ICICI Bank - Annual Report - 2008-2009

ICICI BANK LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

Your Directors have pleasure in presenting the Fifteenth Annual Report of
ICICI Bank Limited with the audited statement of accounts for the year
ended March 31, 2009.

FINANCIAL HIGHLIGHTS:

The financial performance for fiscal 2009 is summarised in the following
table:

Rs. billion, except percentages Fiscal 2008 Fiscal 2009 % change

Net interest income and other income 161.15 159.70 -0.9

Operating profit 79.61 89.25 12.1

Provisions & contingencies1 29.05 38.08 31.1

Profit before tax 50.56 51.17 1.2

Profit after tax 41.58 37.58 -9.6

Consolidated profit after tax 33.98 35.77 5.3

1. Excludes provision for taxes.

Appropriations:

The profit & loss account shows a profit after tax of Rs.37.58 billion
after provisions and contingencies of Rs. 38.08 billion and all expenses.
The disposable profit is Rs.61.94 billion, taking into account the balance
of Rs.24.36 billion brought forward from the previous year. Your Directors
have recommended a dividend at the rate of Rs. 11.00 per equity share of
face value Rs. 10 for the year and have appropriated the disposable profit
as follows:

Rs. billion Fiscal Fiscal
2008 2009
To Statutory Reserve, making in all Rs. 48.791 billion 10.40 9.40
To Special Reserve created and maintained in terms of
Section 36(1) (viii) of the Income-tax Act, 1961,
making in all Rs. 23.44 billion 1.75 2.50
To Capital Reserve, making in all Rs. 16.19 billion 1.27 8.18
Dividend for the year (proposed)
On equity shares @ Rs.11 per share (@ Rs. 11 per share
for fiscal 2008)2 12.28 12.25
On preference shares (Rs.) 35,000 35,000
Corporate dividend tax 1.50 1.51
Leaving balance to be carried forward to the next year3 24.36 28.10

1. Includes Rs.0.20 billion transferred on amalgamation of The Sangli Bank
Limited with the Bank.

2. Includes dividend for the prior year paid on shares issued after the
balance sheet date and prior to the record date.

3. After taking into account transfer to Reserve Fund Rs. 4.2 million for
fiscal 2009, making in all Rs.8.8 million.

SUBSIDIARY COMPANIES:

At March 31, 2009, ICICI Bank had 17 subsidiaries as listed below:

Domestic Subsidiaries International Subsidiaries

ICICI Prudential Life Insurance ICICI Bgnk UK PLC
Company Limited

ICICI Lombard General Insurance ICICI Bank Canada
Company Limited

ICICI Prudential Asset Management ICICI Wealth Management Inc,
Company Limited

ICICI Bank Eurasia Limited ICICI Prudential Trust Limited
Liability Company

ICICI Securities Limited ICICI Securities Holdings Inc.2

ICICI Securities Primary Dealership ICICI Securities Inc.3
Limited

ICICI Venture Funds Management ICICI International Limited
Company Limited

ICICI Home Finance Company Limited

ICICI Investment Management Company
Limited

ICICI Trusteeship Services Limited

1. Subsidiary of ICICI Bank Canada.

2. Subsidiary of ICICI Securities Limited.

3. Subsidiary of ICICI Securities Holdings Inc.

ICICI Prudential Pension Funds Management Company Limited has been
incorporated on April 22, 2009 as a 100% subsidiary of ICICI Prudential
Life Insurance Company Limited.

As approved by the Central Government vide letter dated April 20, 2009
under Section 212(8) of the Companies Act, 1956, copies of the balance
sheet, profit & loss account, report of the board of directors and report
of the auditors of each of the subsidiary companies have not been attached
to the accounts of the Bank for fiscal 2009. The Bank will make available
these documents/details upon request by any Member of the Bank. These
documents/details will be available on the Bank's website www.icicibank.com
and will also be available for inspection by any Member of the Bank at its
Registered Office and Corporate Office and also at the registered offices
of the concerned subsidiaries. As required by Accounting Standard-21 (AS-
21) issued by the Institute of Chartered Accountants of India, the Bank's
consolidated financial statements included in this Annual Report
incorporate the accounts of its subsidiaries and other entities. A summary
of key financials of the Bank's subsidiaries is also included in this
Annual Report.

DIRECTORS:

N. Vaghul retired as non-executive Chairman of the Board of Directors on
completion of his term on April 30, 2009. He assumed office as Chairman &
Managing Director of erstwhile ICICI Limited (ICICI) in 1985. ICICI Bank
was established in 1994 as a subsidiary of ICICI under his leadership. He
laid down his executive position and became non-executive Chairman of ICICI
in 1996. He became Chairman of ICICI Bank in 2002 following the merger of
ICICI with the Bank. The Board placed on record its deep appreciation for
his guidance and leadership to the ICICI Group for over two decades, as it
transformed itself from a project finance company into a diversified
financial services group.

K. V. Kamath completed his term as Managing Director & CEO on April 30,
2009. He assumed office as Managing Director & CEO of ICICI in 1996 and
became Managing Director & CEO of ICICI Bank in 2002 following the merger
of ICICI with the Bank. The Board placed on record its deep appreciation
for his outstanding leadership of the ICICI Group since 1996, and of the
growth and successful diversification achieved by the Group during his
tenure as Managing Director & CEO.

The Board at its Meeting held on December 19, 2008 appointed K. V. Kamath
as non-executive Chairman for a period of five years effective May 1, 2009.
Further, the Board also appointed Chanda D. Kochhar as Managing Directors
CEO for a period of five years effective May 1, 2009. Her term as Joint
Managing Director &CFO expired on March 31, 2009 and the Board approved
extension of her term till April 30, 2009. Reserve Bank of India (RBI) vide
its letter dated March 12, 2009 approved the appointments/re-appointment of
the following Directors of the Bank:

Appointment of K. V. Kamath as non-executive Chairman for a period of three
years w.e.f. May 1, 2009.

Re-appointment of Chanda D. Kochhar as Joint Managing Director & CFO for a
period of one month w.e.f. April 1, 2009.

Appointment of Chanda D. Kochhar as Managing Director & CEO for a period of
three years w.e.f. May 1, 2009.

Approval of the Members to the above appointments was sought and obtained
by way of postal ballot, the result of which was declared on February 13,
2009.

Madhabi Puri Buch, Executive Director resigned from the Board on her
appointment as Managing Director & CEO of ICICI Securities Limited
effective February 1, 2009. The Board placed on record its appreciation of
her contribution to the Bank.

The Board at its Meeting held on January 24, 2009 appointed N. S. Kannan as
additional Director of the Bank effective May 1, 2009 and K. Ramkumar as
additional Director of the Bank effective February 1, 2009. N. S. Kannan
was Executive Director of ICICI Prudential Life Insurance Company Limited
and K. Ramkumar was the Group Chief Human Resources Officer of ICICI Bank.
fJ. S. Kannan and K. Ramkumar have been appointed as wholetime Directors
designated as Executive Director & Chief Financial Officer and Executive
Director respectively, for a period of five years. Their appointments are
subject to the approval of RBI and the Members.

V. Vaidyanathan, Executive Director resigned from the Board on his
appointment as Managing Director & CEO of ICICI Prudential Life Insurance
Company Limited effective May 1, 2009. The Board placed on record its
appreciation of his contribution to the Bank and his leadership role in
building the Bank's retail business.

The Board at its Meeting held on April 25, 2009 appointed Sandeep Bakhshi
as additional Director of the Bank designated as Executive Director
effective May 1, 2009 for a period of five years. Sandeep Bakhshi was
earlier Managing Director & CEO of ICICI Lombard General Insurance Company
Limited. The Board has vide circular resolution passed on May 8, 2009
designated Sandeep Bakhshi as Deputy Managing Director effective from the
date of his appointment to the Board. His appointment is subject to the
approval of RBI and the Members.

Government of India has nominated Anup K. Pujari, Joint Secretary,
Department of Economic Affairs, Ministry of Finance, Government of India,
as a Director on the Board of ICICI Bank effective January 27, 2009, in
place of Arun Ramanathan. The Board placed on record its appreciation of
the invaluable guidance provided by Arun Ramanathan to the Bank. In terms
of Article 128A of the Articles of Association, Anup K. Pujari is not
liable to retire by rotation.

The Board at its Meeting held on April 25, 2009 appointed M. S.
Ramachandran, former Chairman, Indian Oil Corporation, as an additional
Director effective April 25, 2009. M. S. Ramachandran holds office upto the
date of the forthcoming Annual General Meeting (AGM) but is eligible for
appointment.

In terms of the provisions of the Companies Act, 1956 and the Articles of
Association of the Bank, Anupam Puri, M. K. Sharma, P. M. Sinha and V Prem
Watsa would retire by rotation at the forthcoming AGM and, being eligible
offer themselves for re-appointment.

AUDITORS:

The auditors, B S R & Co., Chartered Accountants, will retire at the
ensuing AGM As recommended by the Audit Committee, the Board has proposed
the appointment of B S R & Co. as statutory auditors for fiscal 2010. Their
appointment has been approved by RBI vide its letter dated April 2, 2009.
You are requested to consider their appointment.

PERSONNEL:

As required by the provisions of Section 217(2A) of the Companies Act 1956
read with Companies (Particulars of Employees) Rules, 1975+ as amended the
names and other particulars of the employees are set out in the Annexure to
the Directors' Report.

APPOINTMENT OF NOMINEE DIRECTORS ON THE BOARDS OF ASSISTED COMPANIES:

ICICI had a policy of appointing nominee directors on the boards of certain
borrower companies based on loan covenants, with a view to enable
monitoring of the operations of those companies. Subsequent to the merger
of ICICI with ICICI Bank, the Bank continues to nominate directors on the
boards of assisted companies. Apart from the Bank's employees, experienced
professionals from various fields are appointed as nominee Directors. At
March 31, 2009 ICICI Bank had 30 nominee Directors, of whom 23 were
employees of the Bank, on the boards of 41 assisted companies. The Bank has
a Nominee Director Cell for maintaining records of nominee directorships.

CORPORATE GOVERNANCE:

ICICI Bank has established a tradition of best practices in corporate
governance The corporate governance framework in ICICI Bank is based on an
effective independent Board, the separation of the Board's supervisory role
from the executive management and the constitution of Board Committees,
generally comprising a majority of independent Directors and chaired by an
independent Director, to oversee critical areas.

COMPLIANCE CERTIFICATE OF THE AUDITORS:

ICICI Bank has annexed to this report, a certificate obtained from the
statutory auditors, B S R & Co., Chartered Accountants, regarding
compliance of conditions of Corporate Governance as stipulated in Clause 49
of the listing agreement.

EMPLOYEE STOCK OPTION SCHEME:

In fiscal 2000, ICICI Bank instituted an Employee Stock Option Scheme
(ESOS) to enable the employees and Directors of ICICI Bank and its
subsidiaries. As per the ESOS as amended from time to time, the maximum
number of options granted to any employee/Director in a year is limited to
0.05% of ICICI Bank's issued equity shares at the time of the grant, and
the aggregate of all such options is limited to 5% of ICICI Bank's issued
equity shares on the date of the grant (equivalent to 55.7 million shares
at April 25, 2009).

Options granted for fiscal 2003 and earlier years vest in a graded manner
over a three-year period, with 20%, 30% and 50% of the grants vesting in
each year, commencing not earlier than 12 months from the date of grant.
Options granted for fiscal 2004 to 2008 vest in a graded manner over a
four-year period, with 20%, 20%, 30% and 30% of the grants vesting in each
year, commencing not earlier than 12 months from the date of grant.

Options can be exercised within 10 years from the date of grant or five
years from the date of vesting, whichever is later. The price of the
options granted prior to June 30, 2003 is the closing market price on the
stock exchange, which recorded the highest trading volume on the date of
grant. The price for options granted on or after June 30, 2003 till July
21, 2004 is equal to the average of the high and low market price of the
equity shares in the two week period preceding the date of grant of the
options, on the stock exchange which recorded the highest trading volume
during the two week period. The price for options granted on or after July
22, 2004 is equal to the closing price on the stock exchange which recorded
the highest trading volume preceding the date of grant of options. The
above pricing is in line with the SEBI guidelines, as amended from time to
time.

On the basis of the recommendation of the Board Governance & Remuneration
Committee, the Board at its Meeting held on April 25, 2009 approved a grant
of approximately 1.7 million options for fiscal 2009 to eligible employees.
Each option confers on the employee a right to apply for one equity share
of face value of Rs. 10 of ICICI Bank at Rs. 434.10, which was the closing
price on the stock exchange, which recorded the highest trading volume in
ICICI Bank shares on April 24, 2009. These options would vest over a five
year period, with 20%, 20%, 30% and 30% respectively of the grant vesting
each year commencing from the end of the second year from the date of the
grant. No options have been granted to wholetime Directors for fiscal 2009.

Particulars of options granted by ICICI Bank upto April 25, 2009 are given
below:

Options granted 52,668,955

Options vested 32,068,304

Options exercised 24,271,617

Number of shares allotted pursuant to exercise of options 24,271,617

Options forfeited/lapsed 7,718,099

Extinguishment or modification of options Nil

Amount realised by exercise of options (Rs.) 4,682,588,988

Total number of options in force 20,679,239

No employee was granted options during any one year equal to or exceeding
0.05% of the issued equity shares of ICICI Bank at the time of the grant.

The diluted earnings per share (EPS) pursuant to issue of shares on
exercise of options calculated in accordance with AS-20 was Rs. 33.70 in
fiscal 2009 against basic EPS of Rs. 33.76. Since the exercise price of
ICICI Bank's options is the last closing price on the stock exchange, which
recorded the highest trading volume preceding the date of grant of options,
there is no compensation cost in fiscal 2009 based on the intrinsic value
of options.

However, if ICICI Bank had used the fair value of options based on the
Black-Scholes model, compensation cost in fiscal 2009 would have been
higher by Rs. 1,411.7 million and proforma profit after tax would have been
Rs. 36,169.6 million. On a proforma basis, ICICI Bank's basic and diluted
earnings per share would have been Rs. 32.49 and Rs. 32.43 respectively.
The key assumptions used to estimate the fair value of options granted
during the fiscal 2009 are given below:

Risk-free interest rate 7.62% - 9.24%

Expected life 2 - 6.4 years

Expected volatility 38.90% - 45.23%

Expected dividend yield 1.20% - 3.57%

In respect of options granted in fiscal 2009, the weighted average exercise
price of the options and the weighted average fair value of the options
were Rs. 912.30 per option and Rs. 331.19 per option respectively.

DIRECTORS' RESPONSIBILITY STATEMENT:

The Directors confirm:

1. That in the preparation of the annual accounts, the applicable
accounting standards have been followed, along with proper explanation
relating to material departures;

2. That they have selected such accounting policies and applied them
consistently and made judgements and estimates that are reasonable and
prudent, so as to give a true and fair view of the state of affairs of the
Bank at the end of the financial year and of the profit or loss of the Bank
for that period;

3. That they have taken proper and sufficient care for the maintenance of
adequate accounting records, in accordance with the provisions of the
Banking Regulation Act, 1949 and the Companies Act, 1956 for safeguarding
the assets of the Bank and for preventing and detecting fraud and other
irregularities; and

4. That they have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS:

ICICI Bank is grateful to the Government of India, RBI, SEBI and overseas
regulators for their continued co-operation, support and guidance. ICICI
Bank wishes to thank its investors, the domestic and international banking
community, investment bankers, rating agencies and stock exchanges for
their support.

ICICI Bank would like to take this opportunity to express sincere thanks to
its valued clients and customers for their continued patronage. The
Directors express their deep sense of appreciation of all the employees,
whose outstanding professionalism, commitment and initiative has made the
organisation's growth and success possible and continues to drive its
progress. Finally, the Directors wish to express their gratitude to the
Members for their trust and support.

For and on behalf of the Board
K.V. Kamath
May 8, 2009 Chairman

MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMIC OVERVIEW:

The overall macroeconomic conditions during the first half of fiscal 2009
remained strong although with some moderation in economic activity
following tightening of monetary policy in response to rising inflation.
Year-onyear inflation measured by the Wholesale Price Index (WPI) increased
from 7.8% at year-end fiscal 2008 to a peak of 12.9% at August 2, 2008. In
response to the increase in inflation, Reserve Bank of India (RBI)
increased the cash reserve ratio (CRR) by 150 basis points (bps) from 7.5%
at year-end fiscal 2008 to 9.0% and the repo rate by 125 bps from 7.75% at
year-end fiscal 2008 to 9.0%. The Central Statistical Organisation (CSO)
placed GDP growth at 7.8% during the first half of fiscal 2009 compared to
9.3% during the first half of fiscal 2008. The Index of Industrial
Production (IIP) increased by 5.0% during the first half of fiscal 2009
compared to 9.5% during the first half of fiscal 2008.

