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Name: Gopal Krishan

Semester: III
Enrollment No. 09BS0002792
IUD No. 0901202792
Course Code: SLBK602
Course Title: Treasury Management
Name of the faculty: Prof. Subbakrishna K. R.
Submitted on: 21st August, 2010
Assignment title: Comparative financial
statement analysis of IDBI and ICICI bank
with special reference to treasury management
and banking regulations perspective

Sign. Student Sign Faculty

1. Significant accounting policies
Both the banks i.e. ICICI and IDBI bank follow all the accounting policies as prescribed
by the different legislatures for preparing the financial statements. As per the schedules to
the financial statements, all the financial statements are prepared in accordance with the
requirements prescribed in the Banking Regulation Act, 1949. Method of accounting is
followed as per the accrual basis unless otherwise stated. GAAP and Accounting
standards issued by the ICAI are used to the extent applicable. Historical cost convention
is followed while preparing the financial statements unless otherwise stated. The rules
and regulations which are timely issued by the authorities are being complied with while
preparing the financial statements.
2. Capital and capital adequacy
a. As per the RBI guidelines, banks have to maintain the adequate capital as per
the Basel II norms applicable from March 31, 2008. A minimum ratio
maintained of total capital to the risk adjusted assets (CRAR) should be 9%
with a minimum of Ties I capital ratio of 6%.
b. RBI has stipulated that banks need to maintain a capital which is higher of the
two, minimum capital requirement calculated as per Basel I norms or the
minimum capital required as per calculation in Basel II norms.
In millions As per Basel I As per Basel II
31-Mar-10 31-Mar-09 31-Mar-10 31-Mar-09
Tier I capital 432,614.30 420,098.10 410,615.10 421,967.60
(Of which Lower Tier I) 28,210.00 30,168.60 28,210.00 30,168.60
Tier II capital 181,569.10 129,715.90 160,409.90 131,585.30
(Of which Upper Tier II) 137,912.00 109,100.00 137,912.00 109,100.00
Total capital 614,183.40 549,814.00 571,025.00 553,552.90
Total risk weighted assets 3,208,425.40 3,453,378.90 2,941,805.80 3,564,629.90
CRAR (%) 19.14% 15.92% 19.41% 15.53%
CRAR – Tier I capital (%) 13.48% 12.16% 13.96% 11.84%
CRAR – Tier II capital (%) 5.66% 3.76% 5.45% 3.69%
Amount raised by issue of — — — —
Innovative Perpetual Debt
Instruments (IPDI) during the
Amount of subordinated debt 62,000.00 45,210.00 62,000.00 45,210.00
raised as Tier II capital during
the year

Analysis of capital adequacy norms: The ICICI bank has a CRAR (%) of 19.14 which is
very high. If we check the norms, it should be 9%. For the Tier-I capital the %age is
stipulated to be 6%. ICICI bank has these ratios very high as compared to the norm which is
not a good management of the funds and capital. The bank can have more exposure of assets
to risk by lending and by doing this they can increase their operating profits also. Thus,
efficient management of funds is required because they have more than adequate capital
which is bad.
in crores
As per Basel I As per Basel II
Current Previous Current Previous
Year Year Year Year
CRAR % 10.83% 11.23% 11.31% 11.57%
CRAR - Tier I Capital % 5.97% 6.60% 6.24% 6.81%
CRAR - Tier II Capital % 4.86% 4.63% 5.07% 4.76%
%age of shareholding of the 52.67% 52.67% 52.67% 52.67%
Amount raised by issue of 1131.7 332 1131.7 332
Amount raised by issue of 2728.7 1690 2728.7 1690
Upper Tier II instruments

