ICICI Bank Limited (IBN) 20-F2022 FY Annual report (foreign)

As filed with the Securities and Exchange Commission on July 29, 2022

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)

OR

For the fiscal year ended March 31, 2022.

OR

For the transition period from                                                    to                                                   .

OR

Date of event requiring this shell company report                                                  

Commission file number: 001-15002

ICICI BANK LIMITED

(Exact name of Registrant as specified in its charter)

India

(Jurisdiction of incorporation or organization)

ICICI Bank Towers
Bandra-Kurla Complex
Mumbai 400051, India

(Address of principal executive offices)

Name: Anindya Banerjee / Abhinek Bhargava

Telephone: +91 22 3366 7777

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

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

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

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

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

[None]

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

[None]

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

[None]

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

The number of outstanding Equity Shares of ICICI Bank Limited as of March 31, 2022 was 6,948,771,375.

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

Yes ☒       No ☐

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

Yes ☐       No ☒

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

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

Yes ☒       No ☐

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

Yes ☐       No ☐

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

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

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

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

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

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

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

☐ Item 17     ☒ Item 18

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

Yes ☐     No ☒

table of contents

Page

Cross Reference Sheet

Certain Definitions

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

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

References to “ICICI Bank” and “the Bank” are to ICICI Bank Limited on an unconsolidated basis. References to “ICICI” are to ICICI Limited and its consolidated subsidiaries and other consolidated entities under Indian GAAP prior to the amalgamation of ICICI Limited, ICICI Personal Financial Services Limited and ICICI Capital Services Limited with ICICI Bank Limited, which was effective March 30, 2002 under Indian GAAP. References to a particular “fiscal” year are to the year ended on March 31 of such a year. Unless otherwise indicated, all references to the “Board of Directors” and the “Board” are to the board of directors of ICICI Bank.

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

Pursuant to the issuance and listing of our securities in the United States under registration statements filed with the United States Securities and Exchange Commission, we file annual reports on Form 20-F which must include financial statements prepared under generally accepted accounting principles in the United States (U.S. GAAP), or financial statements prepared according to a comprehensive body of accounting principles with a reconciliation of net income and stockholders’ equity to U.S. GAAP. When we first listed our securities in the United States, Indian GAAP was not considered a comprehensive body of accounting principles under the United States securities laws and regulations. Accordingly, our annual reports on Form 20-F for fiscal years 2000 through 2005 included U.S. GAAP financial statements. However, pursuant to a significant expansion of Indian accounting standards, Indian GAAP constitutes a comprehensive body of accounting principles. Accordingly, we have included in this annual report, as in the annual reports for fiscal years 2020 through 2022, consolidated financial statements prepared according to Indian GAAP, with a reconciliation of net income and stockholders’ equity to U.S. GAAP and a description of significant differences between Indian GAAP and U.S. GAAP.

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

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

Forward-Looking Statements

We have included statements in this annual report which contain words or phrases such as “will”, “would”, “aim”, “aimed”, “will likely result”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, “anticipate”, “estimate”, “estimating”, “intend”, “plan”, “contemplate”, “seek to”, “seeking to”, “trying to”, “target”, “propose to”, “future”, “objective”, “goal”, “project”, “should”, “can”, “could”, “may”, “will pursue” and similar expressions or variations of such expressions that may constitute “forward-looking statements”. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to, impact of Covid-19 pandemic on the global and Indian economy, including the impact on the Bank’s results, the actual growth in demand for banking and other financial products and services in the countries in which we operate or where a material number of our customers reside; future levels of non-performing and restructured loans and any increased provisions and regulatory and legal changes relating to those loans; our exposure to securities of asset reconstruction companies; our ability to successfully implement our strategies, including our growth strategy, our strategic use of technology and the internet and our strategy for resolution of non-performing assets; the continued service of our senior management; the outcome of any legal, tax or regulatory proceedings in India and in other jurisdictions in which we are or become a party to; the outcome of any internal or independent enquiries or regulatory or governmental investigations; our rural expansion; our exploration of merger and acquisition opportunities; our ability to integrate recent or future mergers or acquisitions into our operations and manage the risks associated with such acquisitions to achieve our strategic and financial objectives; our ability to manage the increased complexity of the risks that we face following our international growth; our growth and expansion in domestic and overseas markets; our status as a systemically important bank in India; our ability to maintain enhanced capital and liquidity requirements; the adequacy of our allowance for credit and investment losses; our ability to market new products; investment income; cash flow projections; the impact of any changes in India’s credit rating; the impact of any new accounting standards or new accounting framework; our ability to implement our dividend payment practice; the impact of changes in banking and insurance regulations and other regulatory changes in India and other jurisdictions on us, including changes in regulatory intensity, supervision and interpretations; the state of the global financial system and systemic risks; the bond and loan market conditions and availability of liquidity amongst the investor community in these markets; the nature of credit spreads and interest spreads from time to time, including the possibility of increasing credit spreads or interest rates; our ability to roll over our short-term funding sources and our exposure to credit, market, liquidity and reputational risks. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date thereof.

In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this annual report include, but are not limited to, uncertainty on the trajectory of Covid-19 pandemic on the Bank’s results, including credit quality and provisions, the monetary and interest rate policies of India and the other markets in which we operate, general economic and political conditions in India, southeast Asia, and the other countries which have an impact on our business activities or investments, , political or financial instability in India or any other country caused by any factor including regional hostilities ,terrorist attacks or social unrest, man-made or natural disasters and catastrophes, climate change events, inflation, deflation, unanticipated turbulence in interest rates, changes or volatility in the value of the rupee, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in general, changes in domestic and foreign laws, regulations and taxes, changes in competition and the pricing environment in India and regional or general changes in asset valuations. For a further discussion of the factors that could cause actual results to differ, see the discussion under “Risk Factors” contained in this annual report.

Market Price Information

Equity Shares

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

At June 30, 2022, total 6,956,354,896 equity shares were outstanding. The prices for equity shares as quoted in the official list of each of the Indian stock exchanges are in Indian rupees.

At June 30, 2022, there were 2,031,334 holders of record of our equity shares, of which 2,521 had registered addresses in the United States and held an aggregate of 1,934,183 equity shares.

ADSs

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

At June 30, 2022, we had 580 million ADSs, equivalent to about 1,160 million equity shares, outstanding. At June 30, 2022, there were 126,178 record holders of our ADSs, out of which 85 have registered addresses in the United States.

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

Risk Factors

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

Summary

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

Risks Relating to India and Other Economic and Market Risks

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

Risks Relating to Our Business

Risks relating to technology

Risks relating to our insurance subsidiary and affiliate

Risks Relating to ADSs and Equity Shares

Risks Relating to India and Other Economic and Market Risks

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

We are heavily dependent upon the state of the Indian economy, and a slowdown in growth in the Indian economy could adversely affect our business, our borrowers, our counterparties and other constituents, especially if such a slowdown was to be prolonged. India’s gross domestic product grew by 3.7% in fiscal 2020. In fiscal 2021, India’s gross domestic product declined by 6.6% as the outbreak of the Covid-19 pandemic and consequent lockdowns and other containment measures negatively impacted economic activity during the year. In fiscal 2022, India’s gross domestic product grew by 8.7%.

The Covid-19 pandemic resulted in a nation-wide lockdown in India in April-May 2020, which substantially impacted economic activity. The easing of lockdown measures subsequently led to gradual improvement in economic activity and progress towards normalcy from the second half of fiscal 2021. The second wave of the Covid-19 pandemic in April-May 2021 and the third wave of Covid-19 pandemic in December 2021-January 2022 led to the re-imposition of localised/regional lockdown measures in various parts of the country.

Following the outbreak of the first wave of the Covid-19 pandemic, the Reserve Bank of India announced several measures during fiscal 2021, including a moratorium on loan repayments for certain borrowers and an asset classification standstill benefit for overdue accounts where a moratorium had been granted, restructuring of loans to small borrowers including individuals, small businesses and micro, small and medium enterprises, and funding under the Emergency Credit Line Guarantee Scheme for micro, small and medium enterprises and other stressed sectors. The impact of such measures on our borrowers, our business and the Indian credit market remains uncertain, and may lead to an increase in the level of our non-performing assets, and there could be an adverse impact on our business, our future financial performance, our stockholders’ equity and the prices of our equity shares and ADSs. While there has been a significant improvement in economic conditions during fiscal 2022, and significant progress in the vaccination programme in India, with 1.84 billion vaccine doses administered till March 31, 2022, including 23 million precaution doses, the emergence of another wave of the Covid-19 pandemic or its variant or any other economic challenges could require renewed or additional measures, impacting the pace of recovery of the Indian economy and consequently have an adverse affect on our results of operations and financial condition. See also “Risks Relating to Our Business—The future trajectory of the Covid-19 pandemic is uncertain and could adversely affect our business, the quality of our loan portfolio and our financial performance”.

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

Economic growth in India is also influenced by inflation, interest rates, external trade and capital flows. The level of inflation or depreciation of the Indian rupee may limit monetary easing or cause monetary tightening by the Reserve Bank of India. Any increase in inflation, due to increases in domestic food prices or global prices of commodities, including crude oil, the impact of currency depreciation on the prices of imported commodities and additional pass through of higher fuel prices to consumers, or otherwise, may result in a tightening of monetary policy. During the three months ended June 30, 2022, uncertainties in the global environment increased following geo-political tensions, uncertainties around global growth recovery, increase in commodity prices and an increase in inflation in developed and emerging economies. In India, the Reserve Bank of India increased the repo rate by 90 basis points in May-June 2022 in response to the rise in inflation. A return to high rates of inflation with a resulting rise in interest rates, and any corresponding tightening of monetary policy, may have an adverse effect on economic growth in India.

Adverse changes to global liquidity conditions, comparative interest rates and risk appetite could lead to significant capital outflows from India, which could adversely affect our business. For instance, the increased uncertainties and risk aversion caused by the Covid-19 pandemic led to significant outflows of net investments by foreign portfolio investors from Indian equity and debt markets in an aggregate amount of approximately US$ 14.7 billion during the three months ended March 31, 2020. There has been an outflow of net investments by foreign portfolio investors during the six months ended March 31, 2022 of US$ 19.0 billion, and further during the three months ended June 30, 2022 of approximately US$ 14.0 billion. A slowdown in global growth may impact India’s exports. While currently commodities have experienced a significant increase in prices, sharp and sustained price reductions of globally traded commodities such as metals and minerals in the event of a global slowdown may negatively impact our borrowers in these sectors. Global trade disputes and protectionist measures and counter-measures could impact trade and capital flows and negatively affect the Indian economy, which could adversely affect our business.

Adverse economic conditions in India due to the Covid-19 pandemic or otherwise and movements in global capital, commodity and other markets could result in reduction of demand for credit and other financial products and services, increased competition, and higher defaults among corporate, retail and rural borrowers, which could adversely impact our business, our financial performance, our stockholders’ equity, our ability to implement our strategy and the prices of our equity shares and ADSs.

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

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

Global economic changes, such as developments in the Eurozone, including the United Kingdom’s relationship with the European Union following the United Kingdom’s exit from the European Union (“Brexit”); concerns related to the impact of tightening monetary policy in the U.S.; the war between Russia and Ukraine and the sanctions imposed on the former; elevated inflation levels; supply and demand imbalances relating to the Covid-19 pandemic and the Russia-Ukraine conflict; high global energy prices; potential trade wars between large economies; and the economic consequences of the Covid-19 pandemic may lead to increased risk aversion and volatility in global capital markets and foreign exchange rate movements, which could impact global liquidity and adversely affect our business.

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

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

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

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

In June 2020, Moody’s had lowered the sovereign rating for India from Baa2 to Baa3, with a negative outlook due to the impact of the Covid-19 pandemic on the Government of India’s fiscal position and the stress in the financial sector. We are rated by Moody’s and Standard and Poor’s. In April 2020, following the onset of the Covid-19 pandemic, both rating agencies revised the outlook on our rating from stable to negative, while maintaining the rating on our senior unsecured foreign currency debt at BBB- by Standard and Poor’s and Baa3 by Moody’s. Further, in June 2020, Standard and Poor’s maintained the rating on our senior unsecured debt while downgrading certain other banks on the expectation that we would structurally improve our capital position over the next few months. In June 2021, Standard and Poor’s revised our outlook from negative to stable and reaffirmed our rating at BBB-, and in October 2021, Moody’s revised our outlook from negative to stable and reaffirmed our rating at Baa3. In June 2022, Moody’s revised our baseline credit assessment upwards from ba1 to baa3 citing improvements in asset quality, capital and profitability.

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

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

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

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

India is vulnerable to developments in the trade account. India imports a majority of its requirements of petroleum oil and petroleum products. The decline in the oil import bill in fiscal 2021 was largely due to a decline in global crude oil prices and weak demand conditions in the Indian economy caused by the Covid-19 pandemic. However, global crude oil prices have been rising since November 2020 and recently experienced a sharp increase following the hostilities between Russia and Ukraine. Elevated oil price levels or volatility in oil prices, as well as the impact of currency depreciation, which makes imports more expensive in local currency, and the pass-through of such increases to Indian consumers or an increase in subsidies (which would increase the fiscal deficit) could have a material adverse impact on the Indian economy and the Indian banking and financial system, including through a rise in inflation and market interest rates, higher trade and fiscal deficits and currency depreciation.

India’s trade relationships with other countries and its trade deficit, may adversely affect Indian economic conditions and the exchange rate for the rupee. The current account deficit as a proportion of India’s gross domestic product was 0.9% of India’s gross domestic product in fiscal 2020 and there was a surplus in the current account of 0.9% in fiscal 2021. In fiscal 2022, the current account deficit was 1.2% of India’s gross domestic product. If current account and trade deficits increase, or are no longer manageable because of factors impacting the trade deficit like a significant rise in global crude oil prices or otherwise, the Indian economy, and therefore our business, our financial performance and the prices of our equity shares and ADSs could be adversely affected. Any reduction of or increase in the volatility of capital flows may impact the Indian economy and financial markets and increase the complexity and uncertainty in monetary policy decisions in India, leading to volatility in inflation and interest rates in India, which could also adversely impact our business, our financial performance, our stockholders’ equity, and the prices of our equity shares and ADSs.

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

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

We continue to be categorized as a domestic systemically important bank in India by the Reserve Bank of India. We are not treated as a globally systemically important bank, either by the Financial Stability Board or the Reserve Bank of India. As a systemically important Indian bank, we are exposed to the risks of the Indian financial system which may be affected by the financial difficulties faced by certain Indian financial institutions because the commercial soundness of many financial institutions may be closely related as a result of credit, trading, clearing or other relationships. This risk, which is sometimes referred to as systemic risk, may adversely affect financial intermediaries, such as clearing agencies, banks, securities firms and exchanges with which we interact on a daily basis. Any such difficulties or instability of the Indian financial system in general could create an adverse market perception about Indian financial institutions and banks and adversely affect our business. For instance, in March 2020, the Reserve Bank of India imposed a moratorium restricting deposit withdrawals from a private sector bank, followed by implementation of a scheme of reconstruction involving change in management and equity capital infusion by several Indian banks, including us. The private sector bank also wrote down additional tier-1 bonds. The overall impact of such developments on credit markets is uncertain and there could be an adverse impact on the loan portfolios of banks, including us, if customers are no longer able to access financing or refinancing from these entities or replace such financing or refinancing from other sources, thereby impacting their ability to conduct operations or meet their financial obligations. Our transactions with these financial institutions expose us to credit risk in the event of default by the counterparty, which can be exacerbated during periods of market illiquidity. See also “—Risks Relating to Our Business—There is operational risk associated with the financial industry which, when realized, may have an adverse impact on our business”.

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

In addition to credit risks, we face additional risks as compared with banks in developed economies. We may face the risk of deposit runs notwithstanding the existence of a national deposit insurance scheme. For instance, in 2008, following the bankruptcy of Lehman Brothers and the disclosure of our exposure to Lehman Brothers and other U.S. and European financial institutions, negative rumors circulated about our financial position which resulted in concerns being expressed by depositors and higher than normal transaction levels on a few days. We controlled the situation in this instance, but any failure to control such situations in the future could result in high volumes of deposit withdrawals, which would adversely impact our liquidity position, disrupt our business and, in times of market stress, undermine our financial strength.

We pursue our banking, insurance and other activities in India in a developing economy with all of the risks that come with operating in a developing economy. Our activities in India are widespread and diverse and involve employees, contractors, counterparties and customers with widely varying levels of education, financial sophistication and wealth. Although we seek to implement policies and procedures to reduce and manage marketplace risks as well as risks within our own organization, some risks remain inherent in doing business in a large, developing country. We cannot eliminate these marketplace and operational risks, which may lead to or exacerbate legal, regulatory or judicial actions, negative publicity or other developments that could reduce our profitability. See also “—Risks that arise as a result of our presence in a highly regulated sector—The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal.”, “—Risks that arise as a result of our presence in a highly regulated sector—We are at increased risk for inquiries or investigations by regulatory and enforcement authorities, which may adversely affect our reputation, lead to increased regulatory scrutiny, cause us to incur additional costs or adversely affect our ability to conduct business” and “-Risks Relating to Our Business -Entry into new businesses or rapid growth in existing loan portfolios may expose us to increased risks that may adversely affect our business”.

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

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

The pace of economic liberalization could change, and specific laws and policies affecting banking and finance companies, foreign investment, currency exchange and other matters affecting investment in our securities could change as well. Decisions by the Government of India could impact our business and financial performance. For instance, the Indian government’s decision in fiscal 2017 to withdraw legal tender status of high denomination currency notes led to an increase in costs due to measures such as the reduction or waiver of transaction charges for ATM and card transactions for the specified period. The surge in low cost deposits resulted in a significant increase in liquidity in the banking system and a reduction in cost of funds. The Indian government announced the introduction of central bank digital currency by the Reserve Bank of India in the Union Budget for fiscal 2023, and the impact of the introduction of digital currency on the banking system, including us, is uncertain. Any such changes in regulations or significant change in India’s economic policies or any market volatility as a result of uncertainty surrounding India’s macroeconomic policies or the future elections of its government could adversely affect business and economic conditions in India generally and our business in particular and the prices of our equity shares and ADSs could be adversely affected.

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

India has experienced natural calamities such as earthquakes, floods and droughts in the past few years. The extent and severity of these natural disasters determine their impact on the Indian economy. In particular, climatic and weather conditions, such as the level and timing of monsoon rainfall, impact the agricultural sector, which constituted approximately 15% of India’s gross value added in fiscal 2022. Prolonged spells of below or above normal rainfall or other natural calamities, or global or regional climate change, could adversely affect the Indian economy and our business, especially our rural portfolio. Similarly, global or regional climate change in India and other countries where we operate could result in change in weather patterns and frequency of natural calamities like droughts, floods and cyclones, which could affect the economy of India, the countries where we operate and our operations in those countries.

Health epidemics could also disrupt our business, our borrowers, our counterparties and other constituents. The emergence of disease pandemics like Covid-19 since the first quarter of calendar year 2020, the more recent outbreak of monkeypox or other earlier outbreaks like the nipah virus in 2018 in certain regions of southeast Asia, including India, have caused, and could in the future cause, economic and financial disruptions. Such disruptions in India and other areas of the world in which we operate could lead to operational difficulties, including travel restrictions, that could impact our business and our ability to manage or conduct our business. The Covid-19 pandemic and any future outbreak of health epidemics may impact the quality of our portfolio and result in an increase in our non-performing loans, and restrict the level of business activity in affected areas, which may in turn adversely affect our business and the prices of our equity shares and ADSs. See also “—Risks Relating to Our Business—The future trajectory of the Covid-19 pandemic is uncertain and could adversely affect our business, the quality of our loan portfolio and our financial performance”.

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

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

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

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

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

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

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

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

New regulations and compliance and disclosure requirements relating to environment, social and governance matters, especially climate change, have been recommended or are under consideration by regulators in the jurisdictions where we have our operations. These may require us to review and make changes to the conduct of our business and incur additional costs. Failure to comply with these regulations may result in penalties or regulatory action against us.

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

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

Failure to comply with applicable regulations in various jurisdictions, including unauthorized actions by employees, representatives, agents and third parties, suspected or perceived failures and media reports, and ensuing inquiries or investigations or proceedings by regulatory and enforcement authorities, has resulted, and may result in the future, in regulatory actions, including financial penalties and restrictions on or suspension of the related business operations. Whenever we consider it appropriate and the regulatory guidelines so permit, we may seek to settle or compound regulatory inquiries or investigations or proceedings through consensual process with the concerned regulator, which may entail monetary payment by us or agreeing to non-monetary terms. The non-monetary terms may include suspension or cessation of business activities for a specified period; change in key management personnel or restrictions being placed on key management personnel; disgorgement; implementation of enhanced policies and procedures to prevent future violations; appointing or engaging an independent consultant to review internal policies, processes and procedures; providing enhanced training and education; and/or submitting to enhanced internal audit, concurrent audit or reporting requirements. For example, in December 2021, the Reserve Bank of India imposed a penalty of Rs. 3.0 million on the Bank for non-compliance with directions issued by it on charges levied for non-maintenance of minimum balance in savings accounts.

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

A failure to comply with the applicable regulations in various jurisdictions by our employees, representatives, agents and third-party service providers either in or outside the course of their services, or suspected or perceived failures by them, may result in further inquiries or investigations by regulatory and enforcement authorities and in additional regulatory or enforcement action against either us, or such employees, representatives, agents and third-party service providers. Such additional actions may further impact our reputation, result in adverse media reports, lead to increased or enhanced regulatory or supervisory concerns, cause us to incur additional costs, penalties, claims and expenses or impact adversely our ability to conduct business. See also “—Risks that arise as a result of our presence in a highly regulated sector—The board of directors of the Bank has, pursuant to an independent enquiry, taken action against the former Managing Director and CEO. In the event the Bank is found by any of the enquiries in the matter by government and regulatory agencies to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations or financial condition and reputation.”

We have also experienced international expansion into banking in multiple jurisdictions which exposes us to a variety of regulatory and business challenges and risks, including cross-cultural risk, and further increases the risk of inquiries or investigations by regulatory and enforcement authorities. Expansion into additional jurisdictions also increases the complexity of our risks in a number of areas including currency risks, interest rate risks, compliance risk, regulatory risk, reputational risk and operational risk. We, or our employees, may from time to time, and as is common in the financial services industry, be the subject of inquiries, examinations or investigations that could lead to proceedings against us or our employees.

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

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

Under the directed lending norms of the Reserve Bank of India, banks in India are required to lend 40.0% of their adjusted net bank credit to certain eligible sectors, categorized as priority sectors. Of this, banks have sub-targets for lending to key segments or sectors. A proportion of 9.0% of adjusted net bank credit is required to be lent to small and marginal farmers and 7.5% to micro-enterprises. The balance of the priority sector lending requirement can be met by lending to a range of sectors, including small businesses, medium-sized enterprises, renewable energy, social infrastructure and residential mortgages satisfying certain criteria. The Reserve Bank of India has directed banks to maintain direct lending to non-corporate farmers at the banking system’s average level for the last three years and has notified a target of 12.73% of adjusted net bank credit for this purpose for fiscal 2022. Loans to identified weaker sections of society must comprise 11.0% of adjusted net bank credit. Starting fiscal 2022, the targets for lending to small and marginal farmers and weaker sections has been increased in a phased manner by the Reserve Bank of India. The target for lending to small and marginal farmers will increase from 9.0% in fiscal 2022 to 9.5% in fiscal 2023 and to 10.0% in fiscal 2024. The target for lending to identified weaker sections of society has been increased from 11.0% in fiscal 2022 to 11.5% in fiscal 2023 and 12.0% in fiscal 2024. These requirements were assessed on a quarterly average basis till fiscal 2021 and failure to comply with these requirements would attract penalties. From fiscal 2022, the priority sector achievements are computed based on the weightage assigned to the incremental priority sector credit in the identified districts. The necessary adjustments for weightage of districts and calculation of achievement will be done by the Reserve Bank of India on the basis of data submitted by banks on a quarterly basis.