The bankruptcy of Lehman Brothers in September 2008 led to rapid
deterioration in global macroeconomic conditions and a sharp moderation in
global economic activity. Real GDP for the United States of America
contracted by an annualised rate of 6.1% during the fourth quarter of
calendar year 2008 and 6.3% during the first quarter of calendar year 2009.
During the fourth quarter of calendar year 2008, real GDP for the Euro area
contracted by 1.5%. Economic growth in China witnessed significant
moderation to 6.1% during the first quarter of calendar year 2009 compared
to 10.6% during the first quarter of calendar year 2008.

The impact of global developments on India was felt mainly through the
trade and capital channels. Merchandise exports contracted for six
consecutive months from October 2008 to March 2009 leading to a moderation
in exports growth to 3.4% during fiscal 2009 compared to 29.1% during
fiscal 2008. During the first nine months of fiscal 2009, foreign
institutional investments (FII) recorded a net outflow of US$ 12.4 billion
compared to a net inflow of US$ 24.5 bn during the corresponding period of
the previous year. During this period, net external commercial borrowings
(ECBs) declined to US$ 7.1 billion compared to US$ 17.4 billion during the
corresponding period of the previous year. The decline in net FII and ECB
flows was partly offset by an increase in net foreign direct investment
(FDI) flows to US$ 15.4 billion during the first nine months of fiscal 2009
compared to US$ 6.9 billion during the corresponding period of the previous
year. India's overall balance of payments recorded a deficit of US$ 20.4
billion during the first nine months of fiscal 2009. This led to a
significant depreciation of the Rupee from 40.12 per US dollar at year-end
fiscal 2008 to 50.72 per US dollar at year-end fiscal 2009.

During the third quarter of fiscal 2009, GDP growth moderated to 5.3%
mainly due to a 2.2% decline in agricultural growth and a moderation of
industrial sector growth to 0.8%. Growth in the services sector (including
construction) continued to be robust at 9.5%. IIP growth moderated further
to 0.8% during the third quarter of fiscal 2009 compared to 8.3% during the
corresponding period of the previous year. On the positive side, the
decline in global commodity prices led to a moderation in inflation and
facilitated substantial reductions in key policy rates and reserve
requirements. WPI inflation moderated from a peak of 12.9% in August 2008
to 0.3% at end-March 2009. Since October 2008, RBI has reduced the cash
reserve ratio by 400 bps to 5.0%, the statutory liquidity ratio by 100 bps
to 24.0%, the repo rate by 425 bps to 4.75% and the reverse repo rate by
275 bps to 3.25%. The reduction in policy rates led to a reduction in
market interest rates with the yield on 10-year government securities
declining by about 320 bps during the third quarter of fiscal 2009.

Economic activity during the fourth quarter of fiscal 2009 remained weak
with the IIP contracting by 0.9%. Following the larger than expected
government borrowing programme, the yield on government securities
increased by about 175 basis points during the fourth quarter of fiscal
2009.

Although there has been a moderation in economic and industrial activity,
there are some signs of improvement in demand and industrial output in
recent months. Domestic demand continues to be strong as indicated by
robust sales growth reported in certain sectors. There are also signs of
improvement in capacity utilisation across sectors. Demand and construction
activity in rural areas remain strong and have partly offset the impact of
slower growth in other sectors of the economy. Global developments, capital
inflows and management of the government borrowing programme will be key
factors impacting the economy and financial markets during the current
year.

FINANCIAL SECTOR OVERVIEW:

During fiscal 2009, the year-on-year growth in non-food bank credit
declined from a peak of 29.4% in October 2008 to 17.5% in March 2009. This
was lower than the 23.0% growth recorded during fiscal 2008. Based on data
published by RBI, at February 27, 2009, industry accounted for 41.7% of
non-food gross bank credit, retail credit for 22.3%, agriculture and allied
activities for 11.9%, trade for 5.5%, real estate for 3.6% and other
sectors for the balance 15.0%. Total deposits grew by 19.8% during fiscal
2009 due to a 23.9% growth in time deposits as demand deposits in the
system declined by 0.8%. The credit-deposit ratio remained within the range
of 71.0%-75.5% during fiscal 2009 and was about 72.0% in March 2009.

During fiscal 2009, volatile market and liquidity conditions and a
moderation in demand for retail savings and investment products had a
negative impact on growth in the life insurance and mutual fund industries.
First year retail premium underwritten in the life insurance sector
declined by 10.4% (on weighted received premium basis) to Rs. 471.62
billion in fiscal 2009 with the private sector's retail market share (on
weighted received premium basis) increasing from 50.5% in fiscal 2008 to
57.0% in fiscal 2009. Total assets under management (on average assets
basis) of mutual funds declined by 8.4% from Rs. 5,385.08 billion in March
2008 to Rs. 4,932.85 billion in March 2009. The non-life insurance industry
was de-tariffed with effect from January 1, 2007 resulting in reduction in
premium rates and in the rate of growth of the industry. Gross premium in
the non-life insurance sector (excluding specialised insurance
institutions) grew by 9.1% to Rs. 306.01 billion in fiscal 2009 compared to
12.3% in fiscal 2008 and 22.2% in fiscal 2007. The private sector's market
share in fiscal 2009 was 41.1%.

Equity markets remained weak on global macroeconomic concerns and a
reversal in the pattern of global capital flows. The BSE Sensex was 9,709
at March 31, 2009 compared to 15,644 at March 31, 2008. The Sensex
recovered to 12,173 at May 15, 2009 before rising sharply to 14,302 at May
19, 2009 following the announcement of the results of the general
elections.

There were a number of key policy developments in the banking sector during
fiscal 2009. In April 2008, RBI issued guidelines for banks engaging
recovery agents, advising banks to put in place a grievance redressal
mechanism pertaining to the recovery process and a due diligence process
for engaging recovery agents. In May 2008, RBI issued a guideline whereby
the shortfall in lending to weaker sections was also required to be taken
into account while determining contribution to the Rural Infrastructure
Development Fund. In August 2008, RBI issued final guidelines on prudential
norms for off-balance sheet exposures requiring banks to treat unpaid
amounts due for 90 days or more under derivative contracts as non-
performing assets. Following the global financial crisis, RBI has
identified adequate credit flow at viable rates, maintaining credit
quality, limiting the impact of adverse global developments and price and
financial stability as key monetary policy objectives. Since September
2008, RBI significantly reduced key policy rates and reserve requirements
for banks. Besides these, measures like additional liquidity support
through the Special Refinance Facility (upto 1 % of net demand and time
liabilities, or NDTL, for a maximum period of 90 days) and a temporary
relaxation in statutory liquidity ratio (SLR) maintenance of upto 1.5% of
NDTL for lending to mutual funds and non-banking finance companies (NBFCs)
were also introduced. Interest rate ceilings on non resident Indian (NRI)
deposits were increased, ECBs norms were relaxed and non-deposit taking
NBFCs were given permission to raise short-term foreign currency
borrowings. RBI also reduced risk weights on banks' exposures to certain
sectors as also provisioning requirements for standard assets as a counter
cyclical measure. RBI also permitted loans granted by banks to housing
finance companies for on-lending for housing upto Rs. 2.0 million per
dwelling unit to be classified under priority sector lending. In December
2008, RBI permitted commercial real estate exposures restructured upto June
30,2009 to be treated as standard assets. In addition, second restructuring
by banks of exposures (excluding exposures to real estate, capital markets
and personal/consumer loans) up to June 30, 2009 was also made eligible for
concessionary asset classification treatment.

The Indian financial sector is healthy despite adverse developments in
global markets. The Indian banking system is well capitalised and well
placed to manage any asset quality concerns. The financial sector in India
is well placed to capitalise on growth opportunities in our domestic
markets.

ORGANISATION STRUCTURE:

Our organisation structure is designed to be flexible and customer-focused.
At the same time, we seek to ensure effective control and supervision and
consistency in standards across the organisation. The organisation is
structured into the following principal groups:

Retail Banking Group, comprising the retail liabilities, retail assets and
small enterprises businesses.

Rural, Micro-banking and Agri-business Group, comprising the rural and
agricultural lending and other banking businesses.

Wholesale Banking Group, comprising the corporate & investment banking,
commercial banking, project finance and government banking businesses.

International Banking Group, comprising the Bank's international
operations, including operations in various overseas markets as well as
products and services for NRIs, international trade finance, correspondent
banking and wholesale resource mobilisation.

Global Markets Group, comprising our global client-centric treasury
operations.

Corporate Centre, comprising financial reporting; planning and strategy;
asset liability management; investor relations; secretarial; corporate
communications; risk management; compliance; internal audit; legal;
financial crime prevention and reputation risk management; and the Bank's
proprietary trading operations across various markets.

Human Resources Management Group, which is responsible for the Bank's
recruitment, training, leadership development and other personnel
management functions and initiatives.

Global Operations & Middle Office Groups, which are responsible for back-
office operations, controls and monitoring for our domestic and overseas
operations.

Organisational Excellence Group, which is responsible for enterprise-wide
quality and process improvement initiatives.

Technology Management Group, which is responsible for enterprise-wide
technology initiatives, with dedicated teams serving individual business
groups and managing information security and shared infrastructure.

Global Infrastructure & Administration Group, which is responsible for
management of corporate facilities and administrative support functions.

BUSINESS REVIEW:

Fiscal 2009 was a year of unprecedented volatility. The first half of the
year saw high inflation and interest rates but the business environment
continued to be robust with continued investments by the corporate sector.
However, the second half of the year was impacted by the global financial
and liquidity crisis and loss of business confidence. Given the volatile
operating environment, the focus of the Bank was on capital conservation,
liquidity management and risk containment. At the same time we continued to
grow our branch network with a focus on increasing our low cost and retail
deposit base while maintaining a strict control on operating expenses.

Retail Banking:

Fiscal 2009 saw a further slowdown in retail credit growth in the banking
system due to a volatile interest rate environment, high asset prices and
the impact of economic slowdown on consumer spending. Retail credit growth
of scheduled commercial banks has now decreased from about 30% over the
last few years to about 15% in fiscal 2008 and to less than 10% in fiscal
2009.

The retail credit business requires a high level of credit and analytical
skills and strong operations processes backed by technology. Our retail
strategy is centered on a wide distribution network, comprising our
branches and offices and dealer and real estate developer relationships; a
comprehensive and competitive product suite; technology-enabled back-office
processes; and a robust credit and analytical framework.

During fiscal 2009, we focused on risk containment in the retail credit
business. We tightened our lending norms and moderated our disbursements,
especially in the unsecured retail loans segment. However, we continue to
believe that retail credit has robust long-term growth potential, driven by
sound fundamentals, namely, rising income levels and favourable demographic
profile. We are the largest provider of retail credit in India with a total
retail portfolio of Rs. 1,062.03 billion at March 31, 2009, constituting
49% of our total loans.

During fiscal 2009, we focused on increasing the proportion of low-cost
retail deposits in our funding base. Our current and savings account (CASA)
deposits as a percentage of total deposits increased from 26.1% at March
31, 2008 to 28.7% at March 31, 2009. We continued to expand our branch
network during the year. Our branch network has now increased from 755
branches & extension counters at March 31, 2007 to 1,262 branches &
extension counters at March 31,2008 and 1,419 branches & extension counters
at March 31,2009. We have also received licenses for 580 additional
branches from RBI. Our strategy is to fully leverage the branch network for
sales and service of the entire range of liability, asset and fee-based
products and services to retail customers.

In conjunction with the expansion in branch network, we have continued to
expand our electronic channels, namely internet banking, mobile banking,
call centres and ATMs, and migrate customer transaction volumes to these
channels. We increased our ATM network to 4,713 ATMs at March 31, 2009 from
3,881 ATMs at March 31, 2008. Our call centres have a total seating
capacity of approximately 4,150 sales and service workstations. Transaction
volumes on internet and mobile banking have grown significantly,
constituting an increasing percentage of total customer transactions.

Cross-selling new products and also the products of our life and general
insurance subsidiaries to our existing customers is a key focus area for
the Bank. Cross-sell allows us to deepen our relationship with our existing
customers and helps us reduce origination costs as well as earn fee income.
The expanded branch network has given us a large footprint in the country
and would serve as an integrated channel for deposit mobilisation, selected
retail asset origination and distribution of third party products. In
fiscal 2009, about 23% of ICICI Prudential Life Insurance Company's new
business premium (on an annualised premium equivalent basis) was generated
through ICICI Bank. We will continue to focus on cross-sell as a means to
improve profitability and offer a complete suite of products to our
customers. We continue to leverage our multi-channel network for
distribution of third party products like mutual funds. Government of India
relief bonds and insurance products.

Customer service is a key focus area for the Bank and we have adopted a
multi-pronged approach to continuously monitor and enhance customer service
levels. We conduct regular training programmes for employees to improve
customer handling and interaction and have incorporated customer service
metrics in performance evaluation.

Small Enterprises:

We have expanded our reach to about one million Small and Medium Enterprise
(SME) customers servicing their needs through more than 1,400 branches and
technology enabled channels. We have focused on providing transaction
banking, trade, investment and financing solutions to SMEs. To deliver
these services efficiently, we have evolved a unique cluster banking
approach, corporate linked lending programmes, bouquet of small business
banking products and investment banking and advisory services.

Over the years we have undertaken various SME focused initiatives to
support and shape the SME ecosystem in the country. We setup the 'Emerging
India Awards' which recognises the spirit of successful entrepreneurship
across the industry clusters; played a role in setting up a SME credit
rating agency 'SMERA'; launched 'SME India toolkit' an on-line business and
advisory resource for SMEs in collaboration with International Finance
Corporation and IBM; started the 'SME Dialogue' a weekly feature on SMEs
which shares best practices and success stories of SMEs; and created a
unique platform 'SME CEO Knowledge Series' to mentor and assist SMEs
entrepreneurs.

During fiscal 2009, we were named the 'Best Private Sector Bank in SME
Financing' by Dun & Bradstreet. Our SME strategy will continue to focus on
building a deeper customer relationship by offering comprehensive and
customised financial solutions and to be a preferred banking partner for
SMEs.

Corporate Banking:

Our corporate banking strategy is based on providing comprehensive and
customised financial solutions to our corporate customers. We offer a
complete range of corporate banking products including rupee and foreign
currency debt, working capital credit, structured financing, syndication
and transaction banking products and services.

Our corporate and investment banking franchise is built around a core
relationship team that has strong relationships with almost all of the
country's corporate houses. The relationship team is product agnostic and
is responsible for managing banking relationships with clients. We have
also put in place product specific teams with a view to focus on specific
areas of expertise in designing financial solutions for clients. The
investment banking team is responsible for working with the relationship
team in India and our international subsidiaries and branches, for
origination, structuring and execution of investment banking mandates on a
global basis. We have created a separate credit function inside the
corporate banking group to monitor the credit portfolio. While we had
dedicated sales teams for trade services and transaction banking products,
we have now created a Commercial Banking Group within the Wholesale Banking
Group for growing this business through identified branches, while working
closely with the corporate relationship teams. Our strategy for growth in
commercial banking, or meeting the regular banking requirements of
companies for transactions and trade, is based on not only leveraging our
strong client relationships, but also focusing on enhancing client
servicing capability at the operational level.

The first half of fiscal 2009 saw continued demand for credit from the
corporate sector, with growth and additional investment demand across all
sectors. We were able to leverage our international presence and deep
corporate relationships to work closely on overseas expansion of Indian
companies and infrastructure projects in India. However, post the
deterioration in the global economic environment in the second half of
fiscal 2009, we adopted a cautious approach to lending and were selective
in extending new loans.

As the Indian economy resumes its growth path, the need for infrastructure
development and expansion of Indian companies will provide exciting
opportunities for our corporate banking business. We will continue to focus
on increasing the granularity and hence stability of our revenue streams by
executing our transaction banking and trade services strategy and deepening
our client relationships by offering complete solutions for their trade,
transaction banking and funding requirements.

Project Finance:

Given the rapid growth of the Indian economy, infrastructure development
and investment across sectors is critical for sustaining economic growth by
addressing supply bottlenecks.

The power sector is expected to witness large investments involving
significant capacity additions over the next few years primarily driven by
increased private sector participation. Increasing interest is being
expressed in renewable sources of energy such as wind power and solar
power. The commencement of production of natural gas from the Krishna-
Godavari basin is expected to benefit the fertiliser and petrochemical
sectors, besides power plants. The oil and gas sector is also expected to
witness significant activity across the entire value chain.

The telecom sector is expected to continue its accelerated growth due to
large investments in rollout of new networks with increased focus on tier-2
and rural markets and the impending 3G licence auctions. This will be
augmented by increased sharing of passive elements like towers, enabling
faster rollout of networks providing impetus to the growth of passive
infrastructure segments.

The transportation sector has also been witnessing renewed momentum in the
form of new projects being bid out for development of national highways
(through National Highway Development Programme) and state highways. These
are also expected to create significant momentum for the construction
industry. The port sector is witnessing creation of new capacities both in
the bulk and container cargo segments and increased participation of the
private sector. The railway sector is also expected to witness investments
in modernisation of railway stations, logistics and dedicated freight
corridors.

