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ICICI Bank Ltd.
Change Company :  Go
Chairman : K V Kamath Industry : Bank - Private
Last Price Today's Change Open Prev Close Day's Range 52 Week Range
1768.70 34.70 1740.10 1734.00 (1768.95)   (1740.10) (1742.00)   (944.25)
BSE Code 532174
ISIN Demat INE090A01013
Book Value (Rs.) 681.37
Dividend Yield (%) 1.33
Market Cap (Rs Mn) 2007160.99
P/E 19.03
EPS (Rs.) 91.13
Face Value (Rs.) 10
Volume 56287.00
Year End: March 2008

Significant accounting policies

OVERVIEW

ICICI Bank Limited ("ICICI Bank" or "the Bank"), incorporated in Vadodara, India is a publicly held banking company engaged in providing a wide range of banking and financial services including commercial banking and treasury operations. ICICI Bank is a banking company governed by the Banking Regulation Act, 1949.

Basis of brparation

The financial statements have been brpared in accordance with statutory requirements brscribed under the Banking Regulation Act, 1949. The accounting and reporting policies of ICICI Bank used in the brparation of these financial statements conform to Generally Accepted Accounting Principles in India ("Indian GAAP"), the guidelines issued by Reserve Bank of India ("RBI") from time to time and practices generally brvalent in the banking industry in India. The Bank follows the accrual method of accounting, except where otherwise stated, and the historical cost convention.
The brparation of financial statements requires the management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the brparation of the financial statements are prudent and reasonable. Future results could differ from these estimates.

SIGNIFICANT ACCOUNTING POLICIES

1. 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.

b) Income from hire purchase operations is accrued by applying the implicit interest rate on outstanding balances.

c) Income from leases is calculated by applying the interest rate implicit in the lease to the net investment outstanding on the lease over the primary lease period. Leases entered into till March 31, 2001 have been accounted for as operating leases.

d) Income on discounted instruments is recognised over the tenure of the instrument on a constant yield basis.

e) Dividend is accounted on an accrual basis when the right to receive the dividend is established.

f) Loan processing fee is accounted for upfront when it becomes due.

g) Project appraisal/structuring fee is accounted for at the completion of the agreed service.

h) Arranger fee is accounted for as income when a significant portion of the arrangement/syndication is completed.

i) Commission received on guarantees issued is amortised on a straight-line basis over the period of the guarantee,

 j) All other fees are accounted for as and when they become due.

k) Net income arising from sell-down/securitisation of loan assets prior to February 1, 2006 has been recognised upfront as interest income. With effect from February 1, 2006, net income arising from securitisation of loan assets is amortised over the life of securities issued or to be issued by the special purpose vehicle/special purpose entity to which the assets are sold. 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.

2. Investments

Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation as given below.

a) All investments are classified into 'Held to Maturity', Available for Sale' and 'Hefd for Trading'. Reclassifications, if any, in any category are accounted for as per RBI guidelines. Under each classification, the investments are further categorised as (a) government securities, (b) other approved Securities, (c) shares, (d) bonds and debentures, (e) subsidiaries and joint ventures and (f) others.

b). 'Held to Maturity' securities are carried at their acquisition cost or at amortised cost, if acquired at a brmium over the face value. Any brmium over the face value of the 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.

c) Available for Sale' and 'Held for Trading' securities are valued periodically as per RBI guidelines. Any brmium over the face value of the investments in government securities/classified as Available for Sale', is amortised over the remaining period to maturity on constant yield basis, Quoted investments are valued based on the trades/quotes on the recognised stock exchanges, subsidiary general ledger account transactions, price list of RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income Money Market and Derivatives Association, periodically.

 The market/fair value of unquoted government securities which are in the nature of "SLR" securities included in the 'Available for Sale' and 'Held for Trading' categories is as per the rates published by Fixed Income Money Market and Derivatives Association. The valuation of other unquoted fixed income securities 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 Fixed Income Money Market and Derivatives Association.

Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available, or at Re. 1, as per RBI guidelines,
Securities are valued scrip-wise and debrciation/apbrciation is aggregated for each category. Net apbrciation in each category, if any, being unrealised, is ignored, while net debrciation is provided for.

d) Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged to the profit and loss account.

e) Equity investments in subsidiaries/joint ventures are categorised as 'Held to Maturity' in accordance with RBI guidelines.

f) Profit on sale of investments in the 'Held to Maturity' category is credited to the profit and loss account and is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to Capital Reserve. Profit on sale of investments in 'Available for Sale' and 'Held for Trading' categories is credited to profit and loss account.

g) Repurchase and reverse repurchase transactions are accounted for in accordance with the extant RBI guidelines.

h) Broken period interest on debt instruments is treated as a revenue item.

i) At the end of each reporting period, security receipts issued by the asset reconstruction company are valued in accordance with the guidelines applicable to such instruments, brscribed by RBI from time to time. Accordingly, in cases where the cash flows from security receipts issued by the asset reconstruction company 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 year end.

j) The Bank follows trade date method for accounting of its investments

3. Provisions/Write-offs on loans and other credit facilities

a) All credit exposures are classified as per RBI guidelines, into performing and non-performing assets ("NPAs"). Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. In the case of corporate loans, provisions are made for sub-standard and doubtful assets at rates brscribed by RBI. Loss assets and the unsecured portion of doubtful assets are provided/written off as per the extant RBI guidelines. Provisions on homogeneous retail loans, subject to minimum provisioning requirements of RBI, are assessed at a portfolio level on the basis of days past due. The Bank holds specific provisions against non-performing loans, general provision against performing loans and floating provisions. The assessment of incremental specific provisions is made after taking into consideration all of the above. The specific provisions on retail loans held by the Bank are higher than the minimum regulatory requirements.

