five to ten years    ..    .. 
Greater than ten years    ..    .. 
Total other debt securities    7,800.4    7,800.4 
Total debt securities classified as held to maturity    3,362,244.2    3,324,207.6 

 

The following table sets forth a listing of each category of available for sale debt securities at March 31, 2023, by maturity.

 

  Rupees in million

  

Amortized cost

  

Fair value

 
Corporate debt securities          
Less than one year    64,352.2    64,045.6 
One to five years    129,630.7    129,248.9 
Five to ten years    22,722.1    22,522.6 
Greater than ten years    523.0    392.7 
Total corporate debt securities    217,228.0    216,209.8 
Government securities          
Less than one year    337,871.8    337,498.9 
One to five years    162,837.4    162,500.2 
Five to ten years    16,929.4    16,958.1 
Greater than ten years    107,169.8    107,426.5 
Total Government securities    624,808.4    624,383.7 
Other debt securities          
Less than one year    66,047.6    66,280.7 
One to five years    43,722.8    43,978.3 
Five to ten years    8,046.0    8,004.0 
Greater than ten years    8,509.6    8,646.2 
Total other debt securities    126,326.0    126,909.2 
Total debt securities classified as available for sale    968,362.4    967,502.7 

 

F-80

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Credit rating profile of held-to-maturity debt securities

 

The Group considers credit rating as credit quality indicators for the held-to-maturity debt securities. The credit rating of debt securities is issued by external credit rating agencies.

 

The following table sets forth, held-to-maturity debt securities by external credit rating at March 31, 2023:

 

  Rupees in million

   AAA, AA+, AA, AA-, 1, 2A-C   A+, A, A-, 3 A-C   BBB+, BBB and BBB-, 4A-C   Below investment grade   Unrated   Total 
Corporate debt securities   195,528.8   ..    17,339.7    2,213.2   ..    215,081.7 
Government securities   3,139,362.1    ..    ..       ..       ..    3,139,362.1 
Other debt securities   7,800.4    ..    ..       ..       ..    7,800.4 
Total Debt securities   3,342,691.3    

..

    17,339.7    2,213.2    

..

    3,362,244.2 

  

The following table sets forth, held-to-maturity debt securities by external credit rating at March 31, 2022:

 

  Rupees in million

   AAA, AA+, AA, AA-, 1, 2A-C   A+, A, A-, 3 A-C   BBB+, BBB and BBB-, 4A-C   Below investment grade   Unrated   Total 
Corporate debt securities   161,685.4    198.6    12,071.6    3,049.6     ..    177,005.2 
Government securities   2,546,164.0     ..        ..        ..        ..    2,546,164.0 
Other debt securities   3,938.9     ..        ..        ..        ..    3,938.9 
Total Debt securities   2,711,788.3    198.6    12,071.6    3,049.6    

..

    2,727,108.1 

 

 

There were no held-to-maturity debt securities that were past due (30 days overdue) at year ended March 31, 2023 and March 31, 2022. There were no-held-to-maturity debt securities that were overdue for more than 90 days and still accruing at the year ended March 31, 2023 and March 31, 2022.

 

6.          Repurchase transactions

 

The Group undertakes repurchase and reverse repurchase transactions of Government securities and corporate bonds during the year. These transactions are generally of a very short tenure and are undertaken with the Reserve Bank of India, banks and other financial institutions as counterparties.

 

At March 31, 2023, outstanding borrowings under repurchase transactions including Liquidity Adjustment Facility, Marginal Standing Facility and Standing liquidity facility offered by the Reserve Bank of India amounted to Rs. 258,992.9 million (March 31, 2022: Rs. 126,911.1 million) and the outstanding lendings under reverse repurchase transactions including Liquidity Adjustment Facility and Marginal Standing Facility amounted to Rs. 59,652.4 million (March 31, 2022: Rs. 521,508.1 million).

 

During fiscal 2023, average borrowings under repurchase transactions including Liquidity Adjustment Facility, Marginal Standing Facility and Standing liquidity facility amounted to Rs. 286,800.5 million (March 31, 2022: Rs. 212,852.2 million) and average lendings under reverse repurchase transactions including Liquidity Adjustment Facility and Marginal Standing Facility amounted to Rs. 175,385.7 million (March 31, 2022: Rs. 411,776.6 million).

 

F-81

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

7.          Loans

 

The following table sets forth, for the periods indicated, a listing of loans by category.

 

  Rupees in million

   At March 31, 
   2023   2022 
Commercial loans    4,625,018.9    3,962,140.8 
Term loans    2,058,261.1    1,852,029.2 
Working capital facilities1    2,566,757.8    2,110,111.6 
Consumer loans and credit card receivable    6,469,885.0    5,512,549.6 
Mortgage loans    3,717,546.2    3,301,415.5 
Other secured loans    1,422,524.2    1,287,985.6 
Credit card receivables    384,163.8    254,739.8 
Other unsecured loans    945,650.8    668,408.7 
Lease financing2    50.2    416.5 
Total gross advances    11,094,954.1    9,475,106.8 
Provision for loan losses3    (256,291.0)   (272,025.4)
Total net advances    10,838,663.1    9,203,081.4 

1.Includes bills purchased and discounted, overdrafts, cash credit and loans repayable on demand.

2.Lease financing activity includes leasing and hire purchase.

3.Excludes provision on performing loans.

 

Commercial loans

 

Commercial loans include term loans and working capital facilities extended to corporate and other business entities.

 

Each commercial loan undergoes a detailed credit review process in accordance with the Bank’s credit policy. After disbursement, commercial loans are individually monitored and reviewed for any possible deterioration in the borrower’s ability to repay the loan. Term loans are typically secured by a first lien on the borrower’s fixed assets, which normally consist of property, plants and equipment. Working capital facilities, which include bills purchased and discounted, overdrafts, cash credit and loans repayable on demand, are typically secured by a first lien on the borrower’s current assets, which normally consist of inventory and receivables. Commercial loans also include programme-based loans extended to small and medium enterprises such as proprietorship firms, partnership firms and private limited companies.

 

The overall economic conditions affecting businesses impact the Bank’s commercial loan portfolio. A prolonged slowdown in the Indian economy and significant movement in commodity prices could adversely affect borrowers’ abilities to repay loans. In light of increasing international trade linkages, borrowers’ abilities to repay loans may also be negatively affected by adverse economic developments in the United States and other major economies. Unfavorable exchange rate movements may also increase borrowers’ debt burden and adversely affect their abilities to repay loans.

 

Borrowers’ ability to repay project finance term loans depends on the viability of the project financed which, in turn, depends on the timeliness of the project’s completion, the stability of government policies and changes in market demand.

 

Consumer loans

 

The Bank’s consumer loan portfolio includes both secured loans and unsecured loans. Secured consumer loans constitute a significant majority of the Bank’s total consumer loan portfolio. Though the loans in the Bank’s secured loan portfolio are secured by first and exclusive liens on the assets financed, recoveries in case of default may be subject of delays up to several years, due to the protracted legal process in India. To mitigate risk, the Bank obtains direct debit mandates or post-dated checks with pre-specified dates for repayment of consumer installment loans.

 

Secured consumer loan portfolio

 

The Bank’s secured loan portfolio consists of mortgage loans, automobile loans, commercial vehicle loans, jewel loans, farm equipment loans, kisan (farmer) credit cards and other secured loans.

 

F-82

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The Bank’s mortgage loan portfolio includes home loans made to individuals and business entities and loan against mortgage of property for any business or personal requirement. Typically, mortgage loans are secured by first and exclusive liens on the financed properties. Borrower default risk is mitigated by rigorous credit review procedures. The Bank’s mortgage loan portfolio risk is driven primarily by interest rate movement, the loan-to-value ratios of the loans in the portfolio changes in property price, the nature of the borrowers’ employment (e.g., salaried or self-employed) and the borrowers’ income levels.

 

The Bank’s automobile loan and commercial vehicle loan portfolios are also secured by first liens on the assets financed by the loans. Major factors affecting the performance of the automobile loan portfolio include the nature of the borrowers’ employment, the borrowers’ income levels, the loan-to-value ratios of the loans in the portfolio and the nature of use of the financed vehicles. The Bank’s commercial vehicle loan portfolio risk is largely driven by borrowers’ characteristics, rate of economic activity and fuel price.

 

The Bank extends kisan (farmer) credit card facility to farmers for meeting their cost of cultivation and other ancillary expenses. These loans are secured by hypothecation of crops and mortgage of the agricultural land. Unfavorable monsoon, natural calamities and announcement of farm loan waiver by state governments are among the key risk drivers of kisan (farmer) credit card portfolio.

 

The Bank provides jewel loans against gold ornaments and gold coins. Key risks include volatility in gold price and authenticity (purity and weight) of the jewels.

 

Borrowers’ abilities to repay farm equipment loans generally depend on the agriculture sector in India which, in turn, may depend on the monsoons.

 

Unsecured consumer loan portfolio

 

The Bank’s unsecured loan portfolio includes personal loans, credit cards and other unsecured loans. General economic conditions and other factors such as changes in unemployment rates, economic growth rates and borrowers’ income levels impact this portfolio.

 

Standard restructured loans

 

A loan is classified as restructuring, where a concessionary modification such as changes in repayment period, principal amount, repayment installment and rate of interest has been made by the Group, and downgraded to non-performing. The restructuring of loans in the event of a natural calamity, restructuring involving deferment of date of commencement of commercial operations for projects under implementation and restructuring for certain medium and small medium enterprises continue to be classified as standard restructured loans. Further, the Reserve Bank of India through its guideline on ‘Resolution Framework for COVID-19-related Stress’ dated August 6, 2020, provided a prudential framework to implement a resolution plan in respect of eligible borrowers and personal loans, while classifying such exposures as standard, subject to specified conditions.

 

The loan accounts subjected to restructuring by the Bank are upgraded to the standard category from standard restructured category if the borrower has demonstrated, over a minimum period of one year, the ability to repay the loan in accordance with the contractual terms and the borrower has been reinstated to a normal level of general provisions for standard loans/risk weights for capital adequacy computations. The period of one year is from the commencement of the first payment of principal or interest whichever was later on the credit facility with the longest period of moratorium under the restructured terms. The restructured loans, classified as non-performing, can be upgraded only after satisfactory performance during the ‘specified period’, that is, the date by which at least a certain percentage of the outstanding principal debt as per the resolution plan and interest capitalization sanctioned as part of the restructuring, if any, is repaid or one year from the commencement of the first payment of interest or principal on the credit facility with the longest period of moratorium under the terms of the resolution plan, whichever is later. Further, large restructured accounts (accounts where the aggregate exposure of lenders is Rs. 1.00 billion and above) qualify for an upgrade if in addition to demonstration of satisfactory payment performance as mentioned above, the loan is rated at investment grade (BBB- equivalent or better) at the end of the ‘specified period’ by credit rating agencies accredited by the Reserve Bank of India.

 

F-83

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

At March 31, 2023, the Group had committed to lend (including non-fund based facilities) Rs. 970.0 million (March 31, 2022: Rs. 1,378.3 million) to borrowers who are parties to standard restructurings.

 

The following table sets forth, for the dates indicated, a listing of standard restructured loans.

 

  Rupees in million

   At March 31, 
   2023   2022 
Commercial loans          
Term loans    6,946.3    21,640.6 
Working capital facilities    2,016.3    4,328.6 
Consumer loans          
Mortgage loans    32,993.9    46,241.6 
Other secured loans    9,507.2    18,734.2 
Credit card receivables    69.7    27.4 
Other unsecured loans    980.6    2,293.5 
Lease financing    

..

    

..

 
Total gross restructured loans2    52,514.0    93,265.9 
Provision for loan losses3    (1,778.6)   (2,914.3)
Total net restructured loans    50,735.4    90,351.6 

1.Represents entire borrower level outstanding of the restructured accounts.

2.At March 31, 2023, includes loans amounting to Rs. 35,864.6 million restructured under the Reserve Bank of India guidelines on ‘Resolution Framework for COVID-19-related Stress’ dated August 6, 2020. and May 05, 2021 (March 31, 2022: loans amounting to Rs. 58,297.3 million)

3.Represents provision due to diminution in the fair value of restructured/rescheduled loans in accordance with the applicable RBI guidelines.

 

In addition, the Bank holds general provision amounting to Rs. 12,824.9 million at March 31, 2023 (March 31, 2022: Rs. 23,562.1 million) on these restructured accounts.

 

Non-performing loans

 

The Bank classifies all credit exposures at a borrower level, including overdues arising from crystallized derivative contracts, into performing and non-performing loans as per the Reserve Bank of India guidelines. Under the Reserve Bank of India guidelines, an asset is generally classified as non-performing if any amount of interest or principal remains overdue for more than 90 days (360 days for direct agriculture loans), in respect of term loans. In respect of overdraft or cash credit, an asset is classified as non-performing if the account remains out of order for a period of 90 days. An account is treated as ‘out of order’ if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power for 90 days or where there are no credits continuously for 90 days or credits are not enough to cover the interest debited during the preceding 90 day period. In respect of bills, an asset is classified as non-performing if the account remains overdue for more than 90 days. The Bank also identifies non-performing loans based on a review of accounts selected on the basis of certain criteria, by evaluating additional information (other than that relating to the payment record). Advances held at the overseas branches that are identified as impaired as per host country regulations but which are standard as per the extant Reserve Bank of India guidelines, are identified as non-performing to the extent of amount outstanding in the host country. In case of the Bank’s housing finance subsidiary, loans and other credit facilities are classified into performing and non-performing loans as per Reserve Bank of India guidelines. Further, non-performing loans are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by Reserve Bank of India. Loans in the Bank’s United Kingdom subsidiary are classified as impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the loan (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the loans that can be reliably estimated. Loans in the Bank’s Canadian subsidiary are considered credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that loan have occurred.

 

F-84

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, the nonaccrual status of the loans for the year ended March 31, 2023.

 

  Rupees in million
   Loans outstanding     
   At the beginning of the year   At the end of the year   Loans which are overdue for more than 90 days but on accrual status   Loans on non-accrual basis on which no provision is made   Interest income recognized during the year on loans on non-accrual basis 
Commercial loans                         
-          Term loans   167,209.3    153,131.1    57.5   ..    3,505.3 
-          Working capital facilities   65,033.2    56,797.7    ..    ..    1,811.6 
Consumer loans                         
-          Mortgage loans   54,559.5    46,243.2    ..    ..    2,425.5 
-          Other secured loans   44,822.2    40,187.5    35,527.8    ..    825.6 
-          Credit card receivables   3,864.6    5,836.4    ..    ..    485.2 
-          Other unsecured loans   10,024.8    10,273.8    ..    ..    471.1 
Lease financing   ..    ..    ..    ..    .. 
Total gross loans   345,513.6    312,469.7    35,585.3    

..

    9,524.3 
Provision for loan losses   (269,105.3)   (254,507.1)   ..           
Total net loans   76,408.3    57,962.6    35,585.3           

 

The following table sets forth, the nonaccrual status of the loans for the year ended March 31, 2022.

 

  Rupees in million
   Loans outstanding    
   At the beginning of the year   At the end of the year   Loans which are overdue for more than 90 days but on accrual status   Loans on non-accrual basis on which no provision is made   Interest income recognized during the year on loans on non-accrual basis 
Commercial loans                         
-          Term loans   199,707.8    167,209.3    ..   ..    2,249.3 
-          Working capital facilities   84,398.1    65,033.2    ..    ..    816.1 
Consumer loans                         
-          Mortgage loans   61,876.0    54,559.5    ..    ..    1,951.5 
-          Other secured loans   51,517.8    44,822.2    33,269.2    ..    1,353.9 
-          Credit card receivables   9,905.6    3,864.6    ..    ..    958.3 
-          Other unsecured loans   19,623.6    10,024.8    ..    ..    826.8 
Lease financing   ..    ..    ..    ..    .. 
Total gross loans   427,028.9    345,513.6    33,269.2    

..

    8,155.9 
Provision for loan losses   (327,680.4)   (269,105.3)   ..           
Total net loans   99,348.5    76,408.3    33,269.2           

 

 

F-85

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Provision for loan losses

 

Provisions are generally made by the Bank on non-performing loans as per internal provisioning norms, subject to minimum provisioning requirements of Reserve Bank of India. The Bank holds specific provisions against non-performing loans and a general provision against performing loans.

 

The housing finance subsidiary of the Bank holds specific provisions against non-performing loans and general provisions against performing loans as per Reserve Bank of India requirements.

 

The Bank’s United Kingdom subsidiary maintains provision for loan losses at a level that management considers adequate to absorb identified credit related losses as well as losses that have occurred but are not yet identifiable. The Bank’s Canadian subsidiary maintains provision for all financial assets using expected credit loss model. The expected credit loss for impaired financial assets is computed based on individual assessment of expected cash flows from such assets. The Bank makes provision on assets that are restructured/rescheduled subject to minimum requirements as per the Reserve Bank of India guidelines.

 

The following table sets forth, for the periods indicated, the movement in the provision for loan losses on standard restructured loans.

 

  Rupees in million
   Year ended March 31, 
   2023   2022   2021 
Provision for loan losses at the beginning of the year    2,914.3    896.6    231.7 
Provision for loan losses made for new additions during the year    ..    2,329.7    705.6 
Increase/(decrease) of provision for existing loan losses during the year   (328.4)   (172.8)   (20.4)

Reduction/write-back of provision on restructured loans due to:

         Upgrade to standard assets

   

..

    

..

    

..

 
         Downgrade to non-performing assets   (807.3)   (139.2)   (20.3)
Provision for loan losses at the end of the year    1,778.6    2,914.3    896.6 

 

 The following table sets forth the movement in the provision for loan losses for the year ended March 31, 2023.

  

  Rupees in million
Particulars  Commercial loans  Consumer loans        Total
   Term loans  Working capital facilities  Mortgage loans  Other secured loans  Credit card receivables  Other unsecured loans  Lease financing  Unallocated 
A. Non-performing loans                            
Aggregate provision for loan losses at the beginning of the year   152,200.1  50,822.8  28,852.5  26,173.8  3,119.1  7,937.0  ..  ..  269,105.3
Add: Provisions for loan losses   17,713.5  23,605.3  21,198.2  28,722.4  12,155.9  15,672.9  ..  ..  119,068.2
Less: Utilized for write-off of loans   (4,428.6)  (4,976.5)  (6,469.7)  (13,525.1)  (7,576.9)  (9,491.5)  ..  ..  (46,468.3)
Less: Write back of excess provisions   (23,041.1)  (22,719.4)  (17,927.4)  (14,651.9)  (2,980.8)  (5,877.5)  ..  ..  (87,198.1)
Aggregate provision for loan losses at the end of the year for non-performing loans   142,443.9  46,732.2  25,653.6  26,719.2  4,717.3  8,240.9  ..  ..  254,507.1
B. Aggregate provision for loan losses at the end of the year for performing loans including restructured loans   4,243.4  1,492.1  7,750.8  2,849.7  18.0  376.8  .. 

180,946.81

  197,677.6
C. Aggregate provision for loan losses at the end of the year (A) + (B)   146,687.3  48,224.3  33,404.4  29,568.9  4,735.3  8,617.7  ..  180,946.8  452,184.7
Closing balance of provision: individually evaluated for impairment   146,687.3  48,224.3  33,404.4  29,568.9  4,735.3  8,617.7  ..  ..  271,237.9
Closing balance of provision: collectively evaluated for impairment   ..  ..  ..  ..  ..  ..  ..  180,946.8  180,946.8
Closing balance of provision: loans acquired with deteriorated credit quality   ..  ..  ..  ..  ..  ..  ..  ..  ..

1.At March 31, 2023, the Bank held contingency provisions of Rs. 131,000.0 million which is included in the above amount.

 

F-86

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth the movement in the provision for loan losses for the year ended March 31, 2022.

 

  Rupees in million
Particulars  Commercial loans  Consumer loans         
   Term loans  Working capital facilities  Mortgage loans  Other secured loans  Credit card receivables  Other unsecured loans  Lease financing  Unallocated  Total
A. Non-performing loans                            
Aggregate provision for loan losses at the beginning of the year   173,905.8  72,706.5  25,418.8  32,594.7  8,395.4  14,659.2  ..  ..  327,680.4
Add: Provisions for loan losses   13,677.5  17,842.9  26,440.8  37,637.8  11,240.3  18,452.0  ..  ..  125,291.3
Less: Utilized for write-off of loans   (20,169.8)  (26,607.9)  (6,709.2)  (23,824.4)  (12,204.7)  (18,485.5)  ..  ..  (108,001.5)
Less: Write back of excess provisions   (15,213.4)  (13,118.7)  (16,297.9)  (20,234.3)  (4,311.9)  (6,688.7)  ..  ..  (75,864.9)
A. Aggregate provision for loan losses at the end of the year for non-performing loans   152,200.1  50,822.8  28,852.5  26,173.8  3,119.1  7,937.0  ..  ..  269,105.3
B. Aggregate provision for loan losses at the end of the year for performing loans including restructured loans   12,295.0  3,379.4  11,943.0  5,561.9  7.1  898.9  .. 

118,124.21

  152,209.5
C. Aggregate provision for loan losses at the end of the year (A) + (B)   164,495.1  54,202.2  40,795.5  31,735.7  3,126.2  8,835.9  ..  118,124.2  421,314.8
Closing balance of provision: individually evaluated for impairment   164,495.1  54,202.2  40,795.5  31,735.7  3,126.2  8,835.9  ..  ..  303,190.6
Closing balance of provision: collectively evaluated for impairment   ..  ..  ..  ..  ..  ..  ..  118,124.2  118,124.2
Closing balance of provision: loans acquired with deteriorated credit quality   ..  ..  ..  ..  ..  ..  ..  ..  ..

1.At March 31, 2022, the Bank held contingency provisions of Rs. 74,500.0 million which is included in the above amount.

 

F-87

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth the movement in the provision for loan losses for the year ended March 31, 2021. 

 

  Rupees in million

Particulars

  Commercial loans  Consumer loans     

  Term loans 

Working capital facilities

 

Mortgage loans

 

Other secured loans

 

Credit card receivables

 

Other unsecured loans

  Lease financing  Unallocated  Total
A. Non-performing loans                            
Aggregate provision for loan losses at the beginning of the year   203,736.5  87,163.8  10,649.9  16,659.1  5,400.0  6,612.2  ..  ..  330,221.5
Add: Provisions for loan losses   24,846.2  33,480.8  20,814.5  25,620.9  14,615.7  17,898.2  ..  ..  137,276.3
Less: Utilized for write-off of loans   (51,609.7)  (26,571.6)  (4,569.7)  (6,975.2)  (8,907.8)  (7,782.6)  ..  ..  (106,416.6)
Less: Write back of excess provisions  

(3,067.2)

 

(21,366.5)

 

(1,475.9)

 

(2,710.1)

 

(2,712.5)

 

(2,068.6)

 

..

 

..

 

(33,400.8)

A. Aggregate provision for loan losses at the end of the year for non-performing loans   173,905.8  72,706.5  25,418.8  32,594.7  8,395.4  14,659.2  ..  ..  327,680.4
B. Aggregate provision for loan losses at the end of the year for performing loans including restructured loans  

4,376.8

 

1,638.2

 

1,476.2

 

1,061.5

 

9.9

 

130.6

 

..

 

114,792.61

 

123,485.8

C. Aggregate provision for loan losses at the end of the year (A) + (B)   178,282.6  74,344.7  26,895.0  33,656.2  8,405.3  14,789.8  ..  114,792.6  451,166.2
Closing balance of provision: individually evaluated for impairment   178,282.6  74,344.7  26,895.0  33,656.2  8,405.3  14,789.8  ..  ..  336,373.6
Closing balance of provision: collectively evaluated for impairment   ..  ..  ..  ..  ..  ..  ..  114,792.6  114,792.6
Closing balance of provision: loans acquired with deteriorated credit quality   ..  ..  ..  ..  ..  ..  ..  ..  ..
1.At March 31, 2021, the Bank held Covid-19 related provisions of Rs. 74,750.0 million which is included in the above amount.

 

F-88

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

While the Group assesses the incremental specific provisions after taking into consideration the existing specific provision held, the amounts recovered against debts written off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the profit and loss account. The Bank’s Canadian subsidiary adopted IFRS 9 – Financial instruments from April 1, 2018 and measures impairment loss on all financial assets using expected credit loss model based on a three-stage approach. At March 31, 2023, the Bank’s Canadian subsidiary classified exposure of Rs. 63,524.7 million as Stage-2 (March 31, 2022: Rs. 13,965.8 million) (financial assets, that are not credit impaired, but which have experienced significant increase in credit risk since origination), with allowance for expected credit loss of Rs. 882.7 million (March 31, 2022: Rs. 844.7 million) in fiscal 2023. The Stage-2 assets increased primarily in the mortgage portfolio due to decline in bureau scores of borrowers.

 

Aging Analysis of Past Due Financing Receivable - Performing Loans

 

Any amount due under a credit facility is considered as ‘past due’ if it remains unpaid for more than 30 days from the due date.

 

The following table sets forth the aging analysis of past due performing loans at March 31, 2023.

 

  Rupees in million
Particulars 

Current1

  31 to 60 days  61 to 90 days 

Above 90 days2

 

Total past due3

Commercial loans               
Term loans   1,903,035.5  2,014.0  23.0  57.5  2,094.5
Working capital facilities4   2,504,446.0  4,700.1  814.0  ..  5,514.1
Consumer loans               
Mortgage loans   3,648,352.9  18,153.0  4,797.1  ..  22,950.1
Other secured loans   1,329,423.0  12,985.6  4,400.3  35,527.8  52,913.7
Credit card receivables   371,590.8  4,583.0  2,153.6  ..  6,736.6
Other unsecured loans   927,359.5  6,011.3  2,006.2  ..  8,017.5
Lease financing  50.2  ..  ..  ..  ..
Total   10,684,257.9  48,447.0  14,194.2  35,585.3  98,226.5

1.Loans up to 30 days past due are considered current.

2.Primarily includes crop related agriculture loans overdue less than 360 days.

3.The amount disclosed represents the outstanding amount of the facility which has overdues, and not the borrower-level outstanding.

4.Includes bills purchased and discounted, overdrafts, cash credit and loans repayable on demand.

 

F-89

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth the aging analysis of past due performing loans at March 31, 2022.

 

  Rupees in million

Particulars 

Current1

  31 to 60 days  61 to 90 days 

Above 90 days2

 

Total past due3

Commercial loans               
Term loans   1,682,801.5  1,307.3  711.0  ..  2,018.3
Working capital facilities4   2,039,221.3  5,340.1  517.0  ..  5,857.1
Consumer loans               
Mortgage loans   3,227,102.8  16,270.3  3,482.9  ..  19,753.2
Other secured loans   1,188,144.5  16,887.6  4,862.1  33,269.2  55,018.9
Credit card receivables   247,317.0  2,499.0  1,059.2  ..  3,558.2
Other unsecured loans   653,445.5  3,832.6  1,105.8  ..  4,938.4
Lease financing  416.5  ..  ..  ..  ..
Total   9,038,449.1  46,136.9  11,738.0  33,269.2  91,144.1

1.Loans up to 30 days past due are considered current.

2.Primarily includes crop related agriculture loans overdue less than 360 days.

3.The amount disclosed represents the outstanding amount of the facility which has overdues, and not the borrower-level outstanding.

4.Includes bills purchased and discounted, overdrafts, cash credit and loans repayable on demand.

 

Credit quality indicators of loans

 

The Group has a comprehensive framework for monitoring credit quality of its commercial loans based on internal ratings and of its consumer loans based on delinquency status. For the majority of the portfolio, the credit rating of every borrower/portfolio is reviewed at least annually. For the purpose of disclosure, the Group has used internal ratings as credit quality indicator for commercial loans, for consumer loans the Group has considered the delinquency status as a credit quality indicator.

 

The following table sets forth, a description of internal rating grades linked to the likelihood of default associated with each rating grade:

 

Grade Definition
(I) Investment grade Entities/obligations are judged to offer moderate to high protection with regard to timely payment of financial obligations.
AAA, AA+, AA, AA-, 1, 2A-C Entities/obligations are judged to offer high protection with regard to timely payment of financial obligations.
A+, A, A-, 3A-C Entities/obligations are judged to offer an adequate degree of protection with regard to timely payment of financial obligations.
BBB+, BBB and BBB-, 4A-C Entities/obligations are judged to offer moderate protection with regard to timely payment of financial obligations.
(II) Below investment grade (BB and B, D, 5, 6, 7, 8) Entities/obligations are judged to offer inadequate protection with regard to timely payment of financial obligations.

 

F-90

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, credit quality indicators of commercial loans at March 31, 2023.

 

  Rupees in million
   Non-revolving loans originated in   
   Fiscal 2023  Fiscal 2022  Fiscal 2021  Fiscal 2020  Fiscal 2019  Prior to 2019  Revolving loans1  Total loans
Rating grades                        
Investment grade   659,545.2   411,265.7   462,604.6   95,575.0   136,339.4   87,951.8  2,465,344.3  4,318,626.0
AAA, AA+, AA, AA-, 1, 2A-C   167,007.1   168,070.2   319,275.2   26,165.5   49,785.4   7,605.0   1,269,312.1  2,007,220.5
A+, A, A-, 3 A-C   273,277.7   146,146.2   96,742.6   40,918.1   41,440.3   37,542.3   554,962.3  1,191,029.5
BBB+, BBB and BBB-, 4A-C   219,260.4   97,049.3   46,586.8   28,491.4   45,113.7   42,804.5   641,069.9  1,120,376.0
Below investment grade1   548.8   5,975.2   8,070.9   11,459.8   8,767.6   151,848.9   70,927.4  257,598.6
Unrated   2,228.4   1,992.3   1,069.6   93.4   83.1   128.4   43,249.3  48,844.5
Total Gross loans  662,322.4  419,233.2  471,745.1  107,128.2  145,190.1  239,929.1  2,579,521.0  4,625,069.1
Provisions   (27.6)   (667.0)   (3,628.2)   (5,375.1)   (4,403.0)   (132,731.6)   (44,127.5)  (190,960.0)
Total net loans  662,294.8  418,566.2  468,116.9  101,753.1  140,787.1  107,197.5  2,535,393.5  4,434,109.1

 

1.Includes bills purchased and discounted, overdrafts, cash credit, credit cards and revolving demand loans.