IDBI bank has a capital adequacy ratio for CRAR (%) at 11.31% which is very close to the
norm of 9% and for Tier-I, it is 6.24% which is again close to the norm. This speaks of the
efficient utilization of the funds by the bank and bank is using all the funds available to it
investing properly in the risk class assets with good management of the capital adequacy.
Thus, IDBI bank has a better position in capital adequacy norms management as compared to
3. Revenue recognition
a. Interest income is recognized in the profit and loss account as soon as it gets
accrued except for the Non Performing Assets (NPAs) for which revenue is
recognized when recognized as per the income recognition norms of RBI.
b. Income on discounted instruments is recognized over the tenure of the
investment on a constant yield basis.
c. Dividend is accounted on accrual basis as when the right to receive the
dividend is established.
d. Loan processing fee is accounted for when it is due.
e. Fee related to services like project appraisal and structuring fee is accounted
for on the completion of the service.
f. Arranger fee is accounted when a significant portion of the arrangement is
g. ICICI bank is also into bullion business, for which the revenue is recognized
as follows:
i. Difference between prices recovered when the bullion is sold to the
ii. In the borrowing and lending of bullion, interest is accounted for
received and paid as and when it becomes due.
IDBI bank also follows the above mentioned revenue recognition policies however there is
one difference that was found in the policies followed by both the banks as per their
schedules. That is, IDBI bank gives an explanation
• Commissions on LC/ guarantee are reckoned as accrued, upfront in cases where the
commission does not exceed Rs.1 lakh and, in other cases, accrued over the period of LC/

Also, ICICI bank is more comprehensive in giving details of revenue recognition as

compared to IDBI bank.
4. Investments
a. All the investments are classified into 3 categories namely, ‘held to maturity’,
‘available for sale’ and ‘held for trading’. These investments are further
classified into 6 categories, (1) Government securities, (2) other approved
securities, (3) shares, (4) bonds and debentures, (5) subsidiaries and joint
ventures and (6) others.
b. ‘Held to maturity’ are carried at their acquisition cost or at amortized cost.
c. If asset is acquired at a premium or a value higher than the face value the
difference is amortized over the remaining life of the investment on a straight
line basis.
d. Other investments are valued periodically as per the RBI guidelines.
e. Costs related to investments like brokerage are charged to profit and loss
f. Profit on sale of investments in ‘held to maturity’ is charged to profit and loss
account and thereafter appropriated to the capital reserve.
SCHEDULE 8 – INVESTMENTS (in ‘000) 31-Mar-10 31-Mar-09
I. Investments in India [net of provisions]
i) Government securities 683,991,406 633,774,902
ii) Other approved securities 45,009 93,405
iii) Shares (includes equity and preference shares) 27,557,381 17,031,332
iv) Debentures and bonds 36,353,907 26,000,683
v) Subsidiaries and/or joint ventures1 62,226,766 61,194,621
vi) Others (commercial paper, mutual fund units, pass through 307,378,383 196,688,823
certificates, security receipts, certificate of deposits etc.)
TOTAL INVESTMENTS IN India 1,117,552,852 934,783,766
II. Investments outside India [net of provisions]
i) Government securities 1,645,046 953,347
ii) Subsidiaries and/or joint ventures abroad (includes equity and 66,005,026 65,924,016
preference shares)
iii) Others 23,725,081 28,921,951
TOTAL INVESTMENTS OUTSIDE India 91,375,153 95,799,314
TOTAL INVESTMENTS 1,208,928,005 1,030,583,080

III. Investments in India

Gross value of investments 1,129,332,338 947,314,476
Less: Aggregate of provision/depreciation 11,779,486 12,530,710
Net investments 1,117,552,852 934,783,766
IV. Investments outside India
Gross value of investments 91,756,742 97,586,277
Less: Aggregate of provision/depreciation 381,589 1,786,963
Net investments 91,375,153 95,799,314
TOTAL INVESTMENTS 1,208,928,005 1,030,583,080

a. All the investments are classified into 3 categories namely, ‘held to maturity’,
‘available for sale’ and ‘held for trading’. These investments are further
classified into 6 categories, (1) Government securities, (2) other approved
securities, (3) shares, (4) bonds and debentures, (5) subsidiaries and joint
ventures and (6) others.
b. Investments that are held principally for resale within 90 days of the date
of purchase are classified as ‘held for trading’.
c. Brokerage, commission, stamp duty and other taxes paid are included in
cost of acquisition in respect of acquisition of equity instruments from the
secondary market whereas in respect of other investments, including
treasury investments, such expenses are charged to revenue.
d. If asset is acquired at a premium or a value higher than the face value the
difference is amortized over the remaining life of the investment on a straight
line basis.
e. Profit or Loss on sale of investments is credited/ debited to Profit and Loss
Account (Sale of Investments). Profit on sale of investments in the Held to
Maturity category is appropriated net of applicable taxes to Capital Reserve
Account. Loss on sale is recognized in the Profit and Loss Account.

