MANAGEMENT DISCUSSION & ANALYSIS

In fiscal 2022, the Bank maintained a strategic focus on profitable growth in business within the guardrails of risk and compliance. The Bank grew its credit portfolio with a focus on granularity and saw healthy growth across retail, SME and business banking portfolios, and in current and savings account deposits on a daily average basis. The Bank continued to focus on holistically serving its corporate clients and their ecosystems, including lending to the corporate sector based on risk assessment and pricing. The Bank focused on maintaining a strong balance sheet, with prudent provisioning and healthy capital adequacy. The Bank’s capital adequacy ratios were significantly above regulatory requirements as of March 31, 2022.

Going forward, the Bank would continue its strategic focus on growing the core operating profit (profit excluding income from treasury-related activities and before provisions) in a risk calibrated manner. The Risk Appetite and Enterprise Risk Management framework articulates the Bank’s risk appetite and drills it down into a limit framework for various risk categories. The Bank will focus on growing its loan portfolio in a granular manner with a focus on risk and reward, with return of capital and containment of provisions below a defined percentage of core operating profit being a key imperative. There are no specific targets for loan mix or segment-wise loan growth. The Bank would aim to continue to grow its deposit franchise, maintain a stable and healthy funding profile and competitive advantage in cost of funds.

The Bank believes there are significant opportunities for profitable growth across various sectors of the Indian economy. The key elements of the strategy to maximize the Bank’s share of these opportunities are:

360-degree customer centric approach

The Bank leverages its branch network, digital channels, partnerships and presence across various ecosystems to expand its customer base. Using ICICI STACK, the Bank offers solutions to its customers to suit their life-stage and business needs. The Bank continues to focus on maximising the total life-cycle value of the relationship with its customers.

Focus on ecosytems

The Bank aims to serve all financial requirements of customers and their ecosystems. Using ‘ICICI STACK for Corporates’, the Bank offers customized solutions to corporates and their network of employees, vendors, dealers and other parts of their ecosystems. The Bank focuses on capturing the fund flows in the corporate’s supply chain with dealers and vendors by offering various digital solutions. The Bank’s ecosystem branches house multi-functional teams required to nurture relationships and bring the entire bouquet of services of the Bank to corporate clients and their ecosystems. The “Merchant Stack” provides a wide range of banking and value added services to the merchant ecosystem comprising retailers, online businesses and e-commerce firms.

Focus on micro markets

The Bank follows a micro market based approach to create an efficient distribution and resource allocation strategy. Data analytics underpins the effort, analyzing relevant geographical, demographic and economic data combined with internal data to identify locally relevant opportunities. This also includes allocating appropriate resources and strengthening the branch network where required.

Internal cross-functional collaboration and external partnerships

The Bank has focussed on increasing collaboration to provide solutions that meet the complete banking requirements of customers. Cross-functional teams have been created to tap into various ecosystems, enabling 360-degree coverage of customers and increasing wallet share.

Partnerships with technology companies and platforms with large customer bases and transaction volumes offer unique opportunities for acquiring new customers and enhancing service delivery and customer experience. The Bank has also set up a start-up investment and partnerships team to collaborate with and invest in fintech startups, and co-develop products aligned with the Bank’s digital roadmap.

Process decongestion and operational flexibility

The Bank has emphasised decongestion of internal processes to make customer onboarding and service delivery frictionless, thereby improving the customer experience. The Bank has reduced the layers of management in its organisation structure and empowered operating teams to create flexibility and agility in capturing business opportunities while operating within the guardrails of compliance and risk.

Leveraging technology and digital across businesses

The Bank has embarked on a journey to transform from Bank to Bank^Tech, with a focus on creating an enterprise architecture framework across digital platforms, data and analytics, micro services based architecture, cloud computing, cognitive intelligence and other emerging technologies. This is based on the founding pillars of scalability, modularity, flexibility and agility, resilience and reliability, and creating delightful and digitally native customer experiences to enable sustainable profitable growth.

The Bank extensively leverages data analytics for deeper insights into customer needs and behaviour and create unique propositions for customer and market segments. The Bank’s digital platforms such as iMobile Pay, Internet banking platforms, InstaBIZ and Trade Online provide end-to-end seamless digital journeys, personalized solutions and value added features to customers and enable effective data driven cross-sell and up-sell. The open architecture feature of iMobile Pay and InstaBIZ helps to acquire new customers in a frictionless manner. The Bank has taken initiatives to offer a convenient and frictionless experience to customers by digitising the credit underwriting process, with instant loan approvals.

The Bank is focused on the twin principles of “One Bank, One RoE” emphasizing the need to maximize its share of the target opportunity across all products and services, and “Fair to Customer, Fair to Bank” emphasising the goal of delivering fair value to customers, while creating value for shareholders. The Bank seeks to sell products and offer services which meet societal needs and are in the interest of customers. The Bank will focus on building a culture where every employee upholds this principle and serves customers with humility. The aim is to be the trusted financial services provider of choice for customers.

Summary

Core operating profit increased by 22.3% from ₹ 313.51 billion in fiscal 2021 to ₹ 383.47 billion in fiscal 2022 primarily due to an increase in net interest income by ₹ 84.77 billion and fee income by ₹ 30.28 billion, offset, in part, by an increase in operating expenses by ₹ 51.72 billion. Income from treasury-related activities decreased from ₹ 50.46 billion in fiscal 2021 to ₹ 9.03 billion in fiscal 2022. Provisions and contingencies (excluding provision for tax) decreased by 46.7% from ₹ 162.14 billion in fiscal 2021 to ₹ 86.41 billion in fiscal 2022. Profit after tax increased from ₹ 161.93 billion in fiscal 2021 to ₹ 233.39 billion in fiscal 2022.

Net interest income increased by 21.7% from ₹ 389.89 billion in fiscal 2021 to ₹ 474.66 billion in fiscal 2022 due to an increase in the net interest margin by 27 basis points from 3.69% in fiscal 2021 to 3.96% in fiscal 2022 and an increase of 13.5% in the average interest-earning assets.

Fee income increased by 23.9% from ₹ 126.59 billion in fiscal 2021 to ₹ 156.87 billion in fiscal 2022. Fee income for fiscal 2021 was lower due to reduced borrowing and investment activity by customers and lower consumer spends due to the nation-wide lockdown in April-May 2020 followed by gradual easing of the lockdown by the Government of India. Dividend from subsidiaries/joint ventures increased by 48.2% from ₹ 12.34 billion in fiscal 2021 to ₹ 18.29 billion in fiscal 2022. In line with the Insurance Regulatory and Development Authority guideline asking insurers to conserve capital, ICICI Lombard General Insurance Company Limited (ICICI General) and ICICI Prudential Life Insurance Company Limited (ICICI Life) did not pay any final dividend for fiscal 2020. As a result, there was a decrease in dividend income from insurance subsidiaries in fiscal 2021. Operating expenses increased by 24.0% from ₹ 215.61 billion in fiscal 2021 to ₹ 267.33 billion in fiscal 2022.

Income from treasury-related activities decreased from ₹ 50.46 billion in fiscal 2021 to ₹ 9.03 billion in fiscal 2022. During fiscal 2021, the Bank had sold 3.96% equity shareholding in ICICI General, 1.50% equity shareholding in ICICI Life and 4.21% equity shareholding in ICICI Securities Limited (ICICI Securities) and made a net gain of ₹ 36.70 billion.

Provisions and contingencies (excluding provision for tax) decreased by 46.7% from ₹ 162.14 billion in fiscal 2021 to ₹ 86.41 billion in fiscal 2022 primarily due to a decrease in provision on non-performing and other assets and Covid-19 related provision. Provision on nonperforming and other assets decreased from ₹ 107.49 billion in fiscal 2021 to ₹ 61.64 billion in fiscal 2022. During fiscal 2022, there were higher upgrades and recoveries of non-performing loans resulting in lower provisioning requirement, offset, in part, by provision made on loans restructured under RBI’s Resolution Framework and change in provisioning rate on certain non-performing loans to make it more conservative. The provision coverage ratio on non-performing assets (NPA) increased from 77.7% at March 31, 2021 to 79.2% at March 31, 2022. During fiscal 2022, the Bank wrote-back Covid-19 related provision amounting to ₹ 10.50 billion as against net provision of ₹ 47.50 billion in fiscal 2021. Further, during fiscal 2022, the Bank made an additional contingency provision amounting to ₹ 10.25 billion on a prudent basis. The Bank holds a total contingency provision of ₹ 74.50 billion, including the Covid-19 related contingency provision of ₹ 64.25 billion,
at March 31, 2022

The income tax expense increased from ₹ 39.90 billion in fiscal 2021 to ₹ 72.70 billion in fiscal 2022. The effective tax rate increased from 19.8% in fiscal 2021 to 23.7% in fiscal 2022 primarily due to change in composition of income. Fiscal 2021 included a significant amount of capital gain on sale of stake in subsidiaries, which incurs lower income tax.

Net worth increased from ₹ 1,475.09 billion at March 31, 2021 to ₹ 1,705.12 billion at March 31, 2022 primarily due to accretion to reserves out of retained profit.

