Annual Report - ICICI Bank - 2009-2010

ICICI BANK LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Your Directors have pleasure in presenting the Sixteenth Annual Report of
ICICI Bank Limited with the audited statement of accounts for the year
ended March 31, 2010.



FINANCIAL HIGHLIGHTS:

The financial performance for fiscal 2010 is summarised in the following
table:

Rs. billion, except percentages Fiscal 2009 Fiscal 2010 % change

Net interest income and other income 159.70 155.92 (2.4)
Operating profit 89.25 97.32 9.0
Provisions & contingencies(1) 38.08 43.87 15.2
Profit before tax 51.17 53.45 4.5
Profit after tax 37.58 40.25 7.1
Consolidated profit after tax 35.77 46.70 30.6

(1) Excludes provision for taxes.

Appropriations:

The profit & loss account shows a profit after tax of Rs. 40.25 billion
after provisions and contingencies of Rs. 43.87 billion and all expenses.
The disposable profit is Rs. 68.35 billion, taking into account the balance
of Rs. 28.10 billion brought forward from the previous year. Your Directors
have recommended a dividend at the rate of Rs. 12 per equity share of face
value Rs. 10 for the year and have appropriated the disposable profit as
follows:

Rs. billion Fiscal 2009 Fiscal 2010

To Statutory Reserve, making in all
Rs. 58.86 billion 9.40 10.07

To Special Reserve created and maintained
in terms of Section 36(1) (viii) of the
Income-tax Act, 1961, making in all
Rs. 26.44 billion 2.50 3.00

To Capital Reserve, making in all Rs. 20.63
billion 8.18 4.44

To Investment Reserve, making in all
Rs. 1.16 billion - 1.16

To General Reserve, making in all Rs. 49.79
billion - 0.01

Dividend for the year (proposed)

- On equity shares @ Rs. 12 per share
(@ Rs. 11 per share for fiscal 2009)(1) 12.25 13.38

- On preference shares (Rs.) 35,000 35,000

- Corporate dividend tax 1.51 1.64

Leaving balance to be carried forward
to the next year(2) 28.10 34.64

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

(2) After taking into account transfer to Reserve Fund Rs. 2.2 million for
fiscal 2010, making in all Rs. 10.9 million.

MERGER OF THE BANK OF RAJASTHAN LIMITED WITH ICICI BANK:

The Board of Directors of ICICI Bank and the Board of Directors of The Bank
of Rajasthan Limited (Bank of Rajasthan) at their respective Meetings held
on May 23, 2010, approved the scheme of amalgamation of Bank of Rajasthan
with ICICI Bank. The amalgamation is subject to approval of RBI and Members
of both the Banks. Approval of the Members of ICICI Bank is being sought at
an extraordinary general meeting scheduled on June 21, 2010.

The proposed amalgamation would substantially enhance ICICI Bank's branch
network, already the largest among Indian private sector banks, and
especially strengthen its presence in northern and western India. It would
combine Bank of Rajasthan's branch franchise with ICICI Bank's strong
capital base, to enhance the ability of the merged entity to capitalise on
the growth opportunities in the Indian economy.

About Bank of Rajasthan:

Bank of Rajasthan is a listed old Indian private sector bank with its
corporate office at Mumbai in Maharashtra and registered office at Udaipur
in Rajasthan. At March 31, 2009, Bank of Rajasthan had 463 branches and 111
ATMs, total assets of Rs. 172.24 billion, deposits of Rs. 151.87 billion
and advances of Rs. 77.81 billion. It made a net profit of Rs. 1.18 billion
in fiscal 2009 and a net loss of Rs. 0.10 billion in the nine months ended
December 31, 2009. Around 40% of the branches of the Bank of Rajasthan are
located in rural and semi-urban areas.

SUBSIDIARY COMPANIES:

At March 31, 2010, ICICI Bank had 17 subsidiaries as listed in the
following table:

Domestic Subsidiaries International Subsidiaries

ICICI Prudential Life Insurance
Company Limited ICICI Bank UK PLC

ICICI Lombard General Insurance
Company Limited ICICI Bank Canada

ICICI Prudential Asset Management ICICI Bank Eurasia Limited
Company Limited Liability Company

ICICI Prudential Trust Limited ICICI Securities Holdings Inc.(2)

ICICI Securities Limited ICICI Securities Inc.(3)

ICICI Securities Primary Dealership ICICI International Limited
Limited

ICICI Venture Funds Management
Company Limited

ICICI Home Finance Company Limited

ICICI Investment Management
Company Limited

ICICI Trusteeship Services Limited

ICICI Prudential Pension Funds
Management Company Limited(1)

(1) Subsidiary of ICICI Prudential Life Insurance Company Limited.
(2) Subsidiary of ICICI Securities Limited.
(3) Subsidiary of ICICI Securities Holdings Inc.

ICICI Wealth Management Inc., a subsidiary of ICICI Bank Canada, has been
dissolved effective December 31, 2009.

As approved by the Central Government vide letter dated April 9, 2010 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 2010. 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:

The Members at their Fifteenth Annual General Meeting held on June 29,
2009, approved the appointment of Sandeep Bakhshi, Deputy Managing
Director, N. S. Kannan, Executive Director & CFO and K. Ramkumar, Executive
Director. Reserve Bank of India (RBI) vide its letter dated July 2, 2009
approved the appointment of Sandeep Bakhshi. RBI vide its letter dated June
16, 2009 approved the appointment of N. S. Kannan and K. Ramkumar.

T. S. Vijayan, Chairman, Life Insurance Corporation of India, and a non-
executive Director of the Bank resigned from the Board effective November
24, 2009. Pursuant to the provisions of the Banking Regulation Act, 1949,
P. M. Sinha retired from the Board effective January 22, 2010 and L. N.
Mittal, Anupam Puri and Marti Subrahmanyam retired from the Board effective
May 3, 2010 on completion of eight years as non-executive Directors of the
Bank. The Board placed on record its deep appreciation and gratitude for
their guidance and contribution to the Bank.

The Board at its Meeting held on January 21, 2010 appointed Homi R.
Khusrokhan, former Managing Director, Tata Chemicals Limited and V. Sridar,
former Chairman, National Housing Bank and former Chairman & Managing
Director, UCO Bank, as additional Directors effective January 21, 2010.
Further, the Board at its Meeting held on April 30, 2010 appointed Tushaar
Shah, Senior Fellow at the International Water Management Institute and
former Director of the Institute of Rural Management as an additional
Director effective May 3, 2010. Homi R. Khusrokhan, Tushaar Shah and V.
Sridar hold office upto the date of the forthcoming Annual General Meeting
(AGM) and are eligible for appointment.

Sonjoy Chatterjee, Executive Director resigned from the services of the
Bank effective April 30, 2010.

The Board at its Meeting held on April 30, 2010 approved a proposal for the
appointment of Rajiv Sabharwal as a wholetime Director of the Bank subject
to approval of RBI. Approval of the Members is being sought at the current
AGM for the appointment of Rajiv Sabharwal as a wholetime Director of the
Bank for a period of five years effective only from the date of receipt of
RBI approval.

In terms of the provisions of the Companies Act, 1956 and the Articles of
Association of the Bank, K. V. Kamath, Sridar Iyengar and Narendra Murkumbi
would retire by rotation at the forthcoming AGM and are eligible for re-
appointment. K. V. Kamath and Sridar Iyengar have offered themselves for
re-appointment. Narendra Murkumbi has expressed his desire not to seek re-
appointment as a Director. A resolution is proposed to the Members in the
Notice of the current AGM to this effect and also not to fill up the
vacancy caused by the retirement of Narendra Murkumbi at this meeting or
any adjourned meeting thereof.

AUDITORS:

The auditors, B S R & Co., Chartered Accountants, will retire at the
ensuing AGM. They had been statutory auditors of the Bank for the last four
years, which is the maximum term of appointment of auditors permitted by
RBI. As recommended by the Audit Committee, the Board has proposed the
appointment of S. R. Batliboi & Co., Chartered Accountants as statutory
auditors for fiscal 2011. Their appointment has been approved by RBI vide
its letters dated April 20, 2010 and May 13, 2010. 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:

Erstwhile ICICI Limited (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, 2010, ICICI Bank had 24
nominee directors, of whom 20 were employees of the Bank, on the boards of
39 assisted companies. The Bank has a Nominee Director Cell for maintaining
records of nominee directorships.

RISK MANAGEMENT FRAMEWORK:

The Bank's 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. The Risk Committee reviews risk
management policies of the Bank in relation to various khayaal aapka risks
and regulatory compliance issues. It reviews key risk indicators covering
areas such as credit risk, interest rate risk, liquidity risk, and foreign
exchange risk and the limits framework, including stress test limits, for
various risks. It also carries out an assessment of the capital adequacy
based on the risk profile of the Bank's balance sheet and reviews the
status with respect to implementation of Basel II norms. The Credit
Committee reviews developments in key industrial sectors and Bank's
exposure to these sectors as well as to large borrower accounts. The Audit
Committee provides direction to and also monitors the quality of the
internal audit function. The Asset Liability Management Committee is
responsible for managing the balance sheet and reviewing asset-liability
position of the Bank.

* 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.

* Independent groups and sub-groups have been constituted across the Bank
to facilitate independent evaluation, monitoring and reporting of various
risks. These groups function independently of the business groups/sub-
groups.

The Bank has dedicated groups namely the 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 Global 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.

CORPORATE GOVERNANCE:

It is annexed as a seperate part of the 'REPORT ON CORPORATE GOVERNANCE'.

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 to participate in future growth and financial success of the
Bank. 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 24, 2010).

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
granted in April 2009 vest in a graded manner over a five year period with
20%, 20%, 30% and 30% of grant vesting each year commencing from the end of
24 months from the date of grant.

On the basis of the recommendation of the Board Governance, Remuneration &
Nomination Committee, the Board at its Meeting held on April 24, 2010
approved a grant of approximately 2.49 million options for fiscal 2010 to
eligible employees and wholetime Directors. 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. 977.70, which was the closing price on the stock
exchange, which recorded the highest trading volume in ICICI Bank shares on
April 23, 2010. These options would vest over a four year period, with 20%,
20%, 30% and 30% respectively of the grant vesting each year commencing
from the end of 12 months from the date of the 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.

