ICICI Bank 2008 Annual Report Download - page 115

F41
The break-up of deferred tax assets and liabilities into major items is given below:
Rupees in million
As on
March 31, 2008 As on March 31, 2007
Deferred Tax Asset
Provision for bad and doubtful debts ................................................................. 18,043.3 11,758.5
Capital loss .......................................................................................................... ——
Others ................................................................................................................. 1,409.9 884.0
Total Deferred Tax Assets ................................................................................. 19,453.2 12,642.5
Deferred Tax Liability
Depreciation on fixed assets .............................................................................. 6,220.5 6,543.3
Others ................................................................................................................. ——
Total Deferred Tax Liability .............................................................................. 6,220.5 6,543.3
Deferred tax asset pertaining to foreign branches ............................................. 1.2 0.4
Total net deferred tax asset/(liability) ............................................................. 13,233.9 6,099.6
31. Dividend distribution tax
For the purpose of computation of dividend distribution tax on the proposed dividend, the Bank has reduced the dividend
distribution tax on dividend received from its Indian subsidiaries as per the amendment to section 115-O of the Income Tax
Act, 1961 vide Finance Bill, 2008, read with Section 294 of the Income Tax Act, 1961.
32. 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, 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 sensitivity measures 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 purposes 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.
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. Derivative transactions
are covered under International Swap Dealers Association (“ISDA”) master agreements with the respective counter parties.
The exposure on account of derivative transactions is computed as per RBI guidelines and is marked against the credit
limits approved for the respective counter parties.
schedules
forming part of the Accounts (Contd.)
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