The mining industry in India is gearing up for increase in production and
exploration to meet the growing demand. Recent initiatives by the
Government like the Natural Mineral Policy 2008 are expected to create
opportunities for investments across the mining value chain by private
sector participants.

The key to our project finance proposition is our constant endeavour to add
value to projects through financial structuring to ensure bankability.
These services are backed by sectoral expertise and sound due diligence
techniques.

International Banking:

Our international strategy is focused on building a retail deposit
franchise, meeting the foreign currency needs of our Indian corporate
clients and achieving the status of the preferred NRI community bank in key
markets. We also seek to build stable wholesale funding sources and strong
syndication capabilities to support our corporate and investment banking
business, and to expand private banking operations for India-centric asset
classes. ICICI Bank currently has subsidiaries in the United Kingdom,
Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka,
Dubai International Finance Centre, Qatar Financial Centre and the United
States and representative offices in the United Arab Emirates, China, South
Africa, Bangladesh, Thailand, Malaysia and Indonesia. The Bank's wholly
owned subsidiary ICICI Bank UK PLC has eleven branches in the United
Kingdom and a branch each in Belgium and Germany. ICICI Bank Canada has ten
branches. ICICI Bank Eurasia Limited Liability Company has two branches.

During fiscal 2009, we focused on meeting the foreign currency needs of
Indian corporates for their overseas and domestic expansion. At the same we
also successfully syndicated our client exposures to other financial
intermediaries looking to invest in Indian corporates. We continued to
successfully leverage our technology enabled franchise to create a growing
international deposit base. ICICI Bank Canada saw an increase of about CAD
1.75 billion in term deposits during fiscal 2009 while its customer
accounts increased from about 200,000 at March 31, 2008 to over 280,000 at
March 31,2009. ICICI Bank UK saw an increase of about US$ 1.80 billion in
retail term deposits during fiscal 2009 due to which the proportion of
retail term deposits in total deposits increased from 16% at March 31, 2008
to 58% at March 31, 2009. ICICI Bank UK's customer base increased from
about 210,000 at March 31, 2008 to over 310,000 customers at March 31,
2009. Total advances of our international banking subsidiaries at March
31,2009 were US$ 7.66 billion. During fiscal 2009, we continued to maintain
healthy liquidity at our overseas banking subsidiaries.

With the growth in our domestic branch network, our franchise among NRIs
has grown significantly over the last few years. A well-rounded offering
with a comprehensive India-linked product suite, convenient technology-
enabled access, and efficient customer service has enabled us to establish
a well-recognised financial services brand for NRIs. In fiscal 2009 we
further consolidated our customer relationship management and launched new
products to give superior experience to our customers. We launched the 'NRI
Edge' - a privilege offering for affluent NRIs, along with the Global
Indian Account and an innovative Call-and-Remit offering. Our customer base
stands at over 500,000 NRIs and we continue to maintain a market share of
25% in the inward remittances business. In fiscal 2009 we also consolidated
our private banking business across India and international markets and
launched the ICICI Group Global Private Clients offering. This offering for
high net worth individuals, now spans over 20,000 clients globally.

Rural banking and agri-business:

Rural India is the key to sustaining India's current growth momentum and
our rural banking strategy seeks to match the growing demand for financial
services in rural areas. The Rural, Micro Banking and Agri Business Group
(RMAG) has developed financing schemes that meet the needs of customers
across the agriculture value chain. We offer financial solutions to
farmers, commodity traders & processors, SMEs & corporates in the
agriculture sector and microfinance institutions.

We have financed about 3.5 million low income customers in collaboration
with micro finance institutions. It is our endeavour to not only increase
finance to this sector but also their ability to mitigate risks by offering
micro savings, investment and insurance products. We launched the Kisan
Credit Card for providing adequate and timely support to farmers under a
single window with flexible and simplified procedures. Another key focus
area was to increase warehouse based finance to the farmer/small aggregator
at the village level. To mitigate the risk associated with financing small
warehouses we use technology solutions to help monitor these warehouses and
thereby greatly increase the feasibility of financing small warehouses at
the village level. We continued to finance suppliers and vendors of
corporates and medium enterprises engaged in agriculture linked businesses.
We have also increased our relationships with co-operatives that are
constituted by farmers.

We have taken several initiatives to increase awareness among rural
customers for enhancing credit penetration in rural areas. We launched the
'Kamdhenu - Cattle Loans Campaign' to reach out to cattle farmers. The
campaign received two marketing awards - the Rural Marketing Agencies India
(RMAI) Award and the WOW Events & Experiential Marketing Awards.

RISK MANAGEMENT:

Risk is an integral part of the banking business and we aim at delivering
superior shareholder value by achieving an appropriate trade-off between
risk and returns. The key risks are credit risk, market risk and
operational risk. Our risk management strategy is based on a clear
understanding of various risks, disciplined risk assessment and measurement
procedures and continuous monitoring. The policies and procedures
established for this purpose are continuously benchmarked with
international best practices. The key principles underlying our risk
management framework are as follows:

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. Our Risk Committee reviews risk
management policies in relation to various risks including portfolio,
liquidity, interest rate, investment policies and strategy, and regulatory
and compliance issues in relation thereto. Our Credit Committee reviews
developments in key industrial sectors and our exposure to these sectors as
well as to large borrower accounts. Our Audit Committee provides direction
to and also monitors the quality of the internal audit function. Our Asset
Liability Management Committee is responsible for managing the balance
sheet and reviewing our asset-liability position.

Policies approved from time to time by the Board of Directors/Committees of
the Board form the governing framework for each type of risk. The business
activities are undertaken within this policy framework.

We have dedicated groups viz. Global Risk Management Group (GRMG),
Compliance Group, Corporate Legal Group, Internal Audit Group and the
Financial Crime Prevention and Reputation Risk Management Group (FCPRRMG),
with a mandate to identify, assess and monitor all of the Bank's principal
risks in accordance with well-defined policies and procedures. GRMG is
further organised into the Global Credit Risk Management Group, the Global
Market Risk Management Group and the Operational Risk Management Group.
These groups are completely independent of all business operations and
coordinate with representatives of the business units to implement ICICI
Bank's risk management methodologies. The Internal Audit and Compliance
groups are responsible to the Audit Committee of the Board.

Credit Risk:

Credit risk is the risk that a borrower is unable to meet its financial
obligations to the lender. All credit risk related aspects within the Bank
are governed by the Credit and Recovery Policy (Credit Policy). The Credit
Policy outlines the type of products that can be offered, customer
categories, target customer profile, credit approval process and limits.
The Credit Policy is approved by the Board of Directors.

We measure, monitor and manage credit risk for each borrower and also at
the portfolio level. In order to assess the credit risk associated with any
financing proposal, we assess a variety of risks relating to the borrower
and the relevant industry. We have a structured and standardised credit
approval process which includes a well-established procedure of
comprehensive credit appraisal and credit rating. We have developed
internal credit rating methodologies for rating obligors. The rating
factors in quantitative and qualitative issues and credit enhancement
features specific to the transaction. The rating serves as a key input in
the approval as well as post-approval credit processes. Credit rating, as a
concept, has been well internalised within the Bank. The rating for every
borrower is reviewed at least annually. A risk based asset review framework
has also been put in place wherein the frequency of asset review would be
higher for cases with higher outstanding and/or lower credit rating.
Industry knowledge is constantly updated through field visits and
interactions with clients, regulatory-bodies and industry experts.

The Board of Directors has delegated authority to the Credit Committee,
consisting of a majority of independent Directors, the Committee of
Directors (CoD), consisting of whole time Directors, the Committee of
Executives-Credit, the Regional Committee-Credit, Retail Credit Forums,
Small Enterprise Group Forums and Agri Credit Forums, all consisting of
designated executives, and to individual executives in the case of
program/policy based products, to approve financial assistance within
certain individual and group exposure limits set by the Board of Directors.
The authorisation is based on the level of risk and the quantum of
exposure, to ensure that the transactions with higher exposure and level of
risk are escalated to a higher forum/committee for approval.

Credit facilities with respect to retail products are provided as per
approved product policies. Our credit officers evaluate credit proposals on
the basis of the product policy approved by the Retail Credit Forum and the
risk assessment criteria defined by the Global Credit Risk Management
Group. These criteria vary across product segments but typically include
factors such as the borrower's income, the loan-to-value ratio, demographic
parameters and certain stability factors. Credit scoring models are used in
the case of certain products like credit cards. There is segregation of the
sourcing, credit underwriting and collection of retail advances to achieve
independence.

In addition, the Credit and Treasury Middle Office Groups and the Global
Operations Group monitor operational adherence to regulations, policies and
internal approvals. We have centralised operations to manage operating risk
in most back office processes of the Bank's retail loan business. The fraud
prevention and control group manages fraud-related risks through fraud
prevention and through recovery of fraud losses. The segregation of
responsibilities and oversight by groups external to the business groups
ensure adequate checks and balances.

Market Risk:

Market risk is the possibility of loss arising from changes in the value of
a financial instrument as a result of changes in market variables such as
interest rates, exchange rates, credit spreads and other asset prices. Our
exposure to market risk is a function of our trading and asset-liability
management activities and our role as a financial intermediary in customer-
related transactions. The objective of market risk management is to
minimise the tosses on earnings and equity capital due to market risk.

Market risk policies include the Investment Policy and the Asset-Liability
Management (ALM) Policy. The policies are approved by the Board of
Directors. The Asset-Liability Management Committee (ALCO) stipulates
liquidity and interest rate risk limits, monitors adherence to limits,
articulates the organisation's interest rate view and determines the
strategy in light of the current and expected environment. The policies and
processes, which provide the framework for implementing strategy, are
articulated in the ALM Policy. The Investment Policy addresses issues
related to investments in various trading products. The Global Market Risk
Management Group exercises independent control over the process of market
risk management and recommends changes in processes and methodologies for
measuring market risk.

Interest rate risk is measured through the use of re-pricing gap analysis
and duration analysis. Liquidity risk is measured through gap analysis. We
ensure adequate liquidity at all times through systematic funds planning
and maintenance of liquid investments as well as by focusing on more stable
funding sources such as retail deposits in the long-term. We limit our
exposure to exchange rate risk by stipulating position limits.

The Treasury Middle Office Group monitors the asset-liability position
under the supervision of the ALCO. It also monitors the treasury activities
and adherence to regulatory/internal policy guidelines. The Treasury Middle
Office Group is also responsible for processing treasury transactions,
tracking the daily funds position and complying with all treasury-related
management and regulatory reporting requirements.

Operational Risk:

Operational risk is the risk of loss resulting from inadequate or failed
internal processes, people and systems or from external events. It includes
legal risk but excludes strategic and reputation risks. Operational risks
in the Bank are managed through a comprehensive internal control framework.
The control framework is designed based on categorisation of all functions
into front-office, comprising business groups; mid-office, comprising
credit and treasury mid-offices; back-office, comprising operations; and
corporate and support functions.

ICICI Bank's operational risk management framework is defined in the
Operational Risk Management Policy, approved by the Board of Directors.
While the policy provides a broad framework, detailed standard operating

procedures for operational risk management processes are established. The
policy is applicable across the Bank including overseas branches and aims
to ensure clear accountability, responsibility and mitigation of
operational risk. We have constituted an Operational Risk Management
Committee (ORMC) to oversee the implementation of the Operational Risk
Management framework. The policy specifies the composition, roles and
responsibilities of ORMC. The framework comprises identification and
assessment of risks and controls, new products and processes approval
framework, measurement through incidents and exposure reporting, monitoring
through key risk indicators and mitigation through process & controls
enhancement and insurance. We have formed an independent Operational Risk
Management Group for design, implementation and enhancement of operational
risk framework and support to business and operation groups in carrying out
operational risk management.

Compliance:

The Bank seeks to institute a strong culture of compliance at all levels
across the organisation. The Bank has a dedicated compliance group for
ensuring regulatory compliance across all its businesses and operations.
The key functions of this group include identification and assessment and
compliance related matters, review of new products and process from a
regulatory compliance perspective and ongoing monitoring and reporting. The
Bank has also put in place a group wide anti-money laundering policy
approved by the Board of Directors and Know Your Customer and transaction
monitoring procedures as per RBI guidelines. The Bank reviews these
policies and procedures from time to time.

TREASURY:

The treasury operations are structured along the balance sheet management
function, the client-related corporate markets business and the proprietary
trading activity.

Fiscal 2009 saw very high volatility in interest rates, wide swings in
liquidity conditions, global credit freeze and wide changes in inflation
levels resulting in significant movement in the yield curve at various
points in time. The government bond markets witnessed significant
volatility in yields. The balance sheet management function continued to
actively manage the government securities portfolio held for compliance
with SLR norms to optimise the yield on this portfolio, while maintaining
an appropriate portfolio duration given the volatile interest rate
environment. The focus of our proprietary trading operations was to
maximise profits from positions across key markets including corporate
bonds, government securities, interest rate swap, equity and foreign
exchange markets. While the adverse market conditions in the first half of
fiscal 2009 had an adverse impact on proprietary trading operations, the
Bank capitalised on the opportunities in the fixed income markets in the
third quarter of fiscal 2009 realising significant gains on its portfolio.
The Bank's overseas branches and subsidiaries also have exposure to credit
derivatives with investments in this portfolio representing exposures to
Indian corporates. During fiscal 2009, we sold the entire non-India linked
credit derivatives portfolio on which we realised a loss of about Rs. 4.75
billion, which had been provided for in fiscal 2008.

We provide foreign exchange and derivative products and services to our
customers through our Global Markets Group. These products and services
include foreign exchange products for hedging currency risk, foreign
exchange and interest rate derivatives like options and swaps and bullion
transactions. We also hedge our own market risks related to these products
with banking counterparties.

HUMAN RESOURCES:

During fiscal 2009, given the uncertain operating environment and change in
business strategy, we focused on reaching out to our employees on a regular
basis to ensure constant alignment with organisational goals and strategy.

We focused on bridging the skill gap and providing skilled manpower
wherever required. During fiscal 2009, we launched the Operations Academy,
Debt Service Management Academy, Corporate Banking Academy and the Credit
Academy. These job-linked, skill-enhancement academies helped in equipping
employees with new skill sets and knowledge. In addition, we continued to
utilise and build on the functional academies launched during fiscal 2008.
The first batch of over 700 Probationary Officers graduated from the ICICI
Manipal Academy during fiscal 2009 and was absorbed into the Bank at
managerial levels in different business groups. To further equip the
Probationary Officers with management and advanced skills, we have launched
an 18 months online executive MBA Program in collaboration with Manipal
University.

We also continued our focus on learning and development to build an
enhanced and effective knowledge base widely accessible through technology-
enabled platforms. During fiscal 2009 we extended our interactive
technology-based learning platform to our group companies while also
expanding the scope of its modules. We also launched tests on our mobile
learning platform to constantly test and update our sales and front office
employees on product and policy changes.

INFORMATION TECHNOLOGY:

ICICI Bank leverages information technology as a strategic tool to gain
competitive advantage and to improve productivity and efficiency of the
organisation. Our platforms are designed to service scale and are capable
of handling high customer and transaction volumes. We have used technology
to deliver process improvements, innovations and to create new products and
add value to our offerings.

Investing in appropriate technologies to create new business offerings,
improving performance and optimising costs continues to be a key focus
area. Continued focus on leveraging technology has resulted in improved
process efficiencies across the organisation. The emphasis on an enterprise
view of technology has led to an architecture that is highly aligned to the
changing business environment.

During fiscal 2009, technology initiatives resulted in more flexible and
cost-efficient solutions and services through service request automation,
enhanced use of the SMS alert platform and self-service enablers at
branches. New systems for human resources management and automating
collections were implemented. New interactive banking and direct banking
platforms were launched. The Bank also implemented a new audit management
system for use across the ICICI Group.

Given the fact that many of our systems are used on a 24x7 basis across
diverse time zones we initiated a re-architecture of some of our systems to
reduce application multiplicity, facilitate maintenance, improve fallbacks
and de-risk operations. This exercise was completed for our core banking
system during the year. Initiatives were also undertaken to consolidate
many existing applications and virtualise data centre technology assets. We
also focused on other areas like adoption of low cost alternate
technologies and security surveillance. IT controls relating to change and
incident management, audit and compliance were enhanced to proactively
align with the Bank's overall operational risk management framework under
Basel II norms.