These requirements apply to ICICI Bank on a standalone basis. During fiscal 2022, the Bank met most of the targets, except the average lending to the agriculture sector, which was Rs. 1,226.5 billion constituting 17.8% of adjusted net bank credit against the requirement of 18.0% of adjusted net bank credit.

The Reserve Bank of India allows banks to sell and purchase priority sector lending certificates in the event of excess/shortfall in meeting priority sector targets, which may help in reducing the shortfall in priority sector lending. These instruments are issued by banks that have a surplus in priority sector lending or any of its individual sub-segments and are purchased by banks having a shortfall, through a trading portal, without the transfer of risks or loan assets. The cost of purchasing such certificates may increase substantially depending on the demand and supply scenario. Any shortfall after taking into account transactions in priority sector lending certificates may be required to be allocated to investments yielding sub-market returns. The Bank also purchases priority sector lending certificates to meet directed lending requirements, the cost of which may vary based on the demand for and supply of such certificates. Going forward, the phased increase in sub-segment targets and growth in our domestic loan portfolio could lead to a significant increase in our priority sector lending target amounts. In view of the continuing shortfall in agriculture lending sub-targets and weaker section loans, the Bank may have to significantly increase the purchase of priority sector lending certificates. Shortfalls in priority sector lending achievement, after taking into account the priority sector lending certificates purchased, may increase and may be required to be invested in instruments yielding sub-market returns.

Any shortfall in meeting the priority sector lending requirements may be required to be invested at any time, at the Reserve Bank of India’s request, in Government of India schemes that yield low returns, determined depending on the prevailing bank rate and on the level of shortfall, thereby impacting our profitability. At March 31, 2022, our total investments in such schemes on account of past shortfalls in achieving the required level of priority sector lending were Rs. 264.2 billion. Our investments in Government of India schemes are expected to increase in view of the continuing shortfall in agriculture lending sub-targets. These investments count towards overall priority sector target achievement. Investments at March 31 of the preceding year are included in the adjusted net bank credit which forms the base for computation of the priority sector and sub-segment lending requirements.

The Reserve Bank of India has from time to time issued guidelines on priority sector lending requirements that restrict the ability of banks to meet the directed lending obligations through lending to specialized financial intermediaries, specify criteria to be fulfilled for investments by banks in securitized assets and outright purchases of loans and assignments to be eligible for classification as priority sector lending and regulate the interest rates charged to ultimate borrowers by the originating entities in such transactions. Any revision to the definition or classification of segments eligible for priority sector lending could also impact our ability to meet priority sector lending requirements. See also “Supervision and Regulation—Regulations Relating to Advancing Loans—Directed Lending”.

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

We have participated in the financial inclusion mission of the Government of India, which involves opening a bank account for every household along with credit and insurance facilities. The expansion into these markets involves significant investments and recurring costs. The profitability of these operations depends on our ability to generate business volumes in these centers and from these customers, and the level of non-performing loans in the portfolio of loans to such customers.

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

Banks in India are subject to the Basel III capital adequacy framework as stipulated by the Reserve Bank of India. The Basel III guidelines, among other things, require a minimum common equity Tier 1 risk-based capital ratio of 5.5% and a minimum Tier 1 risk-based capital ratio of 7.0%, a minimum total risk-based capital ratio of 9.0%, and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets above the minimum requirements to avoid restrictions on capital distributions and discretionary bonus payments. The Bank is also required to maintain a capital surcharge of 0.20% on account of being designated a domestic systemically important bank.

The guidelines also establish eligibility criteria for capital instruments in each tier of regulatory capital, require adjustments to and deductions from regulatory capital, and provide for limited recognition of minority interests in the regulatory capital of a consolidated banking group. The Basel III guidelines were to be fully implemented by year-end fiscal 2019. However, the Reserve Bank of India deferred the implementation of the last tranche of 0.625% of capital conservation buffer from March 31, 2019 to March 31, 2020. The full implementation was further deferred to October 1, 2021 due to the Covid-19 pandemic. Accordingly, the last tranche of 0.625% of the capital conservation buffer became applicable from October 1, 2021. Applying the Basel III guidelines, our capital ratios on a consolidated basis at March 31, 2022 were: common equity Tier 1 risk-based capital ratio of 17.3%; Tier 1 risk-based capital ratio of 18.0%; and total risk-based capital ratio of 18.9%.

The Reserve Bank of India has released guidelines on implementation of counter cyclical capital buffers, which propose higher capital requirements for banks, ranging from 0% to 2.5% of risk-weighted assets, during periods of high economic growth. This capital requirement would be determined based on certain triggers such as deviation of long-term average credit-to-GDP ratio and other indicators. While these guidelines are already effective, the Reserve Bank of India has stated that current economic conditions do not warrant activation of the counter cyclical capital buffer. The Reserve Bank of India has also issued a leverage ratio framework which is measured as the ratio of a bank’s Tier 1 capital and total exposure. Since October 1, 2019, the Reserve Bank of India has required maintenance of a minimum leverage ratio of 4.0% for domestic systemically important banks, including us, and 3.5% for other banks. In April 2018, the Reserve Bank of India advised banks to create an Investment Fluctuation Reserve from fiscal 2019 with the aim of building adequate reserves to protect against sudden increase in Government of India bond yields. A minimum amount equal to either the net profit on sale of investments during the year or net profit for the year excluding mandatory appropriations, whichever is lower, would have to be transferred to the Investment Fluctuation Reserve and would cover at least 2.0% of the held-for-trading and available-for-sale portfolio of the bank, on a continuing basis. This reserve is eligible for inclusion in tier 2 capital. Regulatory changes may impact the amount of capital that we are required to hold. Our ability to grow our business and execute our strategy is dependent on our level of capitalization and we may be required to raise resources from the capital markets or to divest stake in one or more of our subsidiaries to meet our capital requirements.

Any reduction in our regulatory capital ratios, changes to the capital requirements applicable to us on account of regulatory changes or otherwise, our inability to access capital markets or otherwise increase our capital base and our inability to meet stakeholder expectations of the appropriate level of capital for us, while also meeting expectations of return on capital may limit our ability to maintain our market standing and grow our business, and adversely impact our future performance and strategy. Debt and equity investors, rating agencies, equity and fixed income analysts, regulators and others would likely expect us to maintain capital adequacy ratios well above the regulatory stipulations, reflecting our position as a large private sector bank. Following the outbreak of the Covid-19 pandemic, a number of banks and other financial companies globally and in India raised capital. In August 2020, we raised Rs. 150.0 billion of equity capital through a Qualified Institutions Placement. We may seek to access the equity capital markets in the future, or make additional divestments of our investments in our subsidiaries and affiliates. Increases in our equity shares would dilute the shareholding of existing shareholders. There can be no assurance that we will be successful in raising the capital when required or that the timing for accessing the market or the terms of the capital raised would be attractive, and these may be subject to various uncertainties including liquidity conditions, market stability, or political or economic conditions. If we are unable to raise enough capital to satisfy our regulatory capital requirements, we will be subject to restrictions on capital distributions and discretionary bonus payments, as well as other potential regulatory actions.

In fiscal 2021, the Reserve Bank of India prohibited banks from making any dividend payouts from the profit pertaining to fiscal 2020 in order to conserve capital and to maintain their capacity to support the economy and absorb losses in an environment of heightened uncertainty caused by the Covid-19 pandemic. Accordingly, we have not declared any dividend for fiscal 2020. We cannot guarantee that we will not be subject to similar restrictions in the future. The Reserve Bank of India’s Prompt Corrective Action framework for banks defines risk thresholds for indicators like capital adequacy, asset quality and leverage, and stipulates actions like restriction on dividend distribution/remittance of profits, restriction on branch expansion, domestic and/or overseas expansion, and restrictions on capital expenditure other than for technological upgradation. At year-end fiscal 2022, the Bank’s financial indicators did not breach the risk thresholds prescribed by the Reserve Bank of India. There can be no assurance that we will always remain within the thresholds prescribed by the Reserve Bank of India in the future.

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

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

The Reserve Bank of India has released guidelines on liquidity coverage ratio requirements under the Basel III liquidity framework that require banks to maintain and report the Basel III liquidity coverage ratio, which is a ratio of the stock of high quality liquid assets and total net cash outflows over the next 30 calendar days. The Reserve Bank of India has also defined categories of assets qualifying as high quality liquid assets and mandated a minimum liquidity coverage ratio, which has been 100.0% since January 1, 2019. Further, the Reserve Bank of India has issued final guidelines on the net stable funding ratio for banks and would require banks to maintain sufficient funds that are considered as reliable to cover the liquidity requirements and asset maturities coming up over the next one year on an ongoing basis. The guidelines on net stable funding ratio are applicable from October 1, 2021. These liquidity requirements together with the existing liquidity and cash reserve requirements may result in Indian banks, including us, holding higher amounts of liquidity, thereby impacting profitability. Any sudden increase in the demand for liquidity by banks to meet these regulatory liquidity requirements could have an adverse impact on the financial markets, and result in a sharp increase in short-term borrowing costs and a sudden increase in the cost of funding for banks, including us.

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

In addition, as we and other banks manage these various liquidity requirements, there could be a sudden increase in demand for liquidity in the banking system, which could have an adverse impact in the financial markets, and result in an increase in our short term borrowing costs and a sudden increase in the bank’s cost of funds. Further, any tightening of liquidity and volatility in international markets may limit our access to international bond markets and result in an increase in our cost of funding for our international business. Continued volatility in international markets could constrain and increase the cost of our international market borrowings and our ability to replace maturing borrowings and fund new assets. Our overseas banking subsidiaries are also exposed to similar risks.

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

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

Our subsidiaries and affiliates are also subject to similar risks. For instance, the Indian government has permitted a dual tax regime for personal income tax, with the option for individuals to have a lower tax rate if no additional tax exemptions are taken. This could impact insurance companies, including our insurance subsidiary and affiliate, where a part of their retail premium is driven by tax exemptions for individuals. See also “—Risks relating to our insurance subsidiary and affiliate—While our insurance businesses are an important part of our business, there can be no assurance of their future rates of growth or levels of profitability”.

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

The Reserve Bank of India has announced a review of the guidelines pertaining to ownership, governance and corporate structure of private sector banks in India and set up an internal working group to consider, among other things, holding of financial subsidiaries through a non-operative financial holding company. The Reserve Bank of India released the report of the internal working group in November 2020, and sought feedback on the recommendations by January 15, 2021. In November 2021, the Reserve Bank of India accepted few recommendations made by the internal working group including a non-operative financial holding company structure for all new licenses issued for universal banks. The outcome of this report may result in changes to our group structure, the nature and impact of which cannot be predicted currently.

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

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

Our banking subsidiaries in the United Kingdom and Canada have in the past focused primarily on leveraging their deposit franchises in these markets to extend financing to Indian companies for their operations in India and globally, including the financing of overseas acquisitions by Indian companies through structured transactions. In view of regulatory limitations on cross-border financing of this nature, these subsidiaries have experienced a reduction in their business, impacting their profitability and resulting in a sharp reduction in the return on the capital invested in these businesses. While both these subsidiaries are focused on growing their business within the current regulatory framework, the opportunities to do so may be limited. Further, while both these subsidiaries are focused on optimizing their capital base and have repatriated capital and made dividend payments to ICICI Bank in the past, such actions are subject to regulatory approvals. There can be no assurance regarding the timing or grant of such approvals in the future. We are repositioning our international business strategy to sharpen our focus on the non-resident Indian community and on India-linked trade. There can be no assurance of the successful execution of this strategy and the future growth and profitability of our international operations. Our international branches are also subject to respective local regulatory requirements, including any requirements related to liquidity, capital and asset classification and provisioning.

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

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

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

Enquiries by government authorities and regulatory agencies in the matter are continuing and the Bank has a cooperative posture for such enquiries and requests emanating from such authorities and agencies. The Securities and Exchange Board of India issued a show-cause notice to Ms. Kochhar and to the Bank in May 2018 in relation to the allegations. In November 2020, Securities and Exchange Board of India, issued a modified show cause notice to the Bank and responses were submitted by the Bank to both the show cause notices. The Central Bureau of Investigation had also initiated a preliminary enquiry and in January 2019, the Central Bureau of Investigation filed a first information report against Ms. Kochhar, her spouse and certain borrowers of the Bank and their promoters, accusing them of cheating the Bank. The first information report states that certain individuals, who were on the board of directors of the Bank and were part of committees (that sanctioned credit facilities to the concerned borrower group when the alleged transactions occurred), may also be investigated. These include the present Managing Director and Chief Executive Officer of the Bank and the present Managing Director of the Bank’s life insurance subsidiary. Authorities such as the Enforcement Directorate and Income-tax authorities are also probing the matter.

In the event that the Bank is found by Securities and Exchange Board of India or the Central Bureau of Investigation or by any other authority or agency to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our reputation and may impact results of operations or financial condition.

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

Our asset management subsidiary, ICICI Prudential Asset Management Company Limited, is subject to supervision and regulation by the Securities and Exchange Board of India. For instance, in fiscal 2019, our asset management subsidiary, based on communication from the regulator, paid compensation with interest to certain schemes of ICICI Prudential Mutual Fund in connection with shares allotted to these schemes in the initial public offering of ICICI Securities Limited in March 2018, and also compensated the investors in these schemes who had redeemed their units since the March 2018 allotment. In the same matter, an adjudication proceeding was initiated by the Securities and Exchange Board of India, which was disposed of pursuant to an application for settlement of proceedings and payment of settlement charges by our asset management subsidiary. Further, certain investors of a real estate investment fund, registered in Mauritius, which is an investor in a real estate fund in India managed by ICICI Venture Funds Management Company Limited, our private equity subsidiary, had initiated legal proceedings in Mauritius alleging, among others, mis-selling and mismanagement. ICICI Bank and ICICI Venture as respondents had denied the allegations and raised objections on jurisdictional maintainability. The court has stayed the proceedings against ICICI Bank and ICICI Venture. The plaintiffs appraised the court of their intention to not pursue vacation of the stay. In view of the stay, application for removal of averments/prayers against ICICI Bank and ICICI Venture was made, which was allowed by the court. However, subsequently the plaintiffs have now filed an appeal against the order permitting removal of averments/prayers against ICICI Bank and ICICI Venture. 

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

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

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

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

The Chief Executive of the United Kingdom Financial Conduct Authority, which regulates the London Interbank Offered Rate or LIBOR, has stopped persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR tenors, except for certain tenors of USD LIBOR, which will cease from June 30, 2023. While alternate reference rates for the different currencies have been identified and are in force, there is still lack of clarity about the use of these rates for all types of transactions that have referenced LIBOR. The impact of the transition to alternative reference rates in USD therefore has some uncertainty and could adversely affect loans, securities and other instruments that reference, or are indirectly affected by LIBOR. Currently, the manner and impact of the pending transition and related developments, as well as the effect of these developments on our funding costs, investment and trading securities portfolios and business, is unclear.

In India, the Mumbai Inter-bank Forward Outright Rate (MIFOR) is calculated using rolling forward premia in percentage terms along with the USD LIBOR for the respective tenors up to 12 months. The Financial Benchmark India Private Limited has commenced publishing an Adjusted MIFOR from June 15, 2021, which will be used for legacy contracts and has also started publishing Modified MIFOR from June 30, 2021, which is being used for new contracts.

On July 8, 2021, the Reserve Bank of India issued a roadmap for LIBOR transition advising banks to use alternate benchmarks instead of LIBOR/MIFOR benchmarks from December 31, 2021 except for managing risks pertaining to pre-existing exposures.

The Bank has number of contracts referencing LIBOR/MIFOR including derivative and loans. While alternate reference rates for LIBOR in different currencies have been identified and are in force, there is still lack of clarity about the use of these rates for all types of transactions that have referenced LIBOR. The impact of the transition to alternative reference rates in USD therefore has some uncertainty and could adversely affect loans, securities and other instruments that reference, or are indirectly affected by USD LIBOR. The potential for reduced liquidity of these different LIBOR/ MIFOR contracts could adversely impact the Bank’s business and future financial performance. Currently, the manner and impact of the pending transition and related developments, as well as the effect of these developments on our funding costs, investment and trading securities portfolios and business, is unclear.

We have identified our LIBOR transition exposures, including existing financial agreements that do not contain fallback provisions that adequately contemplate cessation of benchmark reference rates and that would require additional negotiation with the counterparties. The Bank has a program for its LIBOR transition, which includes governance framework, exposure assessment, tracking of fallback provisions and contract remediation programs and tracking of global developments. In addition, the Bank has been using alternate reference rates in new contracts after December 31, 2021 and had incorporated suitable benchmark replacement provisions in contracts linked to LIBOR originated prior to December 31, 2021. For further details, see “Business—Risk Management—Market Risk—Interest Rate Risk”. The Bank has implemented and continues to implement changes to the technology systems and infrastructure as part of the transition to the new benchmark regime. The Bank has conducted and continues to conduct information sharing sessions with clients on the LIBOR transition. However, the transition to alternative reference rates is complex, could bring about unanticipated challenges and vagaries, and could adversely impact our business, our future financial performance and the prices of our equity shares and ADSs. There can be no guarantee that any efforts by the Bank will successfully mitigate the operational risks associated with the transition away from LIBOR to alternative reference rates.

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

The financial statements and other financial information included or incorporated by reference in this annual report are based on our unconsolidated and consolidated financial statements under Indian GAAP. Indian corporations have transitioned to Ind AS, a revised set of accounting standards, which largely converges the Indian accounting standards with International Financial Reporting Standards, as per the roadmap provided to the Ministry of Corporate Affairs, which is the law making authority for adoption of accounting standards in India. Some of our group non-banking finance companies have transitioned to Ind AS. For banking and insurance companies, the implementation of Ind AS has been deferred until further notice.

Ind AS 109 - Financial Instruments (Standard equivalent to International Financial Reporting Standard 9) would have a significant impact on the way financial assets and liabilities are classified and measured, resulting in volatility in profit or loss and equity. See also “Operating and Financial Review and Prospects—Convergence of Indian accounting standards with International Financial Reporting Standards”.

Risks Relating to Our Business

The future trajectory of the Covid-19 pandemic is uncertain and could adversely affect our business, the quality of our portfolio and our financial performance.

The Covid-19 pandemic has impacted, and is likely to continue to impact most countries, including India, and has resulted in substantial volatility in global financial markets, increased unemployment and operational challenges, such as the temporary closures of businesses, sheltering-in-place directives and increased remote work protocols, which have significantly slowed down economic activity. The Government of India initiated a nation-wide lockdown from March 25, 2020 until May 31, 2020, which substantially impacted economic activities. The easing of lockdown measures subsequently led to gradual improvement in economic activity and progress towards normalcy. For the banking sector, these developments resulted in lower demand for loans and fee-based services and regulatory measures like moratorium on payment of dues and standstill in asset classification to mitigate the economic consequences on borrowers. The second wave of the Covid-19 pandemic in April-May 2021 and the third wave of Covid-19 pandemic in December 2021-January 2022 led to the re-imposition of localized/regional lockdown measures in various parts of the country. During fiscal 2022, there was significant progress in the vaccination programme in India, and significant improvement in economic conditions. However, the emergence of new waves of the Covid-19 pandemic or its variants may require renewed or additional mitigation measures and impact the pace of recovery of the Indian economy. Operationally, although we have established a work-from-home protocol and restricted business travel of our workforce, if significant portions of our workforce, including key personnel, are unable to work effectively because of illness, government actions, or other restrictions in connection with the pandemic, the impact of the pandemic on our businesses could be adverse.

The economic disruption caused by the pandemic, and related lockdowns could impact our business in a number of ways, including by increasing our number of non-performing loans due to the reduction in cash flows of businesses, income levels and the value of savings of households, as well as increased levels of unemployment.

In response to the Covid-19 pandemic, the Reserve Bank of India has permitted lenders to implement a resolution plan, along with asset classification benefits, for eligible corporate and individual borrower segments. Restructuring of loans was also allowed for micro, small and medium enterprises subject to specific requirements. The impact of these measures on borrowers, our business and the Indian credit market is uncertain. The Bank had made Covid-19 related provisions of Rs. 27.3 billion during the three months ended March 31, 2020 and a further net provision of Rs. 47.5 billion during fiscal 2021, towards standard assets, which was higher than the requirement stipulated by the Reserve Bank of India. The Bank held a total contingency provision of Rs. 74.5 billion, including the Covid-19 related contingency provision of Rs. 64.3 billion, at March 31, 2022. Our subsidiaries in the United Kingdom and Canada have also made Covid-19 related provisions. There can be no assurance of the adequacy of these provisions, or the level of additional provisions that will be required.

The framework for resolution of stressed assets is still evolving which may create challenges for banks in suitably invoking a resolution plan. Additional provisions are required in the absence of a resolution plan or initiation of insolvency proceedings. Further, the Reserve Bank of India guidelines require banks to identify borrowers in financial difficulty, indications of which may include defaults, and projections of cash-flows, among other things. Further, as a result of the Covid-19 pandemic, the Reserve Bank of India has allowed restructuring for specific borrower segments and invoking a resolution plan within specified timelines in order to provide temporary relief to eligible borrowers impacted by the pandemic. Considering the uncertainties with regard to economic growth and the trajectory of the Covid-19 pandemic, there is no assurance that such resolution plans will be successful.

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

In recent years, banks, including us, have focused on growing their retail and small business lending portfolios. While we expect the retail and small business segment to remain a key driver of growth, a slowdown in economic growth, investment, consumption or employment or any increase in unemployment, due to a pandemic or otherwise, could have an adverse impact on the quality of our retail loan portfolio. Our portfolio includes lending under a special guarantee scheme introduced by the government to mitigate the adverse impact of Covid-19 pandemic for identified stressed sectors or borrowers that may carry higher risks compared to our portfolio. Our portfolio also includes purchases of retail asset pools of home finance companies and non-banking finance companies, that may expose us to additional risks, including the failure of the underlying borrowers to perform as anticipated, risks arising out of weakness in the financial position or operations of the originators, who are generally responsible for collections and servicing, and additional mark-to-market provisions where the purchases are structured as securitized instruments classified as investments. In addition, challenges in certain sectors like real estate, and the inability of real estate developers to complete and deliver residential properties for which we have provided loans to customers, may impact the repayment behavior of the customers and result in higher delinquencies and non-performing loans. See also “—Risks Relating to India and Other Economic and Market Risks—A prolonged slowdown in economic growth in India could cause our business to suffer” and “—Risks Relating to India and Other Economic and Market Risks—A significant change in the Indian government’s policies, including economic policies, fiscal policies and structural reforms, could adversely affect our business and the prices of our equity shares and ADSs”.

