A

PROJECT REPORT
ON
“Accounting Policies and Financial Statement Analysis through Ratio
Analysis”

FOR

In the partial fulfillment of the requirement for M.B.A

(Full Time)

Submitted By

Gajera Kaushikkumar C.
(M.B.A.)

Submitted To

Prof. Sameer Rohadia (Internal Guide)

Mr. Gopal Vaghasia (External Guide)

G.I.D.C. RAJJU SHROFF ROFEL INSTITUTE OF MANAGEMENT

STUDIES, GRIMS, Vapi

Affiliated with
Veer Narmada South Gujarat University, Surat
Academic year 2007-08
 DECLARATION

I, Gajera Kaushikkumar Chandubhai hereby declare that the report on summer

training and project work entitled “Accounting Policies and Financial Data Analysis
through Ratio Analysis” submitted to ‘GIDC Rajju Shroff Rofel Institute of
Management Studies” is a result of my own work and my indebtedness to other work
publications if any, have been duly acknowledged.

PLACE: VAPI
DATE: Gajera Kaushikkumar

2
 CERTIFICATE

This is to certify that Mr. Gajera Kaushikkumar Chandubhai has satisfactorily

completed the project work entitled, “Accounting Policies and Financial Data Analysis
through Ratio Analysis”, Based on the declaration made by the candidate and my
association as a guide for carrying out this work, I recommended this project report for
evaluation as a part of the MBA programme of Veer Narmad South Gujarat University.

Place: __ _______________
Date: (Prof. Sameer Rohadia)

The project is forwarded for evaluation to Veer Narmad South Gujarat University, Surat
for Presentation.

Place:
Date: ____________________
( Dr. R. S. Shah )

3
 PREFACE

“Knowledge and human power are synonyms”, once said the great philosopher Francis
Bacon. However based on the experience within today’s global markets, he would
probably say, “The ability to capture, communicate & leverage knowledge to solve
problems is human power”. This raises the question how exactly one can best
capture, communicate & leverage knowledge, especially within world of Business
Finance.

The answer probably lies in statement itself by communicating your ideas and devising
ways and means to give shape to your plans in to reality, which requires a long-term
planning, investment and shrewd thinking.

The tryst for knowledge and power led me to two years M.B.A. degree course as part of
this long-term investment. This course not only enabled me to focus firmly on the current
trend but also helped to focus on future changes.

As a part of this M.B.A. degree, students have to undergo a project, which is designed
keeping the prerogative and preferences of industry in mind. This particular project
allows a student to implement what she has learned within the four walls of classroom. It
is here that the caliber of student is tested to find his flexibility for rigorous tasks assigned
to her in future.

This report that I am submitting intends to highlight my versatility in sustaining the pulls
and pressure of day to day professional life and put to perspective the facts that I am
capable enough to deliver whenever a challenge is thrown to me.

This report is divided in two parts. The first part gives the basic information about the
project, the industry and the Bank. The second part consists of Financial Analysis and
Conclusion on the basis of particular Analysis. At the end I have provided a short list of
the reference books and the sites that provided useful information during the project.

4
 ACKNOWLEDGEMENT

Knowledge in itself is a continuous process. At this moment of my substantial

enhancement I rarely find enough words to express my gratitude towards those who were
constantly involved with me during my project and making it a success. Men become
good through practice than by nature.

I would like to express to my gratitude to our Director Dr. R. S. Shah for giving me
opportunity to learn about practical banking business environment for a period 2 months.

Also I am thankful to my Project Guide Prof. Sameer Rohadia, who have shaped my
understanding and also I have got the help of ICICI Bank for preparing this report.

Especially I would like to thanks to

1. Mr. Gopal Vaghasia (Manager - Retail Loan & Cards).

2. Mr. Gaurav Mishra (Business Manager)
3. Mr. Gaurav Kalolia (Team Leader)

Because of their good response towards me & for providing me the important
information & data about the ICICI Bank.

5
 TABLE OF CONTENT

SR.NO PERTICULARS PAGE

NO.

1 EXECUTIVE SUMMARY 8

2 HISTORY OF INDIAN BANKING 9

 Early History 10

 Post Independence 11

 Nationalization 12

 Liberalization 12

 Current Scenario 13

3 HISTORY OF ICICI BANK 14

 Overview & Milestones 15

 Vision Statement 17

 Director’s Profile 19

 Award’s In year 2007 20

 Codes of Business Conduct & Ethics of 21

ICICI Bank

4 OVERVIEW OF CREDIT CARD 26

 History of Credit Card 27

 Functions of Credit Card 28

 Product & Services of Credit Card 33

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  Expert’s Whisper 43

 Pick a Card 46

 Fair Practice Code for Credit Card 53

5 H.R. SERVICES 59

6 FINANCIAL ANALYSIS 69


70
A/c Data of FY 2006 & 2007

 Cash Flow Statement 83

 Financial Finding & Highlights of 85

performance

 Accounting policies of ICICI Bank 90

 Financial Data Analysis 97

 Risk Management 106

 Financial Statement Analysis 113

7 SWOT ANALYSIS 139

8 LEARNING EXPERIENCE 143

9 CONCLUSION 144

10 ANNEXURE 147

 Terms & Conditions of ICICI Bank 148

11 BIBLIOGRAPHY 156

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 EXECUTIVE SUMMARY

The role of banking industry is ever expanding and is becoming inseparable part
of the growth of the country. There are many financial products coming everyday in to
the pool of banking sector. Some are old and some are new from Indian context.
However, there are some products have presence in the country since long, like Saving
A/c, Current A/c, Fixed Deposits etc. But in the era of Globalizations and with free entry
of lot of private players this product need some modification. So, in the current situation
lots of different and attractive products regarding Investment banking, treasurary banking
and Credit Cards are available with different banks in India to encase maximum market
share.

Now to avail such kind of Product’s detailed knowledge & various financial tools
and technique, south Gujarat university, Surat arranged eight week summer project in any
business organization for sharpen our skills & to bridge to gap of the theory & practice. I
completed my project at ICICI Bank, Rajkot.

This is a General training project report prepared at ICICI Bank, which consist of
detailed analysis on the topic of “Accounting Policies & financial Statement Analysis
through Ratio Analysis”.

In first part of this project I highlighted brief introduction of ICICI group bank.
This include Brief introduction about the Bank, director of the bank, Vision of the bank,
Overview of Credit Card and how it work and expert’s whisper to Credit Card, etc. So
this section includes brief history about ICICI Bank Credit Card.

In second part of the project, I get detailed knowledge about the different products
and services of the ICICI Bank and work of Accounting Policies are followed at
Bank and Financial Statement Analysis through Ratio Analysis of the year 2005,
2006 and 2007.

8
9
 BANKING IN INDIA

Banking in India originated in the first decade of 18th century with The General
Bank of India coming into existence in 1786. This was followed by Bank of Hindustan.
Both these banks are now defunct. The oldest bank in existence in India is the State Bank
of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of
decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the
1850s. At that point of time, Calcutta was the most active trading port, mainly due to the
trade of the British Empire, and due to which banking activity took roots there and
prospered. The first fully Indian owned bank was the Allahabad Bank, which was
established in 1865.

By the 1900s, the market expanded with the establishment of banks such as
Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both
of which were founded under private ownership. The Reserve Bank of India formally
took on the responsibility of regulating the Indian banking sector from 1935. After India's
independence in 1947, the Reserve Bank was nationalized and given broader powers.

Early history

At the end of 18th century, there were hardly any banks in India in the modern
sense of the term. At the time of the American Civil War, a void was created as the supply
of cotton to Lancashire stopped from the Americas. Some banks were opened at that time
which functioned as entities to finance industry, including speculative trades in cotton.
With large exposure to speculative ventures, most of the banks opened in India during
that period could not survive and failed. The depositors lost money and lost interest in
keeping deposits with banks. Subsequently, banking in India remained the exclusive
domain of Europeans for next several decades until the beginning of the 20th century.

The Bank of Bengal, which later became the State Bank of India.

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 At the beginning of the 20th century, Indian economy was passing through a
relative period of stability. Around five decades have elapsed since the India's First war of
Independence, and the social, industrial and other infrastructure have developed. At that
time there were very small banks operated by Indians, and most of them were owned and
operated by particular communities. The banking in India was controlled and dominated
by the presidency banks, namely, the Bank of Bombay, the Bank of Bengal, and the Bank
of Madras - which later on merged to form the Imperial Bank of India, and Imperial Bank
of India, upon India's independence, was renamed the State Bank of India. There were
also some exchange banks, as also a number of Indian joint stock banks. All these banks
operated in different segments of the economy. The presidency banks were like the
central banks and discharged most of the functions of central banks. They were
established under charters from the British East India Company. The exchange banks,
mostly owned by the Europeans, concentrated on financing of foreign trade. Indian joint
stock banks were generally under capitalized and lacked the experience and maturity to
compete with the presidency banks, and the exchange banks. There was potential for
many new banks as the economy was growing.

Under these circumstances, many Indians came forward to set up banks, and
many banks were set up at that time, and a number of them set up around that time
continued to survive and prosper even now like Bank of India and Corporation Bank,
Indian Bank, Bank of Baroda, and Canada Bank.

Post-independence

The partition of India in 1947 had adversely impacted the economies of Punjab
and West Bengal, and banking activities had remained paralyzed for months. India's
independence marked the end of a regime of the Laissez-faire for the Indian banking. The
Government of India initiated measures to play an active role in the economic life of the
nation, and the Industrial Policy Resolution adopted by the government in 1948
envisaged a mixed economy. This resulted into greater involvement of the state in
different segments of the economy including banking and finance. The major steps to
regulate banking included:

 In 1948, the Reserve Bank of India, India's central banking authority, was
nationalized, and it became an institution owned by the Government of India.
 In 1949, the Banking Regulation Act was enacted which empowered the
Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in
India."
 The Banking Regulation Act also provided that no new bank or branch of an
existing bank may be opened without a licence from the RBI, and no two
banks could have common directors.

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 However, despite these provisions, control and regulations, banks in India except
the State Bank of India, continued to be owned and operated by private persons. This
changed with the nationalization of major banks in India on 19th July, 1969.

Nationalization:

By the 1960s, the Indian banking industry has become an important tool to
facilitate the development of the Indian economy. At the same time, it has emerged as a
large employer, and a debate has ensued about the possibility to nationalize the banking
industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the
GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray
thoughts on Bank Nationalization." The paper was received with positive enthusiasm.
Thereafter, her move was swift and sudden, and the GOI issued an ordinance and
nationalized the 14 largest commercial banks with effect from the midnight of July 19,
1969. Jayaprakash Narayan, a national leader of India, described the step as a
"masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the
Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill,
and it received the presidential approval on 9th August, 1969.

A second dose of nationalisation of 6 more commercial banks followed in 1980.

The stated reason for the nationalisation was to give the government more control of
credit delivery. With the second dose of nationalisation, the GOI controlled around 91%
of the banking business of India.

Liberalisation

In the early 1990s the then Narasimha Rao government embarked on a policy of
liberalisation and gave licences to a small number of private banks, which came to be
known as New Generation tech-savvy banks, which included banks such as UTI Bank
(the first of such new generation banks to be set up), ICICI Bank and HDFC Bank. This
move, along with the rapid growth in the economy of India, kick started the banking
sector in India, which has seen rapid growth with strong contribution from all the three
sectors of banks, namely, government banks, private banks and foreign banks.

The next stage for the Indian banking has been setup with the proposed relaxation
in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of 10%,at present it has gone up
to 49% with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this
time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods of
working for traditional banks. All this led to the retail boom in India. People not just
demanded more from their banks but also received more.

12
Current scenario:

Currently (2007), overall, banking in India is considered as fairly mature in terms

of supply, product range and reach-even though reach in rural India still remains a
challenge for the private sector and foreign banks. Even in terms of quality of assets and
capital adequacy, Indian banks are considered to have clean, strong and transparent
balance sheets-as compared to other banks in comparable economies in its region. The
Reserve Bank of India is an autonomous body, with minimal pressure from the
government. The stated policy of the Bank on the Indian Rupee is to manage volatility-
without any stated exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector, the demand for banking services-especially retail
banking, mortgages and investment services are expected to be strong. M&As, takeovers,
asset sales and much more action will happen on this front in India.

Currently, India has 88 scheduled commercial banks (SCBs) –

 28 public sector banks (Government of India holding a stake),

 29 private banks (Publicly listed and traded on stock exchanges),

 31 foreign banks.

They have a combined network of over 53,000 branches and 17,000 ATMs.
According to a report by ICRA Limited, a rating agency, the public sector banks hold
over 75 percent of total assets of the banking industry, with the private and foreign banks
holding 18.2% and 6.5% respectively.

13
14
 HISTORY OF ICICI BANK

ICICI Bank (Industrial Credit and Investment Corporation of India) is

India's largest private sector bank and second largest overall. ICICI Bank has total assets
of about USD 5.6 Billion, a network of over 950 (including 190 branches of Sangli bank
recently taken over by ICICI Bank) branches and offices, and about 3500 ATMs. ICICI
Bank offers a wide range of banking products and financial services to corporate and
retail customers through a variety of delivery channels and through its specialized
subsidiaries and affiliates in the areas of investment banking, life and non-life insurance,
venture capital and asset management. ICICI Bank's equity shares are listed in India on
stock exchanges at Kolkata and Vadodara, the Stock Exchange, Mumbai and the National
Stock Exchange of India Limited and its ADRs are listed on the New York Stock
Exchange (NYSE). During the year 2005 ICICI bank was involved as a defendant in
cases of alleged criminal practices in its debt collection operations and alleged fraudulent
tactics to sell its products.

Overview:

ICICI Bank is India's second-largest bank with total assets of Rs. 3,446.58 billion
at March 31, 2007 and profit after tax of Rs. 31.10 billion for fiscal 2007. ICICI Bank is
the most valuable bank in India in terms of market capitalization and is ranked third
amongst all the companies listed on the Indian stock exchanges in terms of free float
market capitalisation. The Bank has a network of about 950 branches and 3,300 ATMs in
India and presence in 17 countries. ICICI Bank offers a wide range of banking products
and financial services to corporate and retail customers through a variety of delivery
channels and through its specialised subsidiaries and affiliates in the areas of investment
banking, life and non-life insurance, venture capital and asset management. The Bank
currently has subsidiaries in the United Kingdom, Russia and Canada, branches in
Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Centre and
representative offices in the United States, United Arab Emirates, China, South Africa,

15
Bangladesh, Thailand, Malaysia and Indonesia. ICICI Bank's equity shares are listed in
India on Bombay Stock Exchange and the National Stock Exchange of India Limited.

Milestones:

 The World Bank, the Government of India and representatives of Indian industry
form ICICI Limited as a development finance institution to provide medium-term
and long-term project financing to Indian businesses in 1955.
 1994 ICICI establishes ICICI Banking Corporation as a banking subsidiary. ICICI
Banking Corporation is renamed as ICICI Bank Limited.
 1999 ICICI becomes the first Indian company and the first bank or financial
institution from non-Japan Asia to list on the NYSE.
 2001 ICICI acquired Bank of Madura. Bank of Madura was a Chettiar bank, and
had acquired Chettinad Mercantile Bank and Illanji Bank in the 1960s.
 2002 The Boards of Directors of ICICI and ICICI Bank approve the merger of
ICICI, ICICI Personal Financial Services Limited and ICICI Capital Services
Limited, with ICICI Bank. After receiving all necessary regulatory approvals,
ICICI integrates the group's financing and banking operations, both wholesale and
retail, into a single entity. Also, ICICI bought the Shimla and Darjeeling branches
that Standard Chartered Bank had inherited when it acquired Grindlays Bank.
 2002 ICICI establishes representative offices in NY and London.
 2003 ICICI opens subsidiaries in Canada and the United Kingdom (UK), and in
the UK it establishes alliance with Lloyds TSB. It also opens an Offshore Banking
Unit (OBU) in Singapore and representative offices in Dubai and Shanghai.
 2004 ICICI opens a rep office in Bangladesh to tap the extensive trade between
that country, India and South Africa.
 2005 ICICI acquires Investitsionno-Kreditny Bank (IKB), a Russia bank with
about US$4mn in assets, head office in Balabanovo in the Kaluga region, and
with a branch in Moscow. ICICI Bank offers a high-interest (5.4% gross) internet
savings account to UK customers. Also, ICICI establishes a branch in the Dubai
International Financial Centre.

16
 VISION

To make ICICI Bank dominant Among the banking player with built on trust by
world-class people and service.
This we hope to achieve by

 Understanding the needs of customers and offering them superior products and
service

 Leveraging technology to service customers quickly, efficiently and conveniently

 Developing and implementing superior risk management and investment

strategies to offer sustainable and stable returns to our shareholders

 Providing an enabling environment to foster growth and learning for our

employees

 And above all, building transparency in all our dealings.

The success of the bank will be founded in its unflinching commitment to 5

core values which are Integrity, Customer First, Boundary less, Ownership and
Passion. Each of the values describes what the bank stands for, the qualities of
ICICI’s people and the way they work.

17
1. CUSTOMER FIRST

 Own the customer; deliver the promise.

 Listen actively, stretch continually to add value to customer and channel

partners.

 RICE –Respect Internal Customer Expectations

 Seek and empower decision making for superior service quality.

2. BOUNDARYLESS

 Never say “its not my job”, Go beyond the call of duty

 Experiment “Believe anything is possible”

 Seek new ideas and thoughts freely across levels and functions

3. OWNERSHIP

 If it is to be, “it is up to me”

 Bias for action.

 Accountable for team performance

4. PASSION

 Winning Instinct

 Transmit Boundless energy and enthusiasm to drive results.

 Stand up and make a difference

18
  Demonstrate speed for competitive advantage.

5. INTEGRITY

 Walk and Talk

 Stand up honestly and fearlessly for what we truly care about.

 Always act in a consistent and equitable manner.

