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NOTES TO ACCOUNTS

ICICI Bank Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 347238.17 Cr. P/BV 3.12 Book Value (₹) 171.96
52 Week High/Low (₹) 538/336 FV/ML 2/1 P/E(X) 81.62
Bookclosure 09/08/2019 EPS (₹) 6.58 Div Yield (%) 0.42
Year End :2019-03 

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/(loss) after tax by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share is computed using the weighted average number of equity shares and weighted average number of dilutive potential equity shares outstanding during the year.

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

2. Business/information ratios

The following table sets forth, for the periods indicated, the business/information ratios.

3. 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, 2020. As per the guidelines, the Tier-1 capital is made up of Common Equity Tier-1 (CET1) and Additional Tier-1.

At March 31, 2019, Basel III guidelines require the Bank to maintain a minimum Capital to Risk-Weighted Assets Ratio (CRAR) of 11.025% with minimum CET1 CRAR of 7.525% and minimum Tier-1 CRAR of 9.025%. The minimum total CRAR, Tier-1 CRAR and CET1 CRAR requirement include capital conservation buffer of 1.875% and additional capital requirement of 0.15% on account of the Bank being designated as Domestic Systemically Important Bank.

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

4. Liquidity coverage ratio

The Basel Committee for Banking Supervision (BCBS) had introduced the liquidity coverage ratio (LCR) in order to ensure that a bank has an adequate stock of unencumbered high quality liquid assets (HQLA) to survive a significant liquidity stress lasting for a period of 30 days. LCR is defined as a ratio of HQLA to the total net cash outflows estimated for the next 30 calendar days. As per the RBI guidelines, the minimum LCR required to be maintained by banks shall be implemented in a phased manner from January 1, 2015 as given below.

The Bank during the three months ended March 31, 2019 maintained average HQLA (after haircut) of Rs. 1,434,622.0 million (March 31, 2018: Rs. 1,051,010.5 million) against the average liquidity requirement of Rs. 1,090,941.2 million (March 31, 2018: Rs. 842,650.4 million) at minimum LCR requirement of 100.0% (March 31, 2018: 90.0%). 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. 1,189,674.2 million (March 31, 2018: Rs. 815,035.6 million). With effect from June 15, 2018, RBI permitted banks to reckon an additional 2.0% of their net demand and time liabilities (NDTL) under FALLCR within the mandatory statutory liquidity requirement (SLR), as Level 1 high quality liquid assets (HQLA) for the purpose of computing their LCR. Further, in September 2018, RBI permitted banks to reckon an additional 2.0% of their net demand and time liabilities (NDTL) with effect from October 1, 2018 under FALLCR within the mandatory statutory liquidity requirement (SLR), as Level 1 high quality liquid assets (HQLA) for the purpose of computing their LCR. Hence, the carve-out from SLR under FALLCR will now be 13.0% compared to 9.0% as of March 31, 2018. This takes the total carve out from SLR available to banks at 15.0% of their NDTL including 2.0% of MSF. 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. 178,691.5 million (March 31, 2018: Rs. 160,400.8 million). Further, average level 2 assets primarily consisting of AA- and above rated corporate bonds and commercial papers, amounted to Rs. 47,040.3 million (March 31, 2018: Rs. 50,909.9 million).

At March 31, 2019, top liability products/instruments and their percentage contribution to the total liabilities of the Bank were term deposits 34.11% (March 31, 2018: 30.83%), savings account deposits 23.61% (March 31, 2018: 22.86%), bond borrowings 9.29% (March 31, 2018: 10.68%) and current account deposits 9.98% (March 31, 2018: 10.12%). Top 20 depositors constituted 5.74% (March 31, 2018: 6.20%) of total deposits of the Bank at March 31, 2019. 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 7.04% (March 31, 2018: 8.92%) of the total liabilities of the Bank at March 31, 2019.

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, 2019, unsecured wholesale funding contributed 56.18% (March 31, 2018: 59.32%) 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 22.98% (March 31, 2018: 21.40%) and 6.14% (March 31, 2018: 5.61%) 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.