Total assets increased by 14.7% from ₹ 12,304.33 billion at March 31, 2021 to ₹ 14,112.98 billion at March 31, 2022. Total advances increased by 17.1% from ₹ 7,337.29 billion at March 31, 2021 to ₹ 8,590.20 billion at March 31, 2022 primarily due to an increase in domestic advances by 17.5%. Total investments increased by 10.3% from ₹ 2,812.87 billion at March 31, 2021 to ₹ 3,102.41 billion at March 31, 2022. Cash and cash equivalents increased by 26.1% from ₹ 1,331.28 billion at March 31, 2021 to ₹ 1,678.22 billion at March 31, 2022.

The average high-quality liquid assets, after haircut, maintained during the three months ended March 31, 2022 were ₹ 3,197.27 billion (three months ended March 31, 2021: ₹ 2,767.44 billion). The average liquidity coverage ratio was 131.09% for the three months ended March 31, 2022 as against the requirement of 100.00%.

Total deposits increased by 14.2% from ₹ 9,325.22 billion at March 31, 2021 to ₹ 10,645.72 billion at March 31, 2022. Term deposits increased by 9.0% from ₹ 5,008.99 billion at March 31, 2021 to ₹ 5,461.35 billion at March 31, 2022. Current and savings account (CASA) deposits increased by 20.1% from ₹ 4,316.23 billion at March 31, 2021 to ₹ 5,184.37 billion at March 31, 2022. Average CASA deposits increased by 25.5% from ₹ 3,345.96 billion in fiscal 2021 to ₹ 4,198.86 billion in fiscal 2022. Borrowings increased by 17.0% from ₹ 916.31 billion at March 31, 2021 to ₹ 1,072.31 billion at March 31, 2022.

The Bank had a branch network of 5,418 branches and an ATM network of 13,626 ATMs at March 31, 2022.

The Bank is subject to Basel III capital adequacy guidelines stipulated by RBI. The total capital adequacy ratio of the Bank at March 31, 2022 (after deducting proposed dividend for fiscal 2022 from capital funds) in accordance with RBI guidelines on Basel III was 19.16% as compared to 19.12% at March 31, 2021. The Tier-1 capital adequacy ratio was 18.35% at March 31, 2022 as compared to 18.06% at March 31, 2021. The Common Equity Tier 1 (CET-1) ratio was 17.60% at March 31, 2022 as compared to 16.80% at March 31, 2021.

Impact of Covid-19 on the performance of the Bank

During fiscal 2021, the Covid-19 pandemic resulted in a nation-wide lockdown in April-May 2020 which substantially impacted economic activity. The subsequent easing of lockdown measures led to gradual improvement in economic activity and progress towards normalcy from the second half of fiscal 2021. In fiscal 2022, India witnessed two more waves of the Covid-19 pandemic and the re-imposition of localised/regional lock-down measures in certain parts of the country.

While the number of new Covid-19 cases have reduced significantly and the Government of India has withdrawn most of the Covid-19 related restrictions, the future trajectory of the pandemic may have an impact on the results of the Bank and the Group.

The following table sets forth, for the periods indicated, the operating results data.

1. Includes merchant foreign exchange income and margin on customer derivative transactions.
2. All amounts have been rounded off to the nearest ₹ 10.0 million.
3. Prior period figures have been re-grouped/re-arranged, where necessary.

The following table sets forth, for the periods indicated, the key financial ratios.

1. Return on average equity is the ratio of the net profit after tax to the quarterly average equity share capital and reserves.
2. Return on average assets is the ratio of net profit after tax to average assets.
3. Cost represents operating expense. Income represents net interest income and non-interest income.
4. Excluding Covid-19 related provisions of ₹ 47.50 billion.

The return on average equity, return on average assets and earnings per share increased primarily due to an increase in profit after tax.

The following table sets forth, for the periods indicated, the net interest income and spread analysis.

1. All amounts have been rounded off to the nearest ₹ 10.0 million.

Net interest income increased by 21.7% from ₹ 389.89 billion in fiscal 2021 to ₹ 474.66 billion in fiscal 2022 primarily due to an increase in the net interest margin by 27 basis points and an increase of 13.5% in the average volume of interest-earning assets.

Net interest margin increased by 27 basis points from 3.69% in fiscal 2021 to 3.96% in fiscal 2022. The yield on average interest-earning assets decreased by 28 basis points from 7.49% in fiscal 2021 to 7.21% in fiscal 2022. The cost of funds decreased by 54 basis points from 4.25% in fiscal 2021 to 3.71% in fiscal 2022. The interest spread increased by 26 basis points from 3.24% in fiscal 2021 to 3.50% in fiscal 2022.

The net interest margin for domestic operations increased by 23 basis points from 3.84% in fiscal 2021 to 4.07% in fiscal 2022 primarily due to a decrease in cost of funds, offset, in part, by a decrease in yield on interest-earning assets. The yield on domestic interest-earning assets decreased by 34 basis points from 7.69% in fiscal 2021 to 7.35% in fiscal 2022 primarily due to sustained surplus liquidity and a decline in interest rates post the onset of the Covid-19 pandemic. The cost of domestic funds decreased by 56 basis points from 4.34% in fiscal 2021 to 3.78% in fiscal 2022 due to a decrease in interest rates on term deposits and increase in average CASA deposits, offset, in part, by an increase in cost of borrowings due to change in borrowings mix.

The net interest margin of overseas branches decreased by 5 basis points from 0.34% in fiscal 2021 to 0.29% in fiscal 2022 primarily due to a decrease in yield on advances, offset, in part, by a decrease in cost of funds.

The following table sets forth, for the periods indicated, the trend in yield, cost, spread and margin.

The yield on average interest-earning assets decreased by 28 basis points from 7.49% in fiscal 2021 to 7.21% in fiscal 2022 primarily due to the following factors:

• The yield on domestic advances decreased by 58 basis points from 9.22% in fiscal 2021 to 8.64% in fiscal 2022. The yield on advances decreased primarily due to re-pricing of existing floating rate loans, linked to the Bank’s Marginal Cost of funds based Lending Rate (MCLR) and the repo rate, to lower rates and incremental lending at lower rates. At March 31, 2022, of the total domestic loan book, 30% had fixed interest rates, 41% had interest rates linked to repo rate, 22% had interest rates linked to MCLR and other older benchmarks and 7% had interest rates linked to T-bills.

  The Bank’s 1-year MCLR decreased by 85 basis points in phases during fiscal 2021 and by an additional 5 basis points during fiscal 2022. RBI had reduced the repo rate by 40 basis points from 4.40% in March 2020 to 4.00% in May 2020. The full impact of decrease in MCLR and repo rate during fiscal 2021 is reflected in the yield on advances in fiscal 2022.

  The yield on overseas advances decreased by 98 basis points from 2.49% in fiscal 2021 to 1.51% in fiscal 2022 primarily due to a reduction in relatively higher yielding non-India linked loans and increase in low yielding trade finance loans.

  The overall yield on average advances decreased by 49 basis points from 8.76% in fiscal 2021 to 8.27% in fiscal 2022 primarily due to a decrease in yield on domestic advances, offset, in part, by an increase in the proportion of domestic advances in total advances.

• The yield on average interest-earning investments decreased by 27 basis points from 6.25% in fiscal 2021 to 5.98% in fiscal 2022. The yield on Indian government investments decreased by 10 basis points from 6.32% in fiscal 2021 to 6.22% in fiscal 2022. This was primarily due to investment in floating rate bonds at lower market yields.

  The yield on non-SLR investments decreased by 125 basis points from 5.97% in fiscal 2021 to 4.72% in fiscal 2022 primarily due to a decrease in average investment in pass through certificates which are relatively high yielding, a decrease in yield on bonds and debentures, pass through certificates and commercial paper and increase in investment in foreign government securities. The increase in investment in foreign government securities was primarily due to surplus Rupee liquidity deployed in foreign currency.

• The yield on other interest-earning assets increased by 18 basis points from 3.86% in fiscal 2021 to 4.04% in fiscal 2022. The increase was primarily due to higher swap premium income on account of surplus Rupee liquidity deployed in foreign currency due to prevailing high forward premia. The increase in yield on other interest-earning assets was, offset, in part, by an increase in average balance with RBI (cash reserve ratio) which does not earn any interest and a decrease in yield on Rural Infrastructure Development Fund (RIDF) and related deposits. During March 2020, RBI had reduced the CRR from 4.0% to 3.0% as a one-time measure to help banks tide over the disruption caused by Covid-19 pandemic. Subsequently, in February 2021, RBI increased the CRR to 3.5% for the first two months of fiscal 2022 and to 4.0% thereafter.

Interest on income tax refund decreased from ₹ 2.57 billion in fiscal 2021 to ₹ 2.43 billion in fiscal 2022. The receipt, amount and timing of such income depends on the nature and timing of determinations by tax authorities and are hence neither consistent nor predictable.

The cost of funds decreased by 54 basis points from 4.25% in fiscal 2021 to 3.71% in fiscal 2022 primarily due to the following factors:

• The cost of average deposits decreased from 4.12% in fiscal 2021 to 3.53% in fiscal 2022 primarily due to a decrease in cost of domestic term deposits and an increase in the proportion of average CASA deposits in total deposits. The cost of domestic term deposits reduced by 85 basis points from 5.42% in fiscal 2021 to 4.57% in fiscal 2022. The Bank reduced retail term deposit rates for select maturities in phases during fiscal 2021 and fiscal 2022.