 Don’t compromise the future to pay for the present

19
 DIRECTOR’S PROFILE

K. V. Kamath
Managing Director and Chief Executive Officer

Chanda Kochhar Nachiket Mor

Deputy Managing Director Deputy Managing Director

V. Vaidyanathan Madhabi Puri Buch

Executive Director Executive Director

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Awards & Recognitions ICICI Bank 2007

 Excellence in Remittance Business Award, 2007 from Asian Banker.

 ICICI Bank has won the Reader’s Digest Trusted Brand Gold Award for the
Bank category in India in 2007.

CODE OF BUSINESS CONDUCT AND ETHICS OF ICICI BANK

Introduction

This Code of Business Conduct and Ethics has been adopted by banks Board of
Directors and summaries the standards that must guide banks actions. While covering a
wide range of business practices and procedures, these standards cannot and do not cover
every issue that may arise, or every situation where ethical decisions must be made, but
rather set forth key guiding principles that represent the Bank’s policies and establish
conditions for employment at the Bank.

We must strive to foster a culture of honesty and accountability. Our commitment

to the highest level of ethical conduct should be reflected in all of the Bank’s business
activities including, but not limited to, relationships with employees, customers,
suppliers, competitors, the government and the public, and our shareholders. All of our
employees, officers and directors must conduct themselves according to the language and
spirit of this Code and seek to avoid even the appearance of improper behavior. Even well
intentioned actions that violate the law or this Code may result in negative consequences
for the Bank and for the individuals involved.

One of our most valuable assets is our reputation for integrity, professionalism
and fairness. We should all recognize that our actions are the foundation of our reputation
and adhering to this Code and applicable law is imperative.

Conflicts of Interest

21
 Our employees, officers and directors have an obligation to conduct themselves in
an honest and ethical manner and act in the best interest of the Bank. All employees,
officers and directors should endeavour to avoid situations that present a potential or
actual conflict between their interest and the interest of the Bank.

A “conflict of interest” occurs when a person’s private interest interferes in any

way, or even appears to interfere, with the interest of the Bank, including its subsidiaries
and affiliates. A conflict of interest can arise when an employee, officer or director takes
an action or has an interest that may make it difficult for him or her to perform his or her
work objectively and effectively. Conflicts of interest may also arise when an employee,
officer or director receives improper personal benefits as a result of the employee’s,
officer’s or director’s position in the Bank.

Although it would not be possible to describe every situation in which a conflict

of interest may arise, the following are examples of situations which may constitute a
conflict of interest:

 Working, in any capacity, for a competitor, customer, supplier or other third party
while employed by the Bank.

 Accepting gifts of more than modest value or receiving personal discounts (if
such discounts are not generally offered to the public) or other benefits as a result
of your position in the Bank from a competitor, customer or supplier.

 Competing with the Bank for the purchase or sale of property, products, services
or other interests.

 Having an interest in a transaction involving the Bank, a competitor, customer or

supplier (other than as an employee, officer or director of the Bank and not
including routine investments in publicly traded companies).

 Directing business to a supplier owned or managed by, or which employs, a

relative or friend.

In the event that an actual or apparent conflict of interest arises between the
personal and professional relationship or activities of an employee, officer or director, the
employee, officer or director involved is required to handle such conflict of interest in an
ethical manner in accordance with the provisions of this Code.
Quality of Public Disclosures

The Bank has a responsibility to communicate effectively with shareholders so

that they are provided with full and accurate information, in all material respects, about
the Bank’s financial condition and results of operations. Our reports and documents

22
required to be filed with or submitted to the Reserve Bank of India, Securities and
Exchange Board of India, stock exchanges in India, United States Securities and
Exchange Commission or other regulatory agencies and our other public communications
shall include full, fair, accurate, timely and understandable disclosure.
Compliance with Laws, Rules and Regulations

We are strongly committed to conducting our business affairs with honesty and
integrity and in full compliance with all applicable laws, rules and regulations. No
employee, officer or director of the Bank shall commit an illegal or unethical act, or
instruct others to do so, for any reason. The Bank also disseminates information regarding
compliance with the laws, rules and regulations that affect our business.
Trading on Inside Information

Using non-public information to trade in securities, or providing a family

member, friend or any other person with a “tip”, is illegal. All non-public information
should be considered inside information and should never be used for personal gain. You
are required to familiarize yourself and comply with the Bank’s Code of Conduct for
Prevention of Insider Trading, copies of which are distributed to all employees, officers
and directors and are available on the Intranet or from the Company Secretary. You
should contact the Company Secretary with any questions about your ability to buy or
sell securities.

Protection of Confidential Proprietary Information

Confidential proprietary information generated and gathered in our business is a

valuable asset. Protecting this information plays a vital role in our continued growth and
ability to compete, and all proprietary information should be maintained in strict
confidence, except when disclosure is authorized by the Bank or required by law.

Proprietary information includes all non-public information that might be useful

to competitors or that could be harmful to the Bank or its customers if disclosed.
Intellectual property such as trade secrets, patents, trademarks and copyrights, as well as
business, research and new product plans, objectives and strategies, records, databases,
salary and benefits data, employee medical information, customer, employee and
suppliers lists and any unpublished financial or pricing information must also be
protected.

Unauthorized use or distribution of proprietary information violates the Bank’s

policy and could be illegal. Such use or distribution could result in negative consequences
for both the Bank and the individuals involved, including potential legal and disciplinary
actions. We respect the property rights of other companies and their proprietary
information and require our employees, officers and directors to observe such rights.

Your obligation to protect the Bank’s proprietary and confidential information

continues even after you leave the Bank, and you must return all proprietary information
in your possession upon leaving the Bank.

23
Protection and Proper Use of the Bank’s Assets

Protecting the Bank’s assets against loss, theft or other misuse is the responsibility
of every employee, officer and director. Loss, theft and misuse of the Bank’s assets
directly impact our profitability. Any suspected loss, misuse or theft should be reported to
a manager/supervisor or the Chief Financial Officer.

The sole purpose of the Bank’s equipment, vehicles, supplies and electronic
resources (including, hardware, software and the data thereon) is the conduct of our
business. They may only be used for the Bank’s business consistent with the Bank’s
guidelines.

Corporate Opportunities

Employees, officers and directors are prohibited from taking for themselves
business opportunities that arise through the use of corporate property, information or
position. No employee, officer or director may use corporate property, information or
position for personal gain, and no employee, officer or director may compete with the
Bank. Competing with the Bank may involve engaging in the same line of business as the
Bank, or any situation where the employee, officer or director takes away from the Bank
opportunities for sales or purchases of property, products, services or interests.

Fair Dealing

Each employee, officer and director of the Bank should endeavour to deal fairly
with customers, suppliers, competitors, the public and one another at all times and in
accordance with ethical business practices. No one should take unfair advantage of
anyone through manipulation, concealment, abuse of privileged information,
misrepresentation of material facts or any other unfair dealing practice. No payment in
any form shall be made directly or indirectly to or for anyone for the purpose of obtaining
or retaining business or obtaining any other favorable action. The Bank and the
employee, officer or director involved may be subject to disciplinary action as well as
potential civil or criminal liability for violation of this policy.

Occasional business gifts to and entertainment of non-employees in connection

with business discussions or the development of business relationships are generally
deemed appropriate in the conduct of the Bank’s business. However, these gifts should be
given infrequently and their value should be modest. Gifts or entertainment in any form
that would likely result in a feeling or expectation of personal obligation should not be
extended or accepted.

Compliance with This Code and Reporting of Any Illegal or Unethical Behavior

All employees, directors and officers are expected to comply with all of the
provisions of this Code. The Code will be strictly enforced and violations will be dealt
with immediately, including subjecting persons to corrective and/or disciplinary action

24
such as dismissal or removal from office. Violations of the Code that involve illegal
behavior will be reported to the appropriate authorities. The Bank recognizes the need for
this Code to be applied equally to everyone it covers. The Head, Corporate Legal Group
of the Bank will have primary authority and responsibility for the enforcement of this
Code, subject to the supervision of the Board Governance & Remuneration Committee
or, in the case of accounting, internal accounting controls or auditing matters, the Audit
Committee of the Board of Directors, and the Bank will devote the necessary resources to
enable the Head, Corporate Legal Group to establish such procedures as may be
reasonably necessary to create a culture of accountability and facilitate compliance with
this Code. Questions concerning this Code should be directed to the Head, Corporate
Legal Group.

The Bank encourages all employees, officers and directors to report any suspected
violations promptly and intends to thoroughly investigate any good faith reports of
violations. The Bank will not tolerate any kind of retaliation for reports or complaints
regarding misconduct that were made in good faith. Open communication of issues and
concerns by all employees, officers and directors without fear of retribution or retaliation
is vital to the successful implementation of this Code. You are required to cooperate in
internal investigations of misconduct and unethical behaviour.

Employees, officers and directors should promptly report any concerns about
violations of ethics, laws, rules, regulations or this Code, including by any senior
executive officer or director, to their supervisors/managers or Head, Corporate Legal
Group or, in the case of accounting, internal accounting controls or auditing matters, the
Audit Committee of the Board of Directors. Any such concerns involving the Head,
Corporate Legal Group should be reported to the Board Governance & Remuneration
Committee. Interested parties may also communicate directly with the Company’s non-
management directors through contact information located in the Company’s annual
report or its website.

The Head, Corporate Legal Group shall notify the Board Governance &
Remuneration Committee of any concerns about violations of ethics, laws, rules,
regulations or this Code by any senior executive officer or director reported to him.

You should report actions that may involve a conflict of interest to the Corporate
Legal Group. In order to avoid conflicts of interests, senior executive officers and
directors must disclose to the Head, Corporate Legal Group any material transaction or
relationship that reasonably could be expected to give rise to such a conflict, and the
Head, Corporate Legal Group shall notify the Board Governance & Remuneration
Committee of any such disclosure. Conflicts of interests involving the Head, Corporate
Legal Group shall be disclosed to the Board Governance & Remuneration Committee.

25
26
 HISTORY OF CREDIT CARD

Credit was first used in Assyria, Babylon and Egypt 3000 years ago. The bill of
exchange - the forerunner of banknotes - was established in the 14th century. Debts were
settled by one-third cash and two-thirds bill of exchange. Paper money followed only in
the 17th century.

The first advertisement for credit was placed in 1730 by Christopher Thornton,
who offered furniture that could be paid off weekly.

From the 18th century until the early part of the 20th, tallymen sold clothes in
return for small weekly payments. They were called "tallymen" because they kept a
record or tally of what people had bought on a wooden stick. One side of the stick was
marked with notches to represent the amount of debt and the other side was a record of
payments. In the 1920s, a shopper's plate - a "buy now, pay later" system - was
introduced in the USA. It could only be used in the shops which issued it.

In 1950, Diners Club and American Express launched their charge cards in the
USA, the first "plastic money". In 1951, Diners Club issued the first credit card to 200
customers who could use it at 27 restaurants in New York. But it was only until the
establishment of standards for the magnetic strip in 1970 that the credit card became part
of the information age.

27
 The first use of magnetic stripes on cards was in the early 1960’s, when the
London Transit Authority installed a magnetic stripe system. San Francisco Bay Area
Rapid Transit installed a paper based ticket the same size as the credit cards in the late
1960's.

First Bank Credit Card

The inventor of the first bank issued credit card was John Biggins of the Flatbush
National Bank of Brooklyn in New York. In 1946, Biggins invented the "Charge-It"
program between bank customers and local merchants. Merchants could deposit sales
slips into the bank and the bank billed the customer who used the card.

Introduction to Credit Card:

A credit card is a system of payment named after the small plastic card issued to
users of the system. A credit card is different from a debit card in that it does not remove
money from the user's account after every transaction. In the case of credit cards, the
issuer lends money to the consumer. It is also different from a charge card (though this
name is sometimes used by the public to describe credit cards), which requires the
balance to be paid in full each month. In contrast, a credit card allows the consumer to
'revolve' their balance, at the cost of having interest charged. Most credit cards are the
same shape and size, as specified by the ISO 7810 standard.

How Credit Card Work?

A user is issued credit after an account has been approved by the credit provider,
with which the user will be able to make purchases from merchants accepting that credit
card up to a pre-established credit limit.

When a purchase is made, the credit card user agrees to pay the card issuer. The
cardholder indicates their consent to pay, by signing a receipt with a record of the card
details and indicating the amount to be paid or by entering a PIN. Also, many merchants
now accept verbal authorizations via telephone and electronic authorization using the
Internet, known as a Card not present (CNP) transaction.

28
 Electronic verification systems allow merchants to verify that the card is valid and
the credit card customer has sufficient credit to cover the purchase in a few seconds,
allowing the verification to happen at time of purchase. The verification is performed
using a credit card payment terminal or Point of Sale (POS) system with a
communications link to the merchant's acquiring bank. Data from the card is obtained
from a magnetic stripe or chip on the card; the latter system is in the United Kingdom
commonly known as Chip and PIN, but is more technically an EMV card.

Other variations of verification systems are used by eCommerce merchants to

determine if the user's account is valid and able to accept the charge. These will typically
involve the cardholder providing additional information, such as the security code printed
on the back of the card, or the address of the cardholder.

Each month, the credit card user is sent a statement indicating the purchases
undertaken with the card, any outstanding fees, and the total amount owed. After
receiving the statement, the cardholder may dispute any charges that he or she thinks are
incorrect. Otherwise, the cardholder must pay a defined minimum proportion of the bill
by a due date, or may choose to pay a higher amount up to the entire amount owed. The
credit provider charges interest on the amount owed (typically at a much higher rate than
most other forms of debt). Some financial institutions can arrange for automatic
payments to be deducted from the user's bank accounts.

Credit card issuers usually waive interest charges if the balance is paid in full each
month, but typically will charge full interest on the entire outstanding balance from the
date of each purchase if the total balance is not paid.

The credit card may simply serve as a form of revolving credit, or it may become
a complicated financial instrument with multiple balance segments each at a different
interest rate, possibly with a single umbrella credit limit, or with separate credit limits
applicable to the various balance segments. Usually this compartmentalization is the
result of special incentive offers from the issuing bank, either to encourage balance
transfers from cards of other issuers, or to encourage more spending on the part of the
customer. In the event that several interest rates apply to various balance segments,
payment allocation is generally at the discretion of the issuing bank, and payments will
therefore usually be allocated towards the lowest rate balances until paid in full before
any money is paid towards higher rate balances. Interest rates can vary considerably from
card to card, and the interest rate on a particular card may jump dramatically if the card
user is late with a payment on that card or any other credit instrument, or even if the
issuing bank decides to raise its revenue. As the rates and terms vary, services have been
set up allowing users to calculate savings available by switching cards, which can be
considerable if there is a large outstanding balance (see external links for some on-line
services).

Because of intense competition in the credit card industry, credit providers often
offer incentives such as frequent flier points, gift certificates, or cash back to try to
attract customers to their program.

29
 Low interest credit cards or even 0% interest credit cards are available. The only
downside to consumers is that the period of low interest credit cards is limited to a fixed
term, usually between 6 and 12 months after which a higher rate is charged. However,
services are available which alert credit card holders when their low interest period is due
to expire. Most such services charge a monthly or annual fee.

Grace (Credit) period:

A credit card's grace period is the time the customer has to pay the balance, before
interest is charged to the balance. Grace periods vary, but usually range from 20 to 30
days depending on the type of credit card and the issuing bank. Some policies allow for
reinstatement after certain conditions are met. Usually, if a customer is late paying the
balance, finance charges will be calculated and the grace period does not apply. Finance
charge incurred depends on the grace period and balance, with most credit cards there is
no grace period if there's any outstanding balance from the previous billing cycle or
statement (i.e. interest is applied on both the previous balance and new transactions).
However, there are some credit cards that will only apply finance charge on the previous
or old balance, excluding new transactions.

Security:

The low security of the credit card system presents countless opportunities for
fraud. This opportunity has created a huge black market in stolen credit card numbers,
which are generally used quickly before the cards are reported stolen.

The goal of the credit card companies is not to eliminate fraud, but to "reduce it to
manageable levels", such that the total cost of both fraud and fraud prevention is
minimized. This implies that high-cost low-return fraud prevention measures will not be
used if their cost exceeds the potential gains from fraud reduction.

Most internet fraud is done through the use of stolen credit card information
which is obtained in many ways, the simplest being copying information from retailers,
either online or offline. Despite efforts to improve security for remote purchases using
credit cards, systems with security holes are usually the result of poor implementations of
card acquisition by merchants. For example, a website that uses SSL to encrypt card
numbers from a client may simply email the number from the web server to someone
who manually processes the card details at a card terminal. Naturally, anywhere card
details become human-readable before being processed at the acquiring bank, a security
risk is created. However, many banks offer systems such as Clear Commerce, where
encrypted card details captured on a merchant's web server can be sent directly to the
payment processor.

Controlled Payment Numbers are another option for protecting one's credit card
number: they are "alias" numbers linked to one's actual card number, generated as

30
needed, valid for a relatively short time, with a very low limit, and typically only valid
with a single merchant.

The Indian Penal Code is the authority responsible for prosecuting criminals who
engage in credit card fraud in the India, but they do not have the resources to pursue all
criminals. In general, they only prosecute in cases exceeding Rs.5,000 in value. Three
improvements to card security have been introduced to the more common credit card
networks but none has proven to help reduce credit card fraud so far. First, the on-line
verification system used by merchants is being enhanced to require a 4 digit Personal
Identification Number (PIN) known only to the card holder.

The way credit card owners pay off their balances has a tremendous effect on
their credit history. All the information is collected by credit bureaus. The credit
information stays on the credit report, depending on the jurisdiction and the situation, for
1, 2, 5, 7 or even 10 years after the debt is repaid.

Profits and losses:

In recent times, credit card portfolios have been very profitable for banks, largely
due to the booming economy of the late nineties. However, in the case of credit cards,
such high returns go hand in hand with risk, since the business is essentially one of
making unsecured (uncollateralized) loans, and thus dependent on borrowers not to
default in large numbers.