b) For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires a provision equal to the brsent value of the interest sacrifice to be made at the time of restructuring.

c) In the case of loan accounts classified as NPAs (other than those subjected to restructuring), the account is upgraded to "standard" category if arrears of interest and principal are fully paid by the borrower.
In respect of non-performing loan accounts subjected to restructuring, the account is upgraded to standard only after the specified period i.e., a period of one year after the date when first payment of interest or of principal, whichever is earlier, falls due, subject to satisfactory performance of the account during the period.

d) 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 recognised in the profit and loss account.

e) In addition to the specific provision on NPAs, the Bank maintains a general provision on performing loans. The general provision covers the requirements of the RBI guidelines.

f) In addition to the provisions required to be held according to the asset classification status, provisions are held for individual country exposures (other than for home country exposure). The countries are categorised into seven risk categories namely insignificant, low, moderate, high, very high, restricted and off-credit and provisioning is made on exposures exceeding 180 days on a graded scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the above provision is required to be held. 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.

4. 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 for only if the Bank surrenders the rights to benefits specified in the loan contract. Recourse and servicing obligations are accounted for net of provisions.

In accordance with the RBI guidelines, with effect from. February .1, 2006, the Bank accounts for any loss arising from securitisation immediately at the time of safe and the profit/brmium 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. In the case of loans sold to an asset reconstruction company the gain, if any, is ignored.

5. Fixed assets and debrciation

 Premises and other fixed assets are carried at cost less accumulated debrciation. Cost includes freight, duties, taxes and . incidental expenses related tothe acquisition and installation of the asset. Debrciation is charged over the estimated useful life of a fixed asset on a. straight-line basis.

a.) Debrciation on leased assets and leasehold improvements is recognised on a straight-line basis using rates determined with referenceto the primary period of lease or rates specified in Schedule XIV to the Companies Act, 1956, whichever is higher.

b) Assets purchased/sold during the year are debrciated on a pro-rata basis for the actual number of days the asset has been put to use.

c) Items costing upto Rs..5,000.are debrciated.fully over a period of 1.2.months from the date of purchase.


6. Transactions involving foreign exchange

Foreign currency income and expenditure items.of domestic operations are translated at the exchange rates brvailing on the date of the transaction. Income and expenditure items of integral foreign operations (rebrsentative offices) are translated at weekly average closing rates; and income and expenditure of non-integral foreign operations (foreign branches and offshore banking units) 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 at the balance sheet date and the resulting profits/losses are included in the profit and loss account.

Both-monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated at closing exchange rates notified by Foreign Exchange Dealers' Association of. India at the balance sheet date and the resulting profits/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.

 The brmium or discount arising on inception of forward exchange contracts that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction is amortised over the life of the contract. . All other.outstanding forward exchange contracts are revalued at the exchange rates notified by Foreign Exchange Dealers  Association of India for specified maturities and.at interpolated rates for contracts of interim maturities. The resultant gains or losses are recognised in the profit and loss account.

Contingent liabilities on account of guarantees, endorsements and.other obligations denominated in foreign currencies are disclosed atthe.closingexchange.rates notified by Foreign Exchange Dealers' Association of India at the balance sheet date.

7. Accounting for derivative contracts

The Bank enters into derivative contracts such as foreign currency options, interest rate and currency swaps, credit default swaps and. cross currency interest rate swaps.

The swap contracts entered to hedge on-balance sheet assets and liabilities are.structured such that they bear an opposite and off setting impact with the underlying on-balance sheet items. The impact of such derivative instruments is correlated with the movement of .underlying assets and accounted pursuant to the principles of hedge accounting. Hedged swaps are accounted for on an accrual basis.
 Foreign currency and rupee.derivative contracts entered into for trading purposes are marked to market and the resulting gain or loss net of provisions, if any) is -accounted for in the profit and loss account.

8. Employee Stock Option Scheme ("ESOS")

The Employees Stock Option Scheme ("the Scheme") provides for grant of equity shares of the Bank to wholetime directors and employees of the Bank and its subsidiaries. The Scheme provides that employees are granted an option to acquire equity shares of the Bank that vests in a graded manner. The options may be exercised within a specified period. The Bank follows the intrinsic value method to account for its stock-based employees 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. The fair market price is the latest closing price, immediately prior to the date of the Board of Directors meeting in which the options are granted, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered.

Since the exercise price of the Bank's stock options are equal to fair market price on the grant date, there is no compensation cost under the intrinsic value method.

The Finance Act, 2007 introduced Fringe Benefit Tax ("FBT") on employee stock options. The FBT liability crystallises on the date of exercise of stock options by employees and is computed based on the difference between fair market value on date of vesting and the exercise price. FBT is recovered from employees as per the Scheme.

9. Staff Retirement Benefits

 Gratuity

ICICI Bank pays gratuity to employees who retire or resign after a minimum period of five years of continuous service and in case of employees at overseas locations as per rules in force in the respective countries. ICICI Bank makes contributions to four separate gratuity funds, for employees inducted from erstwhile ICICI Limited (erstwhile ICICI), employees inducted from erstwhile Bank of Madura, employees inducted from erstwhile The Sangli Bank Limited (erstwhile Sangli Bank) and employees of ICICI Bank other than employees inducted from erstwhile ICICI, erstwhile Bank of Madura and erstwhile Sangli Bank.