I n view of the margin rules for non-centrally cleared derivative transactions issued by the Basel Committee on Banking Supervision and discussion paper issued by the RBI, 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 the 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 as well as 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, 2019 was 131.50% (March 31, 2018: 112.25%). During the three months ended March 31, 2019, 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 daily LCR values, was 117.77% for the three months ended March 31, 2019 (March 31, 2018: 112.57% computed based on month-end LCR values).

5. 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 Basel Committee on Banking Supervision (BCBS) document ‘International Convergence of Capital Measurement and Capital Standards: A Revised Framework’. This segment also includes income from credit cards, debit cards, third party product distribution and the associated costs.

- 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.

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 units in India. The following table sets forth, for the periods indicated, geographical segment results.

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.

6. Preference shares

During the year ended March 31, 2019, the Bank redeemed preference shares of Rs. 3,500.0 million after obtaining requisite approval from RBI. The Bank has created capital redemption reserve of Rs. 3,500.0 million as required under the Companies Act, 2013, out of surplus profits available for previous years.

7. 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. In June 2017, exercise period was further modified to not exceed 10 years from the date of vesting of options as may be determined by the Board Governance, Remuneration & Nomination Committee to be applicable for future grants. In May 2018, exercise period was further modified to not exceed 5 years from the date of vesting of options as may be determined by the Board Governance, Remuneration & Nomination Committee to be applicable for future grants.

Options granted after March 2014, vest in a graded manner over a three-year period with 30%, 30% and 40% of the grant vesting in each year, commencing from the end of 12 months from the date of grant other than certain options granted in April 2014 which vested to the extent of 50% on April 30, 2017 and the balance vested on April 30, 2018 and option granted in September 2015 which vested to the extent of 50% on April 30, 2018 and balance 50% would vest 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), all the unvested options would lapse. Options granted in January 2018 would vest at the end of four years from the date of grant. Certain options granted in May 2018, would vest to the extent of 50% on May 7, 2021 and balance 50% would vest on May 7, 2022 and any unvested options would lapse upon termination of employment due to retirement (including pursuant to early/voluntary retirement scheme).

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

The exercise price of the Bank’s options, except mentioned below, is the last closing price on the stock exchange, which recorded highest trading volume preceding the date of grant of options. In February 2011, the Bank granted 16,692,500 options to eligible employees and whole-time Directors of the Bank and certain of its subsidiaries at an exercise price of Rs. 175.82. This exercise price was the average 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 recognised during the year ended March 31, 2019 (year ended March 31, 2018: Nil). If the Bank had used the fair value of options based on binomial tree model, compensation cost in the year ended March 31, 2019 would have been higher by Rs. 3,179.0 million (year ended March 31, 2018: Rs. 3,526.6 million) and proforma profit after tax would have been Rs. 30,454.0 million (year ended March 31, 2018: Rs. 64,247.6 million). On a proforma basis, the Bank’s basic and diluted earnings per share would have been Rs. 4.73 (year ended March 31, 2018: Rs. 10.01) and Rs. 4.68 (year ended March 31, 2018: Rs. 9.91) respectively for the year ended March 31, 2019.

The following table sets forth, for the periods indicated, the key assumptions used to estimate the fair value of options granted.

The weighted average fair value of options granted during the year ended March 31, 2019 was Rs. 107.22 (year ended March 31, 2018: Rs. 86.43).

Risk free interest rates over the expected term of the option are based on the government securities yield in effect at the time of the grant. The expected term of an option is estimated based on the vesting term as well as expected exercise behavior of the employees who receive the option. Expected exercise behaviour 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 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, 2019 was Rs. 326.37 (year ended March 31, 2018: Rs. 296.94).

8. Subordinated debt

The following table sets forth, the details of subordinated debt bonds qualifying for Additional Tier-1 capital raised during the year ended March 31, 2019.

The following table sets forth, the details of subordinated debt bonds qualifying for Additional Tier-1 capital raised during the year ended March 31, 2018.

During the year ended March 31, 2019, the Bank has not raised subordinated debt qualifying for Tier-2 capital (March 31, 2018: Nil).

9. 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).

10. 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.

During the year ended March 31, 2019, the Bank sold 2.00% of its shareholding in ICICI Prudential Life Insurance Limited and made a net gain of Rs. 11,095.9 million on this sale.