  The cost of savings account deposits decreased marginally from 3.16% in fiscal 2021 to 3.15% in fiscal 2022. The average CASA deposits increased from 41.4% of total average deposits in fiscal 2021 to 44.5% of total average deposits in fiscal 2022. Average CASA deposits were 40.1% of the total funding (i.e., deposits and borrowings) for fiscal 2022 as compared to 35.5% for fiscal 2021.

• The cost of borrowings increased by 33 basis points from 5.04% in fiscal 2021 to 5.37% in fiscal 2022. The cost of domestic borrowings increased by 41 basis points from 5.97% in fiscal 2021 to 6.38% in fiscal 2022 primarily due to a decrease in proportion of lower cost call money and Liquidity Adjustment Facility (LAF) borrowings, offset, in part, by a decrease in cost of refinance borrowings and bond borrowings. The decrease in cost of refinance borrowings and bond borrowings was primarily due to maturity/repayment of higher costs borrowings and new borrowings at lower cost. The cost of overseas borrowings decreased by 73 basis points from 1.84% in fiscal 2021 to 1.11% in fiscal 2022 primarily due to maturity/repayment of bond borrowings which were relatively higher cost and decrease in cost of term borrowings.

The Bank’s interest income, yield on advances, net interest income and net interest margin are impacted by systemic liquidity, the competitive environment, level of additions to non-performing loans, regulatory developments, monetary policy and the economic and geopolitical factors. Interest rates on about 47.7% of Bank’s domestic loans are linked to external market benchmarks. Any differential movements in the external benchmark rates vis-à-vis cost of funds of the Bank may impact the Bank’s net interest income and net interest margin.

The following table sets forth, for the period indicated, the trend in average interest-earning assets and average interest-bearing liabilities:

1. Average investments and average borrowings include average short-term repurchase transactions.
2. All amounts have been rounded off to the nearest ₹ 10.0 million.

The average volume of interest-earning assets increased by 13.5% from ₹ 10,558.79 billion in fiscal 2021 to ₹ 11,979.51 billion in fiscal 2022 due to an increase in average advances by ₹ 1,173.08 billion, average other interest-earning assets by ₹ 149.84 billion and average investments by ₹ 97.81 billion.

Average advances increased by 17.9% from ₹ 6,543.26 billion in fiscal 2021 to ₹ 7,716.34 billion in fiscal 2022 due to an increase of 20.1% in average domestic advances, offset, in part, by a decrease of 11.0% in overseas average advances.

Average interest-earning investments increased by 3.7% from ₹ 2,646.70 billion in fiscal 2021 to ₹ 2,744.51 billion in fiscal 2022 primarily due to an increase in average investment in government securities, offset, in part, by a decrease in average investments in pass through certificates and bonds and debentures.

Average other interest-earning assets increased by 10.9% from ₹ 1,368.83 billion in fiscal 2021 to ₹ 1,518.66 billion in fiscal 2022 primarily due to an increase in balances with RBI and balance with other banks, offset, in part, by a decrease in LAF lending to RBI.

Average interest-bearing liabilities increased by 11.0% from ₹ 9,438.50 billion in fiscal 2021 to ₹ 10,478.20 billion in fiscal 2022 primarily due to an increase in average deposits by ₹ 1,358.98 billion, offset, in part, by a decrease in average borrowings by ₹ 319.29 billion.

Average deposits increased by 16.8% from ₹ 8,074.41 billion in fiscal 2021 to ₹ 9,433.39 billion in fiscal 2022 due to an increase in average term deposits and average CASA deposits.

Average borrowings decreased by 23.4% from ₹ 1,364.09 billion in fiscal 2021 to ₹ 1,044.80 billion in fiscal 2022 primarily due to a decrease in average call and term money borrowing, RBI borrowings and bond borrowings.

Fee income primarily includes fees from retail customers such as loan processing fees, fees from cards business, account servicing charge, income from foreign exchange transactions and third party referral fees. Fees from corporate clients includes loan processing fees, transaction banking fees, income from foreign exchange transactions and margin on derivative transactions.

Fee income increased by 23.9% from ₹ 126.59 billion in fiscal 2021 to ₹ 156.87 billion in fiscal 2022 primarily due to an increase in transaction banking fees, income from foreign exchange and derivatives products and lending linked fees. Fee income for fiscal 2021 was impacted due to lower borrowing and investment activity by customers and lower consumer spends caused by the nation-wide lockdown announced during April-May 2020 followed by gradual easing of lockdown measures.

Dividend from subsidiaries/joint ventures increased by 48.2% from ₹ 12.34 billion in fiscal 2021 to ₹ 18.29 billion in fiscal 2022.

The following table sets forth, for the periods indicated, the details of dividend received from subsidiaries/joint ventures:

1. 0.00 represents insignificant amount.
2. All amounts have been rounded off to the nearest ₹ 10.0 million.
3. In line with the Insurance Regulatory and Development Authority guideline asking insurers to conserve capital, ICICI General and ICICI Life did not pay any final dividend for fiscal 2020. As a result, there was a decrease in dividend income from insurance subsidiaries in fiscal 2021.

Other income

Other income increased from ₹ 0.30 billion in fiscal 2021 to ₹ 0.98 billion in fiscal 2022.

The following table sets forth, for the periods indicated, the principal components of operating expenses.

1. All amounts have been rounded off to the nearest ₹ 10.0 million.

Operating expenses primarily include employee expenses, depreciation on assets and other administrative expenses. Operating expenses increased by 24.0% from ₹ 215.61 billion in fiscal 2021 to ₹ 267.33 billion in fiscal 2022.

Payments to and provisions for employees

Employee expenses increased by 19.5% from ₹ 80.91 billion in fiscal 2021 to ₹ 96.73 billion in fiscal 2022 primarily due to an increase in salary cost and provision for performance bonus and performance-linked retention pay. Further, employee expenses in fiscal 2022 includes an impact of ₹ 2.64 billion due to accounting on fair value basis for employee stock options as per clarification issued by RBI during fiscal 2022. Salary cost increased primarily due to annual increments and promotions and an increase in average staff strength by 7.1% from 94,480 in fiscal 2021 to 101,233 in fiscal 2022 (number of employees at March 31, 2021: 98,750 and at March 31, 2022: 105,844).

The employee base includes sales executives, employees on fixed term contracts and interns.

Depreciation

Depreciation on owned property increased by 9.3% from ₹ 10.72 billion in fiscal 2021 to ₹ 11.71 billion in fiscal 2022 primarily due to higher capitalisation of IT systems and software which attract higher depreciation rates.

Other administrative expenses

Other administrative expenses primarily include rent, taxes and lighting, advertisements, sales promotion, repairs and maintenance, direct marketing expenses and other expenditure. Other administrative expenses increased by 28.2% from ₹ 123.98 billion in fiscal 2021 to ₹ 158.89 billion in fiscal 2022. During fiscal 2021, the other administrative expenses were lower due to impact on business activities caused by the nation-wide lockdown announced during April-May 2020 followed by gradual easing of lockdown measures.

Profit/(loss) on treasury-related activities (net)

Income from treasury-related activities includes income from sale of investments and unrealised profit/(loss) on account of revaluation of investments in the fixed income portfolio, equity and preference share portfolio, units of venture funds and security receipts issued by asset reconstruction companies.

Profit from treasury-related activities was ₹ 9.03 billion in fiscal 2022 as compared to ₹ 50.46 billion in fiscal 2021. During fiscal 2021, the Bank had sold 3.96% equity shareholding in ICICI General, 1.50% equity shareholding in ICICI Life, 4.21% equity shareholding in ICICI Securities and made a net gain of ₹ 36.70 billion.

The following tables set forth, for the periods indicated, the components of provisions and contingencies.

1. Includes restructuring related provision.
2. Includes write-back of Covid-19 related provision amounting to ₹ 10.50 billion for the year ended March 31, 2022 (March 31, 2021: provision made amounting to ₹ 47.50 billion).
3. Includes contingency provision amounting to ₹ 10.25 billion on a prudent basis for the year ended March 31, 2022.
4. All amounts have been rounded off to the nearest ₹ 10.0 million.

In the case of corporate loans and advances, provisions are made for sub-standard and doubtful assets at rates prescribed by RBI. Loss assets and the unsecured portion of doubtful assets are fully provided. For impaired loans and advances held in overseas branches, which are performing as per RBI guidelines, provisions are made as per the host country regulations. For loans and advances held in overseas branches, which are NPAs both as per the RBI guidelines and host country guidelines, provisions are made at the higher of the provisions required under RBI guidelines and host country regulations. Provisions on homogeneous non-performing retail loans and advances, subject to minimum provisioning requirements of RBI, are made on the basis of the ageing of the loan. The specific provisions on non-performing retail loans and advances held by the Bank are higher than the minimum regulatory requirements.