Separate gratuity funds for employees inducted from erstwhile ICICI, erstwhile Bank of Madura and erstwhile Sangli Bank are managed by ICICI Prudential Life Insurance Company Limited. The gratuity fund for employees of ICICI Bank, other than employees inducted from erstwhile ICICI, erstwhile Bank of Madura and erstwhile Sangli Bank is administered by Life Insurance Corporation of India and 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. In accordance with the gratuity funds' rules, actuarial valuation of gratuity liability is calculated based on certain assumptions regarding rate of interest, salary growth, mortality and staff attrition as per the projected unit credit method.

Superannuation Fund

ICICI Bank contributes 15.0% of the total annual basic salary of each employee to a superannuation fund for ICICI Bank employees. The employee gets an option on retirement or resignation to commute one-third of the total credit balance in his/her account and receive a monthly pension based on the remaining balance. In the event of death of an employee, his or her beneficiary receives the remaining accumulated balance. ICICI Bank also gives an option to its employees, allowing them to receive the amount contributed by ICICI Bank along with their monthly salary during their employment.

Upto March 31, 2005, the superannuation fund was administered solely by Life Insurance Corporation of India. Subsequent to March 31, 2005, both Life Insurance Corporation of India and ICICI Prudential Life Insurance Company Limited are administering the fund. Employees had the option to retain the existing balance with Life Insurance Corporation of India or seek a transfer to ICICI Prudential Life Insurance Company Limited.

Pension

The Bank provides for pension, a deferred retirement plan covering certain employees of erstwhile Bank of Madura and certain employees of erstwhile Sangli Bank. 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 Bank. For erstwhile Bank of Madura and erstwhile Sangli Bank employees in service, separate pension funds are managed in-house and the liability is funded as per actuarial valuation. The pension payments to retired employees of erstwhile Bank of Madura and erstwhile Sangli Bank are being administered by ICICI Prudential Life Insurance Company Limited, for whom the Bank has purchased master annuity policies. Employees covered by the pension plan are not eligible for benefits under the provident fund plan, a defined contribution plan.

Provident Fund

ICICI Bank is statutorily required to maintain a provident fund as a part of retirement benefits to its employees. There are separate provident funds for employees inducted from erstwhile Bank of Madura and erstwhile Sangli Bank (other than those employees who have opted for pension), and for other employees of ICICI Bank. In-house trustees manage these funds. Each employee contributes 12.0% of his or her basic salary (10.0% for certain staff of erstwhile Bank of Madura and erstwhile Sangli Bank) and ICICI Bank contributes an equal amount to the funds. The funds are invested according to rules brscribed by the Government of India.

Leave Encashment

The Bank provides for leave encashment benefit, which is a defined benefit scheme, based on actuarial valuation as at the balance sheet date conducted by an independent actuary.

10. Income Taxes

Income tax expense is the aggregate amount of current tax, deferred tax and fringe benefit tax borne by the Bank. The income tax provision is determined in accordance with the provisions of the Income Tax Act, 1961. Deferred tax adjustments comprise of changes in the deferred tax assets or liabilities during the period.

Deferred.tax assets and liabilities are recognised on a prudent basis for the future tax consequences of timing differences arisingbetween the carrying values of assets and liabilities and their respective tax basis, and carryforward losses. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. The impact of. changes in deferred tax assets and liabilities is recognised in the profit and loss account.

Deferred tax assets are recognised and reassessed at each reporting date, based upon management's judgement as to whether their realisation is considered.as reasonably certain.

11. Impairment of Assets

Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with future net discounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment is recognised by debiting the profit and loss account and is measured as ¦ the amount by which the'carrying amount of the assets exceeds the fair value of the assets.

12. Provisions, contingent liabilities and contingent assets

 The Bank estimates the probability of.any loss that might be incurred on outcome of contingencies on the basis of information available up to,the date on which,the financial statements are brpared. A provision is recognised when an enterprise has a brsent 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 . 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 financial statements. In case of remote possibility neither provision nor disclosure is made in the financial statements.- The Bank does not account for or disclose contingent assets, if any.

13. Earnings per share ("EPS")

 Basic earnings per share is calculated,by dividing the net profit or loss for the year attributable to equity shareholders by  the weighted average number of equity shares outstanding during the year.

Diluted earnings per share.reftect the potential dilution that could occur if contracts to issue equity shares were exercised or converted during the period. Diluted earnings per equity share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period, except where the results are anti-dilutive.

14. Lease transactions


Lease payments for assets.taken on operating lease are recognised as an expense in the profit and loss account over the lease term.

15. 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.

NOTES FORMING PART OF THE ACCOUNTS

Thefollowing additional disclosures have been made taking into account the requirements of accounting standards and Reserve Bank of India ("RBI") guidelines in this regard,

1. Merger of the Sangli Bank Limited

The Sangli Bank Limited (Sangli Bank), a banking company incorporated under the Companies Act, 1956 and licensed by RBI.under the.Banking Regulation Act, 1949 was amalgamated with ICICI Bank with effect from April 19, 2007 in terms of the Scheme of Amalgamation.(the Scheme) approved by RBI vide its order DBOD No. PSBD 10268/16.01.128/2006-07, dated-April 18,'2007 under section. 44A(4) of the Banking Regulation Act, 1949. The consideration for the amalgamation - was 100 equity shares of ICICI Bank of the face value Rs. 10 each fully paid-up for every 925 equity shares of Rs. 10 each of Sangli Bank. Accordingly on May 28, 2007, ICICI Bank allotted 3,455,008 equity shares of Rs. 10 each to the shareholders of Sangli Bank.

