ICICI Bank 2006 Annual Report Download - page 72

F13
forming part of the Accounts (Contd.)
schedules
g) All other fee income is recognised upfront on its becoming due.
h) Net income arising from sell-down of loan assets is recognised upfront in interest income. With effect from
February 1, 2006, net income arising from securitisation of loan assets is amortised over the life of securities issued or
to be issued by the special purpose vehicle/special purpose entity to which the assets are sold.
i) Guarantee commission is recognised over the period of the guarantee.
2. Investments
Investments are valued in accordance with the extant RBI guidelines on investment classification and valuation as given
below.
a) All investments are categorised 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 category, the investments are further classified
under (a) government securities (b) other approved securities (c)shares (d) bonds and debentures, (e) subsidiaries
and joint ventures and (f)others.
b) ‘Held to Maturity’ securities are carried at their acquisition cost or at amortised cost, if acquired at a premium over the
face value. A provision is made for other than temporary diminution.
c) ‘Available for Sale’ and ‘Held for Trading’ securities are valued periodically as per RBI guidelines. The market/fair value
for the purpose of periodical valuation of quoted investments included in the ‘Available for Sale’ and ‘Held for Trading’
categories is the market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account
transactions, price list of RBI or prices declared by Primary Dealers Association of India jointly with Fixed Income
Money Market and Derivatives Association (“FIMMDA”), periodically.
The market/fair value of unquoted SLR securities included in the ‘Available for Sale’ and ‘Held for Trading’ categories is
as per the rates published by FIMMDA.
The valuation of 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 YTM rates for government
securities published by FIMMDA.
Unquoted equity shares are valued at the book value, if the latest balance sheet is available or at Re. 1.
Securities are valued scrip-wise and depreciation/appreciation aggregated for each category. Net appreciation, if any,
in each basket, being unrealised, is ignored, while net depreciation is provided for.
d) Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged to
the profit and loss account.
e) Broken period interest on debt instruments is treated as a revenue item.
f) Investments in subsidiaries/joint ventures are categorised as ‘Held to Maturity’ in accordance with RBI guidelines.
g) 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.
h) At the end of each reporting period, security receipts issued by the asset reconstruction company are valued in
accordance with the guidelines applicable to non-SLR instruments prescribed by RBI from time to time. Accordingly, in
case where the security receipts issued by the asset reconstruction company are limited to the actual realisation of the
financial assets assigned to the instruments in the concerned scheme, the Bank reckons the Net Asset Value (“NAV”),
obtained from the asset reconstruction company from time to time, for valuation of such investments at each reporting
year end.
i) The Bank follows trade date method for accounting of its investments.
3. Provisions/Write-offs on loans and other credit facilities
a) All credit exposures are classified as per RBI guidelines, into performing and non-performing assets (“NPAs”). Further,
NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI. Provisions are
made for sub-standard and doubtful assets at rates for prescribed by RBI. Loss assets and unsecured portion of
doubtful assets are provided/written off as per the extant RBI guidelines. The Bank also makes additional floating
provision against non-performing retail loans and additional provision against specific corporate NPAs.
b) For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by RBI, which requires
the present value of the interest sacrifice be provided at the time of restructuring.
c) In the case of loan accounts classified as NPAs (other than those subjected to restructuring), the account is reclassified
as “standard” account 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 i.e., a period of one year after the date when first payment of interest or of principal, whichever is
earlier, falls due, subject to satisfactory performance during the period.
d) Amounts recovered against other 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.
e) 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.
f) In addition to the provisions required to be held according to the asset classification status, provisions are held for
individual country exposure (other than for home country). The countries are categorised into seven risk categories