Particulars r '000
31-Mar-10 31-Mar-09
I Investments in India
(i) Government Securities 608095334 407172390
(ii) Other approved securities 43866 72399
(iii) Shares 26531183 29230505
(iv) Debentures and bonds 21186309 28201283
(v) Subsidiaries and/or joint ventures 7539855 6501850
(vi) Others (CPs, units in MFs, etc.) 70057629 29277084
733454176 500455511
II Investments outside India
(i) Government securities (including local authorities)
(ii) Subsidiaries and/or joint ventures
(iii) Other investments (shares) 453 20453

Grand Total I and II 733454629 500475964

III Investments in India

(i) Gross value of investments 739129616 503651468
(ii) Less: Aggregate provision/depreciation 5675440 3195958
(iii) Net Investments 733454176 500455510

IV Investments outside India

(i) Gross value of investments 453 20453
(ii) Less: Aggregate provision/depreciation
(iii) Net Investments 453 20453

Comparative analysis of investments: The investments are classified by both the banks on
similar basis however there are differences between treatments of certain items in the
financial statements of the banks. As the regulations have laid down that all the investments
have to be classified in three categories namely
a. Held to maturity
b. Held for trade
c. Held for sale
Both the banks are complying with the norms and classifying their investments and valuing
the same as per norms.
IDBI bank includes the commissions and other expenses related to investments in cost of
acquisition of equity instruments from secondary market ICICI bank charges the same to the
revenues. Also IDBI bank clearly states how it put investments into different classes but
ICICI is silent about the same.
As far as the quality of investments is considered, IDBI has better and safer investments
because more than 80% of its investments are in government securities. If we see the
investment pattern in ICICI, they have their investments up to 52.6% in government
securities and close to 26% in other investments like CPs and mutual funds. The ratio is not
good because CPs and mutual funds are subject to market risks whereas government
securities are less exposed to such risks. At the same time, the operating cash flows of the
organization is very less which also says that there is a need to get more into operations of
the funds and earn more.

5. Country-wise exposure
a. ICICI maintains a provision as per the country-wise exposure other than the
investments in domestic country. The bank categorizes countries into 7 risk
categories namely insignificant, low, moderate, high, very high, restricted and
off-credit. Provisioning is made on exposures exceeding 180 days on graded
scale ranging from 0.25% to 100% and for exposures less than 180 days, 25%
of the above provisions is required.
b. If the net exposure to a country is less than 1% of the total funded assets, no
provision is required.
c. The net exposure of ICICI as a percentage of total funded assets in different
countries are; UK 1.44%, Canada 1.11%, USA 0.66%.

Risk Category Exposure (Net) Provision Exposure (Net) 31 Provision

(in Millions) 31 March, 2010 March, 2009
Insignificant 392,684.7 235 442,570.4 285
Low 131,940.9 - 172,910.8 -
Moderate 25,024.4 - 21,870.7 -
High 696.4 - 784.1 -
Very High - - 22.8 -
Restricted - - - -
Off Credit - - - -
Total 550,346.4 235.0 638,158.8 285.0
Of which: funded 245,144.8 289,482.0

In Crores
Current Year Previous Year
Exposure Provision Exposur Provision
Insignifican 318.94 - 599.89 -
Low 355.9 - 244.43 -
Moderate 37.66 - 12.31 -
High 9.91 - 6.78 -
Very high 1.87 - 1.21 -
Restricted - - - -
Off-credit - - - -
Total 724.28 - 864.62 -

As per RBI circular dated Feb 19, 2003, on guidelines on country risk management states
that when a bank’s net funded exposure is 2% or more of its total assets, the bank is required
to make provision for dealing with the country risk exposure. The provision is made in
accordance with the different categories specified in circular. Also of the exposure is for a
period of 180 days or less, 25% of the stated provision is only required.
The schedules of ICICI bank gives that they are making a provision for exposure of 1% or
above which is a good policy and in compliance with the norms. However the financial
statement of IDBI is silent about the policy that they follow. But they clearly state the
amount invested in different countries and the provisions made accordingly.