Particulars of options granted by ICICI Bank upto April 24, 2010 are given
below:

Options granted(1) 55,201,055
Options vested 36,661,828
Options exercised 25,920,074
Number of shares allotted pursuant to exercise of options 25,920,074
Options forfeited/lapsed 8,127,506
Extinguishment or modification of options Nil
Amount realised by exercise of options (Rs.) 5,288,748,500
Total number of options in force 21,153,475

(1) Includes options granted to wholetime Directors pending RBI approval.

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. 35.99 in
fiscal 2010 against basic EPS of Rs. 36.14. 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 2010 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 2010 would have
been higher by Rs. 901.2 million and proforma profit after tax would have
been Rs. 39.35 billion. On a proforma basis, the Bank's basic and diluted
earnings per share would have been Rs. 35.33 and Rs. 35.19 respectively.
The key assumptions used to estimate the fair value of options granted
during fiscal 2010 are given below:

Risk-free interest rate 6.53% to 7.68%
Expected life 6.35 to 6.85 years
Expected volatility 48.65% to 49.18%
Expected dividend yield 1.22% to 2.53%

In respect of options granted in fiscal 2010, the weighted average exercise
price of the options and the weighted average fair value of the options
were Rs. 434.78 per option and Rs. 199.91 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, 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
Date : May 24, 2010 Chairman

Business Overview:

ECONOMIC OVERVIEW:

During fiscal 2010, India witnessed a significant revival in economic
activity following the moderation in fiscal 2009. The economic recovery was
evident across a wide range of sectors with the momentum gaining strength
in the second half of fiscal 2010. Industrial activity, as reflected by the
Index of Industrial Production (IIP), increased by 10.4% during fiscal 2010
as against 2.7% in fiscal 2009. During October 2009-March 2010 the IIP
increased by 14.3% compared to 0.6% during the corresponding period in the
previous year. The growth in IIP was largely driven by the manufacturing
sector which recorded a growth of 10.9% during fiscal 2010 compared to 3.1%
during the corresponding period in the previous year. Growth in the
manufacturing sector accelerated to 15.4% during October 2009-March 2010
compared to 0.4% during the corresponding period in the previous year.
External trade also revived from the third quarter of fiscal 2010, with
growth in exports turning positive from October 2009, after a decline for
12 consecutive months. Equity markets also witnessed strong revival in
fiscal 2010 with the BSE Sensex increasing by 80.5% from 9,709 at March 31,
2009 to 17,528 at March 31, 2010.

The growth in gross domestic product (GDP) during the first half of fiscal
2010 was 7.0% compared to 6.0% during the second half of fiscal 2009.
However, during the third quarter of fiscal 2010, GDP growth moderated to
6.0% mainly due to a 2.8% decline in agricultural output following below
normal monsoons, and moderation in services sector growth to 6.6%.
Reflecting the overall improvement in the economy, the Central Statistical
Organisation (CSO) has placed advance estimates of GDP growth for fiscal
2010 at 7.2%.

Liquidity in the system remained comfortable following the continuation of
a relatively accommodative monetary policy stance for a large part of
fiscal 2010. During fiscal 2010, capital flows revived significantly with
net foreign institutional investment inflows of US$ 23.6 billion during
April-December 2009 compared to net outflows of US$ 11.3 billion in the
corresponding period of fiscal 2009. Net foreign direct investments at US$
16.5 billion during April-December 2009 were also higher as compared to US$
14.3 billion during the corresponding period of the previous year. The
revival in trade and lower oil prices combined with strong capital inflows
improved India's balance of payments, which recorded a surplus of US$ 11.3
billion in the first nine months of fiscal 2010 as compared to a deficit of
US$ 20.4 billion in the corresponding period of fiscal 2009. The rupee
appreciated by 11.4% against the US dollar from Rs.51.0 per US dollar at
year-end fiscal 2009 to Rs. 45.1 per US dollar at year-end fiscal 2010.

During the second half of fiscal 2010, inflationary pressures increased
driven largely by food price inflation. Inflation as measured by the
Wholesale Price Index increased from a low of -1.0% in June 2009 to 9.9% in
March 2010. Following the recovery in economic activity and increased
inflationary concerns, the Reserve Bank of India (RBI) commenced its exit
from the monetary policy stance adopted in response to the global financial
crisis. RBI increased the statutory liquidity ratio (SLR) by 100 basis
points from 24.0% to 25.0% in October 2009, the cash reserve ratio (CRR) by
75 basis points to 5.75% in February 2010 and the repo and reverse repo
rates by 25 basis points each to 5.0% and 3.5% respectively in March 2010.
RBI, in its annual policy review in April 2010, announced a further
increase of 25 basis points each in CRR to 6.0%, repo rate to 5.25% and
reverse repo rate to 3.75%. In addition to the increase in policy rates,
RBI also withdrew the special liquidity support measures instituted in
fiscal 2009 in response to the global financial crisis. As a result of
inflationary concerns, increased policy rates and the large government
borrowing programme, the yield on 10-year government securities increased
by 81 basis points from 7.01% at March 31, 2009 to 7.82% at March 31, 2010.

The pace of economic recovery in India is reflective of the transitory
impact of the global financial crisis on the Indian economy. India's strong
domestic fundamentals are expected to remain operative over the long-term,
with the twin drivers of consumption and investment supporting sustained
high growth for the economy. Over the next year, while economic recovery is
expected to strengthen and assume a broad-based nature, the management of
inflation expectations, the pace of withdrawal of stimulus measures and the
management of systemic liquidity in view of the large government borrowing
programme and the impact of volatile global markets on capital flows will
be key factors impacting the economy and financial markets.

FINANCIAL SECTOR OVERVIEW:

During fiscal 2010, the year-on-year growth in non-food bank credit
declined from 17.8% in March 2009 to 16.9% in March 2010. Based on data
published by RBI, for the period upto February 26, 2010, year-on-year

growth in nonfood bank credit was driven primarily by a 24.4% growth in
credit to agriculture and allied activities and a 20.1% growth in credit to
the industrial sector. Within the industrial sector, credit to
infrastructure grew by 42.3% during this period. At February 26, 2010,
industry accounted for 43.2% of non-food gross bank credit, retail credit
for 20.1%, agriculture and allied activities for 12.8%, trade for 5.7%,
real estate for 3.2% and other sectors for the balance 15.0%. During fiscal
2010, the growth in total deposits was 17.0% as compared to a growth of
19.9% during fiscal 2009. The decline in growth was primarily due to a
moderation in growth in time deposits from 23.9% in fiscal 2009 to 16.2% in
fiscal 2010. Demand deposits after witnessing a decline of 0.2% in fiscal
2009 grew by 22.2% in fiscal 2010. The credit-deposit ratio remained within
the range of 68.0%-72.0% during fiscal 2010 and was about 72.0% in March
2010.

The recovery in economic activity and improvement in financial markets
during fiscal 2010 led to a revival in the demand for financial savings and
investment products, benefiting the life insurance and mutual fund sectors.
First year retail premium underwritten in the life insurance sector
increased by 16.7% (on weighted received premium basis) to Rs. 550.24
billion in fiscal 2010 with the private sector's retail market share (on
weighted received premium basis) at 52.3% in fiscal 2010. Total assets
under management (on average assets basis) of mutual funds increased by
51.5% from Rs. 4,932.85 billion in March 2009 to Rs. 7,475.25 billion in
March 2010. Gross premium in the non-life insurance sector (excluding
specialised insurance institutions) grew by 13.4% to Rs. 347.55 billion in
fiscal 2010 compared to growth rates of 9.2% in fiscal 2009 and 12.3% in
fiscal 2008, with the private sector's market share at 40.9% in fiscal
2010.

There were a number of key policy developments in the banking sector during
fiscal 2010. In continuation of the liberalisation of the banking sector,
in June 2009, banks were allowed to open offsite ATMs without prior
approval from RBI. The branch authorisation policy was also liberalised in
December 2009 and banks were allowed to open branches in Tier III-VI cities
without prior RBI approval. In August 2009, RBI also issued guidelines
relating to the issuance and operation of mobile phone based pre-paid
payment instruments. In July 2009, RBI issued a time schedule for the
introduction of advanced approaches of the Basel II framework in India
whereby banks are required to apply to RBI for migration to internal models
approach for market risk band the standardised approach for operational
risk earliest by April 1, 2010 and for advanced measurement approach for
operational risk and internal ratings based approaches for credit risk
earliest by April 1, 2012. RBI also initiated several measures to increase
systemic transparency and customer convenience. In April 2010, RBI issued
guidelines directing banks to replace the benchmark prime lending rate
system with a base rate system effective July 2010. The guidelines
recommend calculating the base rate taking into consideration cost elements
that can be clearly identified and are common across borrowers. RBI also
issued guidelines revising the method of payment of interest on savings
accounts to a daily average basis effective April 1, 2010. During fiscal
2010, with an improvement in market conditions, RBI also initiated several
measures to maintain systemic stability. In November 2009, the provisioning
requirement for advances to commercial real estate classified as standard
assets was increased from 0.4% to 1.0%. In December 2009, RBI directed
banks to achieve a total provisioning coverage ratio of 70% by September
2010. In February 2010, in its master circular on capital adequacy, RBI
increased the capital requirements relating to securitisation exposures and
provided enhanced guidance on valuation adjustments for illiquid
investments and derivatives. The guidelines also increased disclosure
requirements for credit risk mitigations and securitised exposures.

The Indian financial sector has remained resilient to the volatility in
global markets. The banking sector is healthy and remains well capitalised
to benefit from the recovery in domestic economic activity.

ORGANISATION STRUCTURE:

During fiscal 2010, given the significant expansion in our branch network
and our increased focus on customer service, we reorganised our
organisation structure to provide greater empowerment to our branches with
enhanced senior management oversight of their operations. We expect our
branch network to serve as an integrated channel for deposit mobilisation,
retail asset origination and distribution of third party products. 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: The retail sales and service architecture has been
organised into four geographies. These have been further divided into zonal
and regional structures. The Retail Strategy, Product & Policy Group has
been formed to develop customer-segment specific strategies, including
product design and service propositions. The Retail Banking Group is also
responsible for inclusive and rural banking.

* Wholesale Banking Group, comprising the Corporate Banking Group,
Commercial Banking Group, Investment Banking Group, Project Finance Group,
Financial Institutions and Capital Markets Group, Government Banking Group
and Mid-corporate & Small Enterprises Group.