 

The following table sets forth, for the periods indicated, credit quality indicators of commercial loans at March 31, 2022.

 

  Rupees in million
   Non-revolving loans originated in   
   Fiscal 2022  Fiscal 2021  Fiscal 2020  Fiscal 2019  Fiscal 2018  Prior to 2018  Revolving loans1  Total loans
Rating grades  672,031.5  570,041.2  151,973.3  194,197.7  67,039.7  72,478.3  1,877,515.5  3,605,277.3
Investment grade                        
AAA, AA+, AA, AA-, 1, 2A-C  280,749.6  336,997.1  28,189.3  54,997.2  6,943.5  3,685.2  515,614.9  1,227,176.8
A+, A, A-, 3 A-C  226,803.1  145,059.2  66,245.9  64,168.6  27,224.7  33,746.8  848,088.0  1,411,336.3
BBB+, BBB and BBB-, 4A-C  164,478.8  87,984.9  57,538.2  75,031.9  32,871.6  35,046.2  513,812.6  966,764.2
Below investment grade1  7,747.0  10,438.0  11,542.4  11,838.9  48,185.2  143,975.9  87,711.4  321,438.9
Unrated  3,910.8  1,040.0  38.9  75.4  81.6  31.4  30,662.8  35,840.9
Total Gross loans  683,689.4  581,519.2  163,554.6  206,112.1  115,306.5  216,485.6  1,995,889.7  3,962,557.1
Provision  (1,725.4)  (1,984.0)  (5,418.6)  (3,160.9)  (21,377.4)  (121,650.1)  (48,686.3)  (204,002.7)
Total net loans  681,964.0  579,535.2  158,136.0  202,951.2  93,929.1  94,835.5  1,947,203.4  3,758,554.4

1.Includes bills purchased and discounted, overdrafts, cash credit, credit cards and revolving demand loans.

 

F-91

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, credit quality indicators of consumer loans at March 31, 2023.

 

  Rupees in million
   Non-revolving loans originated in   
   Fiscal 2023  Fiscal 2022  Fiscal 2021  Fiscal 2020  Fiscal 2019  Prior to 2019  Revolving loans1  Total loans
Mortgage loans   1,023,647.7   905,818.5   584,310.6   377,770.5   268,411.7   557,587.2   ..  3,717,546.2
Current2   1,021,255.4   898,891.7   575,522.4   358,817.6   257,364.8   536,501.0   ..  3,648,352.9
Performing loans which are overdue3   1,116.9   2,370.2   3,217.2   6,185.6   3,834.1   6,226.1   ..  22,950.1
Non-performing loans   1,275.4   4,556.6   5,571.0   12,767.3   7,212.8   14,860.1   ..  46,243.2
                         
Other secured loans   629,897.7   272,288.8   139,295.2   69,607.2   28,311.1   14,824.3   268,299.9  1,422,524.2
Current2   625,398.8   263,675.7   130,980.1   62,204.9   24,570.9   10,290.5   212,302.1  1,329,423.0
Performing loans which are overdue3   2,448.7   5,665.0   4,874.0   3,772.5   1,956.7   585.1   33,611.7  52,913.7
Non-performing loans   2,050.2   2,948.1   3,441.1   3,629.8   1,783.5   3,948.7   22,386.1  40,187.5
                         
Credit card receivables  ..  ..  ..  ..  ..  ..   384,163.8  384,163.8
Current2  ..  ..  ..  ..  ..  ..   371,590.8  371,590.8
Performing loans which are overdue3  ..  ..  ..  ..  ..  ..   6,736.6  6,736.6
Non-performing loans  ..  ..  ..  ..  ..  ..   5,836.4  5,836.4
                         
Other unsecured loans   574,768.1   224,726.6   73,289.6   39,214.0   9,758.0   1,953.6   21,940.9  945,650.8
Current2   570,345.3   219,149.6   70,453.9   37,104.4   8,929.9   435.7   20,940.7  927,359.5
Performing loans which are overdue3   2,279.0   2,233.9   1,087.5   921.3   231.7   1,226.7   37.4  8,017.5
Non-performing loans   2,143.8   3,343.1   1,748.2   1,188.3   596.4   291.2   962.8  10,273.8
                         
Total Gross loans  2,228,313.5  1,402,833.9  796,895.4  486,591.7  306,480.8  574,365.1  674,404.6  6,469,885.0
Provisons   (2,984.6)   (5,665.2)   (5,825.6)   (11,205.2)   (5,984.6)   (11,983.6)   (21,682.2)  (65,331.0)
Total net loans  2,225,328.9  1,397,168.7  791,069.8  475,386.5  300,496.2  562,381.5  652,722.4  6,404,554.0

1.Includes bills purchased and discounted, overdrafts, cash credit, credit cards and revolving demand loans.

2.Loans upto 30 days past due are considered current.

3.The amount disclosed represents the outstanding amount of the facility which has overdues, and not the borrower-level outstanding.

 

F-92

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, credit quality indicators of consumer loans at March 31, 2022.

 

  Rupees in million
   Non-revolving loans originated in   
   Fiscal 2022  Fiscal 2021  Fiscal 2020  Fiscal 2019  Fiscal 2018  Prior to 2018  Revolving loans1  Total loans
Mortgage loans  1,042,163.1  718,384.4  473,710.8  339,350.0  252,038.3  475,768.9  ..  3,301,415.5
Current2  1,040,069.6  711,385.5  452,457.6  326,436.9  244,024.1  452,729.1  ..  3,227,102.8
Performing loans which are overdue3  578.3  2,772.3  6,432.5  3,128.0  2,018.5  4,823.6  ..  19,753.2
Non-performing loans  1,515.2  4,226.6  14,820.7  9,785.2  5,995.6  18,216.2  ..  54,559.5
                         
Other secured loans  528,450.5  242,763.3  141,796.8  72,459.3  23,508.2  7,760.5  271,246.8  1,287,985.6
Current2  524,384.0  229,822.0  128,960.9  64,805.0  20,765.0  3,641.8  215,765.8  1,188,144.5
Performing loans which are overdue3  1,807.6  7,963.6  6,443.5  3,591.0  1,284.3  449.1  33,479.8  55,018.9
Non-performing loans  2,258.9  4,977.7  6,392.4  4,063.3  1,459.0  3,669.6  22,001.3  44,822.2
                         
Credit card receivables  ..  ..  ..  ..  ..  ..  254,739.8  254,739.8
Current2  ..  ..  ..  ..  ..  ..  247,317.0  247,317.0
Performing loans which are overdue3  ..  ..  ..  ..  ..  ..  3,558.2  3,558.2
Non-performing loans  ..  ..  ..  ..  ..  ..  3,864.6  3,864.6
                         
Other unsecured loans  370,892.3  145,313.1  97,243.6  37,017.2  6,461.6  4,108.2  7,372.7  668,408.7
Current2  369,155.5  141,835.0  90,736.0  34,916.2  5,970.9  3,757.9  7,074.0  653,445.5
Performing loans which are overdue3    846.1  1,399.6  1,961.8  538.3  123.6  16.9  52.1  4,938.4
Non-performing loans  890.7  2,078.5  4,545.8  1,562.7  367.0  333.5  246.6  10,024.8
                         
Total Gross loans  1,941,505.9  1,106,460.8  712,751.3  448,826.5  282,008.1  487,637.6  533,359.4  5,512,549.6
Provisions  (1,986.8)  (5,322.9)  (14,006.8)  (8,520.0)  (4,779.2)  (15,938.4)  (17,468.6)  (68,022.7)
Total net loans  1,939,519.1  1,101,137.9  698,744.5  440,306.5  277,228.9  471,699.2  515,890.8  5,444,526.9

1.Includes bills purchased and discounted, overdrafts, cash credit, credit cards and revolving demand loans.

2.Loans upto 30 days past due are considered current.

3.The amount disclosed represents the outstanding amount of the facility which has overdues, and not the borrower-level outstanding.

 

F-93

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

8.          Financial assets transferred during the year to securitization company/reconstruction company

 

The Bank has transferred certain assets to securitization companies’/asset reconstruction companies in compliance with the terms of the guidelines issued by the Reserve Bank of India governing such transfer. The Bank transfers its non-performing assets to asset reconstruction companies primarily in exchange for receipt of cash or securities in the form of pass-through instruments issued by such asset reconstruction companies, wherein payments to holders of securities are based on the actual realized cash flows from the transferred assets. In accordance with Reserve Bank of India guidelines, in case of non-performing loans sold to asset reconstruction companies, the Bank reverses the excess provision in profit and loss account in the year in which amounts are received. Any shortfall of sale value over the net book value on sale of such assets is recognized by the Bank in the year in which the assets are sold. For the purpose of the valuation of underlying security receipts issued by underlying trusts managed by asset reconstruction companies, the security receipts are valued at their respective net asset values as advised by the asset reconstruction companies.

 

The following table sets forth, for the periods indicated, the details of the assets transferred.

 

  Rupees in million, except number of accounts
   Year ended March 31,
   2023  2022  2021
Number of accounts1   2052  5612  2
Aggregate value (net of provisions) of accounts sold to securitization company/reconstruction company  

286.32

 

630.52

  11.3
Aggregate consideration   1,739.9  2,340.7  81.0
Aggregate gain/(loss) over net book value   1,453.6  1,710.2  69.7
Provision reversed to profit and loss account on account of sale of NPAs  1,453.6  1,710.2  69.7
1.Excludes accounts previously written-off.

2.Includes 196 consumer loans amounting to Rs. 162.5 million (Fiscal 2022: 557 consumer loans amounting to Rs. 385.7 million)

 

9.          Details of non-performing assets sold, excluding those sold to securitization company/reconstruction company

 

The Bank has sold certain non-performing assets to entities other than securitization company/reconstruction company in compliance with the terms of the guidelines issued by the Reserve Bank of India on such sale.

 

The following table sets forth, for the periods indicated, the details of non-performing assets sold to entities, excluding those sold to securitization company/reconstruction company.

 

Rupees in million, except number of accounts
   Year ended March 31,
   2023  2022  2021
No. of accounts1   1  3  5
Aggregate value (net of provisions) of accounts sold, excluding those sold to securitization company/reconstruction company   ..  188.6  1,302.8
Aggregate consideration   15.7  1,164.1  1,357.8
Aggregate gain/(loss) over net book value   15.7  975.5  55.0

1.Represents corporate loans.

 

10.       Concentration of credit risk

 

Concentration of credit risk exists when changes in economic, industry or geographic factors affect groups of counter-parties whose aggregate credit exposure is material in relation to the Group’s total credit exposure. The Group’s portfolio of financial instruments is broadly diversified along industry, product and geographic lines primarily within India.

 

The Group is subject to supervision guidelines issued by the Reserve Bank of India. The Group’s 20 largest exposures (non-bank) based on gross exposure (credit, derivative and investments), totaled Rs. 1,741,788.4 million at March 31, 2023 which represented 96.3% of the capital funds (March 31, 2022: Rs. 1,618,647.1 million representing 99.8% of the capital funds). The single largest exposure (non-bank) at March 31, 2023 was Rs. 221,107.0 million, which was included in rating category “AAA, AA+, AA, AA-, 1, 2A-C”, and represented 12.2% of the capital funds (March 31, 2022: Rs. 249,230.4 million representing 15.4% of the capital funds).

 

F-94

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The largest group of companies under the same management control accounted for 25.9% of the capital funds at March 31, 2023 (March 31, 2022: 25.0% of the capital funds).

 

11.       Loan commitments

 

The Group has outstanding undrawn commitments to provide loans and financing to customers. These loan commitments aggregated to Rs. 4,992,056.3 million (including fund based commitments fungible with non-fund based facilities) at March 31, 2023 (March 31, 2022: Rs. 3,712,500.2 million). The interest rate on a significant portion of these commitments is dependent on the lending rates prevailing on the date of the loan disbursement. Further, the commitments have fixed expiration dates and are generally contingent upon the borrower’s ability to maintain specific credit standards.

 

12.       Capital commitments

 

The Group is obligated under a number of capital contracts. Capital contracts are job orders of a capital nature, which have been committed. The amounts of contracts remaining to be executed on capital account aggregated to Rs. 16,947.2 million at March 31, 2023 (March 31, 2022: Rs. 11,792.6 million).

 

13.       Derivatives

 

ICICI Bank is a participant in the financial derivatives market. The Bank deals in derivatives for balance sheet management, proprietary trading and market making purposes whereby the Bank offers derivative products to its customers, enabling them to hedge their risks.

 

Dealing in derivatives is carried out by identified groups in the treasury of the Bank based on the purpose of the transaction. Derivative transactions are entered into by the treasury front office. The Bank’s Treasury and Securities Services Group conducts an independent check of the transactions entered into by the front office and also undertakes activities such as confirmation, settlement, accounting, tracking of risk limit utilizations and reporting and ensures compliance with various internal and regulatory guidelines.

 

The market making and the proprietary trading activities in derivatives are governed by the Investment Policy which include Derivative policy of the Bank, which lays down the position limits, stop loss limits as well as other risk limits. The Risk Management Group lays down the methodology for computation and monitoring of risk. The Risk Committee of the Board reviews the Bank’s risk management policy in relation to various risks including Credit and Recovery Policy, Investment Policy including Derivative Policy, Asset Liability Management Policy and Operational Risk Management Policy. The Risk Committee of the Board comprises independent directors and the Executive Director of the Bank.

 

The Bank measures and monitors risk of its derivatives portfolio using risk metrics such as Value at Risk (VaR), stop loss limits and relevant greeks for options. Risk reporting on derivatives forms an integral part of the management information system.

 

Over the counter derivative transactions are covered under International Swaps and Derivatives Association master agreements with the respective counter parties. The exposure on account of derivative transactions is computed as per RBI guidelines.

 

F-95

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The Board of Directors has authorised the Asset Liability Management Committee to review and approve matters, as applicable, pertaining to the London Inter-Bank Offer Rate transition to alternate risk free rates. A London Inter-Bank Offer Rate Working Group has been constituted which reviews the progress on the international front, and the work carried out alongside Indian Banking Association. An update on the activities on the London Inter-Bank Offer Rate transition and the proceedings of the Working Group is presented quarterly to the Asset Liability Management Committee. The necessary changes were implemented in the treasury system of the Bank to handle the transition of existing trades to the alternate risk free rates. The transition was carried out for the London Inter-Bank Offer Rate (GBP, JPY, EUR, CHF) that ceased on December 31, 2021. USD London Inter-Bank Offer Rates and INR Mumbai Inter-bank Forward Outright Rates was expected to cease at the end of June 2023. There is sufficient liquidity in market for USD London Inter-Bank Offer Rate linked trades. The Bank does not expect material valuation risk arising out of non-alignment of fallback provisions of commercially linked positions such as trading deals and on the existing hedge deals of the Bank.

 

The use of derivatives for hedging purposes is governed by the hedge policy approved by the Asset Liability Management Committee. Subject to prevailing regulatory guidelines, the Group deals in derivatives for hedging fixed rate, floating rate or foreign currency assets/liabilities. Transactions for hedging and market making purposes are recorded separately. For hedge transactions, the Bank identifies the hedged item (asset or liability) at the inception of the hedge itself. The effectiveness is assessed at the time of inception of the hedge and periodically thereafter.

 

Based on guidelines issued by Reserve Bank of India on June 26, 2019, the accounting of hedge relationships established after June 26, 2019 is in accordance with the Guidance Note on Accounting for Derivative Contracts issued by Institute of Chartered Accountants of India. Accordingly, for fair value hedges established after June 26, 2019, the hedging instruments and the hedged items (for the risks being hedged) are measured at fair value with changes recognized in the profit and loss account by the Bank. The swaps under hedge relationships established prior to that date are accounted for on an accrual basis and are not marked-to-market unless their underlying transaction is marked-to-market. The Group companies measure the hedging instruments and the hedged items (for the risks being hedged) at fair value with changes recognized in the profit and loss account for fair value hedge. To the extent a cash flow hedge is effective, the change in the fair value of the hedging instrument is recognized in cash flow hedge reserve. The ineffective portion of the hedge is accounted in the profit and loss account. The premium or discount arising on inception of forward exchange contracts, which are not hedging instruments and are not intended for trading purpose, is amortized over the life of the contract as interest income/expense.

 

Credit exposure on interest rate and currency derivative transactions (both trading and hedging), is computed using the current exposure method according to the Reserve Bank of India guidelines, which is arrived at by adding up the positive mark-to-market values and the potential future exposure of these contracts. According to the Reserve Bank of India guidelines, the potential future exposure is determined by multiplying the notional principal amount of each of these contracts (irrespective of whether the mark-to-market value of these contracts is zero, positive or negative value) by the relevant add-on factor, ranging from 0.5% to 15%, according to the type of contract and residual maturity of the instrument. The credit exposure for equity futures is computed based on the market value and open quantity of the contracts at the balance sheet date and credit exposure for equity options is computed based on the price sensitivity of the option and open quantity of the contracts at the balance sheet date.

 

F-96

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth the details of the notional amounts, fair value, realized/unrealized gain and loss on derivatives and credit exposure of trading derivatives for the year ended March 31, 2023.

 

Rupees in million

Particulars  Notional amount  Gross positive fair value  Gross negative fair value  Gain/(loss) on derivatives 

Credit exposure3

Interest rate derivatives1   30,733,301.9  99,901.1  (90,108.3)  19,050.3  365,955.3
Currency derivatives (including foreign exchange derivatives)2   17,100,573.5  64,120.8  (78,607.9)  25,220.1  501,130.1
Equity derivatives   9,629.1  4.3  (1.1)  (602.0)  261.1
Un-funded credit derivatives    ..  ..  ..  ..  ..
1.Includes foreign currency interest rate swaps, forward rate agreements and swap options.

2.Includes foreign currency options, cross currency interest rate swaps and foreign currency futures.

3.Credit exposure is computed as per Current Exposure Method (CEM) without bilateral netting.

 

The following table sets forth the details of the notional amounts, fair value, realized/unrealized gain and loss on derivatives and credit exposure of trading derivatives for the year ended March 31, 2022.

 

Rupees in million

Particulars  Notional amount  Gross positive fair value  Gross negative fair value  Gain/(loss) on derivatives 

Credit exposure3

Interest rate derivatives1   31,560,087.8  48,571.0  (48,494.8)  8,874.7  330,568.1
Currency derivatives (including foreign exchange derivatives)2   11,898,939.6  46,742.3  (53,095.3)  49,080.4  373,318.1
Equity derivatives   771.3  7.2  (0.0)  (195.9)  332.5
Un-funded credit derivatives    ..  ..  ..  1.8  ..
1.Includes foreign currency interest rate swaps, forward rate agreements and swap options.

2.Includes foreign currency options, cross currency interest rate swaps and foreign currency futures.

3.Credit exposure is computed as per Current Exposure Method (CEM) without bilateral netting.

 

The following table sets forth the details of the notional amounts, marked-to-market position and credit exposure of hedging derivatives for the year ended March 31, 2023.

 

Rupees in million

Particulars  Notional amount  Gross positive fair value  Gross negative fair value  Credit exposure
Interest rate derivatives1   426,018.2  1,184.0  (7,409.0)  5,343.3
Currency derivatives (including foreign exchange derivatives)2   5,996.9  122.9  ..  119.9
1.Includes foreign currency interest rate swaps, forward rate agreements and swap options.

2.Includes foreign currency options, cross currency interest rate swaps and foreign currency futures.

 

The following table sets forth the details of the notional amounts, marked-to-market position and credit exposure of hedging derivatives for the year ended March 31, 2022.

 

Rupees in million

Particulars  Notional amount  Gross positive fair value  Gross negative fair value  Credit exposure
Interest rate derivatives1   371,526.8  990.0  (3,340.6)  8,337.3
Currency derivatives (including foreign exchange derivatives)2   11,608.4  340.6  (27.2)  1,382.0

1.Includes foreign currency interest rate swaps, forward rate agreements and swap options.

2.Includes foreign currency options, cross currency interest rate swaps and foreign currency futures.

 

F-97

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The gains/(losses) on hedged items arising from changes in fair value for fiscal 2023 and fiscal 2022 amounted to Rs. 5,282.2 million and Rs. 5,750.5 million respectively and gains/(losses) on corresponding hedging instruments arising from changes in fair value during fiscal 2023 and fiscal 2022 amounted to Rs. (5,176.4) million and Rs. (7,870.3) million respectively.

 

The gains/(losses) on cash flow hedges recorded in cash flow hedge reserve for fiscal 2023 and fiscal 2022 amounted to Rs. 981.2 million and Rs. (397.7) million respectively. At year-end fiscal 2023, loss of Rs. 6.3 million (at year-end fiscal 2022: loss of Rs. 4.1 million) recorded in cash flow hedge reserve is expected to be reclassified into earnings during the next 12 months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations or the addition of other hedges subsequent to year-end fiscal 2023. During fiscal 2023 and fiscal 2022, there were no gains/(losses) reclassified from cash flow hedge reserve into earnings on account of discontinuance of cash flow hedges. At year-end fiscal 2023, the maximum length of time over which the Group was hedging its exposure to the variability in future cash flows was 129 months (year-end fiscal 2022: 107 months). At year-end fiscal 2023, accumulated cash flow hedge reserve was Rs. 544.4 million (year-end fiscal 2022: Rs. (452.0) million). During fiscal 2023, net amount reclassified from accumulated cash flow hedge reserve to earnings was Rs. 15.1 million (fiscal 2022: Rs. 0.2 million).

 

Additionally, the Group has also hedged the foreign currency exposure of its net investment in foreign operations through currency forward contracts of a notional amount of Rs. 47,036.0 million at March 31, 2023 (March 31, 2022: Rs. 43,202.9 million). The gross positive and negative fair values of these hedging instruments were Rs. 354.6 million (March 31, 2022: Rs. 218.9 million) and Rs. (49.1) million (March 31, 2022: Rs. (227.8) million) respectively and the credit exposure was Rs. 1,690.7 million at March 31, 2023 (March 31, 2022: Rs. 1,288.8 million).

 

As per the Basel III Regulations, banks may adopt the comprehensive approach, which allows fuller offset of collateral against exposures, by effectively reducing the exposure amount by the value ascribed to the collateral. Therefore, mark-to-market receivable has been fully off-set against the collateral received from the counterparty and the excess collateral posted over the net mark-to-market payable is reckoned as exposure. Since the collateral received is counterparty wise and not product wise, the derivative exposure reported above has not been adjusted for the collateral received/posted.

 

At March 31, 2023, collateral utilized against mark-to-market receivable of the Bank was Rs. 11,775.9 million (March 31, 2022: Rs. 7,762.9 million), excess collateral posted over net mark-to-market payable was Rs. 1,118.2 million (March 31, 2022: Rs. 1,926.9 million) and the net credit exposure post collateral netting on forex and derivatives was Rs. 779,476.0 million (March 31, 2022: Rs. 596,673.7 million).

 

14.       Tax contingencies

 

Various tax-related legal proceedings are pending against the Group at various levels of appeal either with the tax authorities or in the courts. Where, after considering all available information, a liability requires accrual in the opinion of management, the Group accrues such liability.

 

Where such proceedings are sufficiently advanced to enable management to assess that a liability exists and are subject to reasonable estimation, management records its best estimate of such liability. The contested tax demands are adjusted by the tax authorities against refunds due to the Group on favorable resolution of other years’ appeals/completion of assessments or paid or kept in abeyance in accordance with the terms of the stay order. The payment/adjustment/stay does not prejudice the outcome of the appeals filed by the Group. The tax payments are recorded as tax paid under other assets.

 

At March 31, 2023, the Group has assessed its contingent tax liability at an aggregate of Rs. 82,515.2 million (March 31, 2022: Rs. 84,771.4 million), mainly pertaining to income tax, service tax, goods and service tax and sales tax/ value added tax demands by the Indian tax authorities for past years. The Group has appealed each of these tax demands. Based on consultation with counsel and favorable decisions in the Group’s own or other similar cases as set out below, the Group’s management believes that the tax authorities are not likely to be able to substantiate their tax assessments and accordingly has not provided for these tax demands at March 31, 2023. Disputed tax issues that are classified as remote are not disclosed as contingent liabilities by the Group.

 

F-98

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The Group's contingent liabilities on income tax and interest tax amounted to Rs. 72,410.0 million (March 31, 2022: Rs. 73,191.1 million) which include appeals filed by the Group or the tax authorities, where the Group is relying on favorable precedent decisions of the appellate authorities and counsel opinions. The key disputed liabilities are detailed below:

 

Disallowance of expenses to earn tax free income: Rs. 29,002.9 million (March 31, 2022: Rs. 29,598.3 million) mainly relates to whether interest expenses can be attributed to earning tax-free income. The Group believes that no interest can be allocated thereto as there are no borrowings earmarked for investments in shares/tax free bonds and the interest free funds are sufficient to cover investments in the underlying tax free securities. The Group relies on favorable opinion from counsel and past decisions by the appellate authorities in Group’s own cases and other similar cases.

 

Mark-to-market losses on derivatives: Rs. 15,003.8 million (March 31, 2022: Rs. 15,003.8 million) relates to the disallowance of mark-to-market losses on derivative transactions treated by the tax authorities as notional losses. The Group relies on favorable opinion from the counsel and past decision by the appellate authorities in Group’s own cases and other similar cases, which had allowed the deduction of mark-to-market losses from business income.

 

Provision for operating expense: Rs. 5,258.2 million (March 31, 2022: Rs.5,214.5 Million) relates to disallowance of provision for operating expense by the tax authorities treating it as contingent in nature. The group relies on favorable opinion from counsel and past decisions by the appellate authorities in other similar cases.

 

Interest on perpetual bonds: Rs. 5,145.6 million (March 31, 2022: Rs. 5,962.7 million) relates to the disallowance of interest paid on perpetual bonds. The tax authorities do not deem these as borrowings and therefore the interest paid on these bonds has not been allowed as a deduction. The Group relies on favourable opinion from counsel and the past decision by the appellate authorities in the Group’s own case.

 

Depreciation on leased assets: Rs. 4,723.3 million (March 31, 2022: Rs. 4,744.8 million) relates to the disallowance of depreciation claimed on leased assets due to treatment of the lease transactions as loan transactions by the tax authorities. The Group relies on favorable opinion from the counsel and past decisions by the appellate authorities in Group’s own case and other similar cases.

 

Disallowance of write off in respect of credit cards: Rs. 3,570.9 million (March 31, 2022: Rs. 3,574.9 million) relates to the disallowance of written-off amount for credit cards for claiming bad debt write-offs. It was disallowed on the ground that the credit card business is not a banking business or pertaining to money lending and hence did not fulfill conditions for claim of bad debt write off. The Group has relied on the favourable opinion from counsel and past decision by the appellate authorities in Group’s own case.

 

Interest on non-performing assets: Rs. 3,410.4 million (March 31, 2022: Rs. 3,415.4 million) 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 law has 180 days limit as against 90 days followed by the Bank. The Group has relied on favorable opinion from counsel and past decisions by the appellate authorities in Group’s own and other similar cases.

 

F-99

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Taxability under section 41(4A) of amounts withdrawn from Special Reserve created up to Assessment Year 1997-98: Rs. 1,030.6 million (March 31, 2022: Rs. 1,030.6 million) relates to two special reserve accounts maintained by the Group, which included a special reserve created up to assessment year 1997-98. Withdrawals from the account were assessed as taxable by the tax authorities for assessment years 1998-99 to 2000-01. The Group has received favorable orders in respect of these assessment years. However, the income tax authorities have preferred further appeal against the favourable orders.

 

The Group’s contingent liabilities on service tax and goods and service tax amounted to Rs. 8,888.4 million (March 31, 2022: Rs. 10,236.3 million), which mainly pertain to the demands along with interest and penalty levied by the respective tax authorities. The Group relies on favorable opinion from counsel. The key disputed liabilities are detailed below.

 

Disallowance of input tax credit on interchange fees: Rs. 2,048.0 million (March 31, 2022: Rs. 2,048.0 million) 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. The Group has relied on a favorable opinion from counsel.

 

Service tax on interchange fees: Rs. 1,488.7 million (March 31, 2022: Rs. 1,488.7 million) relates to service tax and interest on interchange fees received by the Bank as an issuing bank. The Group has relied on a favorable opinion from counsel.

 

Service tax on amount retained from contribution: Rs. 1,091.6 million (March 31, 2022: Rs. 1,091.6 million) 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 fund to its contributors. The Group has relied on a favorable opinion from counsel.

 

The Group’s contingent liabilities on sales tax/value added tax amounted to Rs. 1,214.6 million (March 31, 2022: Rs. 1,344.0 million) by various state government authorities. The matters mainly pertain to procedural issues like submission of statutory forms and adhoc additions in turnover. The Group has relied on favorable opinions from the counsels and decisions in own/other cases.

 

Based on judicial precedents in the Group’s and other cases and upon consultation with the tax counsels, the management believes that it is more likely than not that the Group’s tax positions will be sustained. Accordingly, no provision has been made in the accounts.

 

The above mentioned contingent liabilities do not include Rs. 34,988.3 million (March 31, 2022: Rs. 36,173.4 million) considered as remote. Of the total disputed tax demands classified as remote, Rs. 30,493.8 million (March 31, 2022: Rs. 30,753.3 million) mainly pertains to the deduction of bad debts, broken period interest, and levy of penalties, which are covered by favorable decisions by the Supreme Court of India in the Group’s own/other cases and Rs. 3,632.3 million (March 31, 2022: Rs. 4,492.1 million) pertains to errors requiring rectification by tax authorities. Therefore, these are not required to be disclosed as contingent liability.