In respect of non-retail loans reported as fraud to RBI the entire amount, is provided for over a period not exceeding four quarters starting from the quarter in which fraud has been detected. In respect of non-retail loans where there has been delay in reporting the fraud to the RBI or which are classified as loss accounts, the entire amount is provided immediately. In case of fraud in retail accounts, the entire amount is provided immediately. In respect of borrowers classified as non-cooperative borrowers or willful defaulters, the Bank makes accelerated provisions as per RBI guidelines.

The Bank holds specific provisions against non-performing loans and advances and against certain performing loans and advances in accordance with RBI directions, including RBI direction for provision on accounts referred to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016.

The Bank makes provision on restructured loans subject to minimum requirements as per RBI guidelines. Provision due to diminution in the fair value of restructured/ rescheduled loans and advances is made in accordance with the applicable RBI guidelines.

The Bank makes additional provisions as per RBI guidelines for the cases where viable resolution plan has not been implemented within the timelines prescribed by the RBI, from the date of default. These additional provisions are written-back on satisfying the conditions for reversal as per RBI guidelines.

On prudent basis, the Bank has made Covid-19 related provision with regard to certain borrowers, including regarding those who had taken moratorium at any time during fiscal 2021 under the extant RBI guidelines. This provision is included as contingency provision in the books. The Bank also makes additional contingency provision with regard to certain standard assets. The contingency provision is included in ”Other Liabilities and Provisions”.

Provisions and contingencies (excluding provisions for tax) decreased from ₹ 162.14 billion in fiscal 2021 to ₹ 86.41 billion in fiscal 2022 primarily due to a decrease in provision on non-performing and other assets and Covid-19 related provision.

Provision for non-performing and other assets decreased from ₹ 107.49 billion in fiscal 2021 at ₹ 61.64 billion in fiscal 2022. During fiscal 2022, there were higher upgrades and recoveries from non-performing loans resulting in lower provisioning requirement, offset, in part, by provision made on loans restructured under Resolution Framework. and change in provisioning rate on certain non-performing loans to make it more conservative.

The provision coverage ratio (excluding cumulative technical/prudential write-offs) on NPA’s increased from 77.7% at March 31, 2021 to 79.2% at March 31, 2022.

Provision for investments increased from write-back of ₹ 1.58 billion in fiscal 2021 to provision amount of ₹ 3.77 billion in fiscal 2022.

Provision for standard assets increased from ₹ 2.79 billion in fiscal 2021 to ₹ 4.49 billion in fiscal 2022. The cumulative general provision held at March 31, 2022 was ₹ 40.94 billion (March 31, 2021: ₹ 36.34 billion).

Other provisions and contingencies decreased from ₹ 53.44 billion in fiscal 2021 to ₹ 16.51 billion in fiscal 2022. The Bank made net Covid-19 related provision of ₹ 47.50 billion in fiscal 2021 and held an aggregate Covid-19 related provision of ₹ 74.75 billion at March 31, 2021. During first quarter of fiscal 2022, the Bank wrote-back Covid-19 related provision of ₹ 10.50 billion. Further, during last three months of fiscal 2022, the Bank has made an additional contingency provision of ₹ 10.25 billion on a prudent basis. Accordingly, including the Covid-19 related contingency provision of ₹ 64.25 billion, the Bank holds a total contingency provision of ₹ 74.50 billion at March 31, 2022.

The income tax expense increased from ₹ 39.90 billion in fiscal 2021 to ₹ 72.70 billion in fiscal 2022. The effective tax rate increased from 19.8% in fiscal 2021 to 23.7% in fiscal 2022 primarily due to change in composition of income. Fiscal 2021 included a significant amount of capital gain on sale of stake in subsidiaries, which attracts lower income tax.

Assets

The following table sets forth, at the dates indicated, the principal components of assets.

1. Banks in India are required to maintain a specified percentage, currently 18.00% (at March 31, 2022), of their net demand and time liabilities by way of investments in instruments referred as SLR securities by RBI or liquid assets like cash and gold.
2. Deposits made in Rural Infrastructure Development Fund and other related deposits pursuant to shortfall in the amount required to be lent to certain specified sectors called priority sector as per RBI guidelines.
3. All amounts have been rounded off to the nearest ₹ 10.0 million.

Total assets of the Bank increased by 14.7% from ₹ 12,304.33 billion at March 31, 2021 to ₹ 14,112.98 billion at March 31, 2022, due to a 17.1% increase in advances, a 10.3% increase in investments and 26.1% increase in cash and cash equivalents.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and balances with RBI and other banks, including money at call and short notice. Cash and cash equivalents increased by 26.1% from ₹ 1,331.28 billion at March 31, 2021 to ₹ 1,678.22 billion at March 31, 2022 primarily due to an increase in LAF lending to RBI, balance with RBI to maintain cash reserve ratio and short term balances with US Federal Reserve, offset, in part, by a decrease in foreign currency term money lent. LAF lending to RBI increased from ₹ 352.19 billion at March 31, 2021 to ₹ 494.02 billion at March 31, 2022.

Investments

Total investments increased by 10.3% from ₹ 2,812.87 billion at March 31, 2021 to ₹ 3,102.41 billion at March 31, 2022. Investments in Indian government securities increased from ₹ 2,136.10 billion at March 31, 2021 to ₹ 2,563.78 billion at March 31, 2022. Other investments decreased from ₹ 676.77 billion at March 31, 2021 to ₹ 538.63 billion at March 31, 2022 primarily due to a decrease in investment in bonds and debentures, foreign government securities and pass through certificates, offset, in part, by an increase in investment in certificate of deposits.

At March 31, 2022, the Bank had an outstanding net investment of ₹ 8.07 billion in security receipts issued by asset reconstruction companies compared to ₹ 17.29 billion at March 31, 2021.

Advances

Net advances increased by 17.1% from ₹ 7,337.29 billion at March 31, 2021 to ₹ 8,590.20 billion at March 31, 2022 primarily due to an increase in retail advances.

Domestic advances increased by 17.5% from ₹ 6,961.39 billion at March 31, 2021 to ₹ 8,177.36 billion at March 31, 2022. Net retail advances increased by 19.7% from ₹ 3,797.35 billion at March 31, 2021 to ₹ 4,546.36 billion at March 31, 2022. Net advances of rural business increased by 6.5% from ₹ 721.58 billion at March 31, 2021 to ₹ 768.30 billion at March 31, 2022. The business banking portfolio increased by 43.2% from ₹ 373.27 billion at March 31, 2021 to ₹ 534.37 billion at March 31, 2022. SME advances increased by 33.6% from ₹ 302.84 billion at March 31, 2021 to ₹ 404.50 billion at March 31, 2022. The performing domestic corporate portfolio increased by 9.3% year-on-year.

Net advances of overseas branches increased by 9.8% from ₹ 375.90 billion at March 31, 2021 to ₹ 412.84 billion at March 31, 2022.

Fixed and other assets

Fixed assets (net block) increased by 5.6% from ₹ 88.78 billion at March 31, 2021 to ₹ 93.74 billion at March 31, 2022.

Other assets decreased by 11.7% from ₹ 734.11 billion at March 31, 2021 to ₹ 648.41 billion at March 31, 2022 primarily due to a decrease in RIDF and related deposits and receivable on account of foreign exchange and derivative transactions.

The following table sets forth, at the dates indicated, the principal components of liabilities (including capital and reserves).

1. All amounts have been rounded off to the nearest ₹ 10.0 million.

Total liabilities (including capital and reserves) increased by 14.7% from ₹ 12,304.33 billion at March 31, 2021 to ₹ 14,112.98 billion at March 31, 2022 due to a 14.2% increase in deposits, 17.0% increase in borrowings and 15.6% increase in net worth.

Deposits

Deposits increased by 14.2% from ₹ 9,325.22 billion at March 31, 2021 to ₹ 10,645.72 billion at March 31, 2022.

Term deposits increased by 9.0% from ₹ 5,008.99 billion at March 31, 2021 to ₹ 5,461.35 billion at March 31, 2022. Savings account deposits increased by 21.8% from ₹ 2,954.53 billion at March 31, 2021 to ₹ 3,599.57 billion at March 31, 2022 and current account deposits increased by 16.4% from ₹ 1,361.70 billion at March 31, 2021 to ₹ 1,584.80 billion at March 31, 2022. CASA deposits increased by 20.1% from
₹ 4,316.23 billion at March 31, 2021 to ₹ 5,184.37 billion at March 31, 2022.

The average current account deposits increased by 31.0% from ₹ 891.21 billion in fiscal 2021 to ₹ 1,167.28 billion in fiscal 2022. The average savings account deposits increased by 23.5% from ₹ 2,454.75 billion in fiscal 2021 to ₹ 3,031.58 billion in fiscal 2022. Average CASA deposits increased by 25.5% from ₹ 3,345.96 billion in fiscal 2021 to ₹ 4,198.86 billion in fiscal 2022. Average CASA deposits were 40.1% of the total funding (i.e., deposits and borrowings) for fiscal 2022 as compared to 35.5% for fiscal 2021.

Deposits of overseas branches increased by 28.5% from ₹ 76.34 billion at March 31, 2021 to ₹ 98.11 billion at March 31, 2022.