Costs:

Credit card issuers (banks) have several types of costs:

Interest expenses

Banks generally borrow the money that they then lend to their customers.
As they receive very low-interest loans from other firms, they may borrow as
much as their customers require, while lending their capital to other borrowers at
higher rates. If the card issuer charges 15% on money lent to users, and it costs
5% to borrow the money to lend, and the balance sits with the cardholder for a
year, the issuer earns 10% on the loan. This 5% difference is the "interest
expense" and the 10% is the "net interest margin".

31
Operating costs

This is the cost of running the credit card portfolio, including everything
from paying the executives who run the company to printing the plastics, to
mailing the statements, to running the computers that keep track of every
cardholder's balance, to taking the many phone calls which cardholders place to
their issuer, to protecting the customers from fraud rings. Depending on the issuer,
marketing programs are also a significant portion of expenses

Charge offs

When a consumer becomes severely delinquent on a debt (often at the

point of six months without payment), the creditor may declare the debt to be a
charge-off. It will then be listed as such on the debtor's credit bureau reports
(Equifax lists "R9" in the "Status" column.) It is one of the worst possible items to
have on your file. The item will include relevant dates, and the amount of the bad
debt.

Rewards

Many credit card customers receive rewards,

such as frequent flier points, gift certificates, or
cash back as an incentive to use the card.
Rewards are generally tied to purchasing an
item or service on the card, which may or may
not include balance transfers, cash advances, or
other special uses. Depending on the type of card, rewards will generally cost the
issuer between 0.25% and 2.0% of the spend. Networks like Visa or MasterCard
have increased their fees to allow issuers to fund their rewards system. However,
most rewards points are accrued as a liability on a company's balance sheet and
expensed at the time of reward redemption. As a result, some issuers discourage
redemption by forcing the cardholder to call customer service for rewards. On
their servicing website, redeeming awards is usually a feature that is very well
hidden by the issuers. Others encourage redemption for lower cost merchandise;
instead of an airline ticket, which is very expensive to an issuer, the cardholder
may be encouraged to redeem for a gift certificate instead. With a fractured and
competitive environment, rewards points cut dramatically into an issuer's bottom
line, and rewards points and related incentives must be carefully managed to
ensure a profitable portfolio. There is a case to be made that rewards not
redeemed should follow the same path as gift cards that are not used: in certain
states the gift card breakage goes to the state's treasury. The same could happen to
the value of points or cash not redeemed.

32
Fraud

Where a card is stolen, or an unauthorized duplicate made, most card

issuers will refund some or all of the charges that the customer has received for
things they did not buy. These refunds will, in some cases, be at the expense of the
merchant, especially in mail order cases where the merchant cannot claim sight of
the card, but in other cases, these costs must be borne by the card issuer. In
several countries, merchants will lose the money if no ID card was asked for,
therefore merchants usually require ID card in these countries.

The cost of fraud is high; in the UK in 2004 it was over £500 million. [2]
Credit card companies generally guarantee the merchant will be paid on
legitimate transactions regardless of whether the consumer pays their credit card
bill.

Soft fraud is fraud committed by the customer himself: getting a card and
using it with no intention to ever repay the balance. Such customers are called
"diabolical" by the credit card companies, that try to avoid them at all cost.

33
ICICI BANK CREDIT CARDS:

34
 ICICI Bank offers a variety of cards to suit your different transactional needs. Our
range includes Credit Cards, Debit Cards and Prepaid cards. These cards offer you
convenience for your financial transactions like cash withdrawal, shopping and travel.
These cards are widely accepted both in India and abroad. Read on for details and
features of each.

Credit Cards

ICICI Bank Credit Cards give you the facility of cash,

convenience and a range of benefits, anywhere in the world. These
benefits range from life time free cards, Insurance benefits, global
emergency assistance service, discounts, utility payments, travel
discounts and much more.

Debit Cards

The ICICI Bank Debit Card is a revolutionary form of cash

that allows customers to access their bank account around the
clock, around the world. The ICICI Bank Debit Card can be used
for shopping at more than 3.5 Lakh merchants in India and 24
million merchants worldwide.

Travel Card

35
 Presenting ICICI Bank Travel Card. The Hassle Free way to Travel the
world. Traveling with US Dollar, Euro, Pound Sterling or Swiss Francs; Looking for
security and convenience; take ICICI Bank Travel Card. Issued in duplicate. Offers the
Pin based security. Has the convenience of usage of Credit or Debit card.

Pre Paid Cards

ICICI Bank brings to you a complete bouquet of pre-paid

cards providing payment solutions at your fingertips. ICICI Bank
pre-paid cards are a safe & convenient way for associate payments,
disbursements, gifting & small ticket transactions. Pre-paid cards
are available on a VISA platform thus providing accessibility to
over 3.5 Lakh merchant establishments & cash withdrawal from all
VISA ATMs in India.

Merchant Service on Credit Cards

Benefits of Card Acceptance:

 Fast and efficient: ICICI Bank Credit Cards serve as a fast and efficient means of
processing payments.
 More Sales: Studies show that Credit Card customers spend more than customers
who carry only cash.
 More Expensive Merchandise: Cards entice customers to purchase more
expensive merchandise than they had originally planned to buy.
 Competitive Weapon: Differentiates your business from those merchants who do
not accept credit / debit cards and hence gives you an edge over the competition.
 Enhanced Advertising: Since customers are more likely to shop at businesses
where they have credit / debit card acceptance, they tend to look for and read
those ads first.
 Steadier Sales: Credit smoothens out business peaks. Cash shoppers buy heavier
on paydays and just before holidays whereas credit card customers buy whenever
the need arises.

36
  Reaching a wider customer base: You can reach customers who prefer card
payments over cash.
 Improved security: Due to card transactions merchants have to hold lesser cash
in the premises.
 International Transactions: Cards represent the most used instrument for cross-
border payments. Foreign customers prefer cards as a mode of payment rather
than cash.
 Enhance Your Business Image: Accepting credit / debit cards creates a better
image for you.
 Enhanced customer satisfaction: Acceptance of cards leads to greater customer
satisfaction as the customer always gets something in return for the purchase
made on his card either in the form of reward points, discount or cash back.

Payseal
 Payseal, the ICICI Bank payment gateway enables organizations’ to accept secure

online Credit Cards payments over the Internet.

 It makes electronic commerce more convenient & offers ease and security of
accepting payments on the Internet.
 It provides that trust and security which your customers require.
Payseal is an online real-time payment gateway
 Offers 128-bit SSL encryption, an established security technology protocol.

 Can process Visa and MasterCard Credit Cards issued around the globe.
 Provides a robust, flexible and scalable solution used by some of the leading
Internet merchants in India.
 Ensures real time authorizations’ for your Credit Card transactions and reduces
your back end transaction processing requirements.

37
 How it works

In a typical retail purchase on the Internet:

 The customer fills his shopping cart on a merchant website and proceeds to check
out.
 The transaction information is transmitted to the merchant server.
 The web merchant forwards a digital order to the Payseal server in an encrypted
format.
 Payseal authenticates the merchant and provides a payment options and payment
details screens directly on the customer's browser over a secure 128-bit SSL+
connection.
 The customer provides his Credit Card details, which is directly sent to the
payment server.
 The Credit Card details are then forwarded to ICICI Bank for authentication.
ICICI Bank then transmits the message to the Cardholders (issuing) bank for
payment authorization. The issuing bank authorizes the payment and transmits the
confirmation back to the payment gateway through the acquiring bank.
 On receiving authentication and authorization, Payseal forwards the validation of
the payment instrument to the merchant server.
 The merchant transmits the acknowledgement of the payment to the customer's
browser.

38
 The entire process integrates seamlessly with the shop and buys application of the
web merchant ensuring a pleasant shopping experience for the customer. The Credit Card
details of the customer remain unknown to the net merchant.

Advantages of Payseal

 Easy installation, operation and management

Payseal eliminates the need for complex software, large databases, and
heavy-duty processing on the merchant site. Instead, all payment operations are
handled by Payseal's own 24x7 secure Payment Servers. As a result, software
installation, integration and management is no longer a major hurdle for
merchants and their site developers.

 Single platform for all payment options

Payseal’s unified architecture can support the Internet's widest range of

secure payment options.

 Adaptability to multiple platforms

The Payment Client software is available for Microsoft® Windows NT™

and leading versions of UNIX.

 Optimum server utilization on your site

The Payment Client software connects the merchant's storefront to

Payseal's services. It is the only software component that needs to reside on the
merchant's site server, as Payseal physically hosts the rest of the software at its
own sites. This leaves the merchants' server resources free for other tasks, at the
same time allows them to accept multiple modes of payment from your net
customers.

 Fast, easy integration

39
 The Payment Client offers developers and integrators of shop-and-buy
applications a number of programming language interfaces, minimizing the
coding effort required. The Payment Client can be quickly and easily customized
to facilitate integration with all major merchant storefront platforms.

 Centralised and secure data management

To protect the integrity of merchant transactions, Payseal supports the

Internet's strongest security technologies. The client software encrypts transaction
information using 280 bit RSA before passing it through an SSL pipe using 128-
bit encryption.
 Verisign certification

The gateway server is assigned a server ID and authenticated by

"Verisign", one of the leading certifying authorities for websites.

 Automatic upgrades and scalability

Businesses can automatically take advantage of new payment

technologies, standards and services as they emerge, without undergoing costly
and time-consuming software changes to merchant site. Businesses retain the
same interface, yet are able to stay abreast of the latest technologies and offer
customers the widest range of options.

 Swift Transaction processing

Payseal delivers a real time, highly scalable and reliable Internet payment
platform that processes transactions in real time.

POS Terminals

ICICI Bank can help merchants accept the following Cards

Some of the leading retail segments accepting Card payments include

the following:

Airlines Hotels
Auto Parts Jewellery
Bookshops Leather Goods

40
 Car Rentals Opticians
Carpets Petrol Pumps
Departmental Stores Restaurants
Electronics Saris & Silks
Garment Stores 2 wheeler & 4 wheeler
Handicrafts Showrooms

Product Features
 Acceptance of

 Credit Cards : Visa, MasterCard

 Debit Cards : Visa Electron, Maestro

 State of the art terminal

 Zero Balance ICICI Bank account with Cheque book
 Direct account credits to ICICI Bank account for settlement amounts
 New network
 Fast transaction speeds
 Merchant Training on Usage and Fraud prevention
 Prompt Service
 Access to ICICI Banks vast portfolio of finance products for your business and
family needs
 24x 7 Merchant service desk to address queries
 Presence in all the leading metro cities across India

Advantages of a Merchant relationship with ICICI Bank

ICICI Bank has a huge range of Credit Cards on offer to customers. Each of these
Cards comes packed with several powerful benefits which attract high net worth
individuals to spend and shop at premium merchant establishments like you. ICICI Bank
has also in place the most powerful catalogue based rewards program that encourages
customers to spend more and earn more. You can now tap this spends by making ICICI
Bank Cardholders aware of your special offers, discount deals, promotions etc.

To understand the key benefits that each type of Card offers click the link below.
Your understanding of the benefits will help you tailor make your offers to the ICICI
Bank Card members resulting in higher spends for you.

41
 Advertising Opportunities

ICICI Bank provides you advertising opportunities that's sure to give

maximum mileage to your product or service.

Credit Card Statement and ICICI Bank Rewards Plus Program

Envelopes

Direct Mailers E-mailers, Banners and Personalised

WebPages

EMI offers Merchandising opportunities

 ICICI Bank Credit Card Statement and Envelopes

Imagine a leading newspaper reserving sole space for you, running your
ad, and mailing it individually to each of your prospective customers. Here's an
innovative marketing idea that's sure to give maximum mileage to your product or
service. Just carry your offer on the monthly statements of India's high end Credit
Cards - ICICI Bank.

 Targeted Direct Mailers

You get a direct reach to your specific target group and you can
communicate one on one with them. You have a captive audience who'll read and
re-read your message at leisure. And since the people you are targeting are
personally addressed, there's no wastage.

 EMI Opportunities

Advertise your EMI offers to ICICI Bank Credit Card customers interested
in buying now and paying later in installments coupled with a fantastic finance
offer.

42
  Catalogue based rewards Program.

You can also widen your reach and popularize your products by
participating in ICICI Bank's Rewards Program.

 Internet Shoppers Club

We have an Internet shoppers club program reaching out to all of our

online customers. Your banners can reach out to them, directly and cost-
effectively. You can also display your products or offers to our customers and
enable immediate purchase on your own web page, which we can host and
advertise on our site.

``

43
 EXPERTS WHISPER
(ADVICE OF CREDIT CARD EXPERT BEFORE HOLD CREDIT CARD)

Ask the fundamental question?

Are you using plastic to pay for items you used to buy with cash? Are you
confused about how the outstanding on your card keeps increasing every month? Do you
feel sometimes that you have been singled out as a victim in a colossal, well kept
campaign by the card company to get you to part with your fortunes?

First, wake up and smell the coffee - and know the fundamental truth!

There is nothing like free lunch in this world. When you use a credit card, it
comes at a cost. There are annual fees, which range from as low as Rs 250 to Rs 2000,
depending upon type of card (Standard, Gold, and Platinum etc). More important, there is
the interest charged on holding off the payment beyond due date. But at the same time,
you do get many benefits like free credit period, discounts on air and rail travel, express
loans.

So deciding on choosing the right card should be a trade off between the cost
involved in holding a card and the benefits enjoyed from it. Again, a higher Air accident
Insurance shouldn’t become an important factor for buying a Gold card and not a Silver
card, for a person who rarely travels by air. The fundamental question every prospective
cardholder should ask is "Does this feature make any difference to me?" The Card
Company does make a big scene about the benefits of holding their cards. But, it is the
prospective cardholder’s responsibility to differentiate between the nice and the desired
ones.

Retire your Debt

There's more than one compelling reason to retire costly credit card debt. Truth is,
it's next to impossible without risking your money to get a return of 36 per cent even

44
from the stock market, l eave alone conservative investment options like bank or
company deposits

Let's assume you're earning sufficiently high returns on the stock market to meet
your credit card interest payment. To equal the average 36 per cent annual outflow on
your outstanding card balance, the appreciation in the stock prices on your portfolio
would have to be at least 45 per cent to cover the long-term-capital gains tax (at 20 per
cent) of 9 per cent on this income.

So if you have money idling in a savings bank account takes it out and clears your
card dues. It makes sense to even break a fixed deposit that might mature in, say, six
months to pay off card bill s that you'd have paid in three months.

Read between the lines

As most of the literature that flood your mailbox head straight into the dustbin.
For instance checkout the lost card liability before reporting the loss for the cardholder.
Often, what is advertised is the liability after reporting the loss. Before reporting, the
liability is unlimited which means you are responsible for all the purchases made through
the stolen card till the time it is reported. One important thing which is strange but true—
your credit card can be used to spend several times what you are actually entitled to
spend.

Sometimes renewal fees are just billed in your statement. So it is better to cross
check the items on the bill with the charge slip. Then, the card companies give a mild
notice about an upgrade of class of card say from Classic to Gold and they take it as a
‘Yes’ if you don’t say `No’.

Be discreet

One often runs into people offering a free holiday package or doing a survey at a
petrol pump. Usually they ask you to fill out forms that ask for details about your work,
office, home, car, the kind of cards you have, the expiry date of the cards and your date of
birth. The card expiry date and your date of birth are the key things. Part with that
information and you may be walking into a trap.

Generally card companies confirm personal details like birth date, card limit etc
before disclosing details about the card. Any person can misuse the card after having
access to these kinds of information.

Don’t be an ostrich!

Don't trust the future to cure today's problems. Card users are often wishful
spenders and convince themselves that they will have the money to pay up by the time
the bill comes. They don't look at their overall indebtedness because that can be scary.

45
Another common trap is to focus on monthly payments rather than the overall debt. An
amount of Rs 5000 might not look that scary, but that’s how a beginning is made. If only
credit card junkies saw the big picture, they might stop short of charging frivolous
purchases.

 Premium Credit Cards:

The Premium Credit Cards from ICICI Bank bring to you the benefits of owning
an exclusive Credit Card for your convenience and usage. Our Cards include special deals to
complement your lifestyle. We have Super Gold Credit Cards and Platinum Credit Cards along
with Travel Cards for Air miles, the best holiday packages and air tickets. Our special Golf Credit
Card gets you a free membership of the Indian Golf Union along with special Golfing benefits.

Premium Cards: Features at a Glance Chart

American Express Platinum Card
Gold Travel Smart
Gold (3)
Features
Type of Cards offered American Express Master Card Visa
Acceptance International International International
Service Charges for 2.95% 2.95% 1.99%
Revolving Credit
Limited Lost Card Nil Nil Upto Rs
Liability (Post 50000
reporting)

46
Life Time Balance
Transfer Scheme 0.75% for first 6 months (9% p.a.), followed by 1.49%
Introductory offer of (17.88% p.a.) thereafter, until the transferred amount is paid
back

Travel Bookings Tie- Makemytrip.com Makemytrip.com None

up
Discount on Basic 3% 10% none
Domestic airfares
Discount on Basic 3% 10% none
International airfares
Forex and Travel Yes Yes Yes
Cheque Services
Photo Card option No Yes No
Internet Web based Yes Yes Yes
access
Access to ICICI Bank Yes Yes Yes
24-Hour Customer
Care Centre
Personal Loan facility No Yes Yes
on Credit Card
EMI on Call facility Yes Yes Yes
Dial-a-draft facility Yes Yes Yes
Xpress Rewards No Yes No
Programme
Global Emergency Yes Yes Yes
Assistance Services
Surcharge on fuel Waived at HPCL Applicable surcharge
(2.5% of transaction outlets waived across
value or Rs. 10, (Upto Rs. 3000/- per all petrol
whichever is higher) transaction) pumps
Revolving Credit Yes Yes Yes
facility
Free Credit Period Min : 22 days; Max : Min : 22 days; Max : Min : 22 day;
(Applicable provided 52 days 52 days Max 52 days
the Total payment due
shown in the previous
statement is settled in
full)

47
 Premium Cards

Premium Cards: Features at a Glance

ICICI Bank Platinum Card

Own The World

Benefits:

 24 x 7 personal concierge service, offering a host of services, to name a few travel

assistance, hotel bookings, emergency assistance, gift delivery, restaurant booking
assistance
 An exclusive rewards earning program and one of a kind redemption offer
 Fuel surcharge waiver across all petrol pumps
 Priority Pass provides access to over 480 lounges world wide
 Domestic and international life style offers
 Low Interest charge of only 1.99%
 High credit and cash limit

48
  Air accident insurance of up to Rs 1 crore.
 A specialized customer service desk

The ICICI Bank Platinum is currently offered only by invitation

ICICI Bank Solid Gold Credit Card

Most Powerful Global Card

Benefits:

 Welcomed internationally at over 22 million merchant establishments.

