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ICICI Bank

BSE: 532174|NSE: ICICIBANK|ISIN: INE090A01021|SECTOR: Banks - Private Sector
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Notes to Accounts Year End : Mar '17

NOTES FORMING PART OF THE ACCOUNTS

The following disclosures have been made taking into account the requirements of Accounting Standards (ASs) and Reserve Bank of India (RBI) guidelines in this regards.

1. Earnings per share

Basic and diluted earnings per equity share are computed in accordance with AS 20 - Earnings per share. Basic earnings per equity share is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share is computed using the weighted average number of equity shares and weighted average number of dilutive potential equity shares outstanding during the year.

The following table sets forth, for the periods indicated, the computation of earnings per share.

2. For the purpose of computing the ratio, working funds represent the monthly average of total assets computed for reporting dates of Form X submitted to RBI under Section 27 of the Banking Regulation Act, 1949.

3. Operating profit is profit for the year before provisions and contingencies.

4. For the purpose of computing the ratio, assets represent the monthly average of total assets computed for reporting dates of Form X submitted to RBI under Section 27 of the Banking Regulation Act, 1949.

5. Computed based on average number of employees which include sales executives, employees on fixed term contracts and interns.

6. The average deposits and the average advances represent the simple average of the figures reported in Form A to RBI under Section 42(2) of the Reserve Bank of India Act, 1934.

7. Capital adequacy ratio

The Bank is subject to the Basel III capital adequacy guidelines stipulated by RBI with effect from April 1, 2013. The guidelines provide a transition schedule for Basel III implementation till March 31, 2019. As per the guidelines, the Tier-1 capital is made up of Common Equity Tier-1 (CET1) and Additional Tier-1.

At March 31, 2017, Basel III guidelines require the Bank to maintain a minimum Capital to Risk-Weighted Assets Ratio (CRAR) of 10.30% with minimum CET1 CRAR of 6.80% and minimum Tier-1 CRAR of 8.30%. The minimum total CRAR, Tier-1 CRAR and CET1 CRAR requirement include capital conservation buffer of 1.25% and additional capital requirement of 0.05% on account of the Bank being designated as Domestic Systemically Important Bank.

The following table sets forth, for the period indicated, computation of capital adequacy as per Basel III framework.

The Bank during the three months ended March 31, 2017 maintained average HQLA (after haircut) of Rs,971,361.1 million (March 31, 2016: Rs,657,810.1 million) against the average liquidity requirement of Rs,795,626.5 million (March 31, 2016: Rs,502,575.6 million) at minimum LCR requirement of 80.0% (March 31, 2016: 70.0%). HQLA primarily includes government securities in excess of minimum statutory liquidity ratio (SLR) and to the extent allowed under marginal standing facility (MSF) and facility to avail liquidity for LCR (FALLCR) of Rs,806,903.7 million (March 31, 2016: Rs,498,952.5 million). RBI has permitted banks to reckon government securities held by them up to 9.0% (March 31, 2016: 8.0%) of their net demand and time liability (NDTL) under FALLCR as level 1 HQLA for the purpose of computing LCR from July, 2016. Additionally, cash balance in excess of cash reserve requirement with RBI and balances with central banks of countries where the Bank''s branches are located amounted to Rs,100,448.7 million (March 31, 2016: Rs,104,655.2 million). Further, average level 2 assets primarily consisting of AA- and above rated corporate bonds and commercial papers amounted to Rs,36,348.1 million (March 31, 2016: Rs,33,334.1 million).

At March 31, 2017, top liability products/instruments and their percentage contribution to the total liabilities of the Bank were term deposits 31.51% (March 31, 2016: 31.68%), savings account deposits 22.27% (March 31, 2016: 18.63%), bond borrowings 12.33% (March 31, 2016: 12.81%) and current account deposits 9.72% (March 31, 2016: 8.17%). Top 20 depositors constituted 7.04% (March 31, 2016: 7.35%) of total deposits of the Bank at March 31, 2017. Further, the total borrowings mobilised from significant counterparties (from whom the funds borrowed were more than 1.00% of the Bank''s total liabilities) were 10.26% (March 31, 2016: 11.81%) of the total liabilities of the Bank at March 31, 2017.

The weighted cash outflows are primarily driven by unsecured wholesale funding which includes operational deposits, non-operational deposits and unsecured debt. During the three months ended March 31, 2017, unsecured wholesale funding contributed 53.60% (March 31, 2016: 59.50%) of the total weighted cash outflows. The non-operational deposits include term deposits with premature withdrawal facility. Retail deposits including deposits from small business customers and other contingent funding obligations contributed 20.65% (March 31, 2016: 20.89%) and 5.46% (March 31, 2016: 7.50%) of the total weighted cash outflows respectively. The other contingent funding obligations primarily include bank guarantees (BGs) and letters of credit (LCs) issued on behalf of the Bank''s clients.

In view of the margin rules for non-centrally cleared derivative transactions issued by the Basel Committee on Banking Supervision and RBI, currently in a draft stage, certain derivative transactions would be subject to margin reset and consequent collateral exchange would be as governed by Credit Support Annex (CSA). The margin rules are applicable for both the domestic and overseas operations of the Bank. The Bank has entered into CSAs which would require maintenance of collateral due to valuation changes on transactions under CSA framework. The Bank considers the increased liquidity requirement on account of valuation changes in the transactions settled through Qualified Central Counterparties (QCCP) in India including the Clearing Corporation of India (CCIL) and other exchange houses for transactions covered under CSAs. The potential outflows on account of such transactions have been considered based on the look-back approach prescribed in the RBI guidelines.

The average LCR of the Bank for the three months ended March 31, 2017 was 97.67% (March 31, 2016: 91.62%). During the three months ended March 31, 2017, other than Indian Rupee, USD was the only significant foreign currency which constituted more than 5.00% of the balance sheet size of the Bank. The average LCR of the Bank for USD currency, computed based on month end LCR values, was 44.51% for the three months ended March 31, 2017 (March 31, 2016: 87.90%).

8. Information about business and geographical segments Business Segments

Pursuant to the guidelines issued by RBI on AS 17 - Segment Reporting - Enhancement of Disclosures dated April 18, 2007, effective from year ended March 31, 2008, the following business segments have been reported.

- Retail Banking includes exposures which satisfy the four criteria of orientation, product, granularity and low value of individual exposures for retail exposures laid down in BCBS document ''''International Convergence of Capital Measurement and Capital Standards: A Revised Framework''''. This segment also includes income from credit cards, debit cards, third party product distribution and the associated costs.

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

- Treasury includes the entire investment and derivative portfolio of the Bank.

- Other Banking includes leasing operations and other items not attributable to any particular business segment.

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

All liabilities are transfer priced to a central treasury unit, which pools all funds and lends to the business units at appropriate rates based on the relevant maturity of assets being funded after adjusting for regulatory reserve requirements.

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are determined based on the transfer pricing mechanism prevailing for the respective reporting periods.

The following tables set forth, for the periods indicated, the business segment results on this basis.

1. Includes tax paid in advance/tax deducted at source (net) and deferred tax assets (net).

2. Includes share capital and reserves and surplus

1. Includes tax paid in advance/tax deducted at source (net) and deferred tax assets (net).

2. Includes share capital and reserves and surplus.

Geographical segments

The Bank reports its operations under the following geographical segments.

- Domestic operations comprise branches in India.