* International Banking Group, comprising the Bank's international
operations, including operations in various overseas markets as well as
products and services for non-resident Indians, 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
branding, corporate communications, risk management, compliance, internal
audit, legal, financial crime prevention and reputation risk management,
accounts and taxation 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 and Middle Office Groups, which are responsible for
back-office operations, controls and monitoring for our domestic and
overseas operations.

* Customer Services Group, which is responsible for initiatives towards
building and maintaining long-term customer relationships.

* Information Technology 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:

During fiscal 2010, the Bank continued to focus on improving its funding
mix, conserving capital, liquidity management and risk containment and
increasing operating efficiencies. We continued to grow our branch network
and became the first private sector bank in India to have 2,000 branches in
May 2010. We believe that the success achieved with respect to our strategy
in fiscal 2010 and the enhanced branch network have positioned us well to
capitalise on future growth opportunities.

Retail Banking:

Retail credit growth in the banking system continued to moderate in fiscal
2010. As per data published by RBI for the period upto February 26, 2010,
year-on-year retail credit growth was about 5%.

Our retail disbursements remained moderate during fiscal 2010, as we
focused on opportunities in residential mortgages and vehicle finance,
while reducing our unsecured retail loan and credit card receivables
portfolio. There were also substantial repayments and prepayments from the
portfolio during the year. Our retail portfolio (including builder finance
and dealer funding) at March 31, 2010 was Rs. 790.45 billion, constituting
43.6% of our overall loan portfolio. Within the retail portfolio, unsecured
retail loans where we had witnessed higher credit losses, declined from
about 10% of our loan portfolio at March 31, 2008 to 8% at March 31, 2009
and further to below 5% at March 31, 2010. We continue to believe that
retail credit in India has robust long-term growth potential, driven by
sound fundamentals, namely, rising income levels and favourable demographic
profile. We will continue to focus on select retail asset segments like
housing and vehicle loans where we expect significant demand going forward.

During fiscal 2010, 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 28.7% at March
31, 2009 to 41.7% at March 31, 2010. We continued to expand our branch
network during the year. Our branch network has now increased from 1,419
branches & extension counters at March 31, 2009 to 1,707 branches &
extension counters at March 31, 2010 and further to 2,000 branches &
extension counters at May 3, 2010. We also increased our ATM network from
4,713 ATMs at March 31, 2009 to 5,219 ATMs at March 31, 2010.

We expect our branches to become key points of customer acquisition and
service. Accordingly, during fiscal 2010 we changed our organisation
structure to provide greater empowerment to our branches. The branch
network is expected to serve as an integrated channel for deposit
mobilisation, selected retail asset origination and distribution of third
party products as well as the focal point for customer service and
acquisition.

Cross-selling new products and 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.
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 and insurance products.

Small Enterprises:

We have segmented offerings for the small and medium enterprises sector
while adopting a cluster based financing approach to fund small enterprises
that have a homogeneous profile such as engineering, information
technology, transportation and logistics and pharmaceuticals. We also offer
supply chain financing solutions to the channel partners of corporate
clients and business loans (in the form of cash credit/overdraft/term
loans) to meet the working capital needs of small businesses. We are also
proactively reaching out to small and medium enterprises through various
initiatives such as the small and medium enterprises CEO Knowledge Series -
a platform to mentor and assist entrepreneurs, small and medium enterprises
toolkit - an online business and advisory resource for small and medium
enterprises, and Emerging India Awards - a small and medium enterprises
recognition platform.

We have a long tradition of partnering entrepreneurs early in their growth,
building lasting and mutually beneficial relationships that deliver
recurring value to the Bank. Expanding our profitable small enterprises
franchise and identifying and nurturing relationships with medium
enterprises having growth potential will be key priorities in this area.

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 commercial 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 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 structuring and execution of investment
banking mandates. We have 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 leveraging our strong
client relationships and focusing on enhancing client servicing capability
at the operational level.

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 stability of our revenue streams by
executing our transaction banking and trade services strategy, keeping a
close watch on credit quality and further deepening our client
relationships.

Project Finance:

Given the enhanced focus on infrastructure development in the country, we
expect a significant increase in infrastructure financing requirements
going forward.

The power sector is expected to witness continued large investments.
Besides requirements arising out of capacity additions, significant
investments are also projected in private sector transmission projects for
the strengthening of the national grid. Further, we also expect substantial
development in the renewable energy segment.

With the scale up in gas production at KG-D6 block, significant investments
in trunk pipeline network are expected. The improved gas availability and
pipeline connectivity is also expected to drive the expansion of city gas
network.

The growth in telecom infrastructure is expected to continue on account of
decline in tariffs and increased focus on rural markets. Further, the
proposed allotment of additional spectrum is expected to result in
significant investments for rollout of services.

The transportation sector has witnessed renewed momentum with the
government bidding out new projects for development of national and state
highways. The port sector is also witnessing creation of new capacities in
both the bulk and container cargo segments along with increased private
sector participation. The railway sector is also expected to witness
investments for modernisation of railways stations, logistics development
and expansion of dedicated freight corridors.

Further, we also expect increased private sector investments in the
development of water supply, education and healthcare infrastructure. For
example, the government is in the process of inviting bids from private
companies for setting up about 2,500 model schools on a public-private-

partnership basis.

We will continue to position ourselves to cater to the financing
requirements in the infrastructure sector. 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
innovative financial structuring, 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, taking select trade finance exposures linked to imports to India
and achieving the status of the preferred non-resident Indian (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 nine branches. ICICI Bank
Eurasia Limited Liability Company has two branches.

During fiscal 2010, global economic activity remained moderate and the pace
of recovery in international trade and capital flows remained subdued. In
this environment, we continued to focus on risk containment and liquidity
management in our international operations. We also focused on building a
stable deposit base and improving the funding profile in our international
operations. During fiscal 2010, the proportion of retail term deposits in
total deposits in ICICI Bank UK increased from 58% at March 31, 2009 to 66%
at March 31, 2010. The proportion of term deposits in ICICI Bank Canada
remained at over 80% of total deposits at March 31, 2010. During fiscal
2010, 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. Our NRI
customer base currently stands at over 600,000. We continued to focus on
developing products and service offerings to cater to the requirements of
the NRI community. During fiscal 2010, we also focused on improving
customer service across our channels through various technology based
initiatives and by providing value added relationship offerings like expert
views on investment and finance related matters.

Inclusive and rural banking:

We have undertaken several initiatives to meet the financial services needs
of the rural market. These include offering micro-credit through
microfinance institutions (MFIs), micro-insurance and micro-investment
products, financial inclusion through business correspondents, farmer
financing and integration of the agri-value chain. We continued to focus on
improving our product and service offerings to meet the requirements of all
participants in the rural market including farmers, traders, commission
agents, small processors and other medium and large agri-corporates.

We work closely with a number of MFIs and believe that MFIs are well
equipped to drive financial inclusion in existing un-banked rural areas.
During fiscal 2010, we reached out to over 4.0 million micro-finance
borrowers with an outstanding portfolio in this segment at Rs. 31.79
billion at March 31, 2010. We also work with 20 business correspondent
partners having 56 branches across nine states and serving over 100,000
customers. We also focus on enrollment of beneficiaries under government
schemes like the National Rural Employment Guarantee Scheme (NREGS) and
Social Security Pension (SSP) as well as migrant workers in urban areas. We
will continue to leverage technology channels and the facilitative
regulatory environment to drive our inclusive and rural banking initiative.

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 our risk
management policies in relation to various risks and regulatory compliance

issues. It reviews key risk indicators covering areas such as credit risk,
interest rate risk, liquidity risk, and foreign exchange risk and the
limits framework, including stress test limits, for various risks. It also
carries out an assessment of the capital adequacy based on the risk profile
of our balance sheet and reviews the status with respect to implementation
of Basel II norms. Our Credit Committee reviews developments in key
industrial sectors and our exposure to these sectors and reviews major
portfolios on a periodic basis. 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.

* Independent groups and sub-groups have been constituted across the Bank
to facilitate independent evaluation, monitoring and reporting of various
risks. These groups function independently of the business groups/sub-
groups.

We have dedicated groups namely the Global Risk Management Group (GRMG),
Compliance Group, Corporate Legal Group, Internal Audit Group and the
Financial Crime Prevention and Reputation Risk Management Group, 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 Credit Risk Management Group, the 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 are governed by
a credit and recovery policy which outlines the type of products that can
be offered, customer categories, targeted customer profile and the credit
approval process and limits. The credit and recovery policy is approved by
our Board of Directors.

In order to assess the credit risk associated with any corporate 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. 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 exposure and/or lower credit rating. Industry knowledge is
constantly updated through field visits and interactions with clients,
regulatory bodies and industry experts.

In case of retail loans, sourcing and approval are segregated to achieve
independence. The Global Credit Risk Management Group has oversight on the
credit risk issues for retail assets including vetting of all credit
policies/ operating notes proposed for approval by the Board of Directors
or forums authorised by the Board of Directors. The Global Credit Risk
Management Group is also involved in portfolio monitoring for all retail
assets and suggesting/implementing policy changes. The Policy and Risk
Group is an independent unit which focuses on policy formulation and
portfolio tracking and monitoring. In addition, we also have a Business
Intelligence Unit to provide support for analytics, score card development
and database management. Our Credit Administration Unit services various
retail business units.

Our credit officers evaluate retail credit proposals on the basis of the
product policy approved by the Committee of Executive Directors and the
risk assessment criteria defined by the Global Credit Risk Management
Group. These criteria vary across product segments but typically include
factors like the borrower's income, the loanto- value ratio and demographic
parameters. The technical valuations in case of residential mortgages are
carried out by empanelled valuers or in-house technical teams. External
agencies such as field investigation agencies and credit processing
agencies are used to facilitate a comprehensive due diligence process
including visits to offices and homes in the case of loans to individual
borrowers. Before disbursements are made, the credit officer checks a
centralised delinquent database and reviews the borrower's profile. In
making our credit decisions, we also draw upon reports from the Credit
Information Bureau (India) Limited (CIBIL). We also use the services of
certain fraud control agencies operating in India to check applications
before disbursement. A hind-sighting team under the Policy and Risk Group
undertakes review and audit of credit quality and processes across
different products.