KEY SUBSIDIARIES:

ICICI Prudential Life Insurance Company:

After rapid growth in the previous years, the life insurance market has
seen a slowdown in new business due to volatile market conditions. New
business annualised premium equivalent of ICICI Prudential Life Insurance
Company (ICICI Life) decreased by 18.6% to Rs. 53.02 billion in fiscal 2009
while total premium increased by 13.2% to Rs. 153.56 billion. The increase
in total premium was due to a 60.5% increase in renewal premium, reflecting
the long-term sustainability of the business. ICICI Life maintained its
market leadership in the private sector with an overall market share of
10.9% based on retail new business weighted received premium in fiscal
2009. Due to the business set-up and customer acquisition costs, which are
not amortised, and reserving for actuarial liability, ICICI Life's
statutory accounting results reduced the consolidated profit after tax of
ICICI Bank by Rs. 5.77 billion in fiscal 2009 (compared to Rs. 10.32
billion in fiscal 2008). The expense ratio has decreased from 14.9% in
fiscal 2008 to 11.8% in fiscal 2009. Assets held at March 31, 2009 were Rs.
327.88 billion compared to Rs. 285.78 billion at March 31,2008.

ICICI Life's unaudited New Business Profit in fiscal 2009 was Rs. 10.04
billion. Life insurance companies make accounting losses in initial years
due to business set-up and customer acquisition costs in the initial years
and reserving for actuarial liability. Further, in India, amortisation of
acquisition costs is not permitted. These factors have resulted in
statutory losses for ICICI Life since the company's inception, as its
business has grown rapidly year on year. If properly priced, life insurance
policies are profitable over the life of the policy, but at the time of
sale, there is a loss on account of non-amortised expenses and commissions,
generally termed as new business strain that emerges out of new business
written during the year. New Business Profit (NBP) is an alternate measure
of the underlying business profitability (as opposed to the statutory
profit or loss) and relevant in the case of fast expanding companies like
ICICI Life. NBP is the present value of the profits of the new business
written during the year. It is based on standard economic and non-economic
assumptions including risk discount rates, investment returns, mortality,
expenses and persistency assumptions.

ICICI Lombard General Insurance Company:

ICICI Lombard General Insurance Company (ICICI General) maintained its
leadership in the private sector with an overall market share of 11.2% in
fiscal 2009. ICICI General's premiums increased 3.3% from Rs. 33.45 billion
in fiscal 2008 to Rs. 34.57 billion in fiscal 2009. The industry continued
to witness a slowdown in growth on account of de-tariffication of the
general insurance industry whereby insurance premiums were freed from price
controls, resulting in a significant reduction in premium rates. The
industry also continued to witness the adverse impact of motor third party
insurance pool for third party insurance of commercial vehicles. ICICI
General achieved a profit after tax of Rs. 0.24 billion in fiscal 2009
compared to Rs. 1.03 billion in fiscal 2008.

ICICI Prudential Asset Management Company:

ICICI Prudential Asset Management Company (ICICI AMC) was the third largest
asset management company in India with average assets under management of
Rs. 514.32 billion for March 2009. The mutual fund industry was impacted by
the tight liquidity conditions in October and November 2008 which led to a
decrease in assets under management of money market funds. ICICI Prudential
AMC achieved a profit after tax of Rs. 7.1 million in fiscal 2009 compared
to Rs. 0.82 billion in fiscal 2008.

ICICI Venture Funds Management Company Limited:

ICICI Venture Funds Management Company Limited (ICICI Venture) maintained
its leadership position in private equity in India, with funds under
management of about Rs. 97.87 billion at year-end fiscal 2009. ICICI
Venture achieved a profit after tax of Rs. 1.48 billion in fiscal 2009
compared to Rs. 0.90 billion in fiscal 2008.

ICICI Securities Limited and ICICI Securities Primary Dealership Limited:

The brokerage industry saw a slowdown in revenues in fiscal 2009 as the
market turnover decreased sharply from its peak levels. ICICI Securities
achieved a profit after tax of Rs. 44.2 million in fiscal 2009 compared to
Rs. 1.51 billion in fiscal 2008. ICICI Securities Primary Dealership's
profit after tax increased from Rs. 1.40 billion in fiscal 2008 to Rs. 2.72
billion in fiscal 2009 due to higher profits from fixed income portfolio
consequent to the sharp decrease in yields on government securities in the
third quarter of fiscal 2009.

ICICI Bank UK PLC:

ICICI Bank UK PLC (ICICI Bank UK) is a full-service bank offering retail
and corporate and investment banking services in the UK and Europe. During
fiscal 2009, ICICI Bank UK focused on rebalancing its deposit base towards
retail term deposits. The Bank saw an increase of about US$ 1.80 billion in
retail term deposits during fiscal 2009 due to which the proportion of
retail term deposits in total deposits increased from 16% at March 31, 2008
to 58% at March 31, 2009. ICICI Bank UK's customer base increased from
about 210,000 at March 31, 2008 to over 310,000 customers at March 31,
2009. After accounting for the gains on buyback of bonds and mark-to-market
and impairment provisions on the investment portfolio, ICICI Bank UK's
profit after tax for fiscal 2009 was US$ 6.8 million. ICICI Bank UK's
capital position continued to be strong with a capital adequacy ratio of
18.4% at March 31, 2009.

ICICI Bank Canada:

ICICI Bank Canada is a full-service bank which offers a wide range of
financial solutions to cater to personal, commercial, corporate,
investment, treasury and trade requirements. ICICI Bank Canada saw an
increase of about CAD 1.75 billion in term deposits during fiscal 2009
while its customer accounts increased from about 200,000 at March 31, 2008
to over 280,000 at March 31, 2009. ICICI Bank Canada's profit after tax for
fiscal 2009 was CAD 33.9 million. At March 31, 2009, ICICI Bank Canada had
total advances of CAD 5.07 billion and total assets of CAD 6.43 billion.
ICICI Bank Canada's capital position continued to be strong with a capital
adequacy ratio of 19.9% at March 31, 2009.

KEY RISKS:

We have included statements in this annual report which contain words or
phrases such as 'will', 'expected to', etc., and similar expressions or
variations of such expressions, may constitute 'forward-looking
statements'. These forward-looking statements involve a number of risks,
uncertainties and other factors that could cause actual results,
opportunities and growth potential to differ materially from those
suggested by the forward-looking statements. These risks and uncertainties
include, but are not limited to, the actual growth in demand for banking
and other financial products and services in the countries that we operate
or where a material number of our customers reside, our ability to
successfully implement our strategy, including our use of the Internet and
other technology, our rural expansion, our exploration of merger and
acquisition opportunities both in and outside of India, our ability to
integrate recent or future mergers or acquisitions into our operations and
manage the risks associated with such acquisitions to achieve our strategic
and financial objectives, our ability to manage the increased complexity of
the risks we face following our rapid international growth, future levels
of impaired loans, our growth and expansion in domestic and overseas
markets, the adequacy of our allowance for credit and investment losses,
technological changes, investment income, our ability to market new
products, cash flow projections, the outcome of any legal, tax or
regulatory proceedings in India and in other jurisdictions we are or become
a party to, the future impact of new accounting standards, our ability to
implement our dividend policy, the impact of changes in banking regulations
and other regulatory changes in India and other jurisdictions on us, the
state of the global financial system and other systemic risks, the bond and
loan market conditions and availability of liquidity amongst the investor
community in these markets, the nature of credit spreads and interest
spreads from time to time, including the possibility of increasing credit
spreads or interest rates, our ability to roll over our short-term funding
sources and our exposure to credit, market and liquidity risks.

CREDIT RATINGS:

ICICI Bank's credit ratings by various credit rating agencies at March 31,
2009 are given below:

Agency Rating

Moody's Investor Service (Moody's) Baa2(1)

Standard & Poor's (S&P) BBB-(1)

Credit Analysis & Research Limited (CARE) CARE AAA

Investment Information and Credit Rating Agency (ICRA) AAA

CRISIL Limited AAA

Japan Credit Rating Agency (JCRA) BBB+(1)

(1). Senior foreign currency debt ratings.

PUBLIC RECOGNITION:

The Bank received several awards during fiscal 2009, including the
following:

* 'Excellence in Business Model Innovation' by Asian Banker

* 'Best Bank in SME financing (Private Sector)' by Dun & Bradstreet

* 'Best Transaction Bank in India 'by Triple A

* 'Best Trade Finance Bank in India' by Triple A

* 'Best Cash Management Bank in India' by Triple A

* 'Best Domestic Custodian in India' by Triple A

* 'Best Cash Management Bank in India' by Triple A

* 'Rural Marketing programme of the year,' award by WOW Event &
Experiential Marketing Award

Promoting Inclusive Growth:

ICICI Bank has always viewed Corporate Social Responsibility (CSR) as
integral to its core mission of delivering value to its stakeholders. The
Bank's CSR activities have taken three broad strategic directions: CSR
through commercial activities, CSR in partnership with civil society and
CSR through the ICICI Foundation for Inclusive Growth.

I. CSR through commercial activities:

By ensuring that its products and services meet fundamental social needs,
ICICI Group's commercial activities have for over five decades sought to
provide value to its customers and society alike, through project finance,
consumer finance, technology-based retail banking and financial services
for small enterprises. ICICI Bank continues to offer value to its customers
and society through its commercial activities, seeking to build sustainable
business models that are consistent with the Bank's own growth and
profitability while simultaneously stimulating the development of all
sectors of India's economy.

Under-served customer groups: ICICI Bank's Rural, Micro Banking and Agri
Business Group (RMAG) caters to the financial needs of farm and non-farm
sectors, including under-served customer groups like agri-enterprises, Self
Help Groups (SHGs), individual farmers and low-income households. To
provide access to financial services to low-income and other under-served
customer groups, RMAG has undertaken a range of initiatives:

* Financial services for agri-enterprises: During this fiscal year, RMAG
provided financial services aggregating about Rs.151.00 billion to about
3,000 agri-enterprises, supporting the employment of significant number of
people. It provides credit and banking services to SMEs active in the
agricultural value chain and has enhanced credit access for farmers.

* SHGs and micro lending: ICICI Bank's SHG and micro lending programmes
facilitate access to financial services for low-income households, a
segment of the Indian population that ICICI Bank has been serving for close
to a decade. Through direct credit linkages to SHGs promoted by Self Help
Promoting Institutions, the Bank has provided loans to SHGs. With a micro
lending book of Rs. 25.82 billion, ICICI Bank's micro lending initiative
reached 2.58 million low-income households in India this year.

* Cattle funding: Cattle farming provides a means of livelihood for
millions of farmers in India. The Bank's cattle funding initiative enables
farmers to take a loan to purchase even a single cow, enabling small cattle
farmers to grow their dairy businesses. It has partnered with dairies to
provide financing to farmers to purchase milch cattle. During fiscal 2009,
ICICI Bank disbursed cattle loans to the tune of Rs. 1.00 billion
benefiting about 31,000 farmers.

Godown (Warehouse) Security System: Smallerfarmers who need access to
immediate funds are more likely to sell their products soon after the
harvest, when prices for all commodities are at their lowest. ICICI Bank
launched warehouse receipt-based financing to strengthen farmers' inventory
holding capacity by allowing them to take a loan against the produce
(stored in a warehouse) and avoid distress sales. ICICI Bank has deployed
Micro ICICI Godown Security System to monitor the warehouses. The system
uses GSM-based technology with attached wireless motion, fire and shutter
sensors. Any intrusion, fire or motion inside the godowns is detected and
immediately informed to the registered user of the system. This innovation
has enabled the Bank to finance small and medium farmers and aggregators in
their godowns, making it possible for them to benefit from the increases in
off-season prices.

* Small and Medium Enterprises: The Bank's Small Enterprises Group
proactively reaches out to millions of SMEs across the country, using
multiple low-cost channels such as the Internet, dedicated call centre
teams, mobile (SMS) banking, ATMs, debit and credit cards, as well as
through the branch network. About one million SMEs were extended financial
services by the Bank this year. The Bank has also promoted usage of energy
and fuel-efficient technologies among SMEs and signed a Memorandum of
Understanding (MoU) with MITCON Consultancy Services Limited and Agrienergy
Consultancy. These partnerships aim to provide one-stop solutions to
industries for Clean Development Mechanism (CDM) projects and emissions
trade, including carbon credit business. The Bank expects this arrangement
to benefit SMEs who want to avail a complete package of services through
guidance from reliable partners with experience in the carbon credit
business.

II. CSR in partnership with civil society:

In these partnerships, ICICI Bank seeks to achieve a number of medium-term
goals, which include: Offering its employees and customers high quality
philanthropy products and services.

In this area, ICICI Bank has partnered with CSO Partners
(ww.csopartners.org.in) and its various partners.

* Payroll-giving: Since 2003, ICICI Bank has facilitated employee donations
to social causes through Givelndia (www.giveindia.org), a donation platform
that enables individuals to support social causes by donating to 100 non-
government organisations (NGOs) that have been screened for transparency
and credibility. Currently about 5,000 Bank employees participate in the
payroll-giving programme, which allows them to donate a part of their
salary to a cause of their choice every month.

* Employee volunteering: Given that there are a number of civil society
organisations that could benefit from the skills of ICICI Bank's employees,
the Bank has been working with Mitra (www.mitra.org.in) to offer a number
of options for Bank employees to volunteer with civil society organisations
(CSOs).

* Flood relief: In 2008, India experienced massive flooding in the states
of Bihar, Orissa, Assam and parts of West Bengal, causing significant
damage to human life, property and crops. ICICI Bank responded immediately,
mobilising funds to help people affected by the floods by appealing to its
Internet banking customers and its employees. More than 55,000 individual
customers responded, for a total contribution of Rs. 32 million. Nearly
63,000 employees of the ICICI Group supported the cause by contributing a
day's salary, and several ICICI Group companies made a matching employer
contribution, for a total of Rs. 107 million. The ICICI Group is working
through CSO Partners, Givelndia as well as Sphere India and its partners to
utilise this amount for the rehabilitation of flood victims in Orissa,
Bihar and West Bengal.

Developing partnerships designed towards building India's talent pool:

* Read to Lead: ICICI Bank's Read to Lead programme invests in India's
future by facilitating access to elementary education for 100,000 out-of-
school children from 6-13 years of age. It aims to provide low-income
children, including girls, tribal children and children from remote rural
areas, with access to education by strengthening the government system of
education. Read to Lead is a nationwide initiative, spanning 14 states
- Andhra Pradesh, Bihar, Delhi, Gujarat, Haryana, Jharkhand,
Karnataka, Maharashtra, Orissa, Rajasthan, Tamil Nadu, Tripura, Uttar
Pradesh and West Bengal. ICICI Bank, through CSO Partners, has partnered
with various NGOs who have vast experience in this field to share their
knowledge and help the Bank run this programme effectively. The Bank's
partners have been chosen on the basis of their years of experience in
the field of education, the sustainability of their models and their
outreach.

III. CSR through ICICI Foundation for Inclusive Growth:

Given its size and level of engagement with the Indian economy, ICICI Bank
believes that its own long-term growth and profitability are directly
linked to the inclusive growth of all sectors of the nation's economy. It
is therefore in the interest of stakeholders to invest in inclusive growth.
To give a focus to its commitment to making India's economic growth more
inclusive, the ICICI Group started the ICICI Foundation for Inclusive
Growth (www.icicifoundation.org) on January 4, 2008. The ICICI Foundation
for Inclusive Growth (IFIG) envisions a world free of poverty in which
every individual has the freedom and power to create and sustain a just
society to live in. IFIG's mission is to create and support strong
independent organisations which work towards empowering the poor to
participate in and benefit from the Indian growth process.

IFIG's first year has been a period of learning, building the Foundation's
vision, mission and strategy. Rather than build departments within a large
monolithic foundation, IFIG has chosen to collaborate with and foster the
development of independent organisations with focused expertise in five
areas: (i) basic health, (ii) elementary education, (iii) financial
inclusion, (iv) civil society organisations (CSOs) and (v) environmental
responsibility.

IFIG's work and strategic partnerships to support inclusive growth are
guided by its core beliefs:

IFIG believes that good health and basic education are fundamental pre-
requisites to achieving inclusive growth. In line with this belief, IFIG
supports ICICI Centre for Child Health and Nutrition (iCCHN) (www.icchn.
org.in) to strengthen the ability of the government to deliver basic
healthcare and nutrition to every child from the time of conception to the
age of three. ICCHN supports field-based action-research projects across
India, facilitates state-civil society resource partnerships to strengthen
public systems and programmes.

and develops a variety of knowledge, policy and capacity building
initiatives to address key sectoral gaps. Throughout, the focus is on
generating and translating strategies with the greatest potential for
securing large-scale and sustainable improvements in child survival and
development in India.

IFIG also supports ICICI Centre for Elementary Education (ICEE)
(www.icee.org.in), an inter-disciplinary organisation that works to
strengthen the ability of the government to provide high quality education
to every child from pre-school through elementary school. ICEE seeks to
improve teacher performance, advance curricular reform, build a discourse
on education through research and support the development of elementary
education as an academic discipline in India. It provides financial and
resource support to NGOs, and collaborates with NGOs, state governments and
academic institutions to deepen and broaden institutional reform in India's
state system of elementary education.

