ICICI Bank 2009 Annual Report Download - page 113

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27. Early Retirement Option (“ERO”)
The Bank had implemented an Early Retirement Option Scheme 2003 for its employees in July 2003. All employees who had
completed 40 years of age and seven years of service with the Bank (including period of service with entities amalgamated
with the Bank) were eligible for the ERO.
The ex-gratia payments under ERO, terminations benefits and leave encashment in excess of the provision made (net of
tax benefits), aggregating to Rs. 1,910.0 million has been amortised over a period of five years commencing August 1, 2003
(the date of retirement of employees exercising the Option being July 31, 2003).
On account of the above ERO scheme, an amount of Rs. 118.0 million (March 31, 2008: Rs. 384.0 million) has been charged
to revenue being the balance of proportionate amount fully amortised during the year ended March 31, 2009.
28. Provision for income tax
The provision for income tax (including deferred tax and fringe benefit tax) for the year ended March 31, 2009 amounted
to Rs. 13,558.4 million (March 31, 2008: Rs. 8,953.7 million).
The Bank has a comprehensive system of maintenance of information and documents required by transfer pricing legislation
under section 92-92F of the Income Tax Act, 1961. The Bank is of the opinion that all international transactions are at arm’s
length so that the above legislation will not have material impact on the financial statements.
29. Deferred tax
As on March 31, 2009 the Bank has recorded net deferred tax asset of Rs. 17,923.1 million (March 31, 2008: Rs. 13,233.9
million), which has been included in other assets.
The break-up of deferred tax assets and liabilities into major items is given below:
Rupees in million
As on
March 31, 2009 As on March 31, 2008
Deferred tax asset
Provision for bad and doubtful debts ........................................................... 21,597.8 18,043.3
Capital loss .................................................................................................... 131.4 —
Others ........................................................................................................... 1,680.3 1,409.9
Total deferred tax assets ............................................................................ 23,409.5 19,453.2
Deferred tax liability
Depreciation on fixed assets ........................................................................ 5,460.1 6,220.5
Others ........................................................................................................... ——
Total deferred tax liability ........................................................................... 5,460.1 6,220.5
Deferred tax asset/(liability) pertaining to foreign branches ......................... (26.3) 1.2
Total net deferred tax asset/(liability) ....................................................... 17,923.1 13,233.9
During the year ended March 31, 2009, the Bank has created a deferred tax asset on carry forward capital losses as based
on its firm plans it is virtually certain that sufficient future taxable capital gains will be available against which the loss can
be set off.
30. 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.
31. 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”)
forming part of the Accounts (Contd.)
schedules