ICICI Bank Ltd. कंपली की लेखा नीति
Mar 31, 2023
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. The Bank also has overseas branches in Bahrain, China, Dubai, Hong Kong, Singapore, United States of America and Offshore Banking units.
Basis of preparation
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of ICICI Bank used in the preparation 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 the Accounting Standards notified under Section 133 of the Companies Act, 2013 read together with paragraph 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the historical cost convention and the accrual method of accounting, except in the case of interest and other income on non-performing assets (NPAs) where it is recognised upon realisation.
Use of estimates
The preparation of 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 financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the preparation of the 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.
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 on discounted instruments is recognised over the tenure of the instrument on a constant yield basis.
c) Dividend income is accounted on accrual basis when the right to receive the dividend is established.
d) Loan processing fee is accounted for upfront when it becomes due.
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) The annual/renewal fee on credit cards, debit cards and prepaid cards are amortised on a straight line basis over one year.
i) Fees paid/received for priority sector lending certificates (PSLC) is amortised on straight-line basis over the period of the certificate.
j) All other fees are accounted for as and when they become due where the Bank is reasonably certain of ultimate collection.
2. Investments
I nvestments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation.
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.
All investments are classified into âHeld to Maturityâ (HTM), âAvailable for Saleâ (AFS) and âHeld for Tradingâ (HFT) on the date of purchase as per the extant RBI guidelines on investment classification and valuation. 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.
I nvestments 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. Investments in the equity of subsidiaries/joint ventures are classified under HTM or AFS categories.
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.
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.
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.
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.
The market/fair value of unquoted government securities which are in nature of Statutory Liquidity Ratio (SLR) securities included in the âAvailable for Saleâ and âHeld for Tradingâ 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.
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. Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available, or at '' 1, as per RBI guidelines.
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 '' 1, as per RBI guidelines.
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 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.
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 RBI.
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 Reserveâ in accordance with the RBI Guidelines.
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.
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.
3. Provision/write-offs on loans and other credit facilities Classification:
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 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 borrowerâs 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 âResolution Framework for COVID-19-related Stressâ 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.
Non-performing and restructured loans are upgraded to standard as per the extant RBI guidelines or host country regulations, as applicable.
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 the RBI guidelines and host country regulations, 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 noncooperative 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.
In terms of RBI guidelines, the NPAs are written-off in accordance with the Bankâs 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 sectors, provision on exposures to step-down subsidiaries of Indian companies and provision on incremental exposure to borrowers identified as per RBIâs 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 Bankâs net funded exposure in respect of a country is less than 1% of its total 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 âSchedule 5 - Other Liabilities and Provisionsâ.
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 if extant RBI guidelines or any regulatory guidance/instructions. The floating provision is netted-off from advances.
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, only if the Bank surrenders the right to benefits specified in the underlying securitised loan contract. Recourse and servicing obligations are accounted for net of provisions.
I n 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.
5. Fixed assets
Fixed assets, other than premises, are carried at cost less accumulated depreciation and impairment, if any. 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. Assets purchased/sold during the year are depreciated on a pro-rata basis for the actual number of days the asset has been capitalised. Assets individually costing upto '' 5,000/- are depreciated fully in the year of acquisition.
I n 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. The profit on sale of premises is appropriated to Capital Reserve, net of transfer to Statutory Reserve and taxes, in accordance with RBI guidelines.
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The useful lives of the groups of fixed assets are given below. |
|
|
Asset |
Useful life |
|
Premises owned by the Bank |
60 years |
|
Leased assets and improvements to leasehold premises |
60 years or lease period whichever is lower |
|
ATMs1-2 |
5-8 years |
|
Plant and machinery1 (including office equipment) |
5-10 years |
|
Electric installations and equipments |
10-15 years |
|
Computers |
3 years |
|
Servers and network equipment1 |
4-10 years |
|
Furniture and fixtures1 |
5-10 years |
|
Motor vehicles1 |
5 years |
|
Others (including software)13 |
3-4 years |
1. The useful life of fixed assets is based on historical experience of the Bank, which is different from the useful life as prescribed in Schedule II to the Companies Act, 2013.
2. Cash acceptor machine
3. Excludes software, which are procured based on licensing arrangements and depreciated over the period of license.
4. Assets at residences of Bank''s employees are depreciated over the estimated useful life of 5 years.
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.
6. Translation of foreign currency items
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 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 Dealersâ 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.
7. 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 Bank 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, 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 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.
The derivative contracts entered into for trading purposes are marked-to-market and the resulting gain or loss is accounted 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 profit and loss account.
8. Employee Stock Option Scheme (ESOS)
The Employees Stock Option Scheme (the Scheme) provides for grant of options on the Bankâs 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. The fair market price is the closing price on the stock exchange with highest trading volume of the underlying shares, immediately prior to 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.
9. Employee Benefits Gratuity
The Bank 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 in force in the respective countries. The Bank makes contribution to recognised trust which administers the funds on its own account or through insurance companies.
Actuarial valuation of the gratuity liability is determined by an independent 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 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. Further, the Bank 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 Bank to the superannuation fund and NPS or to employees during the year are recognised in the profit and loss account. The Bank has no liability towards future benefits under superannuation fund and national pension scheme other than its annual contribution.
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 employeeâs 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 employerâs contribution under the provident fund plan.
The Bank 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 Bank contributes an equal amount for eligible employees. The Bank makes contribution as required by The Employeesâ Provident Funds and Miscellaneous Provisions Act, 1952 to Employeesâ Pension Scheme administered by the Regional Provident Fund Commissioner. The Bank makes balance contributions to a fund administered by trustees. The funds are invested according to the rules prescribed by the Government of India. The Bank recognises such contribution as an expense in the year in which it is incurred.
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 Bank.
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.
The Bank provides for compensated absence based on actuarial valuation conducted by an independent actuary.
10. Income Taxes
I ncome tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. 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 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 managementâs judgement as to whether their realisation is considered as reasonably certain. However, in case of unabsorbed depreciation or carried forward loss, deferred tax assets will be recognised only if there is virtual certainty of realisation of such assets.
11. Impairment of Assets
The Bank 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 Bank 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.
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 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 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.
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.
13. Earnings per share (EPS)
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 outstanding during the year, except where the results are anti-dilutive.
14. Share issue expenses
Share issue expenses are deducted from Share Premium Account in terms of Section 52 of the Companies Act, 2013.
15. 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.
16. 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.
17. 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.
Mar 31, 2022
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. The Bank also has overseas branches in Bahrain, China, Dubai, Hong Kong, Singapore, South Africa, United States of America and Offshore Banking units.
Basis of preparation
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of ICICI Bank used in the preparation 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 the Accounting Standards notified under Section 133 of the Companies Act, 2013 read together with paragraph 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the historical cost convention and the accrual method of accounting, except in the case of interest and other income on non-performing assets (NPAs) where it is recognised upon realisation.
Use of estimates
The preparation of 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 financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the preparation of the 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.
SIGNIFICANT ACCOUNTING POLICIES
1. Revenue recognition
a) Interest income is recognised in the profit and loss account as it accrues, including for cases where moratorium has been extended for payments of principal and/or interest as per RBI guideline dated March 27, 2020, 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 on discounted instruments is recognised over the tenure of the instrument on a constant yield basis.
c) Dividend income is accounted on accrual basis when the right to receive the dividend is established.
d) Loan processing fee is accounted for upfront when it becomes due.
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) The annual/renewal fee on credit cards, debit cards and prepaid cards are amortised on a straight line basis over one year.
i) Fees paid/received for priority sector lending certificates (PSLC) is amortised on straight-line basis over the period of the certificate.
j) All other fees are accounted for as and when they become due where the Bank is reasonably certain of ultimate collection.
2. Investments
Investments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation.
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.
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 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.
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. Investments in the equity of subsidiaries/ joint ventures are classified under HTM or AFS categories.
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.
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 for. The depreciation on securities acquired by way of conversion of outstanding loans is fully provided for. Non-performing investments are identified based on the RBI guidelines.
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.
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.
The market/fair value of unquoted government securities which are in nature of Statutory Liquidity Ratio (SLR) securities included in the ''Available for Sale'' and ''Held for Trading'' 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.
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. Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available, or at ''1, as per RBI guidelines.
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 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.
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.
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.
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.
3. Provision/write-offs on loans and other credit facilities Classification:
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 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. In accordance with the RBI circular dated April 17, 2020, the moratorium granted to certain borrowers is excluded from the determination of number of days past-due/out-of-order status for the purpose of asset classification. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Interest on nonperforming 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.
Non-performing and restructured loans are upgraded to standard as per the extant RBI guidelines or host country regulations, as applicable.
In the case of corporate loans and advances, provisions are made for sub-standard and doubtful assets at rates prescribed by 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 the RBI guidelines and host country regulations, provisions are made at the higher of the provisions required under RBI guidelines 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 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 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, including RBI direction for provision on accounts referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016.
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.
In terms of RBI guidelines, 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 sectors, 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 Bank''s net funded exposure in respect of a country is less than 1% of its total 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 Covid-19 related provision on certain borrowers, including those who had taken moratorium at any time during FY2021 under the extant RBI guidelines. This provision is included as contingency provision in the books. 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, 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 if extant RBI guidelines or any regulatory guidance/instructions. The floating provision is netted-off from advances.
Depreciation/provision on non-performing investments is made based on the RBI guidelines.
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 right 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.
5. Fixed assets
Fixed assets, other than premises, are carried at cost less accumulated depreciation and impairment, if any. 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. Assets purchased/sold during the year are depreciated on a pro-rata basis for the actual number of days the asset has been capitalised. Assets individually costing upto '' 5,000/- are depreciated fully in the year of acquisition.
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. The profit on sale of premises is appropriated to Capital Reserve, net of transfer to Statutory Reserve and taxes, in accordance with RBI guidelines.
The useful lives of the groups of fixed assets are given below.
|
Asset |
Useful life |
|
Premises owned by the Bank |
60 years |
|
Leased assets and improvements to leasehold premises |
60 years or lease period whichever is lower |
|
ATMs1 |
5-8 years |
|
Plant and machinery1 (including office equipment) |
5-10 years |
|
Electric installations and equipments |
10-15 years |
|
Computers |
3 years |
|
Servers and network equipment1 |
4-10 years |
|
Furniture and fixtures1 |
5-10 years |
|
Motor vehicles1 |
5 years |
|
Others (including software)1-2 |
3-4 years |
1. The useful life of fixed assets is based on historical experience of the Bank, which is different from the useful life as prescribed in Schedule II to the Companies Act, 2013.
2. Excludes software which are procured based on licensing arrangements and depreciated over the period of license.
3. Assets at residences of Bank''s employees are depreciated over the estimated useful life of 5 years.
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.
6. Translation of foreign currency items
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 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 (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.
7. 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 Bank 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, 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.
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 profit and loss account.