As per the-Scheme, the entire undertaking of Sangli Bank including all its assets and liabilities stood transferred/deemed to be transferred to and vested in the Bank.

The amalgamation has been accounted as per the scheme in accordance with the purchase method of accounting as per Accounting Standard 14.(AS-14) "Accounting for Amalgamations" issued by the Institute of Chartered Accountants of India. . Accordingly the assets and liabilities of Sangli Bank have been accounted at the values at which they were appearing in the books of Sangli Bank as on April 18, 2007 and provisions were made for the difference between the book values appearing in the books of Sangli Bank and the fair value as determined by ICICI Bank.

In the books of ICICI Bank, an "Amalgamation Expenses Provision Account" was credited by an amount determined for the expenses and costs of the Scheme arising as a direct consequence on account of any changes in the business or operation of Sangli Bank proposed or considered necessary by the Board of Directors of ICICI Bank (including but not limited to rationalisation, upgradation and enhancement of human resources and expenses relating to modifying signage, modifying stationery, branding, changing systems and network, communication including media costs, impairments of technology and fixed assets, conducting general meetings, payments of listing fees and other statutory and regulatory charges, travel in relation to the consolidation contemplated in the Scheme, valuation, due diligence, investment banking expenses and charges relating to brparation of the Scheme, consultations in relation to the consolidation contemplated in the Scheme and training), and other extraordinary expenses on integration and consolidation under the Scheme, to be incurred by the Bank and the balance in such account has been debited to the securities brmium account.

Accordingly, the excess of the paid-up value of the shares issued over the fair value of the net assets acquired (including reserves) of Rs. 3,259.5 million and amalgamation expenses of Rs. 222.7 million have been netted off from the securities brmium account.

As per Accounting Standard -14 (AS-14) on "Accounting for Amalgamations" issued by the Institute of Chartered Accountants of India, under the purchase method' of accounting for amalgamation, the identity of reserves of the amalgamating entity is not required to be brserved in the books of ICICI Bank. However, the balance in Statutory Reserve Account of Sangli Bank at April 18, 2007 has been added to the Statutory Reserves of ICICI Bank. As a result, the balance in Statutory Reserve is higher to the extent of Rs. 206.5 million and the excess of the paid-up value of shares issued over the fair value of the net assets acquired is lower to that extent.

2. Equity issue

The Bank made a follow on public offering of equity shares (including green shoe option) and American Depository Share's ("ADSs") vide its prospectus dated June 26, 2007 and June 23, 2007 respectively aggregating to Rs. 199,673.5 million. The expenses of the issue amounting to Rs. 1,846.6 million have been written-off against securities brmium account as per the objects of the issue.

3. Capital adequacy ratio

The Bank is subject to the capital adequacy norms stipulated by the Reserve Bank of India ('RBI'). As per the earlier applicable capital adequacy guidelines (Basel I), the Bank was required to maintain a minimum ratio of total capital to risk adjusted assets and off-balance sheet items of 9.0%, at least half of which must be Tier I capital. On April 27, 2007, the Reserve Bank of India issued Prudential Guidelines on Capital Adequacy and Market Discipline - Implementation of the New Capital Adequacy Framework, which are applicable to all Indian banks having operational brsence outside India from March 31, 2008. Under the new guidelines (Basel II), which are now applicable to the Bank, the Bank is required to maintain a minimum ratio of total capital to risk adjusted assets of 9.0%, with a minimum Tier I capital ratio of 6.0%.

In order to comply with prudential floor brscribed by RBI under the new guidelines (100% of minimum capital requirement computed as per Basel I framework as on March 31, 2008), the Bank has computed and reported the capital adequacy position as per Basel I and Basel II norms. Since the capital charge as per the new capital adequacy framework (Basel II) is higher than the Basel I framework, the Bank has maintained capita! as per Basel II norms.

4. Business/information ratios

1. Forthe purpose of computing the ratios, working funds rebrsent the average of total assets as reported to RBi under Section 27 of the Banking Regulation Act; 1949

2. For the purpose of computing the ratio, assets rebrsent average total assets as reported to RBI in Form X under Section 27 of the Banking-Regulation Act, 1949.

3. For the purpose of computingtheratio, deposits and advances are the total deposits and total advances as reported to RBI in Form A under Section 27 of the Banking Regulation Act, 1949. The average deposits and the average advances rebrsent the simple average of the figures reported in-Form A to RBI under Section 27 of the Banking Regulation Act, 1949.

4.. Previous year figures have been regrouped/re-classified to compare with current year classification.

5. Information about business and geographical segments

Business segments for the year ended March 31, 2008

Pursuant to the guidelines issued by RBI on Accounting Standard -17 (Segment Reporting) - Enhancement of Disclosures dated April 18, 2007, effective from period ending March 31, 2008, the following business segments have been reported.

 Retail Banking includes exposures which satisfy the four criteria of orientation, product, granularity and low value of individual exposures for retail exposures l3td down in Basel Committee on Banking Supervision document "International Convergence of Capital Measurement and Capital Standards: A Revised Framework".

 Wholesale Banking includes all advances to trusts, partnership firms, companies and statutory bodies, which are not included under the Retail Banking.

Treasury includes the entire investment portfolio of the Bank.