While healthy and educated individuals have the capacity to transform their
lives, IFIG believes that their ability to do so depends on the quality of
their access to transformative tools such as finance. Financial services
enable individuals and enterprises to smooth consumption and allocate
resources most productively, for example, by allowing them to better manage
risk (e.g. insurance) and take advantage of future opportunities (e.g.
saving today to bui'fd capital for tomorrow). A well-functioning financial
system and access to financial services can also enable households to
engage with the larger economy by providing payment and settlement systems
(e.g. electronic payment systems) and by transmitting price information
through the economy. Access to comprehensive financial services is
therefore an essential part of the development process and inclusive
growth.

Through its support to IFMR Trust Advocacy Unit (ITAU)
(www.ifmrtrust.co.in/advocacy), IFIG works to ensure that every individual
and every enterprise in India has complete access to financial services.
Since its creation in 2008, the IFMR Trust Advocacy Unit team has applied
its focus and resources to initiate research projects, provide support to
new institutions, establish partnerships, and document and disseminate
knowledge. Its central intent has been to become a creative and strategic
group that can deploy its ideas, energies and funding to create leveraged
impact on the state of access and use of high quality financial services
for the financially excluded in India.

For the Indian growth process to be truly inclusive, health, education and
access to complete financial markets are necessary but not sufficient
conditions. Ensuring that every individual has the freedom and the power to
create and sustain a just society and thereby benefit from the Indian
growth process requires additional efforts on the part of civil society and
policymakers. Grassroots organisations and regulatory infrastructure, for
example, must be strengthened to ensure that the market does not exploit
marginalised sectors of the population or the environment.

Through its support to CSO Partners, IFIG seeks to support social change
and build a defence against exploitation of all kinds by strengthening
CSOs. CSO Partners works towards inclusive growth by strengthening CSOs and
forging key partnerships for them from its expanding network of support
partners and contributors, including corporate groups, governments, and
individuals. CSO Partners aims to equip CSOs with financial and human
resources to achieve high standards of quality and efficiency by mobilising
resources and facilitating support services for CSOs.

Through Environmentally Sustainable Finance (ESF)
(www.ifmr.ac.in/cdf/esf.htm), an initiative at the Centre for Development
Finance, IFIG supports policy and regulations that ensure that growth and
development processes proceed in an environmentally sustainable manner. ESF
focuses on research and action to inform environmental policymaking and
implementation, integrate environmental sustainability into development
initiatives, and support scalable commercial and non-profit interventions
to make India's economy more environmentally sustainable from the bottom
up.

IFIG provides active support and mentorship to these five partners - a
strategy that it believes will build knowledge and specialisation in each
field and ensure long-term impact. To achieve maximum impact, IFIG's
strategic partners in turn work closely with additional partners at the
community level, enhancing knowledge, building networks and advocating for
changes necessary to catalyse inclusive growth and create a just society.

The Organisational Excellence Group (OEG) was set up in 2002 with a mandate
to build and institutionalise quality practices across the ICICI Group. OEG
has over the years worked towards integrating the local efforts of business
units into a common platform and building a quality strategy and roadmap to
meet the growing needs of the Group. OEG has evaluated and drawn upon
quality techniques practised by world class companies in automobiles,
hospitality, financial services, banking, heavy engineering and aviation in
building quality practices at the ICICI Group.

The following have been the major focus areas of OEG:

* Institutionalise a focus on quality across the ICICI Group;

* Work with business units to catalyse performance improvements;

* Create a culture of quality and continual improvement;

* Build knowledge capability in the domain of quality in business groups;

* Develop and implement quality practices for the Bank;

* Cross-pollinate best practices among group companies;

* Provide thought leadership on quality practices; and

* Remain at the cutting edge in our global search for quality practices.

ICICI Bank has a number of achievements to its credit, including:

* First services company in Asia to have deployed Five S enterprise-wide;

* First financial services company in south Asia to have deployed Lean;

* Patent for Quality Roadmap from Singapore patent office; and

* ISO:9001:2008 certification for OEG.

The process management framework is built around elements such as
leadership, process thinking, training, continual improvement and results.
Processes have well defined metrics and performance is tracked through
dashboards on an ongoing basis. The leadership of each business unit
continuously reviews the existing processes, initiates improvements and
works towards instilling process thinking among employees. ICICI Bank has a
large number of Six Sigma Change Agents, Lean Change Agents and Elementary
Problem Solving Agents.

ICICI Bank has more than 1,500 locations which regularly practice Five S.
This simple, yet extremely powerful technique, has been not only helped in
building workplace efficiency but also helped to get engagement of teams on
local improvements. To build a culture of improvements, the Bank has been
undertaking Large Improvement Projects and Small Improvement Projects. The
former are targeted towards projects that impact the strategic business
objectives. The latter are tactical improvements that are carried out by
teams on the shop-floor.

'Lean Breakthrough' projects are undertaken by dedicated teams with the
objective of delivering substantial improvements within a period of 6-7
days. So far more than 350 lean breakthrough projects have been executed in
the Bank and this is expected to be a major quality and process improvement
mechanism for the ICICI Group.

BACKGROUND:

The first half of fiscal 2009 was characterised by increasing inflation and
interest rates. Equity markets weakened due to global macroeconomic
concerns and a reversal in the pattern of global capital flows. Despite
these developments, the operating environment remained stable with
continued corporate investment in India as well as outbound merger and
acquisition activity and robust demand for retail savings and investment
products.

The bankruptcy of Lehman Brothers in September 2008 led to a rapid
deterioration of the global macroeconomic environment and a sharp
moderation in global economic activity. In India, this impact was felt
mainly through the trade and capital flow channels. As a result, there was
a sharp reduction in domestic liquidity in September-October 2008. The
decline in global commodity prices led to a moderation in inflation and
facilitated substantial reductions in key policy rates and reserve
requirements. Inflation based on Wholesale Price Index moderated from a
peak of 12.9% in August 2008 to 0.3% at year-end fiscal 2009. Since October
2008, Reserve Bank of India (RBI) has reduced the cash reserve ratio (CRR)
by 400 basis points to 5.0%, the statutory liquidity ratio (SLR) by 100
basis points to 24.0%, the repo rate by 425 basis points to 4.75% and the
reverse repo rate by 275 basis points to 3.25%. The reduction in policy
rates led to a reduction in market interest rates with the yield on 10-year
government securities declining by about 320 basis points in the quarter
ended December 31, 2008 (Q3-2009). During the quarter ended March 31, 2009
(Q4-2009), the yield on government securities increased by about 175 basis
points following a larger than expected government borrowing programme.
Equity markets continued to remain weak with the BSE Sensex declining from
a peak of 17,600 on May 2, 2008 to 9,709 at year-end fiscal 2009. The rupee
depreciated from Rs. 40.12 per US dollar at year-end fiscal 2008 to Rs.
50.72 per US dollar at year-end fiscal 2009.

The Central Statistical Organisation (CSO) placed GDP growth at 7.8% during
the first half of fiscal 2009 compared to 9.3% during the first half of
fiscal 2008. During the third quarter of fiscal 2009, GDP growth moderated
to 5.3% mainly due to a 2.2% decline in agricultural growth and a
moderation of industrial sector growth to 0.8%.

The trends in the economy were also reflected in the banking sector. Non-
food credit growth in the system increased to about 30.0% on a year-on-year
basis during October-November 2008 from about 22.0% at year-end fiscal
2008, before moderating significantly to 17.5% at year-end fiscal 2009.
Growth in total deposits moderated from about 24.0% on a year-on-year basis
in November 2008 to about 20.0% at year-end fiscal 2009. The growth in
total deposits was due to a 24.0% growth in time deposits in fiscal 2009,
as demand deposits in the system contracted by about 1.0% during fiscal
2009.

Given the uncertain and volatile economic environment, we accorded priority
to risk containment, liquidity management and capital conservation. In view
of high asset prices and the increase in interest rates since the second
half of fiscal 2008, we followed a conscious strategy of moderation of
retail disbursements, especially in the unsecured retail loans segment. The
weak equity markets and reduction in demand for retail savings and
investment products as also corporate investment and M&A activity during
the second half of fiscal 2009 had a negative impact on our fee and other
non-interest income (including dividend from subsidiaries). While we
capitalised on opportunities in the fixed income markets due to reduction
in interest rates during Q3-2009, our equity, fixed income and credit
derivative portfolios were negatively impacted due to weaker equity
markets, volatile interest rates and a widening of credit spreads during
fiscal 2009.

STANDALONE FINANCIALS AS PER INDIAN GAAP:

Summary:

Profit before provisions and tax increased by 12.1% to Rs. 89.25 billion in
fiscal 2009 from Rs. 79.61 billion in fiscal 2008 primarily due to an
increase in net interest income by 14.6% to Rs. 83.67 billion in fiscal
2009 from Rs. 73.04 billion in fiscal 2008 and decrease in non-interest
expenses by 13.6% to Rs. 70.45 billion in fiscal 2009 from Rs. 81.54
billion in fiscal 2008, offset, in part, by decrease in non-interest income
by 13.7% to Rs. 76.03 billion in fiscal 2009 from Rs. 88.11 billion in
fiscal 2008. Provisions and contingencies (excluding provision for tax)
increased by 31.1% during fiscal 2009 due to a higher level of specific
provisioning on non-performing loans, offset, in part, by lower general
provisioning as the advances portfolio did not increase. Profit before tax
increased by 1.2% to Rs. 51.17 billion in fiscal 2009 from Rs. 50.56
billion in fiscal 2008. Tax provision was Rs. 13.59 billion in fiscal 2009
compared to Rs. 8.98 billion in fiscal 2008, due to the higher effective
tax rate consequent to a change in mix of taxable profits, which had a
lower component of income from dividend and capital gains. Profit after tax
decreased by 9.6% to Rs. 37.58 billion in fiscal 2009 from Rs. 41.58
billion in fiscal 2008.

Net interest income increased by 14.6% to Rs. 83.67 billion in fiscal 2009
from Rs. 73.04 billion in fiscal 2008, reflecting primarily an increase in
net interest margin by 21 basis points to 2.4% in fiscal 2009 compared to
2.2% in fiscal 2008 and increase in average interest-earning assets to
Rs.3,436.20 billion in fiscal 2009 from Rs. 3,288.34 billion in fiscal
2008.

Non-interest income decreased by 13.7% to Rs. 76.03 billion in fiscal 2009
from Rs. 88.11 billion in fiscal 2008 primarily due to decrease in other
income (including dividend from subsidiaries) by 65.0% to Rs. 4.03 billion
in fiscal 2009 from Rs. 11.52 billion in fiscal 2008.

Non-interest expense decreased by 13.6% to Rs. 70.45 billion in fiscal 2009
from Rs. 81.54 billion in fiscal 2008 primarily due to decrease in direct
marketing agency expenses to Rs. 5.29 billion in fiscal 2009 from Rs. 15.43
billion in fiscal 2008 and due to overall cost reduction initiatives
undertaken by us.

Provisions and contingencies (excluding provision for tax) increased to
Rs.38.08 billion in fiscal 2009 from Rs. 29.05 billion in fiscal 2008
primarily due to higher level of specific provisioning on non-performing
retail loans. Increase in retail non-performing assets was primarily on
account of seasoning of the secured loan portfolio, relatively higher
losses on unsecured portfolio and the adverse macro-economic environment.

Total assets decreased by 5.1% to Rs. 3,793.01 billion at year-end fiscal
2009 from Rs. 3,997.95 billion at year-end fiscal 2008 primarily due to
decrease in cash and balances with RBI by Rs. 118.41 billion due to
reduction in CRR requirement, decrease in investments by Rs. 83.96 billion
and decrease in advances by Rs. 73.05 billion.

Operating results data:

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

Rs. in billion, except percentages
Fiscal Fiscal % change
2009 2009
Interest income, gross of amortisation of premium
on government securities 316.86 318.18 0.4

Less: amortisation of premium on government
securities 8.98 7.25 (19.3)

Interest income 307.88 310.93 1.0

Interest expense 234.84 227.26 (3.2)

Net interest income 73.04 83.67 14.6

Non-interest income 88.11 76.03 (13.7)

Fee income(1) 66.27 65.24 (1.6)

Treasury income 8.15 4.43 (45.6)

Lease income 2.17 2.33 7.4

Others 11.52 4.03 (65.0)

Operating income 161.15 159.70 (0.9)

Operating expenses 64.29 63.06 (1.9)

Direct marketing agency (DMA) expense(2) 15.43 5.29 (65.7)

Lease depreciation, net of lease equalisation 1.82 2.10 15.4

Operating profit 79.61 89.25 12.1

Provisions, net of write-backs 29.05 38.08 31.1

Profit before tax 50.56 51.17 1.2

Tax, net of deferred tax 8.98 13.59 51.3

Profit after tax 41.58 37.58 (9.6)

(1). Includes merchant foreign exchange income and margin on customer
derivative transactions.

(2). Represents commissions paid to direct marketing agents (DMAs) for
origination of retail loans. These commissions are expensed upfront.

(3). All amounts have been rounded off to the nearest Rs. 10.0 million.

(4). Prior period figures have been re-grouped/re-arranged, where
necessary.

Key ratios:

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

Fiscal 2008 Fiscal 2009

Return on average equity [%](1) 11.1 7.7

Return on average assets (%)(2) 1.1 1.0

Earnings per share (Rs.) 39.4 33.8

Book value per share (Rs.) 417.5 444.9

Fee to income (%) 41.6 41.4

Cost to income (%)(3) 50.0 43.4

(1). Return on average equity is the ratio of the net profit after tax to
the quarterly average equity and reserves.

(2). Return on average assets is the ratio of net profit after tax to
average assets.

(3). Cost represents operating expense including DMA cost which is
expensed upfront but excluding lease depreciation. Income represents net
interest income and non-interest income and is net of lease depreciation.

Net interest income and spread analysis:

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

Rs. in billion, except percentages
Fiscel Fiscel % change

Average interest-earning assets(1) 3,288.34 3,436.20 4.5
Average interest-bearing liabilities(1) 3,119.28 3,249.16 4.2
Net interest margin 2.2% 2.4% -
Average yield 9.4% 9.1% -
Average cost of funds 7.5% 7.0% -
Interest spread 1.8% 2.1% -

(1). Averages are based on daily balances.

(2). All amounts have been rounded off to the nearest Rs. 10.0 million.

Net interest income:

Net interest income increased by 14.6% to Rs. 83.67 billion in fiscal 2009
from Rs. 73.04 billion in fiscal 2008, reflecting primarily the following:

* An increase of Rs. 147.86 billion or 4.5% in average interest-earning
assets; and

* An increase in net interest margin by 21 basis points to 2.4% in fiscal
2009 compared to 2.2% in fiscal 2008.

Interest income increased by 1.0% to Rs. 310.93 billion in fiscal 2009 from
Rs. 307.88 billion in fiscal 2008 primarily due to increase in average
interest-earning assets by Rs. 147.86 billion, offset, in part, by a
decrease of 31 basis points in yield on average interest-earning assets.

Average interest-earning assets increased marginally in rupee terms by
Rs.147.86 billion or 4.5% to Rs. 3,436.20 billion in fiscal 2009 from
Rs.3,288.34 billion in fiscal 2008. This increase is after considering the
impact of rupee depreciation on foreign currency denominated assets.

Increase in average interest-earning assets is primarily on account of
increase in average advances by Rs. 155.09 billion. This increase in
average advances is primarily on account of increase in non-retail
advances, offset, in part, by decrease in retail advances. While net
advances of overseas branches (including offshore banking unit) decreased
by US$ 1.2 billion or 10.1% to US$ 10.7 billion at year-end fiscal 2009
from US$ 11.9 billion at year-end fiscal 2008, the net advances of overseas
branches, in rupee terms, increased due to the impact of rupee depreciation
during fiscal 2009. Net retail advances (including dealer financing and
developer financing portfolio of Rs. 8.75 billion and Rs. 24.08 billion,
respectively) were Rs. 1,062.03 billion at year-end fiscal 2009 compared to
Rs. 1,316.63 billion at year-end fiscal 2008. Average interest-earning
investments in fiscal 2009 remained at about the same level as fiscal 2008.
Increase in average interest-earning non-SLR investments was offset by
decrease in average SLR investments. Average SLR investments decreased by
Rs. 23.51 billion primarily on account of reduction in domestic net demand
and time liabilities and a reduction of 100 basis points in SLR requirement
from 25.0% to 24.0% during fiscal 2009.

Yield on average interest-earning assets decreased by 31 basis points to
9.1 % in fiscal 2009 compared to 9.4% in fiscal 2008 primarily due to the
decrease in the yield on advances by 91 basis points to 10.2% in fiscal
2009 from 11.1% in fiscal 2008, offset, in part, by reduction in CRR
requirement. RBI reduced CRR by 250 basis points to 5.0% at year-end fiscal
2009 from 7.5% at year-end fiscal 2008. As CRR balances do not earn any
interest income, the reduction in requirement resulted in a positive impact
on yield on interest-earning assets. Our overall yield on advances
decreased primarily on account of decrease in benchmark rate (LIBOR) and
impact of rupee depreciation on advances denominated in foreign currency.
Yield on average interest-earning investments remained nearly at the same
level as fiscal 2008 (i.e. 7.6% for fiscal 2009 and 7.7% for fiscal 2008).