8. Employee Stock Option Scheme (ESOS)
The Employees Stock Option Scheme (the Scheme) 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. The fair market price is the closing price on the stock exchange with highest trading volume of the underlying shares, immediately prior to 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.
9. Employee Benefits Gratuity
The Bank 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 in force in the respective countries. The Bank makes contribution to recognised trust which administers the funds on its own account or through insurance companies.
Actuarial valuation of the gratuity liability is determined by an independent 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 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. Further, the Bank 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 Bank to the superannuation fund and NPS or to employees during the year are recognised in the profit and loss account. The Bank has no liability towards future benefits under superannuation fund and national pension scheme other than its annual contribution.
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 Bank 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 Bank contributes an equal amount for eligible employees. The Bank 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. The Bank makes balance contributions to a fund administered by trustees. The funds are invested according to the rules prescribed by the Government of India. The Bank recognises such contribution as an expense in the year in which it is incurred.
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 Bank.
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.
The Bank provides for compensated absence based on actuarial valuation conducted by an independent actuary.
10. Income Taxes
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. 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 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 management''s judgement as to whether their realisation is considered as reasonably certain. However, in case of unabsorbed depreciation or carried forward loss, deferred tax assets will be recognised only if there is virtual certainty of realisation of such assets.
11. Impairment of Assets
The Bank 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 Bank 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.
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 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 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.
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.
13. Earnings per share (EPS)
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 outstanding during the year, except where the results are anti-dilutive.
14. Share issue expenses
Share issue expenses are deducted from Share Premium Account in terms of Section 52 of the Companies Act, 2013.
15. 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.
16. 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.
17. 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.
Mar 31, 2021
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Mar 31, 2019
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. The Bank also has overseas branches in Bahrain, China, Dubai, Hong Kong, Singapore, South Africa, Sri Lanka, United States of America and Offshore Banking units.
Basis of preparation
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of ICICI Bank used in the preparation 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 the Accounting Standards notified under Section 133 of the Companies Act, 2013 read together with paragraph 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the historical cost convention and the accrual method of accounting, except in the case of interest and other income on non-performing assets (NPAs) where it is recognised upon realisation.
The preparation of 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 financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the preparation of the 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.
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 finance 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.
c) Income on discounted instruments is recognised over the tenure of the instrument on a constant yield basis.
d) Dividend income is accounted on accrual basis when the right to receive the dividend is established.
e) Loan processing fee is accounted for upfront when it becomes due.
f) Project appraisal/structuring fee is accounted for on the completion of the agreed service.
g) Arranger fee is accounted for as income when a significant portion of the arrangement/syndication is completed.
h) Commission received on guarantees issued is amortised on a straight-line basis over the period of the guarantee.
i) The annual/renewal fee on credit cards and debit cards are amortised on a straight line basis over one year.
j) Fees paid/received for priority sector lending certificates (PSLC) is amortised on straight-line basis over the period of the certificate.
k) All other fees are accounted for as and when they become due.
l) 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. Net loss arising on account of the sell-down/securitisation and direct assignment of loan assets is recognised at the time of sale.
m) The Bank deals in bullion business on a consignment basis. The difference between price recovered from customers and cost of bullion is accounted for at the time of sales to the customers. The Bank also deals in bullion on a borrowing and lending basis and the interest paid/received is accounted on accrual basis.
2. Investments
I nvestments are accounted for in accordance with the extant RBI guidelines on investment classification and valuation as given below.
1. All investments are classified into âHeld to Maturityâ, âAvailable for Saleâ and âHeld for Tradingâ. 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.
2. âHeld to Maturityâ 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.
3. âAvailable for Saleâ and âHeld for Tradingâ 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 âAvailable for Saleâ, 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.
The market/fair value of unquoted government securities which are in nature of Statutory Liquidity Ratio (SLR) securities included in the âAvailable for Saleâ and âHeld for Tradingâ categories is as per the rates published by FIMMDA/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.
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.
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 for. The depreciation on securities acquired by way of conversion of outstanding loans is fully provided for. Non-performing investments are identified based on the RBI guidelines.
4. Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost.
5. The units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund.
6. Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged to the profit and loss account. Cost of investments is computed based on the First-In-First-Out (FIFO) method.
7. Equity investments in subsidiaries/joint ventures are classified under âHeld to Maturityâ and âAvailable for Saleâ. The Bank assesses these investments for any permanent diminution in value and appropriate provisions are made.
8. Profit/loss on sale of investments in the âHeld to Maturityâ category is recognised in the profit and loss account and profit is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to Capital Reserve. Profit/loss on sale of investments in âAvailable for Saleâ and âHeld for Tradingâ categories is recognised in the profit and loss account.
9. 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.
10. Broken period interest (the amount of interest from the previous interest payment date till the date of purchase/sale of instruments) on debt instruments is treated as a revenue item.
11. 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 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.
12. 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.
13. 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.
3. Provision/write-offs on loans and other credit facilities
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 RBI guidelines. Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI.
in the case of corporate loans and advances, provisions are made for sub-standard and doubtful assets at rates prescribed by RBI. Loss assets and the unsecured portion of doubtful assets are provided/written-off as per the extant RBI guidelines. For loans and advances booked in overseas branches, which are standard as per the extant RBI guidelines but are classified as NPAs based on host country guidelines, provisions are made as per the host country regulations. For loans and advances booked in overseas branches, which are NPAs as per the extant RBI guidelines and as per host country guidelines, provisions are made at the higher of the provisions required under RBI regulations and host country regulations. Provisions on homogeneous retail loans and advances, subject to minimum provisioning requirements of RBI, are assessed on the basis of the ageing of the loans in the non-performing category. As per RBI guidelines, in respect of non-retail loans reported as fraud to RBI and classified in 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 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 extant 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, including RBI direction for provision on accounts referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016. The assessment of incremental specific provisions is made after taking into consideration the existing specific provision held. The specific provisions on retail loans and advances held by the Bank are higher than the minimum regulatory requirements.
a) 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.
b) 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.
c) 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 sectors, provision on exposures to step-down subsidiaries of
Indian companies and provision on incremental exposure to borrowers identified as per RBIâs large exposure framework. For performing loans and advances in overseas branches, the general provision is made at higher of host country regulations requirement and RBI requirement.
d) I n 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.
e) The Bank makes floating provision as per the Board approved policy, 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.
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 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 Bank accounts for any loss arising from securitisation immediately at the time of sale and 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 over the life of the transaction based on the method prescribed in the guidelines.
In accordance with RBI guidelines, in case of non-performing/special mention account-2 loans sold to securitisation company (SC)/reconstruction company (RC), 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.
5. Fixed assets
Fixed assets, other than premises, are carried at cost less accumulated depreciation and impairment, if any. 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 lives of the groups of fixed assets are given below.
a) Assets purchased/sold during the year are depreciated on a pro-rata basis for the actual number of days the asset has been capitalised.
b) Items individually costing upto Rs. 5,000/- are depreciated fully over a period of 12 months from the date of purchase.
c) Assets at residences of Bankâs employees are depreciated over the estimated useful life of 5 years.
d) I n 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.
e) The profit on sale of premises is appropriated to capital reserve, net of transfer to Statutory Reserve and taxes, in accordance with RBI guidelines.
Non-banking assets
Non-Banking Assets (NBAs) acquired in satisfaction of claims are carried at lower of net book value and net realisable value. Further, the Bank creates provision on non-banking assets as per specific RBI directions.
6. Transactions involving foreign exchange
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 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 Dealersâ Association of India (FEDAI) relevant to the balance sheet date and the resulting gains/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 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.
The premium 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 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.
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.
7. Accounting for derivative contracts
The Bank enters into derivative contracts such as interest rate and currency options, interest rate and currency futures, 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 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. Hedge swaps are accounted for on an accrual basis and are not marked to market unless their underlying transaction is marked to market.
Foreign currency and rupee 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 profit and loss account.
8. Employee Stock Option Scheme (ESOS)
The Employees Stock Option Scheme (the Scheme) provides for grant of options on the Bankâs equity shares to wholetime directors and employees of the Bank and its subsidiaries. The Scheme provides that employees are granted an option to subscribe to equity shares of the Bank that vest 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 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 latest closing price, immediately prior to the grant date, which is generally the date of the meeting of the Board Governance, Remuneration & Nomination Committee 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.
9. Employee Benefits Gratuity
The Bank 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 in force in the respective countries. The Bank makes contribution to a trust which administers the funds on its own account or through insurance companies. The actuarial gains or losses arising during the year are recognised in the profit and loss account.
Actuarial valuation of the gratuity liability 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.
Superannuation Fund and National Pension Scheme
The Bank contributes 15.0% of the total annual basic salary of certain employees to superannuation funds, a defined contribution plan, managed and administered by insurance companies. Further, the Bank contributes 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 Bank also gives an option to its employees allowing them to receive the amount in lieu of such contributions along with their monthly salary during their employment.
The amounts so contributed/paid by the Bank to the superannuation fund and NPS or to employees during the year are recognised in the profit and loss account.
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 employeeâs years of service with the Bank and applicable salary.
Actuarial valuation of the pension liability is determined by an 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 employerâs contribution under the provident fund plan.
Provident Fund
The Bank 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 Bank contributes an equal amount for eligible employees. The Bank makes contribution as required by The Employeesâ Provident Funds and Miscellaneous Provisions Act, 1952 to Employeesâ Pension Scheme administered by the Regional Provident Fund Commissioner. The Bank makes balance contributions to a fund administered by trustees. The funds are invested according to the rules prescribed by the Government of India.
Actuarial valuation for the interest rate guarantee on the provident fund balances is determined by an actuary appointed by the Bank.
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 Bank provides for compensated absence based on actuarial valuation conducted by an independent actuary.
10. Income Taxes
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. 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.
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 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 re-assessed at each reporting date, based upon managementâs judgement as to whether their realisation is considered as reasonably certain. However, in case of unabsorbed depreciation or carried forward loss, deferred tax assets will be recognised only if there is virtual certainty of realisation of such assets.
Minimum Alternate Tax (MAT) credit is recognised as an asset to the extent there is convincing evidence that the Bank 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 Bank 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 Bank will pay normal income tax during the specified period.
11. Impairment of Assets
The Bank 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.
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 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 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.
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.
13. Earnings per share (EPS)
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 during 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 outstanding during the year, 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 on straight line basis.
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.
Mar 31, 2018
SCHEDULE 17 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. The Bank also has overseas branches in Bahrain, China, Dubai, Hong Kong, Qatar, Singapore, South Africa, Sri Lanka, United States of America and Offshore Banking units.
Basis of preparation
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of ICICI Bank used in the preparation 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 the Accounting Standards notified under Section 133 of the Companies Act, 2013 read together with paragraph 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the historical cost convention and the accrual method of accounting, except in the case of interest and other income on non-performing assets (NPAs) where it is recognized upon realization.