 High credit and cash limits.
 Dial a Draft at 2.5% of the draft amount subject to a minimum of Rs.300.
 Lifetime Balance Transfer offer: 0.75% for first 6 months, followed by 1.49%.
 Zero lost Card liability.
 Most powerful catalogue based rewards Program.
 Mobile Alerts and Statement by E-mail

49
 ICICI Bank Gold American Express Card

The card that rewards you more. Everything that you spend on the card earns you
I-miles which you can redeem towards free air tickets or holidays that befits your
discerning lifestyle.

Superlative Benefits

 Earn 5 I-miles for every Rs. 100 spent on the card, which you can redeem for
a range of exciting rewards such as air-tickets, holidays, shopping vouchers,
electronics and more
 Redeem your I-miles for air miles or vouchers from leading domestic and
international airlines frequent flyer programmes such as Air Sahara Cosmos,
Indian Airlines Flying Returns, Jet Airways Jet Privilege, Singapore Airlines
Kris Flyer and more.
 No expiry dates for your I-miles earned
 Discount of 3% on basic airfares and 5% on holiday packages from
makemytrip.com

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  Enjoy an exciting selection of year round privileges and savings in travel,
leisure, dining and shopping in key destinations around the world with
American Express. .Access over 2,200 American Express Travel Services
Office locations in over 130 countries worldwide for assistance in travel
bookings and arrangements, purchase or encashment of travelers cheques, or
simply to access cash
 Enjoy overseas emergency assistance and support with Global Service hotline
 Life time Free
 Free Add-On card
 0% Balance Transfer offers for 90 days
 Round the clock customer service hotline

ICICI BANK Travel Smart Gold Credit Card

Most Powerful Travel Card – A card which gives the best deals on air travel and
holiday packages, 24x7

Exclusive Benefits

 10% cash back (discount) on any airline ticket booked through

Makemytrip.com
 24x7 Personal Travel Desk for assistance in booking flights, hotels, holiday
packages

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  Upto 50% discount on holiday packages booked through Makemytrip.com
 Upto 20% discount at over 500 fine restaurants in India
 All the benefits of the ICICI Bank Solid Gold Card

ICICI BANK Golf Card

A card specially designed for the discerning golfer

Exclusive Benefits

 Free annual membership of the Indian Golf union

 Access to over 160 golf courses across India
 Upto 25% discount on green fees
 Offers on International Luxury Golf Holiday Packages
 10% discount on premium Golf equipment brands & also get 0% EMI offer at
select outlets.

52
  Special discount available on Golf line Magazine & Golf Digest
 24x7 Golf Concierge Service for assistance on booking tee off times, finding golf
coaches and obtaining tickets to golfing events
 Invitation to tournaments held by the IGU
 All the benefits of the ICICI Bank Solid Gold Card

FAIR PRACTICES CODE FOR CREDIT CARD

1. In the Code, 'you' denotes the credit card customer and 'we' ICICI Bank Limited
as the card issuer.

Unless stated otherwise, all parts if this Code applies to all our credit card
products and services, whether we provide them across the counter, over the phone, on
the internet or by any other method

Commitments outlined in this code are applicable under normal operating

environment. In the event of force majeure, we may not be able to fulfill the
commitments under this Code

2. Key Commitments bank promise to customers:

2.1 Act fairly and reasonably in all our dealings with you by

 Making sure our products and services meet relevant laws and regulations
ensuring that our dealings with you will rest on ethical principles of integrity
and transparency.
 Making sure our products an services meet relevant laws and regulations
ensuring that our dealings with you will rest on ethical principles of integrity
and transparency.
 Not engaging in any unlawful or unethical consumer practice.
2.2 Help you to understand how the following information in a simple language

53
  What are the benefits to you
 How you can avail of the benefits
 What are their financial implications
 Whom you can contact for addressing your queries and how

2.3 Deal quickly and effectively with your queries and complaints by:

 Offering channels for you to route your queries

 listening to you patiently
 accepting our mistakes, if any
 correcting mistakes/implementing changes to your address your queries
 communicating our response to you promptly
 telling you how to take your complaint forward if you are not satisfied with
the response

3. Information:
(To help you to choose products and services, which meet your needs)

3.1 Before you become a credit card customer, bank will:

 Give you information explaining the key features of our credit card products
including applicable fees and charges.
 Advise you what information/documentation we need from you to enable us
to issue credit card to you. We will also advise you what documentation we
need from you with respect to your identity, address, employment etc. and any
other document that may be stipulated by statutory authorities (for e.g. PAN
details), in order to comply with legal and regulatory requirements.
 Verify the details mentioned by you in the credit card application by
contacting you on your residence and/ or business telephone numbers and /or
physically visiting your residence and/or business addresses through agencies
appointed by us for this purpose, if deemed necessary by us
3.2 While you apply for credit card, we will explain the relevant terms and conditions
such as fees and interest charges, billing and payment, renewal and termination
procedures and any other information that you may require to operate the card.

3.3 We will advise you of our targeted turn around time while you are availing /
applying for a product / service

3.4 We will send a service guide / member booklet giving detailed terms and
conditions, interest and charges applicable and other relevant information with
respect to usage of your credit card along with your first credit card.

54
3.5 We will advise you our contact details such as contact telephone numbers, postal
address, website / e-mail address to enable you to contact us whenever you need
to

3.6 If you do not recognize a transaction, which appears on your credit card
statement, we will give you more details if you ask us. In some cases, we may
need you to give us confirmation or evidence that you have not authorized a
transaction.

3.7 We will inform you, through service guide / member booklet of the losses on your
account that you may be liable if your card is lost / misused

4. Tariff (Fees / Charges /Interest)

4.1 You find our schedule of common fees and charges (including interest rates) by
 In our application form
 Referring to the service guide/member booklet
 Calling up on customer service members
 Visiting out website; or
 Asking our designated staff.

4.2 When you become a customer, we will provide you information on the interest
rates applicable on your credit card and we will charge the same to your credit
card account, if applicable.

4.3 If you ask us, we will explain how we apply interest to your account

Changes in out tariff

4.4 When we change our tariff (interest rate of other fees / charges) on our credit card
products, we will update the information on our telephone help-line/web site, we
will inform through monthly statement.

5. Marketing Ethics:

5.1 Field Personnel

 Our sales representatives will identify themselves when they approach you for
selling card products.

55
  We have prescribed a code of conduct for our Direct Selling Agents (DSAs)
whose services we may avail to make credit card products. The code of
conduct is available in our web site also.
 In the event of receipt of any complaint from you that our representative has
engaged in any improper conduct, we shall take appropriate steps to redress
the complaint.

5.2 Telemarketing
 If our telemarketing staff / agents contact you over phone for selling any of
our credit card products or with any cross sell offer, the caller will identify
himself / herself and advise you that he / she is calling on our behalf. \
 Our telemarketing agents would not call those customers, who have registered
with us in "Do not Call Registry".

6. Issuance of Credit Card/PIN:

6.1 Bank will dispatch your credit card only to the mailing address mentioned by you
through courier / post. Alternatively, we shall deliver your credit card at our
branches which maintain your banking account under due intimation to you. You
can collect them by showing proper identity proof of yourself

6.2 Bank may also issue deactivated credit card if we consider your profile
appropriate for issuing credit card and each deactivated card will become active
only after your acceptance of the same.

6.3 PIN (Personal identification number) when allotted will be sent to you separately

7. Account Operations:

Credit Card statements

7.1 To help you manage your credit card account and check details of purchases /
cash drawings using the credit card, we will offer you a facility to receive credit
card transaction details either via monthly statement by post or through the
internet. Credit card statement will be dispatched on a predetermined date of
every month which will be notified to you

7.2 In the even to non-receipt of this information we expect you to get in touch with
us so that we can arrange to resend the details to enable you to make the payment
and highlight exception, if any in a timely manner

7.3 We will let you know / notify changes of fees and charges and terms and
conditions. Normally, changes (other that interest rates and those which are a

56
 result of regulatory requirements) will be made only prospective effect giving
notice of at least one month

7.4 Signature in the charge slip is not mandatory. The very fact that the card is present
in the POS during the transaction is construed as a genuine transaction.

Protecting your account.

7.5 We will advise you what you can do to prevent your credit card from misuse

7.6 In the even your credit card has been lost or stolen or that someone else knows
your PIN or other security information, we will require you to notifying us, take
immediate steps to try to prevent these from being misused subject to operating
regulations and law in force

8. Confidentiality of Account Details:

8.1 We will treat all your information as private and confidential (even when you are
no longer a customer). We will not reveal transaction details of your accounts to a
third party, including entities or group, other than in the following four
exceptional cases when we are allowed to do it.
 If we have to give the information by law
 If there is a duty toward the public to reveal the information
 If our interests require us to give the information (for e.g., to prevent fraud)
but we will not use this as a reason for giving information about you or your
accounts (including your name and address) to anyone else, including other
companies in our group, for marketing purposes.
 If you ask us to reveal information, or if we have your permission to provide
such information to our group / associate / entities or companies when we
have tie-up arrangements for providing other financial service products.

9. Collection of dues:

Our bank's dues collection policy is built on courtesy, fair treatment and
persuasion. We believe in fostering customer confidence and long-term
relationship. Our staff or any person authorized to represent us in collection or
dues or / and security repossession will identify himself / herself and interact with
you in a civil manner. We will provide you with all the information regarding dues
and will give sufficient notice for payment of dues. Our staff / agencies are
governed by Model code for Collection of Dues and Repossession of Security by
Indian Banks Association.

10. Redressal of Grievances.

57
10.1 Redressal of your complaints internally
 We have a Grievance Redressal Cell / Department / Center within the
organization. If you want to make a complaint, we will tell you how to do this
and what to do if you are not happy about the outcome. Our staff will help you
with any queries you have.
 Our complaint handling procedure is displayed on our web site. The
timeframe for the responding to your complaints and escalation process etc.
are also displayed on the web site.

Banking Ombudsman Service and other avenues for Redressal

Within 60 days of lodging a complaint with us if you do not get a

satisfactory response from us and you wish to pursue other avenues for Redressal
of grievances, you may approach Banking Ombudsman appointed by Reserve
Bank of India under Banking Ombudsman Scheme 2002.
11. Termination of Credit Card:

11.1 You may terminate your credit card by giving notice to us and by following the
procedure laid down by us in our service guide / member booklet after clearing
outstanding dues, if any.
11.2 We may terminate your credit card, if in our understanding you are in breach of
the cardholder agreement.

58
59
 HUMAN RESOURCE PLANNING

“Human resource planning is the process of forecasting a firm’s future

demand for and supply of the right type of people in the right number”.

The planning process:

HRP essentially involves forecasting personnel needs, assessing personnel supply

and matching demand supply actors through personnel related programmes. The planning
process is influenced by overall organizational objectives and the environment of
business.

Environment

Organizational
objectives and polices

H R Need Forecast H R Supply Forecast

H R Programming

HRP Implementation

Control and Evaluation of

Programme 60
Surplus restricted Shortage Recruitment
Hiring Reduced Hours and Selection
HRP help to any organization for the estimation of how many qualified people are
necessary to carry out the assigned activities, how many people will be available and
what must be done to ensure that personnel supply equals personnel supply equals
personnel demand at the appropriate point in the future, which helpful to achieve
efficiency of bank in their various services.

Reason behind success of any organization is efficient system of Human Resource

Planning activities carries out by their human resource department. ICICI Bank also
follow the golden system and try to implement those system in their organization well.
Human Resource Planning is the process by which an organization ensures that it has the
right number and kind of people, at the right place, at the right time, capable of
effectively and efficiently completing those tasks that will helps the organization achieve
its overall objectives.

How HRP stands helpful to ICICI Bank:

 Future personnel needs:

 Parts of strategic planning:
 Creating highly talented work force:
 International Banking Strategies:
 Foundations of Personnel functions:
 Increasing investment in human to survive long-term:

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 RECRUITMENT AND SELECTION OF EMPLOYEES

RECRUITMENT:

“Recruitment involves attracting and obtaining as many applications as possible

from eligible job seekers”.

Purpose behind implement of Recruitment system:

 Determine the present and future requirement of the organization in conjunction
with its other activities.
 Helpful to attract the pool of job candidates at minimum cost.
 Help increase the success rate of the selection process by reducing number of
unqualified employees in the prior evaluation.
 Help to reduce the probability that job applicants once recruited and selected will
leave the organization only after a short period of time.
 Meet the organization’s legal and social obligations regarding the composition of
its workforce.
 Begin identifying and preparing potential job applicants who are appropriate
candidate for ICICI Bank.

Recruitment process:

``
Personnel Job Employee
Planning Analysis Requisition

Job Recruitment Searching Applicant Potential

Vacancies planning Activation Pool Hires
-Numbers -Message
-Type -Media

Strategy Applicant
Development Population 62
-Where-How Evaluation
-When Selection
and Control
Sources of Recruitment:

Trade Associations

Present Employees

Advertisements

Employee Referrals
Employment Exchanges

Campus Recruitment
Former Employees

Walk-ins interviews

Previous Applicants
E- Recruiting

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E-Recruiting

Perhaps no method has ever had as revolutionary an effect on recruitment

practices as the internet. There are respective company websites devoted in some manner
to job posing activities. Currently, employers can electronically screen candidate’s soft
attributes, direct potential hires to a special website for online skill assessment. Conduct
background checks over the internet, interview candidates via videoconferencing. And
manage the entire process with web-based software. Companies benefit immensely
through cost savings. Speed enhancement and extended worldwide candidate reach which
the internet offers. From the job seekers perspective the internet allows for searches over
a broader array of geographic and company posting than was possible before.

Problems notwithstanding, both job givers as well as job seekers find internet as
the most effective source of recruiting and its usage in the days to come will be all
pervasive.

Evaluation of External Recruitment:

External sources of recruitment have both merits and demerits. On the plus side,
the following may be cited:

Merits.

 The organization will have the benefit of new skills, new talents and new
experiences, if people are hired from external sources.
 The management will be able to fulfil reservation requirements in favour of the
disadvantaged sections of the society.

64
  Scope for resentment, heartburn end jealousy can be avoided by recruiting from
outside.

Demerits.

 Better motivation and increased morale associated with promoting own

employees are lost ot the organization.
 External recruitment is costly.
 If recruitment and selection processes are not properly carried out. Chances of
right candidates being rejected and wrong applicans being selected occur.

SELECTION:

“Selection is the processes of differentiating between applicants in order in

identifies and hire those with a greater likelihood of success in a job”.

Selection Process:

``
Tele - Interview

Selection Test

Final Interview

Reference & Background

Analysis

Selection Decision

Medical Clarification

Offer Letter

Employment Agreement
65

Job Evaluation
 TRAINNING AND DEVELOPMET

“Training refers to the process of imparting specific skills”.

“Development refers to the learning opportunity design to help employees grow”.

`CC
TRAINING
PROGRAME

On The Job Off The Job

Training Training

Internship Lecture
Job Rotation Video
Coaching Conference
Case study
Role playing
Sensitivity
Training

66
BENEFITS TO THE INDIVIDUAL WHICH ULYMATELY BENEFIT TO THE
ICICI BANK

 Helps the individual in making better decisions and effective problem solving
 Through training and development, motivational variables of recognition,
achievement, growth, responsibility and advancement are internalized.
 aids in encouraging and achieving self-development and self-confidence
 helps a person handle stress, tension, frustration and conflict
 provides information for improving leadership, knowledge, communication skills
and attitudes
 increase job satisfaction and recognition
 moves a person towards personal goals while iproving interactive skills
 satisfies personal needs of the trainer
 provides the trainee an avenue for growth and a say in his own future
 develops a sense of growth in learning
 helps a person develop speaking and listening skills
 helps eliminate fear in attempting new tasks

67
 PARTICIPATIVE MANAGEMENT

“The process of involving employees or group leaders at all levels of decision

making or co-determination”.

Importance of Participative Management

Remove
Conditions of
Powerlessness
 Changes
 Leadership
 Reward
system Perception of
 Job Empowerment

 Competence Performance
 High value
 Job meaning
Enhance  Increased use
Job-related of talent
Self-efficacy
 Job
mastery
 Role
models
 Reinforcem
ent
 Support

68
To create empowered team:

Leadership
Action

- Competitive
Human Continuous Quality
Resources Empowerment Improvement - Productivity
System Action - Customer
Service

Organization
al Structural
Job Design

69
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71
72
73
74
Internal Part: - All the 18 Schedules of Accounts.

75
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78
79
80
81
82
83
84
85
 FINANCIAL FINDINGS AND HIGHLIGHTS OF PERFORMANCE OF ICICI
BANK

1) For the Financial Year 1 April 2005 to 31 March 2006:

27% growth in profit after tax compare to last financial year.