Total deposits at March 31, 2022 formed 90.8% of the funding (i.e., deposits and borrowings) as compared to 91.1% at March 31, 2021.

Borrowings

Borrowings increased by 17.0% from ₹ 916.31 billion at March 31, 2021 to ₹ 1,072.31 billion at March 31, 2022 primarily due to an increase in bond borrowings and foreign currency term money borrowings, offset, in part, by a decrease in subordinated debt and refinance borrowings. Net borrowings of overseas branches increased from ₹ 299.43 billion at March 31, 2021 to ₹ 319.21 billion at March 31, 2022.

Other liabilities

Other liabilities increased by 17.4% from ₹ 587.71 billion at March 31, 2021 to ₹ 689.83 billion at March 31, 2022 primarily due to an increase in security deposits and mark-to-market amount on forex and derivative transactions.

Equity share capital and reserves

Equity share capital and reserves increased from ₹ 1,475.09 billion at March 31, 2021 to ₹ 1,705.12 billion at March 31, 2022 primarily due to accretion to reserves out of retained profit.

The following table sets forth, for the periods indicated, the principal components of contingent liabilities.

1. All amounts have been rounded off to the nearest ₹ 10.0 million.

The Bank enters into foreign exchange contracts in its normal course of business, to exchange currencies at a prefixed price at a future date. This item represents the notional principal amount of such contracts, which are derivative instruments. With respect to the transactions entered into with its customers, the Bank generally enters into off-setting transactions in the inter-bank market. This results in generation of a higher number of outstanding transactions, and hence a large value of gross notional principal of the portfolio, while the net market risk is lower. The notional principal amount of outstanding forward exchange contracts increased from ₹ 8,152.79 billion at March 31, 2021 to
₹ 10,645.24 billion at March 31, 2022 primarily due to increase in trading and market making activities in forwards to facilitate client flow and capture opportunities in the forward market.

The Bank is an active market participant in the interest rate and foreign exchange derivative market for trading and market making purposes, which are carried out primarily for customer transactions and managing the proprietary position on interest rate and foreign exchange risk. The notional amount of interest rate swaps and currency options increased from ₹ 16,428.13 billion at March 31, 2021 to ₹ 25,912.44 billion at March 31, 2022 primarily due to an increase in outstanding position of overnight index swaps. These transactions are done for trading and market-making purposes with a view to manage the interest rate risk.

Claims against the Bank, not acknowledged as debts, represent demands made in certain tax and legal matters against the Bank in the normal course of business and customer claims arising in fraud cases. In accordance with the Bank’s accounting policy and Accounting Standard 29, the Bank has reviewed and classified these items as possible obligations based on legal opinion/ judicial precedents/assessment by the Bank. No provision in excess of provisions already made in the financial statements is considered necessary.

The Bank has issued guarantees to support regular business activities of clients. These generally represent irrevocable assurances that the Bank will make payments in the event that the customer fails to fulfill its financial or performance obligations. Financial guarantees are obligations to pay a third party beneficiary where a customer fails to make payment towards a specified financial obligation, including advance payment guarantee. Performance guarantees are obligations to pay a third party beneficiary where a customer fails to perform a non-financial contractual obligation. The guarantees are generally issued for a period not exceeding 10 years. The credit risks associated with these products, as well as the operating risks, are similar to those relating to other types of financial instruments. Cash margins available to reimburse losses realised under guarantees amounted to ₹ 219.62 billion at March 31, 2022 as compared to ₹ 171.60 billion at March 31, 2021. Other property or security may also be available to the Bank to cover potential losses under guarantees.

Guarantees given on behalf of constituents increased by 4.3% from ₹ 995.02 billion at March 31, 2021 to ₹ 1,037.75 billion at March 31, 2022. Acceptances, endorsements and other obligations increased by 42.7% from ₹ 324.24 billion at March 31, 2021 to ₹ 462.81 billion at March 31, 2022.

The Bank is obligated under a number of capital contracts for purchase of fixed assets. Capital contracts are job orders of a capital nature, which have been committed. Estimated amounts of contracts remaining to be executed on capital account aggregated to ₹ 10.30 billion at March 31, 2022 as compared to ₹ 8.60 billion at March 31, 2021.

The Bank actively manages its capital to meet regulatory norms, current and future business needs and the risks in its businesses. The capital management framework of the Bank is administered by the Finance Group and the Risk Management Group under the supervision of the Board and the Risk Committee. The capital adequacy position and assessment is reported to the Board and the Risk Committee periodically.

Regulatory capital

The Bank is subject to the Basel III guidelines issued by RBI, effective from April 1, 2013, which was to be implemented in a phased manner by March 31, 2019 as per the transitional arrangement provided by Reserve Bank of India. On January 10, 2019, Reserve Bank of India had extended the transition period for implementing the last tranche of 0.625% under Capital Conservation Buffer to March 31, 2020 and thereafter further extended to October 1, 2021.

At March 31, 2022, the Bank was required to maintain a minimum Common Equity Tier-1 (CET1) capital ratio of 8.20%, minimum Tier-1 capital ratio of 9.70% and minimum total capital ratio of 11.70%. The minimum total capital requirement includes a capital conservation buffer of 2.50% and capital surcharge of 0.20% on account of the Bank being designated as a Domestic Systemically Important Bank (D-SIB). Under Pillar 1 of the RBI guidelines on Basel III, the Bank follows the standardised approach for measurement of credit risk, standardised duration method for measurement of market risk and basic indicator approach for measurement of operational risk.

The following table sets forth, for the periods indicated, the capital adequacy ratios computed in accordance with Basel III guidelines of RBI:

1. Including retained earnings and post proposed mandatory appropriations and with appropriation of proposed dividend.
2. All amounts have been rounded off to the nearest ₹ 10.0 million.

At March 31, 2022, the Bank’s Tier-1 capital adequacy ratio was 18.35% as against the requirement of 9.70% and total capital adequacy ratio was 19.16% as against the requirement of 11.70%.

Movement in the capital funds and risk weighted assets from March 31, 2021 to March 31, 2022 as per Basel III norms

Capital funds (net of deductions) increased by ₹ 191.66 billion from ₹ 1,501.47 billion at March 31, 2021 to ₹ 1,693.13 billion at March 31, 2022 primarily due to increase in retained earnings and repatriation of capital from ICICI Bank UK and ICICI Bank Canada off-set, in part, by exercise of call options of Tier-1 bonds and expiry of grandfathering period of Basel II Tier-2 bonds.

Credit risk RWA increased by ₹ 890.07 billion from ₹ 6,467.36 billion at March 31, 2021 to ₹ 7,357.43 billion at March 31, 2022 primarily due to an increase of ₹ 940.40 billion in RWA for on-balance sheet assets, offset, in part, by a decrease of ₹ 50.33 billion in RWA for off-balance sheet assets. On-balance sheet RWA increased primarily due to growth in advances during the year and off-balance sheet RWA decreased primarily due to decrease in non-fund book.

Market risk RWA decreased by ₹ 39.32 billion from ₹ 589.68 billion at March 31, 2021 to ₹ 550.36 billion at March 31, 2022 primarily due to decrease in the fixed income portfolio.

Operational risk RWA increased by ₹ 131.12 billion from ₹ 797.00 billion at March 31, 2021 to ₹ 928.12 billion at March 31, 2022. The operational risk capital charge is computed based on 15% of the average of the previous three financial years’ gross income and is revised on an annual basis at June 30. RWA is arrived at by multiplying the capital charge by 12.5.

Internal assessment of capital

The capital management framework of the Bank includes a comprehensive internal capital adequacy assessment process conducted annually, which determines the adequate level of capitalisation necessary to meet regulatory norms and current and future business needs. Adequate stress testing, as determined by several stress scenarios is also done. The internal capital adequacy assessment process is undertaken at both the standalone bank level and the consolidated group level. The internal capital adequacy assessment process encompasses capital planning for a four-year time horizon, assessment of material risks and the relationship between risk and capital.

The capital management framework is complemented by the risk management framework, which covers the policies, processes, methodologies and frameworks established for the management of material risks. Stress testing, which is a key aspect of the internal capital adequacy assessment process and the risk management framework, provides an insight into the impact of extreme but plausible scenarios on the Bank’s risk profile and capital position. Based on the stress testing framework approved by the Board, the Bank conducts stress tests on various portfolios and assesses the impact on the capital ratios and the adequacy of capital buffers for current and future periods. The Bank periodically assesses and refines its stress testing framework in an effort to ensure that the stress scenarios capture material risks as well as reflect possible extreme market moves that could arise as a result of market conditions and the operating environment. The business and capital plans and the stress testing results of certain key group entities are integrated into the internal capital adequacy assessment process.

Based on the internal capital adequacy assessment process, the Bank determines the level of capital that needs to be maintained by considering the following in an integrated manner:

• strategic focus, business plan and growth objectives;
• regulatory capital requirements as per RBI guidelines;
• assessment of material risks and impact of stress testing;
• perception of shareholders and investors;
• future strategy with regard to investments or divestments in subsidiaries; and
• evaluation of options to raise capital from domestic and overseas markets, as permitted by RBI from time to time;
• assessment of going concern.