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 operational
risk in most back office processes of the Bank's retail loan business. The
Fraud Prevention Group manages fraudrelated risks through forensic audits
and recovery of fraud losses. The segregation of responsibilities and
oversight by groups external to the business groups ensure adequate checks
and balances.

Our credit approval authorisation framework is laid down by our Board of
Directors. We have established several levels of credit approval

authorities for our corporate banking activities like the Credit Committee
of the Board of Directors, the Committee of Executive Directors, the
Committee of Executives (Credit) and the Regional Committee (Credit).
Retail Credit Forums, Small Enterprise Group Forums and Agri Credit Forums
have been created for approval of retail loans and credit facilities to
small enterprises and agri based enterprises respectively. Individual
executives have been delegated with powers in case of policy based retail
products to approve financial assistance within the exposure limits set by
our Board of Directors.

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 and other asset prices. The prime source of
market risk for the Bank is the interest rate risk we are exposed to as a
financial intermediary. In addition to interest rate risk, we are exposed
to other elements of market risk such as liquidity or funding risk, price
risk on trading portfolios, exchange rate risk on foreign currency
positions and credit spread risk. These risks are controlled through limits
such as value-at-risk (VaR) and stop loss and liquidity gap limits. The
limits are stipulated in our Investment Policy, ALM Policy and Derivative
Policy which are reviewed and approved by our Board of Directors.

The Asset Liability Management Committee, which comprises wholetime
directors and executives, meets on a regular basis and reviews the trading
positions, monitors interest rate and liquidity gap positions, formulates
views on interest rates, sets benchmark lending rates and determines the
asset liability management strategy in light of the current and expected
business environment.

The Global Market Risk Management Group recommends changes in risk policies
and controls and the processes and methodologies for quantifying and
assessing market risks. Risk limits including position limits and stop loss
limits for the trading book are monitored on a daily basis by the Treasury
Middle Office Group and reviewed periodically.

Foreign exchange risk is monitored through the net overnight open foreign
exchange limit. Interest rate risk of the overall balance sheet is measured
through the use of re-pricing gap analysis and duration analysis.

We prepare interest rate risk reports on a fortnightly basis. These reports
are submitted to RBI on a monthly basis. Interest rate risk is further
monitored through interest rate risk limits approved by the Asset Liability
Management Committee.

Risks on trading positions are monitored and managed by setting VaR limits,
counterparty limits and stipulating daily and cumulative stop-loss limits.
Liquidity risk is measured through gap analysis. We maintain diverse
sources of liquidity to facilitate flexibility in meeting funding
requirements. Incremental operations in the domestic market are principally
funded by accepting deposits from retail and corporate depositors. The
deposits are augmented by borrowings in the short-term inter-bank market
and through the issuance of bonds. Loan maturities and sale of investments
also provide liquidity. Most of the funds raised are used to extend loans
or purchase securities. Generally, deposits have a shorter average maturity
than loans or investments. Our international branches are primarily funded
by debt capital market issuances, syndicated loans, bilateral loans and
bank lines, while our international subsidiaries raise deposits in their
local markets.

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 governance and framework risk 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 and control enhancement and insurance. We have formed an
independent Operational Risk Management Group for design, implementation
and enhancement of the operational risk framework and to support business
and operation groups in carrying out operational risk management.

Compliance:

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 processes 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:

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

During fiscal 2010, financial markets stabilised to a significant extent
but continued to remain volatile based on global developments. The
government bond markets witnessed an 80 basis points increase in benchmark
yields following the large government borrowing programme, emergence of
inflationary concerns and the initiation of withdrawal from an
accommodative monetary policy stance. Our balance sheet management function
during fiscal 2010 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 building new and alternate
channels of revenue. During fiscal 2010, we built a strategic credit book
in the corporate bonds segment and procured sole arranger status in most of
the primary market transactions sourced by us. The Bank's overseas branches
and subsidiaries also invest in credit derivatives with investments in this
portfolio representing exposures to Indian corporates.

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:

'Leadership through service' has been identified as a core value
proposition of the Bank's business strategy. This entails achieving service
excellence at our branches and enhancing customer service skills among our
employees. In line with the above strategy, the Bank continued its
endeavour to enhance its human resources capability and invest in skill
development and training of its employees along with initiatives to enhance
employee engagement. Developing appropriate skill sets for our client
facing employees has been a key focus area. Skill enhancement of our
employees has been achieved under the aegis of various learning academies.
During fiscal 2010, we also continued to focus on providing functional
training to our employees through various simulations, game-based modules
and e-learning programmes. The Bank has achieved considerable success in
this regard. Our Client Sales Simulator, launched during fiscal 2010 also
won a silver award in the prestigious Brandon Hall Excellence in Learning
Awards in the category of 'Best use of games for learning'.

One of the core differentiators for the Bank has been the availability of a
robust leadership talent pool. The Bank continues to invest in deepening
the leadership pool through various interventions including talent
identification and development, providing employees with challenging
opportunities at an early stage of their career and exposing such employees
to world class leadership practices. As a recognition of the Bank's world
class leadership practice, the Bank was ranked first in the Asia Pacific
region and fifth globally in the 'Top Companies for Leaders' survey
conducted by Hewitt Associates, the RBL Group and Fortune Magazine.

INFORMATION TECHNOLOGY:

Our information technology strategy focuses on increasing customer
convenience by targeting a 24x7 service window, reducing customer
complaints, and increasing tunaround and resolution timeframes. During
fiscal 2010, we implemented several customer centric technology initiatives
including customer account number portability across branches and
electronic fund transfer for global customers for remittances to non-ICICI
beneficiaries in India. We also implemented new modules in our private
banking system to manage the customer life-cycle and offer a consolidated
view of the client's portfolio. We also continued to built technology
capabilities to improve our existing processes and capabilities. During
fiscal 2010, new systems in information security were implemented to
enhance online banking security and mitigate web based frauds. The
technology infrastructure was also upgraded to service increasing business
requirements. We also acquired a comprehensive set of data center
management and automation software to service the increasing complexity and
scale of operations at our data centers. During fiscal 2010, initiatives
were also undertaken to consolidate existing applications and transfer data
centre technology assets to virtual platforms. We also initiated the
construction of two new high density and high efficiency data centres to
cater to future requirements.

KEY SUBSIDIARIES:

ICICI Prudential Life Insurance Company:

ICICI Prudential Life Insurance Company (ICICI Life) maintained its market
leadership in the private sector with an overall market share of 9.3% based
on retail new business weighted received premium in fiscal 2010. ICICI
Life's total premium increased by 7.7% to Rs. 165.32 billion in fiscal 2010
with renewal premiums increasing by 19.4%. ICICI Life's new business
annualised premium equivalent was Rs. 53.45 billion in fiscal 2010. ICICI
Life achieved its first year of accounting profits since inception in
fiscal 2010 with a profit after tax of Rs. 2.58 billion. The expense ratio
has decreased from 11.8% in fiscal 2009 to 9.1% in fiscal 2010. Assets held
at March 31, 2010 were Rs. 573.19 billion compared to Rs. 327.88 billion at
March 31, 2009.

ICICI Life's unaudited New Business Profit in fiscal 2010 was Rs. 10.15
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 resulted in statutory
losses for ICICI Life since the company's inception till fiscal 2009. 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 is an alternate measure of the underlying business profitability (as
opposed to the statutory profit or loss) and 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 9.5% in
fiscal 2010. ICICI General's gross written premium during fiscal 2010 was
Rs. 34.32 billion. 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 impact of motor third party insurance pool for third party
insurance of commercial vehicles. ICICI General achieved a profit after tax
of Rs. 1.44 billion in fiscal 2010 compared to Rs. 0.24 billion in fiscal
2009.

ICICI Prudential Asset Management Company:

ICICI Prudential Asset Management Company (ICICI AMC) was the third largest
asset management company in India. The average assets under management of
ICICI AMC increased from Rs. 514.56 billion for March 2009 to Rs. 810.18
billion for March 2010. ICICI Prudential AMC achieved a profit after tax of
Rs. 1.28 billion in fiscal 2010 compared to Rs. 7.1 million in fiscal 2009.

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. 114.40 billion at year-end fiscal 2010. ICICI
Venture achieved a profit after tax of Rs. 515.2 million in fiscal 2010
compared to Rs. 1.48 billion in fiscal 2009. The profit for fiscal 2009
includes gains from the sale of stake in TSI Venture.

ICICI Securities Limited and ICICI Securities Primary Dealership Limited:

ICICI Securities achieved a profit after tax of Rs. 1.23 billion in fiscal
2010 compared to Rs. 0.04 billion in fiscal 2009. ICICI Securities Primary
Dealership achieved a profit after tax of Rs. 849.8 million in fiscal 2010
despite the significant increase in yields on government securities, as
compared to a profit after tax of Rs. 2.72 billion in fiscal 2009.

ICICI Bank UK PLC:

ICICI Bank UK PLC (ICICI Bank UK) offers retail and corporate and
investment banking services in the UK and Europe. During fiscal 2010, ICICI
Bank UK continued to focus on rebalancing its deposit base towards retail
term deposits and the proportion of retail term deposits in total deposits
increased from 58% at March 31, 2009 to 66% at March 31, 2010. ICICI Bank
UK's profit after tax for fiscal 2010 was USD 37.0 million compared to US$
6.8 million in fiscal 2009. ICICI Bank UK's capital position continued to
be strong with a capital adequacy ratio of 17.3% at March 31, 2010.

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's profit
after tax for fiscal 2010 was CAD 35.4 million compared to CAD 33.9 million
in fiscal 2009. At March 31, 2010, ICICI Bank Canada had total advances of
CAD 3.89 billion and total assets of CAD 5.68 billion. ICICI Bank Canada's
capital position continued to be strong with a capital adequacy ratio of
23.4% at March 31, 2010.

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 forwardlooking 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, 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,
2010 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.

The outlook on ratings from all credit rating agencies is Stable except for
a Negative outlook by CRISIL on the Banks Upper Tier II and Tier I
perpetual bonds.