- Foreign operations comprise branches outside India and offshore banking unit in India. The following table sets forth, for the periods indicated, geographical segment revenues.

Segment assets do not include tax paid in advance/tax deducted at source (net) and deferred tax assets (net).

1. Includes foreign currency balances.

2. Includes borrowings in the nature of subordinated debts and preference shares.

3. Excludes off-balance sheet assets and liabilities.

4. The disclosure format has been revised based on RBI guideline dated March 23, 2016.

2. Includes borrowings in the nature of subordinated debts and preference shares.

3. Excludes off-balance sheet assets and liabilities.

The estimates and assumptions used by the Bank for classification of assets and liabilities under the different maturity buckets is based on the returns submitted to RBI for the relevant periods.

9. Preference shares

Certain government securities amounting to Rs,3,219.7 million at March 31, 2017 (March 31, 2016: Rs,3,189.8 million) have been earmarked against redemption of preference shares issued by the Bank, which fall due for redemption on April 20, 2018, as per the original terms of the issue.

10. Employee Stock Option Scheme (ESOS)

In terms of the ESOS, as amended, the maximum number of options granted to any eligible employee in a financial year shall not exceed 0.05% of the issued equity shares of the Bank at the time of grant of the options and aggregate of all such options granted to the eligible employees shall not exceed 10% of the aggregate number of the issued equity shares of the Bank on the date(s) of the grant of options in line with SEBI Regulations. Under the stock option scheme, eligible employees are entitled to apply for equity shares. In April 2016, exercise period was modified from 10 years from the date of grant or five years from the date of vesting, whichever is later, to 10 years from the date of vesting of options. The exercise price of the Bank''s options, except mentioned below, is the last closing price on the stock exchange, which recorded highest trading volume preceding the date of grant of options. Hence, there was no compensation cost based on intrinsic value of options.

Options granted after March, 2014 vest in a graded manner over a three-year period with 30%, 30% and 40% of the grant vesting in each year, commencing from the end of 12 months from the date of grant other than certain options granted in April 2014 which will vest to the extent of 50% on April 30, 2017 and the balance on April 30, 2018 and granted in September 2015 which will vest to the extent of 50% on April 30, 2018 and 50% on April 30, 2019. However, for the options granted in September 2015, if the participant''s employment terminates due to retirement (including pursuant to any early/voluntary retirement scheme), the whole of the unvested options would lapse.

Options granted prior to March, 2014, vest in a graded manner over a four-year period, with 20%, 20%, 30% and 30% of the grants vesting in each year, commencing from the end of 12 months from the date of grant. Options granted in April, 2009 vest in a graded manner over a five-year period with 20%, 20%, 30% and 30% of grant vesting each year, commencing from the end of 24 months from the date of grant. Options granted in September, 2011 vest in a graded manner over a five-years period with 15%, 20%, 20% and 45% of grant vesting each year, commencing from the end of 24 months from the date of the grant.

In February 2011, the Bank granted 15,175,000 options to eligible employees and whole-time Directors of the Bank and certain of its subsidiaries at an exercise price of Rs,193.40. This exercise price was the average closing price on the stock exchange during the six months ended October 28, 2010. Of these options granted, 50% vested on April 30, 2014 and the balance 50% vested on April 30, 2015. Based on intrinsic value of options, no compensation cost was recognized during the year ended March 31, 2017 (March 31, 2016: Rs,0.8 million).

If the Bank had used the fair value of options based on binomial tree model, compensation cost in the year ended March 31, 2017 would have been higher by Rs,5,107.5 million (March 31, 2016: Rs,3,726.5 million) including additional cost of Rs,1,393.1 million (March 31, 2016: Nil) due to change in exercise period and preformed profit after tax would have been Rs,92,903.4 million (March 31, 2016: Rs,93,536.4 million). Additional cost of Rs,1,393.1 million at the date of modification reflects the difference between fair value of option calculated as per revised exercise period and fair value of option calculated as per original exercise period. On a preformed basis, the Bank''s basic and diluted earnings per share would have been Rs,15.97 and Rs,15.90 respectively. The key assumptions used to estimate the fair value of options granted during the year ended March 31, 2017 are given below.

The weighted average fair value of options granted during the year ended March 31, 2017 is Rs,84.39 (March 31, 2016: Rs,100.50).

Risk free interest rates over the expected term of the option are based on the government securities yield in effect at the time of the grant. The expected term of an option is estimated based on the vesting term as well as expected exercise behavior of the employees who receive the option. Expected term of option is estimated based on the historical stock option exercise pattern of the Bank. Expected volatility during the estimated expected term of the option is based on historical volatility determined based on observed market prices of the Bank''s publicly traded equity shares. Expected dividends during the estimated expected term of the option are based on recent dividend activity.

The following table sets forth, for the periods indicated, the summary of the status of the Bank''s stock option plan.

The options were exercised regularly throughout the period and weighted average share price as per National Stock Exchange price volume data during the year ended March 31, 2017 was Rs,257.82 (March 31, 2016: Rs,273.37).

11. Subordinated debt

During the year ended March 31, 2017, the Bank has raised subordinated debt bonds qualifying for Additional Tier-1 capital. The following table sets forth, the details of these bonds.

During the year ended March 31, 2017, the Bank has not raised subordinated debt qualifying for Tier-2 capital (March 31, 2016: Nil).

12. Repurchase transactions

The following tables set forth for the periods indicated, the details of securities sold and purchased under repo and reverse repo transactions respectively including transactions under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF).

1. Amounts reported are based on face value of securities under Repo and Reverse repo.

2. Amounts reported are based on lending/borrowing amount under LAF and MSF.

13. Investments

The following table sets forth, for the periods indicated, the details of investments and the movement of provision held towards depreciation on investments of the Bank.

1. Amounts reported under columns (a), (b), (c) and (d) above are not mutually exclusive.

2. Excludes equity shares, units of equity-oriented mutual fund, units of venture capital fund, pass through certificates, security receipts, commercial papers, certificates of deposit, non-convertible debentures (NCDs) with original or initial maturity up to one year issued by corporate (including NBFC), unlisted convertible debentures and securities acquired by way of conversion of debt.

3. Excludes investments in non-Indian government securities by overseas branches amounting to Rs,21,051.8 million.

4. Excludes investments in non-SLR government of India securities amounting to Rs,18,686.3 million.

The following table sets forth, the issuer composition of investments of the Bank in securities, other than government

and other approved securities at March 31, 2016.

1. Amounts reported under columns (a), (b), (c) and (d) above are not mutually exclusive.

2. Excludes investments, amounting to Rs,2,652.4 million in preference shares of subsidiary ICICI Bank Canada.

3. Excludes equity shares, units of equity-oriented mutual fund, units of venture capital fund, pass through certificates, security receipts, commercial papers, certificates of deposit, non-convertible debentures (NCDs) with original or initial maturity up to one year issued by corporate (including NBFCs), unlisted convertible debentures and securities acquired by way of conversion of debt.

4. Excludes investments in non-Indian government securities by overseas branches amounting to Rs,21,715.2 million.

5. Excludes investments in non-SLR government of India securities amounting to Rs,2,435.7 million.

14. Sales and transfers of securities to/from Held to Maturity (HTM) category

During the year ended March 31, 2017, the value of sales and transfers of securities to/from HTM category (excluding one-time transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year, sale to RBI under pre-announced Open Market Operation auctions and repurchase of Government securities by Government of India) had exceeded 5% of the book value of the investments held in HTM category at the beginning of the year. The market value of investments held in the HTM category was '' 961,540.1 million at March 31, 2017 (March 31, 2016: '' 999,326.8 million) which includes investments in subsidiaries/joint ventures carried at cost.