During the year ended March 31, 2018, the Bank sold approximately 7.00% of its shareholding in ICICI Lombard General Insurance Company Limited in the IPO and made a net gain of Rs. 20,121.5 million on this sale. Further, the Bank sold approximately 20.78% of its shareholding in ICICI Securities Limited in the IPO and made a net gain of Rs. 33,197.7 million on this sale.

The following table sets forth, for the periods indicated, break-up of other investments in Schedule 8.

11. Investment in securities, other than government and other approved securities (Non-SLR investments)

i) Issuer composition of investments in securities, other than government and other approved securities

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, 2019.

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, 2018.

ii) Non-performing investments in securities, other than government and other approved securities

The following table sets forth, for the periods indicated, the movement in gross non-performing investments in securities, other than government and other approved securities.

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

During the three months ended June 30, 2018, with the approval of Board of Directors, the Bank transferred securities amounting to Rs. 157,519.9 million from held-to-maturity (HTM) category to available-for-sale (AFS) category, being transfer of securities at the beginning of the accounting year as permitted by RBI. During the year ended March 31, 2019, the Bank undertook one transaction for sale of securities with a net book value of Rs. 2,283.2 million, which was 0.20% of the HTM portfolio at April 1, 2018. During the year ended March 31, 2018, the Bank undertook 52 transactions for sale of securities with a net book value of Rs. 44,039.5 million, which was 4.69% of the HTM portfolio at April 1, 2017. The above sale is excluding sale to RBI under pre-announced open market operation auctions and repurchase of government securities by Government of India, as permitted by RBI guidelines. The market value of investments held in the HTM category was Rs. 1,722,629.5 million at March 31, 2019 (March 31, 2018: Rs. 1,549,786.6 million). This includes investments in unlisted subsidiaries/joint ventures classified in the HTM category at cost.

13. CBLO transactions

During the year ended March 31, 2019, the Clearing Corporation of India Limited (CCIL) has discontinued transactions under CBLO. At March 31, 2018, the Bank had outstanding borrowings amounting to Rs. 48,642.5 million and the amortised book value of securities given as collateral by the Bank to CCIL for availing the CBLO facility was Rs. 157,319.7 million.

14. 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 tables set forth, for the periods indicated, the details of derivative positions.

The net overnight open position (NOOP) at March 31, 2019 (as per last NOOP value reported to RBI for the year ended March 31, 2019) was Rs. 2,688.1 million (March 31, 2018: Rs. 992.6 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, 2019 (March 31, 2018: 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, 2019, the net open notional position on this portfolio was Nil (March 31, 2018: Nil) with no mark-to-market gain/loss (March 31, 2018: Nil).

The profit and loss impact on the aforementioned structured deposits portfolio on account of mark-to-market and realised profit and loss during the year ended March 31, 2019 was Nil (year ended March 31, 2018: Nil). 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.

15. 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.

On February 12, 2018, RBI issued a revised framework for resolution of stressed assets, which superceded the existing guidelines on SDR, change in ownership outside SDR (except projects under implementation) and S4A with immediate effect. Under the revised framework, the stand-still benefits for accounts where any of these schemes had been invoked but not yet implemented were revoked and accordingly these accounts were classified as per the extant RBI norms on income recognition and asset classification in the three months ended March 31, 2018.

Further, 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, 2019, the Bank classified certain loans as NPAs at overseas branches amounting to Rs. 3,244.1 million (year ended March 31, 2018: Nil) as per the requirement of these guidelines and made a provision of Rs. 718.2 million (year ended March 31, 2018: Nil) on these loans.

Disclosure on exposure to Infrastructure Leasing & Financial Services Limited (ILFS) and its group entities At March 31, 2019, the Bank has classified its fund-based outstanding to Infrastructure Leasing & Financial Services Limited (ILFS) entities amounting to Rs. 2,759.4 million as non-performing and holds a provision of Rs. 1,459.7 million as per extant RBI guidelines. The Bank also has non-fund based outstanding of Rs. 5,449.2 million to ILFS entities and holds a provision of Rs. 4,682.6 million towards this outstanding at March 31, 2019.