PUBLIC RECOGNITION:

The Bank received several awards during fiscal 2010, including the
following:

* The Bank was ranked 45th in the 2010 BrandZ Top 100 Most Valuable Global
Brands report, becoming the first and only Indian company to feature in
this list

* The Bank was ranked first in the Asia Pacific region and fifth globally
in the 'Top Companies for Leaders' survey conducted by Hewitt Associates,
the RBL Group and Fortune Magazine

* 'Most Admired Knowledge Enterprises (MAKE) India Award' by Teleos in
association with the Know Network

* 'Excellence in Learning' by Brandon Hall

* 'Best Trade Finance Bank' (India) and 'Best Foreign Exchange Bank'
(India) by Finance Asia

* 'House of the Year' by Asia Risk magazine

* 'Best Domestic Bank' (India) and 'Best Derivative House' (India) by Asset
Triple A

* 'Best Super-Affluent Bank' (India), 'Best Fixed Income Portfolio
Management', 'Best Lending/Financing Solutions, 'Best Precious Metals
Investment', 'Best Private Equity Investment', 'Best Specialised Services-
Entrepreneurs', 'Best FX/Rates Derivatives Supplier' by Euromoney

* 'Best NRI Services Bank', 'Excellence in Private Banking' (APAC) and
'Excellence in Remittance Business' by World Finance

* 'Excellence in SME Banking' and 'Best E-Banking Project Implementation'
by the Asian Banker

* 'Best Initiatives in Mobile Payments and Banking' by IDRBT

* 'Excellence in Six Sigma', second prize by the Indian Statistical
Institute

* 'Most preferred auto loan' and 'Most preferred credit card' by CNBC Awaaz

Promoting Inclusive Growth:

1. Background:

Carrying forward its long history of working for India's development, the
ICICI Group is working to create conditions for the empowerment of the
socially and economically disadvantaged. We strive to make a difference to
our customers, society and the nation's development directly through our
products, services and business operations, as well as through outreach
with civil society in the communities we serve.

2. ICICI Foundation for Inclusive Growth:

In January 2008, the ICICI Group established the ICICI Foundation for
Inclusive Growth (ICICI Foundation). ICICI Foundation's mission is to
create and support strong independent organisations that work towards
empowering the poor to participate in and benefit from the Indian growth
process. Since its inception, ICICI Foundation has taken forward the ICICI
Group's existing initiatives in the areas of primary health, elementary
education and access to finance and supported new initiatives in the areas
of civil society and environmental sustainability. ICICI Bank and its
subsidiaries have, till year-end fiscal 2010, provided grants aggregating
Rs. 854.0 million to ICICI Foundation.

i. Areas of focus:

a) Primary health: Through the ICICI Centre for Child Health and Nutrition
(ICICI Child Health) (www.icchn.org.in) in Pune, ICICI Foundation seeks to
support mothers and children in the poorest communities across India
through improvements in government health systems.

In Ranchi district, Jharkhand, ICICI Child Health has worked in partnership
with Krishi Gram Vikas Kendra, Child in Need Institute and the Government
of Jharkhand to reduce the number of babies born with low birth weight.
Village Health Committees (VHCs) and voluntary health workers (Sahiyyas)
were developed that work together to help improve access to health services
and the functioning of health centres, through organising medical camps,
awareness campaigns and building roads to ensure reach of mobile medical
vans to remote areas. This five-year initiative has covered 200,000 women,
newborns up to one year of age and adolescents in two blocks of Ranchi
district. The VHC and Sahiyya models have been adopted by the State
Government for larger health sector reforms.

In Bihar, ICICI Child Health has worked with the Public Health Resource
Network and the National Health Systems Resource Centre to support
preparation of District Health Action Plans in all 38 districts of the
state for fiscal 2011. ICICI Child Health has also conducted extensive
capacity building training right up to the block level in Bhagalpur
district.

Through the City Initiative for Child Health in Mumbai, ICICI Child Health
partnered with Bombay Municipal Corporation (BMC) to improve antenatal,
postnatal and neonatal care in public health facilities in eight wards of
the city and improved the quality of service accessed by 400,000 households
in 48 slum communities. BMC has subsequently replicated the project across
the city's western suburbs.

b) Elementary education: Through the ICICI Centre for Elementary Education
(ICICI Elementary Education) (www.icee.org.in) in Pune, ICICI Foundation
seeks to support the transformation of student learning by focusing on
quality of learning at government-run pre-schools and elementary schools
across India. Among other activities, ICICI Elementary Education works to
improve the support available to teachers, to accurately measure
performance of schools and students and strengthen capabilities of state
and district functionaries.

In partnership with the State of Chhattisgarh since it was constituted in
2002, ICICI Elementary Education has taken on the task of developing school
curriculum and textbooks, teacher training and issues relating to the
improvement of quality of school education. In the district of Baran,
Rajasthan, ICICI Elementary Education has worked with the Vidya Bhawan
Education Resource Centre and the Government of Rajasthan to strengthen and
improve the quality of the government system of elementary education. ICICI
Elementary Education is strengthening the capacity of district level
institutions and providing training and in-classroom support for teachers
in 78 schools, aiming to improve the quality of education for 450,000
children.

ICICI Elementary Education has supported the development of the MA
Education (Elementary) course at the Tata Institute for Social Sciences,
Mumbai, aiming to enhance knowledge and skills that are relevant to
strengthening elementary education. Since the inception of the programme,
two batches of 25 students each have been admitted.

c) Access to finance: In addition to the ICICI Group's direct work in the
area of financial inclusion, which is described subsequently, ICICI
Foundation has supported the IFMR Finance Foundation
(www.ifmrfoundation.org.in) in projects to develop models for enhancing
access to financial services among low-income communities in rural and
urban areas. IFMR Finance Foundation works with partners like Aajeevika
Bureau (for migrants) and Kshetriya Gramin Financial Services (for remote
rural geographies). It has also participated in product development and
training efforts for local financial institutions covering micro money
market mutual funds, livestock insurance, emergency loans and weather
insurance. It also works on strengthening risk management capabilities of
local financial institutions and has currently focused on access to debt
securitisation markets for Micro Finance Institutions (MFIs). IFMR Finance
Foundation has worked with partners to develop recommendations to
strengthen the policy environment for financial inclusion in India.

d) Civil society: Through its support to CSO Partners
(www.csopartners.org.in) in Chennai, ICICI Foundation supports civil
society organisations across India by enabling them to tap into new
resources and networks of support. CSO Partners provides human and
financial resources to NGOs and creates platforms for individuals,
corporates and government to engage with NGOs.

Corporate Disaster Resource Network (CDRN): CDRN is a web-based supply
chain management system that enables relief agencies, first responders and
local governments to highlight their immediate resource needs and access
response offers from potential product suppliers, donors and volunteers.
Currently, it has 300 NGOs and 5,000 corporate organisations as members.
CDRN is a joint initiative of CSO Partners, the National Disaster
Management Authority and Aidmatrix.

NGO Marketplace: NGO Marketplace is an online portal providing national
networking opportunities for the social sector in India. The intent is to
facilitate collaborative work and networking by NGOs with other civil
society organisations as well as donors, social contributors, researchers,
policymakers and other stakeholders.

The ICICI Group has supported GiveIndia (www.GiveIndia.org), an online
platform to enable individuals to support social causes and in turn garner
funds for India's social sector. GiveIndia has cumulatively raised over Rs.
800.0 million for over 200 NGOs; last year alone it raised approximately
Rs. 270.0 million. GiveIndia eventually aims to raise Rs. 3.00 billion
annually to support NGOs across India.

e) Environmental sustainability: ICICI Foundation has supported the
Environmentally Sustainable Finance group at the Centre for Development
Finance at IFMR (http://ifmr-cdf.in), in Chennai. One example of the
group's work is the Environmental Sustainability Index
(www.greenindiastandards. com), an index ranking the environmental
performances of Indian states, which policymakers are using as a diagnostic
tool for planning better environmental policies. In addition, ICICI
Foundation works with ICICI Bank and its subsidiaries in the formulation
and execution of their social responsibility activities.

3. Serving communities in partnership with civil society:

i. Read to Lead:

Launched in 2008, ICICI Bank's Read to Lead programme invests in India's
future by facilitating access to elementary education for 100,000
underprivileged children from 6-14 years of age. Read to Lead is an
initiative across 14 states - Andhra Pradesh, Bihar, Delhi, Gujarat,
Haryana, Jharkhand, Karnataka, Maharashtra, Orissa, Rajasthan, Tamil Nadu,
Tripura, Uttar Pradesh and West Bengal. To ensure effective programme
design and implementation, ICICI Bank has partnered with 30 NGOs chosen on
the basis of their experience in the field of education, ideologies,
sustainability of their models and outreach. Read to Lead provides
materials such as uniforms, bags, books and stationery for students,
supports workshops and training programmes for teachers, offers health and
nutritional support for children and supports bridge schools to re-enrol
school drop-outs in mainstream education.

ii. ICICI Fellows:

ICICI Fellows' (www.icicifellows.org), launched in November 2009, aims to
create a cadre of socially responsible leaders for India. It is a two-year
fellowship that includes experiential learning in semi-rural or semi-urban
India, as well as management training and leadership development through
personalised coaching and mentorship.

iii. Payroll giving:

Since 2003, ICICI Bank has facilitated employee donations to social causes
through GiveIndia (www. Giveindia.org). Currently, close to 5,000 Bank
employees participate in the payroll-giving programme, which allows them to
donate a part of their salary every month to a cause of their choice.

iv. 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 iVolunteer (www.ivolunteer.in) to offer a number of options
for the Bank's employees to volunteer with NGOs.

v. Disaster relief and rehabilitation:

a) Flood rehabilitation in Bihar, Orissa and West Bengal:

Following the floods that affected districts of Bihar, West Bengal and
Orissa in 2008, ICICI Bank's online appeal mobilised Rs. 31.7 million from
more than 55,000 Internet banking customers. ICICI Group companies and
their employees contributed an additional Rs.106.5 million. The Group
programme includes interventions to strengthen communities' capacity to
deal with future disasters by setting up sustainable livelihood systems and
promoting a culture of disaster preparedness that will enable communities
to recover more rapidly and successfully from disasters. In addition,
initiatives have been tailored to protect and nurture the children of the
community, as they are the most vulnerable. The programme covered 425
villages and over 66,500 households in three states (Bihar, Orissa, and
West Bengal), with 160 children's groups formed, providing over 3,200
children with training on community-based disaster risk reduction. In
Bihar, 170 Village Disaster and Risk Management Teams (VDRMT) have been
formed, which are frontline teams in charge of developing and establishing
community-based disaster preparedness plans and leading rehabilitation and
restoration measures when disaster strikes. Other aspects of the programme
include building 11 Child Friendly Flood Shelters (CFFS) that can
accommodate at least 1,000 people with water and sanitation systems and a
first aid emergency medical room.

b) Flood relief in Andhra Pradesh and Karnataka:

Following the devastating floods in Andhra Pradesh and Karnataka in October
2009, ICICI Bank's employees contributed one day's salary towards the
cause, a total of Rs. 18.7 million. This was further matched by the Bank
for a total of Rs. 37.4 million, which was given to the Andhra Pradesh
Chief Minister's Relief Fund and the Karnataka Chief Ministers' Relief
Fund.