15. CBLO transactions

Collateralized Borrowing and Lending Obligation (CBLO) is a discounted money market instrument, established by CCIL and approved by RBI, which involves secured borrowings and lending transactions. At March 31, 2017, the Bank had no outstanding borrowings (March 31, 2016: Nil) and no outstanding lending (March 31, 2016: Nil) in the form of CBLO. The amortized book value of securities given as collateral by the Bank to CCIL for availing the CBLO facility was Rs,53,134.3 million at March 31, 2017 (March 31, 2016: Rs,68,296.0 million).

16. Derivatives

The Bank is a major participant in the financial derivatives market. The Bank deals in derivatives for balance sheet management, proprietary trading and market making purposes whereby the Bank offers derivative products to its customers, enabling them to hedge their risks.

Dealing in derivatives is carried out by identified groups in the treasury of the Bank based on the purpose of the transaction. Derivative transactions are entered into by the treasury front office. Treasury Control and Service Group (TCSG) conducts an independent check of the transactions entered into by the front office and also undertakes activities such as confirmation, settlement, accounting, risk monitoring and reporting and ensures compliance with various internal and regulatory guidelines.

The market making and the proprietary trading activities in derivatives are governed by the Investment policy and Derivative policy of the Bank, which lays down the position limits, stop loss limits as well as other risk limits. The Risk Management Group (RMG) lays down the methodology for computation and monitoring of risk. The Risk Committee of the Board (RCB) reviews the Bank''s risk management policy in relation to various risks including credit and recovery policy, investment policy, derivative policy, Asset Liability Management (ALM) policy and operational risk management policy. The RCB comprises independent directors and the Managing Director & CEO.

The Bank measures and monitors risk of its derivatives portfolio using such risk metrics as Value at Risk (VAR), stop loss limits and relevant greeks for options. Risk reporting on derivatives forms an integral part of the management information system.

The use of derivatives for hedging purposes is governed by the hedge policy approved by ALCO. Subject to prevailing

RBI guidelines, the Bank deals in derivatives for hedging fixed rate, floating rate or foreign currency assets/liabilities. Transactions for hedging and market making purposes are recorded separately. For hedge transactions, the Bank identifies the hedged item (asset or liability) at the inception of the hedge itself. The effectiveness is assessed at the time of inception of the hedge and periodically thereafter.

Hedge derivative transactions are accounted for pursuant to the principles of hedge accounting based on guidelines issued by RBI. Derivatives for market making purpose are marked to market and the resulting gain/loss is recorded in the profit and loss account. The premium on option contracts is accounted for as per Foreign Exchange Dealers Association of India (FEDAI) guidelines.

Over the counter (OTC) derivative transactions are covered under International Swaps and Derivatives Association (ISDA) master agreements with the respective counter parties. The exposure on account of derivative transactions is computed as per RBI guidelines.

The following table sets forth, for the period indicated, the details of derivative positions.

1. Exchange traded and OTC options, cross currency interest rate swaps and currency futures are included in currency derivatives.

2. OTC Interest rate options, Interest rate swaps, forward rate agreements, swaptions and exchange traded interest rate derivatives are included in interest rate derivatives.

3. For trading portfolio including accrued interest.

4. Includes accrued interest and has been computed based on Current Exposure method.

5. Amounts given are absolute values on a net basis, excluding options.

6. The swap contracts entered into for hedging purpose would have an opposite and off-setting impact with the underlying on-balance sheet items.

1. Computed based on current exposure method.

2. Amounts given are absolute values on a net basis.

The net overnight open position at March 31, 2017 was Rs,2,926.7 million (March 31, 2016: Rs,1,272.1 million).

The Bank has no exposure in credit derivative instruments (funded and non-funded) including credit default swaps (CDS) and principal protected structures at March 31, 2017 (March 31, 2016: Nil).

The Bank offers deposits to customers of its overseas branches with structured returns linked to interest, forex, credit or equity benchmarks. The Bank covers these exposures in the inter-bank market. At March 31, 2017, the net open notional position on this portfolio was Nil (March 31, 2016: Nil) with no mark-to-market gain/loss (March 31, 2016: net gain of Rs,0.1 million).

The profit and loss impact on the above portfolio on account of mark-to-market and realized profit and loss during the year ended March 31, 2017 was a net loss of Rs,0.1 million (March 31, 2016: net loss of Rs,16.5 million). The non-Indian Rupee denominated derivatives are marked to market by the Bank based on counter-party valuation quotes or internal models using inputs from market sources such as Bloomberg/Reuters, counter-parties and Fixed Income Money Market and Derivative Association (FIMMDA). The Indian Rupee denominated credit derivatives are marked to market by the Bank based on CDS curve published by FIMMDA.

17. Exchange traded interest rate derivatives and currency derivatives Exchange traded interest rate derivatives

The following table sets forth, for the periods indicated, the details of exchange traded interest rate derivatives.

18. Forward rate agreement (FRA)/Interest rate swaps (IRS)/Cross currency swaps (CCS)

The Bank enters into FRA, IRS and CCS contracts for balance sheet management and market making purposes whereby the Bank offers derivative products to its customers to enable them to hedge their interest rate risk and currency risk within the prevalent regulatory guidelines.

A FRA is a financial contract between two parties to exchange interest payments for ''notional principal'' amount on settlement date, for a specified period from start date to maturity date. Accordingly, on the settlement date cash payments based on contract rate and the settlement rate, which is the agreed bench-mark/reference rate prevailing on the settlement date, are made by the parties to one another. The benchmark used in the FRA contracts of the Bank is London Inter-Bank Offered Rate (LIBOR) of various currencies.

An IRS is a financial contract between two parties exchanging or swapping a stream of interest payments for a ''notional principal'' amount on multiple occasions during a specified period. The Bank deals in interest rate benchmarks like Mumbai Inter-Bank Offered Rate (MIBOR), Indian Government Securities Benchmark Rate (INBMK), Mumbai Inter-Bank Forward Offer Rate (MIFOR) and LIBOR of various currencies.

A CCS is a financial contract between two parties exchanging interest payments and principal, wherein interest payments and principal in one currency would be exchanged for an equally valued interest payments and principal in another currency.

These contracts are subject to the risks of changes in market interest rates and currency rates as well as the settlement risk with the counterparties.

The following table sets forth, for the periods indicated, the details of the FRA/IRS.

1. For trading portfolio both mark-to-market and accrued interest have been considered and for hedging portfolio only accrued interest has been considered.

2. Credit risk concentration is measured as the highest net receivable under swap contracts from a particular counter party.

3. Fair value represents mark-to-market including accrued interest.

1. CCS includes cross currency interest rate swaps and currency swaps.

2. For trading portfolio both mark-to-market and accrued interest have been considered and for hedging portfolio only accrued interest has been considered.

3. Credit risk concentration is measured as the highest net receivable under swap contracts from a particular counter party.

4. Fair value represents mark-to-market including accrued interest.

The following tables set forth, for the periods indicated, the nature and terms of FRA and IRS.