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

If the level of our non-performing assets increases and the overall quality of our loan portfolio deteriorates, our provisioning costs could increase, our net interest income and net interest margin could be negatively impacted due to non-accrual of income on non-performing loans, our credit ratings and liquidity may be adversely impacted, we may become subject to enhanced regulatory oversight and scrutiny, and our reputation, our business, our future financial performance and the prices of our equity shares and ADSs could be adversely impacted. The Covid-19 pandemic and any adverse economic, regulatory and legal developments could cause further increases in the level of our non-performing assets and have a material adverse impact on the quality of our loan portfolio and business.

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

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

Our loans and advances to the retail finance segment constituted 53.2% of our gross advances (gross loans) at March 31, 2022. Our loans and advances to the rural finance segment were 8.4%, services-finance sector were 7.6%, the infrastructure sector (excluding power) were 3.3%, the wholesale/retail trade segment were 3.1%, and the power sector were 2.1% of our gross loans and advances at March 31, 2022.

Since April 1, 2019, banks have been subject to the Reserve Bank of India’s framework for large exposures with limits on exposure of banks to single counterparty and a group of connected counterparties. As per this framework, the sum of all the exposure values of a bank to a single counterparty must not be higher than 20% of the bank’s available eligible capital base at all times and the sum of all the exposure values of a bank to a group of connected counterparties must not be higher than 25% of the bank’s available eligible capital base at all times.

Since April 1, 2019, banks have also been subject to the Reserve Bank of India’s guidelines proposing that large borrowers should reduce reliance on banks for their additional funding and access market borrowings and other funding sources. Borrowers to be considered for this purpose would be those having an aggregate fund-based credit limit of Rs. 250.0 billion at any time during fiscal 2018 and gradually reduced to Rs. 150.0 billion in fiscal 2019 and to Rs. 100.0 billion from fiscal 2020 onwards. Loans from banks in excess of 50.0% of the incremental funds raised by these borrowers attracts higher risk weights and provisioning since April 1, 2018.

Eligible capital base represents the Bank’s Tier I capital as per the last audited balance sheet. Banks may, in exceptional circumstances, with the approval of their boards, consider enhancement of the exposure to a single counterparty further by 5.0% (i.e., 25.0% of the Tier I capital fund). The limit is applicable to total exposure, including off-balance sheet exposures. Off-balance sheet items are required to be converted into credit exposure equivalents through the use of credit conversion factors as per the standardized approach for credit risk for risk based capital requirements, with a floor of 10%. At year-end fiscal 2022, we were in compliance with these guidelines. At year-end fiscal 2022, our largest single counterparty accounted for 16.3% of our Tier I capital fund. The largest group of connected counterparties accounted for 26.5% of our Tier I capital fund.

These guidelines, and our focus on controlling and reducing concentration risk, may restrict our ability to grow our business with some customers, thereby impacting our earnings. Although the Bank has significantly strengthened its enterprise risk management and risk appetite framework since fiscal 2016 for managing concentration risk, including limits/thresholds with respect to single borrower and group exposure, there can be no assurance that our strategy of reducing concentration risk will be successful and that we will be able to successfully grow our operating profits while controlling non-performing loans and provisions through this approach.

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

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

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

The Insolvency and Bankruptcy Code enacted in 2016 provides for a time-bound mechanism to resolve stressed assets. Further, the new prudential framework for resolution of stressed assets, initially introduced in February 2018 and subsequently amended in June 2019 by the Reserve Bank of India, requires banks to implement a plan to resolve any overdue account within timelines as approved by the board and may include legal proceedings for insolvency or recovery. The process of resolution of accounts referred under the Insolvency and Bankruptcy Code is still evolving, with periodic amendments being incorporated in the framework through both legislation and judicial decisions. A few large accounts were resolved under the Code since fiscal 2019. However, uncertainties continue and there are delays in the resolution of accounts referred under the Code. Should the resolution of accounts not be achieved and the borrowers go into liquidation, the market value of the collateral may come down thus impacting the recovery of dues by lenders. There can be no assurance of the level of recovery even in cases where a resolution is achieved. The Government of India has empowered the Committee of Creditors, which comprises of all financial creditors, to decide on the manner of distribution of resolution proceeds and provided an order of priority for the distribution of assets in case of a liquidation, giving priority to financial creditors ahead of operational creditors.

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

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

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

As a result of certain reserve requirements of the Reserve Bank of India, we are more structurally exposed to interest rate risk than banks in many other countries. See also “Supervision and Regulation—Legal Reserve Requirements”. These requirements result in our maintaining a large portfolio of fixed income Government of India securities, and we could be materially adversely impacted by a rise in interest rates, especially if the rise were sudden or sharp. Realized and marked-to-market gains or losses on investments in fixed income securities, including Government of India securities, are an important element of our profitability and are impacted by movements in market yields. A rise in yields on government securities reduces our profits from this activity and the value of our fixed income portfolio. For instance, in fiscal 2019, yields on government securities increased sharply due to tight liquidity conditions between September and December 2018 which resulted in significant losses in the treasury book for most Indian banks, including for us, during the quarter ended December 31, 2018. In April 2018, the Reserve Bank of India advised banks to create an Investment Fluctuation Reserve, equivalent to at least 2.0% of the held-for-trading and available-for-sale portfolio, on a continuing basis, from fiscal 2019 and draw down any balance available in excess of 2.0% of the portfolio. The requirement to maintain a large portfolio of government securities also has a negative impact on our net interest income and net interest margin because we earn interest on a portion of our assets at rates that are generally less favorable than those typically received on our other interest-earning assets.

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

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

The Reserve Bank of India has been releasing guidelines on computation of lending rates by banks. Since April 1, 2016, the marginal cost of funds based methodology was applicable on incremental lending, which led to lower lending rates, and led to more frequent revisions in lending rates due to the prescribed monthly review of cost of funds. In February 2018, the Reserve Bank of India proposed to harmonize the methodology of determining benchmark rates by linking the earlier base rate to the marginal cost based lending rate. Further, in December 2018, the Reserve Bank of India announced the linking of new floating rate retail loans and floating rate loans to micro and small enterprises to an external benchmark. This has been applicable since October 1, 2019. From April 1, 2020, floating rate loans to medium enterprises were also linked to an external benchmark. Since our funding is primarily fixed rate, volatility in external benchmarks underlying loan pricing may cause volatility in or compress our net interest margin. If there are increases in our cost of funds and if we are unable to pass on the increases fully into our lending rates, our net interest margins and profitability would be adversely impacted. Such revisions in external benchmark lending rates may impact the yield on our interest-earning assets, our net interest income and net interest margin. At year-end fiscal 2022, approximately 47.7% of the Bank’s domestic loan portfolio was linked to external benchmarks.

The recent economic challenge of rising inflation during the three months ended June 30, 2022 led the Reserve Bank of India to increase the repo rate by 90 basis points and tighten systemic liquidity conditions by increasing the cash reserve ratio requirement of banks from 4.0% to 4.5% of net demand and time liabilities. The Reserve Bank of India also introduced a standing deposit facility rate as the floor of the liquidity adjustment facility compared to the earlier reverse repo rate. Any sudden withdrawal of or volatility in systemic liquidity or increase in interest rates may impact our liquidity and profitability.

High and increasing interest rates or greater interest rate volatility would adversely affect our ability to grow, our net interest margins, our net interest income, our income from treasury operations and the value of our fixed income securities portfolio as well as the operations of certain of our subsidiaries.

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

Our risk management strategies may not be effective because in a difficult or less liquid market environment other market participants may be attempting to use the same or similar strategies to deal with difficult market conditions. In such circumstances, it may be difficult for us to reduce our risk positions due to the activity of such other market participants. Our derivatives businesses may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses or enhanced regulatory scrutiny. Severe declines in asset values, unanticipated credit events, or unforeseen circumstances that may cause previously uncorrelated factors to become correlated may create losses resulting from risks not appropriately taken into account in the development, structuring or pricing of a derivative instrument. In addition, some derivative transactions are not cleared and settled through a central clearing house or exchange, and they may not always be confirmed or settled by counterparties on a timely basis. In these situations, we are subject to heightened credit and operational risk, and in the event of a default, we may find the contract more difficult to enforce. Further, as new and more complex derivative products are created, disputes regarding the terms or the settlement procedures of the contracts could arise, which could force us to incur unexpected costs, including transaction and legal costs, and impair our ability to manage effectively our risk exposure to these products. Many of our hedging strategies and other risk management techniques have a basis in historic market behavior, and all such strategies and techniques are based to some degree on management’s subjective judgment. To the extent any of the instruments and strategies we use to hedge or otherwise manage our exposure to market or credit risk are not effective, we may not be able to mitigate effectively our risk exposures in particular market environments or against particular types of risk. Our balance sheet growth is dependent upon economic conditions, as well as upon our ability to securitize, sell, purchase or syndicate particular loans or loan portfolios. Our trading revenues and interest rate risk are dependent upon our ability to properly identify, and mark-to-market, changes in the value of financial instruments caused by changes in market prices or rates. Our earnings are dependent upon the effectiveness of our management of migrations in credit quality and risk concentrations, the accuracy of our valuation models and our critical accounting estimates and the adequacy of our allowances for loan losses. The Covid-19 pandemic, climate change and related economic disruption have significantly complicated risk management for banks, including us, and we may not be able to effectively mitigate the changes in our risk exposures.

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

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

Most of our incremental funding requirements are met through short-term funding sources, primarily in the form of deposits including deposits from corporate customers and inter-bank deposits. Our customer deposits generally have a maturity of less than one year. However, a large portion of our assets have medium- or long-term maturities, creating the potential for funding mismatches. For instance, our project finance and mortgage loans typically have longer-term maturities compared to our funding profile.

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

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

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

We have experienced negative publicity with respect to the allegations levelled against Ms. Kochhar and her spouse and the whistleblower complaints regarding alleged incorrect asset classification and other allegations. See also “—Risks that arise as a result of our presence in a highly regulated sector—The board of directors of the Bank has, pursuant to an independent enquiry, taken action against the former Managing Director and CEO. In the event the Bank is found by any of the enquiries in the matter by government and regulatory agencies to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations, financial condition and reputation.” We cannot be certain how the investigations by the government and regulatory and other agencies will conclude with regard to the issue of the former CEO and it is possible that the conclusions of these investigations could lead to more negative publicity.

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

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

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

Global developments including geopolitical tensions could impact economic growth in Canada and the United Kingdom, which in turn could impact the business of our banking subsidiaries in these countries. Our international branches and banking subsidiaries undertake select local banking businesses, including lending to multinational and local corporations, small businesses, property backed lending and insured and other mortgages, and in the event of these corporations being impacted by global and local economic conditions it could have an adverse impact on our business. For instance, during the three months ended March 31, 2020, two non-India linked loan accounts at our international branches had to be classified as non-performing as the borrowers misrepresented their financial position to lenders. Our international branches and banking subsidiaries have also made investments in bonds, certificates of deposit, mortgage backed securities, treasury bills and asset-backed commercial paper.

We are repositioning our international business strategy to sharpen our focus on the non-resident Indian community and on India-linked trade. We aim to progressively exit exposures that are not linked to India in a planned manner at our international branches. Our overseas banking subsidiaries will continue to serve local markets selectively with a focus on risk mitigation and granularity of business. There can be no assurance of our successful execution of this strategy. The global financial and economic crisis resulted in mark-to-market and realized losses on our overseas and other subsidiaries’ investment and derivative portfolios, increased the regulatory scrutiny of our international operations, constrained our international debt capital market borrowings and increased our cost of funding. The Covid-19 pandemic also increased challenges for our international branches and banking subsidiaries. If we are unable to manage these risks, our business would be adversely affected.The classification of the loan portfolio of our international branches and banking subsidiaries is also subject to the regulations of respective local regulators. Such loans that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the current Reserve Bank of India guidelines, are classified as non-performing to the extent of the amount of outstanding loan in the host country. Overseas regulators may also require higher provisions against loans held in their jurisdictions.

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

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

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

Our loan portfolio includes long-term project finance loans, which are particularly vulnerable to completion and other risks.

The quality of our project finance portfolio could be adversely impacted by several factors. The viability of these projects depends upon a number of factors, including market demand, government policies, the processes for awarding government licenses and access to natural resources and their subsequent judicial or other review, the financial condition of the government or other entities that are the primary customers for the output of such projects and the overall economic environment in India and the international markets. These projects are particularly vulnerable to a variety of risks, including risks of delays in regulatory approvals, environmental and social issues, judicial decisions, sudden disruptions in economic activity or lockdown measures, completion risk and counterparty risk, which could adversely impact their ability to generate revenues. In the past, we have experienced a high level of default and restructuring in our industrial and manufacturing project finance loan portfolio.

Our loans to the power sector as a proportion of total loans has declined from 4.8% at March 31, 2018 to 2.1% at March 31, 2022. Power projects face a variety of risks, including access to fuel such as coal and gas, volatility in pricing of power and off-take of the power produced. In addition, power projects inherently have high leverage levels. Any reduction in the output of operational power plants or the projected output of newly commissioned or under-implementation power projects due to lower availability of fuel, higher fuel costs that cannot be passed through to purchasers and inability of state-owned power distribution utilities to purchase or pay for power due to their financial condition, or a decline in the price of power, may have an adverse impact on the financial condition of power producers and their ability to service their debt obligations, including to us.

Our loan portfolio also includes project finance, corporate finance, and working capital loans to commodity-based sectors such as iron and steel, other metals and mining, which are subject to similar and additional risks, as well as global commodity price cycles. For instance, during fiscal 2016, due to a slowdown in global demand for steel, there was a sharp decline in global steel prices, which in turn impacted Indian steel companies. Capacity utilization of steel companies declined and profitability came under pressure. The Government of India announced certain policy measures, including a minimum price for procuring steel from overseas markets, which have benefited the Indian steel sector. However, we cannot be certain that such or any other measures will continue to be introduced by the Government of India in the future. Further, the growing focus on climate change and national commitments towards a low-carbon economy may impact the flow of capital to specific sectors and could lead to structural shifts in these sectors, and the overall economy. It is difficult to assess the impact of these changes, and can expose us to new risks and challenges in managing the loan portfolio.

A slowdown in the Indian and global economy may exacerbate the risks for the projects that we have financed. Future project finance losses or high levels of loan restructuring could have a materially adverse effect on our profitability and the quality of our loan portfolio and the prices of our equity shares and ADSs.

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

We earn commission, exchange and brokerage income from a variety of activities, including loan processing, syndication and advisory services for corporate clients with respect to their acquisition and project financing, distribution of retail investment and insurance products, transaction banking and retail credit products. Our commission, exchange and brokerage income is therefore impacted by the level of corporate activity including new financing proposals, the demand for retail financial products and the overall level of economic and trade activity. Our commission, exchange and brokerage income is also impacted by applicable regulations governing various products and segments of financial services and changes in these regulations may adversely impact our income streams and ability to grow our business. Our fee income from distribution of third party financial products is dependent on applicable regulations, the demand for these products and our distribution strategy for banking and third party products. Our ability to earn fees in the near term would likely be impacted by the Covid-19 pandemic. See also, “—Risks relating to our Business—The future trajectory of the Covid-19 pandemic is uncertain and could adversely affect our business, the quality of our loan portfolio and our financial performance.”

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

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

Further, technology innovations in mobility and digitization of financial services require banks and financial services companies to continuously develop new and simplified models for offering banking products and services. The emergence of new platforms, or new operating models or new types of banks or other entities offering digital banking solutions, are trends that could increase competitive pressures on banks, including us. Innovations in the payments system and increasing use of mobile banking are leading to emergence of new platforms for cashless payments. This can also lead to new types of banks expanding their presence in other financial products like insurance and mutual funds. Non-financial companies, particularly international technology companies including large e-commerce players and internet-based service providers, are increasing their presence in the financial sector and are offering payment platforms and select services. We are currently partnering with some of these entities to jointly offer payment and credit products and services. Some or all of these entities, which have substantially more resources than us and other Indian banks, may eventually seek a larger share of the banking and financial services market in India and compete with us. Our subsidiaries also face similar risks, including enhanced competition from new, technology-led players with disruptive business models that may result in a loss of market share or reduced profitability or both, for existing players. There is no assurance that we will be able to continue to respond promptly to new technological developments, and be in a position to participate in new market opportunities or dedicate resources to upgrade our systems and compete with new players entering the market. See also “—Risks relating to technology—The growing use of technology in banking and financial services creates additional risks of competition, reliability and security”.

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

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

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

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

We, like all financial institutions, are exposed to many types of operational risk, including the risk of fraud or other misconduct by employees or outsiders, unauthorized transactions by employees and third parties (including violation of regulations for prevention of corrupt practices, and other regulations governing our business activities), misreporting or non-reporting with respect to statutory, legal or regulatory reporting and disclosure obligations, or operational errors, including non-compliance with internal processes, clerical or recordkeeping and reconciliation errors or errors resulting from faulty computer or telecommunications systems. We have experienced significant growth in a fast changing environment, and management as well as our regulators, are aware that this may pose significant challenges to our control framework. As a result of our internal evaluations, we and our regulators have noted certain areas where our processes and controls could be improved. Our growth, particularly in retail lending, our rural initiative, our international business and our insurance businesses, exposes us to additional operational and control risks. Regulatory scrutiny of areas related to operational risk, including internal audit information, systems and data processing is increasing. The large size of our treasury and retail operations, which use automated control and recording systems as well as manual checks and recordkeeping, exposes us to the risk of errors in control, recordkeeping and reconciliation. The increasing size of our insurance business and the complexities of the products expose us to the risk that the models set up on actuarial software to compute the actuarial liabilities and deferred acquisition cost may contain errors or may require continuous improvement over a period of time. Given our high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. In addition, our dependence upon automated systems to record and process transactions may further increase the risk that technical system flaws, employee tampering, manipulation of those systems and deficiency in access control management will result in losses that are difficult to detect. We may also be subject to disruptions of our operating systems, arising from events that are wholly or partially beyond our control (including, for instance, computer viruses or electrical or telecommunication outages), which may give rise to deterioration in customer service and to loss or liability to us.

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

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

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

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

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

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

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

Exchange rates are impacted by a number of factors including volatility of international capital markets, interest rates and monetary policy stance in developed economies like the United States, level of inflation and interest rates in India, the balance of payment position and trends in economic activity. Rising volatility in capital flows due to changes in monetary policy in the United States or other economies or a reduction in risk appetite or increase in risk aversion among global investors and consequent reduction in global liquidity may impact the Indian economy and financial markets. Following the outbreak of the Covid-19 pandemic, there was a significant outflow of foreign investments from Indian equity and debt markets during the three months ended March 31, 2020, and the Indian rupee depreciated by 5.6% vis-à-vis the U.S. dollar during the quarter ended March 31, 2020. During fiscal 2021, the exchange rate appreciated by 3.0% from Rs. 75.39 per U.S. dollar at March 31, 2020 to Rs. 73.14 per U.S. dollar at March 31, 2021 as global oil prices declined due to weak demand conditions. During fiscal 2022, several factors impacted the exchange rate including the second and third wave of the Covid-19 pandemic, geo-political tensions due to the crisis in Ukraine and sanctions on Russia, and deterioration in economic conditions following a sharp rise in global crude oil prices and increase in inflation in developed economies. The Rupee depreciated to Rs. 75.87 per U.S. dollar at March 31, 2022.

As discussed above, in the past, concerns over India’s current account deficit and changes in capital flows due to changes in U.S. monetary policy have caused the rupee to depreciate against the U.S. dollar. During the three months ended June 30, 2022, the rupee depreciated by 4.1% to Rs. 79.02 per U.S. dollar at June 30, 2022. This was following the tightening of monetary policy by the US Federal Reserve due to rising inflation concerns and consequent capital outflows from the Indian equity markets. Some of our borrowers with foreign exchange and derivative exposures may be adversely impacted by the depreciation of the rupee. These include borrowers impacted by higher rupee denominated interest or principal repayment on unhedged foreign currency borrowings; increases in the cost of raw material imports where there is limited ability to pass through such escalations to customers; and the escalation of project costs due to higher imported equipment costs; and borrowers that may have taken adverse positions in the foreign exchange markets. The failure of our borrowers to manage their exposures to foreign exchange and derivative risk, particularly adverse movements and volatility in foreign exchange rates, may adversely affect our borrowers and consequently the quality of our exposure to our borrowers and our business volumes and profitability.

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

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

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

We may seek opportunities for growth through acquisitions or be required to undertake mergers mandated by the Reserve Bank of India under its statutory powers. In the past, we have undertaken mergers and acquisitions. In the past, the Reserve Bank of India has ordered mergers of weak banks with other banks primarily in the interest of depositors of the weak banks. The Government of India announced the amalgamation of 10 public sector banks into four larger banks from April 1, 2020 as part of a consolidation measure to create fewer banks that would be individually larger in scale. We may in the future examine and seek opportunities for acquisitions in countries where we currently operate. Our subsidiaries in India may also undertake mergers, acquisitions and takeovers in India or internationally. Our general insurance affiliate, ICICI Lombard General Insurance, concluded the allotment of equity shares to the eligible shareholders of Bharti AXA General Insurance Company Limited as per their proportionate shareholding, following the approval from the Insurance Regulatory Development Authority of India and the National Company Law Tribunal for a merger. Following the completion of the transaction, the Bank’s shareholding in ICICI Lombard General Insurance decreased to 48.1%, and ICICI Lombard General Insurance ceased to be a subsidiary of the Bank. Mergers and acquisitions by our subsidiaries could lead to reduction in our shareholding in such subsidiaries (including to below majority ownership in certain subsidiaries), and under applicable law that may require us to reduce our shareholding to 30.0% or less, unless we receive regulatory and governmental approval to maintain a higher level of shareholding, which may be subject to various conditions including divestment to the required level of 30.0% within a specified timeframe. The Bank has been granted time until September 2023 to reduce its shareholding in ICICI Lombard General Insurance to 30.0%, to comply with the requirements under the Banking Regulation Act, 1949. Any future acquisitions or mergers or takeovers, whether by us or our subsidiaries, both Indian or international, may involve a number of risks, including the possibility of a deterioration of asset quality, quality of business and business operations, financial impact of employee related liabilities, diversion of our management’s attention required to integrate the acquired business and the failure to retain key acquired personnel and clients, leverage synergies or rationalize operations, or develop the skills required for new businesses and markets, or unknown and known liabilities including any ongoing litigation, claims or disputes concerning such acquisition, merger, its shareholders, share capital or its legal and regulatory compliance obligations or practices, some or all of which could have an adverse effect on our business or that of our subsidiaries.

We may also sell all or part of one or more of our businesses, including our subsidiaries and affiliates, for a variety of reasons including changes in strategic focus, redeployment of capital, contractual obligations and regulatory requirements.

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

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. We may also rely on certain representations as to the accuracy and completeness of that information and, with respect to financial statements, on reports of their independent auditors. For instance, in deciding whether to extend credit, we may assume that a customer’s audited financial statements conform to generally accepted accounting principles and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our financial condition and results of operations could be negatively affected by relying on financial statements that do not comply with generally accepted accounting principles or other information that is materially misleading. According to data published by the Reserve Bank of India, frauds reported in the Indian banking sector have shown an increasing trend in recent years, and the composition of the fraud amount reported is largely dominated by frauds related to loans and advances. In addition, our access to information about the credit histories of our borrowers, especially individuals and small businesses, may be limited, relative to what is typically available for similar borrowers in developed economies with more established nation-wide credit bureaus. This may affect the quality of information available to us about the credit history of our borrowers, especially individuals and small businesses. As a result, our ability to effectively manage our credit risk may be adversely affected.