 Profit after tax for FY2006 increased 27% to Rs. 2,540 crore from Rs. 2,005 crore
for the year ended March 31, 2005

 Net interest income increased 48% to Rs. 4,187 crore for FY2006 from Rs. 2,839
crore for FY2005.

 Fee income increased 55% to Rs. 3,259 crore for FY2006 from Rs. 2,098 crore
for FY2005.

 Profit after tax for the quarter ended March 31, 2006 increased 29% to Rs. 790
crore from Rs. 615 crore for the quarter ended March 31, 2005.

 Total assets increased by 50% to Rs. 251,389 crore at March 31, 2006 from Rs.
167,659 crore at March 31, 2005.

 Total advances increased by 60% to Rs. 146,163 crore at March 31, 2006 from
Rs. 91,405 crore at March 31, 2005.

 Deposits increased 65% to Rs. 165,083 crore at March 31, 2006 from Rs. 99,819
crore at March 31, 2005.

 At March 31, 2006, the Bank’s net non-performing assets constituted 0.71% of
customer assets against 2.03% at March 31, 2005.

2) For the Financial Year 1 April 2006 to 31 March 2007:

22 % growth in profit after tax compare to last financial year.

 Operating profit increased 51% to Rs. 5,874 crore for FY2007 from Rs. 3,888
crore for the year ended March 31, 2006.

 Profit after tax increased 22% to Rs. 3,110 crore for FY2007 from Rs. 2,540
crore for FY2006.

 Net interest income increased 41% to Rs. 6,636 crore for FY2007 from Rs. 4,709
crore for FY2006.

 Fee income increased 45% to Rs. 5,012 crore for FY2007 from Rs. 3,447 crore
for FY2006.

86
  Profit before general provisions and tax increased 40% to Rs. 1,369 crore for the
quarter ended March 31, 2007 from Rs. 975 crore for the quarter ended March 31,
2006.

 Profit after tax for Q4-2007 increased 4% to Rs. 825 crore from Rs. 790 crore for
Q4-2006.

 Total advances increased 34% to Rs. 195,866 crore at March 31, 2007 from Rs.
146,163 crore at March 31, 2006.

 Deposits increased 40% to Rs. 230,510 crore at March 31, 2007 from Rs. 165,083
crore at March 31, 2006.

Dividend on equity shares

The Board has recommended a higher dividend of 100% for FY2007 i.e. Rs. 10 per
equity share (equivalent to US$ 0.46 per ADS) as compared to 85% for FY2006. The
declaration and payment of dividend is subject to requisite approvals. The record/book
closure dates shall be announced in due course.

Operating review

Credit growth

The Bank’s net customer assets increased 35% to Rs. 205,374 crore at March 31, 2007
compared to Rs. 152,049 crore at March 31, 2006. The Bank’s retail advances increased
by 39% to Rs. 127,689 crore at March 31, 2007 from Rs. 92,198 crore at March 31, 2006.
Retail assets constituted 65% of advances and 62% of customer assets. The Bank is
focusing on fee based products and services, as well as capitalizing on opportunities
Presented by the domestic and international expansion of Indian companies. The Bank’s
rural portfolio increased by 37% on a year-on-year basis to about Rs. 20,179 crore. The
Bank is also extending its reach in the small and medium enterprises segment.

Deposit growth

The Bank’s total deposits increased 40% to Rs. 230,510 crore at March 31, 2007 from
Rs. 165,083 crore at March 31, 2006. During this period, savings deposits increased by
38% from Rs. 20,938 crore to Rs. 28,839 crore. The Bank added 141 branches and 1,071
ATMs during the year, taking the number of branches and extension counters to 755 and
ATMs to 3,271. The Bank has also received Reserve Bank of India’s approval for
amalgamation of Sangli Bank, which will increase the Bank’s branch network to about
950 branches.

87
International operations

The Bank now has wholly-owned subsidiaries, branches and representative offices in 17
countries, and an offshore banking unit in Mumbai. The total assets of the Bank’s
international branches increased to about Rs. 52,500 crore at March 31, 2007 from about
Rs. 27,500 crore at March 31, 2006. The total assets of the Bank’s international banking
subsidiaries increased to about Rs. 30,500 crore at March 31, 2007 from about Rs. 13,400
crore at March 31, 2006. The Bank’s remittance volumes grew by 23 45% in FY2007
compared to FY2006. ICICI Bank UK’s profit after tax for FY2007 was US$ 39 million,
translating into a return on equity of about 22%. At March 31, 2007 the Bank’s
international operations accounted for about 19% of its consolidated banking assets.

Capital adequacy

The Bank’s capital adequacy at March 31, 2007 was 11.7% including Tier-1 capital
adequacy of 7.4%.

Asset quality

At March 31, 2007, the Bank’s net non-performing assets constituted 0.98% of net
customer assets. The net non-performing asset ratio in the home loan portfolio was .71%.

Consolidated profits

The consolidated profit after tax increased 14% to Rs. 2,761 crore in FY2007 from Rs.
2,420 crore in FY2006. The consolidated profit was lower than the standalone profit due
to the accounting losses of ICICI Prudential Life Insurance Company.

Insurance and asset management subsidiaries

ICICI Life continued to maintain its market leadership among private sector life
insurance companies with a market share of 29% on the basis of weighted received
premium. Life insurance companies worldwide make losses in the initial years, in view of
business set-up and customer acquisition costs in the initial years as well as reserving for
actuarial liability. While the growing operations of ICICI Life had a negative impact of
Rs. 480 crore on the Bank’s consolidated profit after tax in FY2007 on account of the
above reasons, the company’s New Business Achieved Profit (NBAP) for FY2007 was
Rs. 881 crore as compared to Rs. 528 crore in FY2006. NBAP is a metric for the
economic value of the new business written during a defined period. It is measured as the
present value of all the future profits for the shareholders, on account of the new business
based on standard assumptions of mortality, expenses and other parameters. Actual
experience could differ based on variance from these assumptions especially in respect of
expense overruns in the initial years. ICICI Lombard General Insurance Company
enhanced its leadership position with a market share of about 35% among private sector
general insurance companies and an overall market share of about 12.4% during April
2006-February 2007. ICICI General’s gross written premium grew by 89% from Rs.

88
1,592 crore in FY2006 to Rs. 3,004 crore in FY2007. ICICI General is required to
expense upfront, on origination of a policy, all sourcing expenses related to the policy.
While ICICI General’s profit after tax for FY2007 was Rs. 68 crore, its combined ratio
for FY2007 was 97%. The combined ratio is the sum of net claims and expenses as a
percentage of premiums and indicates the surplus generated on an annualized basis from
the business written during a period excluding investment income). The surplus based on
the combined ratio, and investment income aggregated Rs. 180 crore on a pre tax basis in
FY2007. At March 31, 2007, ICICI Prudential Asset Management Company was among
the top two asset management companies in India with assets under management of over
Rs. 37,900 crore. ICICI AMC’s profit after tax increased by 55% to Rs. 48 crore in
FY2007 from Rs. 31 crore in FY2006.

89
90
 SIGNIFICANT ACCOUNTING POLICIES

Financial reporting under US GAAP:

There are significant differences in the basis of accounting between US GAAP and Indian
GAAP primarily relating to determination of allowance for loan losses, amortization of
fees and origination costs, accounting for business combinations and consolidation. In the
merger of erstwhile ICICI Limited (ICICI) with ICICI Bank, the Bank was the legal
acquirer. Under Indian GAAP, the Bank is the accounting acquirer. Under US GAAP,
ICICI is deemed to have acquired ICICI Bank. ICICI’s assets were fair valued while
accounting for the merger under Indian GAAP. The primary impact of the fair valuation
was the creation of additional provisions against ICICI’s loan and investment portfolio,
reflected in the Indian GAAP balance sheet at March 31, 2002. Under US GAAP, ICICI
Bank’s assets were fair valued while accounting for the merger, resulting in the creation
of goodwill and intangibles. There is a significant difference in the basis of computation
of provision for restructured loans under US GAAP, which discounts expected cash flows
at contracted interest rates, unlike Indian GAAP, under which current interest rates are
used.

1. Revenue recognition

 Interest income is recognised in the profit and loss account as it accrues except in
the case of non-performing assets (“NPAs”) where it is recognised, upon
realization, as per the prudential norms of RBI.

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

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

 from April 1, 2001 are accounted as advances at an amount equal to the net
investment

 in the lease. The lease rentals are apportioned between principal and finance
income based on a pattern reflecting a constant periodic return on the net
investment outstanding in respect of finance lease. The principal amount is
recognised as repayment of advances and the finance income is reported as
interest income.

 Income on discounted instruments is recognised over the tenure of the instrument

on a Constant yield basis.

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

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

 Project appraisal/structuring fee is accounted for at the completion of the agreed

service.

 Arranger fee is accounted for as income when a significant portion of the

arrangement/syndication is completed.

 Commission received on guarantees issued is amortised on a straight line basis

over the period of the guarantee.

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

2. Investments

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

 All investments are classified into ‘Held to Maturity‘, ’Available for Sale’ and
‘Held for Trading‘. Reclassifications, if any, in any category are accounted for as
per RBI guidelines. Under each classification, the investments are further
categorized as
o Government securities
o Other approved securities
o Shares
o Bonds and debentures,
o Subsidiaries and joint ventures.

 ‘Held to Maturity’ securities are carried at their acquisition cost or at amortized

cost, if acquired at a premium over the face value. Any premium over the face
value of the securities acquired is mortised over the remaining period to maturity
on constant yield basis.

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

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 The market/fair value of unquoted government and other approved securities
(“SLR” securities) included in the ‘Available for Sale’ and ‘Held for Trading’
categories is as per the rates published by Fixed Income Money Market and
Derivatives Association.

 The valuation of other than government and other approved securities (“non-
SLR” securities), other than those quoted on the stock exchanges, wherever linked
to the Yield-to-Maturity (“YTM”) rates, is computed with a mark-up (reflecting
associated credit risk) over the TM rates for government securities published by
Fixed Income Money Market and Derivatives Association.

 Securities are valued scrip-wise and depreciation/appreciation is aggregated for

each category. Net appreciation in each category, if any, being unrealized, is
ignored, while net depreciation is provided for. Costs including brokerage and
commission pertaining to investments, paid at the time of acquisition, are charged
to the profit and loss account.

 Equity investments in subsidiaries/joint ventures are categorized as ‘Held to

Maturity’ in accordance with RBI guidelines.

 Profit on sale of investments in the ‘Held to Maturity’ category is credited to the

profit And loss account and is thereafter appropriated (net of applicable taxes and
statutory Reserve requirements) to Capital Reserve. Profit on sale of investments
in ‘Available for Sale’ and ‘Held for Trading’ categories is credited to profit and
loss account.

 Repurchase and reverse repurchase transactions are accounted for in accordance

with the extant RBI guidelines.

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

 at the end of each reporting period, security receipts issued by the asset
reconstruction Company are valued in accordance with the guidelines applicable
to instruments, other than government and other approved securities, prescribed
by RBI from time to time. Accordingly, in cases where the security receipts issued
by the asset reconstruction company are limited to the actual realizations of the
financial assets assigned to the instruments in the concerned scheme, the Bank
reckons the net asset value obtained from the asset reconstruction company from
time to time, for valuation of such investments at each reporting period / year end.

 The Bank follows trade date method for accounting of its investments.

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

 All credit exposures are classified as per RBI guidelines, into performing and
nonperforming assets (“NPAs”). Further, NPAs are classified into sub-standard,
doubtful and loss assets based on the criteria stipulated by RBI. In the case of
corporate loans,
 provisions are made for sub-standard and doubtful assets at rates prescribed by
RBI. Loss assets and the unsecured portion of doubtful assets are provided /
written off as per the extant RBI guidelines. Subject to the minimum provisioning
levels prescribed by RBI, provision on homogeneous retail loans is assessed at a
portfolio level, on the basis of days past due.

 For restructured / rescheduled assets, provision is made in accordance with the

guidelines issued by RBI, which requires a provision equal to the present value of
the interest sacrifice to be made at the time of restructuring.

 In the case of loan accounts classified as NPAs (other than those subjected to
restructuring), the account is upgraded to “standard” category if arrears of interest
and principal are fully paid by the borrower. In respect of non-performing loan
accounts subjected to restructuring, the account is upgraded to standard only after
the specified period.
 Amounts recovered against debts written off in earlier years and provisions no
longer considered necessary in the context of the current status of the borrower
are recognised in the profit and loss account. In addition to the specific provision
on NPAs, the Bank maintains a general provision on performing loans. The
general provision covers the requirements of the RBI guidelines.

 In addition to the provisions required to be held according to the asset

classification status, provisions are held for individual country exposures (other
than for home country exposure). The countries are categorized into seven risk
categories namely insignificant, low, moderate, high, very high, restricted and off-
credit and provisioning is made on exposures exceeding 90 days on a graded scale
ranging from 0.25% to 100%. For exposures with contractual maturity of less than
90 days, 25% of the above provision is required to be held.

4. Transfer and servicing of assets

The Bank transfers commercial and consumer loans through securitisation transactions.
The transferred loans are de-recognized and gains/losses, net of provisions, are accounted
for only if the Bank surrenders the rights to benefits specified in the loan contract.
Recourse and servicing obligations are reduced from proceeds of the sale. Retained
beneficial interests in the loans is measured by allocating the carrying value of the loans
between the assets sold and the retained interest, based on the relative fair value at the
date of the securitisation.

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5. Fixed assets and depreciation

6. Employee Stock Option Scheme (“ESOS”):

The Employees Stock Option Scheme (“the scheme “) provides for the grant of equity
shares of the Bank to its employees. The Scheme provides that employees are granted an
option to acquire equity shares of the Bank that vests in a graded manner. The options
may be exercised within a specified period. The Bank follows the intrinsic value method
to account for its stock-based employee’s compensation plans. Compensation cost is
measured by the excess, if any, of the fair market price of the underlying stock over the
exercise price on the grant date. The fair market price is the latest closing price,
immediately prior to the date of the Board of Directors meeting in which the options are
granted, on the stock exchange on which the shares of the Bank are listed. If the shares
are listed on more than one stock exchange, then the stock exchange where there is
highest trading volume on the said date is considered. Since the exercise prices of the
Bank’s stock options are equal to fair market price on the grant date, there is no
compensation cost under the intrinsic value method.

7. Staff Retirement Benefits

7.1 Gratuity

ICICI Bank pays gratuity to employees who retire or resign after a minimum period of
five years of continuous service. ICICI Bank makes contributions to three separate
gratuity funds, for employees inducted from erstwhile ICICI Limited (erstwhile ICICI),
employees inducted from erstwhile Bank of Madura and employees of ICICI Bank other
than employees inducted from erstwhile ICICI and erstwhile Bank of Madura.

95
Separate gratuity funds for employees inducted from erstwhile ICICI and erstwhile Bank
of Madura are managed by ICICI Prudential Life Insurance Company Limited. Actuarial
Valuation of the gratuity liability is determined by an actuary appointed by ICICI
Prudential Life Insurance Company Limited. The investments of the funds are made
according to rules prescribed by the Government of India. The gratuity fund for
employees of ICICI Bank, other than employees inducted from erstwhile ICICI and
erstwhile Bank of Madura, is administered by the Life Insurance Corporation of India and
ICICI Prudential Life Insurance Company Limited. In accordance with the gratuity fund’s
rules, actuarial valuation of gratuity liability is calculated based on certain assumptions
regarding rate of interest, salary growth, mortality and staff attrition as per the projected
unit credit method.

7.2 Superannuation Fund

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

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

7.3 Pension

The Bank provides for pension, a deferred retirement plan covering certain employees.
The plan provides for a pension payment on a monthly basis to these employees on their
Retirement based on the respective employee’s salary and years of employment with the
Bank. Employees covered by the pension plan are not eligible for benefits under the
Provident fund plan, a defined contribution plan.

As per the transition provision of AS 15 (Revised) on “Accounting for retirement benefits

in financial statements of employer”, the difference in the liability on account of pension
Benefits created by the Bank at March 31, 2006 due to the revised standard have been
Included in Schedule 2 (“Reserves and Surplus”).

96
7.4 Provident Fund

ICICI Bank is statutorily required to maintain a provident fund as a part of its retirement
benefits to its employees. There are separate provident funds for employees inducted
from erstwhile Bank of Madura (other than those employees who have opted for
pensions), and for other employees of ICICI Bank. These funds are managed by in-house
trustees. Each employee contributes 12.0% of his or her basic salary (10.0% for clerks
and sub-staff of erstwhile Bank of Madura) and ICICI Bank contributes an equal amount
to the funds. The investments of the funds are made according to rules prescribed by the
Government of India.

7.5 Leave encashment

The Bank provides for leave encashment benefit, which is a defined benefit scheme,
based on actuarial valuation as at the balance sheet date conducted by an independent
ctuary.
As per the transition provision of AS 15 (Revised) on “Accounting for retirement benefits
in financial statements of employer”, the difference in the liability on account of leave
ncashment benefits created by the Bank at March 31, 2006 due to the revised standard
have been included in Schedule 2 (“Reserves and Surplus”).

8. Income Taxes

Income tax expense is the aggregate amount of current tax, deferred tax and fringe
benefit tax charge. The annual income tax provision is based on the tax liability
determined in accordance with the Income Tax Act, 1961. Deferred tax adjustments
comprise of changes in the deferred tax assets or liabilities during the year.

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

Deferred tax assets are recognised and reassessed at each reporting date, based upon
management’s judgement as to whether realisation is considered as reasonably certain.
Deferred tax assets are recognised on carry forward of unabsorbed depreciation, tax
losses and carry forward capital losses, only if there is virtual certainty supported by
convincing evidence that such deferred tax asset can be realised against future profits.

