ICICI Bank 2010 Annual Report Download - page 64

Management’s Discussion and Analysis
with the approval of their boards, enhance the exposure by 5.0% of capital funds (i.e. up to 20.0% of capital funds
for an individual borrower and up to 45.0% of capital funds for a group of companies under the same management)
and are required to make appropriate disclosures in this regard in their annual reports. Exposure for funded and
non-funded credit facilities is calculated as the total committed amount or the outstanding amount whichever
is higher (for term loans, as the sum of undisbursed commitments and the outstanding amount). Investment
exposure is considered at book value.
During the year ended March 31, 2010, our exposures to any single borrower and borrower group were within the
limits prescribed by the Reserve Bank of India except in the cases of Reliance Industries Limited, Barclays Bank PLC
and ICICI Prudential Flexible Income Plan where exposure to single borrowers were above the stipulated ceiling of
15.0% of capital funds. At March 31, 2010, the exposure to these borrowers as a percentage of capital funds was -
Reliance Industries Limited: 15.7%, Barclays Bank PLC: 10.7% and ICICI Prudential Flexible Income Plan: 5.4%. The
excess exposure in all the above cases was duly approved/confirmed by the Board of Directors of the Bank with
exposures being within 20.0% of the Bank’s capital funds in accordance with the guidelines issued by the RBI.
Directed Lending
RBI requires banks to lend to certain sectors of the economy. Such directed lending comprises priority sector
lending, export credit and housing finance.
RBI guidelines require banks to lend 40.0% of their adjusted net bank credit, or credit equivalent amount of off balance
sheet exposure, whichever is higher, to certain specified sectors called priority sectors. The definition of adjusted net
bank credit does not include certain exemptions and includes certain investments and is computed with reference
to the outstanding amount at March 31 of the previous year. Priority sector include small enterprises, agricultural
sector, food and agri-based industries, small businesses and housing finance up to certain limits. Out of the 40.0%,
banks are required to lend a minimum of 18.0% of their net bank credit to the agriculture sector and the balance to
certain specified sectors, including small enterprises (defined as enterprises engaged in manufacturing/production,
processing and services businesses with a certain limit on investment in plant and machinery), small road and water
transport operators, small businesses, professional and self-employed persons, all other service enterprises, micro
credit, education loans and housing loans up to Rs. 2.0 million to individuals for purchase/construction of a dwelling
unit per family. In its letter dated April 26, 2002 granting its approval for the amalgamation of ICICI Limited and ICICI
Bank Limited, RBI stipulated that since the loans of erstwhile ICICI Limited (ICICI) transferred to us were not subject
to the priority sector lending requirement, we are required to maintain priority sector lending of 50.0% of our net
bank credit on the residual portion of our advances (i.e. the portion of our total advances excluding advances of
ICICI at year-end fiscal, 2002, referred to as “residual net bank credit”). This additional 10.0% priority sector lending
requirement will apply until such time as our aggregate priority sector advances reach a level of 40.0% of our total
net bank credit. RBI’s existing instructions on sub-targets under priority sector lending and eligibility of certain types
of investments/funds for qualification as priority sector advances apply to us.
Any shortfall in the amount required to be lent to the priority sectors may be required to be deposited with
government sponsored Indian development banks like the National Bank for Agriculture and Rural Development,
the Small Industries Development Bank of India and the National Housing Bank. These deposits have a maturity of
up to seven years and carry interest rates lower than market rates. At year-end fiscal 2010, our total investments
in such bonds were Rs. 101.10 billion.
As per RBI guidelines, banks are also required to lend 10.0% of adjusted net bank credit or credit equivalent amount of
off-balance sheet exposures, whichever is higher, to weaker sections. In order to ensure that the sub-target of lending
to the weaker sections is achieved, RBI has decided to take into account the shortfall in lending to weaker sections
also, as on the last reporting Friday of March of each year, for the purpose of allocating amounts to the domestic
Scheduled Commercial Banks (SCBs) for contribution to the Rural Infrastructure Development Fund (RIDF) maintained
with NABARD or funds with other financial institutions, as specified by RBI, with effect from April 2009.
We are required to comply with the priority sector lending requirements on the last “reporting Friday” of each
fiscal year. At March 26, 2010, which was the last reporting Friday for fiscal 2010, our priority sector loans were
Rs. 626.98 billion, constituting 51.3% of our residual adjusted net bank credit against the requirement of 50.0%.
At that date, qualifying agriculture loans were 18.7% of our residual net bank credit as against the requirement
of 18.0%. Our advances to weaker sections were Rs. 56.30 billion constituting 4.6% of our residual adjusted net
bank credit against the requirement of 10.0%.
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