Interest income was also impacted by receipt of interest on income tax
refund of Rs. 3.33 billion in fiscal 2009 as compared to Rs. 0.87 billion
in fiscal 2008 and loss on securitisation (including credit losses on
existing pools) of Rs. 3.21 billion in fiscal 2009. This impact was
reflected over all the quarters of fiscal 2009.

Interest expense decreased by 3.2% to Rs.227.26 billion in fiscal 2009 from
Rs.234.84 billion in fiscal 2008 primarily due to decrease in average
deposits to Rs. 2,180.14 billion in fiscal 2009 from Rs. 2,268.13 billion
in fiscal 2008 and decrease in cost of funds by 54 basis points to 7.0% in
fiscal 2009 from 7.5% in fiscal 2008, offset, in part, by increase in
average borrowings to Rs.1,069.03 billion in fiscal 2009 from Rs.851.15
billion in fiscal 2008.

Total deposits decreased by 10.7% to Rs. 2,183.48 billion at year-end
fiscal 2009 from Rs. 2,444.31 billion at year-end fiscal 2008 primarily due
to the Bank's conscious strategy of paying off wholesale deposits. Term
deposits decreased to Rs. 1,556.80 billion at year-end fiscal 2009 from Rs.
1,806.51 billion at year-end fiscal 2008. The proportion of current and
savings account deposits in total deposits increased to 28.7% at year-end
fiscal 2009 from 26.1% at year-end fiscal 2008. Borrowings in rupee terms
have increased primarly due to new capital-eligible borrowings, in the
nature of subordinated debt and an impact of rupee depreciation on foreign
currency denominated borrowings. Borrowings (including subordinated debt)
of foreign branches were V3S$ 10.88 biWion at year-end fiscal 2009 as
compared to US$ 12.72 billion at year-end fiscal 2008.

Cost of funds has decreased to 7.0% in fiscal 2009 from 7.5% in fiscal
2008. Cost of deposits decreased by 30 basis points to 7.2% in fiscal 2009
from 7.5% in fiscal 2008. The cost of borrowings has decreased by 100 basis
points to 6.5% in fiscal 2009 from 7.5% in fiscal 2008. Cost of borrowings
decreased primarily due to decrease in cost of foreign currency borrowings
as the benchmark rate (LIBOR) reduced, and also on account of impact of
rupee depreciation.

Net interest margin is expected to continue to be lower than other banks in
India until we increase the proportion of low-cost deposits and retail
deposits in our total funding. The net interest margin is also impacted by
the relatively lower net interest margin earned by our overseas branches.

NON-INTEREST INCOME:

Fee income:

The first half of fiscal 2009 witnessed a robust growth in fee income
primarily due to growth in fee income from structuring and advisory fees,
third party product distribution fees, income from foreign exchange
transactions and processing fees, in both domestic and international
operations. Fee income in the second half of fiscal 2009 was impacted by
slowdown in domestic economy and continued turmoil in international
markets. Domestic corporate activity slowed down considerably. This
impacted the fee income from corporate and small and medium enterprises.
The high interest rates prevalent for a large part of the year combined
with our strategy to moderate balance sheet growth also impacted domestic
lending activity with retail disbursements slowing down considerably. This
resulted in low retail asset related fees in fiscal 2009. Sales of third
party products such as insurance and mutual funds slowed down considerably
in the second half of fiscal 2009 resulting in lower third party
distribution fees. As a result, fee income decreased by 1.6% to Rs.65.24
billion in fiscal 2009 from Rs. 66.27 billion in fiscal 2008.

Treasury income:

The treasury income decreased to Rs. 4-43 billion in fiscal 2009 from
Rs.8.15 billion in fiscal 2008. Treasury income primarily includes realised
profit on sale of fixed income investments and gains from buy-back of
bonds, offset, in part, by loss on proprietary equity trading and mutual
fund portfolio, reversal of derivative income, mark-to-market (MTM)
provisioning on security receipts and MTM and realised losses on credit
derivatives.

During the first half of fiscal 2009, the yield on government securities
increased by about 70 basis points due to tight liquidity conditions and
monetary policy actions before declining by about 320 basis points
following the sharp reduction in policy rates by RBI in Q3-2009. During Q4-
2009, the yields increased by about 175 basis points following a larger
than expected government borrowing programme and concerns of an over-supply
of government securities. Due to significant easing of monetary policy by
RBI and consequent softening of the interest rates in the economy, we
positioned ourselves to take advantage of the change in the interest rate
scenario by increasing the duration of the SLR portfolio as well as taking
trading positions to benefit from the drop in yields. This resulted in
significant gains on government securities and other fixed income
investments in the second half of fiscal 2009.

We offer various derivative products to our clients for their risk
management purposes including options and swaps. We do not carry market
risk on these client derivative positions as we cover ourselves in the
inter-bank market. Profits or losses on account of currency movements on
these transactions are borne by the clients. In some cases, clients have
filed suits against us disputing the transactions and the amounts to be
paid. There have been delays in payment to us in respect of some of these
clients. We have fully reversed the income recognised in cases where
receivables are overdue for more than 90 days.

During fiscal 2009, the Bank made a provision of Rs. 3.26 billion for MTM
on security receipts (SRs) issued by ARCIL.

During fiscal 2009, the credit derivatives portfolio had net mark-to-market
and realised losses of Rs. 2.75 billion, which was reflected in the profit
& loss account. During fiscal 2009, we sold the entire non-India linked
credit derivatives portfolio on which we realised a loss of about Rs.4.75
billion, which had been provided for in fiscal 2008.

Lease & other income:

Lease income, net of lease depreciation, decreased by 34.3% to Rs.0.23
billion in fiscal 2009 from Rs. 0.35 billion in fiscal 2008 primarily due
to reduction in leased assets to Rs.4.62 billion in fiscal 2009 from
Rs.7.97 billion in fiscal 2008.

Other income decreased by 65.0% to Rs. 4.03 billion in fiscal 2009 from
Rs.11.52 billion in fiscal 2008 primarily due to the absence of any
distribution of income by venture capital funds where we have investments,
compared to income distribution of Rs. 7.88 billion in fiscal 2008.

Non-interest expense:

The following table sets forth, for the periods indicated, the principal
components of non-interest expense.

Rs. in billion, except percentages
Fiscal Fiscal % change
2008 2009

Employee expenses 20.79 19.72 (5.1)

Depreciation on own property (including
non banking assets) 3.96 4.68 18.2

Auditors' fees and expenses 0.02 0.02 -

Other administrative expenses 39.52 38.64 (2.2)

Total non-interest expense (excluding lease
depreciation and direct marketing agency
expenses) 64.29 63.06 (1.9)

Depreciation (net of lease equalisation) on
leased assets 1.82 2.10 15.4

Direct marketing agency expenses 15.43 5.29 (65.7)

Total non-interest expense 81.54 70.45 (13.6)

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

Total non-interest expense decreased by 13.6% to Rs. 70.45 billion in
fiscal 2009 from Rs. 81.54 billion in fiscal 2008 primarily due to a 65.7%
decrease in direct marketing agency expenses and a 2.2% decrease in other
administrative expenses.

We use marketing agents, called direct marketing agents or associates, for
sourcing our retail assets. We include commissions paid to these direct
marketing agents of our retail assets in non-interest expense. These
commissions are expensed upfront and not amortised over the life of the
loan. Due to lower retail disbursements, lower issuance of new credit cards
and reduction in rate of commission, direct marketing agency expenses
decreased by 65.7% to Rs. 5.29 billion in fiscal 2009 compared to Rs. 15.43
billion in fiscal 2008.

Other administrative expenses decreased by 2.2% to Rs. 38.64 billion in
fiscal 2009 from Rs. 39.52 billion in fiscal 2008 primarily due to overall
cost reduction initiatives undertaken by us, offsetting the increase in
expenses related to retail business (primarily related to collections) and
increase in our branch and ATM network. The number of our branches and
extensfon counters fn India increased to f,4f9 at year-end fiscal 2009 from
1,262 at year-end fiscal 2008. The number of ATMs increased to 4,713 at
year-end fiscal 2009 from 3,881 at year-end fiscal 2008. There was a
reduction in expenses on account of printing and stationary, advertisement
and publicity and postage, telegrams and telephone expenses in fiscal 2009
as compared to fiscal 2008.

Employee expenses decreased by 5.1% to Rs. 19.72 billion in fiscal 2009
from Rs. 20.79 billion in fiscal 2008 primarily due to a 15.0% decrease in
the employee base to 34,596 at year-end fiscal 2009 from 40,686 at year-end
fiscal 2008, offset, in part, by annual increase in salaries.

Depreciation on own property increased by 18.2% to Rs. 4.68 billion in
fiscal 2009 from Rs. 3.96 billion in fiscal 2008, reflecting the addition
of new branches. Depreciation on leased assets was Rs. 2.10 billion in
fiscal 2009 as compared to Rs. 1.82 billion in fiscal 2008.

Provisions and tax:

Provisions and contingencies (excluding provision for tax) increased to
Rs.38.08 billion in fiscal 2009 from Rs. 29.05 billion in fiscal 2008
primarily due to higher level of specific provisioning on non-performing
loans, offset, in part, by lower general provisioning as the advances
portfolio did not increase. Specific provisioning on non-performing assets
increased in fiscal 2009 compared to fiscal 2008 primarily due to increase
in retail non-performing loans. The increase in retail non-performing loans
primarily reflects the seasoning of the secured loan portfolio and
relatively higher losses on unsecured portfolio and the adverse macro-
economic environment.

The Ministry of Finance, Government of India has issued guidelines for the
implementation of the Agriculture debt waiver and relief scheme for farmers
on May 23, 2008 which have been duly implemented by us.

There was a reduction in general provision requirement in certain
categories of standard advances as per RBI guidelines issued on November
15,2008 as a counter-cyclical measure. While the cumulative provision
requirement as per the revised rates of general provision requirement was
Rs. 8.38 billion at year-end fiscal 2009, we continue to hold a cumulative
general provision of Rs. 14.36 billion at in accordance with RBI
guidelines, which does not allow reversal of excess cumulative general
provision held as of September 30, 2008. General provision on standard
assets made in fiscal 2008 was Rs. 1.59 billion.

Income tax expense (including wealth tax) increased by 51.3% to Rs. 13.59
billion in fiscal 2009 from Rs. 8.98 billion in fiscal 2008. The effective
tax rate of 26.56% in fiscal 2009 was higher compared to the effective tax
rate of 17.77% in fiscal 2008 primarily clue to change in mix of taxable
profits, which had a lower component of income from dividend and capital
gains.

Financial Condition:

The following table sets forth, for the periods indicated, the summarised
balance sheet.

Rs. in billion, except percentages
March 31, March 31, % change
2008 2009
Assets:
Cash, balances with RBI & other banks
and Statutory Liquidity Ratio (SLR)
investments(1) 1,130.72 933.53 (17.4)

- Cash & balances with RBI & banks 380.41 299.66 (21.2)

- SLR investments1 750.31 633.87 (15.5)

Advances 2,256.16 2,183.11 (3.2)

Debentures, bonds and other investments 364.23 396.71 8.9

Fixed assets (including leased assets) 41.09 38.02 (7.5)

Other assets 205.75 241.64 17.4

Total Assets 3,997.95 3,793.01 (5.1)

Liabilities:

Equity capital and reserves 464.71 495.33 6.6

- Equity capital 11.13 11.13 -

- Reserves 453.58 484.20 6.8

Preference capital 3.50 3.50 -

Deposits 2,444.31 2,183.48 (10.7)

- Savings deposits 390.89 410.36 5.0

- Current deposits 246.91 216.32 (12.4)

- Term deposits 1,806.51 1,556.80 (13.8)

Borrowings 656.49 673.24 2.6

- Domestic 155.23 138.56 (10.7)

- Overseas 501.26 534.68 6.7

Subordinated debt (included in Tier-1
and Tier-2 capital)(2) 207.50 254.82 22.8

- Domestic 193.94 237.66 22.5

- Overseas 13.56 17.16 26.5

Other liabilities 221.44 182.64 (17.5)

Total liabilities 3,997.95 3,793.01 (5.1)

(1). Government securities qualifying for Statutory Liquidity Ratio (SLR).
Banks in India are required to maintain a specified percentage, currently
24.0% (25.0% at year-end fiscal 2008), of their net demand and time
liabilities by way of liquid assets like cash, gold or approved
unencumbered securities.

(2). Included in other liabilities' in schedule 5 of the balance sheet.

(3). All amounts have been rounded off to the nearest Rs. 10.0 million.

Our total assets (including the impact of rupee depreciation on foreign
currency denominated assets) decreased by 5.1% to Rs. 3,793.01 billion at
year-end fiscal 2009 from Rs. 3,997.95 billion at year-end fiscal 2008. Net
advances decreased by 3.2% to Rs. 2,183.11 billion at year-end fiscal 2009
from Rs. 2,256.16 billion at year-end fiscal 2008, primarily due to
decrease in retail advances. Net retail advances (including dealer
financing and developer financing portfolio of Rs. 8.75 billion and Rs.
24.08 billion, respectively) decreased by 19.3% to Rs. 1,062.03 billion at
year-end fiscal 2009 from Rs. 1,316.63 billion at year-end fiscal 2008.
Retail advances constitute 48.6% of our total net advances at year-end
fiscal 2009. Net advances of overseas branches (including offshore banking
unit) decreased in US$ terms by 10.1% to US$ 10.7 billion at year-end
fiscal 2009 from US$ 11.9 billion at year-end fiscal 2008, though they
increased in rupee terms on account of depreciation of the rupee relative
to the US dollar. Total investments at year-end fiscal 2009 decreased by
7.5% to Rs. 1,030.58 billion compared to Rs. 1,114.54 billion at year-end
fiscal 2008 primarily due to the 15.5% decrease in SLR investments to Rs.
633.87 billion at year-end fiscal 2009 from Rs. 750.31 billion at year-end
fiscal 2008, offset, in part, by an increase in other investments by 8.9%
to Rs. 396.71 billion at year-end fiscal 2009 from Rs. 364.23 billion at
year-end fiscal 2008 which primarily includes investment in international
banking subsidiaries. SLR investments decreased primarily on account of
reduction in domestic net demand and time liabilities and a reduction of
100 basis points in SLR requirement from 25.0% to 24.0% during fiscal 2009.
Non-SLR investments include investment in security receipts in asset
reconstruction companies of Rs. 32.18 billion. At year-end fiscal 2009, we
had a gross portfolio of funded credit derivatives of Rs. 18.41 billion and
non-funded credit derivatives of Rs. 38.71 billion.

Our equity share capital and reserves at year-end fiscal 2009 increased to
Rs. 495.33 billion as compared to Rs. 464.71 billion at year-end fiscal
2008 primarily due to annual accretion to reserves out of profits. Total
deposits decreased by 10.7% to Rs. 2,183.48 billion at year-end fiscal 2008
from Rs. 2,444.31 billion at year-end fiscal 2008 primarily due to the
Bank's conscious strategy of reducing wholesale deposits. Term deposits
decreased to Rs. 1,556.80 billion at year-end fiscal 2009 from Rs. 1,806.51
billion at year-end fiscal 2008. Our savings account deposits increased to
Rs. 410.36 billion at year-end fiscal 2009 from Rs. 390.89 billion at year-
end fiscal 2008, while current account deposits decreased to Rs. 216.32
billion at year-end fiscal 2009 from Rs. 246.91 billion at year-end fiscal
2008. Borrowings (including subordinated debt) increased to Rs. 928.06
billion at year-end fiscal 2009 from Rs. 863.99 billion at year-end fiscal
2008 primarily due to capital-eligible borrowings, in the nature of
subordinated debt and the impact of rupee depreciation on foreign currency
denominated borrowings.

Off Balance Sheet Items, Commitments and Contingencies:

The table below sets forth, for the periods indicated the principal
componts of off-balance sheet items, commitments and contingent
liabilities.

Rs. in billion, except percentages
March 31, March 31, % change
2008 2009
Claims against the bank, not acknowledged
as debts 40.31 32.82 (18.6)

Liability for partly paid investments 0.13 0.13 -

Notional principal amount of outstanding
forward exchange contracts 3,071.71 2,583.67 (15.9)

Guarantees given on behalf of constituents 412.81 580.88 40.7

Acceptances, endorsements & other obligations 250.99 306.78 22.2

Notional principal amount of currency swaps 477.04 569.65 19.4

Notional amount of Interest rate swaps and
currency options 7,665.29 4,146.35 (45.9)

Other items for which bank is contingently
liable 192.54 126.55 (34.3)

Total 12,110.82 8,346.83 (31.1)

Off-balance sheet items, commitments and contingencies decreased by 31.1%
or Rs. 3,763.99 billion to Rs. 8,346.83 billion at year-end fiscal 2009
from Rs. 12,110.82 billion at year-end fiscal 2008 primarily due to a 45.9%
decrease in notional principal amount of interest rate swaps and currency
options and 15.9% decrease in notional principal amount of outstanding
forward exchange contracts.