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9. Provisions, contingent liabilities and contingent assets

The Bank estimates the probability of any loss that might be incurred on outcome of
contingencies on the basis of information available up to the date on which the financial
statements are prepared. A provision is recognised when an enterprise has a present
obligation as a result of a past event and it is probable that an outflow of resources will be
required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions are determined based on management estimate required to settle the obligation
at the balance sheet date, supplemented by experience of similar transactions. These are
reviewed at each balance sheet date and adjusted to reflect the current management
estimates. In cases where the available information indicates that the loss on the
contingency is reasonably possible but the amount of loss cannot be reasonably
estimated, a disclosure is made in the financial statements. In case of remote possibility
neither provision nor disclosure is made in the financial statements. The Bank does not
account for or disclose contingent assets, if any.

10. Earnings Per Share (“EPS”)

Basic earnings per share are calculated by dividing the net profit or loss for the year
attributable to equity shareholders by the weighted average number of equity shares
outstanding during the year. Diluted earning per share reflects the potential dilution that
could occur if contracts to issue equity shares were exercised or converted during the
year. Diluted earnings per equity share are computed using the weighted average number
of equity shares and dilutive potential equity shares outstanding during the year, except
where the results are ant dilutive.

98
 FINANCIAL DATA ANALYSIS OF ICICI BANK:

1. Equity issue

During the year ended March 31, 2006, the Bank raised equity capital amounting to Rs.
80,006.1 million. The expenses of the issue amounting to Rs. 874.1 million have been
charged to the share premium account.

2. Capital adequacy ratio:

The capital to risk weighted assets ratio (CRAR) as assessed on the basis of the financial
Statements and guidelines issued by RBI

99
3. Business / information ratios (annualized):

The business / information ratios for the year ended March 31, 2007 and for March 31,
2006 are here.

4. Geographical segments

The Bank has its operations under the following geographical segments.

 Domestic operations comprise branches having operations in India.

 Foreign operations comprise branches having operations outside India and

offshore banking unit having operations in India.

100
5. Business Segments:

Business segment distribute into two different types of internal segments:

 Consumer and Commercial Banking comprising of the retail and corporate

banking operations of the Bank.

 Investment banking comprising the treasury operations of the Bank.

Inter-segment transactions are generally based on transfer pricing measures as determined

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

Based on such allocations, segmental balance sheet as on March 31, 2007 and March 31,
2006 and segmental profit & loss account for the year ended March 31, 2007 and for the
year ended March 31, 2006 have been prepared.

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6. Earnings Per Share

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

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7. Staff retirement benefits

Reconciliation of opening and closing balance of the present value of the defined benefit
Obligation for pension and gratuity benefits is given below.

103
8. Employee Stock Option Scheme (“ESOS”)

In terms of the ESOS, as amended, the maximum number of options granted to any
eligible employee in a financial year shall not exceed 0.05% of the issued equity shares of
the Bank at the time of grant of the options and aggregate of all such options granted to
the eligible employees shall not exceed 5% of the aggregate number of the issued equity
shares of the Bank on the date of the grant of options.

In terms of the Scheme, 13,187,783 options (March 31, 2006: 17,362,584 options)
granted to eligible employees were outstanding at March 31, 2007.

As per the scheme, the exercise price of ICICI Bank’s options is the last closing price on
the stock exchange which recorded highest trading volume preceding the date of grant of
options. Hence, there is no compensation cost in year ended March 31, 2007 based on
intrinsic value of options. However, if ICICI Bank had used the fair value of options
based on the Black-Scholes model, compensation cost in year ended March 31, 2007
would have been higher by Rs. 827.4 million and proforma profit after tax would have
been Rs. 30,274.8 million. On a proforma basis, ICICI Bank’s basic and diluted earnings
per share would have been Rs. 33.91 and Rs. 33.72 respectively.
The key assumptions used to estimate the fair value of options are:

Summary Report of “ESOS” Outstanding during the year 2007.

104
9. Investments:

The details of investments and the movement of provisions held towards depreciation of
Investment of the Bank as on March 31, 2007 and March 31, 2006 is given below.

105
10. Lending to sensitive sectors

The Bank has lending to sectors, which are sensitive to asset price fluctuations. The
sensitive sectors include
 capital market and
 real estate.
The position of lending to capital market is given below.

10.1. Capital Market Sector:

10.2 Real Estate Sector:

106
11. Risk Management at ICICI bank:

Risk is an inherent part of ICICI Bank’s business, and effective Risk Compliance & Audit
Group is critical to achieving financial soundness and profitability. ICICI Bank has
identified Risk Compliance & Audit Group as one of the core competencies for the next
millennium. The Risk Compliance & Audit Group (RC & AG) at ICICI Bank
benchmarks itself to international best practices so as to optimize capital utilization and
maximize shareholder value. With well defined policies and procedures in place, ICICI
Bank identifies, assesses, monitors and manages the principal risks:

11.1. Credit Risk Management

Credit risk, the most significant risk faced by ICICI Bank, is managed by the Credit Risk
Compliance & Audit Department (CRC & AD) which evaluates risk at the transaction
level as well as in the portfolio context. The industry analysts of the department monitor
all major sectors and evolve a sectoral outlook, which is an important input to the
portfolio planning process. The department has done detailed studies on default patterns
of loans and prediction of defaults in the Indian context. Risk-based pricing of loans has
been introduced.

The functions of this department include:

 Review of Credit Origination & Monitoring

- Credit rating of companies/structures
- Default risk & loan pricing
- Review of industry sectors
- Review of large exposures in industries/ corporate groups/ companies
- Ensure Monitoring and follow-up by building appropriate systems such as
CAS
 Design appropriate credit processes, operating policies & procedures
 Portfolio monitoring
- Methodology to measure portfolio risk
- Credit Risk Information System (CRIS)
 Focused attention to structured financing deals
- Pricing, New Product Approval Policy, Monitoring
 Monitor adherence to credit policies of RBI

The department has been instrumental in reorienting the credit processes, including
delegation of powers and creation of suitable control points in the credit delivery process
with the objective of improving customer response time and enhancing the effectiveness
of the asset creation and monitoring activities.

107
Availability of information on a real time basis is an important requisite for sound risk
management. To aid its interaction with the strategic business units, and provide real time
information on credit risk, the CRC & AD has implemented a sophisticated information
system, namely the Credit Risk Information System.

11.1.1. Credit exposure

During the year ended March 31, 2007, the Bank had no single borrower exposure above
15% and no group borrower exposure above 40% of capital funds.

11.2. Market Risk Compliance & Audit Group

ICICI Bank is exposed to all categories of Market Risk, viz.

 Interest Rate Risk (risk due to changes in interest rates)

 Exchange Rate Risk (risk due to changes in exchange rates)
 Equity Risk (risk due to change in equity prices)
 Liquidity Risk (risk due to deterioration in market liquidity for tradable
instruments)

The Market Risk Compliance & Audit Department evaluates tests and approves market
risk methodologies developed by the Treasury. It also participates in the new product
approval process on a firm-wide basis and evaluates all new products from a market risk
perspective.

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11.3. Operational Risk Management

ICICI Bank, like all large banks, is exposed to many types of operational risks. These
include potential losses caused by events such as breakdown in information,
communication, transaction processing and settlement systems/ procedures.

The Audit Department, an integral part of the Risk Compliance & Audit Group, focuses
on the operational risks within the organization. In recent times, there has been a shift in
the audit focus from transactions to controls. Some examples of this paradigm shift are:

 Adherence to internal policies, procedures and documented processes

 Risk Based Audit Plan
 Widening of Treasury operations audit coverage
 Use of Computer Assisted Audit Techniques (CAATs)
 Information Systems Audit
 Plans to develop/ buy software to capture the workflow of the Audit Department

The Audit Department conceptualized and put into operation a Risk Based Audit Plan
during the year 1998-99. The Risk Based Audit Plan envisages allocation of audit
resources in accordance with the risk constituents of ICICI Bank’s business.

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11.4.. Forward rate agreement (“FRA”) :

The notional principal amount of Rupee IRS contracts at March 31, 2007 was Rs. Nil for
Hedging contracts (March 31, 2006: Rs. Nil) and Rs. 2,389,261.3 million for trading
contracts (March 31, 2006: Rs. 1,870,025.6 million).

The fair value represents the estimated replacement cost of swap contracts at balance
sheet date. At March 31, 2007 the fair value of trading rupee interest rate swap contracts
was Rs. 1,111.4 million (March 31, 2006: Rs. 922.4 million). Associated credit risk is the
loss that the Bank would incur in case all the counter-parties to these swaps fail to fulfil
their contractual obligations. At March 31, 2007, the associated credit risk on trading
rupee interest rate swap contracts was Rs. 37,605.4 million (March 31, 2006: Rs.
16,754.4 million).

Market risk is monitored as the loss that would be incurred by the Bank for a 100 basis
points change in the interest rates. At March 31, 2007 the market risk on trading rupee
interest rate swap contracts amounted to Rs. 844.4 million (March 31, 2006: Rs. 1,192.3
million).

Credit risk concentration is measured as the highest net receivable under swap contracts
from a particular counter-party. At March 31, 2007, there was a credit risk concentration
of Rs. 657.9 million with ICICI Securities Primary Dealership Limited (formerly known
as ICICI Securities Limited) (March 31, 2006: Rs. 476.4 million with ICICI Securities
Primary Dealership Limited) under rupee interest rate swap contracts. As per the
prevailing market practice, the Bank does not insist on collateral from the counter-parties
in these contracts.

110
12. Derivatives

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

Dealing in derivatives is carried out by identified groups in the treasury of the Bank
based on the purpose of the transaction. Derivative transactions are entered into by the
treasury front office. Treasury middle office conducts an independent check of the
transactions entered into by the front office and also undertakes activities such as
confirmation, settlement, and accounting, risk monitoring and reporting and ensures
compliance with various internal and regulatory guidelines.
The market making and the proprietary trading activities in derivatives are governed by
the investment policy of the Bank, which lays down the position limits, stop loss limits as
well as other risk limits. The Risk Management Group (“RMG”) lays down the
methodology for computation and monitoring of risk. The Risk Committee of the Board
(“RCB”) reviews the Bank’s risk management policy in relation to various risks
(portfolio, liquidity, interest rate, off-balance sheet and operational risks), investment
policies and compliance issues in relation thereto. The RCB comprises of independent
directors and the Managing Director and CEO.

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

The use of derivatives for hedging purpose is governed by the hedge policy approved by
Asset Liability Management Committee (“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 transaction itself. The effectiveness is assessed at the time of
inception of the hedge and periodically thereafter. During the year ended March 31, 2006,
the Bank changed its method for testing hedge effectiveness from the price value of basis
point (“PVBP”) or duration method to the marked to market method. Due to this change
certain derivative contracts, which were hitherto accounted for as hedges, became
ineffective and were accordingly accounted for as trading.

111
Hedge derivative transactions are accounted for pursuant to the principles of hedge
accounting. Derivatives for market making purpose are marked to market and the
resulting gain/ loss is recorded in the profit and loss account. The premium on option
contracts is accounted for as per Foreign Exchange Dealers’ Association of India
guidelines. The Bank makes provisions on the outstanding positions in trading derivatives
for possible adverse movements in the underlying. Derivative transactions are covered
under International Swap Dealers Association (‘’ISDA’’) master agreements with the
respective counterparties. The credit exposure on account of derivative transactions is
computed as per RBI guidelines and is marked against the credit limits approved for the
respective counterparties.

112
Findings:

The notional principal amount of credit derivatives outstanding at March 31, 2007 was
Rs.59, 096.9 million (March 31, 2006: Rs. 23,514.4 million). Of the above, notional
principal amount Rs. 434.7 million represents protection bought by the Bank through its
overseas branches as on March 31, 2007.

The notional principal amount of forex contracts classified as hedging at March 31, 2007
Amounted to Rs. 288,639.6 million (March 31, 2006: Rs. 165,041.4 million).

The notional principal amount of forex contracts classified as trading at March 31, 2007
Amounted to Rs. 1,042,920.8 million (March 31, 2006: Rs. 753,273.6 million).

The net overnight open position at March 31, 2007 was Rs. 1,279.7 million (March 31,
2006: Rs. 457.8 million).

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 Financial Performance Measure through Ratio Analysis

1. Introduction to Ratio:

A ratio is only a comparison of the numerator with the denominator. The term ratio refers
to the numerical or quantitative relationship between two figures. A ratio is the relationship
between two figures and obtained by dividing the former by the letter. Ratios are designed
to show how one number is related to another. It is worked out by dividing one number by
another.
Ratio analysis is an important and age old technique of financial analysis. The data given
in financial statements, in absolute form, and are unable to communicate anything. Ratios
are relative form of financial data and very useful technique to check upon the efficiency
of an organization. Some ratios indicate the trend or the progress or downfall of an
organization. Traditionally banks have looked at certain ratios to assess whether they
have a satisfactory financial soundness. The commonly used ratios are: Capital position
ratio, debt to equity ratio, Capital gearing debt – equity share capital ratio, interest
coverage ratio, and debt – service coverage ratio etc.

Ratio analysis is an instrument for diagnosis of the financial health of any organization
which is also useful for banking organization. Ratios, in fact, are meaning and
communicate the relative importance of the various items appearing in the Balance Sheet
and Profit and Loss Account.

Ratios refer to the use of the arithmetic expression to highlights relationship between
various figures of financial statements. Ratio may express relationship between two
figures of the profit & loss account & another from balance sheet from available data,
ratio can be computed but only a few are meaningful & of interest to us Ratios of
Specific interest top the ending banking.

Just like a doctor examines his patient by recording his body temperature, blood pressure
etc., before making his conclusion regarding the illness and various tools of analysis
before commenting upon the financial health or weaknesses of an organization ratio
indicates a quantitative relationship which can be in turn used to make a quantitative
judgment.

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2. Importance of Ratio Analysis:
The inter relationship that exists among the different items appeared in the financial
statements, are revealed by accounting ratios. Ratio analysis of a bank’s financial
statements is of interest to a number of parties, mainly, shareholders, creditors,
depositors, and other future investors.

 Aid to measure General Efficiency: Ratios enable the mass of accounting data
to be summarized and simplified. They act as an index of the efficiency of the
banks financial performance. As such they serve as an instrument of management
control.

 Aid to measure financial Solvency: Ratios are useful tools in the hands of
management and other concerned to evaluate the banks performance over a period
of time by comparing the present ratio with the past ones. They point out bank’s
liquidity position to meet its short-term obligations and long term solvency.

 Aid in Forecasting and Planning: Ratio analysis is an invaluable aid to

management in the discharge of its basic function such as planning, forecasting,
control, etc. The ratios that are derived after analyzing and scrutinizing the past
result help the management to prepare budgets to formulate policies and to
prepare the future plan of action etc.

 Facilitate decision-making: It throws light on the degree of efficiency of the

management and utilization of the assets and that is why it is called surveyor of
efficiency. They help management in decision making.

 Aid in corrective Action: Ratio analysis provides inter-bank comparison. If

comparison shows an unfavorable variance, corrective actions can be initiated.

 Aid in Intra firm comparison: Intra bank comparisons are facilitated. It is an

instrument for diagnosis of financial health of bank. It facilitates the management
to know whether the bank’s financial position is improving or deteriorating by
setting a trend with the help of ratios.

 Act as a Good communication: Ratios are an effective mean of communication

and play a vital role in informing the position of and progress made by the
organization concern to the banks and other interested parties. The
communications by simplified and summarized ratios are more easy and
understandable.

 Evaluation of Efficiency: Ratio analysis is an effective instrument which, when

properly used, is useful to assess important characteristics of business – liquidity,
solvency, profitability etc.

115
  Effective tool: Ratio analysis helps in making effective control of the business
measuring performance, control of cost etc. effective control is the keynote of
better management.

3. Limitation of Ratio analysis:

Ratio analysis is widely used tool of financial analysis. It is because ratios are simple and
easy to understand. But they must be used very carefully. They suffer from various
limitations.

 Differences in definitions:
Comparisons are made difficult due to differences in definitions of various
financial terms. Lack of standards formula for working out ratios makes it
difficult to compare them. They are worked out on the basis of different items in
different industries.

 Limitations of accounting records: Ratio analysis is based on financial

statements which are themselves subject to limitations.

 Lack of Proper standards: It is very difficult to ascertain the standard ratio in

order to make proper comparison.

 Changes in Account Procedure: Comparison between two variables proves

worth provided their basis of valuation is identical.

 Qualitative factors are ignored: Ratios are tools of quantitative analysis only
and normally qualitative factors which may generally influence the conclusion
derived are ignored while computing ratios. For instance, a high current ratio
may not necessarily mean sound liquid position when current assets include a
large inventory consisting of mostly obsolete items.

 Limited use of single ratio: A single ratio would not be able to convey
anything. Ratio can be useful only when they are computed in a sufficient large
number. If too many ratios are calculated, they are likely to confuse instead of
revealing meaningful conclusion.

 Background is overlooked: When inter bank comparison is made, they differ

substantially in age, size, nature of product etc. When an inter bank, comparison
is made, these factors are not considered. Therefore, ratio analysis cannot give
satisfactory results.

 Limited use: Ratio analysis is only a beginning and gives just a fraction of
information needed for decision making. Ratio analysis is not a substitute for
sound judgment. Conclusions drawn from the ratio analysis are not sure
indicators of bad or good management.

116
 Personal Bias: Ratios have to be interpreted and different people may interpret
the same ratio different ways. Ratios are only means of financial analysis but not
an end of in themselves. It should be noted that ratios are only tools and the
personal judgment of analyst is more important.

 Arithmetic Window dressing: Window dressing means manipulation of

accounts in a way so as to conceal vital facts and presents the statement in a way
to shoe better position than what it actually is. By, doing so, it is possible to
cover up bad financial position. Therefore, ratios based on such figures are not
reliable.

 Changing policies: Ratios are computed on the basis of past result. Past is not an
indicator of future. Ratios computed from historical data are used for predicting
and projecting the likely events in the future such ratios provide a glimpse of
bank’s past performance. But forecast for the future may not be correct as several
other factors like management policies market conditions etc.

