ICICI Bank 2008 Annual Report Download - page 58

guarantees. Margins available to reimburse losses realised under guarantees amounted to Rs. 10.61 billion at
year-end fiscal 2008 and Rs. 11.93 billion at year-end fiscal 2007. Other property or security may also be available
to us to cover losses under guarantees.
We are obligated under a number of capital contracts. Capital contracts are job orders of a capital nature, which
have been committed. As of the balance sheet date, work had not been completed to this extent. Estimated amounts
of contracts remaining to be executed on capital account aggregated Rs. 17.40 billion at year-end fiscal 2008
compared to Rs. 3.43 billion at year-end fiscal 2007 primarily on account of new branches and office premises.
Capital Adequacy
Rs. in billion, except percentages
As per RBI guidelines
under Basel I
As per RBI
guidelines
under Basel II
March 31,
2007 March 31, 2008 March 31, 2008
Tier-1 capital 215.03 381.34 421.72
Tier-2 capital 123.93 121.21 78.86
Total capital 338.96 502.55 500.59
Credit Risk – Risk Weighted Assets (RWA) 2,579.68 2,998.08 3,173.33
Market Risk – RWA 320.25 369.46 258.74
Operational Risk – RWA — —152.50
Total risk weighted assets 2,899.93 3,367.55 3,584.57
Tier-1 capital adequacy ratio 7.42% 11.32% 11.76%
Tier-2 capital adequacy ratio 4.27% 3.60% 2.20%
Total capital adequacy ratio 11.69% 14.92% 13.97%
We are subject to the capital adequacy norms stipulated by RBI. As per the earlier capital adequacy guidelines
(Basel I), we were required to maintain a minimum ratio of total capital to risk adjusted assets and off-balance
sheet items of 9%, at least half of which must be Tier-1 capital. On April 27, 2007, RBI issued Prudential Guidelines
on Capital Adequacy and Market Discipline – Implementation of the New Capital Adequacy Framework, which
are applicable to all banks with international presence, from March 31, 2008. Under the new guidelines (Basel II),
which are now applicable to us, we are required to maintain a minimum ratio of total capital to risk adjusted assets
of 9%, with a minimum Tier-1 capital ratio of 6%. The other key changes under the new guidelines are:
l Investment above 30% in paid-up equity capital, of financial entities which are not consolidated for capital
adequacy (including insurance entities) and investments in other instruments eligible for regulatory capital
status in those entities have been deducted 50% from Tier-1 and 50% from Tier-2 capital, while earlier only
equity investments in subsidiaries were deducted entirely from Tier-1 capital.
l Capital charge has been introduced for operational risk.
l Under the Basel I guidelines, residential mortgages attract risk weight of 50% for loans upto Rs. 2.0 million
and 75% for loans greater than Rs. 2.0 million. Under the Basel II guidelines, residential mortgages attract a
risk weight of 50% for loans upto Rs. 2.0 million with loan-to-value ratio less than 75%, 75% for loans greater
than Rs. 2.0 million with loan-to-value ratio less than 75% and 100% for all other loans.
l Under the Basel I guidelines, claims on corporates are risk weighted at 100%, while corporate claims are risk
weighted as per the external rating of the corporate under the Basel II guidelines. Further, RBI has stipulated
that for fiscal 2009, all fresh sanctions or renewals in respect of unrated claims on corporates in excess of
Rs. 500.0 million would attract a risk weight of 150%. With effect from April 1, 2009, all fresh sanctions or
renewals in respect of unrated claims on corporates in excess of Rs. 100.0 million will attract a risk weight
of 150%.
Management’s Discussion & Analysis
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