Divergence in asset classification and provisioning for NPAs

I n terms of the RBI circular no. //DBR.BPBC.No.32/21.04.018/2018-19 dated April 1, 2019, banks are required to disclose the divergences in asset classification and provisioning consequent to RBI’s annual supervisory process in their notes to accounts to the financial statements, wherever either (a) the additional provisioning requirements assessed by RBI exceed 10% of the reported net profits before provisions and contingencies (15% of the published net profits after tax for the year ended March 31, 2017) or (b) the additional gross NPAs identified by RBI exceed 15% of the published incremental gross NPAs for the reference period, or both. Based on the condition mentioned in RBI circular, no disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBI’s supervisory process for the year ended March 31, 2018 and for the year ended March 31, 2017.

Accounts covered under Insolvency and Bankruptcy Code, 2016

During the year ended March 31, 2018, RBI had advised banks to initiate insolvency resolution process under the provisions of Insolvency and Bankruptcy Code, 2016 (IBC) for certain specific accounts. Banks were required to make provision at 40% on the secured portion and 100% on unsecured portion of the loan, or provision as per extant RBI guideline on asset classification norms, whichever was higher at March 31, 2018. Banks were required to further increase the provision on secured portion of the loan to 50.0% at June 30, 2018. At March 31, 2019, the Bank holds a provision of Rs. 76,210.3 million in respect of outstanding loans amounting to Rs. 103,065.0 million to these borrowers, which amounts to provision coverage of 73.94%.

16. Floating provision

During the year ended March 31, 2019, the Bank did not make any floating provision (March 31, 2018: Nil).

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

17. General provision on standard assets

The general provision on standard assets held by the Bank at March 31, 2019 was Rs. 28,737.6 million (March 31, 2018: Rs. 25,906.6 million). The general provision on standard assets amounting to Rs. 2,553.7 million was made during the year ended March 31, 2019 (year ended March 31, 2018: Rs. 2,771.1 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 unhedged foreign currency exposure (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 evaluating the impact of exchange rate fluctuations on the Bank’s portfolio on an yearly basis.

The Bank holds provision amounting to Rs. 2,250.0 million (March 31, 2018: Rs. 1,900.0 million) on advances to entities with UFCE at March 31, 2019. The Bank has made provision amounting to Rs. 350.0 million during the year ended March 31, 2019 (year ended March 31, 2018: Rs. 50.0 million). The Bank held incremental capital of Rs. 8,048.3 million at March 31, 2019 on advances to borrowers with UFCE (March 31, 2018: Rs. 5,487.5 million).

The Bank makes additional general provision on stressed sectors of the economy, as per RBI guidelines and as per the Board approved policy. The Bank has reversed general provision amounting to Rs. 483.4 million during the year ended March 31, 2019 (year ended March 31, 2018: provision made amounting to Rs. 1,911.5 million). At March 31, 2019, the Bank holds provision of Rs. 1,428.1 million (March 31, 2018: Rs. 1,911.5 million).

RBI, through its circular dated August 25, 2016, required banks to make additional provision from the year ended March 31, 2019 on incremental exposure of the banking system in excess of normally permitted lending limit (NPLL) on borrowers classified as specified borrower. During the year ended March 31, 2019, the Bank made provision amounting to Rs. 124.2 million on these specified borrowers. At March 31, 2019, the Bank holds provision of Rs. 124.2 million.

18. Provision Coverage Ratio

The provision coverage ratio of the Bank at March 31, 2019 computed as per the extant RBI guidelines was 70.6% (March 31, 2018: 47.7%).

19. Priority Sector Lending Certificates (PSLCs)

During the year ended March 31, 2019, the Bank purchased PSLCs under agriculture category amounting to Rs. 249,175.0 million (year ended March 31, 2018: Rs. 35,000.0 million). During the year ended March 31, 2019, the Bank did not purchase any PSLCs under general category (year ended March 31, 2018: Rs. 17,300.0 million). During the year ended March 31, 2019, the Bank sold PSLC under general category amounting to Rs. 197,500.0 million (year ended March 31, 2018: Rs. 1,000.0 million) and under micro enterprise category amounting to Rs. 47,252.5 million (year ended March 31, 2018: Nil).