6. Exposure to capital market

a. Capital market exposure in ICICI bank’s financial statements is classified as
investments in the sensitive sectors because the asset prices are fluctuating

Capital market sector (In millions) March 31, 2010 March 31, 2009
1. Direct investments in shares 22,082.3 13,167.9
2. Advances against shares/bonds/debentures 34,463.6 7,408.5
3. Advances with shares/ convertible bonds 5,315.6 271.7
as security
4. Advances with shares/bonds as collateral 330.6 609.7
5. Advances to stockbrokers 22,771.3 22,890.5
6. Exposure to venture capital funds 12,214.3 13,564.3
7. Others 14,091.8 3,922.2
8. Total Exposure 111,269.5 61,834.8


Amount in crores Current year Previous year

1. Direct investments in shares 1212.06 1362.7
2. Advances against shares/bonds/debentures 495.97 352.78
3. Advances with shares/convertible bonds as
32.91 151.42
4. Advances with shares/bonds as collateral 212.31 116.56
5. Advances to stockbrokers (secured/unsecured) 741 545.5
6. Loan sanctioned for meeting promoter's
190 190
7. Exposure to venture capital funds 228.37 227.58
8. Others - -
Total Exposure 3112.62 2946.54

As per RBI guidelines given in the circular issued on 17 Nov, 2006 on banks exposure to
capital markets rationalization of norms there are 10 categories and total exposure to capital
market cannot be more than 40% of its net worth on a solo and consolidated basis. Both the
banks have total exposure to the capital market within the stipulated norms.

9. Asset liability management:

The Asset Liability Management Committee, which comprises whole time directors
and executives, meets on a regular basis and reviews the trading positions, monitors
interest rate and liquidity gap positions, formulates views on interest rates, sets
benchmark lending rates and determines the asset liability management strategy in
light of the current and expected business environment.
The use of derivatives for hedging purposes is governed by the hedge policy
approved by Asset Liability Management Committee (ALCO). Subject to prevailing
RBI guidelines, the Bank deals in derivatives for hedging fixed rate, floating rate or
foreign currency assets/liabilities. Transactions for hedging and market making
purposes are recorded separately. For hedge transactions, the Bank identifies the
hedged item (asset or liability) at the inception of the transaction itself. The
effectiveness is assessed at the time of inception of the hedge and periodically
The Board of Directors has oversight on all the risks assumed by the Bank. Specific
Committees of the Board have been constituted to facilitate focused oversight of
various risks. Risk Committee reviews policies in relation to various risks including
liquidity, interest rate, investment policies and strategy, and regulatory and
compliance issues in relation thereto. Credit Committee reviews developments in key
industrial sectors and the Bank’s exposure to these sectors and various portfolios on a
periodic basis. Audit Committee provides direction to and also monitors the quality of
the internal audit function. Asset Liability Management Committee (ALCO) is
responsible for managing the balance sheet and reviewing the Bank’s asset-liability
Profile of maturity of investments (in millions)
Total Total
Loans and Investment Foreign Foreign
Maturity Bucket Deposits Borrowings
Advances securities Currency currency
assets liabilities
Day 1 5,611.10 157,239.20 32,042.00 391.9 35,810.80 18,545.80
2 to 7 days 14,761.90 12,256.10 59,269.50 1,306.20 8,507.60 6,922.20
8 to 14 days 11,134.40 12,895.50 96,406.60 11,072.90 9,116.60 12,425.40
15 to 28 days 20,104.70 74,070.60 50,419.00 11,213.40 17,080.50 18,698.50
29 days to 3 months 131,799.40 98,926.00 265,944.00 80,480.70 38,366.80 78,145.40
3 to 6 months 148,751.80 71,931.70 188,743.90 74,597.90 26,502.90 85,551.50
6 months to 1 year 248,066.90 97,333.90 276,686.10 76,724.40 39,432.10 69,197.50
1 to 3 years 713,445.10 295,899.30 1,030,992.7 302,987.40 218,294.1 223,871.90
0 0
3 to 5 years 292,216.20 39,413.60 15,503.10 88,361.10 106,911.0 85,270.90
Above 5 years 226,164.50 348,962.10 4,159.10 295,499.80 153,711.3 82,846.30
Total 1,812,056.0 1,208,928.0 2,020,166.0 942,635.70 653,733.7 681,475.40
0 0 0 0