 Other Banking includes hire purchase and leasing operations and also includes gain/loss on sale of banking & non-banking assets and other items not attributable to any particular business segment.

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated to segments on a systematic basis.

All liabilities 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. While the transfer pricing methodology followed for the year ended March 31, 2007 was based on similar principles, the same has been refined further in the current year.

Pursuant to the reorganisation of the business segments in line with the aforementioned RBI guidelines, the business segments are not comparable to the segments reported for the year ended March 31, 2007.

Business segments for the year ended March 31,2007

For the year ended March 31, 2007 the Bank reported the following business segments:

 Consumer and Commercial Banking comprising of the retail and corporate banking operations of the Bank.

 Investment Banking comprising the treasury operations of the Bank.

Inter-segment transactions were generally based on transfer pricing measures as determined by management. Income, expenses, assets and liabilities were either specifically identified with individual segments or are allocated to segments on a systematic basis,

Geographical segments

The Bank reports its operations under the following geographical segments.

 Domestic operations comprises branches having operations in India.

 Foreign operations comprises branches having operations outside India and offshore banking unit having operations in India.

6. Earnings per share

Basic and diluted earnings per equity share are computed in accordance with Accounting Standard 20, "Earnings per Share". Basic earnings per share is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year. The diluted earnings per share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year.

7. Maturity pattern

 In compiling the information of maturity pattern (refer 7(a) and (b) below), certain estimates and assumptions have been made by the management.

 Assets and liabilities in foreign currency exclude off-balance sheet assets and liabilities.

8. Related party transactions

The Bank has transactions with its related parties comprising of subsidiaries, associates/joint ventures/other related entities and key management personnel.

Subsidiaries

ICICI Venture Funds Management Company Limited, ICICI Securities Primary. Dealership. Limited> ICICI Securities Limited:, ICICI International Limited, ICICI Trusteeship Services Limited, ICICI Home Finance Company Limited, ICICI Investment Management Company Limited, ICICI Securities Holdings Inc., ICICI Securities Inc.. ICICI Bank UK PLC, ICICI Bank Canada, ICICI Prudential Life Insurance Company Limited 1, ICICI, Lombard General Insurance Company Limited', ICICI Prudential Asset Management Company Limited.', ICICI Prudential Trust Limited', ICICI Bank Eurasia Limited Liability Company and ICICI Wealth Management Inc.

1. Jointly controlled entities.

Associates/Joint Ventures/other related entities

ICICI Equity Fund', ICICI Eco-net Internet and Technology Fund', ICICI Emerging Sectors Fund', ICICI .Strategic Investments Fund', ICICI Kinfra Limited''2, ICICI West Bengal Infrastructure Development Corporation. Limited'2, ICICI Property Trust, Financial Information Network and Operations Limited2, TCW/ICICI Investment Partners LLC, TSI Ventures (India) Private Limited, l-Process Services (India) Private Limited", l-Solutions Providers (India) Private Limited2. NUT Institute of Finance, Banking and Insurance Training Limited1', ICICI Venture Value Fund2. Comm Trade Services Limited2, Loyalty Solutions & . Research Limited2, Cafe Network limited2-, Traveljini.com. Limited2, and.Firstsource Solutions Limited2 (Bank's holding is 24.97% as on March 31, 2008).

1. Entities consolidated under Accounting Standard-21 (AS-21) on "Consolidated.Financial Statements".

2. With respect to entities, which have been identified as related-parties from the financial year ended March 31. 2008, brvious year's comparative figures have not been reported..
The following are the significant transactions between the Bank and its related parties.

Insurance services

During the year ended March 31, 2008, the Bank paid insurance brmium to insurance subsidiaries amounting to Rs. 1,065.3 million (March 31, 2007: Rs. 1,191.1'. million); During;the,year ended March 31, 2008, the Bank received claims from insurance subsidiaries amounting to. Rs. 713.9 million (March 31, 2007: Rs. 725.4 million).

Fees and commission

During the year ended March 31, 2008, the Bank received fees from its subsidiaries amounting to Rs. 5,748.7 million (March 31, 2007: Rs. 4,427.2 million) and Rs. 72.5 million (March 31, 2007: Rs. Nil) from its associates/joint ventures/ other related entities.

During the year ended March 31, 2008, the Bank received commission from its subsidiaries of Rs. 9.3 million (March 31, 2007: Rs. 10.7 million) and Rs. 7.4 million (March 31, 2007: Rs. Nil) from its associates/joint ventures/other related entities on account of guarantees and letters of credit issued.

Lease of brmises and facilities

During the year ended March 31, 2008, the Bank charged an aggregate amount of Rs. 982.8 million from its subsidiaries (March 31, 2007: Rs. 711.5 million) and Rs. 3.9 million (March 31, 2007: Rs. Nil) from its associates/joint ventures/other related entities for lease of brmises, facilities and other administrative costs.

Safe of housing loan portfolio

During the year ended March 31, 2008, the Bank sold housing loan portfolio to its subsidiary amounting to Rs. 6,231.4 million (March 31, 2007: Rs. 13,171.4 million).

Secondment of employees

During the year ended March 31, 2008, the Bank received Rs. 302.8 million (March 31, 2007: Rs. 136.3 million) from subsidiaries and Rs. 1.8 million (March 31,2007: Rs. Nil) from associates/joint ventures/other related entities for secondment of employees.