In accordance with RBI guidelines, the loans and advances held at the overseas branches that are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the extant RBI guidelines, are classified as NPAs to the extent of amount outstanding in the host country. During the year ended March 31, 2017, the Bank classified certain loans as NPAs at overseas branches amounting to Rs,6,587.8 million as per the requirement of these guidelines and made a provision of Rs,3,993.7 million on these loans.

Divergence in asset classification and provisioning for NPAs

In terms of the RBI circular no. DBR.BPBC.No.63/21.04.018/2016-17 dated April 18, 2017, banks are required to disclose the divergences in asset classification and provisioning consequent to RBI''s annual supervisory process in their notes to accounts to the financial statements.

The following table sets forth, for the period indicated, details of divergence in the asset classification and provisioning as per RBI''s supervisory process for the year ended March 31, 2016.

1. Excludes investment in shares of Rs,1,071.9 million with an additional provision requirement of Rs,168.0 million and an impact of Rs,109.9 million on net profit after tax for the year ended March 31, 2016.

The impact of changes in classification and provisioning arising out of the RBI''s supervisory process for the year ended March 31, 2016 has been fully given effect to in the audited financial statements for the year ended March 31, 2017.

19. Floating provision

During the year ended March 31, 2017, the Bank made floating provision of Rs,15,150.0 million which was subsequently utilized during the same year by allocating it to specific non-performing assets.

The following table sets forth, for the periods indicated, the movement in floating provision held by the Bank.

20. General provision on standard assets

The general provision on standard assets (including incremental provision on unheeded foreign currency exposure (UFCE)) held by the Bank at March 31, 2017 was Rs,23,126.2 million (March 31, 2016: Rs,26,583.4 million). The general provision on standard assets amounting to Rs,3,392.3 million was reversed during the year ended March 31, 2017 (March 31, 2016: provision made Rs,2,970.1 million) as per applicable RBI guidelines.

RBI, through its circular dated January 15, 2014 had advised banks to create incremental provision on standard loans and advances to entities with UFCE. The Bank assesses the UFCEs of the borrowers through its credit appraisal and internal ratings process. The Bank also undertakes reviews of such exposures through thematic reviews by Risk Committee based on market developments evaluating the impact of exchange rate fluctuations on the Bank''s portfolio, portfolio specific reviews by the Risk Management Group (RMG) and scenario-based stress testing approach as detailed in the Internal Capital Adequacy Assessment Process (ICAAP). In addition, a periodic review of the forex exposures of the borrowers having significant external commercial borrowings is conducted by RMG.

The Bank has not made any incremental provision against borrowers with UFCE during the year ended March 31, 2017 (March 31, 2016: Rs,100.0 million). The Bank held incremental capital of Rs,4,120.0 million at March 31, 2017 on advances to borrowers with UFCE (March 31, 2016: Rs,5,580.0 million).

21. Provision Coverage Ratio

The provision coverage ratio of the Bank at March 31, 2017 computed as per the extant RBI guidelines was 40.2% (March 31, 2016: 50.6%).

22. Priority Sector Lending Certificate (PSLC)

The Bank purchased PSLCs (general category) amounting to Rs,35,000.0 million during the year ended March 31, 2017 (March 31, 2016: Nil). The Bank did not sell any PSLC during the year ended March 31, 2017.

23. Securitization

A. The Bank sells loans through securitization and direct assignment. The following tables set forth, for the periods indicated, the information on securitization and direct assignment activity of the Bank as an originator till May 7, 2012.

1. Insignificant amount.

The outstanding credit enhancement in the form of guarantees amounted to Nil at March 31, 2017 (March 31, 2016: Nil) and outstanding liquidity facility in the form of guarantees amounted to Rs,265.5 million at March 31, 2017 (March 31, 2016: Rs,265.6 million).

The outstanding credit enhancement in the form of guarantees for third party originated securitization transactions amounted to Rs,3,456.9 million at March 31, 2017 (March 31, 2016: Rs,4,089.3 million) and outstanding liquidity facility for third party originated securitization transactions amounted to Nil at March 31, 2017 (March 31, 2016: Nil).

The following table sets forth, for the periods indicated, the details of provision for securitization and direct assignment transactions.

B. The information on securitization and direct assignment activity of the Bank as an originator as per RBI guidelines ''Revisions to the Guidelines on Securitization Transactions dated May 7, 2012 is given below.

a. The Bank, as an originator, has not sold any loan through securitization during the year ended March 31, 2017 (March 31, 2016: Nil).

b. The following table sets forth, for the periods indicated, the information on the loans sold through direct assignment.

The overseas branches of the Bank, as originators, sold eight loans through direct assignment amounting to Rs,11,143.5 million during the year ended March 31, 2017 (March 31, 2016: four loans amounting to Rs,6,536.9 million).

24. Financial assets transferred during the year to securitization company (SC)/reconstruction company (RC)

The Bank has transferred certain assets to Asset Reconstruction Companies (ARCs) in terms of the guidelines issued by RBI circular no. DBOD.BPBC.No.98/21.04.132/2013-14 dated February 26, 2014. For the purpose of the valuation of the underlying security receipts issued by the underlying trusts managed by ARCs, the SRs are valued at their respective net asset values as advised by the ARCs.

The following table sets forth, for the periods indicated, the details of the assets transferred.

1. During the year ended March 31, 2017, the Bank recognized loss of Rs,7,043.5 million on sale of NPAs to ARCs.

2. During the year ended March 31, 2017, the Bank made a gain of Rs,2,216.4 million on sale of NPAs to ARCs, out of which Rs,1,883.8 million is set aside towards the security receipts received on such sale.

3. During the year ended March 31, 2017, excludes security receipts received amounting to Rs,359.2 million towards interest overdue not recognized as income.

The following tables set forth, for the periods indicated, the details of investments in security receipts (SRs).

1. During the year ended March 31, 2017, investment in a security receipt was fully redeemed by the ARC and there was no gain/loss to the Bank (March 31, 2016: net loss of Rs,470.2 million).

1. The Bank has not taken stand-still benefit for NPA cases and hence these cases are excluded.

2. Cases where SDR has been revoked or not implemented within the permitted RBI timelines have been excluded in subsequent periods.

3. Represents gross loans and credit substitutes.

4. Includes eight cases amounting to Rs,23,182.5 million classified as standard restructured at March 31, 2017 (March 31, 2016: seven cases amounting to Rs,24,154.7 million classified as standard restructured).

During the year ended March 31, 2017, the Bank has not recognized an amount of Rs,6,059.4 million towards interest on cases covered under the SDR scheme (March 31, 2016: Rs,1,093.5 million).

The following table sets forth, for the periods indicated, details for cases of change in ownership outside SDR scheme (accounts which are currently under the stand-still period).

1. Represents gross loans and credit substitutes.

During the year ended March 31, 2017, the Bank has not recognized an amount of Rs,1,000.1 million towards interest for cases outside SDR scheme (March 31, 2016: Nil).

1. Includes three cases amounting to Rs,22,130.0 million classified as NPAs, one case amounting to Rs,6,810.0 million where SDR has been invoked and one case amounting to Rs,3,790.0 million where S4A has been invoked during the year ended March 31, 2017.

1. Represents the total assets and total revenue of foreign operations as reported in Schedule 18 of the financial statements, note no. 5 on information about business and geographical segments.