4. Improving access to financial services:

To provide access to financial services for low-income and other under-
served customer, the ICICI Group has undertaken a range of initiatives. For
ICICI Bank, financial inclusion initiatives have been a part of its core
business strategy, being achieved through different channels and
technologies. Financial Innovation & Network Operations (FINO), a company
sponsored by the ICICI Group, is working with a number of players in the
financial sector for customer acquisition and servicing using the smart
card model. Total enrolments of FINO have crossed 14 million covering 233
districts in 21 states, through tie-up with 21 banks, three insurance
companies, seven government entities and 20 MFIs. ICICI Bank's Self Help
Group (SHG) and-micro lending programmes facilitate access to financial
services for low-income rural households. With a micro lending book of Rs.
34.17 billion, ICICI Bank's micro lending initiative reached more than 4.0
million low-income households in India this year. The Bank's Small
Enterprises Group reaches out to nearly a million small and medium
enterprises across the country, offering solutions using multiple low cost
channels like the Internet, dedicated call center teams, mobile banking,
ATMs, debit and credit cards, as well as branch networks. The Bank met its
priority sector lending and direct agriculture lending targets for fiscal
2010, and at March 26, 2010, total priority sector lending advances of Rs.
626.98 billion were 51.3% of the residual adjusted net bank credit (RANBC)
against the regulatory target of 50.0% of RANBC, while direct agriculture
advances at Rs. 173.29 billion represented 14.2% of RANBC, higher than the
regulatory target of 13.5%.

ICICI Prudential Life Insurance Company (ICICI Life) provides micro-
insurance to low-income population. Its micro insurance product for rural
population, Sarv Jana Suraksha, provides insurance for a minimal premium of
Rs. 50 per annum. More than 330,000 policies have been issued during fiscal
2010. In collaboration with the Micro Insurance Innovation Facility of the
International Labour Organisation, ICICI Life has adopted a multi-pronged
approach to address financial inclusion among the tea labour community in
Assam. It developed and launched Anmol Nivesh, a unique savings cum
insurance debt linked product with special features like flexibility in
premiums, a customised delivery model and innovative consumer education.

ICICI Lombard General Insurance Company (ICICI General) has partnered with
various central and state government ministries/agencies to offer insurance
coverage under schemes like the Rashtriya Swasthya Bima Yojana (RSBY) for
below poverty line workers in the unorganised sector; insurance scheme for
weavers; and the Rajiv Gandhi Shilpi Swasthya Bima Yojana for handicraft
artisans. The company has covered over 8.0 million families under these
schemes. ICICI General has pioneered the introduction of weather insurance
in India and works with a number of financial intermediaries to deliver
weather insurance in 14 states.

5. Protecting the environment:

i. Clean technology initiatives:

ICICI Bank's Technology Finance Group (TFG) implements programmes for
multilateral agencies in areas of collaborative research and development
(R&D), energy, environment and healthcare. TFG's initiatives include
efforts to attract and channel private financing into cleaner technologies,
to create public-private partnerships to mitigate greenhouse gas emissions
through energy efficiency and to promote sustainable development.

TFG assisted in the introduction of codes of environmental management (ISO
14000) to the country. It also supported clean coal concepts like coal
washeries and coal bed methane for the first time in the country. TFG
supported the first passenger electric car in India (Reva), currently being
exported to the UK and 17 other countries. It also supported the
introduction of municipal shared savings concept through the energy service
company (ESCO) route, which help save expenditure for street lighting and
water pumping. Another significant initiative was the introduction of green
rating of buildings through setting up of CII's Green Business Centre
(GBC). The GBC now has 350 million square feet of floor space registered
for green rating that will save energy, water and emissions.

Other prominent projects assisted include waste heat recovery at smelting
operations, power distribution reforms to reduce transmission and
distribution losses in utilities and biomass cogeneration. TFG has also
partnered with the Indian Army to assist 25 resource conservation and
biodiversity protection projects in different geographies of the country.

ii. Go Green:

ICICI Bank's Go Green' initiative aims to move processes and customers to
environment friendly, cost-efficient operational platforms and build
awareness about the environment among customers and employees.

a) Reducing energy and paper consumption: Through Go Green', ICICI Bank
has significantly reduced consumption of energy and paper by encouraging
paperless transactions and communication, using CFL lighting and regulating
AC temperatures across all our offices and branches.

b) Green products and services: ICICI Bank offers discounts in processing
fees for customers opting for energy-efficient vehicles. Processing fees
are reduced for those who purchase homes in Leadership in Energy and
Environmental Design' certified buildings.

c) Engaging and educating employees and customers: As part of Go Green,'
ICICI Bank has conducted green-themed events and contests to spread
awareness about environment friendly practices. Chlorophyll' is ICICI
Bank's monthly internal newsletter launched in September 2009 covering
perspectives of senior management, initiatives within the ICICI Group,
updates on global environmental developments and tips to help employees
contribute towards environmental conservation. ICICI Bank has pledged its
support to the World Wildlife Federation-led Earth Hour by switching of all
lights in its premises, branches and ATMs for one hour. ICICI Bank also
celebrated World Environment Day on June 5, 2009, an occasion when branch
staff and customers took the green pledge, planted and distributed saplings
and conducted other events.

6. Other initiatives by ICICI Group companies:

Project Dignity Millions is an initiative of ICICI Life that aims to expand
the reach of the Dignity Foundation, an NGO serving senior citizens, with a
target to have one million members across India by 2019. ICICI Life has
provided capacity building support, including strengthening infrastructure
and technology to the Dignity Foundation to facilitate user-friendly
services and help senior citizens lead an active and productive life.
'Healthy Lokshakti' is an initiative by ICICI General to enhance the health
of mothers and children (0-1 year) in partnership with the National Rural
Health Mission (NRHM) and Integrated Child Development Services (ICDS). The
programme is being piloted in two tribal blocks in Nasik district of
Maharasthra and is implemented by Vachan, an NGO, with support from
Bhavishya Alliance. A health helpline and transportation facilities for
emergency care are being set up to link the communities, grassroots health
workers and healthcare institutions.

ICICI Securities supports the Muktangan Education Initiative, a partnership
begun in 2003 by the Paragon Charitable Trust and the Municipal Corporation
of Greater Mumbai (MCGM). Muktangan is seeking to create a sustainable
community based, child-centred, inclusive and low cost model. ICICI
Securities has also supported the School Partnership Project of Doorstep
School, which imparts age-appropriate literacy skills for out-of school
children in the age group of 4 to 18 years and facilitates their entry and
continuance in mainstream education.

Management's Discussion & Analysis:

BACKGROUND:

The economic environment in India improved significantly during fiscal 2010
with growth reviving following the moderation in fiscal 2009. The Index of
Industrial Production increased by 10.4% during fiscal 2010 compared to
2.7% during fiscal 2009. Exports growth also turned positive from October
2009 after declining for 12 consecutive months. Net FII inflows into India
revived to US$ 23.6 billion during April-December 2009 compared to net
outflows of US$ 11.3 billion during the corresponding period in the
previous year. The growth in gross domestic product (GDP) during the first
half of fiscal 2010 was 7.0% compared to 6.0% during the second half of
fiscal 2009. During the third quarter of fiscal 2010, GDP growth moderated
to 6.0% mainly due to a 2.8% decline in agricultural output following below
normal monsoons, and moderation in services sector growth to 6.6%. The
Central Statistical Organisation (CSO) has placed advance estimates of GDP
growth for fiscal 2010 at 7.2%.

During the second half of fiscal 2010, inflationary pressures increased
driven largely by food price inflation. Inflation as measured by the
wholesale price index increased from a low of -1.0% in June 2009 to 9.9% in
March 2010. In view of inflationary pressures and the recovery in economic
activity, the Reserve Bank of India (RBI) commenced the exit of the
accommodative stance adopted in response to the global financial crisis.
RBI increased the statutory liquidity ratio (SLR) by 100 basis points from
24.0% to 25.0% in October 2009, the cash reserve ratio (CRR) by 75 basis
points to 5.75% in February 2010 and the repo and reverse repo rates by 25
basis points each to 5.0% and 3.5% respectively in March 2010. The RBI in
its annual policy review in April 2010 announced a further increase of 25
basis points each in CRR to 6.0%, repo rate to 5.25% and reverse repo rate
to 3.75%. As a result of inflationary concerns, increased policy rates and
the large government borrowing programme, the yield on 10-year government
securities increased by 81 basis points from 7.01% at March 31, 2009 to
7.82% at March 31, 2010. During fiscal 2010, equity markets recovered
significantly with the BSE Sensex increasing by 80.5% from 9,709 at March
31, 2009 to 17,528 at March 31, 2010. The rupee appreciated from Rs. 51.0
per US dollar at year-end fiscal 2009 to Rs. 45.1 per US dollar at year-end
fiscal 2010.

The trends in the economy were also reflected in the banking sector. Non-
food credit growth at end December 2009 was 12.7% on a year-on-year basis
as compared to 17.8% at March 2009. There was some revival in credit growth
during the fourth quarter of fiscal 2010 with non-food credit growth
reaching 16.9% at end-fiscal 2010. Growth in total deposits moderated from
19.9% on a year-on-year basis at end-fiscal 2009 to 17.0% at year-end
fiscal 2010. The moderation was due to a lower growth of 16.2% in term
deposits during fiscal 2010 compared to 23.9% in fiscal 2009 while demand
deposits increased by 22.2% compared to a decline of 0.2% in fiscal 2009.

STANDALONE FINANCIALS AS PER INDIAN GAAP:

Summary:

During fiscal 2010, we accorded priority to improving our low cost deposit
base, conserving capital, improving cost efficiency and improving our
credit quality. The key elements of our strategy for fiscal 2011 will
include continued growth in CASA and retail term deposits, capitalising on
opportunities in select asset segments including home loans, other secured
retail loans, project finance and commercial banking activities,
maintaining cost efficiency even as absolute level of expenses is expected
to increase in line with business growth and continued focus on reduction
in credit losses.