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

We are regularly assessed by the Government of India’s tax authorities, and on account of outstanding tax demands we have included in contingent liabilities Rs. 84.8 billion in additional taxes in excess of our provisions at March 31, 2022. These additional tax demands mainly relate to income tax, service tax, sales tax and value added tax demands by the Government of India’s tax authorities for past years. We have appealed against each of these tax demands. The tax related inquiries are not included in contingent liabilities as we believe that such proceedings are likely to be dropped by the tax authorities or will not be upheld by judicial authorities. The amount of Rs. 84.8 billion included in our contingent liabilities does not include further disputed tax assessments amounting to Rs. 36.2 billion, of which Rs. 30.8 billion mainly relates to bad debts written off, broken period interest and penalties levied, where the possibility of liability arising has been considered remote based on favorable Supreme Court of India decisions in other similar cases, and Rs. 4.5 billion relating to error requiring rectification by tax authorities. See also “Business—Legal and Regulatory Proceedings”. During fiscal 2019, the tax authorities had issued notices to banks, including us, regarding levy of service tax on free services provided by banks to customers maintaining specified minimum balances in their deposit accounts. The banking industry has contested this notice and filed a writ petition in the Bombay High Court on July 2, 2019.

We have appealed all of these demands. While we expect that no additional liability will arise out of these disputed demands based on our consultations with tax counsel and favorable decisions in our own and other cases, there can be no assurance that these matters will be settled in our favor or that no further liability will arise out of these demands. Any additional tax liability may adversely impact our financial performance and the prices of our equity shares and ADSs.

There could be a difference in the assessment of our indirect tax liability which may lead to additional demand being raised subsequently by tax authorities. For instance, the service tax authorities, in earlier years, had raised a demand on trusts for certain funds managed by ICICI Venture, including in relation to the amounts retained by the trusts for incurring various expenses, distribution of certain class of unit holders and provisions for certain expenses/losses. On July 1, 2021, the Appellate Tribunal passed a judgement upholding the liability towards service tax on certain items. We are considering legal remedies in this matter and the funds have preferred an appeal with the High Court, against the order of the Appellate Tribunal.

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

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

Our exposure to the securities of asset reconstruction companies could generally affect our business, financial condition and results of operations.

We also have investments in security receipts arising from the sale of non-performing assets by us to reconstruction companies registered with the Reserve Bank of India. At March 31, 2022, the Bank had an outstanding net investment of Rs. 8.1 billion in security receipts issued by asset reconstruction companies. In September 2016, the Reserve Bank of India issued a framework for sale of stressed assets. As per this framework, with effect from April 1, 2017, provisions held for investment in security receipts is subject to a floor rate applicable to the underlying loans (the provisions the bank would have had to make if the loans had continued to be held in its books), if more than 50% of the security receipts are held by the bank that sold the loans. The threshold of 50% was reduced to 10% from April 1, 2018 as per the framework. Further, the framework requires banks to maintain an internal list of stressed assets identified for sale and review assets classified as ‘doubtful’ above a threshold amount on a periodic basis with a view to consider a sale or other disposition. There can be no assurance that reconstruction companies will be able to recover these assets and redeem our investments in security receipts and that there will be no reduction in the value of these investments. Any such inability to recover assets or redeem our investments without a diminution in value could generally affect our business, financial condition and results of operations. In fiscal 2022, the Indian government set up a National Asset Reconstruction Company through equity participation by banks and financial institutions to manage stressed assets of banks.

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

The branch network of ICICI Bank in India increased from 5,266 branches at March 31, 2021 to 5,418 branches at March 31, 2022. We plan to leverage our extensive geographical reach to support growth in our business. Our new branches typically operate at lower productivity levels, as compared to our existing branches. See also “—Risks Relating to Our Business—We may seek opportunities for growth through acquisitions, divest our existing businesses, or be required to undertake mergers by the Reserve Bank of India and could face integration and other acquisitions risks”. We also have a substantial branch network in rural and semi-urban areas and have also established branches in villages that did not have any banking services. Any inability to achieve or substantial delays in achieving desired levels of deposits, advances and revenues from the new branches would have an adverse impact on our growth and profitability and the prices of our equity shares and ADSs.

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

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

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

The loss of any member from our senior management, including directors and key personnel, can have a material impact on our business, our financial performance, our stockholders’ equity, our ability to implement our strategy and the prices of our equity shares and ADSs. If we or one of our business units or other functions fail to staff operations appropriately, or lose one or more key senior executives or qualified young professionals and fail to replace them in a satisfactory and timely manner, our business, financial condition and results of operations, including our control and operational risks, may be adversely affected. Likewise, if we fail to attract and appropriately train, motivate and retain young professionals or other talent, our business may likewise be affected. We have recently made several changes to our human resource management practices, including key performance indicators, unit-level operating flexibility and accountability and a shift from grades to functional designations at senior levels, aimed at greater agility and synergy across the organization. There can be no assurance that these measures will be successful in meeting the desired objectives.

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

Several of our employees were impacted by the Covid-19 pandemic. Such health epidemics or natural disasters in the future could impact our employees, including the senior management. There can be no assurance that this would not impact our ability to manage or conduct our business or the price of our equity shares and ADSs.

Risks relating to technology

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

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

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

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

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

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

We have a governance framework in place for security and have implemented information security policies, procedures and technologies. However, considering that technology is currently in a phase of rapid evolution and that the methods used for cyber-attacks are also changing frequently or, in some cases, are not recognized until an actual attack, we may not be able to anticipate or to implement effective preventive measures against all security breaches. Further, circumstances such as the Covid-19 pandemic requiring a large number of our employees to work from home may increase our vulnerability to cyber attacks. Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, and the use of the internet and telecommunications technologies to conduct financial transactions. For example, cybersecurity risks may increase in the future as we continue to increase our mobile-payment and other internet-based product offerings and expand our internal usage of web-based products and applications. In addition, cybersecurity risks have significantly increased in recent years in part due to the increased sophistication and activities of organized crime affiliates, terrorist organizations, hostile foreign governments, disgruntled employees or vendors, activists and other external parties, including those involved in corporate espionage. Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks and “spear phishing” attacks are becoming more sophisticated and are extremely difficult to prevent. In such an attack, an attacker will attempt to fraudulently induce colleagues, customers or other users of our systems to disclose sensitive information in order to gain access to its data or that of its clients. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and may not be recognized until well after a breach has occurred. The risk of a security breach caused by a cyber-attack at a vendor or by unauthorized vendor access has also increased in recent years. Additionally, the existence of cyber-attacks or security breaches at third-party vendors with access to our data may not be disclosed to us in a timely manner. We could also face cybersecurity risks which result in direct loss of money, as has happened with certain other banks in the past where their high value payment systems were compromised resulting in direct monetary loss for the bank. We also face risks where our customers could lose money because of cyber attacks, and these could result in monetary as well as reputational risks for the Bank.

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

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

In view of the Covid-19 pandemic, work-from-home has been enabled for our employees, other than at the branches, which continue to function as banking is classified as an essential service. This may expose us to risks arising on account of remote work environment, data security issues, increased cyber-attacks and availability of critical functions and IT systems. Our customers could also be exposed to increased phishing and vishing attacks that could result in a financial loss to them, and in turn lead to claims for compensation from the Bank or reputation loss for the Bank.

System failures or system downtime could adversely impact our business.

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

Risks relating to our insurance subsidiary and affiliate

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

At March 31, 2022, we owned 51.4% of the equity shares of our life insurance subsidiary, ICICI Prudential Life Insurance Company, and 48.1% of the equity shares of our general insurance affiliate, ICICI Lombard General Insurance Company.

Although our insurance businesses are profitable and we currently do not anticipate they would require capital, additional capital may be required to support the business which may, among other reasons, arise due to regulatory requirements or increased opportunities for growth or changes in loss experience and actuarial assumptions. See also “—Risks relating to our insurance subsidiary and affiliate—Loss reserves for our affiliate’s general insurance business are based on estimates as to future claims liabilities and adverse developments relating to claims could lead to further reserve additions and materially adversely affect the operation of our general insurance affiliate.” Our insurance subsidiary and affiliate may also explore mergers and acquisitions which may lead to issuance of equity shares. Issuance of additional equity shares for these or other reasons would reduce our shareholding, unless we invest additional capital in these businesses. Our ability to invest additional capital in these businesses is subject to the Reserve Bank of India’s regulations on capital adequacy and its guidelines on financial services provided by banks that prescribe limits for our aggregate investment in financial sector enterprises. All such investments require prior approval of the Reserve Bank of India. The Reserve Bank of India has announced a review of the guidelines pertaining to ownership, governance and corporate structure of private sector banks in India and has set up an internal working group to consider, among other things, holding of financial subsidiaries through a non-operative financial holding company. In November 2020, RBI released the report of the Internal Working Group to review the extant ownership and corporate structure guidelines for Indian private sector banks and sought feedback on the recommendations by January 15, 2021. In November 2021, the Reserve Bank of India accepted few recommendations made by the internal working group including a non-operative financial holding company structure for all new licenses issued for universal banks. The outcome of this report may result in changes to our group structure, the nature and impact of which we cannot currently predict, including a potential impact on our investment in our insurance businesses. Any reduction in our shareholding in our insurance businesses to below majority ownership would (including if arising on account of mergers and acquisitions), under applicable law, require us to reduce our shareholding to 30.0% or less, subject to regulatory and governmental approval to maintain a higher level of shareholding. Our general insurance affiliate, ICICI Lombard General Insurance Company concluded the allotment of equity shares to the eligible shareholders of Bharti AXA General Insurance Company Limited as per their proportionate shareholding, following the approval from the Insurance Regulatory Development Authority of India and National Company Law Tribunal for a merger in September 2021. Following the completion of the transaction, the Bank’s shareholding in ICICI Lombard General Insurance Company decreased to 48.1%, and ICICI Lombard General Insurance Company ceased to be a subsidiary of the Bank. The Bank has been granted time until September 2023 to reduce its shareholding in ICICI Lombard General Insurance Company to 30.0%, to comply with the requirements under the Banking Regulation Act, 1949. There is no assurance that we will be able to undertake further monetization of our investments in our subsidiaries and affiliates, through public offering or otherwise, or of the level of valuation of the subsidiaries and affiliates at which such monetization may take place and the resultant impact on our net income and stockholders' equity.

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

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

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

The Indian life insurance sector has experienced significant regulatory changes in recent years. See also “Supervision and Regulation—Regulations Governing Insurance Companies”. The regulatory changes, apart from impacting the business strategy, have also resulted in reduced profit margins on life insurance products. Our life insurance subsidiary’s growth and profitability depends on various factors, including the proportion of protection and annuity products in its portfolio, the maintenance on its relationship with key distribution partners, regulatory changes, and market movements. The demand for unit-linked products may be influenced by any volatility or downturn in capital markets. ICICI Bank is a corporate agent of its insurance subsidiaries and accounts for a significant portion of the business volumes of its life insurance subsidiary. The growth of the life insurance subsidiary’s business is thus significantly dependent on the Bank’s distribution strategy with respect to banking products and third party products. While the subsidiary has been making profits since fiscal 2010, there can be no assurance of the continued growth of the subsidiary’s business and profitability, including the business generated by the Bank.

We conduct our general insurance business through our general insurance affiliate, ICICI Lombard General Insurance Company. ICICI Lombard General Insurance Company’s growth and profitability depends on various factors, including the proportion of certain profitable products in its portfolio, the maintenance on its relationship with key distribution partners and reinsurers, continuation of support by the Government of India of certain insurance schemes, regulatory changes, changes to tax positions and market movements. There can be no assurance of the future rates of growth in the insurance business. While this affiliate has been making profits since fiscal 2013, there can be no assurance of the future profitability or rates of growth in the insurance business. See also “—Risks relating to our insurance subsidiary and affiliate—Additional capital requirements of our insurance entities or our inability to monetize a part of our shareholding in these entities may adversely impact our business and the prices of our equity shares and ADSs.” and “Supervision and Regulation—Regulations Governing Insurance Companies.”

Further, the Insurance Regulatory Development Authority of India has from time to time proposed changes to the regulations governing distribution of insurance products by corporate agents, including banks. Any future regulatory changes or restrictions may require our insurance subsidiaries to change their distribution strategies, which may result in increased costs and lower business volumes, as well as impacting ICICI Bank’s distribution of their products and the associated fee income. A slowdown in growth in the Indian economy, the impact of the Covid-19 pandemic, further regulatory changes or customer dissatisfaction with our insurance products could adversely impact the future growth of these businesses. See also “—Risks that arise as a result of our presence in a highly regulated sector—The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal”. Any slowdown in these businesses could have an adverse impact on our business and the prices of our equity shares and ADSs.

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

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

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

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

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

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

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

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

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

Portions of our general insurance business may cover losses from unpredictable events such as hurricanes, windstorms, epidemics, monsoons, earthquakes, fires, industrial explosions, floods, riots and other man-made or natural disasters, including acts of terrorism, and epidemics or pandemics such as the Covid-19 pandemic. The incidence and severity of these catastrophes in any given period are inherently unpredictable. Although reserves are established after an assessment of potential losses relating to catastrophes covered, there is no assurance that such reserves would be sufficient to pay for all related claims.

In addition, our life insurance subsidiary’s operations are also exposed to claims arising out of catastrophes and epidemics or pandemics, such as the Covid-19 pandemic, due to increased mortality and morbidity claims of affected customers. In the second wave of the Covid-19 pandemic, the number of new cases and resultant mortality has been higher compared to initial wave of the pandemic in 2020, and has resulted in a significant increase in claims on insurance companies, including our life insurance subsidiary. In addition, catastrophes could result in losses in the investment portfolios of our life insurance subsidiary due to, among other reasons, the failure of its counterparties to perform their obligations or significant volatility or disruption in the financial markets.

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

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

Risks Relating to ADSs and Equity Shares

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

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

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

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

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

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

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

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

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

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

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

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

The Life Insurance Corporation of India, the General Insurance Corporation of India and other government-owned general insurance companies, all of which are directly controlled by the Indian government, are among our principal shareholders. At March 31, 2022, the Life Insurance Corporation of India held 6.4% of our outstanding equity shares. See also “Major Shareholders”. Any substantial sale of our equity shares by these or other large shareholders could adversely affect the prices of our equity shares and ADSs. The Reserve Bank of India, in exercise of powers conferred by the Banking Regulation Act has notified a ceiling on voting rights in a banking company for single shareholder of 26.0%. Deutsche Bank Trust Company Americas held 19.0% of our equity shares at March 31, 2022 and must vote these shares as directed by our Board of Directors.

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

The Indian securities markets are smaller and more volatile than securities markets in developed economies. In the past, the Indian stock exchanges have experienced high volatility and other problems that have affected the market price and liquidity of the listed securities, including temporary exchange closures, broker defaults, settlement delays and strikes by brokers. Following the outbreak of the Covid-19 pandemic in early 2020, the benchmark S&P BSE Sensex declined during the three months ended March 31, 2020 by 28.6%, from 41,254 level at December 31, 2019 to 29,468 at March 31, 2020. During this period, several listed securities were impacted, including us. The index has subsequently recovered and at June 30, 2022, the S&P BSE Sensex closed at 58,568. In the past as well volatility in the Indian stock markets have created temporary concerns regarding our exposure to the equity markets. In recent years, there have been changes in laws and regulations regulating the taxation of dividend income, which have impacted the Indian equity capital markets. See also “Dividends”. Similar problems or changes in the future could adversely affect the market price and liquidity of our equity shares and ADSs.

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

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

Changes in Indian regulations on foreign ownership, a change in investor preferences or an increase in the number of ADSs outstanding could adversely affect the prices of our equity shares and ADSs.

ADSs issued by companies in certain emerging markets, including India, may trade at a discount or a premium to the underlying equity shares, in part because of the restrictions on foreign ownership of the underlying equity shares. See also “Restriction on Foreign Ownership of Indian Securities”. Historically, our ADSs have generally traded at a small premium to the trading price of our underlying equity shares on the Indian stock exchanges. We believe that this price premium resulted from the limited portion of our market capitalization represented by ADSs, restrictions imposed by Indian law on the conversion of equity shares into ADSs and an apparent preference among some investors to trade dollar-denominated securities. In fiscal 2006 and fiscal 2008, we conducted offerings of ADSs which increased the number of outstanding ADSs and we may conduct similar offerings in the future. Also, over time, some of the restrictions on the issuance of ADSs imposed by Indian law have been relaxed. As a result, any premium enjoyed by ADSs as compared to the equity shares may be reduced or eliminated as a result of offerings made or sponsored by us, changes in Indian law permitting further conversion of equity shares into ADSs or a change in investor preferences.

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

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

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

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

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

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

MAJOR SHAREHOLDERS

Shareholding Structure and Relationship with Government of India

The following table sets forth, at June 30, 2022, certain information regarding the ownership of our equity shares.

The holding of government-controlled shareholders was 7.6% at June 30, 2022 against 7.0% at June 30, 2021 and 11.1% at June 30, 2020. The holding of Life Insurance Corporation of India was 6.9% at June 30, 2022 against 6.0% at June 30, 2021 and 8.3% at June 30, 2020.

We operate as an autonomous commercial enterprise and the Indian government has never directly held any of our shares. We are not aware of or a party to any shareholders’ agreement or voting trust relating to the ownership of the shares held by the government-controlled shareholders. We do not have any agreement with our government-controlled shareholders regarding management control, voting rights, anti-dilution or any other matter. Our Articles of Association include a provision for the government of India to appoint, pursuant to the provisions of guarantee agreements between the government of India and ICICI, a representative to our Board. At present, there is no representative of the government of India on our Board. We have generally invited a representative of Life Insurance Corporation of India to join our Board. Since April 2019, there is no representative of Life Insurance Corporation of India on our Board. See also “Management—Directors and Executive Officers” for a discussion of the composition of our Board of Directors.

The holding of other Indian investors was 38.9% at June 30, 2022 against 33.5% at June 30, 2021 and 35.2% at June 30, 2020. The total holding of Indian investors was 46.5% at June 30, 2022 against 40.5% at June 30, 2021 and 46.3% at June 30, 2020. The holding of foreign investors was 53.5% at June 30, 2022 against 59.5% at June 30, 2021 and 53.7% at June 30, 2020. The Reserve Bank of India, exercising its powers under the Banking Regulation Act has established a limit of 26.0% on the voting rights of a single shareholder in a banking company. Deutsche Bank Trust Company Americas holds the equity shares represented by about 580 million American Depositary Receipts outstanding as depositary on behalf of the holders of the American Depositary Shares (ADS). The ADS are listed on the New York Stock Exchange. The Deutsche Bank Trust Company Americas (as depositary) which held 16.7% of our equity shares at June 30, 2022, must vote these shares as directed by our Board of Directors. Our ADS holders themselves have no voting rights unlike holders of our equity shares who have voting rights. Except as stated above, no shareholder has differential voting rights. See also “Supervision and Regulation—Structural Reforms—Amendments to the Banking Regulation Act” and “Supervision and Regulation—Ownership Restrictions”.

Related Party Transactions

In fiscal 2022, we entered into transactions with related parties consisting of (i) associates/other related entities and (ii) key management personnel and their close family members.

Related Parties

Associates/Other Related Entities

For fiscal 2022, the following parties were identified as our associates/other related entities: ICICI Lombard General Insurance Company Limited¹, Arteria Technologies Private Limited, India Advantage Fund-III, India Advantage Fund-IV, India Infradebt Limited, ICICI Merchant Services Private Limited, I-Process Services (India) Private Limited, NIIT Institute of Finance Banking and Insurance Training Limited, Comm Trade Services Limited, ICICI Foundation for Inclusive Growth and Cheryl Advisory Private Limited.

1.   From April 1, 2021, ICICI Lombard General Insurance Company Limited ceased to be a subsidiary and became an affiliate of the Bank.

Key Management Personnel and their Close Family Members

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

Related Party Transactions

The following are the material transactions between us and our associates/other related entities or our key management personnel or their close family members. A related party transaction is disclosed as a material related party transaction whenever it exceeds 10% of all related party transactions in that category.

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

Insurance Services

During fiscal 2022, we received insurance premiums from our associates/other related entities amounting to Rs. 67 million, from key management personnel of the Bank amounting to Rs. 4 million and from the close family members of key management personnel amounting to Rs. 5 million. The premiums received were towards cover for life insurance and investment linked insurance plans. The material transactions during fiscal 2022 included Rs. 48 million of premium received from ICICI Lombard General Insurance Company Limited and Rs. 19 million of premium received from ICICI Foundation for Inclusive Growth.

During fiscal 2022, we paid insurance premiums amounting to Rs. 3.2 billion to ICICI Lombard General Insurance Company Limited. The premiums paid were towards cover for health insurance, personal accident and miscellaneous items.

During fiscal 2022, we paid claims including maturity, annuity and policy surrender value to our associates/other related entities amounting to Rs. 42 million and to key management personnel of the Bank amounting to Rs. 1 million. The material transactions during fiscal 2022 included Rs. 42 million paid to ICICI Lombard General Insurance Company Limited.

During fiscal 2022, we received claims towards health, fire, personal accident, motor and other miscellaneous items amounting to Rs. 147 million from ICICI Lombard General Insurance Company Limited.

Fees, Commission and Other Income

During fiscal 2022, we received fees, commission and other income from our associates/other related entities amounting to Rs. 1.2 billion, from key management personnel of the Bank amounting to Rs. 1 million and from the close family members of key management personnel amounting to Rs. 1 million. These transactions primarily arose from marketing and promotion fee, sponsorship and banking service fee, arranger fees and bank charges. The material transactions during fiscal 2022 included Rs. 1.1 billion of fees, commission and other income received from ICICI Lombard General Insurance Company Limited.

During fiscal 2022, we received commission on bank guarantees from our associates/other related entities amounting to Rs. 3 million. The material transactions during fiscal 2022 included Rs. 3 million commission received from ICICI Merchant Services Private Limited.

Income from Custodial Services

During fiscal 2022, we received income from custodial services amounting to Rs. 0.1 million from India Advantage Fund – III and India Advantage Fund – IV.

Recovery of Lease of Premises, Shared Corporate and Facilities Expenses

During fiscal 2022, we recovered cost towards sharing of premises, corporate infrastructure facilities and technology services from our associates/other related entities amounting to Rs. 353 million. The material transactions during fiscal 2022 included Rs. 315 million of cost recovered from ICICI Lombard General Insurance Company Limited and Rs. 39 million of cost recovered from ICICI Foundation for Inclusive Growth.

Payment of Lease of Premises, Shared Corporate and Facilities Expenses

During fiscal 2022, we paid cost towards sharing of premises, corporate infrastructure facilities and technology services to ICICI Lombard General Insurance Company Limited amounting to Rs. 1 million.

Recovery of Secondment of Employees

During fiscal 2022, we received compensation from I-Process Services (India) Private Limited amounting to Rs. 16 million for the recovery of secondment of our employees.

Brokerage, Fees and Other Expenses

During fiscal 2022, we paid brokerage, fees and other expenses to our associates/other related entities amounting to Rs. 12.3 billion. These transactions primarily pertain to outsourcing of manpower services and expenses towards providing basic banking services. The material transactions during fiscal 2022 included Rs. 8.5 billion in brokerage, fees and other expenses paid to I-Process Services (India) Private Limited and Rs. 3.8 billion in brokerage, fees and other expenses paid to ICICI Merchant Services Private Limited.