The preparation of financial statements requires the 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 financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the preparation 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 recognized in the profit and loss account as it accrues except in the case of non-performing assets (NPAs) where it is recognized upon realization, as per the income recognition and asset classification norms of RBI. Further, interest income was recognized upon realization under the SDR, change in management outside SDR or S4A schemes, from the date of invocation till the end of stand-still period/implementation date. With effect from February 12, 2018, RBI has withdrawn these schemes and the interest income, for cases where the SDR, change in management outside SDR or S4A schemes were not implemented at that date, has been recognized as per the income recognition and asset classification norms of RBI.
b) Income from finance 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.
c) Income on discounted instruments is recognized over the tenure of the instrument on a constant yield basis.
d) Dividend income is accounted on accrual basis when the right to receive the dividend is established.
e) Loan processing fee is accounted for upfront when it becomes due.
f) Project appraisal/structuring fee is accounted for on the completion of the agreed service.
g) Arranger fee is accounted for as income when a significant portion of the arrangement/syndication is completed.
h) Commission received on guarantees issued is amortized on a straight-line basis over the period of the guarantee.
i) The annual/renewal fee on credit cards and debit cards are amortized on a straight-line basis over one year.
j) Fees paid/received for priority sector lending certificates (PSLC) is amortized on straight-line basis over the period of the certificate.
k) All other fees are accounted for as and when they become due.
l) Net income arising from sell-down/securitization of loan assets prior to February 1, 2006 has been recognized upfront as interest income. With effect from February 1, 2006, net income arising from securitization of loan assets is amortized 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 amortized over the life of underlying assets sold and net income from sale of loan assets through direct assignment, without any recourse obligation, is recognized at the time of sale. Net loss arising on account of the sell-down/securitization and direct assignment of loan assets is recognized at the time of sale.
m) The Bank deals in bullion business on a consignment basis. The difference between price recovered from customers and cost of bullion is accounted for at the time of sales to the customers. The Bank also deals in bullion on a borrowing and lending basis and the interest paid/received is accounted on accrual basis.
2. Investments
Investments are accounted for in accordance with the extant RBI guidelines on investment classification and
valuation as given below.
1. All investments are classified into ''Held to Maturity'', ''Available for Sale'' and ''Held for Trading''. Reclassifications, if any, in any category are accounted for as per RBI guidelines. Under each classification, the investments are further categorized as (a) government securities, (b) other approved securities, (c) shares, (d) bonds and debentures, (e) subsidiaries and joint ventures and (f) others.
2. ''Held to Maturity'' securities are carried at their acquisition cost or at amortized 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 amortized over the remaining period to maturity on a constant yield basis and straight-line basis respectively.
3. ''Available for Sale'' and ''Held for Trading'' 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 ''Available for Sale'', is amortized 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 recognized 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.
The market/fair value of unquoted government securities which are in the nature of Statutory Liquidity Ratio (SLR) securities included in the ''Available for Sale'' and ''Held for Trading'' categories is as per the rates published by FIMMDA. 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.
Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available, or at '' 1, as per RBI guidelines.
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 unrealized, is ignored, while net depreciation is provided for. The depreciation on securities acquired by way of conversion of outstanding loans is fully provided for. Nonperforming investments are identified based on the RBI guidelines.
Depreciation on equity shares acquired and held by the Bank under SDR, S4A and change in management outside SDR schemes is provided over a period of four calendar quarters from the date of conversion of debt into equity in accordance with the RBI guidelines. With effect from February 12, 2018, the depreciation is provided over a period of four quarters for the schemes which have been implemented prior to that date as per extant RBI guidelines.
4. Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost.
5. The units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund.
6. Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged to the profit and loss account. Cost of investments is computed based on the First-In-First-Out (FIFO) method.
7. Equity investments in subsidiaries/joint ventures are classified under ''Held to Maturity'' and ''Available for Sale''. The Bank assesses these investments for any permanent diminution in value and appropriate provisions are made.
8. Profit/loss on sale of investments in the ''Held to Maturity'' category is recognized in the profit and loss account and profit is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to Capital Reserve. Profit/loss on sale of investments in ''Available for Sale'' and ''Held for Trading'' categories is recognized in the profit and loss account.
9. 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.
10. Broken period interest (the amount of interest from the previous interest payment date till the date of purchase/ sale of instruments) on debt instruments is treated as a revenue item.
11. 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 realization 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 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.
12. 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.
13. The Bank undertakes short sale transactions in dated central government securities in accordance with RBI guidelines. The short positions are categorized 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.
3. Provision/write-offs on loans and other credit facilities
The Bank classifies its loans and investments, including at overseas branches and over dues arising from crystallized derivative contracts, into performing and NPAs in accordance with RBI guidelines. Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI.
I n the case of corporate loans and advances, provisions are made for sub-standard and doubtful assets at rates prescribed by RBI. Loss assets and the unsecured portion of doubtful assets are provided/written-off as per the extant RBI guidelines. For loans and advances booked in overseas branches, which are standard as per the extant RBI guidelines but are classified as NPAs based on host country guidelines, provisions are made as per the host country regulations. For loans and advances booked in overseas branches, which are NPAs as per the extant RBI guidelines and as per host country guidelines, provisions are made at the higher of the provisions required under RBI regulations and host country regulations. Provisions on homogeneous retail loans and advances, subject to minimum provisioning requirements of RBI, are assessed on the basis of the ageing of the loans in the nonperforming category. In respect of non-retail loans reported as fraud to RBI and classified in doubtful category, the entire amount, without considering the value of security, is provided for over a period of 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 no cooperative borrowers or willful defaulters, the Bank makes accelerated provisions as per extant 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, including RBI direction for provision on accounts referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016. The assessment of incremental specific provisions is made after taking into consideration the existing specific provision held. The specific provisions on retail loans and advances held by the Bank are higher than the minimum regulatory requirements.
a) Provision due to diminution in the fair value of restructured/rescheduled loans and advances is made in accordance with the applicable RBI guidelines.
In respect of non-performing loans and advances 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 later, falls due, subject to satisfactory performance of the account during the period. Prior to February 12, 2018, standard restructured loans were upgraded to the standard category when satisfactory payment performance was evidenced during the specified period and after the loan reverted to the normal level of standard asset provisions/risk weights. With effect from February 12, 2018, non-performing and restructured loans are upgraded to standard only after satisfaction of certain payment and rating threshold criteria specified under RBI guidelines on Resolution of Stressed Assets - Revised Framework.
b) 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.
c) 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 sectors and provision on exposures to step-down subsidiaries of Indian companies. For performing loans and advances in overseas branches, the general provision is made at higher of host country regulations requirement and RBI requirement.
d) I n 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 categorized 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.
e) The Bank makes floating provision as per a Board approved policy, which is in addition to the specific and general provisions made by the Bank. The floating provision is utilized, 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 nonrecurring 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.
4. Transfer and servicing of assets
The Bank transfers commercial and consumer loans through securitization transactions. The transferred loans are de-recognized and gains/losses are accounted for, only if the Bank surrenders the rights to benefits specified in the underlying securitized loan contract. Recourse and servicing obligations are accounted for net of provisions.
I n accordance with the RBI guidelines for securitization of standard assets, with effect from February 1, 2006, the Bank accounts for any loss arising from securitization immediately at the time of sale and the profit/premium arising from securitization is amortized 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 securitization to be amortized over the life of the transaction based on the method prescribed in the guidelines.
In accordance with RBI guidelines, in case of non-performing/special mention account-2 loans sold to securitization company (SC)/reconstruction company (RC), 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 loan is sold.
1. The useful /ife of assets is based on historical experience of the Bank, which is different from the useful life as prescribed in Schedule II to the Companies Act, 2013.
a) Assets purchased/sold during the year are depreciated on a pro-rata basis for the actual number of days the asset has been capitalised.
b) Items individually costing upto '' 5,000/- are depreciated fully over a period of 12 months from the date of purchase.
c) Assets at residences of Bank''s employees are depreciated over the estimated useful life of 5 years.
d) 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.
e) The profit on sale of premises is appropriated to capital reserve, net of transfer to Statutory Reserve and taxes, in accordance with RBI guidelines.
Non-Banking assets
Non-Banking assets (NBAs) acquired in satisfaction of claims are carried at lower of net book value and net realizable value. Further, the Bank creates provision on non-banking assets as per specific RBI directions.
6. Transactions involving foreign exchange
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 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 (FEDAI) relevant to the balance sheet date and the resulting gains/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 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 recognize the cumulative/proportionate amount of such exchange differences as income or expenses, which relate to repatriation of accumulated retained earnings from overseas operations.
The premium 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 amortized over the life of the contract. 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 recognized 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.
7. Accounting for derivative contracts
The Bank enters into derivative contracts such as interest rate and currency options, interest rate and currency futures, 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 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. Hedge swaps are accounted for on an accrual basis and are not marked to market unless their underlying transaction is marked to market.
Foreign currency and rupee 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 profit and loss account.
8. Employee Stock Option Scheme (ESOS)
The Employees Stock Option Scheme (the Scheme) provides for grant of options on the Bank''s equity shares to whole time directors and employees of the Bank and its subsidiaries. The Scheme provides that employees are granted an option to subscribe to equity shares of the Bank that vest 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 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 amortized over the vesting period. The fair market price is the latest closing price, immediately prior to the grant date, which is generally the date of the meeting of the Board Governance, Remuneration & Nomination Committee 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.
9. Employee Benefits Gratuity
The Bank 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 in force in the respective countries. The Bank makes contribution to a trust which administers the funds on its own account or through insurance companies. The actuarial gains or losses arising during the year are recognized in the profit and loss account.
Actuarial valuation of the gratuity liability 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.
Superannuation Fund and National Pension Scheme
The Bank contributes 15.0% of the total annual basic salary of certain employees to superannuation funds, a defined contribution plan, managed and administered by insurance companies. Further, the Bank contributes 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 Bank also gives an option to its employees allowing them to receive the amount in lieu of such contributions along with their monthly salary during their employment.
The amounts so contributed/paid by the Bank to the superannuation fund and NPS or to employee during the year are recognized in the profit and loss account.
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 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 recognized 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 Bank 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 Bank contributes an equal amount for eligible employees. The Bank 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. The Bank makes balance contributions to a fund administered by trustees. The funds are invested according to the rules prescribed by the Government of India.
Actuarial valuation for the interest rate guarantee on the provident fund balances is determined by an actuary appointed by the Bank.
The actuarial gains or losses arising during the year are recognized 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 recognized in profit and loss account at the time of contribution.
Compensated absences
The Bank provides for compensated absence based on actuarial valuation conducted by an independent actuary.
10. Income Taxes
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. 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.
Deferred tax assets and liabilities are recognized 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 at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account.
Deferred tax assets are recognized and re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably certain. However, in case of unabsorbed depreciation or carried forward loss, deferred tax assets will be recognized only if there is virtual certainty of realization of such assets.