 

F-100

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

15.       Litigation

 

A number of litigations and claims against the Group (and its directors and officers) are pending in various forums. The claims on the Group (and its directors and officers) 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. The Group is also subject to counter-claims arising in connection with its 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 inherent unpredictability of litigation and cases where claims sought are substantial in value, actual cost of resolving litigations may be substantially different than the provision held or the contingent liability recognized. For cases where unfavorable outcome is deemed to be reasonably possible, it is not possible to make an estimate of the possible loss or range of possible losses though aggregate of such amounts are recognized as contingent liabilities. The total amount of claims against the Group where an unfavorable outcome is deemed ‘probable’ was Rs. 2,668.2 million against which provision of Rs. 1,883.8 million has been recognized. The total amount of claims where unfavorable outcome is deemed ‘possible’ was Rs. 5,376.8 million at March 31, 2023, which has been included under contingent liability of the Group. Based upon a review of open matters with its legal counsels including loss contingency on account of such litigation and claims, and classification of such contingency as 'probable', 'possible' or 'remote' and with due provisioning for the relevant litigation and claims, the management believes that the outcome of such matters will not have a material adverse effect on the Group's consolidated financial position, results of operations or cash flows.

 

F-101

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

16.       Segmental Information

 

The following table sets forth, the business segment results for the year ended March 31, 2023 prepared on the basis described in Schedule 18 note 10A.

 

Rupees in million

Sr. no.  Particulars  Retail banking  Wholesale banking  Treasury  Other banking business  Life insurance  Others  Inter- segment adjustments  Total
1  Total income  1,037,753.4  506,148.5  845,369.2  44,640.0  479,301.7  97,259.8  (1,148,684.6)  1,861,788.0
   External revenue  624,349.7  366,629.6  241,880.1  44,192.1  478,712.6  106,023.9  ..  1,861,788.0
   Revenue from transfer pricing on external liabilities and other internal revenue  413,403.7  139,518.9  603,489.1  447.9  589.1  (8,764.1)  (1,148,684.6)  ..
2  Segment results1  175,336.8  157,857.8  140,372.1  10,014.5  8,968.9  42,023.7  (15,509.2)  519,064.6
3  Unallocated expenses                       56,500.0
4  Share of profit from associates                       9,982.9
5  Operating profit1 (2) – (3) + (4)                       472,547.5
6  Income tax expenses (net)/(net deferred tax credit)                       117,934.4
7  Net profit2 (5) – (6)                       354,613.1
   Other information                        
8  Segment assets  6,039,593.7  4,328,743.5  5,129,405.0  836,960.5  2,556,899.0  711,348.4  (114,612.3)  19,488,337.8
9  Unallocated assets                       96,567.2
10  Total assets (8) + (9)                       19,584,905.0
11  Segment liabilities  8,913,545.4  3,472,764.9  3,344,275.63  564,779.63  2,558,472.03  714,679.83  (114,612.3)3  19,453,905.0
12  Unallocated liabilities                       131,000.0
13 

Total capital and liabilities 

(11) + (12)

                       19,584,905.0
14  Capital expenditure  11,682.9  5,251.8  610.6  455.2  1,357.0  1,884.8  ..  21,242.3
15  Depreciation  9,274.5  3,427.2  335.8  405.2  835.1  884.2  (16.4)  15,145.6

1.Profit before tax and minority interest.

2.Includes share of net profit of minority shareholders.

3.Includes share capital and reserves and surplus.

 

F-102

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, the business segment results for the year ended March 31, 2022 prepared on the basis described in Schedule 18 note 10A.

 

Rupees in million

Sr. no.  Particulars 

Retail banking

 

Wholesale banking

 

Treasury

 

Other banking business

 

Life insurance

 

Others

 

Inter- segment adjustments

 

Total

1  Total income  846,392.2  399,714.9  673,210.9  27,784.1  453,402.4  87,332.5  (912,473.8)  1,575,363.2
   External revenue  483,837.6  289,280.0  229,049.3  27,291.1  452,258.2  93,647.0  ..  1,575,363.2
   Revenue from transfer pricing on external liabilities and other internal revenue  362,554.6  110,434.9  444,161.6  493.0  1,144.2  (6,314.5)  (912,473.8)  ..
2  Segment results1  114,003.9  90,529.3  96,744.8  6,271.2  7,905.6  43,499.9  (16,792.0)  342,162.7
3  Unallocated expenses                       (250.0)
4  Share of profit from associates                       7,544.3
5  Operating profit1 (2) – (3) + (4)                       349,957.0
6  Income tax expenses (net)/(net deferred tax credit)                       84,574.4
7  Net profit2 (5) – (6)                       265,382.6
   Other information                        
8  Segment assets  4,876,519.3  3,790,918.0  5,218,960.9  682,866.9  2,440,064.2  516,534.8  (105,216.9)  17,420,647.2
9  Unallocated assets                       105,726.6
10  Total assets (8) + (9)                       17,526,373.8
11  Segment liabilities  7,918,942.5  3,213,907.0  2,933,413.93  541,143.13  2,441,543.23  520,286.43  (105,216.9)3  17,464,019.2
12  Unallocated liabilities                       62,354.6
13 

Total capital and liabilities

(11) + (12)

                       17,526,373.8
14  Capital expenditure  9,901.7  4,453.3  623.1  345.7  732.3  943.8  ..  16,999.9
15  Depreciation  8,068.8  3,130.8  399.6  321.9  669.1  726.3  (16.4)  13,300.1
1.Profit before tax and minority interest.

2.Includes share of net profit of minority shareholders.

3.Includes share capital and reserves and surplus.

 

F-103

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, the business segment results for the year ended March 31, 2021 prepared on the basis described in Schedule 18 note 10A.

 

Rupees in million

Sr. no.  Particulars  Retail banking  Wholesale banking  Treasury  Other banking business  Life insurance 

General

insurance

  Others  Inter- segment adjustments  Total
1  Total income  756,692.9  371,945.3  664,810.9  31,800.6  436,215.9  129,648.3  78,270.3  (857,462.3)  1,611,921.9
   External revenue  414,943.4  259,621.0  265,108.2  29,880.4  435,804.7  126,511.3  80,052.9  ..  1,611,921.9
   Revenue from transfer pricing on external liabilities and other internal revenue  341,749.5  112,324.3  399,702.7  1,920.2  411.2  3,137.0  (1,782.6)  (857,462.3)  ..
2  Segment results1  77,399.7  58,199.5  106,155.9  5,735.7  10,811.8  19,539.5  40,077.1  (11,578.8)  306,340.4
3  Unallocated expenses                          47,500.0
4  Share of profit from associates                          1,442.9
5  Operating profit1 (2) – (3) + (4)                          260,283.3
6  Income tax expenses (net)/(net deferred tax credit)                          56,643.7
7  Net profit2 (5) – (6)                          203,639.6
   Other information                           
8  Segment assets  4,124,986.5  3,259,375.0  4,602,320.5  750,682.3  2,169,189.1  389,436.1  445,994.8  (147,461.6)  15,594,522.7
9  Unallocated assets                          143,599.7
10  Total assets (8) + (9)                          15,738,122.4
11  Segment liabilities  6,869,207.9  2,821,639.2  2,480,180.33  639,123.33  2,170,346.23  392,588.73  449,893.83  (147,461.6)3  15,675,517.8
12  Unallocated liabilities                          62,604.6
13 

Total capital and liabilities 

(11) + (12)

                          15,738,122.4
14  Capital expenditure  9,228.1  4,745.0  866.6  401.2  400.1  773.0  745.2  ..  17,159.2
15  Depreciation  7,249.4  2,859.8  481.0  323.3  598.0  1,306.0  599.6  (16.4)  13,400.7
1.Profit before tax and minority interest.

2.Includes share of net profit of minority shareholders.

3.Includes share capital and reserves and surplus.

 

The Bank has pursued a conscious strategy of increasing the share of retail deposits and re-balancing the funding mix. Accordingly, retail deposits have been considerably higher than retail advances. Accordingly, segment liabilities of the retail business segment were higher as compared to segment assets for above periods.

 

F-104

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

17.       Revenue from contracts with customers

 

The Group recognizes the revenue from contracts with customers primarily in the line item ‘commission, exchange and brokerage’ of ‘Schedule 14 - Other income’. The primary components of commission, exchange and brokerage are transaction banking fee, lending linked fee, fund management fee, commercial banking fee, securities brokerage income and third party products distribution fee.

 

The transaction banking fee primarily includes card related fee such as interchange fee, joining fee and annual fee, income on ATM transactions, deposit accounts related transaction charges and charges for normal transaction banking services and fee on cash management services, commission on bank guarantees, letters of credit and bills discounting. The lending linked fee primarily includes loan processing fee and fee on foreclosure/prepayment of loans. The fund management fee includes the income earned by the Bank’s asset management subsidiary on mutual fund schemes and by the private equity fund management subsidiary on private equity funds. The brokerage income earned by the Bank’s securities broking subsidiary on securities transactions by its customers is included in the securities brokerage income. The third party products distribution fee primarily includes income earned on distribution of products such as mutual funds, insurance products and bonds.

 

The revenue is recognized at the time when the performance obligation under the terms of contractual arrangement is completed. The Group generally recognizes the revenue either immediately upon completion of services or over time as the Group performs the services. In cases where the consideration is received in advance from customers by the Group, a liability is recorded and the same is subsequently recognized as revenue over the contract period or on completion of the performance obligation under the contract. The Group does not have any significant contract assets and contract liabilities at March 31, 2023 and March 31, 2022.

 

The segment-wise breakup of the above components of the Group’s revenue for the year ended March 31, 2023 is given below.

Rupees in million

Sr.

No.

  Nature  Retail
Banking
  Wholesale
Banking
  Treasury  Other banking business  Life insurance  Others  Inter segment adjustment  Total
1  Transaction banking fee   75,390.4  22,871.7   ..   1,156.2   ..   37.5   (632.5)  98,823.3
2  Lending linked fee    23,659.0   13,403.0   ..   1,172.9   5.8   1,628.5   (253.8)  39,615.4
3  Fund management fee    ..   ..   ..   ..   ..   27,550.4   (0.6)  27,549.8
4  Securities brokerage income   ..   ..   ..   ..   ..   12,563.0   (6.8)  12,556.2
5  Third party products distribution fee    9,390.9   ..   ..   0.4   ..   6,532.1   (5,673.4)  10,250.0
6  Others   811.3   1,342.7   10.2   408.2   ..   5,348.1   (230.5)  7,690.0
   Total    109,251.6   37,617.4   10.2   2,737.7   5.8   53,659.6   (6,797.6)  196,484.7

1.Out of the total revenue of Rs. 196,484.7 million, amount of revenue recognized point in time is Rs. 177,416.7 million and amount of revenue recognized over the period is Rs. 19,068.0 million.

 

F-105

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The segment-wise breakup of the above components of the Group’s revenue for the year ended March 31, 2022 is given below.

 

       Rupees in million 

Sr. No.  Nature  Retail
Banking
  Wholesale
Banking
  Treasury  Other banking business  Life insurance  Others  Inter segment adjustment  Total
1  Transaction banking fee  59,375.0  19,482.6  ..  799.6  ..  23.5  (783.1)  78,897.6
2  Lending linked fee   20,290.7  11,551.6  ..  540.6  ..  932.0  (274.8)  33,040.1
3  Fund management fee    ..   ..  ..  18.1  ..  24,634.3  (0.5)  24,651.9
4  Securities brokerage income   ..   ..  ..  ..  ..  15,526.0  (6.8)  15,519.2
5  Third party products distribution fee   11,166.9   ..  ..  0.6  ..  5,740.8  (7,506.0)  9,402.3
6  Others  2,754.7  1,576.0  13.8  455.1  4.6  6,576.4  (7.8)  11,372.8
   Total   93,587.3  32,610.2  13.8  1,814.0  4.6  53,433.0  (8,579.0)  172,883.9
1.Out of the total revenue of Rs. 172,883.9 million, amount of revenue recognized point in time is Rs. 154,800.3 million and amount of revenue recognized over the period is Rs. 18,083.6 million.

 

The segment-wise breakup of the above components of the Group’s revenue for the year ended March 31, 2021 is given below.

 

       Rupees in million

Sr. No.  Nature  Retail
Banking
  Wholesale
Banking
  Treasury  Other banking business  Life insurance  General insurance  Others  Inter segment adjustment  Total
1  Transaction banking fee  47,821.6  17,466.5                        ..  707.1                         ..                  ..              10.2                (505.8)      65,499.6
2  Lending linked fee   16,714.2  8,387.1   ..  395.4   ..   ..  603.4  (135.3)  25,964.8
3  Fund management fee    ..   ..   ..  1.4   ..   ..  20,424.7  (0.6)  20,425.5
4  Securities brokerage income  ..   ..   ..  ..   ..   ..  15,045.2  (198.6)  14,846.6
5  Third party products distribution fee  10,595.8  110.3   ..  1.2   ..   ..  4,099.6  (9,046.4)  5,760.5
6  Others  1,767.8  1,190.0  702.9  299.7  3.9   ..  3,979.4  (210.1)  7,733.6
   Total   76,899.4  27,153.9  702.9  1,404.8  3.9   ..  44,162.5  (10,096.8)  140,230.6
1.Out of the total revenue of Rs. 140,230.6 million, amount of revenue recognized point in time is Rs. 124,824.7 million and amount of revenue recognized over the period is Rs. 15,405.9 million.

 

F-106

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

18.       Employee Stock Option Scheme

 

The following table sets forth a summary of the Bank’s stock options outstanding at March 31, 2023.

 

   Number of options  Weighted-average exercise price per share (Rs.)  Weighted-average remaining contractual life (Number of years) 

Aggregate intrinsic value

(Rs. in million)

Outstanding at the beginning of the year   237,197,999  310.82  5.12  99,501.6
Add: Granted during the year   25,793,500  747.92      
Less: Lapsed during the year, net of re-issuance   3,921,340  568.36      
Less: Exercised during the year   34,044,356  276.72      
Outstanding at the end of the year   225,025,803  361.60  4.43  116,036.0
Options exercisable   172,938,533  289.69  4.03  101,611.0

 

The following table sets forth a summary of the Bank’s stock options outstanding at March 31, 2022.

 

   Number of options  Weighted-average exercise price per share (Rs.)  Weighted-average remaining contractual life (Number of years) 

Aggregate intrinsic value

(Rs. in million)

Outstanding at the beginning of the year   246,590,972  276.14  5.86  75,447.4
Add: Granted during the year   25,550,350  570.43      
Less: Lapsed during the year, net of re-issuance   2,164,335  444.41      
Less: Exercised during the year   32,778,988  243.44      
Outstanding at the end of the year   237,197,999  310.82  5.12  99,501.6
Options exercisable   177,170,739  264.69  4.91  82,491.6

 

Total fair value of options vested was Rs. 4,630.2 million for the year ended March 31, 2023, Rs. 4,145.3 million for the year ended March 31, 2022 and Rs. 3,555.6 million for the year ended March 31, 2021.

 

Total aggregate intrinsic value of options exercised was Rs. 19,325.5 million for the year ended March 31, 2023, Rs. 15,094.0 million for the year ended March 31, 2022 and Rs. 7,390.2 million for the year ended March 31, 2021.

 

The total compensation cost related to non-vested awards not yet recognized at March 31, 2023 and March 31, 2022 was Rs. 4,062.2 million and Rs. 3,086.4 million respectively and the weighted-average period over which it is expected to be recognized was 1.51 years and 1.53 years respectively.

 

F-107

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth a summary of stock options exercisable at March 31, 2023.

 

Range of exercise price

(Rupees per share)

  Number of options  Weighted- average exercise price per share (Rs.) 

Weighted-average remaining contractual life

(Number of years)

 

Aggregate intrinsic value

(Rs. in million)

60-199  7,202,993  160.84  1.85  5,160.3
200-399  133,303,238  261.30  4.30  82,108.7
400-599  32,398,912  434.71  3.41  14,337.8
600-799  29,190  742.88  4.60  3.9
800-999  4,200  810.25  4.81  0.3

 

The following table sets forth a summary of stock options exercisable at March 31, 2022.

 

Range of exercise price

(Rupees per share)

  Number of options  Weighted- average exercise price per share (Rs.) 

Weighted-average remaining contractual life

(Number of years)

 

Aggregate intrinsic value

(Rs. in million)

60-199  11,245,113  160.69  2.52  6,405.4
200-399  148,506,165  256.43  5.24  70,372.0
400-599  17,419,461  402.26  3.62  5,714.2

 

The following table sets forth a summary of the Bank’s unvested stock options outstanding at March 31, 2023.

 

   Number of options  Weighted-average fair value per share at grant date (Rupees)
Unvested at April 1, 2022  60,027,260  172.61
Add: Granted during the year  25,793,500  291.15
Less: Vested during the year  29,953,785  154.58
Less: Forfeited during the year  3,779,705  229.14
Unvested at March 31, 2023  52,087,270  237.58

 

The following table sets forth a summary of the Bank’s unvested stock options outstanding at March 31, 2022.

 

   Number of options  Weighted-average fair value per share at grant date (Rupees)
Unvested at April 1, 2021  69,454,030  130.30
Add: Granted during the year  25,550,350  227.75
Less: Vested during the year  32,901,210  125.99
Less: Forfeited during the year  2,075,910  174.60
Unvested at March 31, 2022  60,027,260  172.61

 

F-108

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth for the periods indicated, the key assumptions used to estimate the fair value of options.

 

   Year ended March 31,
   2023  2022  2021
Risk-free interest rate   5.99% to 7.37%  5.34% to 6.53%  4.83% to 5.74%
Expected term   3.23 years to 5.23 years  3.55 years to 5.55 years  3.45 years to 5.45 years
Expected volatility          34.79% to 38.98%         35.38% to 39.41%         35.19% to 37.31%
Expected dividend yield               0.27% to 0.72%              0.18% to 0.30%              0.26% to 0.30%

 

Risk free interest rates over the expected term of the option are based on the government securities yield in effect at the time of the grant.

 

The expected term of an option is computed based on the vesting term and exercise period as well as expected exercise behavior of the employees who receive the option, estimated based on the historical stock option exercise pattern of the Bank.

 

Expected volatility during the estimated expected term of the option is based on historical volatility determined based on observed market prices of the Bank's publicly traded equity shares.

 

Expected dividends during the estimated expected term of the option are based on recent dividend activity.

 

19.       Selected information from Indian GAAP financials

 

The following tables set forth, for the periods indicated, the income statement and balance sheet, by following the guidance of Regulation S-X.

 

  Rupees in million
   Year ended March 31,
   2023  2022  2021
Interest income   1,210,668.1  954,068.7  891,626.6
Interest expense   505,433.9  411,666.7  426,590.9
Net interest income   705,234.2  542,402.0  465,035.7
Provision for loan losses & others   55,482.3  84,354.2  165,723.9
Provision for depreciation on investments   13,917.0  5,412.3  (1,950.0)
Net interest income after provision for loan losses and investments   635,834.9  452,635.5  301,261.8
Non-interest income   651,119.9  621,294.5  720,295.3
Non-interest expense   824,390.2  731,517.3  762,716.7
Income before income tax expense, minority interest and share of profit in associates   462,564.6  342,412.7  258,840.4
Income tax expense   117,934.4  84,574.4  56,643.7
Income before minority interest and share of profit in associates   344,630.2  257,838.3  202,196.7
Add: Share of profit in associates  9,982.9  7,544.3  1,442.9
Net profit for the year before minority interest  354,613.1  265,382.6  203,639.6
Less: Minority interest   14,246.7  14,281.6  19,796.4
Net income   340,366.4  251,101.0  183,843.2

  Year ended March 31,
   2023  2022  2021
Earnings per equity share: (Rs.)         
Basic  48.86  36.21  27.26
Diluted  47.84  35.44  26.83
Weighted average number of equity shares used in computing earnings per equity share (millions)         
Basic  6,966  6,934  6,743
Diluted  7,105  7,076  6,842

 

 

F-109

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

  Rupees in million

   At March 31,
   2023  2022
Assets      
Cash and cash equivalents   1,364,564.9  1,831,259.8
Investments1,2   6,395,519.7  5,670,977.2
Loans, net1,2   10,838,663.2  9,203,081.4
Property, plant and equipment   109,261.2  105,495.6
Goodwill   1,013.3  1,013.3
Deferred tax asset (net)   76,194.4  79,484.8
Interest accrued, outstanding fees and other income   161,497.2  115,466.2
Assets held for sale   428.8  558.5
Other assets   637,762.3  519,037.0
Total assets   19,584,905.0  17,526,373.8
     
Liabilities     
Interest-bearing deposits   10,450,599.7  9,280,377.2
Non-interest bearing deposits   1,657,721.8  1,633,280.8
Short-term borrowings and trading liabilities   578,221.6  418,828.7
Long-term debt   1,312,396.5  1,197,198.1
Other liabilities   3,374,119.9  3,116,355.2
Total liabilities   17,373,059.5  15,646,040.0
       
Minority interest   66,867.5  59,808.9
Stockholders’ equity   2,144,978.0  1,820,524.9
Total liabilities and stockholders’ equity   19,584,905.0  17,526,373.8

1.Includes investments and loans amounting to Rs. 261,206.3 million (March 31, 2022: Rs. 122,799.8 million) pledged as security towards short-term borrowings amounting to Rs. 258,992.9 million (March 31, 2022: Rs. 122,268.9 million).

2.Includes investments and loans amounting to Rs. 246,812.5 million (March 31, 2022: Rs. 243,364.2 million) pledged as security towards long-term borrowings amounting to Rs. 239,969.1 million (March 31, 2022: Rs. 237,157.5 million).

 

The following tables set forth, for the periods indicated, the statement of stockholders’ equity.

 

  Rupees in million

   Equity share capital  Employee stock options outstanding  Securities premium 

Revenue and

other reserves1

 

Other special reserves2

Balance at April 1, 2022                             13,899.7                                      2,664.1                         497,645.1                               597,944.4  708,371.6
Proceeds from issue of share capital                                    68.1  ..                             9,576.3  ..  ..
Additions during the year     ..                                      5,172.4                                    8.13                               200,193.54  111,924.4
Deductions during the year     ..                                       (227.7)5                                      ..                                      (55.0)                                       (2,207.0)6
Balance at March 31, 2023   13,967.8  7,608.8  507,229.5  798,082.9  818,089.0

1.Includes revenue and other reserves and balance in profit and loss account.

2.Includes statutory reserve, special reserve, unrealized investment reserve, capital reserve fund, foreign currency translation reserve, revaluation reserve, investment fluctuation reserve and capital redemption reserve.

3.Represents the ESOP cost recognized by the overseas banking subsidiaries under fair value method.

4.Includes Rs. 1,482.1 million towards addition in fair value change account of ICICI Prudential Life Insurance Company Limited.

5.Represents amount transferred to Securities Premium on account of exercise of employee stock options or to General Reserve on lapses of employee stock options during the year.

6.Represents amount transferred from revaluation reserve to general reserve on account of incremental depreciation charge on revaluation, revaluation surplus on premises sold or loss on revaluation on account of certain assets which were held for sale.

 

F-110

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Rupees in million

   Equity share capital  Employee stock options outstanding  Securities premium 

Revenue and

other reserves1

 

Other special reserves2

Balance at April 1, 2021   13,834.1  31.0            489,694.7  456,653.6  615,661.6
Proceeds from issue of share capital   65.6  ..  7,923.3  ..  ..
Additions during the year   ..  2,642.2  27.13  144,130.1  95,590.6
Deductions during the year   ..  (9.1)4                  ..           (2,839.3)5   (2,880.6)6
Balance at March 31, 2022   13,899.7  2,664.1  497,645.1  597,944.4  708,371.6

1.Includes revenue and other reserves and balance in profit and loss account.

2.Includes statutory reserve, special reserve, unrealized investment reserve, capital reserve fund, foreign currency translation reserve, revaluation reserve, investment fluctuation reserve and capital redemption reserve.

3.Represents the ESOP cost recognized by the overseas banking subsidiaries under fair value method.

4.Represents amount transferred to Securities Premium on account of exercise of employee stock options or to General Reserve on lapses of employee stock options during the year.

5.Includes Rs. 2,471.4 million towards reduction in fair value change account of ICICI Prudential Life Insurance Company Limited.

6.Represents amount transferred from revaluation reserve to general reserve on account of incremental depreciation charge on revaluation, revaluation surplus on premises sold or loss on revaluation on account of certain assets which were held for sale.

 

Rupees in million

   Equity share capital  Employee stock options outstanding  Securities premium 

Revenue and

other reserves1

 

Other special reserves2

Balance at April 1, 2020   12,947.7  34.9              335,899.4  308,804.0  571,914.7
Proceeds from issue of share capital   886.4  ..            154,419.43  ..  ..
Additions during the year   ..  ..                     77.64  147,991.05,6  54,078.3
Deductions during the year   ..  (3.9)7                  (701.7)           (141.4)   (10,331.4)6,8
Balance at March 31, 2021   13,834.1  31.0  489,694.7  456,653.6  615,661.6

1.Includes revenue and other reserves and balance in profit and loss account.

2.Includes statutory reserve, special reserve, unrealized investment reserve, capital reserve fund, foreign currency translation reserve, revaluation reserve, investment fluctuation reserve, capital redemption reserve and reserve fund.

3.Includes Rs. 149,162.0 million on account of equity shares issued under Qualified Institutional Placement and Rs. 5,257.4 million (year ended March 31, 2020: Rs. 5,452.1 million) on exercise of employee stock options.

4.Represents the ESOP cost recognized by the overseas banking subsidiaries under fair value method.

5.Includes Rs. 10,725.6 million towards addition in fair value change account of insurance subsidiaries.

6.Includes balance in reserve fund transferred due to closure of Sri Lanka branch and excess balance in Investment Fluctuation Reserve to balance in profit and loss account during the year ended March 31, 2021.

7.Represents amount transferred to Securities Premium on account of exercise of employee stock options or to General Reserve on lapses of employee stock options during the year.

8.Includes amount transferred from revaluation reserve on account of incremental depreciation charge on revaluation and revaluation surplus on premises sold or loss on revaluation on account of certain assets which were held for sale.

 

The following table sets forth, for the periods indicated, the movement in profit and loss account.

Rupees in million

   March 31, 2023  March 31, 2022  March 31, 2021
Balance at the beginning of the year   508,988.5  385,155.9  267,999.9
Additions during the year   340,366.4  251,101.0  183,843.2
Dividend   (34,794.5)  (13,852.3)  ..
Deductions during the year1   (158,173.6)  (113,416.1)2  (66,687.2)
Balance at the end of the year  656,386.8  508,988.5  385,155.9
1.Includes appropriations/transfers to other reserves.

2.Also includes reduction due to discontinuation of ICICI Lombard General Insurance Company from consolidation during the fiscal 2022.

 

F-111

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The cash flow statement is in compliance with the requirements of IAS 7 – Cash Flow Statements.

 

The following table sets forth, for the periods indicated, the supplementary information to the cash flow statements.

Rupees in million

   Year ended March 31,
   2023  2022  2021
Conversions of loans to investments   7,003.4  204.3  3,064.9
Interest paid   499,568.0  408,972.7  432,471.2
Interest and dividend received   1,167,957.4  956,304.8  892,770.6

 

20.       Estimated fair value of financial instruments

 

The Group’s financial instruments include non-derivative financial assets and liabilities as well as derivative instruments. Fair value estimates are generally subjective in nature and are made at a specific point in time based on the characteristics of the financial instruments and relevant market information. Quoted market prices are used, wherever available. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot necessarily be substantiated by comparison to independent markets and in many cases, may not be realized in an immediate sale of the instruments.

 

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered as financial instruments. Disclosure of fair values is not required for certain items such as investments accounted for under the equity method of accounting, obligations for pension and other post-retirement benefits, income tax assets and liabilities, property and equipment, pre-paid expenses, insurance liabilities, core deposit intangibles and the value of customer relationships associated with certain types of consumer loans, particularly the credit card portfolio and other intangible assets. Accordingly, the aggregate fair value amount presented does not purport to represent and should not be considered representative of the underlying market or franchise value of the Group. In addition, because of differences in methodologies and assumptions used to estimate fair values, the Group’s fair values should not be compared to those of other financial institutions.

 

The methods and assumptions used by the Group in estimating the fair values of financial instruments are described below.

 

Cash and balances with banks and money at call and short notice

 

The carrying amounts reported in the balance sheet approximate fair values because a substantial amount of the portfolio has maturities of less than three months.

 

Investments

 

The fair values of investments are generally determined based on quoted price or based on discounted cashflows. For certain debt and equity investments that do not trade on established exchanges and for which markets do not exist, estimates of fair value are based upon management’s review of the investee’s financial results, condition and prospects.

 

F-112

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Advances

 

The fair values of commercial and consumer loans are estimated by discounting the contractual cash flows using interest rates currently offered on various loan products. The carrying value of certain other loans approximate fair value due to the short-term nature of these loans. The advances are classified as Level 3 instruments in view of absence of any significant market observable data for valuation of these instruments.

 

Deposits

 

The carrying amount of deposits with no stated maturity is considered to be equal to their fair value. Fair value of fixed rate time deposits is estimated by discounting contractual cash flows using interest rates currently offered on the deposit products. Fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of alternative forms of funding (core deposit intangibles). The deposits are classified as Level 3 instruments in view of absence of any significant market observable data for valuation of these instruments.

 

Borrowings

 

The fair value of the Group’s debt is estimated by discounting future contractual cash flows using appropriate interest rates and credit spreads. The carrying value of certain other borrowings approximates fair value due to the short-term nature of these borrowings. The borrowings are classified as Level 2 instruments in view of the inputs used like interest rates, yield curves and credit spreads, which are available from public sources like Reuters, Bloomberg, Financial Benchmark India Private Limited and Fixed Income Money Markets & Derivatives Association of India.

 

The following table sets forth, for the periods indicated, the listing of the fair value by category of financial assets and financial liabilities.