We enter into foreign exchange forwards, options, swaps and other
derivative products to enable customers to transfer, modify or reduce their
foreign exchange and interest rate risk and to manage our own interest rate
and foreign exchange positions. We manage our foreign exchange and interest
rate risk with reference to limits set by RBI and/ or internally. An
interest rate swap does not entail exchange of notional principal and the
cash flow arises on account of the difference between interest rate pay and
receive legs of the swaps which is generally much smaller than the notional
principal of the swap. With respect to the transactions entered into with
customers, we generally enter 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 low. For example, if a transaction
entered into with a customer is covered by an exactly opposite transaction
entered into with counter-party, the net market risk of the two
transactions will be zero whereas the notional principal which is reflected
as an off-balance sheet item will be sum of both the transactions.

Claims against the Bank, not acknowledged as debts', represents demands
made by the Government of India's tax authorities in excess of the
provisions made in our accounts, in respect of income tax, interest tax,
wealth tax, service tax and sales tax/VAT matters. Based on consultation
with counsel and favourable decisions in our own or other cases, the
management believes that the liability is not likely to actually arise.
Other items for which the Bank is contingently liable include primarily
credit derivatives, repurchase and securitisation-related obligations.

As a part of our project financing and commercial banking activities, we
have issued guarantees to enhance the credit standing of our customers.
These generally represent irrevocable assurances that we 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. 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 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. We generally have collateral available to
reimburse potential losses on the guarantees. Margins available to
reimburse losses realised under guarantees amounted to Rs. 11.69 billion at
year-end fiscal 2009 and Rs. 10.61 billion at year-end fiscal 2008. Other
property or security may also be available to us to cover losses under
guarantees.

We are obligated under a number of capital contracts. Capital contracts are
job orders of a capital nature, which have been committed. As of the
balance sheet date, work had not been completed to this extent. Estimated
amounts of contracts remaining to be executed on capital account aggregated
Rs. 4.46 billion at year-end fiscal 2009 compared to Rs. 17.40 billion at
year-end fiscal 2008 primarily on account of new branches and office
premises.

Capital Adequacy:

Rs. in billion, except percentages

A B C D

Tier-1 capital 381.34 420.09 421.72 421.96

Tier-2 capital 121.21 129.72 78.86 131.59

Total capital 502.55 549.81 500.59 553.55

Credit Risk-Risk Weighted
Assets (RWA) 2,998.08 3,171.94 3,173.33 3,151.95

Market Risk - RWA 369.46 281.44 258.74 206.98

Operational Risk - RWA - - 152.50 205.70

Total risk weighted assets 3,367.55 3,453.38 3,584.57 3,564.63

Tier-1 capital adequacy ratio 11.32% 12.16% 11.76% 11.84%

Tier-2 capital adequacy ratio 3.60% 3.76% 2.20% 3.69%

Total capital adequacy ratio 14.92% 15.92% 13.97% 15.53%

A = As per RBI guidelines on Basel I March 31, 2008
B = As per RBI guidelines on Basel I March 31, 2009
C = As per RBI guidelines on Basel II March 31, 2008
D = As per RBI guidelines on Basel II March 31, 2009

We are subject to the capital adequacy norms stipulated by the RBI
guidelines on Basel II which became applicable to us with effect from year-
end fiscal 2008. Prior to year-end fiscal 2008, we were subject to the
capital adequacy norms as stipulated by the RBI guidelines on Basel I. The
RBI guidelines on Basel II require us to maintain a minimum ratio of total
capital to risk weighted assets of 9.0%, with a minimum Tier-1 capital
adequacy ratio of 6.0%. Our total capital adequacy ratio at year-end fiscal
2009 as per the RBI guidelines on Basel II is 15.53% with a Tier-1 capital
adequacy ratio of 11.84%.

Under Pillar 1 of the RBI guidelines on Basel II, we follow the
standardised approach for credit and market risk and basic indicator
approach (BIA) for operational risk.

In view of its transitional arrangements to the Basel II framework, RBI has
prescribed a parallel run under which we calculate capital adequacy under
both Basel I and Basel II. Further at year-end fiscal 2009, we are required
to maintain capital adequacy based on the higher of the minimum capital
required under Basel II or at 90.0% of the minimum capital required under
Basel I. The computation under Basel II guidelines results in a higher
minimum capital requirement as compared to Basel I and hence as a result
the capital adequacy at year-end fiscal 2009 has been maintained and
reported by us as per Basel II guidelines.

The key changes introduced by RBI under Pillar 1 of the Basel II guidelines
during fiscal 2009 are as follows:

* RBI on May 14, 2008 enhanced the limit of Rs. 2.0 million to Rs. 3.0
million in respect of bank loans for residential purposes. Such loans with
a loan-to-value (LTV) ratio of less than or equal to 75.0% would attract
50.0% risk weight.

* RBI on August 8, 2008 increased credit conversion factors (CCF) on the
market related off-balance sheet items.

* RBI on November 3, 2008 stipulated that the restructured residential
loans should be risk weighted with an additional risk weight of 25.0% to
the existing risk weights applicable to residential loans.

* RBI on November 15, 2008 reduced risk weights for exposures to commercial
real estate and non-deposit taking systemically important non-banking
financial companies (NBFC-ND-SI) other than asset finance companies (AFCs),
uniformly to 100.0%. These were earlier in the range of 125.0% to 150.0%.

* RBI had earlier stipulated that for fiscal 2009, all fresh sanctions or
renewals in respect of unrated claims on corporates in excess of Rs. 500.0
million would attract a risk weight of 150.0%. On November 15, 2008, RBI
reduced the risk weight for these claims to 100.0%.

The movement in capital funds and risk weighted assets (RWA) from year-end
fiscal 2008 to year-end fiscal 2009 as per the Basel II framework is as
follows:

* Capital funds have increased by 10.6% vis-a-vis a decrease of 0.6% in
RWA.

* Capital funds have increased by Rs. 52.96 billion primarily due to
increase of Rs. 84.59 billion in upper Tier-2 capital and accretion to
retained earnings, partly offset by increase of Rs. 43.86 billion in
investment in regulatory capital instruments of subsidiaries, which are
deducted from capital.

* Credit risk RWA has decreased by Rs. 21.38 billion primarily due to
decrease in exposures qualifying for credit risk, the increased coverage of
external credit ratings on the portfolio and changes in risk weights and
risk weighting treatment of select asset categories by RBI as outlined
above. The major movement in credit risk RWA was:

* Decrease in RWA on consumer credit, loans secured by residential
properties, loans for commercial real estate and non-market related off-
balance sheet items (letters of credit, bank guarantees, acceptances and
endorsements etc).

* Increase in RWA on held-to-maturity investments, balances with banks,
other loans and advances and market related off-balance sheet items
(derivative contracts).

* Market risk RWA has decreased by Rs. 51.69 billion primarily due to
decrease in portfolio size and the corresponding market value of available
for sale (AFS) and held for trading (HFT) portfolio.

ASSET QUALITY AND COMPOSITION:

Loan Concentration:

We follow a policy of portfolio diversification and evaluate our total
financing in a particular sector in light of our forecasts of growth and
profitability for that sector. Between 2003 and 2006, the banking system as
a whole saw significant expansion of retail credit, with retail loans
accounting for a major part of overall systemic credit growth. Accordingly,
during these years, we increased our financing to retail finance. Given the
uncertain and volatile economic environment, we accorded priority to risk
containment, liquidity management and capital conservation. In view of
high asset prices and the increase in interest rates since the second half
of fiscal 2008, we followed a conscious strategy of moderation of retail
disbursements, especially in the unsecured retail loans segment. At the
same time, there has been an increase in demand for credit from the
corporate sector. Following this trend, our loans and advances to retail
finance constituted 49.3% of our total loans and advances at year-end
fiscal 2009 compared to 58.6% at year-end fiscal 2008.

Our Global Credit Risk Management Group monitors all major sectors of the
economy and specifically tracks sectors to which we have loans outstanding.
We seek to respond to any economic weakness in an industrial segment by
restricting new exposures to that segment and any growth in an industrial
segment by increasing new exposures to that segment, resulting in active
portfolio management.

The following tables set forth, at the dates indicated, the composition of
our gross advances (net of write-offs).

Rs. in billion, except percentages
March 31, 2008 March 31, 2009
Total % of total Total % of total
advances advances advances advances

Retail finance(1) 1,347.54 58.6 1,102.20 49.3

Services - non finance 145.57 6.3 168.05 7.5

Crude petroleum/refining &
petrochemicals 58.21 2.5 142.04 6.4

Iron/steel & products 93.23 4.1 99.14 4.4

Road, port, telecom, urban
development & other infrastructure 51.45 2.2 94.62 4.2

Services - finance 66.18 2.9 77.68 3.5

Power 58.08 2.5 54.19 2.4

Food & beverages 63.32 2.8 53.57 2.4

Chemical & fertilisers 38.06 1.7 51.83 2.3

Electronics & engineering 20.82 0.9 36.17 1.6

Wholesale/retail trade 25.26 1.1 26.29 1.2

Construction 29.36 1.3 23.86 1.1

Other industries(2) 301.84 13.1 306.57 13.7

Total 2,298.92 100.0% 2,236.21 100.0%

(1). Includes home loans, automobile loans, commercial business loans, two
wheeler loans, personal loans and credit cards. It also includes dealer
funding portfolio of Rs. 8.83 billion (Rs. 24.10 billion at year-end fiscal
2008) and developer financing of Rs. 24.14 billion (Rs. 27.79 billion at
year-end fiscal 2008).

(2). Other industries primarily include automobiles, cement, drugs &
pharmaceuticals, agriculture & allied activities, FMCG, gems & jewellery,
manufacturing products excluding metal, metal & metal products (excluding
iron & steel), mining, shipping, textiles etc.

The following table sets forth, at the dates indicated, the composition of
our gross (net of write-offs) outstanding retail finance portfolio.

Rs. in billion, except percentages
A B C D

Home loans(1) 664.39 49.3 575.88 52.2

Automobile loans 174.66 13.0 133.05 12.1

Commercial business 203.71 15.1 164.40 14.9

Two-wheeler loans 29.81 2.2 16.91 1.5

Personal loans 144.13 10.7 108.66 9.9

Credit cards 96.45 7.2 90.02 8.2

Loans against securities & others(2) 34.39 2.5 13.28 1.2

Total retail finance portfolio 1,347.54 100.0% 1,102.20 100.0%

A = March 31, 2008 Total retail advances
B = March 31, 2008 % of total retail advances
C = March 31, 2009 Total retail advances
D = March 31, 2009 % of total retail advances

(1). Includes developer financing of Rs. 27.79 billion and Rs. 24.14
billion at year-end fiscal 2008 and year-end fiscal 2009 respectively.

(2). Includes dealer financing portfolio of Rs. 24.10 billion and Rs. 8.83
billion at year-end fiscal 2008 and year-end fiscal 2009 respectively.

Pursuant to the guidelines of RBI, our exposure to an individual borrower
must not exceed 15.0% of our capital funds, comprising Tier-1 and Tier-2
capital calculated pursuant to the guidelines of RBI. Exposure to
individual borrowers may exceed the exposure norm of 15.0% of capital funds
by an additional 5.0% (i.e. up to 20.0%) provided the additional exposure
is on account of infrastructure financing. Our exposure to a group of
companies under the same management control must not exceed 40.0% of our
capital funds unless the exposure is in respect of an infrastructure
project. In case of infrastructure projects, the exposure to a group of
companies under the same management control may be up to 50.0% of our
capital funds. Banks may, in exceptional circumstances, with the approval
of their boards, enhance the exposure by 5.0% of capital funds (i.e. 20.0%
of capital funds for an individual borrower and 45.0% of capital funds for
a group of companies under same management), making appropriate
disclosures in their annual reports. Exposure for funded facilities is
calculated as the total committed credit and investment sanctions or the
outstanding funded amount, whichever is higher (for term loans, as the sum
of undisbursed commitments and the outstanding amount). Exposure for non-
funded facilities is calculated as 100.0% of the committed amount or the
outstanding non-funded amount whichever is higher.

During the year-end fiscal 2009, we had no single borrower and borrower
group exposures which exceeded the prudential exposure limits prescribed by
RBI.

Directed Lending:

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

RBI guidelines require banks to lend 40.0% of their adjusted net bank
credit, or credit equivalent amount of off balance sheet exposure,
whichever is higher, to certain specified sectors called priority sectors.
The definition of adjusted net bank credit does not include certain
exemptions and includes certain investments and is computed with reference
to the outstanding amount at March 31 of the previous year. Priority
sectors include small enterprises, agricultural sector, food and agri-based
industries, small businesses and housing finance up to certain limits. Out
of the 40.0%, banks are required to lend a minimum of 18.0% of their net
bank credit to the agriculture sector and the balance to certain specified
sectors, including small enterprises (defined as enterprises engaged in
manufacturing/production, processing and services businesses with a certain
limit on investment in plant and machinery), small road and water transport
operators, small businesses, professional and self-employed persons, and
all other service enterprises, retail trade, micro credit, education and
housing loans up to Rs. 2.0 million to individuals for
purchase/construction of a dwelling unit per family. In its letter dated
April 26, 2002 granting its approval for the amalgamation, RBI stipulated
that since the loans of erstwhile ICICI Limited (ICICI) transferred to us
were not subject to the priority sector lending requirement, we are
required to maintain priority sector lending of 50.0% of our net bank
credit on the residual portion of our advances (i.e. the portion of our
total advances excluding advances of ICICI at year-end fiscal 2002,
referred to as 'residual net bank credit'). This additional 10.0% priority
sector lending requirement will apply until such time as our aggregate
priority sector advances reach a level of 40.0% of our total net bank
credit. RBI's existing instructions on sub-targets under priority sector
lending and eligibility of certain types of investments/ funds for
qualification as priority sector advances apply to us.

Any shortfall in the amount required to be lent to the priority sectors may
be required to be deposited with government sponsored Indian development
banks like the National Bank for Agriculture and Rural Development, the
Small Industries Development Bank of India and the National Housing Bank.
These deposits have a maturity of up to seven years and carry interest
rates lower than market rates. At year-end fiscal 2009, total investments
in such bonds were Rs. 60.00 billion.

As per the guidelines, banks are also required to lend to the weaker
sections 10.0% of adjusted net bank credit or credit equivalent amount of
off-balance sheet exposures, whichever is higher. In order to ensure that
the sub-target of lending to the weaker sections is achieved, RBI has
decided to take into account the shortfall in lending to weaker sections
also, at the last reporting Friday of March of each year, for the purpose
of allocating amounts to the domestic Scheduled Commercial Banks (SCBs) for
contribution to the Rural Infrastructure Development Fund (RIDF) maintained
with NABARD or funds with other Financial Institutions, as specified by
RBI, with effect from April 2009.

We are required to comply with the priority sector lending requirements on
the last 'reporting Friday' of each fiscal year. At March 27, 2009, which
was the last reporting Friday for fiscal 2009, our priority sector loans
were Rs. 684.26 billion, constituting 50.6% of our residual adjusted net
bank credit against the requirement of 50.0%. At that date, qualifying
agriculture loans were 19.0% of our residual net bank credit as against the
requirement of 18.0%. Our advances to weaker sections were Rs. 20.74
billion constituting 1.5% of our residual adjusted net bank credit against
the requirement of 10.0%.

Classification of Loans:

We classify our assets as performing and non-performing in accordance with
RBI guidelines. Under these guidelines, an asset is 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 for a period of 90 days and in respect of bills, if the account
remains overdue for more than 90 days.