Minimum Alternate Tax (MAT) credit is recognized as an asset to the extent there is convincing evidence that the Bank 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 recognized as an asset in the year in which it becomes eligible for set off against normal income tax. The Bank 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 Bank will pay normal income tax during the specified period.
11. Impairment of Assets
The Bank 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.
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 prepared. A provision is recognized 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 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.
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.
13. Earnings per share (EPS)
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 during 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 outstanding during the year, except where the results are anti-dilutive.
14. Lease transactions
Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account over the lease term on straight-line basis.
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.
Mar 31, 2017
SCHEDULE 17 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. The Bank also has overseas branches in Bahrain, China, Dubai, Hong Kong, Qatar, Singapore, South Africa, Sri Lanka, and United States of America and Offshore Banking units.
Basis of preparation
The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of ICICI Bank used in the preparation 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 the Accounting Standards notified under Section 133 of the Companies Act, 2013 read together with paragraph 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the historical cost convention and the accrual method of accounting, except in the case of interest and other income on non-performing assets (NPAs) and assets under strategic debt restructuring (SDR) scheme, scheme for sustainable structuring of stressed assets (S4A) and prudential norms on change in ownership of borrowing entities (change in management outside SDR) of RBI where it is recognized upon realization.
The preparation of financial statements requires the 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 financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in the preparation 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 recognized in the profit and loss account as it accrues except in the case of non-performing assets (NPAs) where it is recognized upon realization, as per the income recognition and asset classification norms of RBI. For assets, where SDR or change in management outside SDR schemes of RBI have been invoked, the interest income is recognized upon realization during the period from the date of invocation till the end of stand-still period. Further, the interest income on assets is recognized upon realization where S4A scheme has been invoked but not implemented.
b) Income from finance 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.
c) Income on discounted instruments is recognized over the tenure of the instrument on a constant yield basis.
d) Dividend income is accounted on accrual basis when the right to receive the dividend is established.
e) Loan processing fee is accounted for upfront when it becomes due.
f) Project appraisal/structuring fee is accounted for on the completion of the agreed service.
g) Arranger fee is accounted for as income when a significant portion of the arrangement/syndication is completed.
h) Commission received on guarantees issued is amortized on a straight-line basis over the period of the guarantee.
i) The annual/renewal fee on credit cards is amortized on a straight line basis over one year.
j) Fees paid/received for priority sector lending certificates (PSLC) is amortized on straight-line basis over the period of the certificate.
k) Fees/other income related to borrowers, where SDR or change in management outside SDR schemes of RBI have been invoked, are recognized upon realization during the period from the date of invocation till the end of stand-still period. Further, fees/other income are recognized upon realization where S4A scheme has been invoked but not implemented.
l) All other fees are accounted for as and when they become due.
m) Net income arising from sell-down/securitization of loan assets prior to February 1, 2006 has been recognized upfront as interest income. With effect from February 1, 2006, net income arising from securitization of loan assets is amortized 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 amortized over the life of underlying assets sold and net income from sale of loan assets through direct assignment, without any recourse obligation, is recognized at the time of sale. Net loss arising on account of the sell-down/securitization and direct assignment of loan assets is recognized at the time of sale.
n) The Bank deals in bullion business on a consignment basis. The difference between price recovered from customers and cost of bullion is accounted for at the time of sales to the customers. The Bank also deals in bullion on a borrowing and lending basis and the interest paid/received is accounted on accrual basis.
2. Investments
Investments are accounted for in accordance with the extant RBI guidelines on investment classification and
valuation as given below.
1. All investments are classified into ''Held to Maturity'', ''Available for Sale'' and ''Held for Trading''. Reclassifications, if any, in any category are accounted for as per RBI guidelines. Under each classification, the investments are further categorized as (a) government securities, (b) other approved securities, (c) shares, (d) bonds and debentures, (e) subsidiaries and joint ventures and (f) others.
2. ''Held to Maturity'' securities are carried at their acquisition cost or at amortized 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 amortized over the remaining period to maturity on a constant yield basis and straight line basis respectively.
3. ''Available for Sale'' and ''Held for Trading'' 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 ''Available for Sale'', is amortized 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 recognized stock exchanges or prices declared by Primary Dealers Association of India (PDAI) jointly with Fixed Income Money Market and Derivatives Association (FIMMDA), periodically.
The market/fair value of unquoted government securities which are in the nature of Statutory Liquidity Ratio (SLR) securities included in the ''Available for Sale'' and ''Held for Trading'' categories is as per the rates published by FIMMDA. 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.
Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available, or at '' 1, as per RBI guidelines.
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, if any, being unrealized, is ignored, while net depreciation is provided for. The depreciation on securities acquired by way of conversion of outstanding loans is fully provided for. Non-performing investments are identified based on the RBI guidelines.
Depreciation on equity shares acquired and held by the Bank under SDR, S4A and change in management outside SDR schemes is provided over a period of four calendar quarters from the date of conversion of debt into equity in accordance with the RBI guidelines.
4. Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost.
5. The units of mutual funds are valued at the latest repurchase price/net asset value declared by the mutual fund.
6. Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged to the profit and loss account. Cost of investments is computed based on the First-In-First-Out (FIFO) method.
7. Equity investments in subsidiaries/joint ventures are categorized as ''Held to Maturity'' in accordance with RBI guidelines. The Bank assesses these investments for any permanent diminution in value and appropriate provisions are made.
8. Profit/loss on sale of investments in the ''Held to Maturity'' category is recognized in the profit and loss account and profit is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to Capital Reserve. Profit/loss on sale of investments in ''Available for Sale'' and ''Held for Trading'' categories is recognized in the profit and loss account.
9. 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.
10. Broken period interest (the amount of interest from the previous interest payment date till the date of purchase/ sale of instruments) on debt instruments is treated as a revenue item.
11. 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 realization 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 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.
12. 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.
13. The Bank undertakes short sale transactions in dated central government securities in accordance with RBI guidelines. The short positions are categorized 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.
. Provision/write-offs on loans and other credit facilities
The Bank classifies its loans and investments, including at overseas branches and over dues arising from crystallized derivative contracts, into performing and NPAs in accordance with RBI guidelines. Loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI.
In the case of corporate loans and advances, provisions are made for sub-standard and doubtful assets at rates prescribed by RBI. Loss assets and the unsecured portion of doubtful assets are provided/written-off as per the extant RBI guidelines. For loans and advances booked in overseas branches, which are standard as per the extant RBI guidelines but are classified as NPAs based on host country guidelines, provisions are made as per the host country regulations. For loans and advances booked in overseas branches, which are NPAs as per the extant RBI guidelines and as per host country guidelines, provisions are made at the higher of the provisions required under RBI regulations and host country regulations. Provisions on homogeneous retail loans and advances, subject to minimum provisioning requirements of RBI, are assessed on the basis of the ageing of the loans in the non-performing category. In respect of loans classified as fraud, the entire amount, without considering the value of
security, is provided for over a period of four quarters starting from the quarter in which fraud has been detected. In accounts where there has been delay in reporting the fraud to the RBI, the entire amount is provided immediately. In respect of borrowers classified as non-cooperative borrowers, willful defaulters and NPAs covered under distressed assets framework of RBI, the Bank makes accelerated provisions as per extant 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 also holds provisions on loans under SDR, S4A and change in management outside SDR schemes of RBI. The assessment of incremental specific provisions is made after taking into consideration the existing specific provision held. The specific provisions on retail loans and advances held by the Bank are higher than the minimum regulatory requirements.
a) Provision due to diminution in the fair value of restructured/rescheduled loans and advances is made in accordance with the applicable RBI guidelines.
In respect of non-performing loans and advances 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 later, falls due, subject to satisfactory performance of the account during the period. A standard restructured loan is upgraded to the standard category when satisfactory payment performance is evidenced during the specified period and after the loan reverts to the normal level of standard asset provisions/ risk weights.
b) 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.
c) The Bank maintains general provision on performing loans and advances in accordance and with the RBI guidelines, including provisions on loans to borrowers having unheeded foreign currency exposure and provision on exposures to step-down subsidiaries of Indian companies. For performing loans and advances in overseas branches, the general provision is made at higher of host country regulations requirement and RBI requirement.
d) 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 categorized 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.
e) The Bank makes floating provision as per a Board approved policy, which is in addition to the specific and general provisions made by the Bank. The floating provision is utilized, 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 nonrecurring 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.
4. Transfer and servicing of assets
The Bank transfers commercial and consumer loans through securitization transactions. The transferred loans are de-recognized and gains/losses are accounted for, only if the Bank surrenders the rights to benefits specified in the underlying securitized loan contract. Recourse and servicing obligations are accounted for net of provisions.
In accordance with the RBI guidelines for securitization of standard assets, with effect from February 1, 2006, the Bank accounts for any loss arising from securitization immediately at the time of sale and the profit/ premium arising from securitization is amortized 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 securitization to be amortized over the life of the transaction based on the method prescribed in the guidelines.
In accordance with RBI guidelines, in case of non-performing/special mention account-2 loans sold to securitization company (SC)/reconstruction company (RC), 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 loan is sold.
5. Property, Plant and Equipment
Property, Plant and Equipment (PPE), other than premises, are carried at cost less accumulated depreciation and impairment, if any. 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 PPE on a straight-line basis. The useful lives of the groups of PPE are given below.
1. The useful life of assets is based on historical experience of the Bank, which is different from the useful life as prescribed in Schedule II to the Companies Act, 2013.
a) Assets purchased/sold during the year are depreciated on a pro-rata basis for the actual number of days the asset has been capitalized.
b) Items individually costing up to Rs,5,000/- are depreciated fully over a period of 12 months from the date of purchase.
c) Assets at residences of Bank''s employees are depreciated over the estimated useful life of 5 years.
d) 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.
e) The profit on sale of premises is appropriated to capital reserve, net of transfer to Statutory Reserve and taxes, in accordance with RBI guidelines.
Non-banking assets
Non-banking assets (NBAs) acquired in satisfaction of claims are carried at lower of net book value and net realisable value.
6. Transactions involving foreign exchange
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 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 (FEDAI) relevant to the balance sheet date and the resulting gains/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 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. Prior to April 1, 2016, on the disposal/partial disposal of a non-integral foreign operation, the cumulative/proportionate amount of the exchange differences which had been accumulated in the foreign currency translation reserve and which related to that operation were recognized as income or expenses in the same period in which the gain or loss on disposal was recognized. From April 1, 2016, pursuant to RBI guideline dated April 18, 2017, the Bank does not recognize the cumulative/proportionate amount of such exchange differences as income or expenses, which relate to repatriation of accumulated retained earnings from overseas operations.
The premium 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 amortized over the life of the contract. 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 recognized 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.