Time frame Gap Cumulative negative gap

Day 1 147681.4
2 to 7 days -31972.3
8 to 14 days -86758.4 -118731
15 to 28 days 30924.9
29 days to 3 months -155478
3 to 6 months -101707
6 months to 1 year -37775.1
1 to 3 years -330214 -625173
3 to 5 years 249405.7
Above 5 years 346332.7

Analysis of gap in asset and liability of the bank: The position of the bank is not good and
is facing liquidity management problem as in many time frames it is having negative
maturity pattern, i.e. more liabilities are getting matured than the assets. Also the banks has
positive gap at many occasions. The positive gap can be utilized to cover the negative gap at
few occasions but the continuous negative gap for a period ranging from 29 days to 3 years
can be a problem if funds cannot be raised at the same rate at which the liabilities are
financed. Therefore, the bank’s ALCO has to take care of the gaps and act accordingly in the
future period. The excess funds on the day 1 can be used to discharge the negative funds for
the next 14 days or money can be raised from the market at the time when it is required. But
the interest rates play a major role in this and only if sufficient funds can be raised from the
market at a lower interest rates than at which the liabilities are taken, it will be beneficial.

With a view to limit the bank’s exposure to liquidity and interest rate risk, risk limits have
been specified with Board approval. Asset-Liability Management Committee (ALCO)
regularly monitors the actual risk positions and depending upon requirements, steps are taken
to keep the gap positions within the specified level. The ALM position of the bank is being
periodically reported to ALCO, RMC of the Board and also to RBI.
Deposits Advances Investments Borrowings Foreign Foreign
Currency Currency
Assets Liabilities
Day 1 251.9 1665.9 651.85 14.74 111.83 1.75
2 to 7 days 6019.9 3008.22 1758.07 2639.35 218.93 361.96
8 to 14 days 4412.81 3460.17 1500.63 0 45.94 9.96
15 to 28 days 8324.78 4494.57 987.87 604.72 104.17 2.63
29 days to 3 23990.42 13654.53 3398.43 1980.06 205.05 14.57
3 to 6 months 22859.11 10159.11 1434.34 3133.92 341.26 123.17
6 months to 1 47839.72 9877.03 2972.69 7107.17 2583.34 2629.39
1 to 3 years 40579.67 42943.96 5615.8 9127.88 1122.97 965.14
3 to 5 years 6864.44 19239.67 6758.27 5869.19 400.74 1038.46
Above 5 years 6524.33 29698.69 48267.51 17232.45 433.53 34.3
Total 167667.1 138201.9 73345.46 47709.48 5567.76 5181.33

Time Frames Gaps

Day 1 1361.29
2 to 7 days 4487.67
8 to 14 days 6408.33
15 to 28 days 11328.3
29 days to 3 months 32456.94
3 to 6 months 28668.05
6 months to 1 year 47590.84
1 to 3 years 68937.78
3 to 5 years 12838.93
Above 5 years -28877.71
Total 185200.4

Analysis of maturity pattern: The asset liability maturing gap of the bank is not managed
properly because the bank has a lot of excess funds because at most of the times more assets
are getting matured than the liabilities. The bank has to invest funds for a longer period and
can get better returns. As we can see that in time above 5 years there is a negative gap, thus if
bank had invested its funds in longer term securities this problem would not have been there.

10. Single borrower limit

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 was 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 or 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.


a. During the year ended March 31, 2010, the Bank’s exposure to single borrowers
and group borrowers were within the prudential exposure limits prescribed by
RBI, except in six cases where single borrower limit of 15% was exceeded with
the approval of the Board of Directors. In respect of these cases, the sanctioned
limits and outstanding (including non-funded exposure) were as follows, as on
March 31, 2010:
Name of single borrower group Sanctioned limits as on Outstanding as on March
March 31, 2010, as % of 31, 2010, as % of capital
capital fund fund
HDFC Limited 15.19 14.95
Larsen and Toubro Limited 14.94 11.7
Essar oil Limited 14.92 11.75
Ispat Industries Limited 13.99 12.74
Bharat heavy electricals limited 12.67 9.57
National aviation company of 9.28 8.88
India limited