20. Securitisation

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

The outstanding credit enhancement in the form of guarantees amounted to Nil at March 31, 2019 (March 31, 2018: Nil) and outstanding liquidity facility in the form of guarantees amounted to Rs. 265.1 million at March 31, 2019 (March 31, 2018: Rs. 265.8 million).

The outstanding credit enhancement in the form of guarantees for third party originated securitisation transactions amounted to Rs. 4,858.6 million at March 31, 2019 (March 31, 2018: Rs. 4,189.5 million) and outstanding liquidity facility for third party originated securitisation transactions amounted to Nil at March 31, 2019 (March 31, 2018: Nil).

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

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

a. The Bank, as an originator, has not sold any loan through securitisation during the year ended March 31, 2019 (March 31, 2018: 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 seven loans through direct assignment amounting to Rs. 4,684.1 million during the year ended March 31, 2019 (year ended March 31, 2018: 15 loans amounting to Rs. 19,132.7 million).

21. Financial assets transferred during the year to securitisation 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. DBR.No.BPBC.2/21.04.048/2015-16 dated July 1, 2015. 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.

22. Details of non-performing assets purchased/sold, excluding those sold to SC/RC

The Bank did not purchase any non-performing assets in terms of the guidelines issued by RBI circular no. DBR.No.BPBC.2/21.04.048/2015-16 dated July 1, 2015 during the year ended March 31, 2019 (year ended March 31, 2018: Nil).

The following table sets forth, for the periods indicated, details of non-performing assets sold to banks, NBFCs and other financial institutions.

The following table sets forth, for the periods indicated, details of non-performing assets sold to entities, other than banks, NBFCs and other financial institutions.

During the year ended March 31, 2019, the Bank has not upgraded any borrower to standard category subsequent to change in ownership in accordance with RBI circular dated February 12, 2018 (year ended March 31, 2018: one borrower with fund based outstanding of Rs. 15,452.7 million, which included Rs. 10,262.0 million of credit substitutes and shares converted as per the resolution plan at March 31, 2018. The Bank held an aggregate provision of Rs. 7,785.1 million against this borrower, of which Rs. 6,508.2 million was against credit substitutes and shares at March 31, 2018).

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

23. Exposure to sensitive sectors

The Bank has exposure to sectors, which are sensitive to asset price fluctuations. The sensitive sectors include capital markets and real estate.

The following table sets forth, for the periods indicated, the position of exposure to capital market sector.

24. Factoring business

At March 31, 2019, the outstanding receivables acquired by the Bank under factoring business were Nil (March 31, 2018: Nil).

25. 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 2.69% (March 31, 2018: 3.08%), for Singapore was 1.12% (March 31, 2018: 1.13%) and for United Kingdom was 1.06% (March 31, 2018: Nil). As the net funded exposure to United States of America, Singapore and United Kingdom exceeded 1.0% of total funded assets, the Bank held a provision of Rs. 595.0 million on country exposure at March 31, 2019 (March 31, 2018: Rs. 455.0 million) based on RBI guidelines.

The following table sets forth, for the periods indicated, the details of exposure (net) and provision held by the bank.

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

During the year ended March 31, 2019 and March 31, 2018, the Bank has complied with the RBI guidelines on single borrower and borrower group limit.

27. 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, 2019 (March 31, 2018: Nil).

28. Revaluation of fixed assets

The Bank follows the revaluation model for its premises (land and buildings) other than improvements to leasehold property as per AS 10 - ‘Property, Plant and Equipment’. The Bank had initially revalued its premises at March 31, 2016 and subsequently as per the Bank’s policy, annual revaluation is carried out through external valuers, 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, 2019 was Rs. 56,852.6 million (March 31, 2018: Rs. 56,637.9 million) as compared to the historical cost less accumulated depreciation of Rs. 26,407.5 million (March 31, 2018: Rs. 26,606.0 million).

The revaluation reserve is not available for distribution of dividend.

29. Employee benefits Pension

The following tables set forth, for the periods indicated, movement of the present value of the defined benefit obligation, fair value of plan assets and other details for pension benefits.

Estimated rate of return on plan assets is based on the expected average long-term rate of return on investments of the Fund during the estimated term of the obligations.

Estimated rate of return on plan assets is based on the expected average long-term rate of return on investments of the Fund during the estimated term of the obligations.