 

Rupees in million 

   At March 31, 2023  At March 31, 2022
   Carrying value  Estimated fair value  Carrying value  Estimated fair value
Financial assets            
Cash and balances with Reserve Bank of India   686,489.4  686,489.4  1,096,307.1  1,096,307.1
Balances with banks and money at call and short notice   678,075.5  678,075.5  734,952.8  734,952.8
Investments    6,395,519.7   6,636,987.2  5,670,977.2  6,030,990.1
Advances    10,838,663.2   10,919,209.8  9,203,081.4  9,280,758.0
Other assets    760,213.7   760,213.7  597,430.8  597,430.8
Total   19,358,961.5  19,680,975.6  17,302,749.3  17,740,438.8
Financial liabilities            
Interest-bearing deposits    10,450,594.5   10,457,726.0  9,280,366.5  9,324,755.9
Non-interest-bearing deposits    1,657,727.0   1,657,727.0  1,633,291.4  1,633,291.4
Borrowings    1,890,618.1   1,863,193.1  1,616,026.8  1,616,877.2
Other liabilities and provisions    683,368.0   683,368.0  681,328.9  681,328.9
Total   14,682,307.6  14,662,014.1  13,211,013.6  13,256,253.4

 

F-113

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

21.       Differences between Indian GAAP and U.S. GAAP

 

The consolidated financial statements of the Group are prepared in accordance with Indian GAAP, which differs in certain significant aspects from U.S. GAAP.

 

The following tables summarize the significant adjustments to consolidated net income and stockholders’ equity which would result from the application of U.S. GAAP.

 

1.    Net income reconciliation

Rupees in million 

   Note  Year ended March 31,
      2023  2022  2021
Consolidated profit after tax as per Indian GAAP excluding minority interests1      340,366.4  251,101.0  183,843.2
             
Adjustments on account of:            
             
Allowance for credit losses   (a)  15,616.7  22,853.5  48,654.4
             
Business combinations   (b)  177.6  (634.9)  (1,806.2)
             
Consolidation   (c)  (123,486.7)  248,275.4  6,215.0
             
Valuation of debt and equity securities   (d)  (138.0)  10,930.7  (11,626.2)
             
Amortization of fees and costs   (e)  6,525.7  3,925.8  4,298.8
             
Accounting for derivatives   (f)  (825.7)  53.9  1,328.4
             
Accounting for compensation costs   (g)  (1,246.8)  (2,270.6)  (4,352.7)
             
Accounting for securitization   (h)  (24.0)  (532.5)  715.4
             
Income tax benefit/(expense)   (i)  10,893.6  (21,701.9)  (12,148.5)
             
Others   (j)  2,134.9  (207.8)  (1,420.9)
             
Total impact of all adjustments      (90,372.7)  260,691.6  29,857.5
             
Net income as per U.S. GAAP attributable to ICICI Bank stockholders      249,993.7  511,792.6  213,700.7
Net income as per U.S. GAAP attributable to non-controlling interests1      10,224.3  13,282.7  20,443.0
Total net income as per U.S. GAAP      260,218.0  525,075.3  234,143.7
             
Basic earnings per share (Rs.)            
             
Indian GAAP (consolidated)      48.86  36.21  27.26
             
U.S. GAAP (consolidated)      35.89  73.81  31.69
             
Diluted earnings per share (Rs.)            
             
Indian GAAP (consolidated)      47.84  35.44  26.83
             
U.S. GAAP (consolidated)      35.17  72.41  31.23
1.Profit attributable to minority interests as per Indian GAAP was Rs. 14,246.7 million (March 31, 2022: Rs. 14,281.6 million and March 31, 2021: Rs. 19,796.4 million).

 

F-114

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

2.    Stockholders’ equity reconciliation

Rupees in million

      At March 31,
   Note  2023  2022
Consolidated net worth as per Indian GAAP excluding minority interests1      2,144,977.9  1,820,524.9
          
Adjustments on account of:         
          
Allowance for credit losses   (a)  38,841.3  23,295.9
          
Business combinations   (b)  29,951.6  29,774.0
          
Consolidation
  (c)   218,840.2  349,733.2
          
Valuation of debt and equity securities   (d)  (22,407.9)  14,731.2
          
Amortization of fees and costs   (e)  39,518.2  33,068.2
          
Accounting for derivatives   (f)  1,055.1  1,880.8
          
Accounting for compensation costs   (g)  ..  ..
          
Accounting for securitization   (h)  (1,290.4)  (1,371.7)
          
Income tax assets/(liabilities)   (i)  31,921.9  11,451.2
          
Others   (j)  (8,331.5)  (9,654.8)
          
Total impact of all adjustments      328,098.5  452,908.0
          
ICICI Bank stockholders’ equity as per U.S. GAAP      2,473,076.4  2,273,432.9
Non-controlling interests1      18,836.5  16,358.6
Total equity as per U.S. GAAP      2,491,912.9  2,289,791.5
1.Net worth, representing capital and reserves and surplus, attributable to minority interests as per Indian GAAP was Rs. 66,867.5 million (March 31, 2022: Rs. 59,808.9 million).

 

a)Allowance for credit losses

 

The differences in the credit losses between Indian GAAP and U.S. GAAP are primarily on account of:

 

i.Difference in the credit losses on restructured assets, including losses on certain loans transferred to asset reconstruction companies not accounted for as a sale under U.S. GAAP.

 

ii.Expected credit losses on commercial loans based on individual assessment, which do not share similar risk characteristics with other loans under U.S. GAAP as compared to provisions based on graded provisioning rates on non-performing loans, subject to minimum provisioning rates prescribed by the Reserve Bank of India guidelines under Indian GAAP for the Bank.

 

iii.Expected credit losses on the loans sharing similar risk characteristics under U.S. GAAP as compared to prescriptive/graded provisioning, subject to minimum provisioning rate, as per the Reserve Bank of India guidelines under Indian GAAP for the Bank.

 

iv.Expected credit losses on non-cancellable loan commitments, non-fund exposures and other financial assets under U.S. GAAP as compared to estimated provision on expected devolvement of guarantees on certain borrowers classified as non-performing under Indian GAAP for the Bank.

 

F-115

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Credit losses on restructured loans, including losses on certain loans transferred to asset reconstruction companies not accounted for as a sale under U.S. GAAP

 

Under Indian GAAP, certain loans restructured by the Bank (excluding loans given for implementation of projects in the infrastructure sector and non-infrastructure sector and which are delayed up to a specified period and certain other types of loans explained below) by re-scheduling principal repayments and/or the interest are classified as non-performing as per the Reserve Bank of India guidelines. Provisions as applicable to non-performing loans, are made on restructured loans. In addition to this, provision for the diminution in fair value of the restructured loans is also made by the Bank. The diminution in fair value is computed by discounting both sets of cash flows, based on interest rate prior to restructuring and post restructuring, at the existing rate of interest charged on the loan before the restructuring.

 

Loans restructured under specific guidelines issued by the Reserve Bank of India for Resolution Framework for Covid-19-related Stress and for certain eligible micro, small and medium enterprises and loans restructured with deferment of date of commencement of commercial operations are not classified as non-performing under Indian GAAP. The Bank makes provision on these loans subject to minimum requirements as per the Reserve Bank of India guidelines.

 

Under U.S. GAAP, the credit losses for restructured loans are provided for by discounting expected cash flows at originally contracted interest rates. The credit losses recognized on account of reductions of future interest rates as a part of troubled debt restructurings are accreted as a credit to the provision for loan losses over the tenor of the restructured loan under U.S. GAAP. Under U.S. GAAP, additional credit losses based on present value of expected cash flows are made for restructured loans, which are not performing as per the restructured terms.

 

Under Indian GAAP, the loan accounts subjected to restructuring are upgraded to the standard category if the borrower demonstrates, over a minimum period of one year, the ability to repay the loan in accordance with the contractual terms and the borrower gets reinstated to a normal level of general provisions for standard loans/risk weights for capital adequacy computations. The period of one year is from the commencement of the first payment of principal or interest whichever was later on the credit facility with the longest period of moratorium under the restructured terms. The restructured loans can be upgraded to standard category only after satisfactory performance during the ‘specified period’, that is, the date by which at least certain percentage of the outstanding principal debt as per the resolution plan and interest capitalization sanctioned as part of the restructuring, if any, is repaid or one year from the commencement of the first payment of interest or principal on the credit facility with longest period of moratorium under the terms of the resolution plan, whichever is later. Further, large restructured accounts (accounts where the aggregate exposure of lenders is Rs. 1.00 billion and above) would qualify for an upgrade if in addition to demonstration of satisfactory payment performance as mentioned above, the loan is rated at investment grade (BBB- equivalent or better) at the end of the ‘specified period’ by credit rating agencies accredited with the Reserve Bank of India. However, the process of upgrading under U.S. GAAP is not rule-based and the timing of upgrades may differ across individual loans.

 

The Bank transfers certain loans to borrower specific funds/trusts managed by asset reconstruction companies in exchange for security receipts issued by the funds/trusts, as part of the strategy for resolution of non-performing assets. The funds/trusts have been set up by the asset reconstruction companies under enacted debt recovery legislation in India and they aim to improve the recoveries of banks on non-performing assets by aggregating lender interests and speeding up the enforcement of security interests by lenders. While under Indian GAAP, such transfers are recognized as a sale, under U.S. GAAP these transfers are not recognized as a sale due to the following reasons:

 

F-116

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

• Certain transfers do not qualify for sale accounting under FASB ASC Topic 860, “Transfers and servicing”, as the Bank retains the risks and rewards in such transfers.

 

• Certain transfers were impacted by FASB ASC Subtopic 810-10, “Consolidation – overall”. The funds/trusts to which these loans have been transferred are variable interest entities within the definition contained in ASC Subtopic 810-10. As the Bank is the ‘Primary Beneficiary’ of certain of these funds/trusts, it is required under U.S. GAAP to consolidate these entities.

 

Credit losses on commercial loans which do not share similar risk characteristics

 

These differences primarily relate to provisions on non-performing commercial loans under Indian GAAP and credit loss provisions on commercial loans which do not share similar risk characteristics under U.S. GAAP. This difference arises due to a difference in methodology applied to calculate the credit losses under U.S. GAAP and Indian GAAP.

 

Under Indian GAAP, non-performing loans are classified into three categories: sub-standard assets, doubtful assets and loss assets. A loan is classified as sub-standard if interest payments or installments have remained overdue for more than 90 days. A provision of 15.0% is required for all sub-standard loans. An additional provision of 10.0% is required for accounts that are unsecured from the time of origination. A loan is classified as a doubtful loan if it has remained sub-standard for more than twelve months or if the value of security charged to the Bank has eroded and fallen below 50% of the outstanding loan. A 100% provision/write-off is required with respect to the unsecured portion of the doubtful loans. A 100% provision is required for the secured portion of loans classified as doubtful for more than three years and is recorded in a graded manner as the three-year period occurs. A loan is classified as a loss asset if the losses on it are identified or the loan is considered uncollectible. For loans classified as a loss, the entire loan is required to be provided for. In accordance with regulatory package announced by the Reserve Bank of India, consequent to outbreak of Covid-19 pandemic, the Bank extended the option of payment of moratorium on loans to its borrowers. The moratorium period, wherever granted, was excluded from the determination of number of days past-due for the purpose of asset classification as per the Reserve Bank of India guidelines.

 

Under U.S. GAAP, commercial loans representing significant individual credit exposures (both funded and non-funded), are individually evaluated to ascertain if they share similar risk characteristics, based on the ability of the borrower to repay the contractual amounts due to the Bank, including considerations of both quantitative and qualitative criteria such as the account conduct, future prospects, repayment history and financial performance. The credit losses for commercial loans, ascertained to not share the similar risk characteristics, are estimated on an individual basis and are based on either the present value of expected future cash flows or in case of a collateral dependent loan, the net realizable value of the collateral net of cost to sell, if any.

 

Under Indian GAAP, the Bank holds specific provisions on certain performing commercial loans and advances based on the Reserve Bank of India guidelines/direction.

 

Under Indian GAAP, accounts where the Bank had invoked/implemented strategic debt restructuring under the Reserve Bank of India guidelines were classified as non-performing. Under U.S. GAAP, the Bank opted for fair value option for accounting these loans at fair value through income statement under ASC Subtopic 825-10 “Financial Instruments”. See also– 22. Notes under U.S. GAAP – Fair value accounting of financial interests.

 

Under Indian GAAP, any contractual amount due from the counter-party under derivative contracts, if not collected within 90 days, is required to be reversed through income statement under the Reserve Bank of India guidelines. Under U.S. GAAP, these receivables are analyzed to identify the required credit losses in the same manner as individual credit exposures.

 

F-117

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Credit losses on loans sharing similar risk characteristics

 

Commercial loans

 

Credit losses on commercial loans sharing similar risk characteristics primarily relate to performing commercial loans.

 

Under Indian GAAP, the allowances on the performing portfolios are based on guidelines issued by the Reserve Bank of India. The provisioning requirement is a uniform rate of 0.4% for all standard assets except –

 

·Small and micro enterprise sectors, which attract a provisioning requirement of 0.25%,

 

·Advances to commercial real estate residential and non-residential sectors which attract a provisioning requirement of 0.75% and 1.0% respectively,

 

As per the guidelines issued by the Reserve Bank of India, additional general provision between 0.0%-0.8% is made on outstanding amounts to entities having unhedged foreign currency exposure. The provision range is based on percentage of likely loss due to unhedged foreign currency exposure to their earnings before interest, depreciation and lease rentals, if any. As per the guidelines issued by the Reserve Bank of India, the Bank also makes additional general provision on loans to specific borrowers in specific stressed sectors and on incremental exposure to borrowers identified as per the Reserve Bank of India’s large exposure framework.

 

Under U.S. GAAP, credit losses on the commercial loans sharing similar risk characteristics are accounted on a collective basis. The segmentation for the commercial loans is based on risk characteristics such as customer type, risk rating and delinquency status. The collective assessment begins with a quantitative calculation that considers the likelihood of the borrower defaulting. The quantitative calculation covers expected credit losses over an instrument’s expected life and is estimated by applying probability of default and loss given default. Based on historical default rates, the probabilities of default are derived using a macro-economic scenario over a reasonable and supportable forecast period. The term structure for subsequent periods is built using single year reversion to the long run historical information. The forecasts take into consideration the Group’s economic outlook based on internal as well as external inputs and involve a governance process that incorporates feedback from senior management.

 

Consumer loans

 

Credit losses on consumer loans sharing similar risk characteristics primarily relate to homogenous small balance loans including both performing and non-performing consumer loans under Indian GAAP.

 

Under Indian GAAP, the provision on non-performing consumer loans is made at a pre-determined rate, subject to minimum provision as required under the Reserve Bank of India guidelines. The provision on the performing portfolios are based on guidelines issued by the Reserve Bank of India. The provisioning requirement is a uniform rate of 0.4% for all standard assets except

 

·Farm credit to agriculture and home loan upto a certain amount which attract a provisioning requirement of 0.25%,

 

·Advances to commercial real estate residential and non-residential sectors which attract a provisioning requirement of 0.75% and 1.0% respectively

 

F-118

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Under U.S. GAAP, credit losses on the consumer loans sharing similar risk characteristics are accounted for on collective basis. The segmentation for the consumer loans is based on risk characteristics such as product type, delinquency status, credit scores, and vintage. For agriculture loans, a further segmentation of risk characteristics is also carried out based on direct and indirect agriculture lending categories. The collective assessment begins with a quantitative calculation that considers the likelihood of the borrower defaulting. The quantitative calculation covers expected credit losses over an instrument’s expected life and is estimated by applying probability of default and loss given default. Based on historical default rates, the probabilities of default are derived using a macro-economic scenario over a reasonable and supportable forecast period. The term structure for subsequent periods is built using single year reversion to the long run historical information. The forecasts take into consideration the Group’s economic outlook based on internal as well as external inputs and involve a governance process that incorporates feedback from senior management.

 

Under Indian GAAP, the Bank, on prudent basis, has made contingency provision due to the economic and geopolitical uncertainties. Under US GAAP, the Group makes adjustments to appropriately address these economic circumstances over and above the model output by increasing the probability of default estimates based on management judgement.

 

Credit losses on undrawn commitments, non-fund exposures and other debt securities

 

Under U.S. GAAP, the Bank records a liability for credit losses on non-cancellable undrawn commitments by the Group and non-fund exposures to its borrowers based on the life time expected losses. The credit losses are estimated in accordance with the ASC Topic 326, “Financial Instruments – Credit losses”.

 

Under Indian GAAP, the Bank makes estimated provision on guarantees, above a certain threshold, to its borrowers classified as non-performing based on an assessment of expected devolvement.

 

Under Indian GAAP, the Reserve Bank of India guidelines do not specify the conditions under which the assets may be written-off. The Bank has internal policies for charge off of non-performing loans against loan loss allowances. Commercial loans, are generally charged off against allowances when, based on a borrower-specific evaluation of the possibility of further recovery, the Bank concludes that the balance cannot be collected. The Bank evaluates whether a balance can be collected based on the realizable value of collateral, the results of the Bank’s past recovery efforts, the possibility of recovery through legal recourse and the possibility of recovery through settlement.

 

Small-balance homogenous loans are generally charged off against allowances after predefined periods of delinquency, as follows:

 

Mortgage loans: 3 years of continuous delinquency

 

Other consumer loans: 6 months of continuous delinquency

 

The same criteria are used for charge off of impaired loans under U.S. GAAP.

 

F-119

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, the difference in aggregate expected credit losses between Indian GAAP and U.S. GAAP attributable to the above reconciling items. 

Rupees in million

Reconciling items  Year ended March 31,
  2023  2022  2021
Differences due to expected credit losses on commercial loans classified as troubled debt restructuring under U.S. GAAP (includes cases transferred to asset reconstruction company)  (4,357.5)  (2,979.5)  4,185.6
Differences due to expected credit losses on commercial loans evaluated on individual basis  (8,536.9)  5,868.8  13,788.7
Differences due to expected credit losses on loans evaluated on collective basis  31,333.3  8,963.6  30,275.1
Differences due to expected credit losses on undrawn commitments, non-fund exposures and other financial assets  (2,822.2)  11,000.6  405.0
   15,616.7  22,835.5  48,654.4

 

See note on 22 (f) Loans for detailed discussion on allowance for credit loss. See note on "Consolidated Financial Statements - Schedules to the consolidated financial statements - Schedule 9 - Advances" for Indian GAAP balance sheet presentation.

 

b)Business combinations

 

The differences arising due to business combinations are primarily on account of:

 

i)Accounting for intangible assets and goodwill; and

 

ii)Acquisition of control due to lapse of minority substantive participating rights in acquiree

 

During fiscal 2011, ICICI Bank Limited acquired Bank of Rajasthan Limited through exchange of common stock. The acquisition of Bank of Rajasthan Limited was accounted for under Indian GAAP as per the Reserve Bank of India approved scheme of merger. Under Indian GAAP, the purchase consideration was determined based on the paid-up value of common stock issued. Under U.S. GAAP, the purchase consideration was determined as the fair value of total consideration transferred, based on ASC Topic 805, “Business Combinations”. The impact of this relating to the accounting of business combinations, resulted in an increase in reconciliation differences of Rs. 32,682.7 million in stockholders’ equity reconciliation in fiscal 2011. Under U.S. GAAP, goodwill of Rs. 27,120.9 million and definite life intangible assets of Rs.3,898.0 million were recorded as per ASC 805, “Business Combinations”, and FASB ASC Topic 350, “Intangibles – Goodwill and others”. Under Indian GAAP, no goodwill and intangible assets were recognized as per scheme of merger approved by the Reserve Bank of India. Intangibles recognized under U.S. GAAP due to the above business combinations have been fully amortized.

 

ICICI Lombard General Insurance Company Limited, a general insurance company, was established as a joint venture, which allowed substantive participating rights to a minority shareholder. Under U.S. GAAP, the Bank had been accounting for its investment in ICICI Lombard General Insurance Company Limited as an equity affiliate. During fiscal 2018, the joint venture agreement was terminated, resulting in the Bank acquiring control in ICICI Lombard General Insurance Company Limited without transferring any additional consideration. Under U.S. GAAP, this transaction was accounted using acquisition method for business combination under “ASC Subtopic 805-10, Business Combination – Overall”. Under U.S. GAAP, goodwill was determined by deducting the fair value of net assets acquired from the fair value of equity interest held by the Bank and fair value of minority interest. Accordingly, goodwill of Rs. 142,896.9 million and intangibles of Rs. 15,553.0 million were recorded under U.S. GAAP. The goodwill was allocated to the General insurance segment of the Group. Under Indian GAAP, no specific accounting was required for termination of the above joint venture agreement. During fiscal 2022, the Bank’s holding in ICICI Lombard General Insurance Company Limited has reduced below 50.0% and it ceased to be a subsidiary under ASC Topic 810-Consolidation. Accordingly, the goodwill and unamortized intangibles were de-recognized during fiscal 2022.

 

F-120

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Further, for certain other acquisitions made by the Group, no goodwill and intangibles have been accounted for under Indian GAAP primarily due to accounting for the amalgamation by the pooling of interest method, determination of acquirer for accounting or as per scheme of merger approved by the Reserve Bank of India. However, under U.S. GAAP, goodwill has been accounted for in accordance with FASB ASC Topic 805, “Business Combinations”.

 

Under U.S. GAAP in accordance with FASB ASC Topic 350, the Group does not amortize goodwill and intangibles with infinite life but instead tests the same for impairment at least annually. The annual impairment test under ASC Topic 350 does not indicate an impairment loss for fiscal 2023, 2022 and 2021.

 

Under U.S. GAAP intangible assets with finite useful life are amortized over their estimated useful lives in proportion to the economic benefits consumed in each period.

 

The following table sets forth, for the periods indicated, the differences in net income arising from accounting for business combinations under Indian GAAP and U.S. GAAP.

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Amortization of intangibles  ..  (704.1)  (1,813.7)
Others  177.6  69.2  7.5
Total difference in business combinations  177.6  (634.9)  (1,806.2)

  

c)Consolidation

 

The differences on account of consolidation are primarily on account of:

 

1.Consolidation of life insurance subsidiary;

 

2.Deconsolidation of former general insurance subsidiary

 

3.Equity affiliates and majority owned subsidiaries; and

 

4.Consolidation of variable interest entities.

 

Under Indian GAAP, consolidation is required only if there is ownership of more than one-half of the voting power of an enterprise or control of the composition of the Board of Directors in the case of a company or of the composition of the governing body in case of any other enterprise. Under Indian GAAP, our life insurance subsidiary (ICICI Prudential Life Insurance Company Limited) is consolidated on line-by-line basis. Under U.S. GAAP, ICICI Prudential Life Insurance Company Limited is accounted for by the equity method of accounting as the minority shareholders have substantive participating rights as defined in ASC Subtopic 810-10, “Consolidation – Overall”.

 

In accordance with the Scheme of Arrangement between ICICI Lombard General Insurance Company Limited (ICICI General) and Bharti AXA General Insurance Company Limited, as approved by Insurance Regulatory and Development Authority of India (with effect from September 8, 2021), assets and liabilities of Bharti AXA’s general insurance business vested with ICICI General on the Appointed Date of April 1, 2020. ICICI General issued two fully paid up equity shares to the shareholders of Bharti AXA for every 115 fully paid up equity shares. Subsequent to issuance of equity shares to Bharti AXA shareholders, the Bank’s shareholding in ICICI General reduced to below 50.0%. Accordingly, the Bank has accounted its investment in ICICI General as an associate under Accounting Standard – 23 – “Accounting for Investments in Associates” in consolidated financial statements with effect from April 1, 2021 under Indian GAAP. Under U.S. GAAP, ICICI General was consolidated on line-by-line basis till September 7, 2021, and was accounted as an affiliate with effect from September 8, 2021, the date of loss of control. Under Indian GAAP, the retained interest in ICICI General was accounted at carrying value. Under U.S. GAAP, the retained interest in the ICICI General was fair valued on the date of loss of control based on the closing quoted price of the common stock of ICICI General in the stock exchange. This resulted in a gain of Rs. 254,998.1 million on deconsolidation. On the date of deconsolidation, in accordance with the requirements of FASB ASC Topics 323 and 805, the Bank carried out a preliminary purchase price allocation of carrying value of investment in ICICI General. During fiscal 2022, given the complexity involved in the identification and measurement of the intangibles, the determination of final values of intangibles was underway and was planned to be completed within the permitted measurement period as per the aforementioned requirements. The determination of final values of intangibles was concluded during fiscal 2023 (within the prescribed timelines), accordingly, the Bank’s share in identified intangibles was valued at Rs. 14,982.6 million and Goodwill amounted at Rs. 288,806.9 million. During fiscal 2023, considering the significant and continuous decline in market price of equity shares of ICICI General, the Bank has recognized an impairment loss of Rs. 122,012.3 million.

 

F-121

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, the differences in net income arising from accounting for consolidation under Indian GAAP and U.S. GAAP.

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Profit/(loss) as per U.S. GAAP for life insurance subsidiary   11,412.9  (1,758.2)  21,327.4
Less: Profit/(loss) as per Indian GAAP for life insurance subsidiary   8,134.9  7,592.0  9,561.6
Net reconciliation difference for life insurance subsidiary1   3,278.0  (9,350.2)  11,765.8
Profit/(loss) from life insurance subsidiary attributable to the Group2   1,700.2  (4,780.5)  6,000.8
Profit on deconsolidation of former general insurance subsidiary  ..  254,998.13  ..
Profit/(loss) from equity affiliates and majority owned subsidiaries   (3,179.4)4  (1,932.8)4  ..
Impairment loss on investment in equity affiliate…  (122,012.3)      
Profit/(loss) on consolidation of variable interest entities and special purpose entities   4.8  (9.3)  214.2
Total differences in consolidation   (123,486.7)  248,275.4  6,215.0

1.Represents total differences in profit/(loss) between Indian GAAP and U.S. GAAP for life insurance subsidiary. See also- 22. Notes under U.S. GAAP – Insurance affiliates.

2.Represents the Group’s share of profit/(loss) in “Net reconciliation difference for life insurance subsidiary” and excludes the share of non-controlling interest holders. The Group owns part, not all, of the life insurance subsidiary. As such, only a portion of “Net reconciliation difference for life insurance subsidiary” is attributable to the Group; the rest is attributable to non-controlling interest holders. The share attributable to the Group constitutes the “Profit/(loss) from life insurance subsidiary attributable to the Group.” Reconciling items pertaining to significant differences between Indian GAAP and U.S. GAAP for life insurance affiliate are discussed separately below.

3.Represents gain on fair valuation of retained investment in General insurance affiliate.

4.Represents the Group’s share in difference in profit/(loss) between Indian GAAP and U.S. GAAP for General insurance affiliate and amortization of intangibles. See also- 22. Notes under U.S. GAAP – Insurance affiliates.

 

Profit/(loss) on consolidation of Variable Interest Entities

 

The Bank has consolidated certain qualified special purpose entities used for securitization transactions, effective April 1, 2010 on adoption of FAS 167 (codified within ASC 810-10). Upon consolidation, the assets of the qualifying special purpose entities were incorporated into the Bank’s loan portfolio and the amounts received from the investors were accounted for as borrowings. Under U.S. GAAP, the Bank accounts for the allowance for loan losses on these loans based on expected credit loss.

 

F-122

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Under Indian GAAP, securitized assets are derecognized from the Bank’s books. In accordance with the Reserve Bank of India guidelines for securitization, for securitization transactions entered into after February 1, 2006, the Bank accounted for any losses immediately at the time of securitization but amortized any profits over the life of the securities issued or to be issued by the qualifying special purpose entities. As per the Reserve Bank of India guidelines issued on September 24, 2021, gain realized at the time of securitization of loans is accounted through profit and loss account on completion of transaction. The unrealized gains, associated with expected future margin income is recognized in profit and loss account only when redeemed in cash, after absorbing losses, if any. The Bank also provides credit enhancement to the qualifying special purpose entities against delinquencies on securitized assets. Under Indian GAAP, the recognition of losses is based on the extent of utilization of credit enhancement extended to qualifying special purpose entities.

 

Due to these differences in the Bank’s accounting of securitization transactions, the timing of recognition of income and provision for loan losses differ under U.S. GAAP and Indian GAAP.

 

d)Valuation of debt and equity securities

 

Under Indian GAAP unrealized losses of held for trading and available for sale securities are taken to profit and loss account. Under Indian GAAP, net unrealized gains on investments by category are ignored. Under U.S. GAAP, unrealized gains or losses on trading debt assets are recognized in the profit and loss account and unrealized gains or losses on debt securities classified as ‘available for sale’, which include all securities classified as ‘held to maturity’ under Indian GAAP, are recognized in Other Comprehensive Income under stockholders’ equity except for the unrealized losses on securities identified as impaired which are recognized in profit and loss account. Under U.S. GAAP, unrealized gains or losses on equity securities are recognized in profit and loss account. Under Indian GAAP, the investments are initially measured at transaction cost, while under U.S. GAAP investments are initially measured at fair value.

 

Under Indian GAAP, the impact of currency revaluation on debt securities denominated in foreign currency is taken to profit and loss account. Under U.S. GAAP, the impact of currency revaluation on non-hedged ‘available for sale’ debt securities denominated in foreign currency is taken to Other Comprehensive Income.

 

Under Indian GAAP, premium over the face value of fixed rate and floating rate securities under held to maturity category is amortized over the remaining period to maturity on an effective constant yield basis and straight line basis respectively. Any premium over the face value of fixed rate and floating rate investments in government securities classified under available for sale category is amortized over the remaining period to maturity on constant yield basis and straight line basis respectively. Under U.S. GAAP, the income as per interest method is arrived at by amortization/accrual of premium/discount on the face value of debt securities over the remaining period to maturity on an effective interest rate basis.

 

Under Indian GAAP, gain or loss on sale of equity stake in a subsidiary company is recognized in the income statement. Under U.S. GAAP, change in the parent’s ownership in the subsidiary company is accounted as an equity transaction, if the parent retains controlling financial interest in the subsidiary and accordingly gain or loss is not recognized in the income statement. In fiscal 2021, the Bank sold part of its equity shareholdings in its subsidiaries, namely ICICI Lombard General Insurance Company and ICICI Securities Limited, while retaining the control in these subsidiaries. While, gains on sale of equity shares were recorded through profit and loss account under Indian GAAP, these gains were accounted in equity under U.S. GAAP.

 

F-123

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

In fiscal 2016, the Reserve Bank of India issued guidelines on strategic debt restructuring under which conversion of debt into equity and acquisition of ownership interests in the borrower by banks is allowed. The Reserve Bank of India has exempted banks from consolidation of these entities. Under U.S. GAAP, these entities were considered as equity affiliates. The Bank opted for fair value option of these equity affiliates under ASC Topic 825 “Financial Instruments”. Accordingly, fair value changes in the loans, guarantees and equity shares were accounted through income statement. While fair value impact on loans was recorded in the line item “Valuation of debt and equity securities”, the provisions made on these loans under Indian GAAP were reversed in the line item “Allowance for loan losses”. See also– 22. Notes under U.S. GAAP – Fair value accounting of financial interests.