The Bank continues to monitor relevant developments and believes that its current robust capital adequacy position and demonstrated track record of access to domestic and overseas markets for capital raising will enable it to maintain the necessary levels of capital as required by regulations while continuing to grow its business.

The Bank follows a policy of portfolio diversification and evaluates its total financing exposure to a particular industry in the light of its forecasts of growth and profitability for that industry. The Bank’s Credit Risk Management Group monitors all major sectors of the economy and specifically tracks industries in which the Bank has credit exposures. The Bank monitors developments in various sectors to assess potential risks in its portfolio and new business opportunities. The Bank’s policy is to limit its portfolio to any particular industry (other than retail loans) to 15.0% of its total exposure. In addition, the Bank has a framework for managing concentration risk with respect to single borrower and group exposures, based on the internal rating and track record of the borrowers. The exposure limits for lower rated borrowers and groups are substantially lower than the regulatory limits.

The following tables set forth, at the dates indicated, the composition of the Bank’s exposure.

1. Includes home loans, automobile loans, commercial business loans, dealer financing, personal loans, credit cards and loans against securities
2. Other industries primarily include developer financing portfolio, gems and jewelry, mining, cement, food & beverages, textile, shipping, drugs and pharmaceuticals, asset reconstruction company, venture capital funds and FMCG.
3. All amounts have been rounded off to the nearest ₹ 10.0 million

The exposure to the top 20 non-bank borrowers as a percentage of total exposure decreased from 12.1% of total exposure of the Bank at March 31, 2021 to 9.6% at March 31, 2022. All top 20 borrowers as of March 31, 2022 are rated A- and above internally. The exposure to the top 10 borrower groups decreased from 11.6% of total exposure of the Bank at March 31, 2021 to 10.3% at March 31, 2022.

The following table sets forth, at the dates indicated, the composition of the Bank’s outstanding net advances:

The Bank’s capital allocation framework is focused on growth in granular retail and rural lending and lending to the corporate sector with a focus on increase in lending to higher rated corporates. Net retail advances increased by 19.7% in fiscal 2022 compared to an increase of 17.1% in total advances. The share of net retail advances increased from 51.8% of net advances at March 31, 2021 to 52.9% of net advances at March 31, 2022. Including the non-fund based outstanding, the proportion of retail in the portfolio was 43.8% at March 31, 2022.

The overseas loan portfolio in US dollar terms grew by 5.9% year-on-year at March 31, 2022. The year-on-year increase in the overseas loan portfolio was primarily due to increase in the India-linked trade finance book. The overseas loan portfolio was 4.8% of the overall loan book at March 31, 2022. The corporate fund and non-fund outstanding, net of cash/bank/financial institutions/insurance backed lending, was USD 3.65 billion at March 31, 2022. Out of USD 3.65 billion, 82.4% of the outstanding was to Indian corporates and their subsidiaries and joint ventures and 9.5% of the outstanding was to non-India companies with Indian or India-linked operations and activities. The portfolio in this segment is well rated and the Indian operations of these companies are target customers for the Bank’s deposit and transaction banking franchise. The Bank would continue to pursue risk-calibrated opportunities in this segment.

Out of USD 3.65 billion, about 4.2% was to companies owned by NRIs/ PIOs and 3.9% of the outstanding was to other non-India companies which is less than 1.0% of the total portfolio of the Bank. The non-India linked corporate portfolio reduced by 48.2% from about USD 1.24 billion year-on-year to USD 641 million at March 31, 2022.

The following table sets forth, at the dates indicated, the composition of the Bank’s net outstanding retail advances.

1. Includes loans against securities and dealer financing
2. All amounts have been rounded off to the nearest ₹ 10.0 million.

The following table sets forth, at the dates indicated, the composition of the Bank’s net outstanding rural advances:

1. Based on internal ratings.
2. Includes net non-performing loans.
3. Includes business banking, SME, domestic, corporate and overseas loans.

RBI requires banks to lend to certain sectors of the economy. Such directed lending comprises priority sector lending and export credit.

Priority Sector Lending and Investment

The RBI guidelines on priority sector lending require banks to lend 40.0% of their adjusted net bank credit (ANBC), to fund certain types of activities carried out by specified borrowers. The definition of ANBC includes bank credit in India adjusted by bills rediscounted with RBI and other approved financial institutions and certain investments including Priority Sector Lending Certificates (PSLCs) and investments in Rural Infrastructure Development Fund and other specified funds on account of priority sector shortfall and is computed with reference to the outstanding amount at corresponding date of the preceding year as prescribed by the RBI guidelines titled ‘Master Direction – Priority Sector Lending – Targets and Classification’. Further, the RBI allows exclusion from ANBC for funds raised by the Bank through issue of long-term bonds for financing infrastructure and affordable housing, subject to certain limits.

As prescribed by RBI’s Master Direction on ‘Priority Sector Lending - Targets and Classification’ dated September 4, 2020, the priority sectors include categories such as agriculture, micro, small and medium enterprises, education, housing, social infrastructure, renewable energy, export credit and others. Out of the overall target of 40.0%, banks are required to lend a minimum of 18.0% of their ANBC to the agriculture sector. From fiscal 2022 sub-targets for lending to small and marginal farmers and weaker sections are revised and will be further increased in phased manner till fiscal 2024. For fiscal 2022, revised sub-targets of 9.0% (8.0% till fiscal 2021) for lending to small and marginal farmers (out of agriculture) and 11.0% (10.0% till fiscal 2021) for lending to weaker section would be applicable. The banks are also required to lend 7.5% of their ANBC to micro-enterprises applicable from fiscal 2016. RBI has directed banks to maintain overall lending to non-corporate farmers at the system-wide average of the last three years achievement, RBI would notify the banks, the applicable target for lending to the non-corporate farmers at the beginning of each year. RBI notified a target level of 12.73% of ANBC for this purpose for fiscal 2022. Priority sector lending achievement is evaluated on a quarterly average basis from fiscal 2017. From fiscal 2022, the priority sector achievements of the Banks will be computed based on the weightage assigned to the incremental priority sector credit in the identified districts. The necessary adjustments for weightage of districts and calculation of achievement would be done by RBI on the basis data submitted by Banks on quarterly basis.

The Bank is required to comply with the priority sector lending requirements prescribed by RBI from time to time. The shortfall in the amount required to be lent to the priority sectors and weaker sections may be required to be deposited in funds with government sponsored Indian development banks like the National Bank for Agriculture and Rural Development, the Small Industries Development Bank of India, the National Housing Bank, Micro Units Development and Refinance Agency Limited (MUDRA) and other financial institutions as decided by the RBI from time to time. These deposits have a maturity of up to seven years and carry interest rates lower than market rates. At March 31, 2022, the Bank’s total investment in such funds was ₹ 264.19 billion, which was fully eligible for consideration in overall priority sector lending achievement.

As prescribed in the RBI guideline, the Bank’s priority sector lending achievement is computed on a quarterly average basis. Total average priority sector lending for fiscal 2022 was ₹ 2,845.40 billion (fiscal 2021: ₹ 2,448.37 billion) constituting 41.3% (fiscal 2021: 40.9%) of ANBC, against the requirement of 40.0% of ANBC. The average lending to the agriculture sector was ₹ 1,226.50 billion (fiscal 2021: ₹ 1,019.54 billion) constituting 17.8% (fiscal 2021: 17.0%) of ANBC against the requirement of 18.0% of ANBC. The average advances to weaker sections were ₹ 762.02 billion (fiscal 2021: ₹ 641.59 billion) constituting 11.1% (fiscal 2021: 10.7%) of ANBC against the requirement of 11.0% of ANBC (fiscal 2021: 10.0%). Average lending to small and marginal farmers was ₹ 636.37 billion (fiscal 2021: ₹ 514.25 billion) constituting 9.2% (fiscal 2021: 8.6%) of ANBC against the requirement of 9.0% of ANBC. The average lending to micro enterprises was ₹ 550.66 billion (fiscal 2021: ₹ 448.46 billion) constituting 8.0% (fiscal 2021: 7.5%) of ANBC against the requirement of 7.5% of ANBC. The average lending to non-corporate farmers was ₹ 873.81 billion (fiscal 2021: ₹ 731.61 billion) constituting 12.7% (fiscal 2021: 12.2%) of ANBC against the requirement of 12.7% of ANBC (fiscal 2021: 12.1%). The above includes the impact of PSLCs purchased/sold during fiscal 2022 by the Bank.

The Bank classify its assets as performing and non-performing in accordance with the RBI guidelines. Under the RBI guidelines, an asset is generally classified as non-performing if any amount of interest or principal remains overdue for more than 90 days, in respect of term loans. In respect of overdraft or cash credit, an asset is classified as non-performing if the account remains out of order; and in respect of bills, if the account remains overdue for more than 90 days. An account is treated as ‘out of order’ if the outstanding balance remains continuously in excess of the sanctioned limit/drawing power for 90 days or where there are no credits continuously for 90 days or credits are not enough to cover the interest debited during previous 90 days period.