7. Accounting for derivative contracts
The Bank enters into derivative contracts such as interest rate and currency options, interest rate and currency futures, 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 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. Hedge swaps are accounted for on an accrual basis and are not marked to market unless their underlying transaction is marked to market.
Foreign currency and rupee 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 profit and loss account.
8. Employee Stock Option Scheme (ESOS)
The Employees Stock Option Scheme (the Scheme) provides for grant of options on the Bank''s equity shares to whole time directors and employees of the Bank and its subsidiaries. The Scheme provides that employees are granted an option to subscribe to equity shares of the Bank that vest 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 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 amortized over the vesting period. The fair market price is the latest closing price, immediately prior to the grant date, which is generally the date of the meeting of the Board Governance, Remuneration & Nomination Committee 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.
9. Employee Benefits Gratuity
The Bank 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 in force in the respective countries. The Bank makes contribution to a trust which administers the funds on its own account or through insurance companies.
The actuarial gains or losses arising during the year are recognized in the profit and loss account.
Actuarial valuation of the gratuity liability 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.
Superannuation Fund and National Pension Scheme
The Bank contributes 15.00% of the total annual basic salary of certain employees to superannuation funds, a defined contribution plan, managed and administered by insurance companies. Further, the Bank contributes 10.00% 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 Bank also gives an option to its employees allowing them to receive the amount in lieu of such contributions along with their monthly salary during their employment.
The amounts so contributed/paid by the Bank to the superannuation fund and NPS or to employees during the year are recognized in the profit and loss account.
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 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 recognized 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 Bank 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 Bank contributes an equal amount for eligible employees. The Bank 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. The Bank makes balance contributions to a fund administered by trustees. The funds are invested according to the rules prescribed by the Government of India.
Actuarial valuation for the interest rate guarantee on the provident fund balances is determined by an actuary appointed by the Bank.
The actuarial gains or losses arising during the year are recognized 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 recognized in profit and loss account at the time of contribution.
Compensated absences
The Bank provides for compensated absence based on actuarial valuation conducted by an independent actuary.
10. Income Taxes
Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. 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.
Deferred tax assets and liabilities are recognized 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 at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognized in the profit and loss account.
Deferred tax assets are recognized and re-assessed at each reporting date, based upon management''s judgment as to whether their realization is considered as reasonably certain. However, in case of unabsorbed depreciation or carried forward loss, deferred tax assets will be recognized only if there is virtual certainty of realization of such assets.
11. 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 recognized 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.
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 prepared. A provision is recognized 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 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.
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.
13. Earnings per share (EPS)
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 during 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 outstanding during the year, except where the results are anti-dilutive.
14. Lease transactions
Lease payments for assets taken on operating lease are recognized as an expense in the profit and loss account over the lease term on straight line basis.
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.
Mar 31, 2015
1. Revenue recognition
a) I nterest 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 finance 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. Finance leases entered into prior
to April 1, 2001 have been accounted for as per the Guidance Note on
Accounting for Leases issued by ICAI. The finance leases entered post
April 1,2001 have been accounted for as per Accounting Standard 19 -
Leases.
c) Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
d) Dividend income is accounted on accrual basis when the right to
receive the dividend is established.
e) Loan processing fee is accounted for upfront when it becomes due.
f) Project appraisal/structuring fee is accounted for on the completion
of the agreed service.
g) Arranger fee is accounted for as income when a significant portion
of the arrangement/syndication is completed.
h) Commission received on guarantees issued is amortised on a
straight-line basis over the period of the guarantee.
i) All other fees are accounted for as and when they become due.
j) 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. Net loss arising on
account of the sell-down/securitisation and direct assignment of loan
assets is recognised at the time of sale.
k) The Bank deals in bullion business on a consignment basis. The
difference between price recovered from customers and cost of bullion
is accounted for at the time of sales to the customers. The Bank also
deals in bullion on a borrowing and lending basis and the interest
paid/received is accounted on accrual basis.
2. Investments
Investments are accounted for in accordance with the extant RBI
guidelines on investment classification and valuation as given below.
1. All investments are classified into ''Held to Maturity'', ''Available
for Sale'' and ''Held 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.
2. ''Held to Maturity'' 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.
3. ''Available for Sale'' and ''Held for Trading'' 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 ''Available for Sale'', is amortised over the remaining
period to maturity on constant yield basis and straight line basis
respectively. 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 (FIMMDA), periodically.
The market/fair value of unquoted government securities which are in
the nature of Statutory Liquidity Ratio (SLR) securities included in
the ''Available for Sale'' and ''Held for Trading'' categories is as per
the rates published by FIMMDA. 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 FIMMDA.
Unquoted equity shares are valued at the break-up value, if the latest
balance sheet is available, or at '' 1, as per RBI guidelines.
Securities are valued scrip-wise and depreciation/appreciation is
aggregated for each category. Net appreciation in each category, if
any, being unrealised, is ignored, while net depreciation is provided
for. Non-performing investments are identified based on the RBI
guidelines.
4. Treasury bills, commercial papers and certificate of deposits being
discounted instruments, are valued at carrying cost.
5. Costs including brokerage and commission pertaining to investments,
paid at the time of acquisition, are charged to the profit and loss
account. Cost of investments is computed based on the
First-In-First-Out (FIFO) method.
6. Equity investments in subsidiaries/joint ventures are categorised as
''Held to Maturity'' in accordance with RBI guidelines. The Bank assesses
these investments for any permanent diminution in value and appropriate
provisions are made.
7. Profit/loss on sale of investments in the ''Held to Maturity''
category is recognised in the profit and loss account and profit is
thereafter appropriated (net of applicable taxes and statutory reserve
requirements) to Capital Reserve. Profit/loss on sale of investments
in ''Available for Sale'' and ''Held for Trading'' categories is recognised
in the profit and loss account.
8. Market repurchase and reverse repurchase transactions are accounted
for as borrowing and lending transactions respectively in accordance
with the extant RBI guidelines. The transactions with RBI under
Liquidity Adjustment Facility (LAF) are accounted for as borrowing and
lending transactions.
9. Broken period interest (the amount of interest from the previous
interest payment date till the date of purchase/ sale of instruments)
on debt instruments is treated as a revenue item.
10. 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.
11. 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.
3. Provision/write-offs on loans and other credit facilities
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 RBI guidelines. Loans and
advances held at the overseas branches that are identified as impaired
as per host country regulations for reasons other than record of
recovery, but which are standard as per the extant RBI guidelines, are
classified as NPAs to the extent of amount outstanding in the host
country. Further, NPAs are classified into sub-standard, doubtful and
loss assets based on the criteria stipulated by RBI.
I n the case of corporate loans and advances, provisions are made for
sub-standard and doubtful assets at rates prescribed by RBI. Loss
assets and the unsecured portion of doubtful assets are
provided/written-off as per the extant RBI guidelines. For loans and
advances booked in overseas branches, which are standard as per the
extant RBI guidelines but are classified as NPAs based on host country
guidelines, provisions are made as per the host country regulations.
For loans and advances booked in overseas branches, which are NPAs as
per the extant RBI guidelines and as per host country guidelines,
provisions are made at the higher of the provisions required under RBI
regulations and host country regulations. Provisions on homogeneous
retail loans and advances, subject to minimum provisioning requirements
of RBI, are assessed at a borrower level, on the basis of the ageing of
the loans in the non-performing category. In respect of borrowers
classified as non-cooperative borrowers, wilful defaulters and NPAs
covered under distressed assets framework of RBI, the Bank makes
accelerated provisions as per extant RBI guidelines.
The Bank holds specific provisions against non-performing loans and
advances, general provision against performing loans and advances and
floating provision taken over from erstwhile Bank of Rajasthan upon
amalgamation. The assessment of incremental specific provisions is made
after taking into consideration the existing specific provision held.
The specific provisions on retail loans and advances held by the Bank
are higher than the minimum regulatory requirements.
a) Provision on loans and advances restructured/rescheduled is made in
accordance with the applicable RBI guidelines on restructuring of loans
and advances by the Bank.
I n respect of non-performing loans and advances 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 later, falls due,
subject to satisfactory performance of the account during the period.
A standard restructured loan is upgraded to the standard category when
satisfactory payment performance is evidenced during the specified
period and after the loan reverts to the normal level of standard asset
provisions/ risk weights.
b) 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.
c) I n addition to the specific provision on NPAs, the Bank maintains a
general provision on performing loans and advances at rates prescribed
by RBI. For performing loans and advances in overseas branches, the
general provision is made at higher of host country regulations
requirement and RBI requirement.
d) 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.
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 underlying securitised loan contract. Recourse and
servicing obligations are accounted for net of provisions.
I n accordance with the RBI guidelines for securitisation of standard
assets, with effect from February 1, 2006, the Bank accounts for any
loss arising from securitisation immediately at the time of sale and
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 over the life of the transaction based on the method
prescribed in the guidelines.
I n the case of loans sold to an asset reconstruction company, the
excess provision is not reversed but is utilised to meet the
shortfall/loss on account of sale of other financial assets to
securitisation company (SC)/reconstruction company (RC) in accordance
with RBI guideline dated July 13, 2005. With effect from February 26,
2014, in accordance with RBI guidelines, in case of non-performing
loans sold to SCs/RCs, the Bank reverses the excess provision in profit
and loss account in the year in which amounts are received.
Further, the RBI circular dated March 11, 2015 has allowed banks to
reverse the excess provision/reserve on account of sale of NPAs to
SCs/RCs prior to February 26, 2014 to profit and loss account.
5. Fixed assets and depreciation
Premises and other fixed assets are carried at cost less accumulated
depreciation and impairment, if any. 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 a fixed asset on a straight-line basis. The useful lives
of the groups of fixed assets, are given below.
1. The useful life of assets is based on historical experience of the
Bank, which is different from the useful life as prescribed in Schedule
II to the Companies Act, 2013.
a) Assets purchased/sold during the year are depreciated on a pro-rata
basis for the actual number of days the asset has been put to use.
b) Items costing upto Rs.5,000/- are depreciated fully over a period of
12 months from the date of purchase.
c) Assets at residences of Bank''s employees are depreciated over the
estimated useful life of 5 years.
d) I n case of revalued/impaired assets, depreciation is provided over
the remaining useful life of the assets with reference to revised asset
values.
6. Transactions involving foreign exchange
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 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 (FEDAI)
relevant to the balance sheet date and the resulting gains/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 relevant to 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. On the
disposal/partial disposal of a non-integral foreign operation, the
cumulative/proportionate amount of the exchange differences which has
been accumulated in the foreign currency translation reserve and which
relates to that operation are recognised as income or expenses in the
same period in which the gain or loss on disposal is recognised.
The premium 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 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.
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.
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
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. Hedge swaps are accounted for on an
accrual basis and are not marked to market unless their underlying
transaction is marked to market.
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. 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 profit and loss account.