 

The following table sets forth, for the periods indicated, the differences in net income arising from accounting for valuation of debt and equity securities under Indian GAAP and U.S. GAAP.

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Impact of differences in mark-to-market accounting for investment securities   7,917.9  9,323.9  887.8
Impairment allowance on AFS securities under U.S. GAAP   (2,291.6)  (2,114.9)  (2,067.4)
Impact of currency revaluation on non-hedged AFS debt securities denominated in foreign currency accounted for in profit and loss under Indian GAAP, which is accounted for in Other Comprehensive Income under U.S. GAAP   (549.5)  176.0  (571.1)
Impact of gain on sale of stake in subsidiary companies recognized in the income statement under Indian GAAP, which is recognized as an equity transaction under U.S. GAAP   ..  ..  (25,726.7)
Impact of fair value accounting for financial interest in certain equity affiliates  (754.5)  5,156.8  5,738.4
Others1   (4,460.3)  (1,611.1)  10,112.8
Total   (138.0)  10,930.7  (11,626.2)

1.The difference is primarily due to premium/discount amortization on debt securities and difference in gain on debt securities sold during the year, between Indian GAAP and U.S. GAAP. Under U.S. GAAP, available for sale debt securities include all securities classified as ‘held to maturity’ under Indian GAAP, which amounts to a loss of Rs.5,104.8 million for fiscal 2023 (for fiscal 2022 a loss of Rs. 3,637.2 million, for fiscal 2021 a gain of Rs. 8,767.8 million). First-In-First-Out method of accounting is applied on aggregate ‘available for sale’ securities under U.S. GAAP, resulting in difference in realized gain/(loss) on sale of securities between Indian GAAP and U.S. GAAP.

 

See note on "Consolidated Financial Statements - Schedules to the consolidated financial statements - Schedule 8 - Investments" for Indian GAAP balance sheet presentation.

 

e)Amortization of fees and costs

 

Loan origination fees and costs

 

Under U.S. GAAP, loan origination fees (net of certain costs) are amortized over the period of the loans as an adjustment to the yield on the loan. However, under Indian GAAP, loan origination fees are accounted for upfront. Also under Indian GAAP, loan origination costs, including commissions paid to direct marketing agents, are expensed in the year in which they are incurred.

 

F-124

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Retirement benefit cost

 

Under Indian GAAP, all actuarial gains/losses are recognized on the balance sheet of the enterprise in the year in which they arise through suitable credit/debit in the profit and loss account of the year. Under U.S. GAAP, actuarial gains/losses are accounted in Other Comprehensive Income. Subsequently cumulative actuarial gain/loss lying in the Other Comprehensive Income which is over and above 10% corridor is amortized through profit and loss account. Further, discount rate for computing benefit obligation is linked to yield on high quality fixed income securities in U.S. GAAP as compared to yield on government securities under Indian GAAP.

 

Reinsurance commission and deferred acquisition costs

 

Under Indian GAAP, reinsurance commission on business ceded by general insurance subsidiary is recognized as income in the year of the ceding of the risk. Under U.S. GAAP, proceeds from reinsurance transactions that represent recovery of acquisition costs are reduced from acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense in proportion to net revenue recognized over the related policy period.

 

Under Indian GAAP, acquisition costs for new and renewal of insurance contracts in general insurance subsidiary are charged as expense to the revenue account in the year in which these are incurred, whereas under U.S. GAAP, the same are capitalized and charged to expense in proportion to premium revenue recognized as per ASC Topic 944 “Financial Services-Insurance”.

 

The following table sets forth, for the periods indicated, the differences in net income arising from accounting for amortization of fees and costs under Indian GAAP and U.S. GAAP.

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Loan origination fees and costs  5,382.0  6,425.0  4,345.2
Retirement benefit costs  1,232.4  (2,021.2)  (1,679.8)
Reinsurance commission and deferred acquisition costs  ..  (319.7) 2  1,835.0
Amortization of other costs  (88.7)  (158.3)  (201.6)
Total differences in amortization of fees and costs1   6,525.7  3,925.8  4,298.8

1.Does not include any amount that is attributable to non-controlling interest holders.

2.Represents difference in net income of former general insurance subsidiary upto September 7, 2021

 

The amortization of loan origination fees and costs resulted in higher income under U.S. GAAP as compared to Indian GAAP, primarily due to higher direct loan origination costs on consumer loans incurred during these years reflecting growth in consumer loans.

 

While under Indian GAAP, actuarial gain or loss are recognized in profit and loss account, under U.S. GAAP, the actuarial gain/loss are recognized through other comprehensive income and thereafter amortized through profit and loss account. The actuarial loss for fiscal 2023 recognized through other comprehensive income were higher as compared to amortization of actuarial losses for previous years from other comprehensive income under U.S. GAAP, resulting in retirement benefit costs being lower under U.S. GAAP in fiscal 2023 as compared to Indian GAAP. During fiscal 2022, there was higher amortization of actuarial losses from other comprehensive income under U.S. GAAP, resulting in retirement benefit costs being higher under U.S. GAAP as compared to Indian GAAP.

 

See note on "Consolidated Financial Statements - Schedules to the consolidated financial statements - Schedule 9 – Advances" for balance sheet presentation of amortization of loan processing fees and cost.

 

F-125

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Schedules forming part of the Consolidated Financial Statements

 

f)Accounting for derivatives

 

Under Indian GAAP, the Group hedges interest rate and exchange rate risks on some on-balance sheet assets and liabilities through swap contracts. The impact of such derivative instruments is correlated with the movement of underlying assets and liabilities and accounted pursuant to the principles of the hedge accounting. Under Indian GAAP, based on the Reserve Bank of India’s guidelines, accounting for hedge relationship established after June 26, 2019 by the Bank, is based on Guidance note on Accounting for Derivative Contracts issued by Institute of Chartered Accountant of India. The hedging instruments and the hedged items (for the risks being hedged) are measured at fair value with changes recognized in the profit and loss account. For hedge relationship established before June 26, 2019, the accounting is based on accrual basis. To the extent a cash flow hedge is effective, the change in the fair value of the hedging instrument is recognized in cash flow hedge reserve. The ineffective portion of hedge is accounted in profit and loss account. The premium/discount on certain foreign currency swaps, used for asset liability management purposes, is amortized over the life of the swap. All other outstanding forward exchange contracts are revalued and the resultant gains or losses are recognized in the profit and loss account.

 

Under U.S. GAAP, the Group accounts for its derivative transactions in accordance with the provisions of FASB ASC Topic 815 “Derivatives and Hedging”. Accordingly, certain derivative contracts classified as hedges under Indian GAAP may not qualify as hedges under U.S. GAAP and are accounted for as trading derivatives with changes in fair value being recorded in the income statement. Under U.S. GAAP, the Group does not designate any derivative transaction as cash flow hedge.

 

Under U.S. GAAP, the Group has designated certain derivatives as fair value hedges of certain interest bearing assets and liabilities under ASC Topic 815. At the inception of a hedge transaction, the Group formally documents the hedge relationship and the risk management objective and strategy for undertaking the hedge. This process includes identification of the hedging instrument, hedged item, risk being hedged and the methodology for assessing effectiveness and measuring ineffectiveness of hedge. In addition, the Group assesses both at the inception of the hedge and on an ongoing basis, whether the hedge instrument used in the hedging transaction is effective in offsetting changes in fair value of the hedged item, and whether the hedge is expected to continue to be highly effective. Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with the gain or loss on the hedged asset or liability are recorded in the income statement. The Group has also designated certain forward contracts as hedging instruments for its certain net investments in foreign operations which are accounted for in accordance with ASC Topic 815.

 

g)Accounting for compensation cost

 

FASB ASC Topic 718, “Compensation – stock compensation” requires all share-based payments to employees, including grants of employee stock options to be recognized in the income statement based on their fair values. Under Indian GAAP, till fiscal 2021, the Group followed the intrinsic value method to account for its stock-based employees’ compensation plans. Compensation cost was measured by the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date. In fiscal 2022, Reserve Bank of India, issued a clarification advising banks to recognize fair value of share-linked instruments granted subsequent to March 31, 2021 in income statement. Accordingly, from fiscal 2022 onwards, the Bank has started recognizing the fair value of stock options granted subsequent to March 31, 2021 in profit and loss account. The Group has not recognized an income tax benefit on employee stock options related compensation cost.

 

F-126

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

h)Accounting for securitization

 

Under U.S. GAAP, the Group accounts for gain on sale of loans securitized at the time of sale in accordance with FASB ASC Topic 860, “Transfers and Servicing”. As per ASC Topic 860, any gain or loss on the sale of the financial asset is accounted for in the income statement at the time of the sale. Under Indian GAAP, net income arising from securitization of loan assets is accounted for over the life of the securities issued or to be issued by the special purpose vehicle/special purpose entity to which the assets are sold. The profit/premium arising from securitization is amortized over the life of the transaction based on the method prescribed by Reserve Bank of India. As per the Reserve Bank of India guidelines issued on September 24, 2021, gain realized at the time of securitization of loans is accounted through profit and loss account on completion of transaction. The unrealized gains, associated with expected future margin income is recognized in profit and loss account only when redeemed in cash, after absorbing losses, if any. Net loss arising on account of the sell-down securitization of loan assets is recognized at the time of sale.

 

Further, the securitization transactions of mortgage loans by the Bank’s Canadian subsidiary do not qualify as sale transactions as they do not meet the de-recognition criteria under Indian GAAP. Under U.S. GAAP, these securitization transactions have been accounted for as transfers as these satisfy the derecognition criteria under ASC Topic 860 “Transfers and Servicing”.

 

Under ASC Topic 860 “Transfers and Servicing”, certain securitization transactions, which qualify as transfer under Indian GAAP, do not qualify as transfer under U.S. GAAP. See note 22 (a) on “Securitizations and variable interest entities”.

 

i)Income taxes

 

Deferred taxes are recognized on temporary differences related to investments in subsidiaries, branches and affiliates, subject to limited exceptions, under U.S. GAAP while under Indian GAAP, no deferred taxes are recognized on temporary differences related to investments in subsidiaries, branches and affiliates.

 

The Bank has recognized current tax expense or benefit and recognized deferred tax assets or liabilities on the foreign currency translation reserves pertaining to its overseas branches under Indian GAAP with these offsetting amounts allocated to net income. Under U.S. GAAP, no deferred tax assets or liabilities are recognized on undistributed earnings of overseas branches where current taxes have been incurred and the current tax expense or benefit incurred has been allocated to Other Comprehensive Income.

 

Under Indian GAAP, deferred tax assets on unabsorbed depreciation or carried forward losses of domestic companies are recognized only if there is virtual certainty of realization of such assets, whereas under U.S. GAAP they are recognized based on a more-likely-than-not criteria.

 

The Bank and its housing finance subsidiary create a Special Reserve through appropriation of profits from time to time and receive the current tax benefit as per the Income Tax Act, 1961 for the appropriation. If the funds are withdrawn from the Special Reserve in future periods, the amount withdrawn is taxable. Under Indian GAAP, a deferred tax liability has been recognized on such Special Reserve in accordance with the guidelines issued by Reserve Bank of India/National Housing Bank. Under U.S. GAAP, deferred taxes are recognized and measured based on the expected manner of recovery and deferred taxes are not recognized if the expected manner of recovery does not give rise to income tax consequences. Accordingly, a deferred tax liability was not recognized under U.S. GAAP on the Special Reserve based on the Group’s continuing intention to not withdraw or utilize such Special Reserve until a liquidation of the entity and on an opinion from the legal counsel about the non–taxability of such Special Reserve in the scenario of a liquidation.

 

Under Indian GAAP, no deferred tax asset is recognized on property and equipment, which is not depreciable for income tax purposes. Under U.S. GAAP, a deferred tax asset is recognized for the temporary difference related to such assets including consideration of the indexation benefit available under tax laws.

 

F-127

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Deferred tax assets and liabilities are recognized for the income tax impact of the non-tax adjustments that result from the application of U.S. GAAP.

 

The following table sets forth, for the periods indicated, the components of the adjustments to income tax (expense)/benefit in the net income reconciliation.

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Deferred tax on temporary differences related to subsidiaries, branches and affiliates1,2   (2,139.4)  9,340.1  3,676.7
Deferred tax on unabsorbed depreciation or carried forward losses3  (2,007.0)  2,168.3  (156.4)
Deferred tax on Special Reserve   6,580.8  3,669.5  2,743.2
Deferred tax on temporary difference on property and equipment  (117.4)  48.4  36.3
Income tax impact of non-tax U.S. GAAP adjustments  8,576.6  (36,928.2)  (18,448.3)
Total differences in income taxes benefit/(expense)   10,893.6  (21,701.9)  (12,148.5)

1.For the year ended March 31, 2022, tax effect of Rs.8,247.7 million was recognized for the existing deductible temporary difference for the Bank’s investment in ICICI General as it ceased to be a subsidiary and became an affiliate.

2.For the year ended March 31, 2021, tax effect of Rs. (1,363.7) million on gain on sale of equity shares of the Bank’s subsidiaries (where control is retained) is accounted in equity under U.S. GAAP.

3.For the year ended March 31, 2021, tax effect of Rs. (983.2) million on gain on sale of equity shares of the Bank’s subsidiaries (where control is retained) is accounted in equity under U.S. GAAP.

 

At March 31, 2023, the stockholders’ equity was higher by Rs. 31,921.9 million (March 31, 2022: higher by Rs. 11,451.2 million), under U.S. GAAP as compared to Indian GAAP on account of income tax adjustments, of which Rs. 31,987.1 million (March 31, 2022: Rs. 32,793.4 million) was due to deferred tax on temporary differences related to branches and affiliates, Rs. 615.1 million (March 31, 2022: Rs. 1,245.6 million) was due to deferred taxes not being recognized under U.S. GAAP related to foreign currency translation reserves pertaining to overseas branches, Rs. 1,413.8 million (March 31, 2022: Rs. 3,420.7 million) was due to deferred tax on unabsorbed depreciation or carried forward losses, Rs. 36,865.1 million (March 31, 2022: Rs. 31,118.7 million) was due to deferred tax on Special Reserve, Rs. 500.2 million (March 31, 2022: Rs. 617.7 million) was due to deferred tax on temporary difference on property and equipment and Rs. (39,459.3) million (March 31, 2022: Rs. (57,744.9) million) was due to the income tax impact of non-tax U.S. GAAP adjustments.

 

See note on "Consolidated Financial Statements - Schedules to the consolidated financial statements - Schedule 18A - Notes forming part of the accounts - 9. Deferred tax" for Indian GAAP presentation.

 

j)Others

 

Under Indian GAAP, the Bank and its housing finance subsidiary have revalued fixed assets and created a revaluation reserve amounting to Rs. 30,918.4 million at March 31, 2023 (March 31, 2022: Rs. 32,285.0 million). Under U.S. GAAP, fixed assets are recognized on cost basis, as per ASC Topic 360 – Property, Plant and Equipment. Further, additional depreciation has been charged to income statement on revalued amount under Indian GAAP, but not under U.S. GAAP, resulting in lower depreciation charge by Rs. 755.2 million under U.S. GAAP as compared to Indian GAAP for the year ended March 31, 2023 (Rs. 703.1 million for the year ended March 31, 2022 and Rs. 680.3 million for the year ended March 31, 2021).

 

F-128

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Under Indian GAAP, the Bank has made provisions on certain fixed assets acquired in debt asset swap arrangements as per the direction of Reserve Bank of India. Under U.S. GAAP, these fixed assets were carried at book value or fair value, whichever is lower. There was a higher profit of Rs. 1,216.2 million under U.S. GAAP as compared to Indian GAAP for the year ended March 31, 2023 (lower profit of Rs. 1,476.8 million for the year ended March 31, 2022 and lower profit of Rs. 1,923.1 million for the year ended March 31, 2021).

 

22.Notes under U.S. GAAP

 

Additional information required under U.S. GAAP

 

a)Securitizations and variable interest entities

 

Overview

 

The Bank and its subsidiaries are involved with several types of off-balance-sheet arrangements, including special purpose entities.

 

Uses of Special Purpose Entities

 

The Group deals with some special purpose entities which were created to fulfill limited purposes as specified in their governing documents. The primary purpose of these special purpose entities is to receive contributions from investors for buying assets from the transferor, hold such purchased assets on behalf of the contributors to the trust and making regular payments to the investors from the proceeds of purchased assets. These special purpose entities have been organized mainly in the legal forms of trusts. In a securitization, the company transferring assets to a special purpose entity converts all (or a portion) of those assets into cash before they would have been realized in the normal course of business, through the special purpose entities issuance of debt and equity instruments, certificates, commercial paper and other notes of indebtedness, which are recorded on the balance sheet of the special purpose entity and not reflected in the transferring company’s balance sheet, assuming applicable accounting requirements are satisfied. Investors usually have recourse to the assets in the special purpose entity and often benefit from other credit enhancements, such as a collateral account or over-collateralization in the form of excess assets in the special purpose entity, a line of credit, or from a liquidity facility, such as liquidity put option or asset purchase agreement. In accordance with ASC 810-10, the Group consolidates these entities.

 

 

Variable Interest Entities

 

Variable interest entities are entities that have either a total equity investment that is not sufficient to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e. power through voting rights or similar rights to direct the activities of a legal entity that most significantly impact the entity’s economic performance and right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity). Investors that finance the variable interest entity through debt or equity interests or other counterparties that provide other forms of support, such as guarantees, subordinated fee arrangements, or certain types of derivative contracts, are variable interest holders in the entity. The variable interest holder, if any, that has a controlling financial interest in a variable interest entity is deemed to be the primary beneficiary and must consolidate the variable interest entity. Accordingly, the Group has determined that it has a controlling financial interest because it is the primary beneficiary of certain trusts and entities, based on its determination that it has both, the power to direct activities of a variable interest entity that most significantly impact the entity’s economic performance, and obligation to absorb losses of the variable interest entity that could potentially be significant to the variable interest entity or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity.

 

F-129

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth the Group’s involvement with consolidated and unconsolidated variable interest entities in which the Group holds significant variable interests at March 31, 2023.

Rupees in million

Particulars  Year ended March 31, 2023  Year ended March 31, 2022
Mortgaged backed securitizations (funded)      
Significant investment in unconsolidated variable interest entities   ..  ..
Investment in consolidated variable interest entities   1,425.8  1,425.8
Total investment in variable interest entity assets (gross assets)   1,425.8  1,425.8

 

The asset balances for consolidated variable interest entities represent the carrying amounts of the assets consolidated by the Group. The carrying amount may represent the amortized cost or the current fair value of the assets depending on the legal form of the asset (e.g., loan or security) and the Group’s standard accounting policies for the asset type and line of business. The assets of variable interest entities can be utilized only for the settlement of the obligations of respective variable interest entities.

 

The following table sets forth, for the periods indicated, the carrying amounts and classification of the consolidated assets and liabilities, in respect of variable interest entities and special purpose entities where the Group is primary beneficiary. The liabilities of the consolidated variable interest entities are to be met from the proceeds of the consolidated assets and other support provided by the Bank in the form of credit enhancements and liquidity facilities. The creditors of the consolidated variable interest entities do not have recourse to the general credit of the Group.

Rupees in million

Particulars  At March 31,  2023  At March 31,  2022
Investments   228.8  232.7
Loans   1,537.8  1,802.1
Total assets   1,766.6  2,034.8
Borrowings   334.0  409.2
Total liabilities   334.0  409.2

 

The Bank invests in pass through certificates of securitization trusts with underlying retail loans originated by other entities. The carrying value of such investments was Rs. 98,737.3 million at March 31, 2023 (March 31, 2022: Rs. 58,674.1 million). The Bank is not the primary beneficiary of these trusts based on its assessment under ASC Subtopic 810-10 - Consolidation – overall. Further, neither was the Bank the transferor of assets to these variable interest entities, nor was the Bank involved in the design of these variable interest entities. The maximum exposure to loss from the Bank’s involvement in these trusts is the carrying value of the investments.

 

b)Fair value accounting of financial interests

 

In fiscal 2016, the Reserve Bank of India issued guidelines on strategic debt restructuring under which conversion of debt into equity and acquisition of ownership interests in the borrower entity by banks was allowed. The Bank, along with other lenders, converted a portion of its loans to certain entities into equity as per this guideline. Such conversion also allowed each lender, the right to nominate directors on the Board of the borrower entity. Although these entities were considered as equity affiliates under ASC Subtopic 323-10 because of deemed significant influence due to ownership interests and management rights, the intention of the Bank was to safeguard the debt recovery and not to get an economic benefit from the operations of these entities. Accordingly, the Bank opted for fair value option for accounting these affiliates and the loans, guarantees and equity share investments in these entities were fair valued through income statement under ASC Subtopic 825-10 “Financial Instruments”.

 

F-130

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table, for the periods indicated, provides details of fair value accounting of financial interests

 

Rupees in million

Particulars  At March 31, 2023  At March 31, 2022
Carrying value of loans and guarantees1   19,203.6  21,472.0
Fair value of loans and guarantees   6,973.2  9,398.0
Of which, fair value of loans outstanding for more than 90-days past due  6,304.2  8,474.3
Fair value loss on loans and guarantees   12,230.4  12,074.0
Of which, fair value loss on loans outstanding for more than 90-days due  10,912.1  10,793.4
Fair value loss on investment in these financial interests   6,627.2  6,098.8
1.The Bank has not recognized interest separately on these loans.

 

The Group’s shareholding in these entities at March 31, 2023 is as below:

 

Sr. No. Name of the entity Ownership interest
1. Usher Agro limited 10.88%
2. Gammon India Limited 10.63%
3. Jaiprakash Power Ventures Limited 10.28%
4. Unimark Remedies Limited 9.72%
5. Great Offshore Limited 9.11%
6. Ballarpur Industries Limited 8.99%
7. IVRCL Limited 7.98%
8. Coastal Projects Limited 7.79%
9. GTL Infrastructure Limited 4.17%
10. Pratibha Industries Limited 3.01%
11. Adhunik Power and Natural Resources Limited 1.77%
12. Aster Private Limited 1.77%
13. Patel Engineering Limited 0.98%
14. JSW Ispat Products Limited (erstwhile: Monnet Ispat and Energy Limited) 0.63%
15. Diamond Power Infrastructure Limited ..
16. Vishwa Infrastructure and Services Private Limited ..

 

c)Investments

 

The following table sets forth, for the periods indicated, the portfolio of investments classified as held for trading.

 Rupees in million

Debt securities  At March 31, 2023  At March 31, 2022
Government securities   287,473.6  246,014.4
Corporate debt securities   36,394.4  26,385.1
Other debt securities   76,524.7  35,341.2
Total   400,392.7  307,740.7

 

F-131

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, the portfolio of investments classified as available for sale.

 

Rupees in million

   At March 31, 2023
   Amortized cost/cost  Gross Unrealized gain  Gross Unrealized loss  Fair value
Available for sale            
Corporate debt securities   254,220.6  1,499.6  (1,605.3)  254,114.9
Government securities   3,075,622.4  8,569.5  (28,659.8)  3,055,532.2
Other debt securities   129,371.2  1,272.7  (799.4)  129,844.5
Total debt securities   3,459,214.2  11,341.8  (31,064.5)  3,439,491.6
Other securities   ..  ..  ..  ..
Total   3,459,214.2  11,341.8  (31,064.5)  3,439,491.6

 

Rupees in million

   At March 31, 2022
   Amortized cost/cost  Gross Unrealized gain  Gross Unrealized loss  Fair value
Available for sale            
Corporate debt securities   201,756.9  4,265.3  (671.2)  205,351.0
Government securities   2,618,264.0  30,411.0  (11,618.7)  2,637,056.4
Other debt securities   117,688.3  1,708.9  (961.2)  118,436.0
Total debt securities   2,937,709.2  36,385.2  (13,251.1)  2,960,843.4
Other securities   2.4  3..  (1.4)  1.0
Total   2,937,711.6  36,385.2  (13,252.5)  2,960,844.4

  

The fair value of the Group’s investment in equity securities based on readily determinable fair value at March 31, 2023 was Rs. 53,533.0 million (at March 31, 2022: Rs. 48,445.8 million) and fair value of observable orderly transactions at March 31, 2023 was Rs. 8,047.9 million (at March 31, 2022: Rs. 6,699.2 million). The Group recorded a gain of Rs. 1,897.7 million on securities fair valued based on observable price in orderly transactions during fiscal 2023 (fiscal 2022: gain of Rs. 1,635.9 million).

 

Further, the Group’s investments portfolio also contains investments held by its venture capital subsidiary, investments in non-readily marketable securities and investments in affiliates. The fair value of investments held by the venture capital subsidiary was Rs. 54.3 million at March 31, 2023 and Rs. 50.7 million at March 31, 2022. Non-readily marketable securities primarily represent investments in affiliates and securities acquired as a part of project financing activities, investment in start-up entities or conversion of loans in debt restructurings. The investments in non-readily marketable securities and investment in affiliates was Rs. 316,003.5 million at March 31, 2023 and Rs. 437,021.3 million at March 31, 2022. Of these, the carrying value of equity securities carried at cost less impairment was Rs. 202,368.7 million at March 31, 2023 and Rs. 4.1 million at March 31, 2022 after recognizing Rs. 122, 037.3 million impairment charge during fiscal 2023 and Rs. 44.9 million during fiscal 2022. Further, the fair value of certain investments, where Bank has opted for fair value accounting was Rs. 5,634.4 million at March 31, 2023 and Rs. 6,972.5 million at March 31, 2022 under ASC Subtopic 825-10 “Financial Instruments”.

 

d)Fair value measurements

 

The Group determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820. The standard describes three levels of inputs that may be used to measure fair value.

 

F-132

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Level 1

 

Valuation is based upon unadjusted quoted prices of identical instruments traded in active markets. The instruments that have been valued based upon such quoted prices include traded equity shares, mutual funds, government securities, corporate bonds, certificate of deposits, commercial papers, futures and forex spots. The Bank’s Canadian subsidiary has investments in bankers’ acceptances which are valued based on the quoted prices.

 

Level 2

 

Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, prices quoted by market participants and prices derived from valuation models which use significant inputs that are observable in active markets. Inputs used include interest rates, yield curves, volatilities, credit spreads, which are available from public sources like Reuters, Bloomberg, Foreign Exchange Dealers Association of India, Financial Benchmark India Private Limited and Fixed Income Money Markets & Derivatives Association of India.

 

The products include government securities, debentures and bonds, certificate of deposits, commercial papers, forex options, single currency interest rate derivatives, forwards, cross currency interest rate swaps, and Bond forward rate agreements.

 

Level 3

 

Valuation is based on valuation techniques or models which use significant market unobservable inputs or assumptions. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable or when determination of the fair value requires significant management judgment or estimation. The valuation of certain interest rate options are done by sourcing counterparty quotes at month ends.

 

India-linked non-Rupee denominated bonds price is valued by discounting cash flows using rates incorporating fair market spreads published by Bloomberg/Reuters corresponding to the international foreign currency ratings of the issuer (capped at international sovereign rating). The value of retained interest in securitizations in Bank’s Canadian subsidiary, largely representing the excess spread of mortgage interest over the rate of return on the mortgaged backed securities, is similarly impacted by the amount and timing of cash flows from the underlying mortgage assets.

 

In case of private equity investments, the inputs used include the valuation multiples for comparable listed companies and adjustments for illiquidity and other factors.

 

The valuation of Indian pass through certificates is dependent on the estimated cash flows that the underlying trust would pay out. The underlying trust/originator makes a number of assumptions with regard to various variables to arrive at the estimated flows. The cash flow schedule received from the trust is discounted at the base yield curve rates and credit spreads published by Financial Benchmark India Private Limited and Fixed Income Money Markets & Derivatives Association of India at month ends. Accordingly, these instruments are classified as Level 3 instruments. A reduction in the estimated cash flows of these instruments will adversely impact the value of these certificates. A change in the timing of these estimated cash flows will also impact the value of these certificates.

 

Rupee swaptions and Rupee treasury bill interest rate swaps were valued using valuation model and discounted cash flow methodology respectively based on adjustments carried out on market observable proxy as one of the inputs is unobservable.

 

F-133

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The valuation of certain loans, which have been fair valued as per ASC Subtopic 825-10, is dependent on the estimated cash flows that the underlying borrowers would pay out. The Bank makes a number of assumptions with regard to various variables to arrive at the estimated cash flows. The cash flow schedule is discounted at the current interest rate, which the Bank is likely to offer for loan facilities to borrowers in the similar rating grades, which are not market observable. Accordingly, these loans are classified as Level 3 assets. The value of such loans will be impacted by changes in amount and timing of the estimated cash flows from the borrowers.

 

Investments in venture fund units and security receipts for which fair value is measured using net asset value, as a practical expedient, are not included in fair value hierarchy.

 

The following table sets forth, the information about the Group’s assets and liabilities measured at fair value on a recurring basis at March 31, 2023 and the level of inputs used to measure those products.

 

Rupees in million

Description

 

  Level 1  Level 2  Level 3  Total
Investments            
Equity shares   26,648.7  90.5  7,921.3  34,660.5
Government debt securities   672,451.5  2,670,554.2  ..  3,343,005.7
Corporate debt securities   88,804.1  200,584.0  2,048.4  291,436.5
Mortgage and other asset backed securities   ..  ..  101,578.7  101,578.7
Others1   43,725.9  81,487.2  217.5  125,430.6
Sub-total   831,630.2  2,952,715.9  111,765.9  3,896,112.0
Security receipts2           ..
Venture fund units2           11,041.9
Total investments            3,907,153.9
Derivatives (positive mark-to-market)            
Interest rate derivatives3   ..  96,600.2  4,521.1  101,121.3
Currency derivatives (including foreign exchange derivatives)4   2,147.5  62,323.4  ..  64,470.9
Equity derivatives   4.3  ..  ..  4.3
Total positive mark-to-market   2,151.8  158,923.6  4,521.1  165,596.5
Derivatives (negative mark-to-market)            
Interest rate derivatives3   ..  (96,240.5)  (917.8)  (97,158.3)
Currency derivatives (including foreign exchange derivatives)4   (429.9)  (78,259.3)  ..  (78,689.2)
Equity derivatives   (1.1)  ..  ..  (1.1)
Total negative mark-to-market   (431.0)  (174,499.8)  (917.8)  (175,848.6)
Borrowings            
Bonds   ..  (335,829.9)  ..  (335,829.9)
Total borrowings   ..  (335,829.9)  ..  (335,829.9)

Loans

Loans

  ..  ..  6,973.2  6,973.2
Total loans  ..  ..  6,973.2  6,973.2

1.Includes primarily certificate of deposits, commercial paper and mutual funds.