Purchase of investments

During the year ended March 31, 2008, the Bank purchased certain investments from its subsidiaries amounting to Rs. 7,934.2 million (March 31, 2007: Rs. 14,186.8 million) and from its associates/joint ventures/other related entities amounting to Rs. Nil (March 31, 2007: Rs. 944.7 million). During the year ended March 31, 2008, the Bank invested in the equity and brference shares of its subsidiaries amour ting to Rs. 43,009.2 million (March 31, 2007: Rs. 13,584.7 million) and in its associates/joint ventures/other related entities amounting to Rs. 57.5 million (March 31, 2007: Rs. Nil).

Sale of investments

During the year ended March 31, 2008, the Bank sold certain investments to its subsidiaries amounting to Rs. 15,526.7 million (March 31, 2007: Rs. 8,569.2 million).

Redemption/buyback and conversion of investments

During the year ended Maxh 31, 2008. the Bank received a consideration of Rs. 1.2 million (March 31, 2007: Rs. 663.9 million) on account of buyback/capital reduction of equity shares by subsidiaries. Units in associates/joint ventures/other related entities amounting to Rs. 2,762.4 million (March 31, 2007: Rs. 2,795.9 million) were redeemed during the year ended March 31, 2008.

Reimbursement of expenses

During the year ended March 31, 2008, the Bank reimbursed expenses to its subsidiaries amounting to Rs. 526.8 million (March 31, 2007: Rs. 2,147.7 million), and to its associates/joint ventures/other related entities amounting to Rs. 0.8 million (March 31, 2007: Rs. Nil).

Brokerage and fee expenses

During the year ended March 31, 2008, the Bank paid brokerage/fees to its subsidiaries amounting to Rs. 950.7 million (March 31, 2007: Rs. 795.4 million), and to its associates/joint ventures/other related entities amounting to Rs. 2,354.7 million (March 31, 2007: Rs. Nil).

Custodial charges income

During the year ended March 31, 2008, the Bank charged an aggregate amount of Rs. 16.3 million (March 31, 2007: Rs. 20.4 million) from its subsidiaries and Rs. 6.8 million (March 31, 2007: Rs. 5.7 million) from its associates/joint ventures/other related entities.

Interest expenses

During the year ended March 31, 2008, the Bank paid interest to its subsidiaries amounting to Rs. 3,311.9 million (March 31, 2007: Rs. 513.6 million) and to its associates/joint ventures/other related entities amounting to Rs. 28.2 million (March 31, 2007: Rs. Nil).

Interest income

During the year ended March 31, 2008, the Bank received interest from its subsidiaries amounting to Rs. 1,575.3 million (March 31, 2007: Rs. 1,366.2 million), from its associates/joint ventures/other related entities amounting to Rs. 21.0 million (March 31, 2007: Rs. Nil) and from its key management personnel Rs. 0.7 million (March 31, 2007: Rs. 0.7 million).

Other income

During the year ended March 31, 2008, the net gain on derivative transactions entered into with subsidiaries was Rs. 4,398.0 million (March 31, 2007: gain of Rs. 537.3 million).

Dividend income

During the year ended March 31, 2008, the Bank received dividend from its subsidiaries amounting to Rs. 3,636.6 million (March 31, 2007: Rs. 2,027.8 million) and from its associates/joint ventures/otherrelated entities amounting to Rs. 8,931.4 million (March 31, 2007: Rs. 2,457.1 million).

Dividend paid

During the year ended March 31, 2008, the Bank paid dividend to its key management personnel amounting to Rs. 15.0 million (March 31, 2007: Rs. 4.4 million).

Remuneration to whole-time directors

Remuneration paid to the whole-time directors of the Bank during the year ended March 31, 2008 was Rs. 90.3 million (March 31. 2007: Rs. 87.0 million).

Lines of credit

As on March 31, 2008, the Bank had issued lines of credit to its subsidiaries amounting to Rs. 1,003.0 million (March 31, 2007: Rs. 2,173.5 million).

Sale of property

During the year ended March 31, 2008, the Bank sold properties to its subsidiaries amounting to Rs. 151.8 million (March 31, 2007: Rs, 1,505.7 million).

Letters of Comfort

As per the assessment done, the financial impact of the above letters issued to overseas regulators is Nil as at March 31, 2008.

In addition to the above, the Bank has also issued letters of comfort in the nature of awareness on behalf of banking and non-banking subsidiaries in respect of their borrowings made or proposed to be made and for other incidental business purposes. As they are in the nature of factual statements or confirmation of facts, they do not create any financial impact on the Bank.

forming part of the Accounts

The estimates of future salary increases, considered in actuarial valuation, take into consideration inflation, seniority, promotion and other relevant factors.

The guidance on implementing Accounting Standard 15, Employee Benefits (revised 2005) issued by the Accounting Standards Board (ASB) provides that exempt provident funds which require employers to meet the interest shortfall are in effect defined benefit plans. The Bank's actuary has informed that it is not practicable to actuarially determine the interest shortfall obligation.

9. Employee Stock Option Scheme ("ESOS")

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 5% of the aggregate number of the issued equity shares of the Bank on the date(s) of the grant of options. Under the stock option scheme, options vest in a graded manner over a four-year period, with 20%, 20%, 30% arid 30% of grants vesting each year, commencing from the end of 12 months from the date of grant. The options can be exercised within 10 years from the date of grant or five years from the date of vesting, whichever is later.

In terms of the Scheme, 15,638,152 options (March 31, 2007: 13,187,783 options) granted to eligible employees were outstanding at March 31, 2008.