117
4. Types of Ratio:

Balance sheet ratio:

Current Ratio:
This is most widely used ratio. This ratio shows the proposition of current assets to
current liabilities. This ratio is also called working capital ratio as it is a measure of
working capital available at a particular time. This ratio is obtained by dividing current
assets by current liabilities. This ratio indicates short-term financial strength of the bank
and shows as to whether the business will be able to meet its obligations towards current
liabilities as and when they mature. Current assets here would mean the assets, which
will be realized within a period of 12 months in the normal course of business. Similarly,
current liabilities would mean liabilities that would mature within a period of 12 months.
Generally, current ratio of 2 is considered as comfortable working capital position. It
implies that current assets are twice the current liabilities. However, there can not be hard
and fast rule, because a current ratio which is satisfactory for one industry may not be
satisfactory in another industry.
CURRENT RATIO: = CURRENT ASSETS
CURRENT LIABILITIES

Year 2005 2006 2007

C.A. = 1139046773 = 2347507278 =3242447660

C.L. 213961606 252278777 382286356

Times = 5.32 =9.30 =8.46

118
Interpretation:

Current ratio shows the short term financial soundness of the bank it judge whether the
current assets are sufficient to meet the current liabilities. The standard current ratio is 2:1
(i.e. Current Assets should be two times of the current liabilities).

In case of ICICI Bank, there is increase in 2006 and started to decline in current financial
year. However, current ratio is satisfactory in all the 3 year.

Acid-Test Ratio:
Acid-Test Ratio shows the banks liquidity capacity to meet short-term financial
soundness of the bank and helpful to judge whether the liquid assets are sufficient to meet
current liabilities.
ACID-TEST RATIO: = QUICK ASSETS
CURRENT LIABILITIES

Year 2005 2006 2007

Q.A. = 129299723 = 170402245 =371213452

C.L. 213961606 252278777 382286356

Times = 0.60 =0.68 =0.97

119
Interpretation:
Acid-Test ratio shows the short term financial soundness of the company it judge whether
the Quick assets are sufficient to meet the current liabilities. The standard Acid-test ratio
is 0.5:1.
In case of ICICI Bank, there is increase in 2006 and in current financial year also. So,
Acid test ratio is satisfactory in all the 3 year

Debt Equity Ratio:

This is another very widely used ratio in the business, which shows relationship
between outside long-term liabilities and owners fund. It shows the proposition of
long term debt and internal equities. This ratio is calculated by dividing long term
liabilities by Shareholders fund.
A ratio of 56% would mean long term debt of Rs. 56 as against net worth of Rs. 100.
However, there can not be any strict norm for debt equity ratio. Capital intensive
industry will have higher lower debt equity ratio.
Debt equity ratio is also calculated on the basis of total debts. This takes into account
all types of debts (long term and short term) in place of long term debt only.

DEBT EQUITY RATIO = DEBT

EQUITY

DEBT EQUITY RATIO = LONG-TERM DEBT

SHARE-HOLDERS EQUITY

Year 2005 2006 2007

DEBT = 1333632735 = 2036050849 = 2817662126

EQUITY 128999712 225560916 246632644

Times = 10.34 =09.06 =11.43

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Interpretation:
Higher debt equity ratio would mean high level of outside debt visa a versa owner’s fund.
This will result into higher pressure from lenders / creditors. Normally debt equity ratio
of 2 is considered reasonable.

In the case of ICICI Bank, Debt equity ratio is changing in nature because banks main
debt is of deposit from customer to bank so it is not steady in nature so it change every
time mostly depends on money market situation.
The main reason behind high rate in the last FY is because of high FD rate at ICICI Bank
compare to other competitive banks.

DEBT-EQUITY RATIO = TOTAL DEBT

SHARE-HOLDERS EQUITY

Year 2005 2006 2007

TOTAL DEBT = 1547594341 = 2288329626 =3199948482

EQUITY 128999712 225559916 246632644

Times = 11.99 =10.11 =12.97

121
122
Defensive-Interval Ratio:

The defensive-interval ratio provides such a measure of liquidity. The liquidity position
of a firm should be examined to check the ability of bank to meet their projected daily
cash expenditure from different banking operations.

The projected cash expenditure is based on past expenditures and future plans. To take
rough estimate of cash expenditure can be obtained by deducting the non cash expenses
from total expenses. The defensive-interval ratio measures the time span a bank can
operates on present liquid assets without resorting to next years income.

DEFENCIVE-INTERVAL RATIO= LIQUID ASSETS

PROJECTED DAILY CASH REQUIREMENT

PROJECTED DAILY CASH REQUIREMENT:

= PROJECTED CASH EXPEDITURE
NO.OF DAYS IN A YEAR

Year 2005 2006 2007

CACH EXP. = 987004000 = 145986000 =230490600

365 365 365 365

Daily Exp. = 270142 =399961 =631481

Year 2005 2006 2007

L.A. = 129229723 = 170402245 =371213246

Daily Exp. 270142 399961 631481

Days to defend = 478 =426 =588

123
Interpretation:

The short-term solvency of the bank can be judged not merely in terms of traditional
liquidity ratio but the analysis should also extended towards examining the quality of
turnover of the items of current assets on which such ratios are based.

Defencive-interval ratio of the ICICI Bank, during FY 2005 it reaches to 478 days which
shows strong financial position and that minor decrease in FY 2006 to 426 days because
of increase in administrative expenses and last FY bank concentrate on that thing more
and result become superior and touches new height of 588 days.

Debt to total capital ratio:

Debt to total capital ratio= Long-term debt

Permanent Capital

Year 2005 2006 2007

debt = 1333632735 = 2036050849 =2817662126

P.Capital 1462632447 2261610765 3064294770

Times = 0.91:1 =0.90:1 =0.92:1

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Reserves to Equity Share Capital:

Reserves to Equity share Capital = Revenue reserves

Equity Capital

Year 2005 2006 2007

R. Reserves = 118131954 = 213161571 =234139207

E.Capital 10867758 12398345 12493437

Times =10.86 =17.19 =18.74

125
Interpretation:

It reverses the policy pursued by the bank with regard to growth shares. A very high ratio
indicates a conservative dividend policy and increased ploughing back a profit. Higher
the ratio better will be the position. But here the company has very high ratio which
shows the bank’s efficiency.

Total Debt to total asset Ratio:

Ratio= Total Debt

Total asset

Year 2005 2006 2007

Total debt = 1333632735 = 2036050849 = 2817662126

Total asset 128369288 166382264 204133466

Times =10.39 =12.24 =13.80

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Interpretation:

This ratio has uniqueness to banking industry because total debt of banking involves
deposit and advances from customer so need not make any special attention but
comparison of last three year show that bank have more deposits so debt of bank may
increase compare to its total asset much faster but banks profit also increase over the year
so bank may continue with their policy but at the time they need to take care of that in
near future.

Dividend Coverage ratio:

Dividend Coverage Ratio = Earning After Tax

Preference Dividend

Year 2005 2006 2007

E.A.T. = 20582892 = 27282968 = 34036616

Pref. Div. 35 35 35

Times =588082 =779513 =942475

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Interpretation:

By interpreting this ratio came to know that ICICI Bank has issued very limited no of
preference share in the past and since then not issued any preference share so the
dividend amount also steady and same.
As the bank had other long term financial debt instrument so they generally deal in that
so dividend coverage ratio is much bigger than standard ratio.

128
Profitability Ratio:

Operating profit Margin:

A ratio of 5% shows for a receivable of every Rs.100, a margin of Rs. 5 is available
from which operating expenses are to be recovered and net profit to be earned. This
ratio shows as to weather the mark up obtained on cost of operation is sufficient.
Higher ratio indicates better profitability. If the Operating profit margin is showing
increasing trend, management must investigate causes for falling profitability and
should take necessary measures to improve profitability.

Operating Profit Margin = Operating Profit * 100

Total receivables

Year 2005 2006 2007

Operating profit
Receivables. 29560000 * 100 46906700*100 58744000*100
* 128260400 187676300 289234600
100

% =23.04 =24.99 =20.31

Interpretation:
The Operating profit margin of the bank has fluctuated every year. In year 2005 bank’s
Gross Profit was 23.04 % and which was increase very near to 25 % reason behind
increase in the G.P. was competitive position and favorable condition of the money
market. And in the last year’s G.P. decline due to high inflation rate in the economy.
Which create adverse condition to banking sector because of increase in Lending Rate
and Cash Reserve Ratio (CRR rate).

129
Operating profit Ratio:

Profitability Ratio = Earning Before Interest & Tax

Total Receipt

Year 2005 2006 2007

E.B.I.T.
25272000 31966000 34975000
Receipt.
128260400 187676300 289234600

times =0.20 =0.17 =0.13

Net Profit ratio:

This ratio is also calculated as percentage to total receipt. This ratio is valuable for
the purpose of ascertaining the overall profitability of the bank’s business and
shows the efficiency of the bank. Net profit here would mean net Profit after
taxes. A ratio of 5% shows that for a receipt of every Rs.100, bank may earns a net
profit of Rs.5. This ratio is calculated on the basis of net profit earned from the
banking business and non-operating income and non-operating expenses are
excluded. The higher the ratio the higher will be the profitability. This ratio has to be
seen along with Gross Profit ratio. If Gross Profit ratio is improving and this ratio is
declining, it indicates that the administrative expenses/tax liability is
increasingly.

Net Profit Ratio = Net Profit * 100

Reciept

130
 Year 2005 2006 2007

E.A.T.* 100
20052000*100 25400700*100 31102200*100
Receipt.
128260400 187676300 289234600

% =15.6 =13.5 =10.7

Interpretation:

In the case of ICICI Bank, there is constant decrease in net profit ratio. During the year
2005 it was 15.6 % of total receipt and which short fall to 13.5 % and last year also short
fall fund in that ratio Upto 10.7 % so from above comparison came to know that bank’s
operating expense and administrative cost increase which is responsible to adverse ratio.

131
Expenses Ratio:

Administrative ratio:

Administrative Expenses Ratio = Administrative Expenses

Total receipt

Year 2005 2006 2007

Admn.Exp*100
7374121*100 10822935*100 16167490*100
Receipt.
128260400 187676300 289234600

% =5.75 =5.76 =5.58

Interpretation:

Administrative expenses of ICICI bank’s increases but as the turnover and profit also
increases which result into the steady of the ratio between 5 to 6 %.

132
Advertising & publicity expenses ratio:

Administrative & publicity ratio = Advertising expenses * 100

Total Receipts

Year 2005 2006 2007

Adv. Exp*100
1162555*100 1855514*100 2177368*100
Receipt.
128260400 187676300 289234600

% =0.90 =0.99 =0.75

Interpretation:

While comparing the financial ratio of advertising and publicity expenses of ICICI Bank
was lower than one percentage of total receipt during the financial year since 2005 to last
financial year. But analyst suggest that one % expense on advertising and publicity is
Hugh expenses because the total receipt of bank is much higher so bank should
concentrate on economic mode of advertising.

133
Direct Marketing Agency (DMA) ratio:

DMA Ratio = DMA EXPENSES * 100

Total Receipt

Direct Marketing Agents are the rankers for the ICICI Bank’s various product lines for
customer service department.
They are the major expenses contribute to Administrative and management Dept.

It is beneficial for bank to understand total expenses occur on that department and which
helpful in future planning of bank.

Year 2005 2006 2007

DMA Exp.*100
4854521*100 11770607*100 15238964*100
Receipt.
128260400 187676300 289234600

% =3.78 =6.21 =5.26

Interpretation:

This ratio helpful to understand the DMA’s expenses to total receipt of ICICI Bank during
financial year. DMA Expenses of bank was near about 4 % which was higher than it
should be, which further increases in the next FY 2006 and with that ratio the net profit
ratio of the bank reduced drastically so bank concentrate on that matter and try to reduce.

134
Profitability Ratio related to investment:

Return on investment (R.O.A.):

ROA =Net Profit after Tax * 100

Average Total Asset

Year 2005 2006 2007

NPAT.*100
20052000*100 25400700*100 31102200*100
Asset.
128369288 166382264 204133468

% =15.62 =15.27 =15.24

Interpretation:

This ratio helpful to understand the how much return bank can generate from their
available asset with them which shows banks capacity to encash the return from above
comparison suggest that bank generate near about 15 % return from available asset.
So bank should increase their asset only when the rate of market return was less than 15
% and if market rate is higher should concentrate else.

135
Return on capital employed (ROCE):

Return on Equity Capital = NET PROFIT * 100

CAPITAL EMPLOYED

Year 2005 2006 2007

N.P.A.T. * 100
20052000*100 25400700*100 31102200*100
E.B.I.T.
1462632447 2261610765 3064294770

% =1.37 =1.13 =1.01

Interpretation:

The capital employed Basis provides a test of profitability related to the source of long
term funds. A comparison of this ratio with similar firm with the industry average and
over time would provide sufficient insight into how efficient the long term fund of owner
and creditors are being used. The higher the ratio the more efficient is the use of capital
employed. The bank has good position in the steady in each year which shows the
efficient use of capital.

136
Return on ordinary shareholder’s equity:

Return on Net worth = NET PROFIT – Pref. Dividend* 100

NET WORTH

Year 2005 2006 2007

NPAT –
20052000-35 25400700-35 31102200-35
Pref.Div.*
1462632447 2261610765 3064294770
100
* * *
E.B.I.T.
100 100 100

% =1.36 =1.12 =1.01

Interpretation:

As the ICICI Bank had not issued more preference shares so dividend of preference share
becomes very less which leads to same amount dividend on shareholder’s equity and
return to ordinary shareholder’s equity during all three financial year.

137
Earnings Per Share:

This ratio measures the profit available to the equity shareholders on a per share basis the
amount that they can get on every share held. The real available to the ordinary
shareholders are represented by net profits after taxes and preferences dividends.

EPS = Net Profit available to equity holders

No. of ordinary shares outstanding

Year 2005 2006 2007

Dividend 20052000000 25400700000 31102200000

No. of shares 727728042 781693773 892876768

Rs. =27.55 =32.49 =34.84

Interpretation:

Comparison of EPS of ICICI Bank suggests that bank’s net earning increase over the
year. Since 2005 constant increase noted in FY 2005 it was 27.55rs. Per share which
increases to 32.49rs I n 2006 and which lead to record breaking operating profit of ICICI
Bank and which continue in last financial year by 34.84rs per share

138
Dividend Per Share:

Dividend per share is the net distributed profit belonging to the shareholders divided by
the number of ordinary shares outstanding.

DPS = Dividend paid to equity shareholders

No. of ordinary shares outstanding

Year 2005 2006 2007

NPAT to
equity 6329609000 7593326000 9011694000
727728042 781693773 892876768
No. of shares

Rs. =8.70 =9.71 =10.09

Interpretation:

The dividend per share would be a better indicator than EPS as the former shows what
exactly is received by the owners. Same as the EPS, DPS also should not be taken at its
face value as the increased DPS ay not be a reliable measures of profitability as the equity
base may have increased due to increased relation without change in the number of
outstanding shares.

139
Dividend-Pay out (D/P) Ratio:

D/P Ratio = DPS * 100

EPS

Year 2005 2006 2007

DPS * 100 8.70 * 100 9.71 * 100 10.09

EPS 27.55 32.49 34.84

Ratio. =31.58 =29.88 =28.96

Interpretation:

D/P Ratio is an important and widely-used ratio. The pay-out ratio can be compared with
the trend followed in the banking sector.
Here the ICICI Bank has policy to distribute less profit as dividend and invest that fund to
generate more profit which good indicator of bank. Banks financial data indicate that in
2005 bank has average profit and to repute their credit distribute 31.58 % to total
distributable earning which going to decrease from year to year but the amount to equity
was steadily increase.

140
141
 SWOT ANALYSIS OF ICICI BANK CREDIT CARD.

We did a SWOT analysis of the company on the basis of experience we had in the
field while summer training

STRENGTHS

 ICICI Bank is no. 1 private Bank and second largest bank in India.
 They not only teach the concept of Credit Card but also teach them how to sell
policies effectively.
 They provide time-to-time training for not only how to provide superior
effectively but also for self-development.
 Most of the Private bank’s DMA try to issue that Credit Card in which they
earn handsome commission irrespective of the requirement of customer, but
ICICI Bank’s DMA go for need based analysis of their customers and issue
the most suitable Credit card, irrespective of the greed for commission.
 They can arrange product according to need of the customers.
 Extensive Network of Distribution Associates.
 It was one of the initial Credit Card players in this region.

WEAKNESS

 People were reluctant to join or trust a Private Bank’s Credit Card because
fear of High charges and belief in mind of customer.
 Credit card Accepted only in urban area so rural segment of Rajkot not
interested to apply for Credit card.

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OPPORTUNITIES

 Most of the people, in Rajkot, have fashion of opting for Credit Card and High
spending habit through Credit Card.
 There are very few players who issue Credit Card in the market in this region.
 The population in this region is need high Credit limit without investing
money, so they will apply for credit card in near future.

THREATS

 Some Foreign Bank enter into Indian Market with superior service may
decrease the market share of ICICI Bank.
 Some of PSU Bank also concentrates on service part which creates threat to
ICICI Bank in near future.
 At present there are 29 Private Sector Bank and 31foreign national bank
which create threat of Market Penetration.
 ICICI Bank has celebration with 35 major company so bank dependent on that
for providing service, if contract is broken than ICICI Credit Card Suffer like
anything.

143
 LEARNING EXPERIENCE

This was for the first time we experienced the taste of the corporate world. It was
a great experience; we learned the various pros and cons of the Banking Industry.

At first we started learning the basics of Banking Industry, how it worked, etc.
Our project guide at ICICI Bank played a key role in enhancing our knowledge
and also shared their practical experience with us.