2.Fair value for these investments has been estimated using net asset value per unit as declared by investee entities as per ASC Subtopic 820-10-35 – “Fair Value Measurements and Disclosures”. The fair value for these investments has not been categorized in the fair value hierarchy as per ASC Subtopic 820-10-35-54B.

3.Foreign currency interest rate swaps, forward rate agreements, swap options and exchange traded interest rate derivatives are included in interest rate derivatives.

4.Foreign currency options, cross currency interest rate swaps and foreign currency futures are included in currency derivatives.

 

The following table sets forth, the information about the Group’s assets and liabilities measured at fair value on a recurring basis at March 31, 2022 and the level of inputs used to measure those products.

 

F-134

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Rupees in million

Description

 

  Level 1  Level 2  Level 3  Total
Investments            
Equity shares    15,572.3   14,366.3   121.1  30,059.7
Government debt securities   308,980.4  2,574,090.4   ..  2,883,070.8
Corporate debt securities    54,035.8  176,070.8  2,484.9  232,591.5
Mortgage and other asset backed securities    ..   ..   62,143.1  62,143.1
Others1   30,131.5  82,942.2  751.0  113,824.7
Sub-total   408,720.0  2,847,469.7  65,500.1  3,321,689.8
Security receipts2           1.0
Venture fund units2           9,034.1
Total investments            3,330,724.9
Derivatives (positive mark-to-market)            
Interest rate derivatives3    ..  47,141.8    2,563.2  49,705.0
Currency derivatives (including foreign exchange derivatives)4    1,012.3  46,199.4  ..  47,211.4
Equity derivatives   6.8  ..  ..  6.8
Total positive mark-to-market   1,019.1  93,341.2  2,563.2  96,923.5
Derivatives (negative mark-to-market)            
Interest rate derivatives3   ..  (49,410.3)  (417.9)  (49,828.2)
Currency derivatives (including foreign exchange derivatives)4    (273.9)  (52,937.4)  ..  (53,211.3)
Equity derivatives   ..  ..  ..  ..
Total negative mark-to-market   (273.9)  (102,347.7)  (417.9)  (103,039.5)
Borrowings            
Bonds   ..  (235,819.4)  ..  (235,819.4)
Total borrowings   ..  (235,819.4)  ..  (235,819.4)

Loans

Loans

  ..  ..  9,398.0  9,398.0
Total loans  ..  ..  9,398.0  9,398.0

1.Includes primarily certificate of deposits, commercial paper and mutual funds.

2.Fair value for these investments has been estimated using net asset value per unit as declared by investee entities as per ASC Subtopic 820-10-35 – “Fair Value Measurements and Disclosures”. The fair value for these investments has not been categorized in the fair value hierarchy based on the changes in ASC Subtopic 820-10-35-54B vide ASU No. 2015-07.

3.Foreign currency interest rate swaps, forward rate agreements, swap options and exchange traded interest rate derivatives are included in interest rate derivatives.

4.Foreign currency options, cross currency interest rate swaps and foreign currency futures are included in currency derivatives.

5.From September 8, 2021, under U.S.GAAP, ICICI General ceased to be a subsidiary and became an affiliate of the Bank.

 

The Group holds investments in certain venture capital funds and security receipts. The fair value of these investments has been estimated using the net asset value per unit as declared by such investee entities. The security receipts are issued by asset reconstruction companies with underlying mainly as non-performing loans with objectives of gains through improvement in recoveries on these assets. The venture capital fund units are issued by venture capital funds with underlying investment in equity shares and other instruments with the objective of generating long term returns. Some of the venture capital funds have focused investments in real estate and infrastructure sectors. The cash flow from these investments is expected to happen through distribution upon liquidation of the underlying assets by the asset reconstruction companies’/venture capital funds. A reduction in the estimated cash flows from the underlying assets or delays in collection of estimated cash flows will adversely impact the net asset values and therefore the fair value of these investments.

 

F-135

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Transfers in/out of Level 3 of the fair value hierarchy

 

Equity shares of Rs. 111.9 million were transferred from Level 1 to Level 3 as the valuation of these securities was based on significant management estimation/unobservable market inputs at March 31, 2023 as compared to valuation based on unadjusted quoted prices at March 31, 2022.

 

Equity shares of Rs. 5,323.1 million were transferred from Level 2 to Level 3 as the valuation of these securities was based on prices from prior transactions or third-party pricing information without adjustment at March 31, 2023.

 

Equity shares of Rs. 604.4 million were transferred from cost to Level 3 as the valuation of these securities was based on management estimation/unobservable market inputs at March 31, 2023 as compared to cost based valuation at March 31, 2022.

 

Other securities of Rs. 177.7 million were transferred from Level 2 to Level 3 as the valuation of these securities was based on significant management estimation/unobservable market inputs at March 31, 2023.

 

Other securities of Rs. 7.3 million were transferred from cost to Level 3 as the valuation of these securities was based on management estimation/unobservable market inputs at March 31, 2023 as compared to cost based valuation at March 31, 2022.

 

F-136

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, certain additional information about changes in the fair value of Level 3 assets for the year ended March 31, 2023.

 

Rupees in million

Description  Investments   
  Equity shares  Corporate debt securities 

Mortgage and other

asset backed securities

  Others  Total  Loans
Beginning balance at April 1, 2022   121.2  2,484.9  62,143.3  750.9  65,500.2  9,398.0
Total gains or losses (realized/unrealized)                  
  -Included in earnings   374.7  (382.5)  51.3  293.0  336.5  (948.0)
  -Included in Other Comprehensive Income   (35.2)  282.3  219.1  (355.0)  111.2  ..
Purchases/additions   1,306.0  27.5  87,155.9  ..  88,489.4  ..
Sales   ..  ..  ..  ..  ..  ..
Issuances   ..  ..  797.9  ..  797.9  ..
Settlements   ..  (363.8)  (48,798.9)  (656.4)  (49,819.1)  (1,476.8)
Transfers in Level 3   6,039.5  ..  ..  185.0  6,224.5  ..
Transfers out of Level 3   ..  ..  ..  ..  ..  ..
Foreign currency translation adjustment   115.2  ..  10.1  ..  125.3  ..
Ending balance at March 31, 2023   7,921.4  2,048.4  101,578.7  217.5  111,766.0  6,973.2
                   
Total amount of gains or (losses) included in earnings attributable to change in unrealized gains or (losses) relating to assets still held at reporting date   374.7  (513.3)  34.7  32.5  (71.4)  (948.0)
Total amount of gains or (losses) included in other comprehensive income attributable to change in unrealized gains or (losses) relating to assets still held at reporting date  (35.2)  301.1  528.8  ..  794.7  ..

1.Includes India-linked asset backed securities.

 

F-137

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, certain additional information about changes in the fair value of Level 3 assets for the year ended March 31, 2022.

 

Rupees in million

Description  Investments   
   Equity shares  Corporate debt securities  Mortgage and other asset backed securities  Others  Total  Loans
Beginning balance at April 1, 2021   107.2  2,640.1  95,039.5  300.7  98,087.4  9,089.4
Total gains or losses (realized/unrealized)                  
  -Included in earnings    9.6  (364.4)   (103.4)  202.9  (255.3)  804.7
  -Included in Other Comprehensive Income    1.9  393.9   (235.1)  353.4  514.1  ..
Purchases/additions   ..  97.9   31,264.7   ..  31,362.6  184.2
Sales    ..   (73.6)  ..   (401.0)   (474.6)  ..
Issuances    ..  ..   1,524.4  ..   1,524.4  ..
Settlements    ..   (97.9)   (65,503.3)  ..   (65,601.2)  (680.3)
Transfers in Level 3    ..  ..   ..  294.9  294.9  ..
Transfers out of Level 3    ..  (111.1)   ..  ..  (111.1)   
Foreign currency translation adjustment    2.5   ..   156.5  ..   159.0  ..
Ending balance at March 31, 2022   121.2  2,484.9  62,143.3  750.9  65,500.2  9,398.0
                   
Total amount of gains or (losses) included in earnings attributable to change in unrealized gains or (losses) relating to assets still held at reporting date   9.6  (419.9)  (148.0)  102.6  (453.8)  506.7
Total amount of gains or (losses) included in other comprehensive income attributable to change in unrealized gains or (losses) relating to assets still held at reporting date  1.9  393.9  (179.7)  353.4  567.6  ..
1.Includes India-linked asset backed securities.

 

F-138

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, certain additional information about changes in the fair value of Level 3 derivatives for the year ended March 31, 2023.

 

Rupees in million

Description  Derivatives
   Interest rate derivatives  Currency derivatives (including foreign exchange derivatives)  Equity derivatives  Un-funded credit derivatives  Total
Beginning balance at April 1, 2022   2,145.3  ..  ..  ..  2,145.3
Total gains or losses(realized/unrealized)               
  -Included in earnings   1,307.7  ..  ..  ..  1,307.7
  -Included in Other Comprehensive Income   ..  ..  ..  ..  ..
Purchases   ..  ..  ..  ..  ..
Sales   ..  ..  ..  ..  ..
Issuances   ..  ..  ..  ..  ..
Settlements   150.3  ..  ..  ..  150.3
Transfers in Level 3   ..  ..  ..  ..  ..
Transfers out of Level 3   ..  ..  ..  ..  ..
Foreign currency translation adjustment   ..  ..  ..  ..  ..
Ending balance at March 31, 2023   3,603.3  ..  ..  ..  3,603.3
                
Total amount of gains or (losses) included in earnings attributable to change in unrealized gains or (losses) relating to assets still held at reporting date   1,756.2  ..  ..  ..  1,756.2

 

 

F-139

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, certain additional information about changes in the fair value of Level 3 derivatives for the year ended March 31, 2022.

 

Rupees in million

Description  Derivatives
   Interest rate derivatives  Currency derivatives (including foreign exchange derivatives)  Equity derivatives  Un-funded credit derivatives  Total
Beginning balance at April 1, 2021   (148.0)  ..  ..  ..  (148.0)
Total gains or losses(realized/unrealized)               
  -Included in earnings   2,165.3  ..  ..  ..  2,165.3
  -Included in Other Comprehensive Income    ..  ..  ..  ..   ..
Purchases   47.8  ..  ..  ..  47.8
Sales    ..  ..  ..  ..   ..
Issuances    ..  ..  ..  ..   ..
Settlements    83.4  ..  ..  ..  83.4
Transfers in Level 3   ..  ..  ..  ..  ..
Transfers out of Level 3   (2.4)  ..  ..  ..  (2.4)
Foreign currency translation adjustment   (0.8)  ..  ..  ..  (0.8)
Ending balance at March 31, 2022   2,145.3  ..  ..  ..  2,145.3
                
Total amount of gains or (losses) included in earnings attributable to change in unrealized gains or (losses) relating to assets still held at reporting date   2,119.7  ..  ..  ..  2,119.7

 

 

F-140

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Quantitative information about unobservable inputs used in Level 3 fair value measurements

 

The Group Level 3 instruments consist of investment, loans and derivatives. An asset is classified as Level 3 of the fair value hierarchy when one or more unobservable inputs are used that are considered significant to its valuation.

 

The following table sets forth, significant unobservable inputs used in fair value measurement of Level 3 financial instruments at March 31, 2023.

 

Sr. No.

Product

Fair value

(Rs. in million)

Principal Valuation techniques

Unobservable inputs

Units

Range of input values

Low

High

Weighted average
1 Loans 6,973.2 Discounted cash flow

Discounting rate

%

44.08% 49.41% 47.15%
Loss Severity % 21.09% 100.00% 61.40%
2

Investment

             
2A Mortgage and other asset backed securities - India linked 98,737.4 Discounted cash flow

Yield

%

7.43% 12.27% 8.34%
Loss Severity  

%

.. .. ..
2B Mortgage and other asset backed securities - Non India linked 2,841.3 Discounted cash flow

Yield

%

3.14% 4.90% 3.47%
2C Corporate Debt securities 2,048.4 Discounted cash flow Discounting rate % 8.50% 16.00% 14.27%
Loss Severity  

%

.. 100.00% 17.91%
2D Equity shares - Non India Linked 36.6 Comparable analysis   Listed price per share of the same issuer

USD

.. 225.46 225.46
Illiquidity and other discount % .. 50.00% 50.00%
2E

Equity shares - India Linked

54.3

Net asset valuations

Net asset value

%

132.97% 302.49% 184.66%
3 Interest Rate derivatives - India linked  3,524.7 Discounted cash flow marked down for illiquidity Illiquidity discount  bps  40  77  52

Swaptions - India linked

27.6 Discounted cash flow marked down for volatility Volatility discount bps 96 96 96
Cap & Floors - India linked (1.5) Counterparty Quote .. .. .. .. ..

Interest Rate derivatives – Non India linked

52.5 Counter party quotes .. .. .. .. ..

 

F-141

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, significant unobservable inputs used in fair value measurement of Level 3 financial instruments at March 31, 2022.

 

Sr. No.

Product

Fair value

(Rs. in million)

Principal Valuation techniques

Unobservable inputs

Units

Range of input values

Low

High

Weighted average
1 Loans 9,398.0 Discounted cash flow

Discounting rate

%

27.94% 33.62% 31.48%
Loss Severity % 13.24% 100.00% 53.78%
2

Investment

             
2A Mortgage and other asset backed securities - India linked 58,674.1 Discounted cash flow

Yield

%

4.25% 11.67% 6.30%
2B Mortgage and other asset backed securities - Non India linked 3,469.0 Discounted cash flow

Yield

%

0.78% 2.97% 2.09%
2C Corporate Debt securities 2,484.9 Discounted cash flow Discounting rate % 8.20% 16.00% 13.80%
Loss Severity  

%

0.00% 100.00% 67.12%
         
2D Preference Shares 751.0 Discounted cashflow Discounting rate  %    9.07% 10.30% 9.61%
 Loss Severity  %    0.00% 99.59% 64.42%
2E Equity shares - Non India Linked 70.4 Comparable analysis   Listed price per share of the same issuer

USD

..  221.77  221.77
Illiquidity and other discount % .. 50.00% 50.00%
2F

Equity shares - India Linked

50.7

Net asset valuations

Net asset value

%

133.28% 261.36% 172.33%
3 Interest Rate derivatives - India linked 292.4 Discounted cash flow Mark up to discount rate bps  77.00  77.00  77.00
1,795.3    Counter party quotes .. ..      

Interest Rate derivatives – Non India linked

57.5 Counter party quotes .. .. .. .. ..

 

F-142

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

e)Investment securities in unrealized loss position

 

The Group adopted ASU Topic 2016-13, “Financial Instruments—Credit Losses” effective April 1, 2020. The Group has determined that certain available for sale debt securities with unrealized losses do not have credit losses. The Group conducts a review each year to identify and evaluate investments that have indications of credit losses. Factors considered in determining whether a credit loss exists include the extent to which the fair value is less than the amortized cost of a security, credit rating and financial condition of the issuer. A credit loss is computed as difference between the amortized cost basis of the security and the present value of cash flows expected to be collected from a security, limited by the amount that the fair value is less than amortized cost basis. The Group considers whether the investments have been identified for sale or whether it is more likely than not that the Group will be required to sell the investment before recovery of its amortized cost basis. The Group does not recognize an allowance on accrued interest as the Group’s policy is to reverse uncollected accrued interest immediately after 90 days past due by derecognizing interest income.

 

The following table sets forth, the fair value of the debt investments in available for sale debt securities and unrealized loss position, at March 31, 2023.

 

Rupees in million

Description of securities  Less than 12 months  12 months or longer  Total
  

Fair

Value

  Gross Unrealized Losses 

Fair

Value

  Gross Unrealized Losses 

Fair

Value

  Gross Unrealized Losses
                   
Corporate debt securities   26,848.6  (631.1)  14,338.1  (974.2)  41,186.7  (1,605.3)
Government securities   594,925.7  (9,956.4)  777,128.1  (18,703.3)  1,372,053.8  (28,659.7)
Other debt securities   16,018.7  (258.0)  7,299.2  (541.6)  23,317.9  (799.6)
Total debt securities   637,793.0  (10,845.5)  798,765.4  (20,219.1)  1,436,558.4  (31,064.6)

 

The following table sets forth, the fair value of the debt investments in available for sale debt securities and unrealized loss position, at March 31, 2022.

 

Rupees in million

Description of securities  Less than 12 months  12 months or longer  Total
  

Fair

Value

  Gross Unrealized Losses 

Fair

Value

  Gross Unrealized Losses 

Fair

Value

  Gross Unrealized Losses
                   
Corporate debt securities    15,635.3   (629.0)   953.2  (42.2)   16,588.5  (671.2)
Government securities   359,291.0  (6,883.1)  404,683.9  (4,735.6)  763,974.9  (11,618.7)
Other debt securities   9,389.5  (208.0)  6,988.8  (753.3)  16,378.3  (961.3)
Total debt securities   384,315.8  (7,720.1)  412,625.9  (5,531.1)  796,941.7  (13,251.2)

 

 

Certain investments in debt securities with unrealized losses are not classified as impaired, since the Group has assessed that the securities in an unrealized loss position have not been identified for sale and it is not more likely than not that the Group will be required to sell the securities before recovery of its amortized cost basis less any current period credit loss.

 

The Group also holds certain debt investments with credit losses, which have not been identified for sale and it is not more likely than not that the Group will be required to sell the securities before an anticipated recovery in value other than credit losses, where the amount representing the credit losses is recognized in earnings and the amount of loss related to other factors is recognized in Other Comprehensive Income. The credit losses have been determined based on the difference of present value of expected future cash flows of the securities and the amortized cost basis of such securities. The Group bases its estimates of future cash flows on evaluation of the issuer’s overall financial condition, resources and payment record and the realizable value of any collateral, third party guarantees or other credit enhancements.

 

F-143

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, roll-forward of the allowance for credit losses for available for sale debt securities for March 31, 2023:

 

      Rupees in million
  Corporate debt securities Government securities Other debt securities Total allowance
Allowance for credit losses at the beginning of the period 7,881.6 .. 596.8 8,478.4
Additions during the year for which credit losses were not previously recorded .. .. .. ..
Additions to the allowance for credit losses arising from purchased financial assets with credit deterioration .. .. .. ..
Reductions due to sale of securities during the year .. .. .. ..
Reductions due to the Group intends to sale the securities or more likely than not will be required to sell the security before recovery of its amortized cost basis .. .. .. ..
Additional increases or decreases during the year on securities that had an allowance recorded in a previous period 597.1 .. 0.9 598.0
Write-off during the period .. .. 15.3 15.3
Recoveries during the period 188.7 .. 47.4 236.1
Balance of the allowance for credit losses at the end of the period 8,290.0 .. 535.0 8,825.0

 

The following table sets forth, roll-forward of the allowance for credit losses for available for sale debt securities for March 31, 2022:

 

      Rupees in million
  Corporate debt securities Government securities Other debt securities Total allowance
Allowance for credit losses at the beginning of the period 7,605.7 .. 1,086.0 8,691.7
Additions during the year for which credit losses were not previously recorded .. .. .. ..
Additions to the allowance for credit losses arising from purchased financial assets with credit deterioration. .. .. .. ..
Reductions due to sale of securities during the year .. .. .. ..
Reductions due to the Group intends to sale the securities or more likely than not will be required to sell the security before recovery of its amortized cost basis .. .. .. ..
Additional increases or decreases during the year on securities that had an allowance recorded in a previous period. 448.8 .. 122.1 570.9
Write-off during the period 146.7 .. 611.3  758.0
Recoveries during the period 26.2 .. ..  26.2
Balance of the allowance for credit losses at the end of the period 7,881.6 .. 596.8 8,478.4

 

At March 31, 2023, the Group holds cost method equity investments amounting to Rs. 315,919.2 million (March 31, 2022: Rs. 437,017.2 million). The fair value for such securities has not been estimated in the absence of changes in circumstances that have a significant adverse effect on the fair value of the investments.

 

F-144

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

f)Loans

 

The Group follows the guidance provided in the FASB ASC topic 326: “Financial instruments – Credit Losses” for accounting and measurement of loan loss allowance. This guidance established a single allowance framework for all financial assets measured at amortized cost including unfunded credit facilities and loan commitments. This framework requires that management’s estimate reflects credit losses over the instrument’s remaining expected life and considers expected future changes in macroeconomic conditions.

 

The Group’s allowance for credit losses primarily comprises allowance for loan losses, unfunded credit exposure and non-cancellable loan commitments. The Group does not classify its investment in debt securities as held-to-maturity. The Group does not recognize an allowance on accrued interest as the Group’s policy is to write-off uncollected accrued interest immediately after 90 days past due (based on crop cycle for certain agriculture based loans) by reversing interest income.

 

Any changes in the allowance for credit losses is recognized in the income statement as allowance for credit losses.

 

The estimation of the allowance for credit losses is complex and requires significant management judgment about the effect of certain matters that are inherently uncertain. The allowance for credit losses in future periods may be significantly different, considering the macro-economic conditions, forecasts and other factors then prevailing.

 

The allowance for loan losses and allowance for lending-related commitments represents expected credit losses over the remaining expected life of retained loans and lending-related commitments that are in the nature of non-cancellable by the Group. The expected life of each instrument is determined by considering its contractual term and expected prepayments. The expected life of credit card loans is determined based on the behavioral study by the Group. For the behavioral study, cash flows from the credit card accounts are considered on a first-in-first-out basis on credit card loan outstanding.

 

When calculating the allowance for credit losses, the Group assesses whether exposures share similar risk characteristics. If similar risk characteristics exist, the Group estimates expected credit losses collectively, considering the risk associated with a particular segment and the probability that the exposures within the segment will default. The segmentation for the consumer loans and small business lending exposures is based on risk characteristics such as product type, delinquency status, credit scores, months on book, etc. For Agriculture loans, a further segmentation of risk characteristics is also carried out based on direct and indirect agriculture lending. The segmentation for commercial loans is based on risk characteristics such as customer type, risk rating assigned using internal rating models and delinquency status. The commercial loans are also considered as not sharing similar risk characteristics if principal or interest has remained overdue for more than 90 days or the borrower has undergone restructuring/likely to be restructured. The consumer loan, loan commitment and significant portion of commercial loans and unfunded credit exposure share similar risk characteristic with other credit exposures in the segment, and as a result are collectively assessed for credit loss.

 

If an exposure for commercial loans does not share risk characteristics with other exposures, expected credit losses are estimated on an individual basis. The credit loss on individual basis is either estimated on basis of the present value of expected future cash flows or in case of a collateral dependent loan, the net realizable value of the collateral net of cost to sell, if any. The loans primarily have collateral in the form of business assets or real estate.

 

F-145

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The credit loss on collective basis is estimated using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances. The collective assessment begins with a quantitative calculation that considers the likelihood of the borrower defaulting. The quantitative calculation covers expected credit losses over an instrument’s expected life and is the result of multiplying the individual loan level exposure at default with the estimated probability of default and loss given default. The probabilities of default are derived using a macro-economic scenario over a reasonable and supportable forecast period. The term structure for subsequent periods is built using single year reversion to the long run historical information. The forecasts take into consideration the Group’s overarching economic outlook based on internal as well as external inputs and involve a governed process that incorporates feedback from senior management. The quantitative calculation is adjusted to take into consideration model imprecision not yet reflected in the calculation.

 

The geopolitical uncertainties and macroeconomic environment including the outlook on growth across the world and India may have an impact on the results of the Bank and the Group. The Group makes adjustments to appropriately address these economic circumstances over and above the model output by increasing the probability of default estimates based on management judgement.

 

Estimating the timing and amounts of future cash flows is highly judgmental as these cash flow projections rely upon estimates such as loss severities, asset valuations, default rates, the amounts and timing of interest or principal payments (including any expected prepayments) or other factors that are reflective of current and expected market conditions. These estimates are, in turn, dependent on factors such as uncertainty around geo-political situation, current overall economic conditions, portfolio or borrower-specific factors, the expected outcome of insolvency proceedings as well as, in certain circumstances, other economic factors. All of these estimates and assumptions require significant management judgment and certain assumptions are highly subjective.

 

The following table sets forth the recorded investment in restructured loans at March 31, 2023.

 

Rupees in million

   Total recorded investment in restructured loans with related allowance for credit losses  Total allowances for credit losses  Total recorded investment in restructured loans with no related allowance for credit losses  Unpaid principal amount
Commercial loans   147,724.0  106,616.1  20,230.2  167,954.2
Consumer loans   56,104.6  15,947.5  ..  56,104.6
 Total   203,828.6  122,563.6  20,230.2  224,058.8

 

The following table sets forth the recorded investment in restructured loans at March 31, 2022.

 

Rupees in million

   Total recorded investment in restructured loans with related allowance for credit losses  Total allowances for credit losses  Total recorded investment in restructured loans with no related allowance for credit losses  Unpaid principal amount
Commercial loans   163,582.9  118,258.3  27,137.4  190,720.3
Consumer loans   79,787.3  21,508.6  ..  79,787.3
 Total   243,370.2  139,766.9  27,137.4  270,507.6

 

F-146

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

A loan is considered impaired when the Group believes it is probable that all amounts due according to the original contractual terms of the loan will not be collected. A loan is generally classified as impaired if any amount of interest or principal remains overdue for more than 90 days (360 days for direct agriculture loans). For large balance commercial loan, evaluation also includes assessment of individual loans based on borrower specific facts and circumstances, including financial performance, future prospects and repayment history of the borrower.

 

The following table sets forth the recorded investment in impaired loans at March 31, 2023.

 

Rupees in million 

   Total recorded investment in impaired loans with related allowance for credit losses  Total allowances for credit losses  Total recorded investment in impaired loans with no related allowance for credit losses  Unpaid principal amount
Commercial loans1   116,108.4  87,381.2  8,139.3  124,247.7
Consumer loans2   60,429.1  29,677.8  ..  60,429.1
 Total   176,537.5  117,059.1  8,139.3  184,676.8
1.Primarily includes commercial loans assessed individually.

2.Includes consumer loans assessed collectively.

 

The following table sets forth the recorded investment in impaired loans at March 31, 2022.

 

Rupees in million

   Total recorded investment in impaired loans with related allowance for credit losses  Total allowances for credit losses  Total recorded investment in impaired loans with no related allowance for credit losses  Unpaid principal amount
Commercial loans1   125,154.2  86,171.0  13,303.9  138,458.0
Consumer loans2   67,185.7  32,807.8  ..  67,185.7
 Total   192,339.9  118,978.8  13,303.9  205,643.7
1.Primarily includes commercial loans assessed individually.

2.Includes consumer loans assessed collectively.

 

The following table sets forth the closing balance of allowance for loan losses for restructured loans and recorded financing receivables at March 31, 2023.

 

Rupees in million

Particulars  Commercial loans  Consumer loans & credit card receivables  Financial lease  Total
Allowance for loan losses            
Allowance for loan losses: individually evaluated for impairment   106,616.1  ..  ..  106,616.1
Allowance for loan losses: collectively evaluated for impairment   ..  15,947.5  ..  15,947.5
Total allowance for loan losses   106,616.1  15,947.5  ..  122,563.6
Recorded financing receivables            
Individually evaluated for impairment   167,954.2  ..  ..  167,954.2
Collectively evaluated for impairment   ..  56,104.6  ..  56,104.6
Total recorded financing receivables   167,954.2  56,104.6  ..  224,058.8

 

F-147

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth the closing balance of allowance for loan losses for restructured loans and recorded financing receivables at March 31, 2022.

 

Rupees in million

Particulars  Commercial loans  Consumer loans & credit card receivables  Financial lease  Total
Allowance for loan losses            
Allowance for loan losses: individually evaluated for impairment   118,258.3  ..  ..  118,258.3
Allowance for loan losses: collectively evaluated for impairment   ..  21,508.6  ..  21,508.6
Total allowance for loan losses   118,258.3  21,508.6  ..  139,766.9
Recorded financing receivables            
Individually evaluated for impairment   190,720.3  ..  ..  190,720.3
Collectively evaluated for impairment   ..  79,787.3  ..  79,787.3
Total recorded financing receivables   190,720.3  79,787.3  ..  270,507.6

 

The following table sets forth the closing balance of allowance for loan losses for other loans and recorded financing receivables at March 31, 2023. 

 

Rupees in million

Particulars  Commercial loans  Consumer loans & credit card receivables  Financial lease  Total
Allowance for loan losses            
Allowance for loan losses: individually evaluated for impairment   78,406.5  ..  ..  78,406.5
Allowance for loan losses: collectively evaluated for impairment   51,045.8  205,792.1  ..  256,837.9
Total allowance for loan losses   129,452.3  205,792.1  ..  335,244.5
Recorded financing receivables            
Individually evaluated for impairment   108,037.9  ..  ..  108,037.9
Collectively evaluated for impairment   4,288,123.3  6,392,677.9  50.1  10,680,851.2
Total recorded financing receivables   4,396,161.2  6,392,677.9  50.1  10,788,889.2

 

The following table sets forth the closing balance of allowance for loan losses for other loans and recorded financing receivables at March 31, 2022.