Investments in Securities Issued by Related Parties

During fiscal 2022, we invested Rs. 1.0 billion in securities issued by India Infradebt Limited.

Purchase of Investments

During fiscal 2022, we purchased investments of Rs. 1.8 billion from ICICI Lombard General Insurance Company Limited. Purchase of investments included purchase of government securities and corporate bonds/debentures from secondary market.

Interest Expenses

During fiscal 2022, we paid interest on deposits accepted and bond borrowings to our associates/other related entities amounting to Rs. 192 million, to our key management personnel amounting to Rs. 5 million and to the close family members of key management personnel amounting to Rs. 2 million. The material transactions during fiscal 2022 included Rs. 164 million of interest paid to ICICI Lombard General Insurance Company Limited.

Interest Earned

During fiscal 2022, we received interest on investments in non-convertible bonds and loans from our associates/other related entities amounting to Rs. 511 million and from our key management personnel amounting to Rs. 6 million. The material transaction during fiscal 2022 included Rs. 505 million of interest received from India Infradebt Limited.

Purchase of fixed assets

During fiscal 2022, we purchased fixed assets from our associates/other related entities amounting to Rs. 5 million. The material transactions during fiscal 2022 included Rs. 3 million of fixed assets purchased from ICICI Lombard General Insurance Company Limited and Rs. 2 million of fixed assets purchased from Arteria Technologies Private Limited.

Dividend Income

During fiscal 2022, we received dividend income from our associates/other related entities amounting to Rs. 2.0 billion. The material transaction during fiscal 2022 was Rs. 1.9 billion of dividend received from ICICI Lombard General Insurance Company Limited.

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

During fiscal 2022, we received gain on foreign exchange and derivative transactions from ICICI Lombard General Insurance Company Limited amounting to Rs. 37 million.

Reimbursement of Expenses to Related Parties

During fiscal 2022, we reimbursed expenses to ICICI Foundation for Inclusive Growth amounting to Rs. 2.2 billion for corporate social responsibility related activities.

Reimbursement of Expenses from Related Parties

During fiscal 2022, we received Rs. 83 million on account of reimbursement of expenses from ICICI Lombard General Insurance Company Limited.

Dividends Paid

During fiscal 2022, we paid dividends to our key management personnel, amounting to Rs. 2.5 million and to the close family members of key management personnel, amounting to Rs. 0.0 million (insignificant amount). The dividend paid during fiscal 2022 to Ms. Vishakha Mulye was Rs. 1.8 million, to Mr. Sandeep Bakhshi was Rs. 0.4 million, to Mr. Sandeep Batra was Rs. 0.2 million, to Mr. Anup Bagchi was Rs. 0.1 million, to Mr. Shivam Bakhshi was Rs. 0.0 million (insignificant amount), to Ms. Esha Bakhshi was Rs. 0.0 million (insignificant amount) and to Ms. Minal Bakhshi was Rs. 0.0 million (insignificant amount).

Sale of Investments

During fiscal 2022, we sold investments to our associates/other related entities amounting to Rs. 8.3 billion. The material transactions during fiscal 2022 included Rs. 6.8 billion of investments sold to ICICI Lombard General Insurance Company Limited and Rs. 1.5 billion of investments sold to India Infradebt Limited. Sale of investments included sale of government securities and corporate bonds/debentures from secondary market.

Donations Given

During fiscal 2022, we gave donations to ICICI Foundation for Inclusive Growth amounting to Rs. 486 million.

Related Party Balances

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

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

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

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

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

Joint Ventures and Affiliates

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

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

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

Business

Overview

We are a diversified financial services group offering a wide range of banking and financial services to corporate and retail customers through a variety of delivery channels. Apart from banking products and services, we offer life and general insurance, asset management, securities broking, and private equity products and services through our specialized subsidiaries and affiliates. Our consolidated total assets at year-end fiscal 2022 were Rs. 17,526.4 billion. Our consolidated capital and reserves and surplus at year-end fiscal 2022 were Rs. 1,820.5 billion and our consolidated net profit (after minority interest) for fiscal 2022 was Rs. 251.1 billion.

Our primary business consists of commercial banking operations for retail and corporate customers. Our commercial banking operations for retail customers consist of retail lending, deposit taking, distribution of insurance and investment products and other fee-based products and services. We provide a range of commercial banking products and services, including loan products, fee and commission-based products and services, deposit products and foreign exchange and derivatives products to India’s leading corporations, middle market companies and small and medium enterprises. We also offer agricultural and rural banking products. We earn interest and fee income from our commercial banking operations. We deliver our products and services through a variety of channels, including bank branches, ATMs, call centers, internet and mobile phones. We had a network of 5,418 branches and 13,626 ATMs in India at year-end fiscal 2022.

Our international franchise focusses on four strategic pillars, namely (a) the non-resident Indian ecosystem comprising deposits, remittances, investments and asset products; (b) multinational corporation ecosystem comprising both foreign multinational companies investing in India and Indian multinational companies branching out for their foreign currency and other India related requirements and also Global In-house Centres, which are back-offices of multinational companies; (c) trade ecosystem, comprising primarily India-linked trade transactions which are self-liquidating in nature; and (d) funds ecosystem, to capture fund flows into India through the Foreign Portfolio Investment and Foreign Direct Investment routes. At year-end fiscal 2022, we had banking subsidiaries in the United Kingdom and Canada, branches in China, Singapore, Dubai International Finance Centre, Hong Kong, the United States (New York), South Africa and Bahrain. We have representative offices in the United Arab Emirates (Dubai, Abu Dhabi and Sharjah), Bangladesh, Nepal, Malaysia (Kuala Lumpur), United States (Texas and California), Sri Lanka and Indonesia. Our subsidiary in the United Kingdom has a branch in Germany. See also “Risk factors—Risks Relating to Our Business—The exposures of our international branches and banking subsidiaries could generally affect our business, financial condition and results of operations”.

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

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

Our affiliate, ICICI Lombard General Insurance Company provides a wide range of general insurance products. In September 2021, the Insurance Regulatory and Development Authority of India and the National Company Law Tribunal approved the scheme of arrangement between ICICI Lombard General Insurance Company Limited and Bharti AXA General Insurance Company Limited, with effect from September 8, 2021. Pursuant to the scheme of arrangement, assets and liabilities of Bharti AXA’s general insurance business vested with ICICI General Insurance Company Limited on September 8, 2021 with effect from the Appointed Date of April 1, 2020. ICICI Lombard General Insurance Company Limited issued two fully paid up equity shares to the shareholders of Bharti AXA for every 115 fully paid up equity shares. Subsequent to issuance of equity shares to Bharti AXA shareholders, the Bank’s shareholding in ICICI Lombard General Insurance Company Limited reduced to below 50.0%, and from April 1, 2021, ICICI Lombard General Insurance Company Limited ceased to be a subsidiary and became an equity affiliate of the Bank.

Our subsidiary ICICI Securities Limited is engaged in equities underwriting, securities broking and distribution of financial products. Our subsidiary ICICI Securities Primary Dealership Limited is engaged in underwriting and primary dealership of government securities. Our private equity fund management subsidiary ICICI Venture Funds Management Company, manages funds that make private equity investments.

Our legal name is ICICI Bank Limited, but we are known commercially as ICICI Bank. We were incorporated on January 5, 1994 under the laws of India as a limited liability corporation. The duration of ICICI Bank is unlimited. Our principal corporate office is located at ICICI Bank Towers, Bandra-Kurla Complex, Mumbai 400 051, India, our telephone number is +91 22 3366 7777 and our website address is www.icicibank.com. None of the contents of our and our subsidiaries’ websites are incorporated in this annual report. Our agent for service of process in the United States is Mr. Akshay Chaturvedi, Country Head, ICICI Bank Limited, New York Branch, 500 Fifth Avenue, Suite 2830, New York, New York 10110.

History

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

Strategy

In fiscal 2022, we maintained our strategic focus on profitable growth in business within the guardrails of risk and compliance. We grew our credit portfolio with a focus on granularity and saw healthy growth across our retail, SME and business banking portfolios, and in current and savings account deposits on a daily average basis. We continued to focus on holistically serving our corporate clients and their ecosystems, including lending to the corporate sector based on risk assessment and pricing. We focused on maintaining a strong balance sheet, with prudent provisioning and healthy capital adequacy. We continue to hold high provisioning coverage on non-performing loans. We also hold additional contingency provisions to mitigate any stress that could arise due to the Covid-19 pandemic and other uncertainties. Our capital position is strong with capital adequacy ratios significantly above regulatory requirements at March 31, 2022.

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

We see significant opportunities for profitable growth across various sectors of the Indian economy. The key elements of our strategy to maximize our share of these opportunities are:

360-degree customer centric approach

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

Focus on ecosystems

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

Focus on micro markets

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

Internal cross-functional collaboration and external partnerships

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

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

Process decongestion and operating flexibility

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

Leveraging technology and digital across businesses

The Bank has embarked on a journey to transform from Bank to Bank^Tech, with a focus on creating an enterprise architecture framework across digital platforms, data and analytics, micro services based architecture, cloud computing, cognitive intelligence and other emerging technologies. This is based on the founding pillars of scalability, modularity, flexibility, agility, resilience and reliability, and creating delightful and digitally native customer experiences to enable sustainable profitable growth.

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

Guiding principles of our strategy

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

Impact of Covid-19 pandemic

During fiscal 2021, the Covid-19 pandemic resulted in a nation-wide lockdown in April-May 2020 which substantially impacted economic activity. Several unprecedented fiscal and monetary measures were taken by the Government of India and the Reserve Bank of India to provide stability to the financial sector and protect individuals, businesses and the banking sector from adverse economic consequences. The easing of lockdown measures subsequently led to gradual improvement in economic activity and progress towards normalcy from the second half of fiscal 2021. In fiscal 2022, India witnessed two more waves of the Covid-19 pandemic and the re-imposition of localised/regional lock-down measures in certain parts of the country. Currently, while the number of new Covid-19 cases have reduced significantly and the Government of India has withdrawn most of the Covid-19 related restrictions, the future trajectory of the pandemic may have an impact on the results of the Bank and the Group. See also “Risk Factors—Risks Relating to Our Business—The future trajectory of the Covid-19 pandemic is uncertain and could adversely affect our business, the quality of our portfolio and our financial performance.” and “Risk Factors—Risks Relating to India and Other Economic and Market Risks—A prolonged slowdown in economic growth in India could cause our business to suffer.”

Overview of Our Products and Services

We offer products and services in the commercial banking area to corporate and retail customers, both domestic and international. We also undertake treasury operations and offer treasury-related products and services to our customers. We are also engaged in insurance, asset management, securities broking business, housing finance and private equity fund management through specialized subsidiaries.

Commercial Banking for Retail Customers

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

Retail Lending Activities

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

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

The following table sets forth, at the dates indicated, the break-down of our gross retail finance portfolio.

Home loans

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

We follow robust credit appraisal processes for loan-against-property. The average loan-to-value ratios of the loan-against-property portfolio are lower compared to our home loan portfolio. Lending is based on cash flows of borrowers and not just the value of the collateral. We also provide loans to customers belonging to economically weaker sections and customers buying homes in the low-cost affordable housing segment. The loan amount under this segment is generally up to Rs. 3.0 million. Our initiatives to digitize the entire underwriting process with instant approvals have been one of the drivers of growth in our home loan portfolio. See also “Technology” and “Risk Factors—Risks Relating to Our Business—Our banking and trading activities are particularly vulnerable to interest rate risk and volatility in interest rates could adversely affect our net interest margin, the value of our fixed income portfolio, our income from treasury operations, the quality of our loan portfolio and our financial performance”.

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

We offer home loan products primarily in India through ICICI Bank and our wholly owned subsidiary, ICICI Home Finance Company Limited. The loan portfolio of our housing finance subsidiary includes home loans, loans-against-property and loans to developers among others. The loan portfolio of ICICI Home Finance Company Limited increased by 5.4% from Rs. 137.6 billion at March 31, 2021 to Rs. 145.0 billion at March 31, 2022. The total assets under management, including securitized assets, increased from Rs. 169.7 billion at March 31, 2021 to Rs. 178.7 billion at March 31, 2022. ICICI Home Finance Company Limited raises funds through term loans from banks (including external commercial borrowings), bonds and debentures, commercial papers, fixed deposits and refinance from National Housing Bank. At March 31, 2022, ICICI Home Finance Company Limited had a branch network of 170 branches.

Our banking subsidiary in Canada offers residential mortgages in the local market. ICICI Bank Canada held total residential mortgages amounting to CAD 3,692 million (Rs. 223.3 billion) at year-end fiscal 2022 as compared to CAD 3,627 million (Rs. 210.5 billion) at year-end fiscal 2021. This includes mortgages of CAD 2,400 million (Rs. 145.2 billion) at year-end fiscal 2022 as compared to CAD 2,572 million (Rs. 149.2 billion) at year-end fiscal 2021 securitized under the Canadian National Housing Act—Mortgage Backed Securities program or through participation in the Canada Mortgage Bonds program. Further, the total residential mortgages also include conventional mortgages of CAD 1,223 million (Rs. 74.0 billion) at year-end fiscal 2022 as compared to CAD 887 million (Rs. 51.5 billion) at year-end fiscal 2021 and insured mortgages of CAD 69 million (Rs. 4.2 billion) at year-end fiscal 2022 as compared to CAD 169 million (Rs. 9.8 billion) at year-end fiscal 2021.

Automobile loans

We finance the purchase of new and used automobiles. Automobile loans are fixed rate products repayable in equal monthly installments. The interest rate is based on factors such as customer relationship, car segment and tenure of loan, among others, for new automobiles and age and segment of car, tenure of loan and product variant like top-up or refinance, for used automobiles. Our automobile loans for new cars typically range from Rs. 250,000 to Rs. 5,000,000 in size with tenors in the range of 12 to 84 months.

Commercial business loans

We finance the purchase of commercial vehicles and equipment. Commercial business loans are fixed rate products repayable in equal monthly installments. Our commercial business customers include large fleet operators in the medium commercial vehicle and heavy commercial vehicle categories. Our commercial vehicles portfolio is not concentrated, with the top 20 customers contributing approximately 2.5% of the commercial vehicles portfolio at year-end fiscal 2022.

Personal loans and credit cards

We also offer unsecured products such as personal loans and credit cards to our customers. Personal loans and credit card receivables have fixed interest rates. At year-end fiscal 2022, approximately 75% of our personal loan and credit card portfolio was extension of credit to existing customers of the Bank, and approximately 85% of the portfolio comprised salaried individuals. We offer a range of instant personal loans and credit cards that are accessible entirely through our digital channels. The Bank’s personal loan disbursements in fiscal 2022 were Rs. 391.1 billion, which was approximately 17.6% of total retail loan disbursements. Our personal loans typically range from Rs. 50,000 to Rs. 4,000,000 in size with tenors of one to five years and yields ranging from 11% to 22%.

Retail Deposits

Our retail deposit products include time deposits and savings account deposits. We offer these products with special features targeted at specific customer segments such as high net worth individuals, defense personnel, trusts and businessmen. We also offer real-time account opening and activation to savings account customers, through enhanced system-driven validations. We also offer corporate salary account products and current account (i.e., checking accounts for businesses) products to our small enterprise customers, who maintain balances with us. At year-end fiscal 2022, we had a debit card base of approximately 37 million cards compared to 39 million cards at year-end fiscal 2021. The decline was due to closure of dormant and inactive accounts during fiscal 2022.

Fee-Based Products and Services

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

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

Retail lending for rural customers

The Bank’s rural banking operations aim to meet the financial requirements of customers in rural and semi-urban locations. Our products in this segment include working capital loans for growing crops, financing of post-harvest activities, loans against gold jewelry along with personal loans, financing against warehouse receipts, farm equipment loans and affordable housing finance and auto and two wheeler loans. We also provide consumption loans for low-income customers. We offer financial solutions to micro-finance institutions, self-help groups, co-operatives constituted by farmers, corporations and medium enterprises engaged in agriculture-linked businesses. The rural banking portfolio grew by 7.6% from Rs. 739.0 billion at year-end fiscal 2021 compared to Rs. 795.1 billion at year-end fiscal 2022.

The following table sets forth, at the dates indicated, the break-down of our gross rural finance portfolio.

1. Includes kisan credit card.

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

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

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

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

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

We have adopted a community banking approach with emphasis on personal relationships with customers. Our operational structure enables us to meet the holistic financial needs of the customers in the villages at their doorstep. Our reach in rural areas comprises a network of branches, ATMs and field staff, and business correspondents providing last-mile access in remote areas. As at year-end fiscal 2022, we had a network of 5,418 branches, of which 51.2% were in rural and semi-urban areas with 649 branches in villages that were previously unbanked. The Bank had a network of over 20,500 branches, including business correspondent outlets. As at March 31, 2022, we had over 3,300 ATMs and 490,000 digital service points in rural areas. See also “Risk Factors—Risks Relating to Our Business—Entry into new businesses or rapid growth in existing loan portfolios may expose us to increased risks that may adversely affect our business”. At year-end fiscal 2022, more than 4,000 customer service points were enabled through our business correspondent network.

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

Commercial banking for Small and Medium Enterprises and Business Banking

Our business banking customers include proprietorship firms, partnership firms and private limited companies. The average size of loans in this segment is approximately Rs. 10.0-15.0 million. Our focus in this segment is on using digital channels and ensuring granularity, obtaining adequate collateral and robust monitoring. More than 95% of our business banking portfolio has collateral covering more than 100% of the outstanding value of the loan. The loans are generally secured by collateral in the form of property apart from a charge on current assets.

Our small and medium enterprise portfolio consists of enterprises with a turnover of up to Rs. 2.5 billion. We offer a wide spectrum of banking products and solutions to small and medium enterprises to address their evolving business needs. This involves customized offerings, faster turnaround time, transaction convenience, timely access to capital and cross-border trade and foreign exchange. We offer digital solutions for on-boarding, payments and collections, lending and cross-border transactions. We focus on providing parameterized and programme-based lending for small and medium enterprises, which is granular and well-collateralized.

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

Following the Covid-19 pandemic, we have provided financial assistance to clients based on various Government of India schemes, which includes providing moratorium on loan repayment and emergency credit lines to eligible small and medium enterprise customers. We had disbursed about Rs. 170.0 billion to our retail and micro, small and medium enterprises customers under the Government of India’s Emergency Credit Line Guarantee Scheme until year-end fiscal 2022.

Commercial Banking for Corporate Customers

Our product suite for corporate customers includes working capital and term loan products and transaction banking services, fee and commission-based products and services, deposits and foreign exchange and derivatives products across trade, treasury, bonds, commercial papers, channel financing, supply chain solutions, and various other activities. Our approach has been to deepen our partnership and support to clients through their life cycle. Our corporate customer base includes top business houses, large and medium private and public sector companies, financial institutions, banks, non-bank finance companies, private equity funds and financial sponsors. We have established relationships with multinational companies operating in India, and financial sponsors, including private equity funds and their investee companies. We offer transaction banking services to corporates to meet the day-to-day needs for smooth functioning of their businesses. The transaction banking services offered include account related services, payment and collection services, domestic and cross border trade finance, working capital finance and supply chain finance. We offer integrated cash management and trade finance solutions to our customers. Our transaction banking solutions are delivered to our customers through physical and digital channels and a team of account managers. In addition to leveraging the physical branch network, we have expanded our capabilities for providing transaction banking services to our customers from 183 locations at year-end fiscal 2021 to 211 locations at year-end fiscal 2022. Many of these expanded branch capabilities are in the factory/township premises of certain large conglomerates in the country.

Corporate Loan Portfolio

Our corporate loan portfolio consists of project and corporate finance (including structured finance and cross-border acquisition financing) and working capital financing. For further details on our loan portfolio, see “Selected Statistical Information—Loan Concentration”. For a description of our credit rating and approval system, see “—Risk Management—Credit Risk”.

Our project finance portfolio consists principally of medium-term and long-term rupee and foreign currency loans to the manufacturing and infrastructure sectors. We also provide financing by way of investment in marketable instruments such as fixed rate and floating rate debentures. We generally have a security interest on the fixed assets of the borrower although some of our financing is also extended on an unsecured basis. Our working capital financing consists mainly of cash credit facilities, overdraft, demand loans and non-fund based facilities including bill discounting, letters of credit and guarantees.

Fee and Commission-Based Activities

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

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

At year-end fiscal 2022, total assets held in custody on behalf of our clients (mainly foreign institutional investors, offshore funds, overseas corporate bodies and depositary banks for Global Depository Receipts (GDR) investors were Rs. 19,272.0 billion. As a registered depositary participant of National Securities Depository Limited and Central Depository Services (India) Limited, the two securities depositaries operating in India, we also provide electronic depositary facilities to investors.

Corporate Deposits

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

Foreign Exchange and Derivatives

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

·         Foreign Exchange Products

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

·         Derivatives

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

Commercial Banking for Government and Institutions

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

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

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

Commercial Banking for International Customers

Our international franchise focusses on four strategic pillars, namely (a) the non-resident Indian ecosystem comprising deposits, remittances, investments and asset products; (b) multinational corporation ecosystem comprising both foreign multinational companies investing in India and Indian multinational companies branching out for their foreign currency and other India related requirements and also Global In-house Centres, which are back-offices of multinational companies; (c) trade ecosystem, comprising primarily India-linked trade transactions which are self-liquidating in nature; and (d) funds ecosystem, to capture fund flows into India through the Foreign Portfolio Investment and Foreign Direct Investment routes. During fiscal 2022, we continued to reduce non-India linked exposures in a planned manner. Further, our overseas banking subsidiaries continue to serve local markets selectively with a focus on risk mitigation and granularity of business.

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

Total assets (net of inter-office balances) of ICICI Bank’s overseas branches at year-end fiscal 2022 were Rs. 866.0 billion and total advances were Rs. 412.8 billion compared to total assets of Rs. 858.4 billion and total advances of Rs. 375.9 billion at year-end fiscal 2021. The year-on-year increase in our overseas branches loan portfolio was primarily due to increase in the India-linked trade finance book. Our overseas branches are primarily funded by bond issuances, syndicated loans from banks, money market borrowings, inter-bank bilateral loans and borrowings from external commercial agencies. The overseas loan portfolio of ICICI Bank was 4.8% of the overall loan portfolio at year-end fiscal 2022. The corporate fund and non-fund outstanding, net of cash/bank/insurance backed lending, was US$ 3.7 billion at March 31, 2022. Out of US$ 3.7 billion, 82.4% of the outstanding was to Indian corporates and their subsidiaries and joint ventures and 9.5% of the outstanding was to non-India companies with Indian or India-linked operations and activities and this portfolio is generally well-rated and the Indian operations of these companies are our target customers for deposit and transaction banking franchise. The Bank will continue to pursue risk calibrated opportunities in this segment. Out of US$ 3.7 billion, approximately 4.2% of the outstanding was to companies owned by non-resident Indians/person of Indian origins and 3.9% of the outstanding was to other non-India companies which is less than 1.0% of the total portfolio of the Bank. The non-India linked corporate portfolio reduced by 48.2% from about US$ 1.2 billion year-on-year to US$ 641 million at March 31, 2022. See also “Risk Factors—Risks Relating to Our Business—Our funding is primarily short-term and if depositors do not roll over deposited funds upon maturity, our business could be adversely affected”.