Provident Fund (PF)

As there is no liability towards interest rate guarantee on exempt provident fund on the basis of actuarial valuation, the Bank has not made any provision for the year ended March 31, 2019 (year ended March 31, 2018: Nil).

The Bank has contributed Rs. 2,067.3 million to provident fund for the year ended March 31, 2019 (year ended March 31, 2018: Rs. 1,982.2 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 Rs. 224.9 million for the year ended March 31, 2019 (year ended March 31, 2018: Rs. 207.2 million) to Superannuation Fund for employees who had opted for the scheme.

National Pension Scheme (NPS)

The Bank has contributed Rs. 95.2 million for the year ended March 31, 2019 (year ended March 31, 2018: Rs. 76.8 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.

30. Movement in provision for credit cards/debit cards/savings accounts and direct marketing agents reward points

The following table sets forth, for the periods indicated, movement in provision for credit cards/debit cards/savings accounts reward points.

31. Provisions and contingencies

The following table sets forth, for the periods indicated, the break-up of provisions and contingencies included in profit and loss account.

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 recognises a provision for material foreseeable losses when it has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. In cases where the available information indicates that the loss on the contingency is reasonably possible or the amount of loss cannot be reasonably estimated, a disclosure to this effect is made as contingent liabilities in the financial statements. The Bank does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.

32. Provision for income tax

The provision for income tax (including deferred tax) for the year ended March 31, 2019 amounted to Rs. 4,134.6 million (March 31, 2018: Rs. 6,571.3 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, 2019, the Bank has recorded net deferred tax assets of Rs. 104,365.7 million (March 31, 2018: Rs. 74,770.2 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.

As per ICDS and subsequent circular issued by Central Board of Direct Taxes, during the year ended March 31, 2017, the Bank had recognised tax expense and deferred tax asset on closing balance of Foreign Currency Translation Reserve (FCTR) at March 31, 2017. Delhi High Court struck down certain part of ICDS in November 2017. Further, pursuant to amendments in Income tax Act, 1961 through Finance Act, 2018, the movement during the year in FCTR has become taxable effective from April 1, 2016. Accordingly, tax expense of Rs. 4,159.0 million and equal amount of deferred tax asset on the opening balance of FCTR at April 1, 2016 recognised earlier under ICDS has been reversed during the year ended March 31, 2018.

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 on equity shares

The Board of Directors at its meeting held on May 6, 2019 has recommended a dividend of Rs. 1.00 per equity share for the year ended March 31, 2019 (year ended March 31, 2018: Rs. 1.50 per equity share). The declaration and payment of dividend is subject to requisite approvals.

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

Arteria Technologies Private Limited1, 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, ICICI Strategic Investments Fund2, Comm Trade Services Limited and ICICI Foundation for Inclusive Growth.

1. Identified as related party effective from May 29, 2018.

2. Entity consolidated as per Accounting Standard (AS) 21 on ‘Consolidated Financial Statements’.

Key management personnel

Mr. Sandeep Bakhshi1, Ms. Vishakha Mulye, Mr. Vijay Chandok, Mr. Anup Bagchi, Mr. N. S. Kannan2 and Ms. Chanda Kochhar3.

1. Identified as related party effective from June 19, 2018.

2. Ceased to be related party effective close of business hours on June 18, 2018.

3. Ceased to be related party effective from October 4, 2018.

Relatives of key management personnel

Ms. Mona Bakhshi1, Mr. Shivam Bakhshi1, Ms. Esha Bakhshi1, Ms. Minal Bakhshi1, Mr. Sameer Bakhshi1, Mr. Vivek Mulye, Ms. Vriddhi Mulye, Dr. Gauresh Palekar, Ms. Shalaka Gadekar, Ms. Manisha Palekar, Ms. Poonam Chandok, Ms. Saluni Chandok, Ms. Simran Chandok, Mr. C. V. Kumar, Ms. Shad Kumar, Ms. Sanjana Gulati, Ms. Mitul Bagchi, Mr. Aditya Bagchi, Mr. Shishir Bagchi, Mr. Arun Bagchi , Mr. Animesh Bagchi, Ms. Rangarajan Kumudalakshmi2, Ms. Aditi Kannan2, Ms. Sudha Narayanan2, Mr. Raghunathan Narayanan2, Mr. Rangarajan Narayanan2, Mr. Deepak Kochhar3, Mr. Arjun Kochhar3, Ms. Aarti Kaji3 and Mr. Mahesh Advani3.