 

Rupees in million

Particulars  Commercial loans  Consumer loans & credit card receivables  Financial lease  Total
Allowance for loan losses            
Allowance for loan losses: individually evaluated for impairment   78,444.9  ..  ..  78,444.9
Allowance for loan losses: collectively evaluated for impairment   52,068.5  175,751.9  ..  227,820.4
Total allowance for loan losses   130,513.4  175,751.9  ..  306,265.3
Recorded financing receivables            
Individually evaluated for impairment   124,677.2  ..  ..  124,677.2
Collectively evaluated for impairment   3,616,725.1  5,363,222.7  416.5  8,980,364.3
Total recorded financing receivables   3,741,402.3  5,363,222.7  416.5  9,105,041.5

 

 

F-148

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, allowance of credit losses for the unfunded credit commitments for the period ended March 31, 2023:

 

Rupees in million

Particulars  Fiscal 2023
   Loan commitment  Guarantees and Letter of Credit  Total allowance
Allowances at the beginning of fiscal.  3,258.3  28,198.7  31,456.9
          
          
Additions/(reductions) to allowances during the year  2,262.0  (305.1)  1,957.0
Allowances at the end of the fiscal  5,520.3  27,893.6  33,414.0

 

The following table sets forth, allowance of credit losses for the unfunded credit commitments for the period ended March 31, 2022:

 

Rupees in million

Particulars  Fiscal 2022
   Loan commitment  Guarantees and Letter of Credit  Total allowance
Allowances at the beginning of fiscal  3,565.7  28,510.2  32,075.9
          
          
Additions/(reductions) to allowances during the year  (307.5)  (311.5)  (619.0)
Allowances at the end of the fiscal  3,258.3  28,198.7  31,456.9

 

The following table sets forth, allowance of credit losses for the unfunded credit commitments for the period ended March 31, 2021:

 

Rupees in million

Particulars  Fiscal 2021
   Loan commitment  Guarantees and Letter of Credit  Total allowance
Allowances at the beginning of fiscal.  ..  14,887.6  14,887.6
Add: Adjustment on transition to ASU Topic 2016-13  4,987.9  9,261.3  14,249.2
Allowance at April 1, 2020  4,987.9  24,148.9  29,136.8
Additions/(reductions) to allowances during the year  (1,422.2)  4,361.3  2,939.1
Allowances at the end of the fiscal  3,565.7  28,510.2  32,075.9

 

F-149

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth loans restructured during the year ended March 31, 2023.

 

Rupees in million

Particulars  Restructured loans involving changes in the amount and/or timing of
   Number of borrowers whose loans are classified as restructured  Principal payments  Interest payments  Both principal and interest payments  Provision/(write-back) through P&L  Net restructured amount
Commercial loans   21  726.4  ..  3,506.8  (422.9)  2,594.5
Consumer loans   13  ..  ..  121.9  39.8  82.1
Total   34  726.4  ..  3,628.7  (383.1)  2,676.6

 

The following table sets forth loans restructured during the year ended March 31, 2022.

 

Rupees in million

Particulars  Restructured loans involving changes in the amount and/or timing of
   Number of borrowers whose loans are classified as restructured  Principal payments  Interest payments  Both principal and interest payments  Provision/(write-back) through P&L  Net restructured amount
Commercial loans   46  14,624.1  ..  6,765.6  (301.9)  21,691.5
Consumer loans   63,199  7,991.3  ..  51,561.8  19,462.4  40,090.8
Total   63,245  22,615.4  ..  58,327.4  19,160.4  61,782.3

 

The following table sets forth restructured loans at March 31, 2023 and 2022, as well as loans that were restructured during a fiscal year and defaulted within the same or next fiscal year:

 

Rupees in million

Particulars  Balances at March 31, 2023 

Payment default during the year ended March 31, 20231

  Balances at March 31, 2022 

Payment default during the year ended March 31, 20221

Commercial loans   167,954.2  6,651.5  190,720.3  1,000.2
Consumer loans   56,104.6  7,755.0  79,787.3  16,466.2
Total   224,058.8  14,406.5  270,507.6  17,466.4
1.Default is defined as 90 days past due.

 

Additionally, at March 31, 2023, the Bank has outstanding loans amounting to Rs. 18,064.0 million (March 31, 2022: Rs. 20,332.3 million) to equity affiliates, where the Bank has opted for fair value accounting under ASC Subtopic 825-10 “Financial Instruments”. See also 22. Notes under U.S. GAAP – Additional information required under U.S. GAAP – Fair value accounting of financial interests.

 

g)Equity affiliates

  

Under U.S. GAAP, the Group accounts for its ownership interest in ICICI Prudential Life Insurance Company Limited (ICICI Life) and ICICI Lombard General Insurance Company Limited (ICICI General) by the equity method of accounting.

 

F-150

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

ICICI Life

 

The following tables set forth, for the periods indicated, the summarized U.S. GAAP balance sheets and statements of operations of ICICI Life.

 

Rupees in million

   At March 31,
Balance sheet  2023  2022
Cash and cash equivalents    57,856.5  44,864.9
Securities   964,814.0  824,009.7
Assets held to cover linked liabilities   1,440,580.6  1,508,663.0
Other assets   139,349.3  123,718.5
Total assets   2,602,600.4  2,501,256.1
       
Provision for linked liabilities   1,440,580.6  1,508,663.0
Other liabilities   1,062,924.1  895,340.7
Stockholders’ equity   99,095.7  97,252.4
Total liabilities and stockholders’ equity   2,602,600.4  2,501,256.1

 

 

Rupees in million

   Year ended March 31,
   2023  2022
Interest income   101,212.1  87,940.7
Interest expense   (1,014.2)  (999.7)
Net interest income   100,197.9  86,941.0
Insurance premium   399,327.8  374,579.9
Other non-interest income   (8,403.8)  150,410.2
Non-interest expense   (477,926.2)  (614,873.7)
Income tax (expense)/benefit   (1,782.8)  1,184.4
Income/(loss), net   11,412.9  (1,758.2)

  

The income increased to Rs. 11,412.9 million in fiscal 2023 from a loss of Rs. 1,758.2 million in fiscal 2022, primarily due to lower policyholders’ liabilities and unallocated policyholders’ surplus, net of amortization of deferred acquisition cost and lower marked-to-market loss on trading portfolio and equity securities.

 

The aggregate market value of the investment in shares of ICICI Life at March 31, 2023 based on quoted market prices was Rs. 321,374.7 million (At March 31, 2022: Rs. 369,466.6 million).

 

ICICI General

 

The following tables set forth, for the periods indicated, the summarized U.S. GAAP balance sheets and statements of operations of ICICI General.

 

Rupees in million

   At March 31,
Balance sheet  2023  2022
       
Cash and cash equivalents   11,907.8  7,066.3
Securities   417,522.7  386,353.4
       
Other assets   176,329.3  173,986.0
Total assets   605,759.8  567,405.7

 

F-151

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

   At March 31,
Balance sheet  2023  2022
       
Other liabilities  455,252.5  422,936.5
Stockholders’ equity  150,507.3  144,469.2
Total liabilities and stockholders’ equity  605,759.8  567,405.7

 

Rupees in million

   Year ended March 31,
   2023  2022
Interest income   25,604.5  22,916.0
Interest expense   (114.8)  (375.0)
Net interest income   25,489.7  22,541.0
Insurance premium   161,484.6  131,372.1
Other non-interest income   3,542.9  4,223.5
Non-interest expense   (171,855.0)  (144,442.7)
Income tax (expense)/benefit   (3,538.4)  (3,518.0)
Income/(loss), net   15,123.8  10,175.9

  

The income/(loss) increased from Rs. 10,175.9 million in fiscal 2022 to Rs. 15,123.8 million in fiscal 2023 primarily due to increase in fair value of on equity investments.

 

The aggregate market value of the investment in shares of ICICI General at March 31, 2023 based on quoted market prices was Rs. 252,235.0 million (At March 31, 2022: Rs. 313,271.3 million).

 

h)Insurance affiliates

 

Life insurance affiliate

 

The significant differences between Indian GAAP and U.S. GAAP in case of the life insurance affiliate are primarily on account of:

 

i) Difference in policyholders’ liability and unallocated policyholders’ surplus, net of amortization of deferred acquisition cost

 

Policyholders’ liability

 

Reserves under Indian GAAP are held as per the requirements of Insurance Act, 1938, regulations notified by the Insurance Regulatory and Development Authority of India and Actuarial Practice Standards of the Institute of Actuaries of India. Accordingly, the reserves are computed using the Gross Premium Method (reserves are computed as the present value of future benefits including future bonuses and the present value of expenses including overheads and are net of the present value of future total premiums, paid by policyholders). The discount rates used are on prudent basis which change at every fiscal year end. Reserves under U.S. GAAP are valued using the Modified Net Premium Method as per the valuation norms prescribed under U.S. GAAP. The liability under U.S. GAAP consists of two parts, namely, policy reserves (comprising benefit reserve and maintenance expense reserve) and deferred profit liability.

 

 

F-152

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The benefit reserve is computed as the present value of guaranteed benefits less the present value of the net premium for benefits. The maintenance expense reserve is computed as the present value of maintenance expenses less the present value of net premiums for maintenance expenses. Deferred profit liability is held in accordance with ASC Topic 944-40-25-28 for products where the premium paying term is shorter than the policy term so as to allow the emergence of the profits over the entire policy term. The discount rates used for non-linked products represent best estimate with a provision for adverse deviation and are on locked-in basis, where the assumptions change at every fiscal year end only for the new business sold with in the fiscal year. Such assumptions include mortality, morbidity, policy expenses, policy lapse, policy surrenders and interest rates. Under unit-linked products, the excess of initial charges over ultimate charges is held as unearned revenue reserve to allow for the emergence of the profit over the term of the policy. The discount rates used are on best estimate basis and change at every financial year end.

 

Unallocated policyholders’ surplus

 

Participating policyholders are entitled to 90% of the surplus generated in the fund, which is given in the form of bonus.

 

Under Indian GAAP, based on the recommendation of Appointed Actuary, 1/9th of the bonus declared is transferred to the shareholders and remaining surplus after the transfer is held back as Funds for future appropriation.

 

Under U.S. GAAP, 10% of the surplus is transferred to shareholders and 90% is held back as unallocated policyholders’ surplus for participating policyholders.

 

Amortization of deferred acquisition cost

 

Under U.S GAAP, acquisition costs are those costs that vary with and are primarily related to the acquisition of new and renewal of existing insurance contracts. If an acquisition cost has substantial future utility, and is clearly associated with (and recoverable from) future revenue, it may be considered for deferral. These costs are referred to as deferrable acquisition costs.

 

The deferrable acquisition cost asset amortizes over time with a pattern of amortization that is proportional to revenues. Deferrable acquisition costs amortization for the accounting period is recognized as an expense in the income statement. In case of deferrable acquisition cost amortization for non-linked products, the unamortized balance of deferrable acquisition cost is reflected as an asset on the balance sheet. The assumptions used to calculate deferrable acquisition costs are the same as those used for policy reserves.

 

The deferred acquisition costs are amortized in proportion to premium revenue recognition for non linked insurance products and is based on the estimated gross profits for unit linked and universal life products as per ASC Topic “Financial Services – Insurance”. The estimated gross profits are made up of margins available from mortality and contract administration, investment earnings spreads, surrender charges and other expected assessments and credits.

 

Under Indian GAAP, acquisition cost is charged to the revenue account in the year in which it is incurred whereas under U.S. GAAP, the acquisition costs that are related directly to the successful acquisition of new or renewal insurance contracts and is deferred over the policy term.

 

ii)Compensation costs

 

Accounting for employee stock options

 

Under Indian GAAP, stock compensation costs are accounted for using the intrinsic value method as compared to U.S. GAAP where the stock compensation costs have been accounted for based on fair value method.

 

F-153

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Retirement benefit cost

 

Under Indian GAAP, all actuarial gains/losses are recognized on the balance sheet of the enterprise in the year in which they arise through suitable credit/debit in the profit and loss account of the year. Under U.S. GAAP, actuarial gains/losses are accounted in Other Comprehensive Income. Subsequently cumulative actuarial gain/loss lying in the Other Comprehensive Income which is over and above 10% corridor is amortized through profit and loss account. Further, discount rate for computing benefit obligation is linked to yield on high quality fixed income securities in U.S. GAAP as compared to yield on Government securities under Indian GAAP.

 

iii)Unrealized gain/(loss) on trading portfolio and equity securities

 

Under Indian GAAP, accounting for investments is in accordance with the guidelines issued by the Insurance Regulatory and Development Authority of India, which do not allow the unrealized gain to be routed through the revenue account except in the case of linked business. A linked life insurance policy is a policy in which the cash value of the policy varies according to the net asset value of units (i.e., shares) in investment assets chosen by the policyholder. Under U.S. GAAP, unrealized gain/(loss) on investments classified as “held for trading” is taken to the profit and loss account. Under U.S. GAAP, unrealized gain/losses on equity securities are recognized in profit and loss account.

 

iv) Income taxes

 

The differences in the accounting for income taxes are primarily on account of the income tax impact of non-tax U.S. GAAP adjustments.

 

v) Lease

 

Under Indian GAAP, expenses towards operating lease is charged to profit and loss account on a straight line basis. Under U.S. GAAP, a right to use asset and a lease liability is required to be recognized at the commencement of the lease for all lease on adoption of FASB ASC 842- “Leases” and a single lease cost is recognized, which is calculated such that the cost of the operating lease is allocated over the lease term on a generally straight-line basis.

 

The following table sets forth, for the periods indicated, the significant differences between Indian GAAP and U.S. GAAP in case of the life insurance affiliate.

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Profit as per Indian GAAP  8,134.9  7,592.0  9,561.6
Adjustments on account of         
Unrealized gain/(loss) on trading portfolio and equity securities  (4,532.8)  (12,544.7)  40,326.6
Difference in policyholders’ liabilities and unallocated policyholders’ surplus, net of amortization of deferred acquisition cost  8,502.5  1,479.4  (23,030.4)
Compensation costs  (692.1)  (563.5)  (744.4)
Deferred taxes benefit/(expense)  160.4  2,140.4  (4,739.6)
Others  (160.0)  138.2  (46.4)
Profit/(loss) as per U.S. GAAP  11,412.9  (1,758.2)  21,327.4
          
Net income/(loss) (net of tax)  11,412.9  (1,758.2)  21,327.4
Other Comprehensive Income:         
Net unrealized gain/(loss) on securities, net of realization & others  (11,667.8)  (17,777.5)  (3,963.3)
Accounting for post retirement employee benefits  (0.2)  (28.8)  44.0
Deferred taxes benefit/(expense)          1,698.5          2,591.0  574.3
Total comprehensive income/(loss)  1,443.4    (16,973.5)  17,982.4

 

 

F-154

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The profit under Indian GAAP increased from Rs. 7,592.0 million in fiscal 2022 to Rs. 8,134.9 million in fiscal 2023, net income under U.S. GAAP increased from a loss of Rs. 1,758.2 million in fiscal 2022 to an income of Rs. 11,412.9 million in fiscal 2023. In fiscal 2023, the total comprehensive income was Rs. 1,443.4 million as compared to total comprehensive loss of Rs. 16,973.5 million in fiscal 2022.

 

The unrealized loss on the trading portfolio and equity securities decreased from Rs. 12,544.7 million in fiscal 2022 to Rs. 4,532.8 million in fiscal 2023. This reduction was primarily due to lower marked-to-market losses in debt securities and marked-to-market gains in equity securities. In fiscal 2023, the marked-to-market loss recognized in net income on the debt securities was Rs. 4,683.4 million (compared to Rs. 6,466.3 million in fiscal 2022), out of which a loss of Rs. 4,562.2 million (compared to Rs. 6,302.4 million in fiscal 2022) was recognized in participating funds. Furthermore, the marked-to-market gain recognized on equity securities in fiscal 2023 was Rs. 150.6 million (compared to a marked-to-market loss of Rs. 6,078.4 million in fiscal 2022), with a gain of Rs. 1,458.6 million (compared to a marked-to-market loss of Rs. 4,815.6 million in fiscal 2022) recognized on the equity securities of shareholders’ fund.

 

Under U.S. GAAP, the policyholders' liabilities and unallocated policyholders' surplus, net of amortization of deferred acquisition cost, were lower by Rs. 8,502.5 million in fiscal 2023 compared to Indian GAAP. In fiscal 2022, the difference was lower by Rs. 1,479.4 million. In fiscal 2023, the liabilities recognized through the income statement towards unallocated policyholders' surplus under U.S. GAAP were lower by Rs. 7,339.6 million compared to Indian GAAP, primarily due to the marked-to-market loss on the debt portfolio of participating funds. In fiscal 2022, the liabilities recognized through the income statement towards unallocated policyholders' surplus under U.S. GAAP were lower by Rs. 3,590.7 million compared to Indian GAAP, primarily due to the marked-to-market loss on the debt portfolio of participating funds.

 

The liabilities associated with Guaranteed Savings Insurance Plan product include the impact of marked-to-market gain/loss on underlying investments. Under U.S. GAAP, the changes in liabilities related to Guaranteed Savings Insurance Plan are recognized through net income, while the marked-to-market changes in underlying debt investments, classified as available-for-sale investments, is recognized through other comprehensive income. During fiscal 2023, the life insurance affiliate recognized a marked-to-market loss of Rs. 4,995.2 million (compared to a marked-to-market loss of Rs. 5,028.1 million in fiscal 2022) on available-for-sale debt securities through other comprehensive income, while the related change in liability was recognized through net income.

 

Other comprehensive income arising from policyholders’ assets classified as available for sale decreased on account of unrealized loss of Rs. 11,667.8 million in fiscal 2023 (fiscal 2023: unrealized loss of Rs. 17,777.5 million).

 

The following table sets forth, for the periods indicated, the components of income taxes in net income reconciliation of ICICI Life.

 

F-155

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Income tax impact of non-tax U.S. GAAP adjustments   160.4  2,140.4  (4,739.6)
Total differences in income taxes   160.4  2,140.4  (4,739.6)

 

General insurance affiliate

 

The significant differences between Indian GAAP and U.S. GAAP in case of the general insurance affiliate are primarily on account of:

 

i)Provision for reinsurance commission

 

Under Indian GAAP, reinsurance commission on business ceded is recognized as income in the year of the ceding of the risk. Under U.S. GAAP, proceeds from reinsurance transactions that represent recovery of acquisition costs are reduced from unamortized acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense in proportion to net revenue recognized over the related policy period.

 

ii)Amortization of deferred acquisition costs

 

Under Indian GAAP, acquisition cost is charged as an expense to the revenue account in the year in which it is incurred whereas under U.S. GAAP, the same is deferred and charged as an expense in proportion to premium revenue recognized as per ASC Topic 944 “Financial Services-Insurance”. Accordingly, certain acquisition costs specified in Accounting Standards Update 2010-26 have been deferred that are related directly to the successful acquisition of new or renewal insurance contracts.

 

iii)Premium deficiency

 

Under Indian GAAP, premium deficiency is recognized if the sum of the expected claims costs, related expenses and maintenance costs exceed related unearned premiums. Under Indian GAAP, for assessment of premium deficiency, line of business are segmented under “Fire”, “Marine”, “Miscellaneous” segments. Under U.S. GAAP premium deficiency is assessed for each line of business and recognized in the profit & loss account if the sum of expected claim costs and claims adjustment expenses, expected dividends to policyholders, un-amortized acquisition costs and maintenance costs exceed related unearned premiums. A premium deficiency is recognized by first charging acquisition costs to expense, to the extent required to eliminate the deficiency. If the premium deficiency is greater than un-amortized acquisition costs, a liability for the excess deficiency is required to be accrued.

 

iv)Compensation costs

 

Accounting for employee stock options

 

Under Indian GAAP, stock compensation costs are accounted for by the intrinsic value method as compared to U.S. GAAP where the compensation costs have been accounted for at the fair value method in accordance with the requirement of FASB ASC Topic 718 “Compensation-Stock Compensation”.

 

Retirement benefit cost

 

Under Indian GAAP, all actuarial gains/losses are recognized on the balance sheet of the enterprise in the year in which they arise through suitable credit/debit in the profit and loss account of the year. Under U.S. GAAP, actuarial gains/losses are accounted in Other Comprehensive Income. Subsequently cumulative actuarial gain/loss lying in the Other Comprehensive Income which is over and above 10% corridor is amortized through profit and loss account. Further, discount rate for computing benefit obligation is linked to yield on high quality fixed income securities in U.S. GAAP as compared to yield on government securities under Indian GAAP.

 

F-156

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

v)Mark to market on equity investments

 

Under Indian GAAP, all unrealized gains/ (losses) on equity investments are recognized through reserves. Under U.S. GAAP, unrealized gains/ (losses) on equity investments are recognized through income statement.

 

vi)Income taxes

 

The differences in the accounting for income taxes are primarily on account of the income tax impact of non-tax U.S. GAAP adjustments.

 

vii)Lease

 

Under Indian GAAP, expenses towards operating lease is charged to profit and loss account on a straight line basis. Under U.S. GAAP, a right to use asset and a lease liability is required to be recognized at the commencement of the lease for all lease on adoption of FASB ASC 842- “Leases” and a single lease cost is recognized, which is calculated such that the cost of the operating lease is allocated over the lease term on a generally straight-line basis.

 

viii)Business Combination

 

During fiscal 2022, in accordance with the Scheme of Arrangement between ICICI Lombard General Insurance Company Limited and Bharti AXA General Insurance Company Limited, as approved by Insurance Regulatory and Development Authority of India with effect from September 8, 2021, assets and liabilities of Bharti AXA General Insurance Company Limited’s general insurance business vested with ICICI Lombard General Insurance Company Limited on the Appointed Date of April 1, 2020. ICICI Lombard General Insurance Company Limited issued two fully paid up equity shares to the shareholders of Bharti AXA General Insurance Company Limited for every 115 fully paid up equity shares.

 

Under Indian GAAP the merger was accounted using the “Pooling of Interest Method” as prescribed in Accounting Standard 14 “Accounting for Amalgamations” where all the assets, liabilities and reserves of the Bharti AXA’s general insurance business were recorded in their existing form and at their carrying value and the excess of consideration paid over net assets taken-over was adjusted with the reserve and surplus account.

 

Under US GAAP, the merger was accounted in accordance with ASC 805 – Business Combinations where all the assets and liabilities were measured at fair value on September 8, 2021 of merger. Goodwill was measured as excess of consideration paid over the net assets taken over. Accordingly under US GAAP, ICICI Lombard General Insurance Company Limited recognized intangible assets of Rs. 1,230.0 million and goodwill of Rs. 46,454.5 million. The goodwill is tested for impairment on annual basis and intangible assets are amortized over the useful life.

 

The following table sets forth, for the periods indicated, the details of the significant differences between Indian GAAP and U.S. GAAP for the general insurance affiliate.

 

F-157

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Profit as per Indian GAAP   17,290.5  12,710.1  14,730.5
Adjustments on account of         
Provision for reinsurance commission   (1,171.9)  1,511.7  2,715.1
Amortization of deferred acquisition costs   531.3  (125.0)  824.1
Premium deficiency   11.9  (5.8)  6.7
Compensation costs   (1,285.6)  (981.3)  (760.2)
Unrealized gain/(loss) on equity investments.   (413.6)  (2,791.4)  11,285.1
Income tax benefit/(expense)   296.4  607.2  (3,707.2)
Business Combination  (123.0)  (508.2)  ..
Others   (12.2)  (241.4)  (129.4)
Profit/(Loss) as per U.S. GAAP   15,123.8  10,175.9  24,964.9
Other Comprehensive Income         
MTM on Debt Securities  (6,010.8)  (2,763.0)  976.0
Compensation Cost  1,285.6  981.2  760.2
Actuarial Gain/(Loss)  14.4  0.6  43.0
Total Other Comprehensive Income  (4,710.8)  (1,781.2)  1,779.1
Total Comprehensive Income  10,413.0  8,394.7  26,744.1

 

The profit under Indian GAAP increased from Rs. 12,710.1 million in fiscal 2022 to Rs. 17,290.5 million in fiscal 2023, profit under U.S. GAAP increased from Rs. 10,175.9 million in fiscal 2022 to Rs. 15,123.8 million in fiscal 2023. Total comprehensive income under U.S. GAAP increased from Rs. 8,394.7 million in fiscal 2022 to Rs. 10,413.0 million in fiscal 2023. The unrealized loss on available for sale debt securities increased from Rs. 2,763.0 million in fiscal 2022 to Rs. 6,010.8 million in fiscal 2023.

 

Reinsurance commission on premium ceded is recognized as income in the year of the ceding of the risk under Indian GAAP and recognized over the policy period under U.S. GAAP. Reinsurance commission income was lower by Rs. 1,171.9 million under U.S. GAAP as compared to Indian GAAP in fiscal 2023 (higher by Rs. 1,511.7 million in fiscal 2022). This decrease was primarily due to increase in reinsurance commission of health attachment business in fiscal 2023 resulting in higher deferral under U.S. GAAP, which was accounted as upfront under Indian GAAP in fiscal 2023.

 

Deferred acquisition cost resulted in income of Rs. 531.3 million in fiscal 2023 (fiscal 2022: cost of Rs. 125.0 million) under U.S. GAAP as compared to Indian GAAP primarily due to higher deferred acquisition cost incurred during fiscal 2023 as compared to fiscal 2022.

 

Unrealized loss on equity investments decreased from Rs. 2,791.4 million in fiscal 2022 to Rs. 413.6 million in fiscal 2023 primarily due to equity market movement in March 2023. While, these gains/losses are accounted through fair value change account in balance sheet under Indian GAAP, under U.S. GAAP these gains/losses are accounted through net income.

 

The following table sets forth, for the periods indicated, the components of income taxes in net income reconciliation of the general insurance affiliate.

 

Rupees in million

Reconciling items  Year ended March 31,
   2023  2022  2021
Income tax impact of non-tax U.S. GAAP adjustments   296.4  607.2  (3,707.2)
Total differences in income taxes   296.4  607.2  (3,707.2)

 

F-158

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

i)         Goodwill and intangible assets

 

The following table sets forth, for the periods indicated, a listing of goodwill and intangible assets, by category under U.S. GAAP.

 

Rupees in million

   Year ended March 31,
   2023  2022
Goodwill   35,101.4  35,101.4
Charge off/write off   (54.0)  (54.0)
Goodwill, net…………………………………………………………………… (A)  35,047.4  35,047.4
       
Asset management and advisory intangibles…………………………………… (B)  367.0  367.0
Customer-related intangibles   10,410.0  10,410.0
Accumulated amortization   (10,410.0)  (10,410.0)
Customer-related intangibles net…………………………………………… (C)  ..  ..
Goodwill and intangible assets, net…………………………………………… (A+B+C)  35,414.4  35,414.4

 

1.See also “Schedule 18 -Fixed assets”.

 

The following table sets forth, for the periods indicated, the changes in goodwill under U.S. GAAP.

 

Rupees in million

   Year ended March 31,
   2023  2022
Opening balance   35,047.4  177,944.3
Goodwill addition during the period   ..  ..
Goodwill disposed off during the period1   ..  (142,896.9)
Closing balance   35,047.4  35,047.4
1.Represents Goodwill disposed off due to loss of control of general insurance subsidiary.

 

The following table sets forth, for the periods indicated, the changes in intangible assets under U.S. GAAP.

 

Rupees in million

   Year ended March 31,
   2023  2022
Opening balance   ..  8,751.6
Additions   ..  ..
Amortization   ..  (704.1)
Disposal   ..  (8,047.5) 1
Closing balance   ..  ..
1.Represents intangible assets disposed off due to loss of control of general insurance subsidiary

 

The Group has assigned goodwill to reporting units. The Group tests its goodwill for impairment on an annual basis at a reporting unit level. The fair value of the reporting units was assessed as per ASC topic 350-20-35-3 and determined that it was not more likely than not that the fair value of the reporting units was less than their carrying amounts and the quantitative goodwill impairment test was unnecessary at March 31, 2023.

 

F-159

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

j)         Employee benefits

 

Gratuity

 

In accordance with Indian regulations, the Group provides for gratuity, a defined benefit retirement plan covering all employees. The plan provides a lump sum payment to vested employees at retirement, death or termination of employment based on the respective employee’s salary and the years of employment with the Group. The gratuity benefit provided by the Group to its employees is equal to or greater than the statutory minimum.

 

In respect of the parent company, the gratuity benefit is provided to the employee through a fund administered by a Board of Trustees and managed by ICICI Prudential Life Insurance Company Limited. The parent company is responsible for settling the gratuity obligation through contributions to the fund.

 

In respect of the remaining entities within the Group, the gratuity benefit is provided through annual contributions to a fund administered and managed by Life Insurance Corporation of India (LIC) and ICICI Prudential Life Insurance Company Limited. Under this scheme, the settlement obligation and contribution to be paid remains with the Group, although LIC and ICICI Prudential Life Insurance Company Limited administer the scheme.

 

The following table sets forth, for the periods indicated, the funded status of the plans and the amounts recognized in the financial statements.

 

Rupees in million

   Year ended March 31,
   2023  2022
Change in benefit obligations      
Projected benefit obligations at the beginning of the year  15,469.9  15,358.4
Less: Reduction due to deconsolidation of ICICI Lombard General Insurance Company during the year  ..  (1,020.2)
Add: Adjustment for exchange fluctuation on opening obligations  12.2  6.0
Adjusted opening obligations  15,482.1  14,344.2
Service cost  1,526.2  1,435.9
Interest cost  1,063.6  984.5
Acquisition/(Divestitures)  34.1  (2.8)
Benefits paid  (1,742.0)  (1,454.4)
Unrecognized prior service cost  ..  ..
Plan amendments  (72.2)  ..
Actuarial (gain)/loss on obligations  506.0  162.5
Projected benefit obligations at the end of the year  16,797.8  15,469.9
Change in plan assets      
Fair value of plan assets at the beginning of the year  15,190.5  15,091.6
Less: Reduction due to deconsolidation of ICICI Lombard General Insurance Company during the year  ..  (1,080.6)
Adjusted opening plan assets  15,190.5  14,011.0
Acquisition/(Divestitures)  50.8  (2.8)
Actual return on plan assets  551.6  989.6
Employer contributions  1,403.2  1,647.1
Benefits paid  (1,742.0)  (1,454.4)
Plan assets at the end of the year  15,454.1  15,190.5
Funded status  (1,343.7)  (279.5)
Amount recognized, net  (1,343.7)  (279.5)
Accumulated benefit obligation at year-end  10,111.0  9,422.6

 

F-160

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, the components of the net gratuity cost.

