ICICI Bank 2016 Annual Report Download - page 140

Annual Report 2015-2016138
Schedules
forming part of the Accounts (Contd.)
Financial Statements of ICICI Bank Limited
The Bank holds specic provisions against non-performing loans and advances and against certain performing loans
and advances in accordance with RBI directions. The Bank also holds provisions on loans under SDR scheme of
RBI. The assessment of incremental specic provisions is made after taking into consideration the existing specic
provision held. The specic provisions on retail loans and advances held by the Bank are higher than the minimum
regulatory requirements.
a) Provision due to diminution in the fair value of restructured/rescheduled loans and advances is made in
accordance with the applicable RBI guidelines.
In respect of non-performing loans and advances accounts subjected to restructuring, the account is upgraded
to standard only after the specied period i.e. a period of one year after the date when rst payment of interest
or of principal, whichever is later, falls due, subject to satisfactory performance of the account during the period.
A standard restructured loan is upgraded to the standard category when satisfactory payment performance is
evidenced during the specied period and after the loan reverts to the normal level of standard asset provisions/
risk weights.
b) Amounts recovered against debts written-off in earlier years and provisions no longer considered necessary in
the context of the current status of the borrower are recognised in the prot and loss account.
c) The Bank maintains general provision on performing loans and advances in accordance with the RBI guidelines,
including provisions on loans to borrowers having unhedged foreign currency exposure, provision on exposures
to step-down subsidiaries of Indian companies and oating provision taken over from erstwhile Bank of Rajasthan
upon amalgamation. For performing loans and advances in overseas branches, the general provision is made at
higher of host country regulations requirement and RBI requirement.
d) In addition to the provisions required to be held according to the asset classication status, provisions are
held for individual country exposures including indirect country risk (other than for home country exposure).
The countries are categorised into seven risk categories namely insignicant, low, moderately low, moderate,
moderately high, high and very high, and provisioning is made on exposures exceeding 180 days on a graded
scale ranging from 0.25% to 25%. For exposures with contractual maturity of less than 180 days, provision is
required to be held at 25% of the rates applicable to exposures exceeding 180 days. The indirect exposure is
reckoned at 50% of the exposure. If the country exposure (net) of the Bank in respect of each country does not
exceed 1% of the total funded assets, no provision is required on such country exposure.
4. Transfer and servicing of assets
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 benets specied in the
underlying securitised loan contract. Recourse and servicing obligations are accounted for net of provisions.
In accordance with the RBI guidelines for securitisation of standard assets, with effect from February 1, 2006, the
Bank accounts for any loss arising from securitisation immediately at the time of sale and the prot/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. With effect from May 7, 2012, the RBI guidelines require the prot/premium arising from
securitisation to be amortised over the life of the transaction based on the method prescribed in the guidelines.
In the case of loans sold to an asset reconstruction company, the excess provision is not reversed but is utilised to
meet the shortfall/loss on account of sale of other nancial assets to securitisation company (SC)/reconstruction
company (RC) in accordance with RBI guideline dated July 13, 2005. With effect from February 26, 2014, in accordance
with RBI guidelines, in case of non-performing loans sold to SCs/RCs, the Bank reverses the excess provision in prot
and loss account in the year in which amounts are received.
5. Fixed assets and depreciation
Fixed assets are carried at cost and include amounts added on revaluation of premises, less accumulated depreciation
and impairment, if any. Cost includes freight, duties, taxes and incidental expenses related to the acquisition and