1. Identified as related party effective from June 19, 2018.

2. Ceased to be related party effective close of business hours on June 18, 2018.

3. Ceased to be related party effective from October 4, 2018.

II. Transactions with related parties

The following table sets forth, for the periods indicated, the significant transactions between the Bank and its related parties.

III. Material transactions with related parties

The following table sets forth, for the periods indicated, the material transactions between the Bank and its related parties. A specific related party transaction is disclosed as a material related party transaction wherever it exceeds 10% of all related party transactions in that category.

VI. 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 (March 31, 2018: Singapore dollar 10.0 million) (equivalent to Rs. 510.4 million at March 31, 2019 and Rs. 498.2 million at March 31, 2018) to the Monetary Authority of Singapore (MAS) and has executed six indemnity agreements including one issued during the year on behalf of ICICI Bank Canada to its independent directors for a sum not exceeding Canadian dollar 2.5 million each, aggregating to Canadian dollar 15.0 million (March 31, 2018: Canadian dollar 17.5 million) (equivalent to Rs. 773.1 million at March 31, 2019 and Rs. 886.4 million at March 31, 2018). The aggregate amount of Rs. 1,283.5 million at March 31, 2019 (March 31, 2018: Rs. 1,384.6 million) is included in the contingent liabilities.

The letters of comfort in the nature of letters of awareness that were outstanding at March 31, 2019 issued by the Bank on behalf of its subsidiaries in respect of their borrowings made or proposed to be made, aggregated to Rs. 7,060.0 million (March 31, 2018: Rs. 12,363.0 million).

I n 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. 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, 2019 was Rs. 10.0 million (year ended March 31, 2018: Rs. 627.2 million).

RBI through an order dated February 25, 2019, imposed a monetary penalty of Rs. 10.0 million on the Bank for delay in compliance with RBI’s directives on “Time-bound implementation & strengthening of SWIFT related controls”.

40. 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 wholetime/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) and senior management, 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 employed the services of a reputed consulting firm for market benchmarking in the area of compensation, including executive compensation.

- Scope of the Bank’s remuneration policy (e.g. 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 reviewed by the BGRNC and the Board at their meeting held on May 7, 2018, 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, 2019 was 84,922.

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.

o 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, senior management and equivalent positions and bonus for employees, including senior management and key management personnel.

o 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

During the year ended March 31, 2019, the Bank’s Compensation Policy was reviewed by the BGRNC and the Board at their meeting held on May 7, 2018. No changes were proposed in the compensation policy.

- 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 risk calibrated core operating profit (profit before provisions and tax, excluding treasury income), 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 risk calibrated core operating profit, 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 risk calibrated core operating profit (profit before provisions and tax, excluding treasury income), asset quality metrics (such as additions to non-performing loans and recoveries & upgrades), 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 ‘weak’ 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.

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 recognised an amount of Rs. 5.8 million as profit related commission payable to the non-executive Directors during the year ended March 31, 2019, subject to requisite approvals. During the year ended March 31, 2019, the Bank paid Rs. 5.1 million as profit related commission payable to the non-executive Directors for the year ended March 31, 2018.

41. 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, 2019 was Rs. 1,189.6 million (March 31, 2018: Rs. 1,702.0 million).

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

42. Drawdown from reserves

The Bank has not drawn any amount from reserves during the year ended March 31, 2019 (year ended March 31, 2018: Nil).

43. Investor Education and Protection Fund

The unclaimed dividend amount, due for transfer to the Investor Education and Protection Fund (IEPF) during the year ended March 31, 2019, has been transferred without any delay.

Any unexpired demand drafts as on the date of transfer to IEPF get subsequently extinguished after the date of expiry of the relevant instruments. The amounts of such extinguished drafts are credited back to the unclaimed dividend account from time to time as per SEBI circular dated April 20, 2018 and are transferred to IEPF.

44. Comparative figures

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

Signatures to Schedules 1 to 18

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