We do not distinguish between provisions and technical write-offs while
assessing the adequacy of our loan loss coverage, as both provisions and
write-offs represent a reduction of the principal amount of a non-
performing asset. In compliance with regulations governing the presentation
of financial information by banks, we report non-performing assets net of
cumulative write-offs in our financial statements. RBI has separate
guidelines for restructured loans. A fully secured standard asset can be
restructured by re-schedulement of principal repayments and/or the interest
element, but must be separately disclosed as a restructured asset. The
diminution in the fair value of the loan, if any, measured in present value
terms, is either written off or provision is made to the extent of the
diminution involved. Similar guidelines apply to substandard loans. The
sub-standard or doubtful accounts which have been subjected to
restructuring, whether in respect of principal installment or interest
amount are eligible to be upgraded to the standard category only after the
specified period, i.e., a period of one year after the date when first
payment of interest or of principal, whichever is earlier, falls due,
subject to satisfactory performance during the period. From December 2008,
RBI has permitted banks to restructure loans classified as real estate
exposures, up to June 30, 2009. Similarly, banks have also been permitted
to undertake, for accounts that were previously restructured, a second
restructuring without downgrading the account to the non-performing
category, up to June 30, 2009. RBI also permitted banks to restructure as
standard accounts all eligible accounts which meet the basic criteria for
restructuring, and which were classified as standard at September 1, 2008
irrespective of their subsequent asset classification. This is subject to
banks receiving an application from the borrower for restructuring the
advance on or before year-end fiscal 2009 and implementing the
restructuring the package within 120 days from the date of receipt of the
application. During fiscal 2009 we restructured loans aggregating Rs. 11.15
billion extended to 996 borrowers which included 962 retail mortgage
borrowers. In fiscal 2008, we had restructured loans aggregating Rs. 16.76
billion. At year-end fiscal 2009, we had received proposals for
restructuring of loans aggregating Rs. 20.03 billion from 41 borrowers,
which were under process.

The following table sets forth, at year-end fiscal 2008 and year-end fiscal
2009, information regarding the classification of our gross assets (net of
write-offs, interest suspense and derivatives income reversal).

Rs. in billion
March 31, 2008 March 31, 2009

Standard assets Rs. 2,352.22 Rs. 2,316.10

of which: Restructured loans(1) 48.41 61.27

Non-performing assets 75.88 98.03

Of which: Sub-standard 48.49 61.67

Doubtful assets 22.09 31.04

Loss assets 5.30 5.32

Total customer assets(2) Rs. 2,428.10 Rs. 2,414.13

(1). Reflects the cumulative position of restructured loans (excluding
applications received for restructruing).

(2). Customer assets include advances, lease receivables and credit
substitutes like debenture and bonds but excludes preference shares.

(3). All amounts have been rounded off to the nearest Rs. 10.0 million.

The following table sets forth, at the dates indicated, information
regarding our non-performing assets, or NPAs.

Rs. in billion, except percentages
Year ended Gross NPA(1) Net NPA Net customer % of Net NPA to
assets Net customer
assets(2)

March 31, 2007 41.68 20.19 2,053.74 0.98%

March 31, 2008 75.88 35.64 2,384.84 1.49%

March 31, 2009 98.03 46.19 2,358.24 1.96%

(1). Net of write-offs, interest suspense and derivative income reversal.

(2). Customer assets include advances and credit substitutes like
debentures and bonds but excludes preference shares.

(3). All amounts have been rounded off to the nearest Rs. 10.0 million.

At year-end fiscal 2009, the gross NPAs (net of write-offs, interest
suspense and derivatives income reversal) were Rs. 98.03 billion compared
to Rs. 75.88 billion at year-end fiscal 2008. Gross of technical write-
offs, the gross NPAs at year-end fiscal 2009 were Rs. 99.29 billon compared
to Rs. 83.50 billion at year-end fiscal 2008. Net NPAs were Rs. 46.19
billion at year-end fiscal 2009 compared to Rs. 35.64 billion at year-end
fiscal 2008. The ratio of net NPAs to net customer assets was 1.96% at
year-end fiscal 2009 compared to 1.49% at year-end fiscal 2008. During the
year, we wrote-off certain NPAs, including retail NPAs, that were fully
provided for at the time of the write-off. The coverage ratio (i.e. total
provisions and technical write-offs made against non-performing assets as a
percentage of gross non-performing assets) at year-end fiscal 2009 was
53.5%. In addition, total general provision held against standard assets
was Rs. 14.36 billion at year-end fiscal 2009.

The increase in non-performing assets was due to higher level of non-
performing assets in the retail assets portfolio. In the retail assets
portfolio, non-performing loans rose due to the change in the portfolio mix
towards non-collateralised loans and seasoning of the loan portfolio. At
year-end fiscal 2009, the net non-performing loans in the retail portfolio
were 2.94% of net retail loans as compared with 1.83% at year-end fiscal
2008. The overall decline in our retail loans during fiscal 2009
contributed to the rise in the proportion of non-performing loans in the
retail asset portfolio. The net non-performing loans in the collateralised
retail portfolio were 1.59% of net collateralised retail loans and net non-
performing loans in the non-collateralised retail portfolio (including
overdraft financing against automobiles) were about 10.08% of net non-
collateralised retail loans.

During the year, we sold certain retail NPAs to asset reconstruction
companies registered with the RBI. Our aggregate investments in security
receipts issued by these asset reconstruction companies were Rs. 32.18
billion at year-end fiscal 2009. Our net restructured standard loans were
Rs. 59.38 billion at year-end fiscal 2009 compared to Rs. 46.84 billion at
year-end fiscal 2008.

Classification of Non-Performing Assets by Industry:

The following table sets forth, at year-end fiscal 2008 and year-end fiscal
2009, the composition of gross non-performing assets by industry sector.

Rs. in billion, except percentages
March 31, 2008 March 31, 2009
Amount % Amount %

Retail finance(1) Rs. 55.16 72.7% Rs. 71.50 72.9%

Chemicals & fertilisers 1.92 2.5 1.96 2.0

Textiles 1.07 1.4 1.77 1.8

Wholesale/retail trade 0.08 0.1 1.47 1.5

Services - finance 1.19 1.6 1.29 1.3

Shipping 1.00 1.3 1.02 1.0

Food & beverages 0.57 0.8 1.03 1.1

Electronics & engineering 0.53 0.7 0.79 0.8

Automobiles 0.07 0.1 0.32 0.3

Iron/steel & products 1.21 1.6 0.36 0.4

Services - non finance 0.41 0.5 0.35 0.4

Metal & metal products 0.10 0.1 0.20 0.2

Power 0.14 0.2 0.15 0.1

Paper and paper products 0.04 0.1 0.04 0.1

Other industries(2) 12.39 16.3 15.78 16.1

Total 75.88 100.0% 98.03 100.0%

(1). Includes home loans, automobile loans, commercial business loans, two
wheeler loans, personal loans and credit cards. Also includes NPAs in
dealer funding and developer finance portfolios of Rs. 0.44 billion at
year-end fiscal 2009 and Rs. 0.30 billion at year-end fiscal NPA's in 2008.

(2). Other industries primarily include construction, drugs &
pharmaceuticals, agriculture & allied activities, FMCG, gems & jewellery,
manufacturing products excluding metal, crude petroleum/refining &
petrochemicals, mining, cement etc.

(3). All amounts have been rounded off to the nearest Rs. 10.0 million.

SEGMENTAL INFORMATION:

RBI issued revised guidelines on segment reporting applicable from fiscal
2008. As per the guidelines, the business operations of the Bank have
following segments:

* Retail Banking includes exposures which satisfy the four criteria of
orientation, product, granularity and low value of individual exposures for
retail exposures laid down in Basel Committee on Banking Supervision
document 'International Convergence of Capital Measurement and Capital
Standards: A Revised Framework'.

* Wholesale Banking includes all advances to trusts, partnership firms,
companies and statutory bodies which are not included under the Retail
Banking.

* Treasury includes the entire investment portfolio of the Bank.

* Other Banking includes hire purchase and leasing operations and other
items not attributable to any particular business segment.

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 requirements.

Despite challenges in the operating environment during the course of the
year, profit before tax of the retail banking segment was Rs. 0.58 billion
in fiscal 2009 as compared to Rs. 9.47 billion in fiscal 2008. The profit
before tax of the retail banking segment was impacted primarily by the
sharp increase in the interest rates in the banking system which impacted
the net interest income on the existing retail asset portfolio, and the
higher credit losses primarily on account of the challenges in collections
and the deteriorating macroeconomic environment. Also, as a risk
containment measure, we had consciously moderated retail disbursements,
which resulted in a lower level of interest income and loan related fees.
These challenges were partly offset by lower direct marketing agency
expenses due to lower disbursements during the year.

Profit before tax of the wholesale banking segment was marginally lower at
Rs. 34.13 billion in fiscal 2009 as compared to Rs. 35.75 billion in fiscal
2008. This was primarily due to the sharp downturn in the global economy
which resulted in a slowdown in the Indian economy and also impacted the
Indian corporate sector. Corporate clients had therefore slowed down their
investment and overseas expansion plans which impacted our fees related to
investment and M&A activity of corporate clients during the second half of
the year.

Profit before tax of the treasury banking segment was higher at Rs.12.84
billion in fiscal 2009 as compared to Rs. 5.13 billion in fiscal 2008. With
the easing of the monetary policy stance in October 2008, we positioned
ourselves to take advantage of the change in the interest rate scenario by
increasing the duration of the SLR portfolio as well as taking trading
positions to benefit from the drop in yields. This resulted in higher
profit before tax of the treasury banking segment.

Profit before tax of the other banking segment was higher at Rs. 3.61
billion in fiscal 2009 as compared to Rs. 0.21 billion in fiscal 2008. This
was primarily due to completion of pending income tax assessments during
the course of the year, as a result of which we had received interest on
income tax refund.

CONSOLIDATED FINANCIALS AS PER INDIAN GAAP:

The consolidated profit after tax for fiscal 2009 including the results of
operations of our subsidiaries and other consolidating entities was Rs.
35.77 billion as compared to Rs. 33.98 billion for fiscal 2008.

ICICI Bank UK made a profit of Rs. 0.31 billion in fiscal 2009, as compared
to Rs. 1.55 billion in fiscal 2008 due to increase in impairment loss
mainly pertaining to provision made for investments in Lehman Brothers and
other investments, offset, in part, by profit of Rs. 4.02 billion on buy-
back of bonds. ICICI Bank UK's mark-to-market loss on investments made
through profit and loss accounts was Rs. 0.56 billion (US$ 12 million). In
October 2008, the UK Accounting Standards Board amended FRS 26 on
Financial Instruments: Recognition and Measurement' and permitted
reclassification of financial assets in certain circumstances from the
held for trading (HFT)' category to the available for sale (AFS)'
category, HFT category to the loans and receivables' category and from the
AFS category to the loans and receivables' category. Pursuant to these
amendments, during fiscal 2009, ICICI Bank UK has transferred certain
assets with fair value of Rs. 34.03 billion (US$ 671 million) from the HFT
category to the AFS category, certain assets with fair value of Rs. 0.12
billion (US$ 2 million) from the HFT category of investments to loans and
receivables' category and certain assets with fair value of Rs. 20.39
billion (US$ 402 million) from the AFS category of investments to loans
and receivables' category. If these re-classifications had not been made,
ICICI Bank UK's profit would have reduced by Rs. 2.45 billion [expense on
fair value of financial instruments through profit and loss would have
increased by Rs. 2.69 billion (US$ 59 million) offset by change in net
interest income by Rs. 0.24 billion (US$ 5 million)].

ICICI Bank UK's mark-to-market provisions against AFS investments adjusted
against its shareholders' equity increased by post-tax amount of Rs. 8.31
billion (US$ 164 million) during fiscal 2009 to post-tax amount of Rs.
13.43 billion (US$ 265 million) at year-end fiscal 2009. If the above re-
classifications had not been made, these provisions would have increased by
a further pre-tax amount of Rs. 0.53 billion (US$ 11 million).

ICICI Bank Canada has made a profit of Rs. 1.39 billion in fiscal 2009 as
compared to a loss of Rs. 0.57 billion in fiscal 2008 due to increase in
net interest income and income from investment banking and client-centric
derivative business. ICICI Bank Canada's loss in fiscal 2008 was due to
provision for mark-to-market loss and other losses through the profit and
loss account on investments, including asset backed commercial paper and
credit derivatives portfolio.

ICICI Prudential Life Insurance Company Limited (ICICI Life) incurred a
loss of Rs. 7.80 billion in fiscal 2009 as compared to Rs. 13.95 billion in
fiscal 2008. The decline in the loss of ICICI Life was on account of higher
renewal premiums and lower new business premiums, resulting in lower
upfront expenses and commission expenses, together with rationalisation of
various operating expenses. Life insurance companies incur losses in the
initial years mainly due to higher business set-up costs in the initial
years of rapid growth, non-amortisation of acquisition costs and reserving
for actuarial liability in line with insurance company accounting norms.
These factors have resulted in statutory losses for the life insurance
business since the company's inception, as its business has grown rapidly
year on year. The impact on consolidated profits for fiscal 2009 on account
of the loss is Rs. 5.77 billion.

ICICI Lombard General Insurance Company Limited (ICICI General) made a
profit of Rs. 0.24 billion in fiscal 2009 as compared to Rs. 1.03 billion
in fiscal 2008 primarily due to decrease in premium rates on account of de-
tariffing, enhanced investments in technology architecture, brand building
and offices in small towns, certain high value claims and impairment
provision on investments during fiscal 2009.

ICICI Prudential Asset Management Company made a profit of Rs. 7.1 million
in fiscal 2009 as compared to Rs. 821.0 million in fiscal 2008 primarily
due to reduction in the average funds under management and expenses towards
scheme support.

ICICI Securities Limited made a profit of Rs. 0.04 billion in fiscal 2009
as compared to Rs. 1.51 billion in fiscal 2008 on account of sharp decline
in brokerage volumes and corporate finance fees due to the unfavourable
conditions in domestic and international markets.

Consolidated assets of the Bank and its subsidiaries were Rs. 4,826.91
billion at year-end fiscal 2009 as against Rs. 4,856.17 billion at year-end
fiscal 2008. Consolidated advances of the Bank and its subsidiaries
increased to Rs. 2,661.30 billion at year-end fiscal 2009 from Rs. 2,514.02
billion at year-end fiscal 2008.

The following table sets forth, for the periods indicated, the
profit/(loss) of our principal subsidiaries.

Rs. in billion
Fiscal 2008 Fiscal 2009

ICICI Bank UK PLC 1.55 0.31

ICICI Bank Canada (0.57) 1.39

ICICI Bank Eurasia Limited Liability Company (0.08) (0.07)

ICICI Prudential Life Insurance Company Limited (13.95) (7.80)

ICICI Lombard General Insurance Company Limited 1.03 0.24

ICICI Prudential Asset Management Company Limited 0.82 0.01

ICICI Securities Limited 1.51 0.04

ICICI Securities Primary Dealership Limited 1.40 2.72

ICICI Home Finance Company Limited 0.70 1.43

ICICI Venture Funds Management Company Limited 0.90 1.48

INTERNATIONAL FINANCIAL REPORTING STANDARDS:

Convergence with International Financial Reporting Standards (IFRS), issued
by the International Accounting Standards Board (IASB) is gaining the
attention of companies, regulators and investing communities across the
globe. Many countries have adopted IFRS and some of them, including India,
are in the process of adopting the same. The Institute of Chartered
Accountants of India (ICAI) has issued a roadmap for convergence of Indian
GAAP with IFRS by April 1, 2011.

Currently, we report our financials under Indian GAAP and also report a
reconciliation of Indian GAAP with US GAAP to determine shareholders'
equity and net profit in accordance with US GAAP. We will adopt IFRS for
our consolidated financial statements as per the roadmap issued by ICAI.
The main impact on banks will be on account of the IFRS relating to
Financial Instruments (IAS 39, IAS 32 and IFRS 7). The ICAI, has already
issued similar Accounting Standards (AS) relating to Financial Instruments
(AS 30, AS 31 and AS 32), which are recommendatory from April 1, 2009 till
March 31, 2011 and mandatory from April 1, 2011. We have commenced
preparations for the conversion to IFRS.

The reconciliation to US GAAP and related notes will be issued separately.

Key Financial Indicators:

Rs. in billion, except per share data
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
2003 2004 2005 2006 2007 2008 2009

Net interest income 14.45 21.85 29.32 39.07 56.37 73.04 83.67

Fee income(1) 8.47 12.89 22.03 34.47 50.12 66.27 65.24

Profit before tax 7.80 19.02 25.27 30.96 36.48 50.56 51.17

Profit after tax 12.06 16.37 20.05 25.40 31.10 41.58 37.58

Dividend per share 7.50 7.50 8.50 8.50 10.00 11.00 11.00

Earnings per share (Basic) 19.68 26.66 27.55 32.49 34.84 39.39 33.76

Earnings per share
(Diluted) 19.65 26.44 27.33 32.15 34.64 39.15 33.70

(1). Includes merchant foreign exchange income and margin on customer
derivative transactions.

Rs. in billion
At year-end fiscal
2003 2004 2005 2006 2007 2008 2009

Advances 532.79 626.48 914.05 1461.63 1958.66 2256.16 2183.11

Deposits 481.69 681.09 998.19 1650.83 2305.10 2444.31 2183.48

Total assets 1068.12 1252.29 1676.59 2513.89 3446.58 3997.95 3793.01

Equity capital
& reserves 69.33 80.10 125.50 222.06 243.13 464.71 495.33

Total capital
adequacy ratio 11.1% 10.4% 11.8% 13.4% 11.7% 14.0%(2) 15.5%2

(2). Total capital adequacy ratio has been calculated as per Basel II
framework.