As per RBI master circular dated October 10, 2006, on exposure norms, the exposure ceiling
limit is 15% of capital funds for a single borrower. It can be increased by further 5%
provided if the excess is exposed in account of infrastructure. Otherwise the limit can be
increased by 5% by taking a board’s approval. IDBI bank exceeded the exposure in 6 cases
with the board’s approval and outstanding amount from the borrowers at the end of the year
was within the prescribed norm of 15%. ICICI bank also exceeded the limit in 3 cases out of
which one borrower is still in excess to what the norm is. But since the board’s approval is
taken, the rules are complied with; however, exposing to such an extent to a single borrower
can be bad for future.

11. Cash Flow statement


ICICI in '000
2010 2009 %age 2010
Cash from operating activities 1869210 -141884897
9 20.99
Cash from investing activities 6150732 38578805
4 69.05
Cash from financial activities 1382616 16253589
8 15.52
Exchange fluctuation -4954299 6306853 -5.56
Total 8907130 -80745650
2 100.00

Analysis of cash flow statement: The cash flow statement of ICICI bank doesn’t give a good picture
of the bank’s operations for the financial year 2009-2010. This can be said because the cash from
operating activities are just 21% of the total cash inflow for the year. Also the major portion of the
cash flow, i.e. 69%, is from the investing activities i.e. sale of investments which are categorized as
held to maturity. Bank also lost in the exchange rate fluctuations to an extent of 5.6% of the total cash
flow. In the previous year, the bank lost in operations and also had a negative overall cash flow. Since
a major portion of cash flow is from investments which are categorized as held to maturity, it is not a
good sign for the bank finance. Also, as it is already seen the bank has excess funds in long term, i.e.
for time above 5 years, it should start investing in the short term investments so that the cash flow is
also from the securities which are held for sale and held to trade and they should retain the securities
which are held to maturity because they give better returns.

IDBI in '000
2010 2009 %age 2010
Cash from operating activities 38793917 27677110 115.34
cash from investing activities -3071042 -1400599 -9.13
Cash from financial activities -2087712 -1671039 -6.21
Exchange fluctuation - - -
Total 33635163 24605472 100.00
Analysis of cash flow statement: The cash flow statement of IDBI gives a good picture of
the financial and cash management of the bank’s funds. All the cash inflow is from operating
activities of the bank and 15% of the total cash raised from the operating activities is invested
in the investing activities and paying dividends. From the previous year also the inflow of
cash has increased which is a positive sign for the bank. The cash management of the bank
thus is very efficient and as it was seen in the asset liability management also there were no
negative gaps except for the long term.

