ICICI Bank 2009 Annual Report Download - page 164

F90
The credit rating process involves assessment of risk emanating from various sources such as industry risk,
business risk, financial risk, management risk, project risk and structure risk. For all corporate and majority of small
enterprises, a case-by-case rating is issued based on detailed analysis of the above factors.
In respect of retail advances, the Bank’s credit officers evaluate credit proposals on the basis of the product policy
approved by the Retail Credit Forum and the risk assessment criteria defined by the Global Retail Credit Risk
Management Group.
Credit approval authorisation structure
The Board of Directors has delegated the authority to the Credit Committee consisting of a majority of independent
Directors, the Committee of Directors consisting of whole time Directors, the Committee of Executives, the Regional
Committee, Small Enterprise Group Forums and Agricultural Credit Forums, all consisting of designated executives
and to individual executives in the case of program/policy based products, to approve financial assistance within
certain individual and group exposure limits set by the Board of Directors. The authorization is based on the level
of risk and the quantum of exposure, to ensure that the transactions with higher exposure and level of risk are put
up to correspondingly higher forum/committee for approval.
In respect of retail loans, all product-level policies require the approval of the Retail Credit Forum, comprising of
Executive Director and senior managers. These criteria vary across product segments but typically include factors
such as the borrower’s income, the loan-to-value ratio and demographic parameters. The individual credit proposals
are evaluated and approved by executives on the basis of the product policies.
Credit risk monitoring process
For effective monitoring of credit facilities, a post-approval authorization structure has been laid down. For Corporate
and Small Enterprises and RMAG, Credit Middle Office Group verifies adherence to the terms of the approval prior
to commitment and disbursement of credit facilities.
For retail credit, the Bank has established centralised operations to manage operating risk in the various back
office processes of the Bank’s retail loan business except for a few operations, which are decentralized to improve
turnaround time for customers. A fraud prevention and control group has been set up to manage fraud-related
risks through fraud prevention and through recovery of fraud losses. The fraud control group evaluates various
external agencies involved in the retail finance operations, including direct marketing associates, external verification
associates and collection agencies.
The Bank has a collections unit structured along various product lines and geographical locations, to control
delinquency levels. The collections unit operates under the guidelines of a standardised recovery process.
Reporting and measurement
Credit exposure for ICICI Bank is measured & monitored using a centralised exposure management system. The
analysis of the composition of the portfolio is presented to the Risk Committee on a quarterly basis.
ICICI Bank complies with the norms on exposure stipulated by RBI for both single borrower as well as borrower
group at the consolidated level. Limits have been set by the risk management group as a percentage of the Bank’s
consolidated capital funds and are regularly monitored. The utilisation against specified limits is reported to the
Committee of Directors and Credit Committee on a periodic basis.
Credit concentration risk
Credit concentration risk arises mainly on account of concentration of exposures under various categories including
industry, products, geography, underlying collateral nature and single/group borrower exposures.
Within the corporate portfolio, as a prudential measure in line with better risk management practice, the RBI has
prescribed regulatory limits on banks’ maximum exposure to single borrowers and group borrowers. In order to
restrict the concentration risk arising out of longer tenure exposure within the prudential limits set by RBI, the Board
of ICICI Bank has approved prescribed sub-limits for the maximum long tenor exposure to a particular borrower
group.
Limits are stipulated in the credit policy to address concentration risk. Limits have been stipulated on single borrower,
group, industry, longer tenure exposure to a group. Exposure of top 10 borrowers and borrower groups for the
consolidated Bank are reported to the Committee of Directors on a quarterly basis.
BASEL II – Pillar 3 Disclosures (Consolidated)