As per the scheme, the exercise price of ICICI Bank's options is the last closing price on the stock exchange, which recorded highest trading volume brceding the date of grant of options. Hence, there is no compensation cost in the year ended March 31, 2008 based on intrinsic value of options. However, if ICICI Bank had used the fair value of options based on the Black-Scholes model, compensation cost for the year ended March 31, 2008 would have been higher by Rs. 1,259.9 million and proforma profit after tax would have been Rs. 40,317.4 million. On a proforma basis, ICICI Bank's basic and diluted earnings per share would have been Rs. 38.19 and Rs. 37.96 respectively.

The Finance Act 2007,introduced Fringe Benefit Taxf'FBT") on employee stock options. The FBT liability crystallises on the date of exercise of stock options by employees and is computed based on the difference between fair market value on date of vesting and the exercise price. As per the ESOS scheme, FBT of Rs. 226.7 million has been recovered from the employees on 1,468.713 stock options exercised during the year ended: March 31, 2008.'

10. Preference shares

Certain government securities amounting to Rs. 2,331.8 million (March 31, 2007: Rs. 2,104.8 million) have been earmarked against redemption of brference share capital, which falls due for redemption on April 20, 2018, as per the original issue terms.

11. Details of Single Borrower Limit ("SBL"), Group Borrower Limit ("GBL") exceeded by the Bank

During the year ended March 31, 2008, the Bank had no single borrower and group borrower, which exceeded the prudential exposure limits brscribed by RBI.

12. Risk category-wise country-wise exposure

As per the extant RBI guidelines, the country exposure of the Bank is categorised into various risk categories listed in the following table. The funded country exposure (net) of the Bank in respect of United Kingdom is 1.81% and United States of America is 1.57% of the total funded assets as on March 31, 2008 (as on March 31, 2007: United Kingdom was 0.98% and United States of America was 0.68%). As the net funded exposure to United Kingdom and United States of America exceeds 1 % of total funded assets, the Bank has made a provision of Rs. 245.0 million on country exposure as on March 31, 2008 (Provision as on March 31, 2007: Nil).

13. Financial assets transferred during the year to securitisation company (SC)Zreconstruction company (RC)

The Bank has transferred certain assets to Asset Reconstruction Company (India) Limited (ARCIL) in terms of the guidelines issued by RBI governing such transfer. For the purpose of the valuation of the underlying security receipts issued by the underlying trusts managed by ARCIL, the security receipts are valued at their respective NAVs as advised by the ARCIL.

14. Provisions on standard assets

During the year ended March 31, 2007, RBI increased the requirement of general provisioning to 2% on standard loans relating to personal loans, loans and advances qualifying as capital market exposure, credit card receivables, advances to non-deposit taking systemically important non-banking financial companies (NBFCs) and commercial real estate loans. On standard loans for residential housing beyond Rs: 2.0 million, the provisioning requirement was increased to 1% from the earlier level of 0.4%. In accordance with the revised RBI guidelines, a general provision of Rs. 1,590.0 million has been made during the year ended March 31, 2008 (March 31, 2007: Rs. 7,310.0 million). The provision on standard assets held by the Bank in accordance with RBI guidelines was Rs. 14,550.3 million (including Rs. 12.0 million transferred on account of merger of the Sangli Bank Limited effective April 19, 2007) at March 31, 2008 (March 31, 2007: Rs. 12,948.3 million).

15. Early Retirement Option ("ERO")

The Bank had implemented an Early Retirement Option Scheme 2003 for its employees in July 2003. All employees who had completed 40 years of age and seven years of service with the Bank (including period of service with entities amalgamated with the Bank) were eligible for the ERO.
The ex-gratia payments under ERO, terminations benefits and leave encashment in excess of the provision made (net of tax benefits), aggregating to Rs. 1,910.0 million is being amortised over a period of five years commencing August 1, 2003 (the date of retirement of employees exercising the Option being July 31, 2003).

On account of the above ERO scheme, an amount of Rs. 384,0 million (March 31,2007: Rs. 384.0 million) has been charged to revenue being the proportionate amount amortised for the year endedMarch 31, 2008.

16. Provision for income tax

The provision for income tax (including deferred tax and fringe benefit tax) for the year ended March 31, 2008 amounted to Rs. 8,953.7 million (March 31. 2007: Rs. 5,348:2 million).

The Bank has a combrhensive system of maintenance of information and documents required by transfer pricing legislation under section 92-92F of the Income Tax Act, 1961. The Bank is of the opinion that all international transactions are at arm's length so that the above legislation will not have material impact on the financial-statements,

17. Deferred tax

As on March 31, 2008 the Bank has.recorded net deferred tax asset of Rs. 13.233.9 million (March 31, 2007: Rs. 6,099.6 million), which has been included mother assets.

18. Dividend distribution tax

For the purpose of computation of dividend distribution tax on the proposed dividend, the Bank has reduced the dividend distribution tax on dividend received from its Indian subsidiaries as per the amendment to section 115-0 of the Income Tax Act, 1961 vide Finance Bill, 2008, read with Section 294 of the Income Tax Act, 1961.

19. Derivatives

ICICI Bank is a major participant in the financial derivatives market. The Bank deals in derivatives for balance sheet management 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. Treasury middle office conducts an independent check of the transactions entered into by the front office and also undertakes activities such as confirmation, settlement, accounting, risk monitoring 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 of the Bank, which lays down the position limits, stop loss limits as well as other risk limits. The Risk Management Group ("RMG") lays down the methodology for computation and monitoring of risk. The Risk Committee of the Board ("RCB") reviews the Bank's risk management policy in relation to various risks (portfolio, liquidity, interest rate, off-balance sheet and operational risks), investment policies and compliance issues in relation thereto. The RCB comprises of independent directors and the Managing Director and CEO.