(IV) Off-balance sheet special purpose vehicles (SPVs) sponsored (which are required to be consolidated as per accounting norms)

(a) The following table sets forth, the names of SPVs/trusts sponsored by the Bank/subsidiaries which are consolidated.

Sr

No Name of the SPV sponsored12

A. Domestic3

1. ICICI Strategic Investments Fund

2. India Advantage Fund-III

3. India Advantage Fund-IV

B. Overseas None

1. The nature of business of the above entities is venture capital fund.

2. SPVs/Trusts which are consolidated and set-up/sponsored by the Bank/Subsidiaries of the Bank.

3. During the three months ended December 31, 2015, ICICI Equity Fund redeemed its units held by the Bank and accordingly, ICICI Equity Fund has not been consolidated.

1. Commercial real estate exposure include loans to individuals against non-residential premises, loans given to land and building developers for construction, corporate loans for development of special economic zone, loans to borrowers where servicing of loans is from a real estate activity and exposures to mutual funds/venture capital funds/private equity funds investing primarily in the real estate companies.

25. Factoring business

At March 31, 2017, the outstanding receivables acquired by the Bank under factoring business were Rs,2,061.0 million (March 31, 2016: Rs,4,290.6 million).

26. Risk category-wise country exposure

As per the extant RBI guidelines, the country exposure of the Bank is categorised into various risk categories listed in the following table. The funded country exposure (net) of the Bank as a percentage of total funded assets for United States of America was 2.27% (March 31, 2016: 2.51%), Singapore was 1.20% (March 31, 2016: 1.50%) and United Kingdom was 0.77% (March 31, 2016: 1.50%). As the net funded exposure to United States of America and Singapore exceeds 1.0% of total funded assets, the Bank held a provision of Rs,375.0 million on country exposure at March 31, 2017 (March 31, 2016: Rs,530.0 million) based on RBI guidelines.

27. Details of Single Borrower Limit and Borrower Group Limit exceeded by the Bank

During the year ended March 31, 2017, the Bank has complied with the RBI guidelines on single borrower and borrower group limit.

During the year ended March 31, 2016, the Bank complied with the RBI guidelines on single borrower and borrower group limit. As per the exposure limits permitted under the extant RBI regulation, the Bank with the approval of the Board of Directors can enhance exposure to a single borrower or borrower group by a further 5.0% of capital funds. In accordance with the guidelines issued by RBI, with the prior approval of the Board of Directors, the Bank had taken additional exposure to Reliance Industries Limited. At March 31, 2016, the exposure to Reliance Industries Limited as a percentage of capital funds was 14.6% and was within the prudential exposure limit of 20.0% of the Bank''s capital funds.

28. Unsecured advances against intangible assets

The Bank has not made advances against intangible collaterals of the borrowers, which are classified as ''Unsecured'' in the financial statements at March 31, 2017 (March 31, 2016: Nil) and the estimated value of the intangible collaterals was Nil at March 31, 2017 (March 31, 2016: Nil).

29. Revaluation of fixed assets

The Bank follows the revaluation model for its premises (land and buildings) as per AS 10 - ''Property, Plant and Equipment''. The Bank had initially revalued its premises at March 31, 2016. In accordance with the Bank''s policy, annual revaluation was carried out through external values, using methodologies such as direct comparison method and income generation method and the incremental amount has been taken to revaluation reserve. The revalued amount at March 31, 2017 was Rs,57,161.9 million (March 31, 2016: Rs,55,405.2 million) as compared to the historical cost less accumulated depreciation of Rs,26,740.5 million (March 31, 2016: Rs,27,230.5 million).

The revaluation reserve is not available for distribution of dividend.

30. Fixed Assets

The following table sets forth, for the periods indicated, the movement in software acquired by the Bank, as included in fixed assets.

31. Description of contingent liabilities

The following table describes the nature of contingent liabilities of the Bank.

Sr. No. Contingent liability Brief Description

1. Claims against the Bank, This item represents demands made in certain tax and legal matters against the Bank in the not acknowledged as normal course of business and customer claims arising in fraud cases. In accordance with debts the Bank''s accounting policy and AS 29, the Bank has reviewed and classified these items as possible obligations based on legal opinion/judicial precedents/assessment by the Bank.

2. Liability for partly paid This item represents amounts remaining unpaid towards liability for partly paid investments. investments These payment obligations of the Bank do not have any profit/loss impact.

3. Liability on account of The Bank enters into foreign exchange contracts in the normal course of its business, to exchange outstanding forward currencies at a pre-fixed price at a future date. This item represents the notional principal exchange contracts amount of such contracts, which are derivative instruments. With respect to the transactions

entered into with its customers, the Bank generally enters into off-setting transactions in the inter-bank market. This results in generation of a higher number of outstanding transactions, and hence a large value of gross notional principal of the portfolio, while the net market risk is lower.

4. Guarantees given on This item represents the guarantees and documentary credits issued by the Bank in favor of behalf of constituents, third parties on behalf of its customers, as part of its trade finance banking activities with a view acceptances, to augment the customers'' credit standing. Through these instruments, the Bank undertakes endorsements and to make payments for its customers'' obligations, either directly or in case the customers fail to other obligations fulfill their financial or performance obligations.

5. Currency swaps, This item represents the notional principal amount of various derivative instruments which interest rate swaps, the Bank undertakes in its normal course of business. The Bank offers these products to its currency options and customers to enable them to transfer, modify or reduce their foreign exchange and interest rate interest rate futures risks. The Bank also undertakes these contracts to manage its own interest rate and foreign exchange positions. With respect to the transactions entered into with its customers, the Bank generally enters into off-setting transactions in the inter-bank market. This results in generation of a higher number of outstanding transactions, and hence a large value of gross notional principal of the portfolio, while the net market risk is lower.

6. Other items for which Other items for which the Bank is contingently liable primarily include the amount of government the Bank is contingently securities bought/sold and remaining to be settled on the date of financial statements. This liable also includes the value of sell down options and other facilities pertaining to securitization,

the notional principal amounts of credit derivatives, amount applied in public offers under Application Supported by Blocked Amounts (ASBA), bill re-discounting, amount transferred to RBI under the Depositor Education and Awareness Fund (DEAF), exposure under partial credit enhancement, commitment towards contribution to venture fund and the amount that the Bank is obligated to pay under capital contracts. Capital contracts are job orders of a capital nature which have been committed.

The Bank has contributed '' 1,823.6 million to provident fund for the year ended March 31, 2017 (March 31, 2016: '' 1,612.8 million), which includes compulsory contribution made towards employee pension scheme under Employees Provident Fund and Miscellaneous Provisions Act, 1952.

Superannuation Fund

The Bank has contributed '' 197.4 million for the year ended March 31, 2017 (March 31, 2016: '' 122.7 million) to Superannuation Fund for employees who had opted for the scheme.

National Pension Scheme (NPS)

The Bank has contributed '' 64.4 million for the year ended March 31, 2017 (March 31, 2016: '' 51.3 million) to NPS for employees who had opted for the scheme.

Compensated absence

The following table sets forth, for the periods indicated, movement in provision for compensated absence.

1. Included in line item ''Payments to and provision for employees'' of Schedule-16 Operating expenses.

39. AS 11 - Change in accounting of exchange gains/losses on repatriation of retained earnings from foreign branches

Effective from April 1, 2016, pursuant to RBI circular no. DBR.BPBC.No.61/21.04.018/2016-17 dated April 18, 2017, the Bank does not recognize the proportionate amount of exchange differences in foreign currency translation reserve (FCTR) as income or expense, which relates to repatriation of accumulated profits from overseas operations. Accordingly for the year ended March 31, 2017, the Bank has not recognized an amount of '' 2,884.1 million as income, which relates to the repatriation of retained earnings from foreign branches during the current year.