 

Rupees in million

   Year ended March 31,
   2023  2022  2021
Service cost   1,526.2  1,435.9  1,422.1
Interest cost   1,063.6  984.5  1,018.0
Expected return on plan assets   (1,092.2)  (1,019.5)  (953.1)
Amortization of prior service cost   8.3  8.3  1.6
Amortized actuarial (gain)/loss   10.2  16.2  12.1
Acquisition and divestiture (gain)/loss   ..  ..  ..
Exchange (gain)/loss   12.2  6.0  (6.5)
Gratuity cost, net   1,528.3  1,431.4  1,494.2

 

 

The discount rate for the corresponding tenure of obligations for gratuity is selected by reference to local government security yield with a premium added to reflect the additional risk for AAA rated corporate bonds.

 

The following table sets forth, for the periods indicated, the weighted average assumptions used to determine net periodic benefit cost.

 

   Year ended March 31,
   2023  2022  2021
Discount rate  6.7%  6.6%  7.4%
Rate of increase in the compensation levels  7.0%  7.1%  7.2%
Rate of return on plan assets  7.5%  7.5%  8.0%

 

The following table sets forth, for the periods indicated, the weighted average assumptions used to determine benefit obligations.

 

   Year ended March 31,
   2023  2022
Discount rate   7.7%  6.6%
Rate of increase in the compensation levels   8.0%  7.0%

 

Plan assets

 

The Group determines its assumptions for the expected rate of return on plan assets based on the expected average long-term rate of return over the next 7 to 8 years.

 

The following table sets forth, for the periods indicated, the Group’s asset allocation for gratuity by asset category based on fair values.

 

Rupees in million

   At March 31,
   2023  2022
Assets category      
Investment in schemes of ICICI Prudential Life Insurance Company Limited       
Group balance fund1   14,439.4  14,087.9
Group growth fund2   1.7  58.5
Group debt fund3   158.0  207.5
Group short-term debt fund4   101.3  107.3
Total investment in schemes of ICICI Prudential Life Insurance Company Limited  14,700.4  14,461.2
Investment in scheme of Life Insurance Corporation of India   425.4  418.1
Total assets managed by external entities   15,125.8  14,879.3
Special deposit with central government   290.0  290.0
Government debt securities   13.2  24.9
Balance with banks and others   25.1  (3.6)
Total   15,454.1  15,190.5

1.Objective of the scheme is to provide a balance between long-term capital appreciation and current income through investment in equity as well as fixed income instruments in appropriate proportions. At March 31, 2023, investment in government securities, corporate bonds, fixed deposits and equity were 35.37%, 41.26%, 8.55% and 14.82% respectively.

2.Objective of the scheme is to primarily generate long-term capital appreciation through investment in equity and equity related securities and complement it with current income through investment in fixed income instruments in appropriate proportions depending on market conditions prevalent from time to time. At March 31, 2023, investment in government securities, corporate bonds, fixed deposits and equity were 17.12%, 18.04%, 11.61% and 53.23% respectively.

3.Objective of the scheme is to provide accumulation of income through investment in various fixed income securities. The Fund seeks to provide capital appreciation while maintaining suitable balance between return, safety and liquidity. At March 31, 2023, investment in government securities, corporate bonds, and fixed deposits were 29.59%, 60.25% and 10.16% respectively.

4.Objective of the scheme is to provide suitable returns through low risk investments in debt and money market instruments while attempting to protect the capital deployed in the fund. At March 31, 2023, investment in government securities, corporate bonds and fixed deposits were 14.67%, 79.15% and 6.18% respectively, the rest is in money market instruments.

 

F-161

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, the Group’s target asset allocation for gratuity by asset category.

 

Description  Target asset allocation at March 31, 2024  Target asset allocation at March 31, 2023
Funds managed by external entities1   98%  98%
Special deposit with central government   2%  2%
Debt securities   0%  0%
Total   100%  100%
1.Targeted investment during fiscal 2024 of about 45% in Central Government securities, about 35% in corporate debt securities, about 5% in money market investment and about 15% in equity investment.

 

The plan assets primarily consist of investments made in funds managed by external entities, which are primarily in equity, money market instruments and debt instruments in different proportions depending on the objective of schemes. The value of the plan assets in funds managed by ICICI Prudential Life Insurance Company Limited has been arrived at based on the net asset value per unit of individual schemes. The value of plan assets in the form of investments in scheme of LIC and special deposit with the Central Government are recorded at carrying value. The value of plan assets in the form of debt securities is derived using Level 2 input.

 

ICICI Prudential Life Insurance Company Limited administers the plan fund and it independently determines the target allocation by asset category. The investment strategy is to invest in a prudent manner for providing benefits to the participants of the scheme. The strategies are targeted to produce a return that, when combined with the Group’s contribution to the funds will maintain the fund’s ability to meet all required benefit obligations. ICICI Prudential Life Insurance Company Limited functions within the regulated investment norms.

 

LIC administers the plan fund and it independently determines the target allocation by asset category. The selection of investments and the asset category is determined by LIC. The investment strategy is to invest in a prudent manner to produce a return that will enable the fund to meet the required benefit obligations. LIC, which is owned by Government of India, functions within regulated investment norms.

 

The plan assets are mainly invested in various gratuity schemes of the insurance companies to limit the impact of individual investment. The Group’s entire investment of plan assets is in India and 95.1% of investment is in various gratuity schemes of ICICI Prudential Life Insurance Company Limited. Insurers managing the plan assets of the Group consider operational risk, performance risk, credit risk and equity risk in their investment policy as part of their risk management practices.

 

F-162

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, the benefit expected to be paid in each of the next five fiscal years and thereafter.

 

Rupees in million

   Amount
Expected Group contributions to the fund during the year ending March 31, 2024   1,600.0
Expected benefit payments from the fund during year ending March 31,   
2024   2,465.2
2025   2,024.6
2026   2,098.5
2027   2,197.1
2028   2,433.6
Thereafter upto 10 years   13,654.3

 

The expected benefits are based on the same assumptions as used to measure the Group’s benefit obligation at March 31, 2023.

 

Pension

 

The Group provides for pension, a deferred retirement plan covering certain employees. The plan provides for a pension payment on a monthly basis to these employees on their retirement based on the respective employee’s salary and years of employment with the Group. Employees covered by the pension plan are not eligible for benefits under the provident fund plan. The pension plan pertained to the employees of erstwhile Bank of Madura, erstwhile Sangli Bank and erstwhile Bank of Rajasthan which were acquired with effect from March 2001, April 2007 and August 2010 respectively. The Group makes contribution to a trust which administers the funds on its own account or through insurance companies.

 

The following table sets forth, for the periods indicated, the funded status of the plan and the amounts recognized in the financial statements.

 

Rupees in million

   Year ended March 31,
   2023  2022
Change in benefit obligations      
Projected benefit obligations at beginning of the year   18,543.6  19,871.3
Service cost   150.8  200.7
Interest cost   1,152.3  1,151.9
Liability extinguished on settlement   (2,192.6)  (2,289.8)
Benefits paid   (99.8)  (118.2)
Actuarial (gain)/loss on obligations   (178.3)  (272.2)
Projected benefit obligations at the end of the year   17,376.0  18,543.6
       
Change in plan assets      
Fair value of plan assets at beginning of the year   19,843.2  21,162.1
Actual return on plan assets   840.0  1,288.8
Assets distributed on settlement   (2,436.2)  (2,544.2)
Employer contributions   42.9  54.7
Benefits paid   (99.8)  (118.2)
Plan assets at the end of the year   18,190.1  19,843.2
       
Funded status   814.1  1,299.6
       
Net amount recognized   814.1  1,299.6
       
Accumulated benefit obligation at year end   16,819.6  17,848.7

 

F-163

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

The following table sets forth, for the periods indicated, the components of the net pension cost.

 

Rupees in million

   Year ended March 31,
   2023  2022  2021
Service cost   150.8  200.7  204.4
Interest cost   1,152.3  1,151.9  1,209.1
Expected return on assets   (1,522.1)  (1,621.0)  (1,350.8)
Curtailment and settlement (gain)/loss   243.6  254.4  244.2
Actuarial (gain)/loss   1,402.5  1,779.8  1,528.0
          
Net pension cost   1,427.1  1,765.8  1,834.9

 

The discount rate for the corresponding tenure of obligations for pension is selected by reference to government security yield with a premium added to reflect the additional risk corresponding to AAA rated corporate bonds.

 

The following table sets forth, for the periods indicated, the weighted average assumptions used to determine net periodic benefit cost.

 

   Year ended March 31,
   2023  2022  2021
          
Discount rate   6.4%  5.9%  7.3%
Rate of increase in the compensation levels         
On basic pay   1.5%  1.5%  1.5%
On dearness relief   7.0%  7.0%  7.0%
Rate of return on plan assets   7.5%   7.5%  8.0%
Pension increases (applicable on basic pension)   7.0%  7.0%  7.0%

 

The following table sets forth, for the periods indicated, the weighted average assumptions used to determine benefit obligations.

 

  

Year ended March 31,

  

2023

 

2022

Discount rate   7.8%  6.4%
Rate of increase in the compensation levels      
On basic pay   1.5%  1.5%
On dearness relief   8.0%  7.0%
Pension increases (applicable on basic pension)   7.0%  7.0%

 

The compensation escalation rate eligible for pension was determined at the time of acquisition and the same escalation rate is consistently considered for computation of benefit obligations and periodic cost.

 

F-164

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Plan Assets

 

The Group determines its assumptions for the expected rate of return on plan assets based on the expected average long-term rate of return over the next 7 to 8 years.

 

The following table sets forth, for the periods indicated, the Group’s asset allocation and target asset allocation for pension by asset category based on fair values.

 

Rupees in million

Asset category

 

Fair value at March 31, 2023

 

Fair value at March 31, 2022

 

Target asset allocation at March 31, 2024

 

Target asset allocation at March 31, 2023

Government debt securities   7,592.9  9,264.4  42%  47%
Corporate debt securities   8,786.4  9,217.3  48%  46%
Equity securities  1,288.2  1,281.3  7%  6%
Balance with banks and others   522.6  80.2  3%  1%
Total  

18,190.1

 

19,843.2

 

100%

 

100%

 

The valuation of the government and corporate securities is derived using Level 2 inputs.

 

The Group’s entire investment of plan assets are in India and invested in government securities, corporate bonds, equity securities and equity traded funds. Trustees manage the plan assets of the Group by investing in above securities as per the investment pattern and guidelines prescribed under the Indian income tax law. Securities are purchased after considering credit rating, comparative yields and tenure of investment.

 

The following table sets forth, the benefit expected to be paid in each of the next five fiscal years and thereafter.

 

Rupees in million

   Amount
Expected Group contributions to the fund during the year ending March 31, 2024  1,000.0
Expected benefit payments from the fund during the year ending March 31,   
2024  1,086.9
2025  924.4
2026  915.1
2027  1,017.4
2028  1,038.1
Thereafter upto 10 years  7,080.9

 

The expected benefits are based on the same assumption as used to measure the Group’s benefit obligation at March 31, 2023.

 

k)Lease

 

The Group as lessee

 

The Group has entered into lease arrangements primarily for the real estate office premises and for certain equipment used for the business purposes. For these lease arrangements, the Group is required to make fixed lease payments adjusted for escalation clauses for certain lease arrangements, except for certain assets where the variable lease payments are being made by the Group. The variable lease payments are determined primarily based on the usage of the asset by the Group. None of these lease arrangements impose any restriction on the Group in relation to dividend payments or incurring any additional financial obligations. The group has elected not to separate the lease and non-lease components of these arrangements.

 

F-165

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Operating lease

 

Operating lease liabilities and right of use assets are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. The future lease payments are discounted at a rate that represents the Group’s incremental borrowing rate for financing instruments of a similar term and are included in accounts payable and other liabilities. The operating lease right of use asset, included in premises and equipment, also includes any lease prepayments made, plus initial direct costs incurred, less any lease incentives received. Rental expense associated with operating leases is recognized on a straight-line basis over the lease term, and is included in the consolidated statements of income. The following table sets forth, the information related to the Group’s operating leases.

 

Rupees in million

   Year ended March 31, 2023  Year ended March 31, 2022
Right-of-use assets at year end   52,069.1  46,568.7
Lease liability at year end   57,128.2  51,550.6
Cash paid for amounts included in the measurement of lease liabilities –
operating cashflows from operating lease
  11,139.4  10,904.8
Non-cash investing and financing activities –
additions to right-of-use asset obtained from new operating lease
liabilities
  17,268.7  9,974.0
Weighted average remaining lease term (in years)   8.0 years  7.6 years
Weighted average discounting rate (in %)   6.1%  6.0%

 

The following table sets forth, the future payments under operating leases as of March 31, 2023.

 

Rupees in million

   Year ended March 31, 2023
Fiscal 2024   10,947.5
Fiscal 2025   10,034.3
Fiscal 2026   9,250.2
Fiscal 2027   8,382.1
Fiscal 2028   7,867.6
After Fiscal 2028   27,440.4
Total Lease payments  73,922.1
Less: Imputed interest   16,793.9
Lease liabilities at March 31, 2023  57,128.2

 

The Group does not have any other significant future commitments at the end of fiscal 2023.

 

F-166

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

Finance lease

 

Finance lease liabilities and right of use assets are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term. The future lease payments are discounted at a rate that represents the implicit rate in the lease. Rental expense associated with finance leases is recognized on a straight-line basis over the lease term, and is included in the consolidated statements of income. The following tables provide information related to the Bank’s finance leases:

 

Rupees in million

   Year ended March 31, 2023  Year ended March 31, 2022
Right-of-use assets at year end   832.6  1,061.0
Lease liability at year end   929.3  1,124.6

Cash paid for amounts included in the measurement of lease liabilities

a.        finance cashflows from finance lease
b.       operating cashflows from finance lease

 

220.0

93.5

 

183.2

106.4

Non-cash investing and financing activities – additions to right-of-use asset obtained from new finance lease liabilities   11.7   388.3
Weighted average remaining lease term (in years)   4.1 years  4.8 years
Weighted average discounting rate (in %)   10.2%  10.6%

 

The following table sets forth, the future payments under finance leases as of March 31, 2023.

 

Rupees in million

   Year ended March 31, 2023
Fiscal 2024   326.0
Fiscal 2025   306.3
Fiscal 2026   213.5
Fiscal 2027   180.4
Fiscal 2028   66.1
After Fiscal 2028   15.0
Total Lease payments  1,107.3
Less: Imputed interest   178.0
Lease liabilities at March 31, 2023  929.3

 

Lease cost

 

The Group’s lease cost recognized in profit and loss account during the fiscal year is as below.

 

Rupees in million

   Year ended March 31, 2023  Year ended March 31, 2022
Finance lease cost      
Amortisation of right-to-use assets  240.1  195.4
Interest on lease liabilities  106.5  108.8
Operating lease cost  11,578.6  11,424.5
Short-term lease cost  3.9  0.9
Variable lease cost  4,658.9  4,552.7
Less: Sublease income  (12.8)  (51.1)
Total lease cost  16,575.2  16,231.2

 

F-167

ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

I)          Income taxes

 

Components of deferred tax balances

 

The following table sets forth, for the periods indicated, components of the deferred tax balances.

 

Rupees in million 

   At March 31,
   2023  2022
Deferred tax assets      
Allowance for credit losses  96,231.3  100,963.3
Debt and equity securities  3,138.4  8.5
Business and capital loss carry forwards  8,569.7  6,890.2
Financial instruments  2,843.0  2,727.0
Investments in affiliates  30,153.5  30,224.8
Lease liability  14,334.5  12,929.7
Others  7,036.4  3,655.2
Total deferred tax assets  162,306.8  157,398.7
Valuation allowance  (3,553.3)  (878.2)
Total deferred tax assets (net of valuation allowance)  158,753.5  156,520.5
Deferred tax liabilities      
Debt and equity securities  ..  (6,485.1)
Property, plant and equipment  (5,044.8)  (4,559.8)
Investments in branches, subsidiaries and affiliates  (12,764.9)  (25,357.7)
Amortization of fees and costs  (9,271.8)  (7,999.9)
Non-banking assets  (6,194.3)  (6,273.4)
Right to use assets  (13,061.3)  (11,675.8)
Others  (3,902.7)  (2,913.0)
Total deferred tax liabilities  (50,239.8)  (65,264.7)
       
Net deferred tax assets  108,513.7  91,255.8

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent on the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers carryback availability, the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable incomes over the periods in which the deferred tax assets are deductible, management believes that it is more likely than not that the Group will realize the benefits of its deferred tax assets, net of the existing valuation allowances at March 31, 2023 and 2022. The amount of deferred tax assets considered realizable, however could be reduced in the near term if estimates of future taxable income are reduced.

 

The Indian statutory income tax rate, including surcharge and cess was 25.17% for the year ended March 31, 2023, 2022 and 2021.

 

Reconciliation of income tax expense

 

The following table sets forth, for the periods indicated, a reconciliation of expected income tax expense at the Indian statutory income tax rate, the income tax rate in our country of domicile to reported income tax expense/(benefit).

 

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Schedules forming part of the Consolidated Financial Statements

 

Rupees in million

   Year ended March 31,
   2023  2022  2021
Income/(loss) before income tax expense from continuing operations          
In India   359,939.4  622,481.7  308,259.6
Outside India   6,381.2  5,922.9  (4,663.4)
Total   366,320.6  628,404.6  303,596.2
          
Statutory tax rate   25.17%  25.17%  25.17%
Effective tax rate  28.96%  16.86%  22.20%
Income tax expense/(benefit) at the statutory tax rate   92,195.6  158,156.9  76,409.1
Increases/(reductions) in taxes on account of:         
Special tax deductions available to financial institutions/insurance companies through appropriation of profits to a Special Reserve   (6,580.8)  (3,669.5)  (2,743.2)
Exempt interest and dividend income   (832.9)  (964.7)  (198.9)
Income charged at rates other than statutory tax rate1   15,997.8  (37,780.6)  63.8
Expenses disallowed for income tax purposes   2,861.6  2,021.3  1,617.9
Tax on investment and undistributed earnings  in subsidiaries, branches and affiliates2   2,139.4  (9,340.1)  (2,313.0)
Change in valuation allowance   2,675.1  (71.3)  (2,404.5)
Tax adjustments in respect of prior year tax assessments   276.2  (230.6)  108.4
Others   (2,629.4)  (2,144.3)  (1,087.2)
          
Income tax expense/(benefit) reported   106,102.6  105,977.2  69,452.4
Current tax expense          
In India   111,869.8  73,064.0  61,312.2
Outside India   1,694.8  600.3  301.9
Total   113,564.6  73,664.3  61,614.1
Deferred tax (benefit)/expense          
In India3   (7,517.5)  31,858.2  6,490.9
Outside India   55.5  454.7  1,347.4
Total   (7,462.0)  32,312.9  7,838.3

1.During fiscal 2022, includes tax effect of Rs. (35,006.1) million on gains due to remeasurement of equity interest in ICICI Lombard General Insurance Company Limited.

2.During fiscal 2022, the Bank had recognized a deferred tax asset amounting to Rs. 8,247.7 million on the investment in its equity affiliate (ICICI Lombard General Insurance Limited).

3.During fiscal 2023, includes income tax expense of Rs 2,683.1 million for an increase of a valuation allowance because of a change in judgment about the realizability of a beginning-of-the-year deferred tax assets for capital loss carryforwards of the Bank in future years.

 

The following table sets forth the details of the amount and expiration dates of operating loss carry forwards at March 31, 2023.

 

Rupees in million

Expiry period  Bank  Subsidiaries  Overseas branches
Capital loss carry forwards          
April 1, 2023 to March 31, 2028   1,000.3  2,069.1  ..
April 1, 2028 to March 31, 2033   27,353.3  88.1  ..
Total capital loss carry forwards   28,353.6  2,157.2  ..
          
Business loss carry forwards          
April 1, 2023 to March 31, 2028   ..  659.6  ..
April 1, 2028 to March 31, 2033   ..  899.3  ..
April 1, 2033 to March 31, 2038   ..  29.0  5,798.1
April 1, 2038 to March 31, 2043   ..  0.4  ..
Indefinite period   ..  3,325.1  5,937.8
Total business loss carry forwards   ..  4,913.4  11,735.9

 

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Schedules forming part of the Consolidated Financial Statements

 

Accounting for uncertainty in income taxes

 

The Group has a policy to include interest and penalties on income taxes, if any, within interest expense or income and income tax expense respectively. However, no interest expense has been recognized in view of the adequate income taxes paid by the Group. No penalties have been accrued as of March 31, 2023 and 2022, as the Group believes that the tax positions taken have met the minimum statutory requirements to avoid payment of penalties.

 

The Group has recognized income with respect to interest accrued or received on tax refunds due to the Group against favourable orders received from tax authorities amounting to Rs. 1,149.5 million, Rs. 2,434.3 million and Rs. 2,569.7 million during the year ended March 31, 2023, 2022 and 2021 respectively. Further, the Group does not recognize the interest income accrued on advance income taxes paid against various income tax matters until the related matter is resolved with the taxing authority. Unrecognized interest on such advance income taxes paid is Rs. 13,866.7 million and Rs. 11,636.2 million at March 31, 2023 and 2022 respectively.

 

The following table sets forth, for the periods indicated, a reconciliation of the beginning and ending amount of unrecognized tax benefits.

 

Rupees in million

   Year ended March 31,
   2023  2022  2021
          
Beginning balance   36,271.5  35,856.2  31,945.3
Increases related to prior year tax positions.   41.8  ..  1,227.3
Increases related to current year tax positions   5,462.6  4,116.5  2,740.5
Decreases related to prior year tax positions   (1,633.1)  (3,701.2)  (56.9)
Ending balance   40,142.8  36,271.5  35,856.2

 

The Group’s total unrecognized tax benefits, if recognized, would reduce income tax expense and thereby would affect the Group’s effective tax rate.

 

The Group’s major tax jurisdiction is India and the assessments are not yet completed for fiscal 2020 and onwards. However, appeals filed by the Group are pending with various local tax authorities in India from fiscal 1990 onwards.

 

Significant changes in the amount of unrecognized tax benefits within the next 12 months cannot be reasonably estimated as the changes would depend upon the progress of tax examinations with various taxing authorities.

 

m)       Earnings per share

 

Basic earnings per share is net income per weighted average equity shares. Diluted earnings per share reflects the effect that existing options would have on the basic earnings per share if they were to be exercised, by increasing the number of equity shares.

 

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Schedules forming part of the Consolidated Financial Statements

 

The basic and diluted earnings per share under U.S. GAAP differs to the extent that income under U.S. GAAP differs.

 

The following table sets forth, for the periods indicated, the computation of earnings per share as per U.S. GAAP.

 

Rupees in million, except per share data

   Year ended March 31,
   2023  2022  2021
   Basic  Diluted  Basic  Diluted  Basic  Diluted
Earnings                  
Net income attributable to ICICI Bank stockholders (before dilutive impact)  249,993.7  249,993.7  511,792.6  511,792.6  213,700.7  213,700.7
Contingent issuances of subsidiaries/equity affiliates  ..  (441.8)  ..  (224.1)  ..  (415.9)
   249,993.7  249,551.9  511,792.6  511,568.5  213,700.7  213,284.8
Common stock                  
Weighted-average common stock outstanding  6,966.3  6,966.3  6,933.7  6,933.7  6,743.4  6,743.4
Dilutive effect of employee stock options  ..  130.0  ..  131.2  ..  86.6
Total   6,966.3  7,096.3  6,933.7  7,064.9  6,743.4  6,830.0
                   
 Earnings per share (Rs.)  35.89  35.17  73.81  72.41  31.69  31.23

 

n)         Comprehensive income

 

The following table sets forth, for the periods indicated, details of comprehensive income.

 

Rupees in million

   Year ended March 31,
   2023  2022  2021
Net income/(loss) (net of tax) excluding non-controlling interest  249,993.7  511,792.6  213,700.7
Other Comprehensive Income:         
Net unrealized gain/(loss) on securities, net of realization & others (net of tax)1   (34,719.5)  (33,087.7)  4,643.9
Translation adjustments (net of tax)2   2,476.1  (838.1)  (4,825.3)
Employee accounting for deferred benefit pensions and other post retirement benefits (net of tax)3   (61.3)  1,161.2  (1,050.3)
          
Comprehensive income attributable to ICICI Bank stockholders   217,689.0  479,028.0  212,469.0
Comprehensive income attributable to non-controlling interests   10,301.6  14,041.9  21,325.7
Total comprehensive income   227,990.6  493,069.9  233,794.7

1.Net of tax effect of Rs. (10,211.3) million, Rs. (8,963.5) million and Rs. 1,483.2 million for the year ended March 31, 2023, March 31, 2022 and March 31, 2021 respectively.

2.Net of tax effect of Rs. 630.5 million, Rs. (466.6) million and Rs. (1,747.0) million for the year ended March 31, 2023, March 31, 2022 and March 31, 2021 respectively.

3.Net of tax effect of Rs. (14.4) million, Rs. 390.6 million and Rs. (345.7) million for the year ended March 31, 2023, March 31, 2022 and March 31, 2021 respectively.

 

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ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

o)          Guarantees

 

As a part of its project financing and commercial banking activities, the Group has issued guarantees to enhance the credit standing of its customers. These generally represent irrevocable assurances that the Group will make payments in the event that the customer fails to fulfill its financial or performance obligations. Financial guarantees are obligations to pay a third party beneficiary where a customer fails to make payment towards a specified financial obligation. Performance guarantees are obligations to pay a third party beneficiary where a customer fails to perform a non-financial contractual obligation. The guarantees are generally for a period not exceeding 10 years.

 

The credit risks associated with these products, as well as the operating risks, are similar to those relating to other types of financial instruments. The current carrying amount of the liability for the Group’s obligations under the guarantees at March 31, 2023 amounted to Rs. 7,713.8 million (March 31, 2022: Rs. 8,049.8 million).

 

The following table sets forth, the details of guarantees outstanding at March 31, 2023.

 

Rupees in million

Nature of guarantee  Maximum potential amount of future payments under guarantee
  

Less than

1 year

  1 - 3 years  3 - 5 years  Over 5 years  Total
    
Financial guarantees   460,062.6  194,977.2  29,149.4  11,423.1  695,612.3
Performance guarantees   343,517.9  352,135.4  69,022.1  19,491.4  784,166.8
Total guarantees   803,580.5  547,112.6  98,171.5  30,914.5  1,479,779.1

 

The following table sets forth, the details of guarantees outstanding at March 31, 2022.

 

Rupees in million

Nature of guarantee  Maximum potential amount of future payments under guarantee
  

Less than

1 year

  1 - 3 years  3 - 5 years  Over 5 years  Total
    
Financial guarantees   257,758.7  266,161.4  30,650.5  6,061.5  560,632.1
Performance guarantees   260,614.3  343,329.8  74,327.6  17,203.8  695,745.5
Total guarantees   518,373.0  609,491.2  104,978.1  23,265.3  1,256,107.6

 

The Group has collateral available to reimburse potential losses on its guarantees. At March 31, 2023, margins in the form of cash and fixed deposit available to the Group to reimburse losses realized under guarantees amounted to Rs. 243,659.2 million (March 31, 2022: Rs. 220,022.8 million). Other property or security may also be available to the Group to cover losses under these guarantees.

 

Performance risk

 

For each corporate borrower, a credit rating is assigned at the time the exposure is being evaluated for approval and the rating is reviewed periodically thereafter. At the time of assigning a credit rating, the possibility of non-performance or non-payment is evaluated. Additionally, an assessment of the borrower's capacity to repay obligations in the event of invocation is also evaluated. Thus, a comprehensive risk assessment is undertaken at the time of sanctioning such exposures and reviewed periodically thereafter.

 

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Schedules forming part of the Consolidated Financial Statements

 

23.Regulatory matters

 

Statutory liquidity requirement

 

In accordance with the Banking Regulation Act, 1949, the Bank is required to maintain a specified percentage of its net demand and time liabilities by way of liquid unencumbered assets like cash, gold and approved securities. The amount of securities required to be maintained at March 31, 2023 was Rs. 2,067,305.8 million (March 31, 2022: Rs. 1,853,475.8 million), and the Bank complied with the requirement throughout the year.

 

Capital Adequacy

 

The Bank is subject to Basel III capital adequacy guidelines stipulated by the Reserve Bank of India with effect from April 1, 2013. As per the guidelines, the Tier-1 capital is made up of Common Equity Tier-1 and additional Tier-1.

 

At March 31, 2023, the Bank is required to maintain minimum Common Equity Tier-1 capital ratio of 8.20%, minimum Tier-1 capital ratio of 9.70% and minimum total capital ratio of 11.70%. The minimum total capital requirement includes capital conservation buffer of 2.50% and additional Common Equity Tier-1 capital surcharge of 0.20% on account of the Bank being designated as a Domestic Systemically Important Bank. Under Pillar 1 of the Reserve Bank of India guidelines on Basel III, the Bank follows the standardized approach for measurement of credit risk, standardized duration method for measurement of market risk and basic indicator approach for measurement of operational risk.

 

The total capital adequacy ratio of the Bank calculated in accordance with the Reserve Bank of India guidelines on Basel III at March 31, 2023 was 18.34% (March 31, 2022: 19.16%). These are based on unconsolidated financial statements as per Indian GAAP.

 

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ICICI Bank Limited and subsidiaries

Schedules forming part of the Consolidated Financial Statements

 

24.Impact of deconsolidation of ICICI General on previous period numbers

 

From September 8, 2021 (the effective date of merger), ICICI General ceased to be a subsidiary and became affiliate of the Bank and accordingly has been accounted as per the equity method of accounting in Consolidated Financial Statements under U.S. GAAP. Accordingly, the numbers for previous periods may not be comparable.

 

For and on behalf of Board of Directors

 

/s/ Sandeep Bakhshi

Managing Director & CEO

/s/ Sandeep Batra 

Executive Director

   

/s/ Anindya Banerjee 

Group Chief Financial Officer

/s/ Prachiti Lalingkar 

Company Secretary

   

/s/ Rajendra Khandelwal 

Chief Accountant

 
   
   

Mumbai

July 28, 2023

 

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