Our project guides at ICICI Bank (Manager of Retail Loan & Cards) guided us
about the working of the Banking industry & Credit Cards, its future prospects, etc.
we had also got the chance to join them during their meetings with their clients and
also from the meetings with our clients were they came with us.

During our training we got the chance to meet various types of people, people from
various backgrounds like high net worth individuals, salaried person, small
businessman, students, housewife, etc. They all had different views about the
Private and public sector banks; we heard their queries and tried our best to solve
them. Through this we learned how to tackle with different types of people.

We also studied the attitude and way of thinking of the Customers towards bank
which we came to know by conducting survey of “Competitive analysis with
respect to brand awareness of ICICI Bank Credit Cards”, which we conducted
during our training.

Our main work at the company was to Promote the credit card of ICICI Bank,
which we found throughout our training how difficult it was as the estimated
conversion rate was good if person have talent for doing that.

144
145
 BASIC SUGGETION FOR CARD HOLDERS:

Some of what we're going to describe here sounds paranoid - but hey, better safe
than sorry! To minimize the possibility of someone getting your card information and
ordering the Benz that you'd always thought about!

 Report lost or stolen cards immediately

 Never allow anyone else to use your card

 Ensure that your card is signed on the signature panel as soon as you receive it

 Never write down your PIN - memorize it

 Ensure that you get your card back after every purchase

 Always check sales vouchers/charge slips including purchase amount when you

sign them - keep copies of sales vouchers and ATM receipts.

 Never give your credit card number over the phone or on the Net, unless you are

dealing with a reputable company and have initiated the call yourself

 Always check your billing statement, especially after a trip. Check the amounts of

your purchases with the charge slips - specifically look for transactions which are

not yours.

 Make a record of your credit card PIN numbers and telephone numbers for

reporting lost or stolen cards. Keep that list in a safe place.

146
  While traveling (abroad or within the country), ensure that you carry the

telephone number of the card company

 Know who has access to your cards. If your credit card is borrowed by a family

member (spouse, child, parent), with or without your knowledge, you may be

responsible for their purchase/cash withdrawal.

When Using a Credit Card as an ATM

 After completing transaction, remember to take your card and, if provided, your

transaction record

 Never disclose your PIN to anyone. No one from Card Company, the police, or a

merchant should ask for your PIN. You are the only person who should know it

 When traveling it is advisable that you only take one card and memorize the PIN.

Protect your card from damage by keeping it in a safe place - don’t allow it to

bend or be scratched.

 Memorize your Personal Identification Number (PIN) - if you must write down

your PIN, do not keep it in your wallet, purse, or on the card itself.

 Make sure that anyone waiting to use the card after you cannot see you entering

your PIN or transaction amount.

 Cancel your transaction and leave immediately if you see anything suspicious.

Confirm, as soon as possible, with your card company that the transaction was

cancelled.

147
 If you are using an indoor ATM that requires your card to open the door, avoid

letting anyone come in with you that you do not know.

 Do not leave your receipt behind - take it with you. Compare your ATM receipts

to your monthly statement. It is the best way to guard against fraud and it makes

record-keeping easier for you.

 If you lose your credit card contact the company that issued your card

immediately.

148
 Annexure - 1
MOST IMPORTANT TERMS AND CONDITIONS
1. Definitions:

1.1. “Applicant” means person(s) who has / have applied for a Card to ICICI Bank. In
case of a corporate credit card it shall mean the person/s named in the application form
submitted by the Company.

1.2. “Card” or “Credit Card” or “EMI Card” or “Corporate Credit Card” or

“Online Credit Card” or “Business Card” means an ICICI Bank VISA / AMEX /
MasterCard Credit Card or any other Credit Card issued by ICICI Bank at the request of
the Applicant.

1.3. “Card Account” means the account opened in the name of the Card Member and
maintained by ICICI Bank for the purpose of usage of the Credit Card as per the terms
and conditions contained herein.

1.4. “Credit-Limit / Purchase Limit” means the limit up to which the Card Member
is authorized to spend on his Credit Card.

1.5. “Cash-Limit” means the maximum amount of cash or equivalent of cash as

defined or prescribed by ICICI Bank, that the Card Member can withdraw on his Card
Account. Cash-Limit forms a subset of the Card Member's Credit-Limit / Purchase Limit.

(a) Fees and Charges:

i) Joining Fees & Annual Fees

149
 No joining fees, annual fees and renewal fees are applicable on the Credit Card of
both the Primary Card Member and the Supplementary Card Member unless indicated /
informed by ICICI Bank.

ii) Other fees and charges are as provided in the Annexure 1

No interest is charged if the Total Amount Due indicated in the Statement is paid
on or before the Payment Due Date. For part or full payment after the Payment Due Date
interest will be charged. The billing cycle is the Statement date and the grace period is
from the date of the previous billing cycle to the current due date.

For Example:

The Card Member’s statement date is 15th of every month and due date is 7th of
every month. Therefore the interest free credit is from the 16th of every month to the 6th
of the next month provided full payment is made for the previous month. The Card
Member makes total purchases of Rs.2000 on November 10th. The Total Amount Due
(TAD) on the Statement dated 15th November is Rs.2000 to be paid before 7th
December. On 7th December the Card Member may choose to pay the Minimum Amount
Due (MAD) of Rs.100. Following will be the charges levied on the Card Account *
2.95% of Rs.2000 for 28 days (from 10th November till 7 December) equal to Rs 55.01.
If the Card Member pays the balance Rs.1900 later on 10th December, 2.95% will be
charged on Rs.1900 for 3 days (8th December till 10th December) equal to Rs.5.35.
Therefore total interest charged on the Card Account on 15th December (the statement
date) would be Rs.55.01+Rs.5.35 = Rs.60.36 However if the balance is carried on till the
next due date following interest will be charged * 2.95% of Rs.2000 for 28 days (from
10th November till 7 December) equal to Rs 55.01 * 2.95% of Rs.1900 for 8 days (8th
December till 15th December) equal to Rs 14.31. Therefore total interest charged on the
Card Account on 15th December (your statement date) would be Rs. 55.01+Rs.14.31
=Rs.69.32.

Example in case of EMI CARD:

A Cardholder has an EMI Card with EAD of Rs 2000/- per month with purchase
limit of Rs 48000 and interest (monthly) of 1.49%. The Statement date is 20th of every
month and due date is 7th of every month.

150
 The cardholder has made total purchases of Rs 10000/- on 5th of Jan’06. A
transaction fee of Rs 149/- will be levied on this transaction. On 20th of Jan’06 the
Statement will be generated and the closing balance amount is Rs 10224.61/-. This will
include interest of Rs 75.61/- on your purchases from 5th of Jan’06 to 20th of Jan’06. The
Cardholder will be required to make a payment of EAD of Rs 2000 on 7 th of Feb’06. On
10th of Feb’06 the Cardholder makes a purchase of Rs 6000/- A transaction fee of Rs
149/- will be levied on this transaction. On 7th of Feb’06 the Cardholder makes a
payment of Rs 2000. Interest will be charged on the amount 10224.61 from 20th Jan’06
to 7th Feb’06 and on amt 8224.61 from 7th Feb’06 to 20 th Feb’06. Interest will also be
charged on purchase of Rs 6000/- from 10th Feb’06 to 20th Feb ’06.A total of 169.97/-
interest amount will reflect in the statement generated on 20th Feb’06 with closing
balance amount of Rs 14543.58 on 20th Feb’06. The Cardholder shall be required to
make a payment of EAD of Rs 2000 on 7th of Mar’06.

Incase of any delay in payment late payment charges will be levied. Incase of any
excess payment above the EAD, certain charges will be levied. Any incremental
purchases made by the Card Member shall not result in an increase in the EAD, but shall
result in a proportionate increase in the closing balance amount and tenure of repayment.
The same is illustrated in the tabular format below.

Any change in charges (other than interest and statutory charges such as service
tax) may be made only with prospective effect with prior notice of at least one month.

(b) Drawal limits

(i) Credit Limit / Purchase-Limit: means the limit up to which the Card-
Member is authorized to spend on his Credit Card.

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 (ii) Available credit limit / Available Purchase -Limit: means the difference
between the Credit Limit/Purchase-Limit and total amount due / EMI Amount Due
(EAD).

(iii) Cash withdrawal limit: The difference between the Cash Limit and cash
withdrawals subject to Credit Limit / Purchase Limit being available.

(c) Billing

(i) Billing Statement:

All Card- Members will be billed on a monthly basis for all charges incurred by
the use of Card and for all charges applicable to the Card- Account. However there may
be no Statement generated for the period in which there has been no outstanding due and
no transaction on the account in the past month. The billing statement will be dispatched
on a monthly basis to customers on the mailing address as per our records by post.

(ii) Minimum Amount Due:

Without prejudice to the liability of the Card Member to immediately pay all
charges incurred, the Card Member may exercise the option to pay on or before the
payment due date, only the Minimum Amount Due (MAD) indicated in the Statement.
The Minimum Amount Due shall be 5% of the total amount due or such other amount as
may be determined by ICICI Bank at its sole discretion. If there is some unpaid Minimum
Amount Due of the previous statements, these will also be added to the Minimum
Amount Due of the current statement. If the total outstanding is more than the Credit
Limit, then the amount by which the Credit Limit has been exceeded will also be
included in the Minimum Amount Due. If the Card Member’s Cash Withdrawal exceeds
his/her Cash Limit then his/her MAD shall be either 5% of his/her total amount due
(calculated as described above) or the amount by which he/she has exceeded his/her Cash
Limit, whichever is higher.

(iii) Method of Payment:

Payments towards the Card Account may be made in any of the following ways:

Cash:

The Card Member may deposit cash at any of ICICI Bank’s branches from
8 a.m to 6 p.m. towards his/her Card payment. The payment would reflect in the
Card Account within 24 hours.

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 Cheque/Draft:

Make a cheque or draft favoring ICICI Bank Credit Card No. XXXX
XXXX XXXX XXX and drop it into the collection boxes at any ICICI Bank
branch/ATM/Skypak drop boxes.

Internet:

If the Card Member holds a savings account with ICICI Bank he/she may
even pay online through ICICI Bank’s website. Just log on to www.icicibank.com.

Auto Debit:

If the Card Member holds a savings bank account with ICICI Bank, he/she
may pay directly through the savings bank account by giving a written instruction
to debit the payment from such account every month on the payment due date. In
case the payment due date falls on a Sunday or a holiday, the amount would be
debited from such account the next working day.

(iv) Billing disputes resolution

In the event the Card Member disagrees with a charge indicated in his Statement,
the same should be communicated to reach ICICI Bank within 60 (sixty) days of receipt
of the Statement, failing which it would be construed that all Charges indicated in the
Statement are in order.

(v) Contact Particulars of ICICI Bank 24 hour Customer Care

Centres

The Card Member can contact ICICI Bank at any of the following 24-hour
customer care numbers and/or such other call center numbers as may be notified by ICICI
Bank from time to time:

ICICI Bank Call Center Nos.

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 (vi) Grievances redressal escalation

Grievances redressal escalation: The card member may write a mail to Email:
headcustomer.care@icicibank.com or Fax No.:022-28307700. Alternately, The card
member may write a letter to the below mentioned for the redressal of any unresolved
grievances. Ms. Sujatha Rao, Chief Manager - Customer Service, ICICI Bank Ltd, Mohd
Illyas Khan Estate, 3rd floor, Above Music World, Road no 1, Banjara Hills, Hyderabad –
500034.
(d) Default and Circumstances

(i) If the Card Members fails to pay at least the Minimum Amount Due as
mentioned in the Statement on or before the Payment Due Date, ICICI Bank shall be
entitled to disclose information relating to days past due (“dpd”) of the Card Member to
credit information bureaus / agencies (specifically authorized by RBI). A notice shall be
deemed to have been given to the Card Member by ICICI Bank by informing the Card
Member of the disclosures of information relating to dpd status of the Card Member
through Statements. The time period between statement date and the payment due date of
the credit card shall be construed to be the notice period for such reporting of the card
member.

(ii) ICICI Bank reports the credit/repayment history of the Card Members to
bureaus/agencies in terms of the dpd. The dpd status will indicate the number of days the
Card Member has not cleared his dues to ICICI Bank beyond the due date. The updated
status of the Card Member will be sent to the bureaus/agencies on pre decided regular

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intervals and thus there will be no withdrawal of the default report except in case of
disputes having been resolved in favor of the Card Member.

(iii) Recovery procedure in case of default:

ICICI Bank shall be entitled, at the sole risk and cost of the Card member, to
engage one or, more person(s) to collect the Card Member’s dues and/or to enforce any
security provided by the Card Member, and ICICI Bank may (for such purposes) furnish
to such person(s) such information, facts and figures pertaining to the Card Member and
the security as ICICI Bank deems fit. ICICI Bank may also delegate to such person(s) the
right and authority to perform and execute all acts, deeds, matters and things connected
therewith, or incidental thereto, as ICICI Bank deems fit.

(iv) Recovery of dues in case of death/permanent incapacitance of Card

Member:

The whole of the outstanding balance on the Card Account, together with the
amounts of any outstanding Card transactions, effected but not yet charged to the Card
Account, shall become immediately due and payable in full to ICICI Bank, by the Card
Member, his/her successors, nominees, legal heirs in the event of his/her death (after
adjustment of credit shield benefit if subscribed by the Card Member) or
insolvency or winding up of the business of the Card Member.

(v) Available insurance cover for Card Member and date of activation of
policy:

The Card Member may be offered various Insurance Benefits from time to time
by ICICI Bank through a tie up with the Insurance Company. The date of activation of
such policy will be communicated through the website. The Card Member specifically
acknowledges that in all cases of claim, the Insurance Company will be solely liable for
settlement of the claim, and he/she will not hold ICICI Bank responsible in any manner
whether for compensation, recovery of compensation, processing of claims or for any
reason whatsoever.

(e) Termination / Revocation of Card Membership

(i)
(A) The Card Member may at any point of time, by notice in writing to
ICICI Bank, request for termination of the Card Account.

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 (B) Such a notice will not take effect till the Card has been defaced by
cutting off the top right hand corner ensuring that both the hologram and
magnetic stripe have been cut (except in case of an Online Credit Card),
and has been received by ICICI Bank.
(C) Save as aforesaid, neither the Card Account nor any Card may be
terminated by the Card Member.

(ii) In the event Charges are incurred on the Card after the Card Member
claims to have destroyed the Card, the Card Member shall be entirely
liable for charges incurred on the Card, whether or not the same are the
result of the misuse and whether or not ICICI Bank has been intimated of
the destruction of the Card.

(iii) ICICI Bank may at any time, with or without notice, as to the
circumstances in ICICI Bank's absolute discretion require, terminate the
Card Account or any Card.

(iv) On termination of the Card Account and notwithstanding any prior

agreement between ICICI Bank and the Card Member to the contrary:

(A) The total of all charges then outstanding, whether or not already
reflected in the Statement and, (B) the amount of any Voluntary Charges
incurred after termination (with effect from the date of relevant
Transaction Instruction), shall become forthwith due and payable by the
Card Member as though they had been so reflected, and interest will
accrue thereon as applicable from time to time.

(f) Loss / Theft / Misuse Of Card

If a Card is lost or stolen, the Card Member must report the loss/theft to ICICI
Bank 24 Hour Customer Care/Infinity within 24 hours of such loss/theft. However, in
case of loss of Card due to theft, the Card Member must also file a report with the local
police station and send a copy of the same to the card operation office of ICICI Bank at
the address as embossed on the back of the Card. ICICI Bank will, upon adequate
verification, suspend the Card Account and terminate all facilities in relation thereto and
will not be liable for any inconvenience caused to the Card Member.

Card Members shall take cognizance of the fact that once a Card is reported lost,
stolen or damaged, the Card cannot be used again, even if found subsequently. The Card
Member declares that if a Card is reported lost, damaged or stolen, it shall not be used
again, even if found or said to be in a non-damaged condition subsequently. In such
cases, the Card Member shall promptly cut the Card in 4 pieces and return the same to
ICICI Bank for cancellation. The Card Member is responsible for the security of the Card

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and shall take all steps towards ensuring that the Card is not misused. In the event that
ICICI Bank determines that the Card Member has failed to take the steps as mentioned
above in case of loss / theft / destruction of the card and the same are questionable,
financial liability on the lost, stolen or damaged card would rest with the Card Member
and could even result in cancellation of the Card Account. The Card Member shall be
fully liable for: (a) any unauthorized use of the Card for the period preceding 48 hours, as
counted from the end of the day of reporting of the loss/theft/damage; and/or (b) all
authorized transactions on the Card irrespective of the 48 hour period preceding the
reporting of the loss/theft/damage, or the period preceding such 48 hours.

No liability shall attach to the Card Member for any unauthorized transactions
done on the Card after the reporting of the loss/theft/damage of the Card and upon ICICI
Bank having suspended the Card Account.

(g) Disclosure
The Card Member authorizes ICICI Bank and all its group companies and their
agents to exchange, share or part with all the information relating to him/her and
repayment history to other ICICI Bank group companies, banks, financial institutions,
credit bureaus, agencies, statutory bodies etc. as may be required or as they may deem fit
and shall not hold ICICI Bank (or any of its group companies or its/their agents) liable for
use/sharing of this information. ICICI Bank shall disclose information relating to credit
history/repayment record and dpd status of the Card Member to a credit information
bureau in terms of the Credit Information Companies (Regulation) Act, 2005 (specifically
authorized by RBI).

BIBLIOGRAPHY

Reference Book:

 Financial Management -- Khan & Jain.

 Marketing Management -- Philip Kotler
 Principles of Management -- Stiffen Robbins
 Human Resource Management -- K Ashwathapa
 Research Methodology -- Donald Cooper

Journals:
 Indian Journal of Banking Monthly journal of 2006-07

Web References:
 www.icicibank.com
 www.wikipedia.org

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 www.rbi.gov.in
 www.sebi.gov.in
 www.google.co.in

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