12. Key financial ratios

Mar Mar % Mar Mar %
Ratios '09 '10 Change '09 '10 Change
Investment Valuation Ratios
Face Value 10 10 0.0% 11 12 9.1%
Dividend Per Share 2.5 3 20.0% 343.59 293.74 -14.5%
Profitability Ratios
Adjusted Cash Margin(%) 7.02 6.48 -7.7% 11.45 13.64 19.1%
Net Profit Margin 6.71 5.95 -11.3% 9.74 12.17 24.9%
151.4 174.8
Return on Long Term Fund(%) 9 3 115.4% 56.72 44.72 78.8%
Return on Net Worth(%) 11.53 12.53 108.7% 7.58 7.79 102.8%
Adjusted Return on Net
Worth(%) 11.35 12.55 110.6% 7.55 7.53 99.7%
Return on Assets Excluding 102.7
Revaluations 1 113.5 110.5% 444.94 463.01 104.1%
Return on Assets Including 130.0 140.2
Revaluations 2 3 107.9% 444.94 463.01 104.1%
Management Efficiency
Interest Income / Total Funds 8.47 8.49 0.2% 9.82 8.82 -10.2%
Net Interest Income / Total
Funds 1.58 2.02 27.8% 3.99 4.08 2.3%
Non Interest Income / Total
Funds 0.08 0.13 62.5% 0.08 0.08 0.0%
Interest Expended / Total Funds 6.89 6.47 -6.1% 5.83 4.74 -18.7%
Operating Expense / Total
Funds 0.96 0.98 2.1% 2.6 2.59 -0.4%
Profit Before Provisions / Total
Funds 0.67 1.12 67.2% 1.3 1.41 8.5%
Net Profit / Total Funds 0.57 0.51 -10.5% 0.96 1.08 12.5%
Loans Turnover 0.14 0.14 0.0% 0.18 0.17 -5.6%
Total Income / Capital
Employed(%) 8.55 8.61 0.7% 9.9 8.9 -10.1%
Interest Expended / Capital
Employed(%) 6.89 6.47 -6.1% 5.83 4.74 -18.7%
Total Assets Turnover Ratios 0.08 0.08 0.0% 0.1 0.09 -10.0%
Asset Turnover Ratio 3.27 4.18 27.8% 5.14 4.6 -10.5%
Capital Adequacy Ratio 11.57 11.31 -2.2% 15.53 19.41 25.0%
Advances / Loans Funds(%) 77.06 74.26 -3.6% 69.86 58.57 -16.2%
Debt Coverage Ratios
Credit Deposit Ratio 3 86.28 -13.8% 91.44 90.04 -1.5%
Investment Deposit Ratio 44.69 44.06 -1.4% 46.35 53.28 15.0%
Cash Deposit Ratio 8.24 8.03 -2.5% 10.14 10.72 5.7%
Total Debt to Owners Fund 15.1 20.38 35.0% 4.42 3.91 -11.5%
Financial Charges Coverage
Ratio 1.1 1.18 7.3% 1.25 1.33 6.4%
Financial Charges Coverage
Ratio Post Tax 1.09 1.09 0.0% 1.2 1.26 5.0%
Cash Flow Indicator Ratios
Earnings Per Share 11.85 14.23 20.1% 33.76 36.1 6.9%
Book Value 1 113.5 10.5% 444.94 463.01 4.1%
Analysis of ratios of ICICI and IDBI bank for the year 2010: The profitability ratios of
IDBI bank and ICICI bank when compared gave a better picture of ICICI bank than IDBI.
Also the investment valuation ratios dividend per share is also higher in ICICI bank. But if
we see the trend in the ratios for previous year and current year in the two banks, the
performance of IDBI has improved more than ICICI bank. Also dividend in ICICI bank has
decreased over previous year whereas dividend has increased in IDBI bank. If we see the
return on long term assets, IDBI bank has a higher ratio which is because of the reason that
ICICI has sold a lot of assets held under held to maturity in the current financial year.

In terms of management efficiency ratios also ICICI bank has a better performance against
IDBI bank. Once again IDBI bank has improved over its previous year better than ICICI

In terms of debt coverage ratio also ICICI bank has a better position as compared to IDBI
bank. Also EPS and book value per share is higher in ICICI bank. Therefore, ICICI overall
has a better position than IDBI presently but performance of IDBI bank has improved over
previous year more than what ICICI bank has.

13. Treasury and international operations

The financial year 2009-2010 has witnessed great volatility on the grounds of recovery from
the recession and rising inflation in the economy. The bond market witnessed an 80 basis
point increase in benchmark yield followed by borrowings at a huge amount. In such a
condition, the concern of the treasury operations becomes very important to manage the
statutory requirements and the liquidity and profitability position.
ICICI: The bank’s treasury management has focused on all the key markets that are the bond
market, government securities, interest rate swaps, equity and foreign exchange market. The
bank has been involved in the repurchase transactions and the daily outstanding balance of
securities sold under repurchase transactions is 160,855 million rupees and at the end of the
year the balance is 27,301 million. The bank is able to earn a treasury income of 11.81 billion
in the fiscal year 2010 which is almost 25% of the total profit after tax of the bank for the
financial year. The income from treasury operations include income from investments in
government securities and other fixed income instruments, reversal of mark to margin
provision of credit derivatives. In the current year, there has been a tremendous increase in
the earnings from the treasury operations in equity market because of the recovery in the
market through out the globe. Treasury operations for the year 2010 account for almost 40%
of the total revenues of the bank.