Profit before provisions and tax increased by 9.0% from Rs. 89.25 billion
in fiscal 2009 to Rs. 97.32 billion in fiscal 2010 primarily due to an
increase in treasury income from Rs. 4.43 billion in fiscal 2009 to Rs.
11.81 billion in fiscal 2010 and a 16.8% decrease in non-interest expenses
from Rs. 70.45 billion in fiscal 2009 to Rs. 58.60 billion in fiscal 2010,
offset, in part, by a 3.0% decrease in net interest income from Rs. 83.67
billion in fiscal 2009 to Rs. 81.14 billion in fiscal 2010 and a 13.4%
decrease in fee income from Rs. 65.24 billion in fiscal 2009 to Rs. 56.50
billion in fiscal 2010. Provisions and contingencies (excluding provision
for tax) increased by 15.2% from Rs. 38.08 billion in fiscal 2009 to Rs.
43.87 billion in fiscal 2010 due to a higher level of specific provisioning
on non-performing retail loans and restructured corporate loans. Profit
before tax increased by 4.5% from Rs. 51.17 billion in fiscal 2009 to Rs.
53.45 billion in fiscal 2010. Tax provision decreased from Rs. 13.59
billion in fiscal 2009 to Rs. 13.20 billion in fiscal 2010 primarily due to
a change in the mix of taxable profits with a higher component of exempt
income, abolition of fringe benefit tax, offset, in part, by a negative
impact of revaluation of deferred tax asset due to reduction in surcharge
from 10.0% to 7.5% vide Finance Act, 2010. Profit after tax increased by
7.1% from Rs. 37.58 billion in fiscal 2009 to Rs. 40.25 billion in fiscal
2010. Net interest income decreased by 3.0% from Rs. 83.67 billion in
fiscal 2009 to Rs. 81.14 billion in fiscal 2010, primarily due to a
decrease in average interest-earning assets by 5.1% from Rs. 3,436.20
billion in fiscal 2009 to Rs. 3,259.66 billion in fiscal 2010, offset, in
part, by an increase in the net interest margin from 2.4% in fiscal 2009 to
2.5% in fiscal 2010.

Non-interest income decreased by 1.6% from Rs. 76.03 billion in fiscal 2009
to Rs. 74.78 billion in fiscal 2010, primarily due to a decrease in fee
income by 13.4% from Rs. 65.24 billion in fiscal 2009 to Rs. 56.50 billion
in fiscal 2010, offset, in part by an increase in treasury income from Rs.
4.43 billion in fiscal 2009 to Rs. 11.81 billion in fiscal 2010.

Non-interest expense decreased by 16.8% from Rs. 70.45 billion in fiscal
2009 to Rs. 58.60 billion in fiscal 2010, primarily due to a decrease in
direct marketing agency expenses from Rs. 5.29 billion in fiscal 2009 to
Rs. 1.25 billion in fiscal 2010 and a reduction in salary and other
operating expenses from Rs. 65.16 billion in fiscal 2009 to Rs. 57.35
billion in fiscal 2010 on account of overall cost reduction initiatives
undertaken by us. Provisions and contingencies (excluding provision for
tax) increased by 15.2% from Rs. 38.08 billion in fiscal 2009 to Rs. 43.87
billion in fiscal 2010 primarily due to a higher level of specific
provisioning on non-performing retail loans and restructured corporate
loans. The increase in provisions for retail non-performing assets was
primarily on account of seasoning of the secured loan portfolio, losses on
the unsecured loan portfolio, challenges in collections and the impact of
adverse macro-economic environment experienced in fiscal 2009. Total assets
decreased by 4.2% from Rs. 3,793.01 billion at year-end fiscal 2009 to Rs.
3,634.00 billion at yearend fiscal 2010, primarily due to a decrease in
advances by Rs. 371.05 billion, offset, in part, by an increase in
investments by Rs. 178.35 billion.

Operating results data:

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

Rs. in billion, except percentages
Fiscal 2009 Fiscal 2010 % change

Interest income Rs. 310.93 Rs. 257.07 (17.3)
Interest expense 227.26 175.93 (22.6)
Net interest income 83.67 81.14 (3.0)
Non-interest income 76.03 74.78 (1.6)
- Fee income(1) 65.24 56.50 (13.4)
- Treasury income 4.43 11.81 166.6
- Lease income 2.33 1.57 (32.6)
- Others 4.03 4.90 21.6
Operating income 159.70 155.92 (2.4)
Operating expenses 63.06 55.93 (11.3)
Direct marketing agency (DMA)
expense(2) 5.29 1.25 (76.4)
Lease depreciation, net of
lease equalisation 2.10 1.42 (32.4)
Operating profit 89.25 97.32 9.0
Provisions, net of write-backs 38.08 43.87 15.2
Profit before tax 51.17 53.45 4.5
Tax, net of deferred tax 13.59 13.20 2.9
Profit after tax Rs. 37.58 Rs. 40.25 7.1

(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 2009 Fiscal 2010
Return on average equity (%)(1) 7.7 7.9
Return on average assets (%)(2) 1.0 1.1
Earnings per share (Rs.) 33.8 36.1
Book value per share (Rs.) 444.9 463.0
Fee to income (%) 41.4 36.6
Cost to income (%)3 43.4 37.0

(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. The average balances are the averages of daily balances,
except averages of foreign branches which are calculated on monthly basis.

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
Fiscal 2009 Fiscal 2010 % change

Average interest-earning assets(1) Rs. 3,436.20 Rs. 3,259.66 (5.1)

Average interest-bearing
liabilities(1) 3,249.16 3,054.87 (6.0)

Net interest margin 2.4% 2.5% -

Average yield 9.1% 7.9% -

Average cost of funds 7.0% 5.8% -

Interest spread 2.1% 2.1% -

(1) The average balances are the averages of daily balances, except
averages of foreign branches which are calculated on monthly basis.

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

Net interest income:

Net interest income decreased by 3.0% from Rs. 83.67 billion in fiscal 2009
to Rs. 81.14 billion in fiscal 2010 primarily due to a decrease of Rs.
176.54 billion or 5.1% in the average volume of interest-earning assets,
offset, in part, by an increase in the net interest margin from 2.4% in
fiscal 2009 to 2.5% in fiscal 2010.

Interest income decreased by 17.3% from Rs. 310.93 billion in fiscal 2009
to Rs. 257.07 billion in fiscal 2010, due to a decrease in average
interest-earning assets by 5.1% i.e., Rs. 176.54 billion and a 116 basis
points decrease in the yield on average interest-earning assets.

Average interest-earning assets decreased by Rs. 176.54 billion or 5.1%
from Rs. 3,436.20 billion in fiscal 2009 to Rs. 3,259.66 billion in fiscal
2010. The decrease in average interest-earning assets was primarily due to
the decrease in average advances by Rs. 277.41 billion. Average advances
decreased primarily due to a decrease in retail advances. Net retail
advances (including dealer financing and developer financing portfolios)
declined by 25.6% from Rs. 1,062.03 billion at year-end fiscal 2009 to Rs.
790.45 billion at year-end fiscal 2010. Net advances of overseas branches
(including offshore banking unit) decreased by USD 0.7 billion or 6.5% from
USD 10.7 billion at year-end fiscal 2009 to USD 10.0 billion at year-end
fiscal 2010. In rupee terms, net advances of overseas branches decreased by
16.9%from Rs. 542.91 billion at year-end fiscal 2009 to Rs. 451.37 billion
at year-end fiscal 2010 due to rupee appreciation. Average earning
investments increased by 7.7% from Rs. 971.00 billion in fiscal 2009 to Rs.
1,046.05 billion in fiscal 2010 primarily due to an increase in non-SLR

earning investments, mainly investments in mutual funds. During fiscal
2010, average SLR investments decreased by Rs. 24.06 billion primarily on
account of reduction in domestic net demand and time liabilities, offset,
in part, by a 100 basis points increase in SLR requirement from 24.0% to
25.0% during fiscal 2010.

The yield on average interest-earning assets decreased by 116 basis points
from 9.1% in fiscal 2009 to 7.9% in fiscal 2010 primarily due to a decrease
in the yield on advances by 111 basis points from 10.2% in fiscal 2009 to
9.1% in fiscal 2010 and a 144 basis points decrease in the yield on earning
investments from 7.6% in fiscal 2009 to 6.2% in fiscal 2010. Average
balances with RBI decreased from Rs. 189.57 billion in fiscal 2009 to Rs.
120.74 billion in fiscal 2010 primarily due to a reduction in our net
demand and time liabilities. During fiscal 2010, CRR was increased by 75
basis points to 5.75% at year-end fiscal 2010. As CRR balances do not earn
any interest income, the increase in requirement resulted in a negative
impact on yield on interest-earning assets.

The overall yield on advances decreased primarily on account of a reduction
in the prime lending rate and floating reference rates for our domestic
loan book, a decrease in the benchmark rate (LIBOR) on our overseas loan
book and a decrease in the proportion of high yielding unsecured retail
loans in our total loan book. Effective June 5, 2009, we reduced the prime
lending rate and the floating reference rate for domestic advances by 100
basis points each. The decline in the proportion of retail loans in total
loans was primarily due to moderation in fresh retail loan disbursements
and contractual repayments and prepayments on the existing portfolio.