1. Includes provision towards NPA amounting to Rs,164,334.2 million (March 31, 2016: Rs,64,019.9 million).

2. During the year ended March 31, 2016, the weak global economic environment, the sharp downturn in the commodity cycle and the gradual nature of the domestic economic recovery adversely impacted the borrowers in certain sectors like iron and steel, mining, power, rigs and cement. In view of the above, the Bank had on a prudent basis made a collective contingency and related reserve during the year ended March 31, 2016, amounting to Rs,36,000 million towards exposures to these sectors. This was over and above provisions made for non-performing and restructured loans as per RBI guidelines.

3. The Bank has fully utilized an amount of Rs,36,000.0 million from collective contingency and related reserve during the year ended March 31, 2017.

4. Includes reversal of general provision towards standard assets amounting to Rs,3,392.4 million (March 31, 2016: provision made Rs,2,970.1 million).

The Bank has assessed its obligations arising in the normal course of business, including pending litigations, proceedings pending with tax authorities and other contracts including derivative and long term contracts. In accordance with the provisions of AS 29 on ''Provisions, Contingent Liabilities and Contingent Assets'', the Bank recognizes a provision for material foreseeable losses when it has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure to this effect is made as contingent liabilities in the financial statements. The Bank does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.

The following table sets forth, for the periods indicated, the movement in provision for legal and fraud cases, operational risk and other contingencies.

32. Provision for income tax

The provision for income tax (including deferred tax) for the year ended March 31, 2017 amounted to Rs,14,775.1 million (March 31, 2016: Rs,24,694.3 million).

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

33. Deferred tax

At March 31, 2017, the Bank has recorded net deferred tax assets of Rs,54,722.3 million (March 31, 2016: Rs,47,700.3 million), which have been included in other assets.

The following table sets forth, for the periods indicated, the break-up of deferred tax assets and liabilities into major items.

1. These items are considered in accordance with the requirements of Income Computation and Disclosure Standards (ICDS).

2. Tax rate of 34.608% is adopted based on Finance Act, 2017.

During the year ended March 31, 2017, pursuant to the press release dated July 6, 2016 issued by the Ministry of Finance, the Bank has reversed the tax provision and corresponding deferred tax amounting to Rs,4,624.1 million created for the year ended March 31, 2016 on account of ICDS. As the ICDS is applicable from the year ending March 31, 2017, the tax provision and deferred tax for the year ended March 31, 2017 have been computed after considering its impact.

34. Details of provisioning pertaining to fraud accounts

The following table sets forth, for the periods indicated, the details of provisioning pertaining to fraud accounts.

35. Proposed dividend and issue of bonus shares Proposed dividend - equity and preference shares

The Board of Directors at its meeting held on May 3, 2017 has recommended a dividend of Rs,2.50 per equity share pre-bonus issue for the year ended March 31, 2017 (March 31, 2016: Rs,5.00 per equity share). The declaration and payment of dividend is subject to requisite approvals.

The Board of Directors has also recommended a dividend of Rs,100.00 per preference share for the year ended March 31, 2017 (March 31, 2016: Rs,100.00 per preference share). The declaration and payment of dividend is subject to requisite approvals.

According to the revised AS 4 - ''Contingencies and events occurring after the balance sheet dateRs,as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not accounted for proposed dividend (including tax) as a liability for the year ended March 31, 2017. However, the Bank has reckoned proposed dividend in determining capital funds in computing capital adequacy ratio at March 31, 2017.

Proposal to issue bonus shares

The Board of Directors at its meeting held on May 3, 2017 approved issue of bonus shares, in the proportion of 1:10, i.e. 1 (One) bonus equity share of Rs,2 each for every 10 (Ten) fully paid-up equity shares held (including shares underlying ADS) as on the record date, subject to approval by the Members of the Company. Subsequent to the bonus issue, the ratio of ADSs to equity shares will remain unaffected and each ADS after the bonus issue will continue to represent two equity share of par value of Rs,2 per share.

36. Dividend distribution tax

Dividend received from Indian subsidiaries, on which dividend distribution tax has been paid by them and dividend received from overseas subsidiaries, on which tax has been paid under section 115BBD of the Income Tax Act, 1961, have been reduced from dividend to be distributed by the Bank for the purpose of computation of dividend distribution tax as per section 115-O of the Income Tax Act, 1961.

37. Related Party Transactions

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

I. Related parties Subsidiaries

ICICI Bank Canada, ICICI Bank UK PLC, ICICI Home Finance Company Limited, ICICI International Limited, ICICI Investment Management Company Limited, ICICI Lombard General Insurance Company Limited, ICICI Prudential Asset Management Company Limited, ICICI Prudential Life Insurance Company Limited, ICICI Prudential Pension Funds Management Company Limited, ICICI Prudential Trust Limited, ICICI Securities Holdings Inc., ICICI Securities Inc., ICICI Securities Limited, ICICI Securities Primary Dealership Limited, ICICI Trusteeship Services Limited and ICICI Venture Funds Management Company Limited.

Associates/joint ventures/other related entities

ICICI Merchant Services Private Limited, ICICI Strategic Investments Fund1, India Advantage Fund-III, India Advantage Fund-IV, India Infradebt Limited, I-Process Services (India) Private Limited, NIIT Institute of Finance, Banking and Insurance Training Limited, Comm Trade Services Limited and ICICI Foundation for Inclusive Growth.

1. Entity consolidated as per Accounting Standard (AS) 21 on ''Consolidated Financial Statements''.

ICICI Equity Fund, I-Ven Biotech Limited, Akzo Nobel India Limited and FINO PayTech Limited ceased to be related parties effective from December 31, 2015, March 31, 2016, April 30, 2016 and January 5, 2017 respectively.

Key management personnel

Ms. Chanda Kochhar, Mr. N. S. Kannan, Ms. Vishakha Mulye1, Mr. Vijay Chandok2, Mr. Anup Bagchi3, Mr. K. Ramkumar4 and Mr. Rajiv Sabharwal5.

1. Identified as related party effective from January 19, 2016.

2. Identified as related party effective from July 28, 2016.

3. Identified as related party effective from February 1, 2017.

4. Mr. K. Ramkumar ceased to be the whole-time director of the Bank effective from April 30, 2016.

5. Mr. Rajiv Sabharwal ceased to be the whole-time director of the Bank effective from January 31, 2017.

Relatives of key management personnel

Mr. Deepak Kochhar, Mr. Arjun Kochhar, Ms. Aarti Kaji, Mr. Mahesh Advani, Ms. Rangarajan Kumudalakshmi, Ms. Aditi Kannan, Ms. Sudha Narayanan, Mr. Raghunathan Narayanan, Mr. Rangarajan Narayanan, Mr. Vivek Mulye1, Ms. Vriddhi Mulye1, Mr. Gauresh Palekar1, Ms. Shalaka Gadekar1, Ms. Manisha Palekar1, Ms. Poonam Chandok2, Ms. Saluni Chandok2, Ms. Simran Chandok2, Mr. C. V. Kumar2, Ms. Shad Kumar2, Ms. Sanjana Gulati2, Ms. Mitul Bagchi3, Mr. Aditya Bagchi3, Mr. Shishir Bagchi3, Ms. Jaya Ramkumar4, Mr. R. Shyam4, Ms. R. Suchithra4, Mr. K. Jayakumar4, Mr. R. Krishnaswamy4, Ms. J. Krishnaswamy4, Ms. Pushpa Muralidharan4, Ms. Malathi Vinod4, Ms. Sangeeta Sabharwal5, Mr. Kartik Sabharwal5 and Mr. Arnav Sabharwal5.

