ICICI Bank 2009 Annual Report Download - page 161

F87
e. Total eligible capital (March 31, 2009)
Rupees in billion
Amount
Eligible Tier-1 capital 454.10
Eligible Tier-2 capital 192.94
Total eligible capital 647.04
3. CAPITAL ADEQUACY
a. Capital assessment
The Bank is subject to the capital adequacy norms stipulated by the RBI guidelines on Basel II with effect
from March 31, 2008. Prior to March 31, 2008, the Bank was subject to the capital adequacy norms as
stipulated by the RBI guidelines on Basel I. The RBI guidelines on Basel II require the Bank to maintain a
minimum ratio of total capital to risk weighted assets of 9.0%, with a minimum Tier-1 capital adequacy
ratio of 6.0%. The total capital adequacy ratio of the Bank at a standalone level as at March 31, 2009 as per
the RBI guidelines on Basel II is 15.53% with a Tier-1 capital adequacy ratio of 11.84%. The total capital
adequacy ratio of the ICICI Group (consolidated) as at March 31, 2009 as per the RBI guidelines on Basel
II is 14.73% with a Tier-1 capital adequacy ratio of 10.34%.
Under Pillar 1 of the RBI guidelines on Basel II, the Bank follows the standardised approach for credit and
market risk and basic indicator approach (BIA) for operational risk. The Bank is in the process of setting
up a framework for the adoption of the advanced approaches under Basel II for measuring credit, market
and operational risks and aims to migrate to these approaches in line with the required approval and time
schedule stipulated by RBI.
In view of its transitional arrangements to the Basel II framework, the RBI has prescribed a parallel run
under which the Bank calculates capital adequacy under both Basel I and Basel II. Further at March 31, 2009,
the Bank is required to maintain capital adequacy based on the higher of the minimum capital required
under Basel II or at 90.0% of the minimum capital required under Basel I. The computation under Basel II
guidelines results in a higher minimum capital requirement as compared to Basel I and hence as a result
the capital adequacy as at March 31, 2009 has been maintained and reported by the Bank as per Basel II
guidelines.
The Board of Directors of ICICI Bank maintains an active oversight over the Bank’s capital adequacy
levels. In line with the RBI guidelines, the Bank has a Board approved policy for internal capital adequacy
assessment process (ICAAP) and the outcomes of the ICAAP are presented to the Board on an annual
basis. The ICAAP encompasses the Bank’s capital planning for current and future periods. The Bank
determines its capital needs and the optimum level of capital taking into account the Bank’s strategic
focus, business plan, growth objectives and any other related factors including:
 Regulatory capital requirements as per the RBI guidelines on Basel II;
 Assessment of material risks;
 Perception of credit rating agencies, shareholders and investors;
 Future strategy with regard to investments or divestments in subsidiaries; and
 Evaluation of capital raising options in the form of equity and hybrid/debt capital instruments from
domestic and overseas markets, as permitted by RBI from time-to-time.
The Bank also conducts stress tests and scenario analysis and factors the impact of the same in its capital
planning process. The Bank formulates its internal capital level targets based on the ICAAP and endeavours
to maintain its capital adequacy level in excess of the targeted levels at all times.
Thus, the Bank’s capital assessment and planning for current and future periods reflects the Bank’s capital
needs, planned capital consumption, desired level of capital, limits related to capital, management actions/
contingency plan for dealing with divergences and unexpected events and assessment for external and
internal sources of capital.
BASEL II – Pillar 3 Disclosures (Consolidated)