The RBI guidelines also require an asset to be classified as non-performing based on certain other criteria like restructuring of a loan, inability of a borrower to complete a project funded by us within stipulated timelines and certain other non-financial parameters. In respect of borrowers where loans and advances made by overseas branches are identified as impaired as per host country regulations for reasons other than record of recovery, but which are standard as per the RBI guidelines, the amount outstanding in the host country is classified as non-performing.

The RBI has separate guidelines for classification of loans for projects under implementation which are based on the date of commencement of commercial production and date of completion of the project as originally envisaged at the time of financial closure. For infrastructure projects, a loan is classified as non-performing if it fails to commence commercial operations within two years from the documented date of commencement and for non-infrastructure projects, the loan is classified as non-performing if it fails to commence operations within 12 months from the documented date of such commencement.

The RBI also has separate guidelines for restructured loans. Loans restructured after April 1, 2015 (excluding loans given for implementation of projects in the infrastructure sector and non-infrastructure sector and which are delayed up to a specified period) by re-scheduling of principal repayments and/or the interest element are classified as non-performing. For such loans, the diminution in the fair value of the loan, if any, measured in present value terms, has to be provided for in addition to the provisions applicable to non-performing loans. RBI has issued guidelines for restructuring of loans to micro and small enterprises borrowers while continuing asset classification as standard, subject to specified conditions. Further, RBI through its guideline on ‘Resolution Framework for COVID-19-related Stress’ dated August 6, 2020, has provided a prudential framework to implement a resolution plan in respect of eligible corporate borrowers and personal loans, while classifying such exposures as standard, subject to specified conditions.

In accordance with the RBI circular dated April 17, 2020, the moratorium granted to certain borrowers is excluded from the determination of number of days past-due/out-of-order status for the purpose of asset classification. The moratorium granted to the borrowers is not accounted as restructuring of loan.

The following table sets forth, at the dates indicated, information regarding asset classification of the Bank’s gross non-performing assets (net of write-offs, interest suspense and derivative income reversals).

1. Include advances, lease receivables and credit substitutes like debentures and bonds. Excludes preference shares.
2. All amounts have been rounded off to the nearest ₹ 10.0 million.

The following table sets forth, at the dates indicated, information regarding the Bank’s non-performing assets (NPAs).

1. Net of write-offs, interest suspense and derivatives income reversal.
2. Include advances, lease receivables and credit substitutes like debentures and bonds. Excludes preference shares.
3. All amounts have been rounded off to the nearest ₹ 10.0 million.

The following table sets forth, for the periods indicated, the composition of gross non-performing assets (net of write-offs) by industry sector.

1. Includes home loans, automobile loans, commercial business loans, dealer financing, personal loans, credit cards and loans against securities.
2. Other industries primarily include textile, metal and metal products, manufacturing products, services-finance, cement, gems and jewelry, drugs and pharmaceuticals, FMCG, automobiles and developer financing.
3. All amounts have been rounded off to the nearest ₹ 10.0 million.

In fiscal 2021, the Indian economy was impacted by Covid-19 pandemic with contraction in industrial and services output across small and large businesses. The nation-wide lock down in April-May 2020 substantially impacted economic activity. The easing of lock-down measures subsequently led to a gradual improvement in economic activity and progress towards normalcy. For the banking sector, these developments resulted in regulatory measures like moratorium on payment of dues and standstill in asset classification to mitigate the economic consequences on borrowers. There was an increase in additions to NPAs in fiscal 2021. The impact of Covid-19 pandemic continues as a second wave since the latter part of March 2021, has resulted in re-imposition of localised/regional lock-down measures in various parts of the country. A prolonged period of economic weakness caused by the second wave of the pandemic and uncertainty regarding normalization could continue to impact banking sector and result in higher addition to NPAs.

The gross additions to NPAs were ₹ 161.23 billion in fiscal 2021 and increased to ₹ 192.91 billion in fiscal 2022. In fiscal 2022, the Bank recovered/upgraded non-performing assets amounting to ₹ 163.63 billion, wrote-off non-performing assets amounting to ₹ 99.46 billion and sold non-performing assets amounting to ₹ 4.35 billion. As a result, gross NPAs (net of write-offs) of the Bank decreased from ₹ 413.73 billion at March 31, 2021 to ₹ 339.20 billion at March 31, 2022.

Net NPAs decreased from ₹ 91.80 billion at March 31, 2021 to ₹ 69.61 billion at March 31, 2022. The ratio of net NPAs to net customer assets decreased from 1.14% at March 31, 2021 to 0.76% at March 31, 2022.

At March 31, 2022, gross non-performing loans in the retail portfolio were 1.76% of gross retail loans compared to 3.09% at March 31, 2021 and net non-performing loans in the retail portfolio were 0.74% of net retail loans compared to 1.33% at March 31, 2021. The provision coverage ratio at March 31, 2022 was 79.2% as compared to 77.7% at March 31, 2021.

The total non-fund based outstanding to borrowers classified as non-performing was ₹ 36.40 billion at March 31, 2022 (March 31, 2021: ₹ 44.05 billion). The Bank held a provision of ₹ 20.51 billion at March 31, 2022 (March 31, 2021: ₹ 14.92 billion) against these non-fund based outstanding.

The gross outstanding loans to borrowers whose facilities have been restructured increased from ₹ 32.69 billion at March 31, 2021 to ₹ 82.67 billion at March 31, 2022. The net outstanding loans to borrowers whose facilities have been restructured increased from ₹ 31.79 billion at March 31, 2021 to ₹ 79.84 billion at March 31, 2022. Additionally, Bank holds provision of ₹ 22.60 billion on restructured accounts. The aggregate non-fund based outstanding to borrowers whose loans were restructured was ₹ 5.65 billion at March 31, 2022 (March 31, 2021: ₹ 4.38 billion).

At March 31, 2022, the outstanding loans and non-fund facilities to borrowers in the corporate and small and medium enterprises portfolio rated BB and below were ₹ 108.08 billion which includes the outstanding loans and non-funded facilities under resolution amounting to ₹ 23.89 billion.

RBI in its guidelines on “segmental reporting” has stipulated specified business segments and their definitions, for the purposes of public disclosures on business information for banks in India.

The standalone segmental report for fiscal 2022, based on the segments identified and defined by RBI, has been presented as follows:

• Retail Banking includes exposures of the Bank, which satisfy the four qualifying criteria of ‘regulatory retail portfolio’ as stipulated by RBI guidelines on the Basel III framework.
• Wholesale Banking includes all advances to trusts, partnership firms, companies and statutory bodies, by the Bank which are not included in the Retail Banking segment, as per RBI guidelines for the Bank.
• Treasury includes the entire investment portfolio of the Bank.
• Other Banking includes leasing operations and other items not attributable to any particular business segment of the Bank.
• Unallocated includes items such as income tax paid in advance net of provision for tax, deferred tax and provisions to the extent reckoned at entity level.

Framework for transfer pricing

All liabilities are transfer priced to a central treasury unit, which pools all funds and lends to the business units at appropriate rates based on the relevant maturity of assets being funded after adjusting for regulatory reserve requirement and directed lending requirements.

Retail banking segment

The profit before tax of the segment increased by 47.3% from ₹ 77.40 billion in fiscal 2021 to ₹ 114.00 billion in fiscal 2022 primarily due to an increase in non-interest income and net interest income and reduction in provisions, offset, in part, by an increase in operating expenditure.

Net interest income increased by 16.0% from ₹ 223.46 billion in fiscal 2021 to ₹ 259.12 billion in fiscal 2022 primarily due to growth in the average loan portfolio.

Non-interest income increased by 23.5% from ₹ 84.44 billion in fiscal 2021 to ₹ 104.30 billion in fiscal 2022 primarily due to an increase in fees from the credit card portfolio and transaction banking fees. Fee income for fiscal 2021 had been significantly impacted due to lower borrowing and investment activity by customers and lower consumer spends because of the pandemic.

Non-interest expenses increased by 21.0% from ₹ 160.85 billion in fiscal 2021 to ₹ 194.66 billion in fiscal 2022 primarily due to an increase in employee expenses, technology related expenses, direct marketing agency expenses and advertisement and sales promotion expenses.

The provisions (net of write-back) decreased from ₹ 69.65 billion in fiscal 2021 to ₹ 54.74 billion in fiscal 2022 primarily due to higher upgrades from non-performing loans resulting in lower provisioning requirement, offset, in part, by provision made on loans restructured under the Resolution Framework.

Wholesale banking segment

The profit before tax of the segment increased from ₹ 58.20 billion in fiscal 2021 to ₹ 90.53 billion in fiscal 2022 primarily due to a decrease in provisions and an increase in net interest income and non-interest income, offset, in part, by an increase in operating expenditures.

Net interest income increased by 14.0% from ₹ 110.69 billion in fiscal 2021 to ₹ 126.16 billion in fiscal 2022 primarily due to a growth in average loan portfolio.

Non-interest income increased by 32.2% from ₹ 36.00 billion in fiscal 2021 to ₹ 47.58 billion in fiscal 2022 primarily due to an increase in income from lending linked fees, commercial banking fees and foreign exchange and derivatives products.

Non-interest expenses increased by 27.3% from ₹ 43.50 billion in fiscal 2021 to ₹ 55.36 billion in fiscal 2022 primarily due to an increase in employee expenses and technology related expenses.