Our subsidiaries in the United Kingdom and Canada are full service banks offering retail and corporate banking services. These subsidiaries offer direct banking using the internet as the access channel. Our subsidiary in the United Kingdom offers loans to corporate businesses, including to Europe-based multinational corporations which have active trade and investment flows with India, large businesses owned by persons of Indian origin and for Indian corporations seeking to develop their overseas businesses. Our subsidiary in Canada originates residential mortgages, primarily insured and qualifying for insurance by either the Canadian federal government agency or insurance companies back-stopped by the Canadian federal government, and offers loans to both Canadian and US corporations as well as Indian corporations seeking to develop their business overseas. Our overseas subsidiaries also aim to reduce their exposures to non-India linked corporate loan portfolio, subject to regulatory requirements.

At year-end fiscal 2022, ICICI Bank UK PLC had seven branches in the United Kingdom and a branch in Germany. At year-end fiscal 2022, the total assets of ICICI Bank UK PLC were US$ 2.2 billion. ICICI Bank UK PLC made a net profit of US$ 11 million during fiscal 2022, compared to US$ 15 million during fiscal 2021. At year-end fiscal 2022, loans and advances of ICICI Bank UK PLC were US$ 1.2 billion and investments were US$ 0.5 billion.

At year-end fiscal 2022, ICICI Bank Canada had seven branches and total assets of CAD 5.7 billion. ICICI Bank Canada earned a net profit of CAD 29 million in fiscal 2022 as compared to a net profit of CAD 20 million in fiscal 2021. At year-end fiscal 2022, net advances (net loans) of ICICI Bank Canada were CAD 5.0 billion and investments were CAD 0.6 billion.

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

Branch and ATM network and call centers

We deliver our products and services through a variety of channels, ranging from traditional bank branches to ATMs and call centers. In addition, our digital channels and platforms have become increasingly important to our customers. See “Technology”. At year-end fiscal 2022, we had a network of 5,418 branches across several Indian states. The branch network serves as an integrated channel for deposit mobilization and selected retail asset origination. Our focus is to create fully digital branches and touch points for customer experience in order to maximize customer engagement time for solutions. Many of our branches have insta-banking kiosks that are touch-screen self-service devices that allow customers to pre-process or completely process transactions, thus reducing wait-time.

The following table sets forth the break-down of the number of branches by area for the periods indicated.

At March 31, 2022, we had 13,626 ATMs across India. Our ATMs have additional features such as instant fund transfer, cardless cash withdrawal for ICICI Bank customers, bill payment and insurance premium payment.

Our call centers across locations at Thane and Hyderabad are operational around the clock and are equipped with multiple leading edge systems such as interactive voice response systems, automatic call distribution, computer telephony integration and voice recorders. We seek to use the latest technology in these call centers to provide an integrated customer view to the call center agents to get a complete overview of the customer’s relationship with us. We use a virtual relationship management channel for superior and seamless connect that caters to the transaction and product needs of customers through human interface on the phone. We have implemented a customer relationship management solution for the automation of customer service requests in all key retail products. The solution helps in tracking and timely resolution of various customer queries and issues. The solution has been deployed at the phone banking call centers as well as at a large number of branches.

Investment Banking

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

Treasury

Through our treasury operations, we seek to manage our balance sheet, including the maintenance of required regulatory reserves, and to optimize profits from our trading portfolio by taking advantage of market opportunities. Our domestic trading and securities portfolio includes our regulatory reserve portfolio, as there is no restriction on active management of our regulatory reserve portfolio. Our treasury operations include a range of products and services for corporate and small enterprise customers, such as forward contracts and interest rate and currency swaps, and foreign exchange products and services. See also “—Commercial Banking for Corporate Customers—Foreign Exchange and Derivatives”.

Our treasury undertakes liquidity management by seeking to maintain an optimum level of liquidity, complying with the cash reserve ratio requirement and seeking to maintain the smooth functioning of all our branches. We maintain a balance between interest-earning liquid assets and cash to optimize earnings and undertake reserve management by maintaining statutory reserves, including the cash reserve ratio and the statutory liquidity ratio. At year-end fiscal 2022, ICICI Bank was required to maintain the statutory liquidity ratio requirement percentage at 18.00% of its domestic net demand and time liabilities by way of approved securities such as Government of India securities and state government securities. We maintain the statutory liquidity ratio through a portfolio of government of India securities that we actively manage to optimize the yield and benefit from price movements. Further, as a prudent liquidity management strategy, we generally maintain excess investments in securities eligible for classification under the statutory liquidity ratio requirement. We maintain the liquidity coverage ratio and net stable funding ratio, as required under Basel III, both on a standalone basis and at the group level. The minimum requirement is 100%. The liquidity coverage ratio requirement is met by investment in high quality liquid assets which are primarily in the form of government securities and better-rated corporate bonds. At March 2022, our liquidity coverage ratio on a standalone basis was 131.16% and on a group level was 131.98%. Both of these ratios were higher than the regulatory requirement of 100%. See also “Supervision and Regulation—Legal Reserve Requirements”.

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

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

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

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

Securities broking and investment banking

ICICI Securities Limited is a financial services company operating across capital market segments including retail and institutional equity, financial product distribution, private wealth management and investment banking. As at March 31, 2022, ICICI Securities Limited served 8 million customers. ICICI Securities Limited has an online securities broking platform called www.icicidirect.com. ICICI Securities Limited assists its customers like retail investors, corporates, financial institutions, high net worth individuals and ultra high networth individuals in meeting their financial goals by providing them with research, advisory and execution services. ICICI Securities Limited has a subsidiary in the United States, ICICI Securities Holdings Inc., which in turn has a subsidiary in the United States, ICICI Securities Inc., which is registered as a broker dealer with the Securities and Exchange Commission. ICICI Securities Inc., which is a member of the Financial Industry Regulatory Authority in the United States; also has a branch office in Singapore that is registered with the Monetary Authority of Singapore where it holds a capital markets services license for dealing in capital market products in Singapore.

The consolidated profit after tax of ICICI Securities Limited was Rs. 14.0 billion in fiscal 2022 as compared to Rs. 10.9 billion in fiscal 2021. ICICI Securities Limited was listed on the National Stock Exchange of India Limited and BSE Limited on April 4, 2018 following an offer for sale in an initial public offering of the company. After this sale, our share ownership in ICICI Securities Limited came down from 100.00% to 79.22% as of year-end fiscal 2020. To meet the minimum public shareholding norm for ICICI Securities Limited, the Bank further sold its 4.21% stake in ICICI Securities in fiscal 2021. Our share ownership in ICICI Securities Limited was 74.89% at March 31, 2022.

Primary dealership

ICICI Securities Primary Dealership is engaged in the primary dealership of Indian government securities. It also deals in other fixed income securities. In addition to this, it has underwriting, portfolio management services and placement of debt and money market operations. ICICI Securities Primary Dealership earned a net profit of Rs. 3.3 billion in fiscal 2022 compared to a net profit of Rs. 6.5 billion in fiscal 2021. The revenues of the business are directly linked to conditions in the fixed income market.

Private Equity

Our subsidiary ICICI Venture Funds Management Company Limited is a diversified specialist alternative asset manager with a presence across private equity, real estate, infrastructure and special situations. During fiscal 2022, ICICI Venture Funds Management Company Limited concluded a total of six new investments involving an aggregate capital outlay of approximately Rs. 19.9 billion. In the same period, ICICI Venture Funds Management Company Limited concluded four exit/liquidity transactions involving aggregate realization of Rs. 7.1 billion. ICICI Venture Funds Management Company Limited launched a fifth fund in its private equity vertical with target fund size of Rs. 25.0 billion. ICICI Venture Funds Management Company Limited also concluded set-up work for a new office platform and commenced preparatory work for the successor fund in its real estate vertical. ICICI Venture Funds Management Company Limited reported a net profit of Rs. 2 million in fiscal 2022 as compared to Rs. 40 million in fiscal 2021.

Asset Management

We provide asset management services through our subsidiary, ICICI Prudential Asset Management Company. ICICI Prudential Asset Management Company is a joint venture with Prudential PLC of the United Kingdom. We have 51.0% interest in the entity and Prudential PLC owns 49.0%. ICICI Prudential Asset Management Company also provides portfolio management services and advisory services to clients. ICICI Prudential Asset Management Company had average mutual fund assets under management of Rs. 4,498.7 billion during fiscal 2022. ICICI Prudential Asset Management Company earned a net profit of Rs. 14.4 billion during fiscal 2022 compared to a net profit of Rs. 11.8 billion during fiscal 2021.

Insurance

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

ICICI Prudential Life Insurance Company Limited has a wholly owned subsidiary, ICICI Prudential Pension Funds Management Company Limited, one of the fund managers for the pension assets of Indian citizens (other than the mandated pension funds of government employees) under the National Pension System.

Our share ownership in ICICI Prudential Life Insurance Company Limited was 51.32% at March 31, 2022.

ICICI Prudential Life Insurance Company Limited had a market share of 7.2% on retail weighted new business received premium in fiscal 2022 based on data published by Insurance Regulatory and Development Authority. The market share within the private sector was 11.4% in fiscal 2022. The total premium increased by 4.8% from Rs. 357.3 billion in fiscal 2021 to Rs. 374.6 billion in fiscal 2022. Within product segments, for fiscal 2022, contribution of the protection and non-linked savings to the business of our life insurance subsidiary has increased. While unit-linked product contribution was still significant, its demand may be influenced by any volatility or downturn in capital markets. Our life insurance subsidiary is primarily focused on growth in the value of new business, as a key profitability metric. The profit after tax of ICICI Prudential Life Insurance Company Limited was Rs. 7.5 billion in fiscal 2022 as compared to Rs. 9.6 billion in fiscal 2021. The decline in profit after tax during fiscal 2022 reflects the higher Covid-19 claims seen during the second wave of Covid-19 pandemic in first half of fiscal 2022.

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

ICICI Lombard General Insurance Company Limited’s gross direct premium income was Rs. 179.8 billion in fiscal 2022 as compared to Rs. 140.0 billion in fiscal 2021. During fiscal 2022, ICICI Lombard General Insurance Company Limited was ranked second in the country with a market share of 8.1% based on gross direct premium as per the data published by the Insurance Regulatory Development Authority of India. ICICI Lombard General Insurance Company Limited earned a net profit of Rs. 12.7 billion in fiscal 2022 and a net profit of Rs. 14.7 billion in fiscal 2021.

ICICI Lombard General Insurance Company Limited was formed as a joint venture with Fairfax Financial Holdings of Canada. The joint venture was terminated on July 3, 2017. During fiscal 2021, the Board of ICICI Lombard General Insurance Company Limited approved the proposed merger of the general insurance business of Bharti AXA General Insurance Company Limited with an appointed date of April 1, 2020. ICICI Lombard received the approval from Insurance Regulatory and Development Authority of India on September 3, 2021. The merger came into effect at September 8, 2021. As consideration towards the merger, ICICI Lombard General Insurance issued fresh equity shares to shareholders of Bharti AXA General Insurance Company Limited whereby the shareholding of the Bank in ICICI Lombard General Insurance Company Limited was reduced to less than 50% resulting in ICICI Lombard ceasing to be a subsidiary of the Bank. The numbers for ICICI Lombard General Insurance provided above for fiscal 2022 are not comparable with fiscal 2021.

As per the Banking Regulation Act, 1949, as amended, a bank can hold either less than 30.0% or more than 50.0% in a company. Following the transaction of ICICI Lombard General Insurance Company, the Bank’s shareholding in ICICI Lombard General Insurance Company Limited has gone below 50.0%. The Bank’s holding in ICICI Lombard General Insurance Company Limited was 48.04% at March 31, 2022. The Bank has been granted time until September 2023 to reduce its shareholding in ICICI Lombard General Insurance to 30.0%, to comply with the requirements under the Banking Regulation Act, 1949.

The Insurance Regulatory and Development Authority of India issued regulations on registration of corporate agents for the sale of insurance products. As per the regulations, banks can partner with three insurance companies each in life, non-life and health insurance sectors. We have entered into an agreement with our insurance subsidiaries, ICICI Prudential Life Insurance Company Limited and ICICI Lombard General Insurance Company Limited, and operate as a corporate agent for these companies. We distribute life and general insurance products through our branches, phone banking and digital channels and earn commissions and fees from these subsidiaries. ICICI Bank accounts for a significant portion of the business volumes of its life insurance subsidiary. The growth of the life insurance subsidiary’s business is thus significantly dependent on the Bank’s distribution strategy, including the Bank’s choice of and focus on specific life insurance products, and the relative emphasis on sales of insurance and banking products.

Risk Management

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

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

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

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

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

Credit Risk

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

The credit risk is governed by the Credit and Recovery Policy (credit policy) approved by the Board of Directors. The Credit and Recovery Policy outlines the type of products that can be offered, customer categories, the targeted customer profile and the credit approval process and limits.

ICICI Bank measures, monitors and manages credit risk at an individual borrower level and at the portfolio level for non-retail borrowers. The credit risk for retail borrowers is managed at a portfolio level. ICICI Bank has a structured and standardized credit approval process, which includes a well-established procedure of credit appraisal. The Country Risk Management Policy addresses the recognition, measurement, monitoring and reporting of country risk.

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

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

Credit Approval Authorities

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

The Bank has established several levels of credit approval authorities for its corporate banking activities - the Credit Committee, the Committee of Executive Directors, the Committee of Senior Management, the Committee of Executives, Corporate Lending Forum and Regional Committees. For certain exposures under programs, approval under joint authorization framework have been established. These authorities approves cases under programs formulated through a cluster-based approach wherein a lending program is implemented for a homogeneous group of individuals or business entities that comply with certain norms. To be eligible for funding under the programs, borrowers need to meet the stipulated credit norms and obtain a minimum score on a scoring model. We have incorporated control norms, borrower approval norms and review triggers in all such programs. The Corporate Lending Forum, which comprises personnel from business groups and Credit Risk Management Group, approves credit proposals for higher rated corporates (internal rating A- and above) and upto a certain exposure limit.

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

Credit Risk Assessment Methodology for Standalone Entities

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

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

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

Borrower risk is evaluated by considering:

After conducting an analysis of a specific borrower’s risk, the Credit Risk Management Group assigns a credit rating to the borrower. We have a scale of 12 ratings ranging from AAA to B. A borrower’s credit rating is a vital input for the credit approval process. The borrower’s credit rating and the default pattern corresponding to that credit rating, form an important input in the risk-based pricing framework of the Bank. Every proposal for a financing facility is prepared by the relevant business unit and reviewed by the Credit Risk Management Group before being submitted for approval to the appropriate approval authority other than retail products, program lending, score card-based lending to small and medium enterprises and agri-businesses and certain other specified products. The approval process for non-fund facilities is similar to that for fund-based facilities. The credit rating for every borrower is reviewed periodically. We also review the ratings of our borrowers in a particular industry upon the occurrence of any significant event impacting that industry. An in-house developed statistical scoring model is being used for assessment of the majority of credit proposals in Mid Corporate Group programs.

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

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

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

Assessment of Project Finance Exposures

For optimal risk identification, allocation and mitigation to minimize risk in project finance transactions, the Bank carries out detailed evaluation of technical and the financial aspects of the project and the sponsor’s financial strength. Project finance loans are generally fully secured, and cash flows are routed through an escrow account. We may also take security interest in relevant project contracts such as concession agreements, off-take agreements and construction contracts as part of the security package. Funds are disbursed based on project progress. Project completion is considered upon satisfactory commencement of operations of the project. We continue to monitor the credit exposure until loans are fully repaid. We have adopted a cautious and selective approach to project financing since the last few years.

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

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

The analysis covers the following key areas:

Our analysis enables us to identify risks in these transactions. To mitigate risks, we use various credit enhancement techniques, such as collateralization, cash collateralization, creation of escrow accounts and debt service reserves. Rating review of these exposure is done based on asset quality review framework of the Bank.

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

The Credit Monitoring Group also carries out regular monitoring of these exposures.

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

We emphasize environmental and social risk assessment for new project and corporate financing proposals subject to certain criteria. These proposals are reviewed under a social and environmental management framework that integrates analysis of the environmental and social risk assessment into the overall credit appraisal process. We are also in the process of incorporating environmental, social and governance and climate risk aspects as part of the credit evaluation process. Borrower level environmental, social and governance scores from external agencies are considered during the evaluation of a proposal. We have developed sector specific environmental, social and governance tools for borrower level evaluation and a framework for assessment of climate-related physical and transition risk that a borrower in the sector could be exposed. We have also formulated an approach to address risks emanating from climate change on the Bank’s operations and loan portfolio.

Assessment of Working Capital Finance Exposures

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

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

Assessment of Retail Loans

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

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

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

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

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

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

Assessment Procedures for Small Enterprises Loans and Business Banking

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

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

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

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

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

Assessment Procedures for Rural and Agricultural Loans

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

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

Rural and agriculture credit also includes financing extended on a cluster-based approach to borrowers with homogeneous profile. The risk assessment of such cluster includes identification of appropriate credit norms, the use of scoring models for enterprises and stipulating suitable collateral norms.

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

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

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

Risk Monitoring and Portfolio Review

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

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

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

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

Under the Bank’s Enterprise Risk Management framework, the Bank has defined benchmark vintage curves as delinquency triggers for key retail products. Actual delinquencies for these products are monitored against these benchmark vintage curves, to enable analysis and directed collection strategies as well as review of origination norms, where required.

Market Risk

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

Market Risk Management Procedures

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

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

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

Interest Rate Risk

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

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

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

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

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

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

As a part of the transition from LIBOR to alternate risk free rates, the Bank has set up a cross-functional working group to monitor the developments internationally, and to oversee the LIBOR transition. The working group is addressing matters primarily pertaining to exposure and impact assessment, contracts remediation, system upgrades, valuation and accounting implications and conduct and reputational risks. The working group is also implementing an internal program, developed with assistance from an external consultant, for ensuring a smooth transition.

The Bank has exposures to LIBOR through both on balance-sheet and off balance-sheet transactions. For the on balance-sheet transactions, the Bank has incorporated fallback language in new lending and borrowing contracts. For existing on balance-sheet contracts, the Bank is in process of amending documentation in order to transit to secured overnight financing rate (SOFR) index and to finalize its detailed terms with counterparties in line with market standards. With respect to off balance-sheet transactions through derivatives, the Bank has adopted the International Swaps and Derivatives Association 2020 IBOR Fallbacks Protocol. Some of the derivatives exposures are linked to INR MIFOR, which will cease by June 30, 2023. There is an ongoing industry wide consultation for the transition of these MIFOR based trades, and the Bank is actively involved in the same. The transition for non-US$ denominated on and off balance-sheet transactions has been completed as of December 31, 2021. The transition for US$ denominated transactions is in progress for tenors of US$ LIBOR that have not yet ceased publication. The timeline for the phase out for US$ based instruments linked to five tenors that continue to be published, including the three month and six month indices, is June 30, 2023. The Bank is also actively engaging with its customers to inform them about the transition. The Bank has published frequently asked questions on its website and has set up a centralized desk to handle client queries. At March 31, 2022, the Bank had outstanding LIBOR based instruments that will mature after June 30, 2023. The cash flows of loans outstanding at March 31, 2022 and due after June 30, 2023 were approximately US$ 0.53 billion and for debt obligations outstanding at March 31, 2022 and due after June 30, 2023 were approximately US$ 0.21 billion. The notional of derivatives outstanding at March 31, 2022 and maturing after June 30, 2023 was approximately US$ 28.01 billion. The notional of derivatives linked to MIFOR index outstanding at March 31, 2022 and maturing after June 30, 2023 was approximately US$ 8.27 billion.

The Bank has upgraded its core systems and has carried out transactions referencing alternate reference rates, as part of the system preparedness. At an industry level, the Bank is engaging with trade bodies, regulators and other institutions for development of alternate instruments and a transition roadmap for the industry. The progress with respect to the transition both on internal status as well as external developments is updated to the Bank’s Asset Liability Committee and to the Risk Committee of the Board on a periodic basis. The Board of Directors is also briefed about the LIBOR transition program periodically. See also “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector—The transition from LIBOR to other alternative reference rates may adversely affect our income from exposures or transactions currently referenced to LIBOR and also bring about the vagaries that such alternative reference rates may have”.

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

Equity Risk

We assume equity risk both as part of our investment book and our trading book. At year-end fiscal 2022, we had a total equity investment portfolio (excluding investment in affiliates) of Rs. 184.6 billion, primarily comprising Rs. 39.9 billion of investments by ICICI Bank and Rs. 106.0 billion of investments by our insurance subsidiaries. The Bank also acquires equity investments from loan conversion and also investment in unlisted equity which are long-term in nature. We also invest in private equity funds, primarily those managed by our subsidiary ICICI Venture Funds Management Company. These funds invest in equity and equity linked instruments. Our investments through these funds are similar in nature to our other equity investments and are subject to the same risks. In addition, they are also subject to risks in the form of changes in regulation and taxation policies applicable to such equity funds. ICICI Securities and ICICI Securities Primary Dealership also have a small portfolio of equity derivatives. For further information on our trading and available-for-sale investments, see “—Overview of Our Products and Services—Investment Banking—Treasury”.

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

Exchange Rate Risk

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

The Bank offers foreign currency-rupee options for hedging foreign currency exposures including hedging of balance sheet exposures to the users which include banks and corporate clients. All the options positions are maintained within the limits including greek limits specified in the Investment Policy. The foreign exchange rate risk is monitored through the net overnight open position limit approved by the Board and intra-day foreign exchange position limits.

Derivative Instruments Risk

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

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

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

Credit Spread Risk

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

Liquidity Risk

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

The goal of liquidity management is to ensure that the Bank is always in a position to efficiently meet both expected and unexpected current and future cash flow and collateral needs without negatively affecting either the Bank’s daily operations or financial conditions.

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

The Bank uses various tools for the measurement of liquidity risk including the statement of structural liquidity, dynamic liquidity cash flow statements, liquidity ratios and stress testing through scenario analysis. The statement of structural liquidity is used as a standard tool for measuring and managing net funding requirements and the assessment of a surplus or shortfall of funds in various maturity buckets in the future. The cash flows pertaining to various assets, liabilities and off-balance sheet items are placed in different time buckets based on their contractual or behavioral maturity. The statement of structural liquidity of rupee currency for domestic operations, and statement of structural liquidity of all currencies together for international operations of the Bank (country-wise and in aggregate) are prepared on daily basis. The statement of structural liquidity of foreign currency for domestic operations, consolidated statement for domestic operations and for the Bank as a whole are prepared on fortnightly basis. The utilization against gap limits laid down for each bucket is reviewed by Asset Liability Management Committee of the Bank.

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

The Bank has diverse sources of liquidity to allow for flexibility in meeting funding requirements. For the domestic operations, this includes current accounts and savings deposits payable on demand and retail term deposits, augmented by wholesale deposits, issuance of Certificate of Deposits, borrowings and through the issuance of bonds and subordinated debt from time to time. Loan maturities and sale of investments also provide liquidity. The Bank holds unencumbered, high quality liquid assets and has certain mitigating measures to protect against stress conditions.

For domestic operations, the Bank also has the option of managing liquidity by borrowing in the inter-bank market on a short-term basis. The overnight market, which is a significant part of the inter-bank market, is susceptible to volatile interest rates. To limit the reliance on such volatile funding, the Asset Liability Management Policy stipulates limits for borrowing and lending in the inter-bank market.

