ICICI Bank 2009 Annual Report Download - page 170

F96
and jewellery, subject to collateralized jewellery being benchmarked to 99.99% purity), securities issued by
Central and State Governments, Kisan Vikas Patra, National Savings Certificates, life insurance policies with a
declared surrender value issued by an insurance company which is regulated by the insurance sector regulator,
certain debt securities rated by a recognized credit rating agency, mutual fund units where daily Net Asset
Value (NAV) is available in public domain and the mutual fund is limited to investing in the instruments listed
above. The Bank reckons the permitted financial collateral for capital relief when the financial collateral fulfill
the conditions stipulated for eligibility by RBI in its guidelines on Basel II.
The table below details the total exposure that is covered by eligible financial collateral as at
March 31, 2009.
Rupees in billion
Exposures covered by eligible financial collateral Amount1
Exposure before considering eligible financial collateral 208.31
Exposure after considering eligible financial collateral 162.80
1. Includes all entities considered for Basel II capital adequacy computation.
8. SECURITISATION
a. Securitisation objectives and policies
Objectives
The Bank’s primary objective of securitization activities is to increase the efficiency of capital and enhance the
return on capital employed by diversifying sources of funding.
Roles played by the Bank
In securitization transactions backed by assets either originated by the Bank or third parties, the Bank plays
the following major roles:
 Underwriter: allowing un-subscribed portions of securitized debt issuances, if any to devolve on the
Bank, with the intent of selling at a later stage.
 Investor/trader/market-maker: acquiring investment grade securitized debt instruments backed by
financial assets originated by third parties for purposes of investment/trading/market-making with the
aim of developing an active secondary market in securitized debt.
 Structurer: structuring appropriately in a form and manner suitably tailored to meet investor requirements
while being compliant with extant regulations.
 Provider of liquidity facilities: addressing temporary mismatches on account of the timing differences
between the receipt of cash flows from the underlying performing assets and the fulfillment of obligations
to the beneficiaries.
 Provider of credit enhancement facilities: addressing delinquencies associated with the underlying
assets, i.e. bridging the gaps arising out of credit considerations between cash flows received/collected
from the underlying assets and the fulfillment of repayment obligations to the beneficiaries.
 Provider of collection and processing services: collecting and/or managing receivables from underlying
obligors, contribution from the investors to securitisation transactions, making payments to counterparties/
appropriate beneficiaries, reporting the collection efficiency and other performance parameters and
providing other services relating to collections and payments as may be required for the purpose of the
transactions.
b. Summary of the Bank’s accounting policies for securitisation activities
The Bank transfers commercial and consumer loans through securitisation transactions. The transferred
loans are de-recognised and gains/losses are accounted for only if the Bank surrenders the rights to benefits
specified in the loan contracts. Recourse and servicing obligations are accounted for net of provisions.
In accordance with the RBI guidelines, with effect from February 1, 2006, the Bank accounts for any loss
arising from securitisation immediately at the time of sale and the profit/premium arising from securitisation
is amortised over the life of the securities issued or to be issued by the special purpose vehicle to which the
assets are sold. In the case of loans sold to an asset reconstruction company, the gain, if any, is ignored.
BASEL II – Pillar 3 Disclosures (Consolidated)