Risk monitoring of the derivatives portfolio other than credit derivatives is done on a daily basis. Risk monitoring of the credit derivatives portfolio is done on a monthly basis. The Bank measures and monitors risk using Value-at-Risk ("VAR") approach and the relevant sensitivity measures for options. Risk reporting on derivatives forms an integral part of the management information system and the marked to market position and the VAR of the derivatives portfolio other than credit derivatives is reported on a daily basis. The marked to market position and VAR on the credit derivatives portfolio is reported on a monthly basis.

The use of derivatives for hedging purposes is governed by the hedge policy approved by Asset Liability Management Committee ("ALCO"). Subject to brvailing RBI guidelines, the Bank 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 transaction itself. The effectiveness is assessed at the time of inception of the hedge and periodically thereafter.

Hedge derivative transactions are accounted for pursuant to the principles of hedge accounting. Derivatives for market making purpose are marked to market and the resulting gain/loss is recorded in the profit and loss account. The brmium on option contracts is accounted for as per Foreign Exchange Dealers' Association of India guidelines. Derivative transactions are covered under International Swap Dealers Association ("ISDA") master agreements with the respective counter parties. The exposure on account of derivative transactions is computed as per RBI guidelines and is marked against the credit limits approved for the respective counter parties.

The Bank deals in credit derivative instruments including credit default swaps, credit linked notes, collateralised debt obligations and principal protected structures. The notional principal amount of these credit derivatives outstanding at March 31, 2008 was Rs. 12,231.2 million in funded instruments and Rs. 50,568.5 million in non-funded instruments which includes Rs. 200.6 million of protection bought oy the Bank. The mark-to- market loss as on March 31, 2008 on the above portfolio was Rs. 5,870.6 million, which has been provided for through the profit and toss account. The profit and loss impact on the above portfolio on account of mark-to-market and realised losses during the year ended March 31, 2008 was a net loss of Rs. 6,848.3 million.

The credit derivatives are marked to market by the Bank based on counter-party valuation quotes, or internal models using inputs from market sources such as Bloomberg/Reuters, counter-parties and FIMMDA.

The Bank offers deposits to customers of its offshore branches with structured returns linked to interest, forex or equity benchmarks. The Bank covers these exposures in the inter-bank market. As on March 31, 2008, the net open position on this portfolio was Rs. 4.0 million with mark-to-market of Rs. 0.1 million as on that date, which has been provided for through profit and loss account.

The notional principal amount of forex contracts classified as hedging amounted to Rs. 393,701.5 million (March 31, 2007: Rs. 288,639.6 million).

The notional principal amount of forex contracts classified as trading amounted to Rs. 2,678,010.8 million(March 31, 2007: Rs. 1,042,920.8 million).

The net overnight open position at March 31, 2008 was Rs. 2,584.5 million (March 31, 2007: Rs. 1,279.7 million).

20. Penalties/fines imposed by RBI and other regulatory bodies

There were no penalties imposed by RBI during the year ended March 31, 2008 (March 31, 2007: Rs. Nil).
Securities and Futures Commission (SFG), Hong Kong had charged the Bank with carrying on the business of dealing in securities in Hong Kong without having a license to do so. Pursuant to the charges brferred vide issue of summons on March 30, 2007 and the submissions of SFC and the Bank, the Eastern Magistrate's Court, Hong Kong, on April 10, 2007, fined the Bank a sum of HKD 40,000 (Rs. 0.2 million) and required the Bank to reimburse investigation costs to SFC.

21. Premium amortisation

As per general clarification from RBI dated July 11,2007 on circular DBOD.BP.BC.87/21.04.141/2006-07 dated April 20,2007, the Bank has deducted the amortisation of brmium on government securities from "Income on investment" in Schedule 13, which was earlier included in "Profit/(Loss) on revaluation.of, investments (net)" in Schedule 14.

22. Small and micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments.

23. Farm loan waiver

The Union Finance Minister, in his budget proposal for Financial Year 2008-09, announced a debt relief scheme for farmers, which would cover agricultural loans disbursed.by scheduled commercial banks, regional rural banks and co-operative credit institutions up to March 31, 2007, overdue as on December 31, 2007 and which remained unpaid upto February 28, 2008. The Bank has not considered any expected receipts and has retained provisions on all eligible loans as per its current provisioning norms, pending the quantification and acceptance of its claims as per guidelines of the debt relief scheme

24. Change in estimate in the retail agriculture loan portfolios provisioning

During the year, the Bank has changed its basis of estimating provisions in respect of certain retail agriculture loan portfolios. The impact of the change on the profit aftertax for the year ended March 31, 2008 is not significant.

25. Comparative figures

Figures for the brvious year have been regrouped wherever necessary, to conform to the current year's brsentation.

For and on behalf of the Board of Directors

SANDEEP BATRA

Group Compliance Officer & Company Secretary

N. VAGHUL

Chairman

CHANDA D. KOCHHAR

Joint Managing Director & CFO

MADHABI PURI BUCH

Executive Director

RAKESH JHA

Deputy Chief Financial Officer

K. V. KAMATH

Managing Director & CEO

V. VAIDYANATHAN

Executive Director

SONJOY CHATTERJEE

Executive Director

CHARANJIT ATTRA

General Manager & Chief Accountant

Place : Mumbai

Date : April 26, 2008

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