For our overseas branches, the Bank also has a well-defined borrowing program. The incremental wholesale borrowings are primarily in the form of money market borrowings and interbank bilateral loans. The Bank also raises refinance from other banks against eligible trade assets. Those loans that meet the Export Credit Agencies’ criteria are refinanced as per the agreements entered into with these agencies. The Bank also mobilizes deposits liabilities, in accordance with the regulatory framework in place in the respective host country.

The Bank maintains prudential levels of liquid assets in the form of cash, balances with the central bank and government securities, money market and other fixed income securities. As stipulated by the regulator, banks in India are required to maintain statutory liquidity ratio at a level of 18.0% at March 31, 2022 of their net demand and time liabilities in India and cash reserve ratio at a level of 4.0% of their net demand and time liabilities in India. The Bank generally holds additional securities over and above the stipulated statutory liquidity ratio requirement. In order to address the stress in financial conditions caused by Covid-19 pandemic, the Reserve Bank of India on March 27, 2020 announced reduction in the required cash reserve ratio by 100 basis points to 3.0% of net demand and time liabilities with effect from the reporting fortnight beginning March 28, 2020 for a period of one year ending on March 26, 2021. Further, Reserve Bank of India on February 5, 2021 decided to gradually restore the cash reserve ratio in two phases in a non-disruptive manner. The required cash reserve ratio was at 3.5% of net demand and time liabilities with effect from the reporting fortnight beginning March 27, 2021 and 4.0% of net demand and time liabilities with effect from the fortnight beginning May 22, 2021. On May 4, 2022, the Reserve Bank of India decided to increase the cash reserve ratio by 50 basis points from 4.0% to 4.5% of their net demand and time liabilities, effective from the reporting fortnight beginning May 21, 2022.

Banks in India are required to maintain a liquidity coverage ratio at a minimum of 100.0% on a standalone as well as consolidated basis. The liquidity coverage ratio requirement is met by investments in high quality liquid assets which are primarily in the form of government securities, in excess of mandatory statutory liquidity ratio, specified portion of government securities held by the bank within the mandatory statutory liquidity ratio requirement in the form of facility to avail liquidity for liquidity coverage ratio and marginal standing facility, and better-rated corporate bonds.

At March 31, 2022, out of the statutory liquidity ratio requirement of 18.0% of net demand and time liabilities in India, 17.0% (15.0% for securities eligible for the facility to avail liquidity for liquidity coverage ratio, and 2.0% for securities eligible for the marginal standing facility) was counted towards the high quality liquid assets under the liquidity coverage ratio. In order to address the stress in financial conditions caused by Covid-19 pandemic, during March 2020, the Reserve Bank of India increased the limit of securities eligible for the marginal standing facility from 2.0% to 3.0% of a bank’s net demand and time liabilities, with effect from March 27, 2020 until June 30, 2020. The Reserve Bank of India subsequently decided to extend this enhanced limit until December 31, 2021. The Reserve Bank of India on April 18, 2022 permitted banks to reckon Government securities as under the facility to avail liquidity for liquidity coverage ratio within the mandatory statutory liquidity ratio requirement up to 16.0% of their net demand and time liabilities from 15.0% of their net demand and time liabilities.

During fiscal 2022, the Bank maintained a liquidity coverage ratio above the stipulated level. Banks in India are also required to maintain a net stable funding ratio at a minimum of 100.0% on a standalone as well as consolidated basis. Net stable funding ratio ensures resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding.

We have a Board approved liquidity stress-testing framework, under which we estimate the Bank’s liquidity position under a range of stress scenarios, and consider possible measures we could take to mitigate the outflows under each scenario. During fiscal 2022, the results of each of the stress scenarios were within the Board-approved limits.

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

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

Our subsidiary in the United Kingdom has access to diverse sources of liquidity to allow for flexibility in meeting its funding requirements. In line with local regulatory requirements, ICICI Bank UK has an Internal Liquidity Adequacy Assessment Process document, which is approved by its Board of Directors. The Internal Liquidity Adequacy Assessment Process outlines the stress testing framework and liquidity and funding risk limits. These limits are monitored by Asset Liability Management Committee of ICICI Bank UK PLC, at least on monthly basis. ICICI Bank UK PLC has complied with these requirements throughout fiscal 2022. It maintained liquidity coverage ratio above the stipulated level of 100.0% during fiscal 2022 and complied with Pillar 2 liquidity requirements, as stipulated to it by the Prudential Regulation Authority.

In Canada, the liquidity coverage requirements guidelines from Office of the Superintendent of Financial Institution expect banks to ensure that the value of the liquidity coverage ratio be no lower than 100.0%, in absence of the situation of financial stress. At March 31, 2022, ICICI Bank Canada maintained liquidity coverage ratio above the regulatory minimum of 100.0%. Office of the Superintendent of Financial Institution expects each Canadian bank to have an internal liquidity policy articulating and defining the role of liquid assets within the bank’s overall liquidity management system and establishing minimum targets for liquid asset holdings. ICICI Bank Canada has a Liquidity Management Policy and Market Risk Management Policy, which are approved by its Board of Directors. These limits are monitored by Asset Liability Management Committee of ICICI Bank Canada, at least on monthly basis. ICICI Bank Canada has complied with these requirements throughout fiscal 2022.

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

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

Operational Risk

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

The management of operational risk is governed by the Operational Risk Management Policy approved by the Board of Directors. The Policy is applicable across the Bank including overseas branches, ensuring a clear accountability and responsibility for management and mitigation of operational risk, developing a common understanding of operational risk and assisting the business and operation groups to improve internal controls. The Board has constituted an Operational Risk Management Committee for reviewing risks associated with the various business activities of the Bank. The Operational Risk Management Committee reviews the risk profile of various key functions, the tools used for management of operational risk and implementation of the operational risk management policies as approved by the Board. The Board has also approved a framework for approval of products and processes, which requires the products and processes pertaining to products/product variants to be assessed from an operational risk perspective. Based on the Group Operational Risk Management Policy approved by the Board, for companies having total assets of more than Rs. 10.00 billion or assets under management of more than Rs. 100.00 billion, the respective group companies are responsible for implementing operational risk management framework through the operational risk management policy approved by their respective Boards.

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

Operational risk is sought to be mitigated by maintaining a comprehensive system of internal controls, establishing systems and procedures to monitor transactions, maintaining key back-up procedures and undertaking regular contingency planning.

The Bank has put in place comprehensive process documents from customer sales to processing of transactions/proposals at various stages of the transaction life cycle. These process documents are required to be reviewed at a periodic basis. Further, the functional structure at the Bank has been organized in a manner to ensure adequate checks and balances. A brief on the management of operational controls and procedures at the Bank is summarized below:

Operational Controls and Procedures in Retail Banking

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

The Bank has its contact centres in multiple cities for extending banking services to customers through phone banking. The services are offered through an automated Interactive Voice Response and as well through an agent after proper authentication of the customer.

Operational Controls and Procedures for Wholesale and Transaction Banking

The credit risk of the Wholesale banking business is independently evaluated by the credit risk management group, the legal group reviews, the security structure and documentation aspects and the operations group conducts verification and scrutiny of the loan documents vis-à-vis sanction terms, monitoring important covenants of the terms of sanction, monitoring creation of security and other important aspects for the facility extended by the Bank. The Bank has a credit monitoring group, which provides inputs for monitoring and management of credit portfolio across the life cycle of the loans. The Transaction Banking focuses on offering comprehensive payment and collection related products to the customers.

Operational Controls and Procedures in Treasury

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

Operational Controls and Procedures for Information Technology and Information Security

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

The cyber security threat landscape for banks and financial institutions globally is constantly evolving and threats such as phishing, distributed denial of service attacks, leakage of sensitive data, malware, ransomware and exploitation of ATM vulnerabilities or vulnerabilities in systems provided to banks by software vendors are not only prevalent but also continuously morphing.

To stay on top of such an evolving threat landscape and to regularly monitor any attempted threats to the Bank’s information assets, the Bank has 24x7 monitoring and surveillance of systems by Security Operations Centre and IT Command Center (which includes Network Operation Center). This is supported by the resilience in the design and redundancy at every layer in Bank’s Information Technology infrastructure (servers, storage and network). The Bank has processes for change management, identity management, access management and security operations, and these processes are periodically reviewed and refined to keep them abreast of emerging risks and to implement commensurate controls to mitigate such risks. The Bank has a fully equipped disaster recovery setup in place at remote location(s), which is subject to periodic disaster recovery drills. Further, stringent gating controls are followed at the time of introducing new applications. As data protection is important, critical and vital, data leakage and loss prevention system is in place which consists of many policies to protect confidential data at endpoint, web and email level. The Bank also has in-house ethical hacking (red teams) to continuously test applications for vulnerabilities or security flaws. The Bank undergoes multiple assessments of its security by internal and external auditors, through specific thematic assignments and regulators to continuously check its security posture and strengthen its controls. The Bank continually keeps learning from the environment and any incidents, in order to enhance cyber resilience.

The Bank conducts and participates in cyber security drills to continuously fine tune its response mechanisms. The Bank runs frequent awareness campaigns for employees through mails, screen savers and other modes, and conducts internal simulation exercises to ensure high levels of employee awareness on information security. The Bank is continuously reviewing and taking adequate measures to enhance the IT resilience in terms of application architecture, network and infrastructure.

Operational Controls and Procedures for Digital Channels:

The digital channels are used by the Bank for both sales and servicing. The Bank has separate online channels for retail and corporate and small business banking customers and the same are also compatible with mobile devices. The Bank has put in place authentication and authorization controls for transactions through internet and mobile banking. The internet banking infrastructure is secured through multi-layer information security controls, including firewalls, intrusion prevention systems and network level access controls. These are supplemented by periodic penetration tests, vulnerability assessments and continuous security checks. The customer access and transactions are authenticated using two-factor authentication wherever applicable and the challenge mechanism is also dynamic, to ensure that the facility is being accessed by the intended customer.

To create awareness among customers about phishing, vishing and other digital banking frauds, the Bank regularly sends communications to customers. The Bank also has various fraud monitoring tools for online and offline monitoring of possible frauds being committed on customers account.

The adherence to the processes and guidelines in the aforesaid areas is overseen through risk monitoring, concurrent audits and internal audits.

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

Anti-Money Laundering Controls

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

Implementation of these guidelines includes the formulation of a Group Anti-Money Laundering Policy with the approval of the Board of Directors of the Bank which also covers the overseas branches; oversight by the Audit Committee on the implementation of the Anti-Money Laundering framework; appointment of a senior level officer as the principal officer who has the day-to-day responsibility for implementation of the anti-money laundering framework; implementation of adequate Know Your Customer procedures, screening of names of customers with negative lists issued by the regulators and customer risk categorization for classifying the customers as high, medium and low risk; risk-based transaction monitoring and regulatory reporting procedures through automated applications; implementing appropriate mechanisms to train employees’ and to creating customer awareness on this subject.

The Bank adopts a risk based approach and conducts customer risk assessment with simplified due diligence for low risk, normal due diligence for medium risk and enhanced due diligence for high risk customers pursuant to the Reserve Bank of India guidelines.

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

The Bank has a Group Anti-Money Laundering policy which requires the non-banking and banking subsidiaries to formulate Anti-Money Laundering policies in line with their respective regulatory requirements.

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

The Directorate of Enforcement earlier issued six show-cause notices against ICICI Bank and certain other entities and persons alleging certain violations under Foreign Exchange Management Act, 1999 mainly pertaining to the sale of foreign exchange travel cards to travellers. In four of these matters, the Enforcement Directorate has imposed penalties of Rs. 4 million on ICICI Bank Limited and Rs. 1 million on its employees. ICICI Bank Limited has filed an appeal against these orders before Appellate Tribunal for Foreign Exchange and the matters are listed for hearing in the Appellate Tribunal.

The Bank has received a favorable order in two matters.

The Financial Intelligence Unit through its order dated July 30, 2021 issued a warning for failing to have effective internal mechanism to detect and report complete information on Cross Border Wire Transfer Reports under Prevention of Money Laundering Act, 2002. The Financial Intelligence Unit India also mentioned that resubmission of the entire Cross Border Wire Transfer Reports by the Bank according to guidelines was a mitigating factor in favor of the Bank.

In May 2021, Reserve Bank of India cautioned the Bank for continued operations in InstaSave Salary accounts despite aggregate balances exceeding permissible limits.

See also “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector—The enhanced supervisory and compliance environment in the financial sector increases the risk of regulatory action against us, whether formal or informal” and “Risk Factors—Risks Relating to Our Business—Negative publicity could damage our reputation and adversely impact our business and financial results and the prices of our equity shares and ADS.”

Cyber Security

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

We have made arrangements for all key activities to be performed on a work-from-home model through a secure Virtual Private network and Virtual Desktop Interface. Our 24x7 Security Operation Centre has also configured specific rules to continually monitor logs from virtual private network services and generate alerts in case of any unusual events.

Audit

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

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

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

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

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

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

Legal and Regulatory Risk

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

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

Risk Management Framework for International Operations

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

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

Risk Management in Certain Subsidiaries and Affiliates

ICICI Bank UK PLC

The key risks to which ICICI Bank UK PLC is exposed to include credit risk (including concentration risk, climate change risk and geo-political risk), market risk (including interest rate and credit spread risks), liquidity risk, operational risk (including compliance, legal risk and conduct risks) and information security risk.

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

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

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

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

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

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

ICICI Bank UK PLC has implemented an integrated approach to IT security and made significant progress in enhancing its information security governance through monitoring at the Information Technology and Security Committee. Additionally, periodic presentations are provided to the Board Risk Committee on cyber threat landscape and the measures like periodic vulnerability and penetration testing, Application security life cycle assessment, information security awareness programs and cyber incident management undertaken to mitigate risks. At March 31, 2022, ICICI Bank UK PLC was in the process of renewing its “Cyber Essentials” certificate and badge which demonstrates that ICICI Bank UK PLC’s information security processes and procedures meet the UK baseline standards.

ICICI Bank Canada

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

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

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

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

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

Canada experienced market-wide liquidity tightening and higher volatilities in the fixed income and foreign exchange markets at the beginning of the pandemic. ICICI Bank Canada observed higher than usual collateral posting requirements with foreign exchange swap counterparties due to currency price movements. ICICI Bank Canada proactively maintained higher liquid assets and took all internal approvals for participation in Bank of Canada’s standing term liquidity facility for liquidity requirements towards unforeseen contingency events.

Following the outbreak of the Covid-19 pandemic, our overseas banking subsidiaries conducted detailed reviews of their portfolios as well as their underwriting norms. While these subsidiaries have made additional Covid-19 related provisions, the extent of impact of the pandemic on their loan portfolios is uncertain. The pandemic and its economic impact may negatively impact growth and profitability in these subsidiaries.

ICICI Securities Primary Dealership

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

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

ICICI Prudential Life Insurance Company

The risk governance structure of ICICI Prudential Life Insurance Company consists of the Board, Board Risk Management Committee, Executive Risk Committee and its sub-committees. The Board, on the recommendation of the Board Risk Management Committee, has approved the risk policy which covers the identification, measurement, monitoring and control standards relating to various individual risks, namely investment (market, credit and liquidity), insurance, reputation and operational (including legal, compliance, outsourcing, customer dissonance, business continuity, information and cyber security) risks. The Board periodically reviews the potential impact of strategic risks such as changes in macro-economic factors, government policies, regulatory environment and tax regime on the business plan of the Company. In addition to these risks, the life insurance industry faces sustainability risks related to environmental, social and governance issues. One of the most prominent environmental, social and governance risks is that of climate change which could potentially have wide-ranging implications including (but not limited to) adverse impact on economic growth and investment markets and higher than expected claims due to increased risk of future weather related catastrophes, pandemics as well as possible changes in long-term mortality/morbidity rates. Apart from climate change, there are emerging risks associated with public health trends such as increase in obesity related disorders and demographic changes such as population urbanization and ageing. Other important environmental, social and governance elements include data privacy which has an increasing material impact on the Company’s reputation. The risk management framework of the Company seeks to identify, measure and control its exposures to all these risks within its overall risk appetite. During the year, the Company has integrated sustainability risks in its risk management framework.

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

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

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

After a surge of claims during the second wave of the pandemic witnessed in the first half of fiscal 2022, the Covid-19 related claims intimation to ICICI Prudential Life Insurance Company tapered down in the third quarter of fiscal 2022 and continued to show a declining trend in the fourth quarter of fiscal 2022. However, there remains uncertainty around the outlook for Covid-19 pandemic. The long-term impact on mortality and morbidity is dependent on the extent of natural immunity that develops in the general population, the efficacy of new healthcare treatments, possible future strains that may emerge and the implications from other factors such as long-term post-Covid-19 symptoms (although there is currently no consensus on the longer-term impact on mortality/morbidity). ICICI Prudential Life Insurance Company continues to closely watch the evolving situation for appropriate risk mitigation and management.

ICICI Lombard General Insurance Company

ICICI Lombard General Insurance Company is principally exposed to risks arising out of the nature of business underwritten and credit risk on its total investment assets as well as the credit risk it carries on its reinsurers. In respect of business risk, ICICI Lombard General Insurance Company seeks to diversify its insurance business across product classes, industry sectors and geographical regions. ICICI Lombard General Insurance Company focuses on achieving a balance between the corporate and retail business mix to achieve favorable claim ratio and risk diversification. ICICI Lombard General Insurance Company has a risk retention and reinsurance policy whereby tolerance levels are set as per risk and on a per event basis. ICICI Lombard General Insurance Company also has the ability to limit its risk exposure by way of re-insurance arrangements. Investments of the Company are governed by the investment policy approved by its Board of Directors within the norms stipulated by the Insurance Regulatory and Development Authority of India. As per the Insurance Regulatory and Development Authority of India’s Investment Regulations, the Company is required to invest a certain portion of its investment assets in central government securities and state government securities/loans. The regulations also have a stipulation to invest in AAA or equivalent rating debt instruments. The Investment Committee oversees the implementation of this policy and reviews it periodically. Exposure to any single non-government issuer is restricted to maximum 5.0% of the total investment assets, by cost. The regulatory stipulation for such exposure is capped at 10.0% of the investment assets. The Company invests a minimum of 5.0% of its investment assets in money market instruments to ensure adequate liquidity in the investment portfolio.

ICICI Lombard General Insurance Company would continue to closely watch the evolving situation for appropriate risk mitigation and management.

Loan Portfolio

Our gross loan portfolio increased by 14.9% from Rs. 8,246.6 billion at year-end fiscal 2021 to Rs. 9,475.1 billion at year-end fiscal 2022. At year-end fiscal 2022, 88.4% of our gross loans were rupee loans. See also “Operating and Financial Review and Prospects—Financial Condition—Assets—Advances”.

Collateral—Completion, Perfection and Enforcement

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

Secured consumer loan portfolio

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

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

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

Commercial loans

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

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

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

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

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

We recognize that our ability to realize the full value of the collateral in respect of current assets is affected adversely by, among other things, delays on our part in taking immediate action, delays in bankruptcy proceedings, defects in the perfection of collateral (including due to inability to obtain approvals that may be required from various persons, agencies or authorities) and fraudulent transfers by borrowers and other factors, including current legislative provisions or changes thereto and past or future judicial pronouncements. The value and time to dispose the collateral could also be impacted by policy decisions. In addition, the Bank generally has a right of set-off for amounts due to us on these facilities. The Bank generally requires its working capital loan customers to submit data on their working capital position on a regular basis, so that we can take any actions required before the loan becomes impaired. On a case-by-case basis, we may also stop or limit the borrower from drawing further credit from its facility.

Loan Pricing

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

The Reserve Bank of India, through its circular dated September 4, 2019 and February 26, 2020, amended the Master Direction – Interest Rate on advances and mandated banks to link all new floating rate personal or retail loans (housing, auto, etc.) and floating rate loans to micro, small and medium enterprises extended by banks to specified external benchmarks. The interest rate of external benchmark linked floating rate loans shall be reset at least once in three months. For borrowers other than retail and micro, small and medium enterprises, the Bank has the option to offer floating rate loans linked to external benchmark or marginal cost of funds based lending rate. Currently, ICICI Bank links its external benchmark linked floating rate loans to the Reserve Bank of India Policy Repo Rate and 3-months Treasury bill rates as published by Financial Benchmarks India Pvt. Ltd.

Subsidiaries, Associates and Joint Ventures

The following table sets forth certain information relating to our subsidiaries, joint ventures and consolidated entities at year-end fiscal 2022.

The following table sets forth certain information on our affiliates whose results were included in the consolidated financial statements under Indian GAAP at year-end fiscal 2022.

At year-end fiscal 2022, all of our subsidiaries and joint ventures were incorporated in India, except the following five companies:

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

Technology

Technology organization

The digital channels group focuses on internet and mobile banking solutions. Dedicated technology groups support core banking and other systems used by business groups and corporate functions. The technology infrastructure and technology management group are responsible for providing and maintaining the required infrastructure. A start-up investment and partnerships team focuses on collaborating with and investing in fintech start-ups and piloting strategic digital projects.

Digital platforms and journeys for retail customers

We use artificial intelligence and machine learning based engines to develop personas of customers and curate personalized offerings for them. We offer various solutions such as account opening, payment solutions, home loans, automobile loans, personal loans, credit cards, term life insurance, health insurance and investment solutions to our customers suiting their life-stage needs through our digital channels viz retail internet banking platform and our mobile banking application, iMobile Pay. Our retail internet banking platform offers users a native dashboard, semantic and personalized search options and an interface that can be personalized by them to suit their requirements and preferences. The open architecture based feature of iMobile Pay allows users to make payments using unified payments interface even if they do not have an account with us. There have been 6.3 million activations of iMobile Pay from non-ICICI Bank account holders at March 31, 2022. The feature ‘Pay to contact’ enables users to automatically see the unified payments interface IDs of their phone contacts and enables customers to easily transfer money to any payment application or digital wallet via unified payments interface. The ‘Scan to Pay’ feature allows users to make bill payments by scanning the quick response code. These features have led to an increase in adoption of iMobile Pay. We continuously look to improve user experience on iMobile Pay to attract more customers. During fiscal 2022, we introduced a contactless payment facility on iMobile Pay which enables users of android based smartphones to make credit and debit card payments on Point of Sale terminals in a safe and secure manner by tapping their phones. We also introduced a feature which allows users to link credit card of any bank in iMobile Pay and make payments directly using the application. We have gone live with end-to-end digital journeys for new-to-bank customers on iMobile Pay for products such as credit cards, personal loans, savings accounts and demat account. We also recently introduced an outward remittances feature, Money2World, on iMobile Pay for seamless cross-border transfer of funds.

We use video interaction for carrying out Know Your Customer while onboarding new customers. Our proprietary iScore for non-ICICI Bank account holders developed from their digital footprint helps them to understand their eligibility for various products. We offer instant home loan sanctions, car loan disbursements, personal loan disbursements and credit cards that are accessible entirely through our retail internet banking platform and iMobile Pay. The processing of loans is digitized end-to-end enabling instant disbursement to pre-approved customers. We also offer an instant digital credit facility, PayLater, on iMobile Pay which enables pre-approved customers to avail instant credit for buying small ticket items through unified payments interface. Approximately 34% of our mortgage sanctions and 44% of our personal loan disbursements, by volume, were end-to-end digital in fiscal 2022. During fiscal 2022, we introduced iLens, an integrated, end-to-end digital lending solution for mortgages which covers all facets of loan lifecycle starting from sales till disbursement including property appraisal. It is a single interface for employees, third party agencies and distribution channels with the objective of providing smooth transacting experience and enhanced operational efficiency. It also offers seamless experience to new-to-bank and existing customers through instant sanction letters, option for disbursement initiation and real time loan tracking.