1. Identified as related party effective from January 19, 2016.

2. Identified as related party effective from July 28, 2016.

3. Identified as related party effective from February 1, 2017.

4. Mr. K. Ramkumar ceased to be the whole-time director of the Bank effective from April 30, 2016.

5. Mr. Rajiv Sabharwal ceased to be the whole-time director of the Bank effective from January 31, 2017.

1. The Bank undertakes derivative transactions with its subsidiaries, associates, joint ventures and other related entities. The Bank manages its foreign exchange and interest rate risks arising from these transactions by covering them in the market. While the Bank within its overall position limits covers these transactions in the market, the above amounts represent only the transactions with its subsidiaries, associates, joint ventures and other related entities and not the offsetting/covering transactions.

2. Excludes the perquisite value on account of employee stock options exercised.

3. Identified as related party effective from January 19, 2016.

4. Identified as related party effective from July 28, 2016.

5. Identified as related party effective from February 1, 2017.

6. Mr. K. Ramkumar ceased to be the whole-time director of the Bank effective from April 30, 2016.

7. Mr. Rajiv Sabharwal ceased to be the whole-time director of the Bank effective from January 31, 2017.

Letters of comfort

The Bank has issued letters of comfort on behalf of its banking subsidiary ICICI Bank UK PLC to Financial Services Authority, UK (now split into two separate regulatory authorities, the Prudential Regulation Authority and the Financial Conduct Authority) to confirm that the Bank intends to financially support ICICI Bank UK PLC in ensuring that it meets all of its financial obligations as they fall due.

The Bank has issued an undertaking on behalf of ICICI Securities Inc. for Singapore dollar 10.0 million (currently equivalent to Rs,464.1 million) to the Monetary Authority of Singapore (MAS) and has executed indemnity agreement on behalf of ICICI Bank Canada to its independent directors for a sum not exceeding Canadian dollar 2.5 million each (currently equivalent to Rs,121.5 million), aggregating to Canadian dollar 17.5 million (currently equivalent to Rs,850.4 million). The aggregate amount of Rs,1,314.5 million at March 31, 2017 (March 31, 2016: Rs,1,389.2 million) is included in the contingent liabilities.

The letters of comfort in the nature of letters of awareness that were outstanding at March 31, 2017 issued by the Bank on behalf of its subsidiaries in respect of their borrowings made or proposed to be made, aggregated to Rs,12,363.0 million (March 31, 2016: Rs,12,486.1 million). During the year ended March 31, 2017, borrowings pertaining to letters of comfort aggregating Rs,123.1 million were repaid.

In addition to the above, the Bank has also issued letters of comfort in the nature of letters of awareness on behalf of its subsidiaries for other incidental business purposes. These letters of awareness are in the nature of factual statements or confirmation of facts and do not create any financial impact on the Bank.

38. Details of amount transferred to The Depositor Education and Awareness Fund (the Fund) of RBI

The following table sets forth, for the periods indicated, the movement in amount transferred to the Fund.

39. Small and micro enterprises

The following table sets forth, for the periods indicated, details relating to enterprises covered under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

40. Penalties/fines imposed by RBI and other banking regulatory bodies

The penalty imposed by RBI and other banking regulatory bodies during the year ended March 31, 2017 was Nil (March 31, 2016: Nil).

41. Disclosure on Remuneration Compensation Policy and practices

(A) Qualitative Disclosures

a) Information relating to the bodies that oversee remuneration.

- Name, composition and mandate of the main body overseeing remuneration

The Board Governance, Remuneration and Nomination Committee (BGRNC/ Committee) is the body which oversees the remuneration aspects. The functions of the Committee include recommending appointments of Directors to the Board, identifying persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down and recommending to the Board their appointment and removal, formulate a criteria for the evaluation of the performance of the whole time/ independent Directors and the Board and to extend or continue the term of appointment of independent Director on the basis of the report of performance evaluation of independent Directors, recommending to the Board a policy relating to the remuneration for the Directors, Key Managerial Personnel and other employees, recommending to the Board the remuneration (including performance bonus and perquisites) to wholetime Directors (WTDs), commission and fee payable to non- executive Directors subject to applicable regulations, approving the policy for and quantum of bonus payable to members of the staff including senior management and key managerial personnel, formulating the criteria for determining qualifications, positive attributes and independence of a Director, framing policy on Board diversity, framing guidelines for the Employee Stock Option Scheme (ESOS) and decide on the grant of the Bank''s stock options to employees and WTDs of the Bank and its subsidiary companies.

- External consultants whose advice has been sought, the body by which they were commissioned, and in what areas of the remuneration process

The Bank did not take advice from an external consultant on any area of remuneration during the year ended March 31, 2017.

- Scope of the Bank''s remuneration policy (eg. by regions, business lines), including the extent to which it is applicable to foreign subsidiaries and branches

The Compensation Policy of the Bank, as last amended and approved by the BGRNC and the Board at their meeting held on April 28, 2016, pursuant to the guidelines issued by RBI, covers all employees of the Bank, including those in overseas branches of the Bank. In addition to the Bank''s Compensation Policy guidelines, the overseas branches also adhere to relevant local regulations.

- Type of employees covered and number of such employees

All employees of the Bank are governed by the Compensation Policy. The total number of permanent employees of the Bank at March 31, 2017 was 81,129.

b) Information relating to the design and structure of remuneration processes.

- Key features and objectives of remuneration policy

The Bank has under the guidance of the Board and the BGRNC, followed compensation practices intended to drive meritocracy within the framework of prudent risk management. This approach has been incorporated in the Compensation Policy, the key elements of which are given below.

- Effective governance of compensation: The BGRNC has oversight over compensation. The Committee defines Key Performance Indicators (KPIs) for WTDs and equivalent positions and the organisational performance norms for bonus based on the financial and strategic plan approved

by the Board. The KPIs include both quantitative and qualitative aspects. The BGRNC assesses organisational performance as well as the individual performance for WTDs and equivalent positions. Based on its assessment, it makes recommendations to the Board regarding compensation for WTDs and equivalent positions and bonus for employees, including senior management and key management personnel.

- Alignment of compensation philosophy with prudent risk taking: The Bank seeks to achieve a prudent mix of fixed and variable pay, with a higher proportion of variable pay at senior levels and no guaranteed bonuses. Compensation is sought to be aligned to both financial and non-financial indicators of performance including aspects like risk management and customer service. In addition, the Bank has an employee stock option scheme aimed at aligning compensation to long term performance through stock option grants that vest over a period of time. Compensation of staff in financial and risk control functions is independent of the business areas they oversee and depends on their performance assessment.

- Whether the remuneration committee reviewed the firm''s remuneration policy during the past year, and if so, an overview of any changes that were made

The Bank''s Compensation Policy was reviewed by the BGRNC and the Board at their meeting held on April 28, 2016. The disclosures were reviewed pursuant to RBI circular on Disclosures in Financial Statements.