IDBI: According to the information and explanations given to us, the Company is dealing in
Treasury Bills, Certificates of Deposit, Commercial Papers, Government Dated Securities,
Corporate Bonds. Proper records have been maintained and timely entries have been made
thereof. Since the principal business of the Company consists of buying and selling of
securities, the provision of Section 49(1) of the Companies Act, 1956, regarding holding of
investments in its own name are not applicable to it. IDBI bank maintained a good SLR
portfolio and used it periodically to manage the short-term liquidity mismatch by borrowing
in the CBLO segment against G-Secs. However the profit from treasury segment of the bank
when compared to the total profit before tax from all the different sectors is only 8% which is
significantly less. A major part of revenues come from wholesale banking in IDBI bank.

14. Accounting for derivative contracts

a. All foreign currency and rupee derivatives entered into for trading purposes
are marked to market and the resulting gain or losses are accounted in the
profit and loss account.
b. Hedge swaps are accounted for on accrual basis.
c. In the year ending march 2010, ICICI also traded in exchange traded interest
rate derivatives and invested in NSE- GOI Bond Futures an amount worth 0.2
d. The use of derivatives for hedging purposes is governed by the hedge policy
approved by Asset Liability Management Committee (ALCO). Subject to
prevailing RBI guidelines, the Bank deals in derivatives for hedging fixed
rate, floating rate or foreign currency assets/liabilities. Transactions for
hedging and market making purposes are recorded separately.

Particulars (In millions) Currency Interest rate

Derivatives derivatives
1. Derivatives (Notional principal amount)
a. For hedging 23,432.8 235,286.1
b. For trading 1,136,020.6 3,145,275.0
2. Marked to market positions
a. Assets (+) 13,891.8 1,459.8
b. Liabilities (-)
3. Credit exposures 115,703.5 91,886.0
4. Likely impact of 1% change in interest rate
a. On hedging derivatives 58.2 7,288.5
b. On trading derivatives 1,380.6 1,646.7
5. Maximum and minimum of 100*PV01
observed during the year
a. On hedging
Maximum (54.6) (6,835.8)
Minimum (323.9) (9,071.7)
b. On trading
Maximum (1,358.8) 2,322.6
Minimum (2,121.7) 1,282.0

Forward rate agreement (FRA)/Interest Rate Swaps (IRS)

Particulars (Amounts in millions) March 31, 2010 March 31, 2009

i. The notional principal of rupee swap 1,870,819.1 1,942,528.9
ii. Losses if all counter parties fail to fulfill 20,533.2 35,591.8
their obligation
iii. Collateral required by the bank upon - -
entering into swap
iv. Concentration of credit risk arising from 500.0 919.7
the rupee swaps
v. The fair value of rupee trading swap book (180.5) 622.1

a. Hedge contracts are not marked to market unless the underlying is also
marked to market. In respect of hedge contracts that are marked to market,
changes in the market value are recognized in the profit and loss account.
b. Redesignation of hedge swaps by change of underlying liability is accounted
as the termination of one hedge and acquisition of another.
c. On premature termination of Hedge swaps, any profit/ losses are recognized
over the remaining contractual life of the swap or the residual life of the asset/
liability whichever is lesser.

in crores
Particulars Currency Interest rate
derivatives derivatives
Derivative (notional principal amount)
(a) For hedging - 1964.68
(b) For trading 4237.54 22703.71
Marked to market positions
(a) Assets (+) 111.86 497.16
(b) Liabilities (-) -118.71 -388.38
Credit Exposure
(a) On hedging derivatives - 170.09
(b) On trading derivatives 347.67 506.86
Likely impact of 1% change in interest
rate (100*PV01)
(a) On hedging derivatives - 29.04
(b) On trading derivatives 0.12 0.08
Maximum and minimum of 100*PV01
observed during the year
On hedging
Maximum - 33.17
Minimum - 11.57
On trading
Maximum 1.22 4.46
Minimum 0.007 0.33

in Crores
Items Current Year Previous Year
Hedge Trading Hedge Trading
Swaps Swaps Swaps Swaps
Notional principal of swap 1964.68 22703.71 4592.81 26555.93
Losses which would be incurred if 144.12 353.04 675.57 221.76
counterparties failed to fulfill their
obligations under the agreement
Collateral required by the bank - - - -
upon entering into swaps
Concentration of credit risk arising - - - -
from the swaps
Fair value of swap book 110.91 -2.13 151.04 -1.73