8. Employee Stock Option Scheme (ESOS)
The Employees Stock Option Scheme (the Scheme) provides for grant of
options on the Bank''s equity shares to wholetime directors and
employees of the Bank and its subsidiaries. The Scheme provides that
employees are granted an option to subscribe to equity shares of the
Bank that vest 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 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 latest
closing price, immediately prior to the grant date, which is generally
the date of the meeting of the Board Governance, Remuneration &
Nomination Committee 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.
9. Employee Benefits Gratuity
The Bank 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 in force in
the respective countries. The Bank makes contribution to a trust which
administers the funds on its own account or through insurance
companies.
The actuarial gains or losses arising during the year are recognised in
the profit and loss account.
Actuarial valuation of the gratuity liability 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.
Superannuation Fund
The Bank contributes 15.00% of the total annual basic salary of certain
employees to superannuation funds, a defined contribution plan, managed
and administered by insurance companies for its employees. The Bank
also gives an option to its employees, allowing them to receive the
amount contributed by the Bank along with their monthly salary during
their employment.
The amount so contributed/paid by the Bank to the superannuation fund
or to employee during the year is recognised in the profit and loss
account.
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
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 Bank 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 Bank contributes an equal amount for eligible
employees. The Bank 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. The Bank makes balance contributions to a fund
administered by trustees. The funds are invested according to the rules
prescribed by the Government of India.
Actuarial valuation for the interest rate guarantee on the provident
fund balances is determined by an actuary appointed by the Bank.
The actuarial gains or losses arising during the year are recognised in
the profit and loss account.
Leave encashment
The Bank provides for leave encashment benefit based on actuarial
valuation conducted by an independent actuary.
10. Income Taxes
Income tax expense is the aggregate amount of current tax and deferred
tax expense incurred by the Bank. 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. 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 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
re-assessed at each reporting date, based upon management''s judgement
as to whether their realisation is considered as reasonably/virtually
certain.
11. 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.
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 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 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.
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.
13. Earnings per share (EPS)
Basic and diluted earnings per share are computed in accordance with
Accounting Standard 20 - 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 during 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 outstanding during the year, 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 on straight
line basis.
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.
Mar 31, 2013
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 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. Finance leases entered into prior to
April 1, 2001 have been accounted for as per the guidance Note on
Accounting for Leases issued by ICAI. The finance leases entered post
April 1, 2001 have been accounted for as per Accounting Standard 19 -
Leases issued by ICAI.
c) Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
d) Dividend income is accounted on an accrual basis when the right to
receive the dividend is established.
e) Loan processing fee is accounted for upfront when it becomes due.
f) Project appraisal/structuring fee is accounted for on the completion
of the agreed service.
g) Arranger fee is accounted for as income when a significant portion
of the arrangement/syndication is completed.
h) Commission received on guarantees issued is amortised on a
straight-line basis over the period of the guarantee.
i) All other fees are accounted for as and when they become due.
j) 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. Net loss arising on
account of the sell-down/securitisation and direct assignment of loan
assets is recognised at the time of sale.
k) The Bank deals in bullion business on a consignment basis. The
difference between price recovered from customers and cost of bullion
is accounted for at the time of sales to the customers. The Bank also
deals in bullion on a borrowing and lending basis and the interest
paid/received is accounted on accrual basis.
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 ''Held 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 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.
c) ''Available for Sale'' and ''Held for Trading'' 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 ''Available for Sale'', is amortised over the remaining
period to maturity on constant yield basis and straight line basis
respectively. 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 (FIMMDA), periodically.
The market/fair value of unquoted government securities which are in
the nature of Statutory Liquidity Ratio (SLR) securities included in
the ''Available for Sale'' and ''Held for Trading'' categories is as per
the rates published by FIMMDA. 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 FIMMDA.
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.
Securities are valued scrip-wise and depreciation/appreciation is
aggregated for each category. Net appreciation in each category, if
any, being unrealised, is ignored, while net depreciation is provided
for. Non-performing investments are identified based on the RBI
guidelines.
d) Costs including brokerage and commission pertaining to investments,
paid at the time of acquisition, are charged to the profit and loss
account. Cost of investments is computed based on the
First-In-First-Out (FIFO) method.
e) Equity investments in subsidiaries/joint ventures are categorised as
''Held to Maturity'' in accordance with RBI guidelines. The Bank assesses
these investments for any permanent diminution in value and appropriate
provisions are made.
f) Profit/loss on sale of investments in the ''Held to Maturity''
category is recognised in the profit and loss account and profit is
thereafter appropriated (net of applicable taxes and statutory reserve
requirements) to Capital Reserve. Profit/loss on sale of investments
in ''Available for Sale'' and ''Held for Trading'' categories is recognised
in the profit and loss account.
g) Market repurchase and reverse repurchase transactions are accounted
for as borrowing and lending transactions respectively in accordance
with the extant RBI guidelines. The transactions with RBI under
Liquidity Adjustment Facility (LAF) are accounted for as borrowing and
lending transactions.
h) Broken period interest (the amount of interest from the previous
interest payment date till the date of purchase/sale of instruments) on
debt instruments is treated as a revenue item.
i) 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.
j) 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.
3. Provision/write-offs on loans and other credit facilities
a) All credit exposures, including loans and advances at the overseas
branches and overdues arising from crystallised derivative contracts,
are classified as per RBI guidelines, into performing and NPAs. 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 identified as NPAs at borrower level.
Further, NPAs are classified into sub-standard, doubtful and loss
assets based on the criteria stipulated by RBI.
In the case of corporate loans and advances, provisions are made for
sub-standard and doubtful assets at rates prescribed by RBI. Loss
assets and the unsecured portion of doubtful assets are
provided/written-off as per the extant RBI guidelines. For loans and
advances booked in overseas branches, which are standard as per the
extant RBI guidelines but are classified as NPAs based on host country
guidelines, provisions are made as per the host country regulations.
For loans and advances booked in overseas branches, which are NPAs as
per the extant RBI guidelines and as per host country guidelines,
provisions are made at the higher of the provisions required under RBI
regulations and host country regulations. Provisions on homogeneous
retail loans and advances, subject to minimum provisioning requirements
of RBI, are assessed at a borrower level, on the basis of the ageing of
the loans in the non-performing category.
The Bank holds specific provisions against non-performing loans and
advances, general provision against performing loans and advances and
floating provision taken over from erstwhile Bank of Rajasthan upon
amalgamation. The assessment of incremental specific provisions is made
after taking into consideration the existing specific provision held.
The specific provisions on retail loans and advances held by the Bank
are higher than the minimum regulatory requirements.
b) Provision on loans and advances restructured/rescheduled is made in
accordance with the applicable RBI guidelines on restructuring of loans
and advances by Banks.
In respect of non-performing loans and advances 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.
c) 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.
d) In addition to the specific provision on NPAs, the Bank maintains a
general provision on performing loans and advances at rates prescribed
by RBI. For performing loans and advances in overseas branches, the
general provision is made at higher of host country regulations
requirement and RBI requirement.
e) 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, 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, provision is required to be
held at 25% of the rates applicable to exposures exceeding 180 days.
The indirect exposures will be 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.
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 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 Bank accounts for any
loss arising from securitisation immediately at the time of sale and
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. In the case of loans sold to an
asset reconstruction company, the excess provision is not reversed but
is utilised to meet the shortfall/loss on account of sale of other
financial assets to securitisation company (SC)/ reconstruction company
(RC).
In accordance with the RBI guidelines dated May 7, 2012 for
securitisation of standard assets, with effect from May 7, 2012, the
Bank accounts for any loss arising from securitisation immediately at
the time of sale and the profit/premium arising from securitisation is
amortised over the life of the transaction based on the method
prescribed by RBI guidelines.
5. Fixed assets and depreciation
Premises and other fixed assets are carried at cost 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 a fixed asset
on a straight-line basis. The rates of depreciation for fixed assets,
which are not lower than the rates prescribed in Schedule XIV of the
Companies Act, 1956, are given below.
a. Depreciation on leased assets and leasehold improvements is
recognised on a straight-line basis using rates determined with
reference to 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 depreciated 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 depreciated fully over a period
of 12 months from the date of purchase.
d. Assets at residences of Bank''s employees are depreciated at 20% per
annum.
e. In case of revalued/impaired assets, depreciation is provided over
the remaining useful life of the assets with reference to revised
assets values.
6. Transactions involving foreign exchange
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 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 (FEDAI) 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 FEDAI 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 premium 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 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.
Contingent liabilities on account of guarantees, endorsements and other
obligations denominated in foreign currencies are disclosed at the
closing exchange rates notified by FEDAI 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
offsetting 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. 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 profit and loss account.
8. Employee Stock Option Scheme (ESOS)
The Employees Stock Option Scheme (the Scheme) provides for grant of
option on 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 subscribe to equity shares of the
Bank that vest 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 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 latest
closing price, immediately prior to the grant date, which is generally
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.
9. Staff Retirement Benefits Gratuity
The Bank pays gratuity 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 in force in the
respective countries.
The actuarial gains or losses arising during the year are recognised in
the profit and loss account.
Actuarial valuation of the gratuity liability 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.
Superannuation Fund
The Bank contributes 15.0% of the total annual basic salary of certain
employees to a superannuation fund for its employees. The Bank also
gives an option to its employees, allowing them to receive the amount
contributed by the Bank along with their monthly salary during their
employment.
The amount so contributed/paid by the Bank to the superannuation fund
or to employee during the year is recognised in the profit and loss
account.
Pension
The Bank provides for pension, a deferred retirement plan covering
certain employees of erstwhile Bank of Madura, erstwhile Sangli Bank
and erstwhile Bank of Rajasthan. 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
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 Bank is statutorily required to maintain a provident fund as a part
of retirement benefits to its employees. Each employee contributes a
certain percentage of his or her basic salary and the Bank contributes
an equal amount. The funds are invested according to the rules
prescribed by the Government of India.
Actuarial valuation for the interest rate guarantee on the provident
fund balances is determined by an actuary appointed by the Bank.
The actuarial gains or losses arising during the year are recognised in
the profit and loss account.
Leave encashment
The Bank provides for leave encashment benefit, which is a long-term
benefit scheme, based on actuarial valuation conducted by an
independent actuary.
10. Income Taxes
Income tax expense is the aggregate amount of current tax and deferred
tax expense incurred by the Bank. 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. 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 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
re-assessed at each reporting date, based upon management''s judgement
as to whether their realisation is considered as reasonably/virtually
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 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 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 and diluted earnings per share are computed in accordance with
Accounting Standard-20 - 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 during 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 outstanding during the year, 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 on straight
line basis.
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.
Mar 31, 2012
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 preparation
The financial statements have been prepared in accordance with
requirements prescribed under the Third Schedule of the Banking
Regulation Act, 1949. The accounting and reporting policies of ICICI
Bank used in the preparation 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, the
Accounting Standards (AS) issued by the Institute of Chartered
Accountants of India (ICAI) and notified by the Companies (Accounting
Standards) Rules, 2006 (as amended) to the extent applicable and
practices generally prevalent in the banking industry in India. The
Bank follows the accrual method of accounting, except where otherwise
stated, and the historical cost convention.
