ICICI Bank 2014 Annual Report Download - page 51

Annual Report 2013-2014 49
borrower rating accounts for quantitative and qualitative issues as well as credit enhancement features
specific to the transaction. The rating serves as a key input in the approval as well as post-approval
credit processes. A risk based asset review framework has also been put in place wherein the frequency
of asset review would be higher for cases with higher exposure and/or lower credit rating. Industry
knowledge is constantly updated through field visits and interactions with clients, sector regulators and
industry experts.
The Bank has a strong framework for the appraisal and execution of project finance transactions that
involves a detailed evaluation of technical, commercial, financial, marketing and management factors
and the sponsor’s financial strength and experience. The Bank identifies the project risks, mitigating
factors and residual risks associated with the project. As a part of the due diligence process, we appoint
consultants, including technical advisors, business analysts, legal counsel and insurance consultants,
wherever considered necessary, to advise the lenders. Risk mitigating factors in these financings include
creation of debt service reserves and channeling project revenues through a trust and retention account.
The Bank’s project finance loans are generally fully secured and have full recourse to the borrower. In
some cases, we also take additional credit comforts such as corporate or personal guarantees from
one or more sponsors of the project or a pledge of the sponsors’ equity holding in the project company.
The Bank’s practice is to normally disburse funds after the entire project funding is committed and all
necessary contractual arrangements have been entered into.
In case of retail loans, sourcing and approval are undertaken by two independent groups. The Credit
Risk Management Group has oversight on the credit risk issues for retail assets including vetting of all
credit policies, limits and operating notes proposed for approval by the Board of Directors or forums
authorised by the same. The Credit Risk Management Group is also involved in portfolio monitoring for
all retail assets and suggesting and implementing policy changes. The Retail Credit and Policy Group
is an independent unit which focuses on policy formulation and portfolio tracking and monitoring. This
group also includes the Credit Administration Unit that services various retail business units for credit
underwriting. In addition, there is also a Business Intelligence Unit to provide support for analytics, score
card development and database management.
The credit officers evaluate retail credit proposals on the basis of the product policy approved by
the Committee of Executive Directors and the risk assessment criteria defined by the Credit Risk
Management Group. These criteria vary across product segments but typically include factors like the
borrower’s income, the loan-to-value ratio and demographic parameters. The technical valuations in case
of residential mortgages are carried out by empanelled valuers or technical teams. External agencies such
as field investigation agencies and credit processing agencies are used to facilitate a comprehensive
due diligence process including visits to offices and homes in the case of loans to individual borrowers.
Before disbursements are made, the credit officer checks a centralised delinquent database and reviews
the borrower’s profile. In making our credit decisions, we also draw upon reports from credit information
bureaus. We also use the services of certain fraud control agencies operating in India to check applications
before disbursement.
In addition, the Credit Middle Office Group, the Treasury Control and Services Group and the Operations
Group monitor operational adherence to regulations, policies and internal approvals. We have centralised
operations to manage operational risk in most back office processes of the Bank’s retail loan business.
The Fraud Prevention Group manages fraud related risks through forensic audits and recovery of fraud
losses. The segregation of responsibilities and oversight by groups external to the business groups
ensure adequate checks and balances.