Provisions decreased by 38.1% from ₹ 44.99 billion in fiscal 2021 to ₹ 27.86 billion in fiscal 2022. This decline was primarily due to higher upgrades and recoveries.

Treasury segment

The profit before tax of the segment decreased from ₹ 110.80 billion in fiscal 2021 to ₹ 98.20 billion in fiscal 2022 primarily due to a decrease in non-interest income, offset, in part, by an increase in net interest income.

Non-interest income decreased from ₹ 68.48 billion in fiscal 2021 to ₹ 32.46 billion in fiscal 2022. In fiscal 2021, the Bank made a gain of
₹ 36.70 billion on sale of equity shares of ICICI General, ICICI Life and ICICI Securities. There was a gain on government securities and other fixed income positions of ₹ 1.65 billion in fiscal 2022 as compared to ₹ 14.58 billion in fiscal 2021. In fiscal 2021, the gain was higher primarily due to a decrease in yield on government securities resulting in higher opportunities for gains.

Non-interest expenses increased by 55.8% from ₹ 9.86 billion in fiscal 2021 to ₹ 15.36 billion in fiscal 2022 primarily due to an increase in premium paid towards purchase of priority sector lending certificates.

There was a provision of ₹ 3.79 billion in fiscal 2022 as compared to a write-back of ₹ 1.48 billion in fiscal 2021.

Other banking segment

Profit before tax of the other banking segment increased from ₹ 2.93 billion in fiscal 2021 to ₹ 3.11 billion in fiscal 2022 primarily due to a decrease in provisions.

Unallocated

In fiscal 2022, the Bank wrote-back Covid-19 related provision amounting to ₹ 10.50 billion (made Covid-19 provision of ₹ 47.50 billion in fiscal 2021) and has made additional contingency provision, on a prudent basis, of ₹ 10.25 billion on loan portfolio. The contingency provision including Covid-19 related provision was not allocated to any segment and included in unallocated.

The consolidated profit after tax increased from ₹ 183.84 billion in fiscal 2021 to ₹ 251.10 billion in fiscal 2022 primarily due to an increase in the profit of ICICI Bank, ICICI Securities, ICICI Prudential Asset Management Company and ICICI Bank Canada, offset, in part, by decrease in profit of ICICI Life, ICICI Securities Primary Dealership and ICICI General.

The consolidated assets of the Bank and its subsidiaries and other consolidating entities increased from ₹ 15,738.12 billion at March 31, 2021 to ₹ 17,526.37 billion at March 31, 2022. Consolidated advances increased from ₹ 7,918.01 billion at March 31, 2021 to ₹ 9,203.08 billion at March 31, 2022.

In accordance with the Scheme of Arrangement (Scheme) between ICICI Lombard General Insurance Company Limited (ICICI General) and Bharti AXA General Insurance Company Limited (Bharti AXA), as approved by Insurance Regulatory and Development Authority of India (IRDAI) on September 3, 2021, assets and liabilities of Bharti AXA’s general insurance business vested with ICICI General on the Appointed Date of April 1, 2020. Subsequent to issuance of equity shares to Bharti AXA shareholders, the Bank’s shareholding in ICICI General reduced to below 50.0%. Accordingly, the Bank has accounted its investment in ICICI General as an associate under Accounting Standard – 23 – “Accounting for Investments in Associates in Consolidated Financial Statements” from April 1, 2021.

At March 31, 2022, the Bank’s consolidated Tier-1 capital adequacy ratio was 18.02% as against the requirement of 9.70% and consolidated total capital adequacy ratio was 18.87% as against the requirement of 11.70%.

As per Indian GAAP, the profit after tax of ICICI Prudential AMC increased from ₹ 11.79 billion in fiscal 2021 to ₹ 14.36 billion in fiscal 2022 primarily due to an increase in fee income, offset, in part, by an increase in operating expenses.

As per Indian GAAP, the consolidated profit after tax of ICICI Securities increased from ₹ 10.94 billion in fiscal 2021 to ₹ 13.98 billion in fiscal 2022 primarily due to an increase in fee income and net interest income, offset, in part, by an increase in operating expenses

The Gross Domestic Premium Income of ICICI General increased by 28.4% year-on-year from ₹ 140.03 billion in fiscal 2021 to ₹ 179.77 billion in fiscal 2022. The profit after tax decreased from ₹ 14.73 billion in fiscal 2021 to ₹ 12.71 billion in fiscal 2022.

The Annualised Premium Equivalent of ICICI Life increased by 19.7% from ₹ 64.62 billion for fiscal 2021 to ₹ 77.33 billion for fiscal 2022. The Value of New Business (VNB) increased by 33.4% from ₹ 16.21 billion for fiscal 2021 to ₹ 21.63 billion for fiscal 2022. The VNB margin increased from 25.1% for fiscal 2021 to 28.0% in fiscal 2022. The total premium earned increased by 4.8% from ₹ 357.33 billion in fiscal 2021 to ₹ 374.58 billion in fiscal 2022. The total assets under management increased from ₹ 2,142.18 billion at March 31, 2021 to ₹ 2,404.92 billion at March 31, 2022.

Net premium earned increased by 3.9% from ₹ 349.73 billion in fiscal 2021 to ₹ 363.21 billion in fiscal 2022. The profit after tax decreased from ₹ 9.60 billion in fiscal 2021 to ₹ 7.54 billion in fiscal 2022 primarily due to higher claims incurred including Covid-19 related claims

As per Indian GAAP, the profit after tax of I-Sec PD decreased from ₹ 6.47 billion in fiscal 2021 to ₹ 3.30 billion in fiscal 2022 primarily due to lower trading gains.

The core operating profit of ICICI Bank Canada increased from CAD 21.3 million in fiscal 2021 to CAD 26.2 million in fiscal 2022 primarily due to a decrease in operating expenses and increase in fee income. The profit after tax of ICICI Bank Canada increased from CAD 20.0 million
(₹ 1.13 billion) in fiscal 2021 to CAD 29.2 million (₹ 1.74 billion) in fiscal 2022 primarily due to an increase in core operating profit.

The total assets decreased from CAD 5.96 billion at March 31, 2021 to CAD 5.74 billion at March 31, 2022. Loans and advances decreased from CAD 5.08 billion at March 31, 2021 to CAD 4.98 billion at March 31, 2022. The net impairment ratio decreased from 0.02% at March 31, 2021 to 0.01% at March 31, 2022. ICICI Bank Canada had a total capital adequacy ratio of 17.2% at March 31, 2022 as compared to 24.1% at March 31, 2021. During fiscal 2022, ICICI Bank Canada had repatriated equity share capital of CAD 220.0 million to the Bank.

As per Indian GAAP, profit after tax increased from ₹ 0.81 billion in fiscal 2021 to ₹ 0.93 billion in fiscal 2022 primarily due to an increase in core operating profit, offset, in part, by an increase in provisions. The core operating profit increased primarily due to an increase in net interest income and fee income, offset, in part, by an increase in operating expenses.

Net NPAs decreased from ₹ 5.59 billion at March 31, 2021 to ₹ 5.16 billion at March 31, 2022.

The core operating profit of ICICI Bank UK decreased from USD 21.8 million in fiscal 2021 to USD 11.7 million in fiscal 2022 primarily due to a decrease in net interest income and increase in operating expenses, offset, in part, by an increase in other income. Profit after tax of ICICI Bank UK decreased from USD 14.8 million (₹ 1.10 billion) in fiscal 2021 to USD 10.9 million (₹ 0.81 billion) in fiscal 2022 primarily due to lower core operating profit, offset, in part, by a decrease in impairment provisions.

Total assets decreased from USD 2.96 billion at March 31, 2021 to USD 2.24 billion at March 31, 2022. Net advances decreased from USD 1.57 billion at March 31, 2021 to USD 1.32 billion at March 31, 2022. The net impairment ratio decreased from 2.2% at March 31, 2021 to 2.0% at March 31, 2022. ICICI Bank UK had a total capital adequacy ratio of 23.0% at March 31, 2022 compared to 28.3% at March 31, 2021. During fiscal 2022, ICICI Bank UK had repatriated equity share capital of USD 200.0 million to the Bank.

The profit after tax of ICICI Venture decreased from ₹ 40.1 million in fiscal 2021 to ₹ 2.2 million in fiscal 2022 primarily due to lower income from venture capital funds, offset, in part, by lower administrative expenses.

The following table sets forth, for the periods and at the dates indicated, the profit/(loss) and total assets of our principal subsidiaries/associates as per Indian GAAP.

1. 0.00 represents insignificant amount
2. Total assets are as per classification used in the consolidated financial statements and hence the total assets as per subsidiary’s financial statements may differ.
3. . Effective April 1, 2021, ICICI Lombard General Insurance Company Limited has been accounted as an associate under Accounting Standard – 23 – “Accounting for Investments in Associates in Consolidated Financial Statements”.
4. Represents total assets as per financial statements of ICICI Lombard General Insurance Company Limited.
5. See also “Financials- Statement pursuant to Section 129 of the Companies Act, 2013”.
6. All amounts have been rounded off to the nearest ₹ 10.0 million.