The preparation of financial statements requires the 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 financial statements and the reported income and expenses
during the reporting period. Management believes that the estimates
used in the preparation of the financial statements are prudent and
reasonable. Future results could differ from these estimates.
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 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. Finance leases entered into prior to
April 1, 2001 have been accounted for as per the Guidance Note on
Accounting for Leases issued by ICAI. The finance leases entered post
April 1, 2001 have been accounted for as per Accounting Standard 19 -
Leases issued by ICAI.
c) Income on discounted instruments is recognised over the tenure of
the instrument on a constant yield basis.
d) Dividend is accounted on an accrual basis when the right to receive
the dividend is established.
e) Loan processing fee is accounted for upfront when it becomes due.
f) Project appraisal/structuring fee is accounted for on the completion
of the agreed service.
g) Arranger fee is accounted for as income when a significant portion
of the arrangement/syndication is completed.
h) Commission received on guarantees issued is amortised on a
straight-line basis over the period of the guarantee.
i) All other fees are accounted for as and when they become due.
j) 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. Net loss arising on
account of the sell-down/securitisation and direct assignment of loan
assets is recognised at the time of sale.
k) The Bank deals in bullion business on a consignment basis. The
difference between price recovered from customers and cost of bullion
is accounted for at the time of sales to the customers. The Bank also
deals in bullion on a borrowing and lending basis and the interest
paid/received is accounted on accrual basis.
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 'Held 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 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.
c) 'Available for Sale' and 'Held for Trading' 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 'Available for Sale', is amortised over the remaining
period to maturity on constant yield basis and straight line basis
respectively. 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 (FIMMDA), periodically.
The market/fair value of unquoted government securities which are in
the nature of Statutory Liquidity Ratio (SLR) securities included in
the 'Available for Sale' and 'Held for Trading' categories is as per
the rates published by FIMMDA. 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 FIMMDA.
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.
Securities are valued scrip-wise and depreciation/appreciation is
aggregated for each category. Net appreciation in each category, if
any, being unrealised, is ignored, while net depreciation 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. The Bank assesses
these investments for any permanent diminution in value and appropriate
provisions are made.
f) Profit/loss on sale of investments in the 'Held to Maturity'
category is recognised in the profit and loss account and profit is
thereafter appropriated (net of applicable taxes and statutory reserve
requirements) to Capital Reserve. Profit/loss on sale of investments
in 'Available for Sale' and 'Held for Trading' categories is recognised
in the profit and loss account.
g) Market repurchase and reverse repurchase transactions are accounted
for as borrowing and lending transactions respectively in accordance
with the extant RBI guidelines. The transactions with RBI under
Liquidity Adjustment Facility (LAF) are accounted for as borrowing and
lending transactions from the quarter ended March 31, 2012.
h) Broken period interest (the amount of interest from the previous
interest payment date till the date of purchase/sale of instruments) on
debt instruments is treated as a revenue item.
i) 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.
j) 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.
3. Provisions/write-offs on loans and other credit facilities
a) All credit exposures, including advances at the overseas branches
and overdues arising from crystallised derivative contracts, are
classified as per RBI guidelines, into performing and NPAs. 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 identified as NPAs at borrower level. 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 prescribed by RBI. Loss assets and the
unsecured portion of doubtful assets are provided/written-off as per
the extant RBI guidelines. For advances booked in overseas branches,
which are standard as per the extant RBI guidelines but are classified
as NPAs based on host country guidelines, provisions are made as per
the host country regulations. Provisions on homogeneous retail loans,
subject to minimum provisioning requirements of RBI, are assessed at a
borrower level on the basis of days past due.
The Bank holds specific provisions against non-performing loans,
general provision against performing loans and floating provision taken
over from erstwhile Bank of Rajasthan upon amalgamation. The assessment
of incremental specific provisions is made after taking into
consideration the existing specific provision held. The specific
provisions on retail loans held by the Bank are higher than the minimum
regulatory requirements.
b) Provision on assets restructured/rescheduled is made in accordance
with the applicable RBI guidelines on restructuring of advances by
Banks.
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.
c) 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.
d) 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.
e) 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, provision is required to be held at 25% of the rates applicable
to exposures exceeding 180 days. 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 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 Bank accounts for any
loss arising from securitisation immediately at the time of sale and
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. In the case of loans sold to an
asset reconstruction company, the excess provision is not reversed but
is utilised to meet the shortfall/loss on account of sale of other
financial assets to securitisation company (SC)/ reconstruction company
(RC).
a. Depreciation on leased assets and leasehold improvements is
recognised on a straight-line basis using rates determined with
reference to 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 depreciated 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 depreciated fully over a period of
12 months from the date of purchase.
d. Assets at residences of Bank's employees are depreciated at 20% per
annum.
e. In case of revalued/impaired assets, depreciation is provided over
the remaining useful life of the assets with reference to revised
assets values.
6. Transactions involving foreign exchange
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 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 (FEDAI) 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 FEDAI 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 premium 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 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.
Contingent liabilities on account of guarantees, endorsements and other
obligations denominated in foreign currencies are disclosed at the
closing exchange rates notified by FEDAI 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
offsetting 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. 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 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 subscribe to equity shares of the Bank that vest
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 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. The fair market price is the
latest closing price, immediately prior to the grant date, which is
generally 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.
9. Staff Retirement Benefits Gratuity
ICICI Bank pays gratuity 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 in force in the
respective countries. ICICI Bank makes contributions to five separate
gratuity funds, for employees inducted from erstwhile ICICI Limited
(erstwhile ICICI), employees inducted from erstwhile Bank of Madura
Limited (erstwhile Bank of Madura), employees inducted from erstwhile
The Sangli Bank Limited (erstwhile Sangli Bank), employees inducted
from erstwhile The Bank of Rajasthan Limited (erstwhile Bank of
Rajasthan) and employees of ICICI Bank other than those inducted from
erstwhile ICICI, erstwhile Bank of Madura, erstwhile Sangli Bank and
erstwhile Bank of Rajasthan.
Separate gratuity funds for employees inducted from erstwhile ICICI,
erstwhile Bank of Madura, erstwhile Sangli Bank and erstwhile Bank of
Rajasthan 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, erstwhile
Sangli Bank and erstwhile Bank of Rajasthan is administered by Life
Insurance Corporation of India (LIC) 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. 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.
Superannuation Fund
ICICI Bank contributes 15.0% of the total annual basic salary of
certain employees 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
LIC. Subsequent to March 31, 2005, both LIC and ICICI Prudential Life
Insurance Company Limited are administering separate funds. Employees
have the option to decide on an annual basis, the insurance company for
management of that year's contribution towards superannuation fund.
Pension
The Bank provides for pension, a deferred retirement plan covering
certain employees of erstwhile Bank of Madura, erstwhile Sangli Bank
and erstwhile Bank of Rajasthan. 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. For erstwhile Bank of Madura,
erstwhile Sangli Bank and erstwhile Bank of Rajasthan employees in
service, separate pension funds are managed by the trust and the
liability is funded as per actuarial valuation. The Bank purchases
annuities from LIC and ICICI Prudential Life Insurance Company Limited
as part of master policies for payment of pension to retired employees
of erstwhile Bank of Madura, erstwhile Sangli Bank and erstwhile Bank
of Rajasthan. Actuarial valuation of the pension liability for all the
above funds is determined by an 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.
Employees covered by the pension plan are not eligible for employer's
contribution under the provident fund 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,
erstwhile Sangli Bank, erstwhile Bank of Rajasthan 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 Sangli Bank) and ICICI Bank contributes an
equal amount. The funds are invested according to the rules prescribed
by the Government of India.
Actuarial valuation for the interest rate guarantee on the provident
fund balances is determined by an actuary appointed by the Bank.
Leave encashment
The Bank provides for leave encashment benefit, which is a long-term
benefit scheme, based on actuarial valuation conducted by an
independent actuary.
10. Income Taxes
Income tax expense is the aggregate amount of current tax and deferred
tax expense incurred by the Bank. 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 issued by ICAI, respectively. Deferred tax adjustments
comprise changes in the deferred tax assets or liabilities during the
year. Deferred tax assets and liabilities are recognised on a prudent
basis for the future tax consequences of timing differences arising
between the carrying values of assets and liabilities and their
respective tax basis, and carry forward 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
re-assessed 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 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 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 and diluted earnings per share are computed in accordance with
Accounting Standard-20 - 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 during 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 outstanding during the year, 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.
Mar 31, 2011
Sale, is amortised over the remaining period to maturity on constant
yield basis and straight line basis respectively. 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
(FIMMDA), periodically,
The market/fair value of unquoted government securities which are in
the nature of Statutory Liquidity Ratio (SLR) securities included in
the Available for Sale and Held for Trading categories is as per
the rates published by FIMMDA. 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 FIMMDA.
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.
Securities are valued scrip-wise and depreciation/appreciation is
aggregated for each category. Net appreciation in each category, if
any, being unrealised, is ignored, while net depreciation 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. The Bank assesses
these investments for any permanent diminution in value and appropriate
provisions are made.
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) Market repurchase and reverse repurchase transactions are accounted
for as borrowing and lending transactions in accordance With the extant
RBI guidelines. Transactions with the RBI under Liquidity Adjustment
Facility (LAF) are accounted for as sale and purchase transactions.
h) Broken period interest (the amount of interest from the previous
interest payment date till the date of purchase/sale of instruments) 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, prescribed 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 period end.
j) The Bank follows trade date method of accounting for purchase and
sale of investments, except government securities where settlement date
method of accounting is followed from January 1, 2011 in accordance
with RBI guidelines.
3. Provisions/write-offs on loans and other credit facilities
a) All credit exposures, including advances at the overseas branches
and overdues arising from crystallised derivative contracts, are
classified as per RBI guidelines, into performing and 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 prescribed by RBI. Loss assets and the
unsecured portion of doubtful assets are provided/written off as per
the extant RBI guidelines. For advances booked in overseas branches,
provisions are made at the higher of the provision required at the
overseas branch as per the host country regulations and provision
required as per extant RBI guidelines. Provisions on homogeneous retail
loans, subject to minimum provisioning requirements of RBI, are
assessed at a borrower - level on the basis of days past due.
The Bank holds specific provisions against non-performing loans,
general provision against performing loans and floating provision taken
over from erstwhile Bank of Rajasthan upon amalgamation. The assessment
of incremental specific provisions is made after taking into
consideration the existing specific provision held. The specific
provisions on retail loans held by the Bank are higher than the minimum
regulatory requirements.
b) Provision on assets restructured/rescheduled is made in accordance
with the applicable RBI guidelines on restructuring of advances by
Banks.