- Discussion of how the Bank ensures that risk and compliance employees are remunerated independently of the businesses they oversee

The compensation of staff engaged in control functions like Risk and Compliance depends on their performance, which is based on achievement of the key results of their respective functions. Their goal sheets do not include any business targets.

c) Description of the ways in which current and future risks are taken into account in the remuneration

processes.

- Overview of the key risks that the Bank takes into account when implementing remuneration measures

The Board approves the risk framework for the Bank and the business activities of the Bank are undertaken within this framework to achieve the financial plan. The risk framework includes the Bank''s risk appetite, limits framework and policies and procedures governing various types of risk. KPIs of WTDs & equivalent positions, as well as employees, incorporate relevant risk management related aspects. For example, in addition to performance targets in areas such as growth and profits, performance indicators include aspects such as the desired funding profile and asset quality. The BGRNC takes into consideration all the above aspects while assessing organisational and individual performance and making compensation-related recommendations to the Board.

- Overview of the nature and type of key measures used to take account of these risks, including risk difficult to measure

The annual performance targets and performance evaluation incorporate both qualitative and quantitative aspects including asset quality, provisioning, increase in stable funding sources, refinement/ improvement of the risk management framework, effective management of stakeholder relationships and mentoring key members of the top and senior management.

- Discussion of the ways in which these measures affect remuneration

Every year, the financial plan/targets are formulated in conjunction with a risk framework with limit structures for various areas of risk/lines of business, within which the Bank operates to achieve the financial plan. To ensure effective alignment of compensation with prudent risk taking, the BGRNC takes into account adherence to the risk framework in conjunction with which the financial plan/targets have been formulated. KPIs of WTDs and equivalent positions, as well as employees, incorporate relevant risk management related aspects. For example, in addition to performance targets in areas such as growth and profits, performance indicators include aspects such as the desired funding profile and asset quality. The BGRNC takes into consideration all the above aspects while assessing organisational and individual performance and making compensation-related recommendations to the Board.

- Discussion of how the nature and type of these measures have changed over the past year and reasons for the changes, as well as the impact of changes on remuneration

The nature and type of these measures have not changed over the past year and hence, there is no impact on remuneration.

d) Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration

- Overview of main performance metrics for Bank, top level business lines and individuals

The main performance metrics include profits, loan growth, deposit growth, risk metrics (such as quality of assets), compliance with regulatory norms, refinement of risk management processes and customer service. The specific metrics and weightages for various metrics vary with the role and level of the individual.

- Discussion of how amounts of individual remuneration are linked to the Bank-wide and individual performance

The BGRNC takes into consideration above mentioned aspects while assessing performance and making compensation-related recommendations to the Board regarding the performance assessment of WTDs and equivalent positions. The performance assessment of individual employees is undertaken based on achievements compared to their goal sheets, which incorporate various aspects/metrics described earlier.

- Discussion of the measures the Bank will in general implement to adjust remuneration in the event that performance metrics are weak, including the Bank''s criteria for determining ''weakRs,performance metrics

The Bank''s Compensation Policy outlines the measures the Bank will implement in the event of a reasonable evidence of deterioration in financial performance. Should such an event occur in the manner outlined in the policy, the BGRNC may decide to apply malus on none, part or all of the unvested deferred variable compensation.

e) Description of the ways in which the Bank seeks to adjust remuneration to take account of the longer term performance

- Discussion of the Bank''s policy on deferral and vesting of variable remuneration and, if the fraction of variable remuneration that is deferred differs across employees or groups of employees, a description of the factors that determine the fraction and their relative importance

The quantum of bonus for an employee does not exceed a certain percentage (as stipulated in the compensation policy) of the total fixed pay in a year. Within this percentage, if the quantum of bonus exceeds a predefined threshold percentage of the total fixed pay, a part of the bonus is deferred and paid over a period. These thresholds for deferrals are same across employees.

- Discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and (if permitted by national law) after vesting through claw back arrangements

The deferred portion of variable pay is subject to malus, under which the Bank would prevent vesting of all or part of the variable pay in the event of an enquiry determining gross negligence, breach of integrity or in the event of a reasonable evidence of deterioration in financial performance. In such cases, variable pay already paid out may also be subjected to clawback arrangements, as applicable.

f) Description of the different forms of variable remuneration that the Bank utilises and the rationale for using these different forms

- Overview of the forms of variable remuneration offered. A discussion of the use of different forms of variable remuneration and, if the mix of different forms of variable remuneration differs across employees or group of employees, a description of the factors that determine the mix and their relative importance

The Bank pays performance linked retention pay (PLRP) to its front-line staff and junior management and performance bonus to its middle and senior management. PLRP 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 service. The Bank also pays variable pay to sales officers and relationship managers in wealth management roles while ensuring that such pay-outs are in accordance with applicable regulatory requirements.

The Bank ensures higher proportion of variable pay at senior levels and lower variable pay for front-line staff and junior management levels.

(B) Quantitative disclosures

The following table sets forth, for the period indicated, the details of quantitative disclosure for remuneration of WTDs (including MD and CEO) and equivalent positions.

1. Fixed pay includes basic salary, supplementary allowances, superannuation, contribution to provident fund and gratuity fund by the Bank. The amount contains part year payouts for a retired, a resigned WTD and a newly appointed WTD for the year ended March 31, 2017.

2. Variable pay and share-linked instruments for the year ended March 31, 2017 are subject to approval from RBI.

3. Excludes special grant of stock options approved by RBI in November 2015 aggregating to 5.8 million stock options and grant of 1.0 million stock options to a WTD.

4. Includes special grants and stock options granted to a WTD during the year ended March 31, 2016.

Payment of compensation in the form of profit related commission to the non-executive directors

The Board at its meeting held on September 16, 2015 and the shareholders at their meeting held on July

11, 2016 approved the payment of profit related commission of Rs,1.0 million per annum to be paid to each non-executive Director of the Bank (excluding government nominee and part-time Chairman) subject to the availability of net profits at the end of each financial year.

The Bank accordingly recognized an amount of Rs,6.0 million as profit related commission payable to the nonexecutive Directors during the year ended March 31, 2017, subject to statutory approvals. For the year ended March 31, 2016, the Bank had recognized an amount of Rs,6.0 million as profit related commission payable to the non-executive Directors, which was paid in July 2016 after obtaining the shareholder approval in the Annual General Meeting of the Bank.

42. Corporate Social Responsibility

The gross amount required to be spent by the Bank on Corporate Social Responsibility (CSR) related activities during the year ended March 31, 2017 was Rs,1,997.3 million (March 31, 2016: Rs,2,121.1 million).

The following table sets forth, for the periods indicated, the amount spent by the Bank on CSR related activities.

43. Drawdown from reserves

The Bank has not drawn any amount from reserves during the year ended March 31, 2017 (March 31, 2016: Nil).

44. Investor Education and Protection Fund

The unclaimed dividend amount due to be transferred to the Investor Education and Protection Fund during the year ended March 31, 2017 has been transferred without any delay.

45. Specified bank notes

The disclosure requirement on specified bank notes is not applicable to banks as clarified by RBI through its letter dated April 13, 2017.

46. Comparative figures

Figures of the previous year have been re-grouped to conform to the current year presentation.

Source : Dion Global Solutions Limited
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