We have also introduced digital conversion of three-in-one accounts for non-resident Indian customers. We also introduced mutual fund investment through iMobile Pay for non-resident Indian customers.

While creating seamless and convenient banking experiences for customers, we also recognize the customers’ need to understand personal finance better through reliable information that is easily accessible. We launched a digital initiative “The Orange Book” in fiscal 2022, a monthly e-magazine that educates customers about personal finance and helps them to take better financial decisions. The Orange Book covers an array of financial topics from investment planning, safe banking tips to tax savings, financial preparedness and much more.

Digital payments and partnerships

We have continued to strengthen our position in the digital payments ecosystem by designing seamless journeys for customers, facilitating higher volumes and prompting recurrent transactions. Our strategy is to participate in unified payments interface payments both directly through our own platforms and partner with third party players in the peer-to-peer and peer-to-merchant space . The total number of our unified payments interface person-to-merchant transactions increased by 57.5% year-on-year in fiscal 2022. The value of unified payments interface person-to-merchant transactions in fiscal 2022 was 2.3 times the value of unified payments interface peer-to-merchant transactions in fiscal 2021.

FASTag is an electronic toll collection system in India operated by the National Highways Authority of India through prepaid radio frequency identification tags. We are one of the leading banks in electronic toll collection on highways through FASTag. Our value of electronic toll collections through FASTag grew by 55.4% year-on-year in fiscal 2022. We had a market share of approximately 35% in electronic toll collections through FASTag in fiscal 2022 and were ranked first in the industry.

We have partnered with Amazon Pay, a leading global ecommerce company and MakeMyTrip, a leading Indian online travel portal to offer co-branded credit cards. We offer these credit cards to our customers as well as non-ICICI Bank account holders. Over three million Amazon Pay credit cards were issued until year-end fiscal 2022. We aim to provide 360-degree solutions to the new-to-bank customers that have been acquired through Amazon Pay credit cards. We have recently tied up with Emirates Skywards, the award-winning loyalty programme of Emirates and FlyDubai, to launch a range of cobranded credit cards that enable customers to earn reward points on travel, lifestyle and everyday spends. We have tied up with Hindustan Petroleum Corporation Limited to offer a cobranded credit card called ‘ICICI Bank HPCL Super Saver Credit Card’ which offers rewards and benefits to customers on their everyday spends on fuel as well as other categories. Our credit cards in force increased by 22.6% year-on-year to 13 million at year-end fiscal 2022. Our market share in credit cards in force increased from 17.1% at year-end fiscal 2021 to 17.6% at year-end fiscal 2022. The value of credit card transactions in fiscal 2022 was 2.1 times the value of transactions in fiscal 2021. The growth in credit card transactions was driven by higher activation rate through digital onboarding of customers, including Amazon Pay credit cards, automated and effective portfolio management and diversification through commercial cards. Our market share in credit card transactions by value increased from 14.6% in fiscal 2021 to 20.1% in fiscal 2022.

We offer a host of Application Programme Interfaces and software developer kits through our Application Programme Interfaces Banking Portal which enable third party apps to offer payment, trade, investment and credit solutions for their retail customers.

Digital platforms and solutions for rural customers

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

Technology in debt service management

We invest in big data initiatives involving artificial intelligence and machine learning to manage our collections effectively. We use an artificial intelligence based pre-delinquency management engine which uses more than 100 variables to create multiple microsegments and accurately forecast most of the bounces for the right intervention at the right time. The Bank has also tied up with various merchant platforms to facilitate collections through digital means from customers and also uses Application Programme Interface based integrations with large payment channels to ensure timely credit of the overdue amounts.

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

Our digital platform, InstaBIZ, offers various services such as instant overdraft facility, payment of goods and services tax, foreign exchange deal booking, business loans based on revenues reported in goods and service tax returns, automatic bank reconciliations, inward and outward remittances. We had more than 1 million active customers on InstaBIZ as of year-end fiscal 2022. The value of financial transactions on InstaBIZ grew by about 70.9% year-on-year in fiscal 2022. In line with the philosophy of open architecture, we recently made the InstaBIZ interoperable. Various features of InstaBIZ are now available to all merchants including those who do not have a current account with us. Merchants, including those who do not have a current account with us, can instantly create digital collection solutions like unified payments interface ID and quick response code and start collecting money from their customers immediately. They can digitally apply for Point of Sale devices as well. Merchants can open a current account instantly and digitally on InstaBIZ. This end-to-end paperless process leverages our Application Programme Interfaces that auto fill the account opening form and validate the identity of the merchant instantly. Through ‘InstaOD Plus’, customers of any bank can avail an overdraft up to Rs. 2.5 million instantly. Our customers can activate the overdraft facility into their current account instantly, while customers of other banks can do so after opening of a current account with us digitally by using Know Your Customer video.

Our Trade Online platform allows customers to perform most of their trade finance and foreign exchange transactions such as regularization of bill of entry and export bills, availing letters of credit and fixed deposit backed bank guarantees, export credit, and import and export bill collections among others digitally. The value of transactions on the Trade Online platform grew by 76.2% year-on-year in fiscal 2022. Customers can also avail bank guarantees on the go through our mobile and internet banking platforms using our express bank guarantee facility. We have created an online repository of bank guarantees called Bank Guarantee Repository Solution which can be used by government departments and institutions to view and authenticate bank guarantees issued in their favor.

Our strategy in the merchant ecosystem space involves onboarding merchants through acquiring platforms or by providing them payment gateways and then cross-selling other financial products and services seamlessly. During fiscal 2022, we launched “Merchant STACK” which offers an array of banking and value-added services to retailers, online businesses and large e-commerce firms. The main pillars of the Merchant STACK include a zero-balance Super Merchant Current Account which offers various benefits such as digital account opening and instant overdraft facilities based on point-of-sale transactions. Merchants can also perform instant reconciliation by using the Connected Banking services, which integrates banking with the merchants’ accounting system. The Merchant STACK also offers a digital store management feature for invoicing, inventory and collections management.

The e-commerce ecosystem lends significant opportunities for us to offer digital solutions to customers and merchants selling their goods through e-commerce websites. We introduced ‘Cardless Equated Monthly Instalment (EMI)’ facility, which enables our pre-approved customers to convert their transactions into equated monthly installments at the check-out section of the e-commerce website or mobile application. In another initiative, we partnered with Amazon India and Flipkart to offer instant overdraft facility to their registered sellers with end-to-end digital processing. Some key solutions offered to e-commerce entities and their sellers include overdraft facility, composite pay Application Programme Interfaces enabling payments through various channels, foreign currency fixed deposit, working capital and easy payment solutions.

We also provide platforms and solutions that go beyond banking and support the growth of small and medium enterprises like providing an online marketplace to buy and sell products and avenues for networking, building knowledge on businesses and global best practices.

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

During fiscal 2022, we launched “ICICI STACK for Corporates” offering comprehensive solutions to corporates and their ecosystem like channel partners, dealers, vendors, employees and other stakeholders, thus bringing the full bank to the customer. Using ICICI STACK for Corporates we offer customized digital banking services to companies in over 20 key industries. The four main pillars of ‘ICICI STACK for Corporates’ include digital banking solutions for companies; digital banking services for channel partners, dealers and vendors; digital banking services for employees and curated services for promoters, directors and signatories. Our digital banking services for companies and their ecosystems include digital platforms for domestic and international trade and industry specific solutions across the value chain. Platforms offered to corporate customers as a part of ICICI STACK for Corporates include corporate internet banking platform, Trade online and FX online, among others. During fiscal 2022, we launched ‘Trade Emerge’, an online platform for cross-border trade. It offers an array of banking and value-added services in one place, and eliminates the need for companies to coordinate with multiple touchpoints. The list of banking services includes current/saving account offerings, comprehensive trade services, state-of-the-art foreign exchange solutions, payment and collection solutions and credit cards. Trade Emerge is a step towards developing banking as a platform, targeted at emerging businesses. With this, we aim to ensure a holistic approach to trade fulfilment, and offer a unique competitive advantage because of the end-to-end coverage of the trade journey. Trade Emerge has also been integrated with Corporate Internet Banking and InstaBIZ.

Our solutions to meet the needs of customers and their ecosystems are supported by robust online channels and Application Programme Interfaces that aim to impart convenience and efficiency to our clients. The volume of payment and collection transactions through these Application Programme Interface based solutions in fiscal 2022 was 2.9 times the volume of transactions in fiscal 2021.

Supply chain financing is an integral part of the small and medium enterprise business and a focus area towards deepening our coverage of the corporate ecosystem. Our supply chain solutions, CorpConnect and DigitalLite, enable corporates to seamlessly manage supply chain financing, payments, collection and reconciliation requirements of their dealers and vendors in a convenient and paperless process. These platforms also automatically assess the eligibility of the corporate’s dealers and vendors for credit through business rule engine, Goods and Services Tax returns, intelligent algorithm with automated bureau checks, dedupe checks, digital approval letter generation automation and e-sign features which requires minimal or no manual intervention. During fiscal 2022, we launched a revamped OneSCF, an integrated supply chain platform providing corporate customers, their vendors and dealers with a one-stop solution to efficiently manage their working capital requirements. The corporate clients can also experience a seamless end-to-end supply chain financing by integrating with our platform through various modes for improving operational efficiency.

During fiscal 2022, a facility to download ‘Easy Balance Confirmation Certificate’ through the Corporate Internet Banking platform was introduced which reduces the turnaround time for obtaining confirmations for financial reporting and regulatory purposes. To give a one-stop solution for all statutory requirements of the customer, we facilitated online payment of customs duty along with direct taxes, Goods and Services Tax and various others tax payments. For addressing the challenges and risks associated with the transfer of physical documents, we partnered with leading electronic bill of lading service providers for facilitating digital transfer of trade documents over the platform. Electronic bill of lading imparts value to the customer by providing operational efficiency and improved cash flow management. These embedded solutions ensure stable business for us by enhancing customer satisfaction and improved wallet share.

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

Transforming into Bank^Tech

We are continuously investing in key technological and operational capabilities. The priorities driving our technology focus include building a secure and resilient technology infrastructure, improving customers’ digital experiences, operational efficiency and enabling sales and cross-sell of products and services. We have embarked on a journey to transform from a Bank to Bank^Tech, with a focus on creating an enterprise architecture framework across digital platforms, data and analytics, micro services based architecture, cloud computing, cognitive intelligence and other emerging technologies. This is based on the founding pillars of scalability, modularity, flexibility and agility, resilience and reliability, and creating delightful and digitally native customer experiences to enable sustainable profitable growth. The key priorities that dominate our technology requirements include our technology platforms, embedded banking, cloud adoption and data platforms and analytics.

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

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

Data Centre and Disaster Recovery System

We have a data center at Hyderabad, which is designed to optimize energy efficiency and accommodate high server densities. We also have a disaster recovery data center at Jaipur. We have developed business continuity plans, which would help facilitate continuity of critical businesses in the event of a disaster. These plans are tested periodically and have been prepared in line with the guidelines issued by the Reserve Bank of India and have been approved by our Board of Directors. The Bank has also equipped itself with state-of-the-art infrastructure management systems which leverage Internet of Things based technology at its data center for optimal utilization of energy and reduction of operational costs.

Competition

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

Commercial banks in India meet the short-term financial needs, or working capital requirements, of industry, trade and agriculture, provide long-term financing to sectors like infrastructure and provide retail loan products. At March 31, 2022, there were 136 scheduled commercial banks in the country, with a network of 151,320 branches serving approximately Rs. 170.2 trillion in deposit accounts. Scheduled commercial banks are banks that are listed in the second schedule of the Reserve Bank of India Act, 1934, and are further categorized as public sector banks, private sector banks and foreign banks. Scheduled commercial banks have a presence throughout India, with approximately 63.2% of bank branches located in rural or semi-urban areas of the country.

Commercial Banking Products and Services for Retail Customers

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

Non-financial companies, particularly international technology companies including large e-commerce players and internet-based service providers, are increasing their presence in the financial sector and are offering payment platforms and select services. We are currently partnering with some of these entities to jointly offer payment and credit products and services. Some or all of these entities, which have substantially more resources than us and other Indian banks, may eventually seek a larger share of the banking and financial services market in India and compete with us.

We seek to compete in this market through a full product portfolio and effective distribution channels, which include digital channels, branches, agents, partnerships and experienced professionals. We offer a comprehensive suite of products and services to customers. These include savings, investment, credit and protection products based on customer needs, along with convenient payment and transaction banking services. Cross-selling appropriate products to existing customers based on analytics is a key element of our strategy. We seek to adopt a ‘Fair to Customer, Fair to Bank’ approach across all our businesses.

Commercial Banking Products and Services for Agricultural and Rural Customers

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

Commercial Banking Products and Services for Corporate Customers

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

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

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

Commercial Banking Products and Services for International Customers

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

Insurance and Asset Management

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

Employees

At year-end fiscal 2022, we had 130,542 employees, including sales executives, employees on fixed term contracts and interns. Of these, ICICI Bank employed 105,844 employees at year-end fiscal 2022. Of our 130,542 employees at year-end fiscal 2022, 71,047 were professionally qualified, holding degrees in management, accountancy, engineering, law, computer science, economics or banking. From April 1, 2021, ICICI Lombard General Insurance Company Limited ceased to be a subsidiary of the Bank and became an affiliate. Accordingly, the number of employees in fiscal 2022 is not comparable with the number of employees in fiscal 2021.

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

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

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

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

Properties

Our existing registered office is located at ICICI Bank Tower, Near Chakli Circle, Old Padra Road, Vadodara 390 007, Gujarat, India. Our corporate headquarters are located at ICICI Bank Towers, Bandra-Kurla Complex, Mumbai 400 051, Maharashtra, India. The Board of Directors at their Meeting held on May 9, 2020 approved the shifting of registered office to its corporate headquarters. The Shareholders at the Annual General Meeting held on August 14, 2020 also approved the shifting of registered office of the Bank.

ICICI Bank had a domestic branch network consisting of 5,418 branches and 13,626 ATMs at March 31, 2022 compared to 5,266 branches and 14,136 ATMs at March 31, 2021. These facilities are located throughout India. In addition to branches, extension counters and ATMs, ICICI Bank has 52 controlling or administrative offices, including our registered office at Vadodara and our corporate headquarters at Mumbai, 66 processing centers and 46 currency chests.

At March 31, 2022, we had branches in Bahrain, Dubai International Financial Centre, Hong Kong, Singapore, the United States (New York), South Africa, China and representative offices in the United Arab Emirates (Dubai, Abu Dhabi and Sharjah), Bangladesh, Indonesia, Sri Lanka, the United States (Texas and California) and Malaysia (Kuala Lumpur). During fiscal 2021, we closed our branch in Sri Lanka.

We also provide residential facilities to employees in India. At March 31, 2022, we owned 488 apartments for providing the United States residential facilities to our employees.

Legal and Regulatory Proceedings

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

The following penalties were imposed and paid by us in the past five years:

The Securities and Exchange Board of India issued showcause notices dated April 27, 2018 to ICICI Venture Funds Management Company Limited, the Indian Funds and the Mauritius Funds (together referred to as “Noticees”) to show cause as to why inquiry should not be held against the Noticees. Noticees had filed their reply with the Securities and Exchange Board of India contesting the allegations made in the show cause notices. With a view to avoid costly and lengthy litigation, all the Noticees had filed settlement applications with the Securities and Exchange Board of India on a “no admission or denial of default” basis.

Pursuant to the settlement applications, ICICI Venture Funds Management Company Limited paid an aggregate amount of Rs. 52 million in fiscal 2020 to the Securities and Exchange Board of India towards settlement of the notices received by all the Noticees, the terms of which were set out in the settlement orders issued by the Securities and Exchange Board of India to the Noticees. However, one of the investors in the real estate investment fund, registered in Mauritius has filed a writ petition in the Bombay High Court against, among others, the Securities and Exchange Board of India and ICICI Venture in respect of the settlement order. In the said writ petition, no reliefs have been sought as against ICICI Venture. At present the writ petition has not been admitted and no notice to ICICI Venture has been issued by the Bombay High Court.

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

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

Contingent tax liability

At year-end fiscal 2022, our contingent tax liability was assessed at an aggregate of Rs. 84.8 billion, mainly pertaining to income tax, service tax and sales tax/value added tax demands by the Government of India’s tax authorities for past years. We have appealed against each of these tax demands. The tax related inquiries by the tax authorities are not included in contingent liabilities as we believe that such proceedings are likely to be either dropped by the tax authorities or will not be upheld by judicial authorities. Based on consultation with counsel and favorable decisions in our own and other similar cases as set out below, management believes that the tax authorities are not likely to be able to substantiate their tax assessments and, accordingly, we have not provided for these tax demands at year-end fiscal 2022. Disputed tax issues that are classified as remote are not disclosed as contingent liabilities by us.

Of the contingent tax liability of Rs. 84.8 billion:

Based on judicial precedents in our own and other cases, and upon consultation with the tax counsel, the management believes that it is more likely that our tax position will be sustained and accordingly, no provision has been made in the accounts.

The above contingent liabilities does not include Rs. 36.2 billion (March 31, 2021: Rs. 53.6 billion), considered as remote. Of the total disputed tax demands classified as remote, Rs. 30.8 billion (March 31, 2021: Rs. 29.4 billion) mainly pertained to the deduction of bad debts, broken period interest and levy of penalties which are covered by favorable Supreme Court of India decisions in own/other cases and Rs. 4.5 billion (March 31, 2021: Rs. 23.3 billion) pertained to error requiring rectification by tax authorities. Therefore, they were not required to be disclosed as contingent liability. The consequence of inquiries initiated by the tax authorities has not been quantified, as we believe that such proceedings are likely to be dropped by the tax authorities or would not be upheld by judicial authorities.

Litigation

A number of litigations and claims against ICICI Bank and its directors are pending in various forums. The claims on ICICI Bank mainly arise in connection with civil cases involving allegations of service deficiencies, property or labor disputes, fraudulent transactions, economic offences and other cases filed in the normal course of business. We are also subject to counterclaims arising in connection with our enforcement of contracts and loans. A provision is created where an unfavorable outcome is deemed probable and in respect of which a reliable estimate can be made. In view of the inherent unpredictability of litigation and for cases where the claim amount sought is substantial, the actual cost of resolving litigations may be substantially different from the provision held.

We held a total provision of Rs. 687 million at year-end fiscal 2022 for 622 cases with claims totaling to Rs. 1.6 billion, where an unfavorable outcome was deemed probable and in respect of which a reliable estimate could be made.

For cases where an unfavorable outcome is deemed to be reasonably possible but not probable, the amount of claims is included in contingent liabilities. At year-end fiscal 2022, such claims amounted to a total of Rs. 3.2 billion relating to 54 cases. It was not possible to estimate the possible loss or range of possible losses for these cases due to the nature of the cases and other external factors. For cases where the possibility of an unfavorable outcome is deemed remote, we have not made a provision, nor have we included the amount of the claims in these cases in contingent liabilities.

In some instances, civil litigants have named our directors as co-defendants in legal proceedings against ICICI Bank. There were 347 such cases at year-end fiscal 2022.

Management believes, based on consultation with counsel, that the claims and counterclaims filed against us in the above legal proceedings that are assessed as remote are frivolous and untenable and their ultimate resolution will not have a material adverse effect on our results of operations, financial condition or liquidity. Based on a review of other litigations by Legal Group, management believes that the outcome of such other matters will also not have a material adverse effect on our financial position, results of operations or cash flows.

At year-end fiscal 2022, there were 111 ongoing litigations (including those where the likelihood of our incurring liability is assessed as “probable”, “possible” and “remote”), each involving a claim of Rs. 10 million or more against us, with an aggregate amount of Rs. 781.8 billion (to the extent quantifiable and including amounts claimed jointly and severally from us and other parties).

For proceedings filed by the former Managing Director and Chief Executive Officer relating to her termination, see “Risk Factors—Risks that arise as a result of our presence in a highly regulated sector—The board of directors of the Bank has, pursuant to an independent enquiry, taken action against the former Managing Director and CEO. In the event the Bank is found by any of the enquiries in the matter by government and regulatory agencies to have violated applicable laws or regulations, the Bank could become subject to legal and regulatory sanctions that may materially and adversely affect our results of operations or financial condition and reputation.”

We cannot predict the timing or form of any future regulatory or law enforcement initiatives, which we note are increasingly common for international banks, but we would expect to co-operate with any such regulatory investigation or proceeding.

American Depository Receipt Fees and Payments

Fees and Charges Payable by Holders of our ADSs

The fees and charges payable by holders of our ADSs include the following:

Additionally, under the terms of our deposit agreement, the depositary is entitled to charge each registered holder the following:

In the case of cash distributions, fees, if applicable, are generally deducted from the cash being distributed. Other fees may be collected from holders of ADSs in a manner determined by the depositary with respect to ADSs registered in the name of investors (whether certificated or in book-entry form) and ADSs held in brokerage and custodian accounts (via DTC). In the case of distributions other than cash (i.e., stock dividends, etc.), the depositary charges the applicable ADS record date holder concurrently with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or in book-entry form), the depositary sends invoices to the applicable record date ADS holders.

If any tax or other governmental charge is payable by the holders and/or beneficial owners of ADSs to the depositary, the depositary, the custodian or the Bank may withhold or deduct from any distributions made in respect of deposited securities and may sell for the account of the holder and/or beneficial owner any or all of the deposited securities and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, with the holder and the beneficial owner thereof remaining fully liable for any deficiency.

Fees and Other Payments Made by the Depositary

In March 2020, we agreed to an amendment to an agreement previously entered into with the Depositary, Deutsche Bank Trust Company Americas in fiscal 2018. Under this amended agreement, the Depositary pays certain amounts to us and waives fees and expenses for services provided in exchange for the Deutsche Bank Trust Company Americas acting as the Depositary for the ADR program. We may use these payments to cover annual expenses incurred by the Bank towards investor relations or other expenses directly related to the ongoing maintenance of the ADR program. The amount of payment to us is tied to the amount of fees the depository collects from ADR holders, with certain exceptions. In the three months ended June 30, 2022, we received US$ 3 million relating to the ADR program.

SELECTED STATISTICAL INFORMATION

The following information should be read together with our financial statements included in this report as well as “Management Discussion and Analysis of Financial Condition and Results of Operations”.

Average Balance Sheet

The average balances are the sum of daily average balances outstanding. The yield on average interest-earning assets is the ratio of interest earned to average interest-earning assets. The cost of average interest-bearing liabilities is the ratio of interest expended to average interest-bearing liabilities. The average balances of advances include non-performing advances and are net of allowance for loan losses. We have re-calculated tax-exempt income on a tax-equivalent basis. Other interest income has been bifurcated into rupee and foreign currency amounts in order to facilitate the explanation of movements of rupee and foreign currency spreads and margins. The rupee portion of other interest income primarily includes interest on income tax refunds and income from swaps. The foreign currency portion of other interest income primarily includes income from interest rate swaps in foreign currencies. These interest rate swaps are not part of our trading portfolio and are undertaken by us to manage the market risk arising from our assets and liabilities.

The following table sets forth, for the periods indicated, the average balances of the assets and liabilities outstanding, which contribute to the major components of interest earned, interest expended and net interest income.