In respect of nonTperforming 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,
c) 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.
d) 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.
e) 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, provision is required to be held at.25% of the rates applicable
to exposures exceeding 180 days. 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 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 Bank accounts for any
loss arising from securitisation immediately at the time of sale and
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. In the case of loans sold to an
asset reconstruction company, the excess provision is not reversed but
is utilised to meet the shortfall/loss on account of sale of other
financial assets to securitisation company (SC)/ reconstruction company
(RC).
6. Transactions involving foreign exchange
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 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 (FEDAI) 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 FEDAI 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 premium 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 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 at 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.
Contingent liabilities on account of guarantees, endorsements and other
obligations denominated in foreign currencies are disclosed at the
closing exchange rates notified by FEDAI 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
offsetting 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. 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 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 subscribe to equity shares of the Bank that vest
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 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. The fair market price is the
latest closing price, immediately prior to the grant date, which is
generally 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.
9. Staff Retirement Benefits
Gratuity
ICICI Bank pays gratuity 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 in force in the
respective countries. ICICI Bank makes contributions to five separate
gratuity funds, for employees inducted from erstwhile ICICI Limited
(erstwhile ICICI), employees inducted from erstwhile Bank of Madura
Limited (erstwhile Bank of Madura), employees inducted from erstwhile
The Sangli Bank Limited (erstwhile Sangli Bank), employees inducted
from erstwhile The Bank of Rajasthan Limited (erstwhile Bank of
Rajasthan) and employees of ICICI Bank other than those inducted from
erstwhile ICICI, erstwhile Bank of Madura, erstwhile Sangli Bank and
erstwhile Bank of Rajasthan.
Separate gratuity funds for employees inducted from erstwhile ICICI,
erstwhile Bank of Madura, erstwhile Sangli Bank and erstwhile Bank of
Rajasthan 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, erstwhile
Sangli Bank and erstwhile Bank of Rajasthan is administered by Life
Insurance Corporation of India (LIC) 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. 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
certain employees 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.
Up to March 31, 2005, the superannuation fund was administered solely
by LIC. Subsequent to March 31, 2005, both LIC and ICICI Prudential
Life Insurance Company Limited are administering separate funds.
Employees have the option to decide on an annual basis, the insurance
company for management of that years contribution towards
superannuation fund.
Pension
The Bank provides for pension, a deferred retirement plan covering
certain employees of erstwhile Bank of Madura, erstwhile Sangli Bank
and erstwhile Bank of Rajasthan. The plan provides for pension payment
on a monthly basis to these employees on their retirement based on the
respective employees years of service with the Bank and applicable
salary. For erstwhile Bank of Madura, erstwhile Sangli Bank and
erstwhile Bank of Rajasthan employees in service separate pens/on 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 and pension payments to
retired employees of erstwhile Bank of Rajasthan are being administered
by LIC and ICICI Prudential Life Insurance Company Limited from whom
the Bank has purchased master annuity policies. Employees covered by
the pension plan are not eligible for benefits under the provident fund
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,
erstwhile Sangli Bank, erstwhile Bank Rs.o noixf" andufor,other employees
of ICICI Bank. In-house trustees manage these funds. Each employee
contributes 12.0/0 of his or her basic salary (10.0% for certain staff
of erstwhile Sangli Bank) and ICICI Bank contributes an equal amount.
The funds are invested according to the rules prescribed by the
Government of India. Leave encashment
The Bank provides for leave encashment benefit, which is a defined
benefit scheme, based on actuarial valuation conducted by an
independent actuary.
10. Income Taxes
Income tax expense is the aggregate amount of current tax and deferred
tax expense incurred by the Bank 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 issued by the Institute of Chartered Accountants of
India respectively. Deferred tax adjustments comprise changes in the
deferred tax assets or liabilities during the year Deferred tax assets
and liabilities are recognised on a prudent basis for the future tax
consequences of timing differences arisinq between the carrying values
of assets and liabilities and their respective tax basis, and carry
forward losses Deferred tax assets and liabilities are measured using
tax rates arid 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 re-assessed at each reporting date, based
upon managements judqement 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.
M. 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 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 bv 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 and diluted earnings per share are computed in accordance with
Accounting Standard-20 - 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 during 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 outstanding during the year, 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 equivalent*, include cash in hand, balances with RBI,
balances with other banks and money at call and short notice.
Mar 31, 2010
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 to 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 on 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. Net loss arising on
account of the sell-down/securitisation and direct assignment of loan
assets is recognised at the time of sale.
l) The Bank deals in bullion business on a consignment basis. The
difference between price recovered from customers and cost of bullion
is accounted for at the time of sale to the customers. The Bank also
deals in bullion on a borrowing and lending basis and the interest
paid/received is accounted on accrual basis.
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 ÃHeld to MaturityÃ, Available
for Saleà and ÃHeld for TradingÃ. 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) ÃHeld to Maturityà 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.
c) ÃAvailable for Saleà and ÃHeld for Tradingà securities are valued
periodically as per RBI guidelines. Any premium over the face value of
investments in government securities, classified as Available for
SaleÃ, 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 (FIMMDA), periodically.
The market/fair value of unquoted government securities which are in
the nature of Statutory Liquidity Ratio (SLR) securities included in
the Available for Saleà and ÃHeld for Tradingà categories is as per the
rates published by FIMMDA. 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 FIMMDA.
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 depreciation/appreciation is
aggregated for each category. Net appreciation in each category, if
any, being unrealised, is ignored, while net depreciation 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
ÃHeld to Maturityà in accordance with RBI guidelines.
f) Profit on sale of investments in the ÃHeld to Maturityà 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 Saleà and ÃHeld
for Tradingà 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 (the amount of interest from the previous
interest payment date till the date of purchase/sale of instruments) on
debt instruments is treated as a revenue item.
i) At the end of each reporting period, security receipts issued by
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 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.
j) The Bank follows trade date method for accounting for its
investments.
3. Provisions/write-offs on loans and other credit facilities
a) All credit exposures, including overdues arising from crystallised
derivative contracts, 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 prescribed by RBI. Loss assets and the
unsecured portion of doubtful assets are provided for/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 and general provision against
performing loans. The assessment of incremental specific provisions is
made after taking into consideration existing specific provision. The
specific provisions on retail loans held by the Bank are higher than
the minimum regulatory requirements.
b) Provision on assets restructured/rescheduled is made in accordance
with the applicable RBI guidelines on restructuring of advances by
Banks.
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.
c) 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.
d) 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.
e) 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 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 Bank accounts for any
loss arising from securitisation immediately at the time of sale and
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. In the case of loans sold to an
asset reconstruction company, the excess provision, if any, is not
reversed but is utilised to meet the shortfall/loss on account of sale
of other financial assets to asset reconstruction company.
6. Transactions involving foreign exchange
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 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 Dealersà Association of India (FEDAI) 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 FEDAI 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 premium 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 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 at the
forward exchange rates implied by the swap curves for respective
currencies. 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 at the
closing exchange rates notified by FEDAI 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 into 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 accounted pursuant to the principles of hedge
accounting. Hedge 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. Pursuant to RBI guidelines, any receivables under derivative
contracts, which remain overdue for more than 90 days, are reversed
through 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 subscribe to equity shares of the Bank that vest
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 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. 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 BankÃs stock options is equal to fair
market price on the grant date, there is no compensation cost under the
intrinsic value method.
The Finance (No.2) Act, 2009 has abolished fringe benefit tax (FBT) and
introduced tax on the perquisite value in the hands of the employees
which is computed on the difference between the fair market value on
date of exercise and the exercise price with effect from April 1, 2009.
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 the 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 fundsà 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 separate funds. 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 employeeÃs 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.
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 Sangli Bank and Bank
of Madura) and ICICI Bank contributes an equal amount to the funds. The
funds are invested according to rules prescribed by the Government of
India.
Leave encashment
The Bank provides for leave encashment benefit, which is a defined
benefit scheme, based on actuarial valuation conducted by an
independent actuary.
10. Income taxes
Income tax expense is the aggregate amount of current tax and deferred
tax expense incurred by the Bank. 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 issued by the Institute of Chartered Accountants of
India, respectively. The levy of FBT is not applicable as the Finance
(No. 2) Act, 2009 has abolished the tax with effect from April 1, 2009.
Deferred tax adjustments comprise changes in the deferred tax assets or
liabilities during the year. Deferred tax assets and liabilities are
recognised on a prudent basis for the future tax consequences of timing
differences arising between the carrying values of assets and
liabilities and their respective tax basis, and carry forward 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 re-assessed at each reporting
date, based upon managementÃs 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 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 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.
Mar 31, 2009
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 to 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 on 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. Net loss arising on
account of the sell-down/securitisation and direct assignment of loan
assets 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 Held 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 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.
c) Available for Sale and Held for Trading securities are valued
periodically as per RBI guidelines. Any premium over the face value of
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- Matunty ("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 depreciation/appreciation is
aggregated for each category Net appreciation in each category, if any,
being unrealised, is ignored, while net depreciation 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, prescribed 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/period 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, including overdues arising from crystallised
derivative contracts, 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 prescribed 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 and general provision against
performing loans. The assessment of incremental specific provisions is
made after taking into consideration existing specific provision. The
specific provisions on retail loans held by the Bank are higher than
the minimum regulatory requirements.
b) Provision on assets restructured/rescheduled is made in accordance
with the applicable RBI guidelines on restructuring of advances by
Banks.
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.
c) 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.
d) 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.
e) 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 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 Bank accounts for any
loss arising from securitisation immediately at the time of sale and
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. In the case of loans sold to an
asset reconstruction company the gain, if any, is ignored.
5. Transactions involving foreign exchange
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 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 ("FEDAI") 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 FEDAI 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 premium 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 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 at 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.
Contingent liabilities on account of guarantees, endorsements and other
obligations denominated in foreign currencies are disclosed at the
closing exchange rates notified by FEDAI at the balance sheet date.
6. 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
offsetting 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. Pursuant to RBI guidelines, any receivables under derivative
contracts, which remain overdue for more than 90 days, are reversed
through profit and loss account.
7. 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 subscribe to 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 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. 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 Banks 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.
8. 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 the 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 employees 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.
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 Sangli Bank) and ICICI
Bank contributes an equal amount to the funds. The funds are invested
according to rules prescribed 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.
9. 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 year.
Deferred tax assets and liabilities are recognised on a prudent basis
for the future tax consequences of timing differences arising between
the carrying values of assets and liabilities and their respective tax
basis, and carry forward 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 re-assessed at each reporting
date, based upon managements judgement as to whether their realisation
is considered as reasonably certain.
10. 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.
11. 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 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 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.
12. 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 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 outstanding during the year, except where the results are
anti-dilutive.
13. 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.
14. 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.
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ICICI Bank Ltd. कंपनी का विवरण
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ICICI Bank Ltd. Financial Data
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