During fiscal 2010, interest income was also impacted by lower interest on
income tax refund of Rs. 1.21 billion in fiscal 2010 as compared to Rs.
3.33 billion in fiscal 2009 and loss on securitisation pools (including
credit losses on existing pools) of Rs. 5.09 billion in fiscal 2010 as
compared to Rs. 3.21 billion in fiscal 2009. This impact was reflected over
all the quarters of fiscal 2010. Interest expense decreased by 22.6% from
Rs. 227.26 billion in fiscal 2009 to Rs. 175.93 billion in fiscal 2010 due
to a 6.0% decrease in average interest-bearing liabilities from Rs.
3,249.16 billion in fiscal 2009 to Rs. 3,054.87 billion in fiscal 2010 and
a 123 basis points decrease in the cost of funds from 7.0% in fiscal 2009
to 5.8% in fiscal 2010. Total average interest-bearing liabilities
decreased in fiscal 2009 compared to in fiscal 2010 primarily due to a
decrease in average deposits. Total deposits decreased by 7.5% from Rs.
2,183.48 billion at year-end fiscal 2009 to Rs. 2,020.17 billion at year-
end fiscal 2010. The decrease in total deposits was primarily due to a

decrease in term deposits from Rs. 1,556.80 billion at year-end fiscal 2009
to Rs. 1,178.01 billion at year-end fiscal 2010 due to our conscious
strategy of reducing wholesale deposits. During fiscal 2010, our savings
account deposits increased from Rs. 410.36 billion at year-end fiscal 2009
to Rs. 532.18 billion at year-end fiscal 2010, while current account
deposits increased from Rs. 216.32 billion at year-end fiscal 2009 to Rs.
309.98 billion at year-end fiscal 2010. Accordingly, the proportion of
current and savings account deposits in total deposits increased from 28.7%
at year-end fiscal 2009 to 41.7% at year-end fiscal 2010. The proportion of
average current and savings account deposits in total average deposits
increased from 26.6% in fiscal 2009 to 32.5% in fiscal 2010. Borrowings
increased primarily due to new capital-eligible borrowings in the nature of
subordinated debt. Subordinated debt (including application money towards
subordinated debt) increased by 29.4% from Rs. 254.82 billion at year-end
fiscal 2009 to Rs. 329.67 billion at year-end fiscal 2010. Borrowings
(including subordinated debt) of foreign branches decreased from USD 10.9
billion at year-end fiscal 2009 to USD 10.8 billion at year-end fiscal
2010. Borrowings (including subordinated debt) of foreign branches, in
rupee terms, decreased from Rs. 551.84 billion at year-end fiscal 2009 to
Rs. 484.46 billion at year- end fiscal 2010.

The decrease in the cost of funds was primarily due to a 140 basis points
decrease in the average cost of deposits from 7.2% in fiscal 2009 to 5.8%
in fiscal 2010 and a 88 basis points decrease in the average cost of
borrowings from 6.5% in fiscal 2009 to 5.6% in fiscal 2010. The cost of
borrowings decreased due to a decrease in the cost of foreign currency
borrowings and cost of call money borrowings and borrowings under
repurchase agreements. The cost of foreign currency borrowings decreased
during fiscal 2010 due to reduction in benchmark rate (LIBOR).

RBI has prescribed a rate of 3.5% on savings deposits and banks were
required to pay this interest on the minimum outstanding balance in a
savings account between the 10th day and end of the month. Effective April
1, 2010, RBI has changed the methodology of computation of the interest
payable and banks will be required to pay interest on the average balance
maintained in a savings account. The change in methodology will result in
an increased effective interest rate on savings account deposits and will
adversely impact the net interest margin of banks. Our cost of savings
account deposits for the quarter ended March 31, 2010 was 2.9% and in line
with the change mentioned above, would increase to 3.5% from April 1, 2010.
Based on average balances for the quarter ended March 31, 2010, this change
is estimated to have an adverse impact of about 10 basis points on our net
interest margin.

Our net interest margin is expected to continue to be lower than other
banks in India until we increase the proportion of retail deposits in our
total funding. Our net interest margin is also impacted by the relatively
lower margins on our international book.

NON-INTEREST INCOME:

Fee income:

Fee income decreased by 13.4% from Rs. 65.24 billion in fiscal 2009 to Rs.
56.50 billion in fiscal 2010 primarily due to subdued credit demand from
the corporate sector in fiscal 2010 resulting in lower loan processing fees
and moderation in retail disbursements resulted in lower retail asset
(including credit cards) related fees in fiscal 2010 as compared to fiscal
2009. Retail liabilities related fees increased marginally in fiscal 2010
as compared to fiscal 2009.

Treasury income:

Treasury income increased from Rs. 4.43 billion in fiscal 2009 to Rs. 11.81
billion in fiscal 2010. Treasury income for fiscal 2010 includes income on
investments in government of India securities and other fixed income
instruments, reversal of mark-to-market (MTM) provision on credit
derivatives and gains from realised profit and reversal of mark-to-market
provision held on equity investments, offset, in part by loss on security
receipts. 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.

Lease & other income:

Lease income, net of lease depreciation, decreased by 34.8% from Rs. 0.23
billion in fiscal 2009 to Rs. 0.15 billion in fiscal 2010 primarily due to
reduction in leased assets from Rs. 4.62 billion at year-end fiscal 2009 to
Rs. 3.53 billion at year-end fiscal 2010.

Other income increased by 21.6% from Rs. 4.03 billion in fiscal 2009 to Rs.
4.90 billion in fiscal 2010. Other income primarily includes dividend from
subsidiaries and profit/loss on sale of fixed and other assets. During
fiscal 2010, the Bank and First Data, a global leader in electronic
commerce and payment services, formed a merchant acquiring alliance and a
new entity, 81% owned by First Data, was formed, which has acquired ICICI
Bank's merchant acquiring operations through transfer of assets, primarily
comprising fixed assets and receivables, for a total consideration of Rs.
3.74 billion. We realised a profit of Rs. 2.03 billion from this
transaction, which is included in 'Other income'.

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 2009 Fiscal 2010 % change

Employee expenses Rs. 19.72 Rs. 19.26 (2.3)

Depreciation on own property
(including non banking assets) 4.68 4.78 2.1

Auditors' fees and expenses 0.02 0.02 -

Other administrative expenses 38.64 31.87 (17.5)

Total non-interest expense (excluding
lease depreciation and direct
marketing agency expenses) 63.06 55.93 (11.3)

Depreciation (net of lease
equalisation) on leased assets 2.10 1.42 (32.4)

Direct marketing agency expenses 5.29 1.25 (76.4)

Total non-interest expense Rs. 70.45 Rs. 58.60 (16.8)

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

Total non-interest expense decreased by 16.8% from Rs. 70.45 billion in
fiscal 2009 to Rs. 58.60 billion in fiscal 2010 primarily due to a 17.5%
decrease in other administrative expenses and 76.4% decrease in direct
marketing agency expenses.

Other administrative expenses decreased by 17.5% from Rs. 38.64 billion in
fiscal 2009 to Rs. 31.87 billion in fiscal 2010 primarily due to overall
cost reduction initiatives undertaken by us. There was a reduction in
expenses on account of printing and stationery, advertisement and publicity
and postage and communication expenses in fiscal 2010 as compared to fiscal
2009.

Employee expenses decreased by 2.3% from Rs. 19.72 billion in fiscal 2009
to Rs. 19.26 billion in fiscal 2010 despite the provision of performance
bonus and performance-linked retention pay in fiscal 2010. The decrease in
employee expenses was primarily due to a decrease in the average employee
base. Though the average employee base was lower in fiscal 2010, the
employee base at year-end fiscal 2010 was marginally higher at 35,256 as
compared to 34,596 at year-end fiscal 2009.

Depreciation on owned property increased by 2.1% from Rs. 4.68 billion in
fiscal 2009 to Rs. 4.78 billion in fiscal 2010, primarily due to the
addition of new branches. The number of branches and extension counters in
India increased from 1,419 at year-end fiscal 2009 to 1,707 at year-end
fiscal 2010. The number of ATMs increased from 4,713 at year-end fiscal
2009 to 5,219 at year-end fiscal 2010. Depreciation on leased assets
decreased by 32.4% from Rs. 2.10 billion in fiscal 2009 to Rs. 1.42 billion
in fiscal 2010.

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 and lower issuance of new credit
cards, direct marketing agency expenses decreased by 76.4% from Rs. 5.29
billion in fiscal 2009 to Rs. 1.25 billion in fiscal 2010.

Provisions and tax:

Provisions and contingencies (excluding provision for tax) increased by
15.2% from Rs. 38.08 billion in fiscal 2009 to Rs. 43.87 billion in fiscal
2010, due to a higher level of provisioning for retail non performing loans
and an increase in provisions for restructured corporate assets. Provisions
for retail non-performing loans increased due to seasoning of the secured
loan portfolio, losses on the unsecured loan portfolio, challenges in
collections and the impact of adverse macro-economic environment
experienced in fiscal 2009.

Our provision coverage ratio (i.e. total provisions made against non-
performing advances as a percentage of gross non-performing advances), at
year-end fiscal 2010 was 59.5%. RBI guidelines require banks to achieve a
provision coverage ratio of 70% by September 30, 2010. We have been
permitted by RBI to achieve the stipulated level of provision coverage
ratio of 70% in a phased manner by March 31, 2011.

At March 31, 2010, we held a provision of Rs. 14.36 billion towards
provision for standard assets against the requirement of Rs. 7.30 billion.
The excess provision was not reversed in line with the RBI guidelines.


Income tax expense decreased by 2.9% from Rs. 13.59 billion in fiscal 2009
to Rs. 13.20 billion in fiscal 2010. The effective tax rate of 24.7% in
fiscal 2010 was lower compared to the effective tax rate of 26.6% in fiscal
2009 primarily due to a change in the mix of taxable profits with a higher
component of exempt income, abolition of fringe benefit tax, offset, in
part, by a negative impact of revaluation of deferred tax asset due to
reduction in surcharge from 10.0% to 7.5% vide Finance Act, 2010.

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
2009 2010
Assets:

Cash, balances with RBI and other
banks and Statutory Liquidity Ratio
(SLR) investments(1) Rs. 933.53 Rs.1,072.77 14.9

- Cash and balances with RBI and banks 299.66 388.73 29.7

- SLR investments(1) 633.87 684.04 7.9

Advances 2,183.11 1,812.06 (17.0)

Debentures, bonds and other
investments 396.71 524.89 32.3

Fixed assets (including leased assets) 38.02 32.13 (15.5)

Other assets 241.64 192.15 (20.5)

Total Assets Rs.3,793.01 Rs.3,634.00 (4.2)

Liabilities:

Equity capital and reserves Rs. 495.33 Rs. 516.18 4.2

- Equity capital 11.13 11.15 0.2

- Reserves 484.20 505.03 4.3

Deposits 2,183.48 2,020.17 (7.5)

- Savings deposits 410.36 532.18 29.7

- Current deposits 216.32 309.98 43.3

- Term deposits 1,556.80 1,178.01 (24.3)

Preference capital(2) 3.50 3.50 -

Borrowings 673.24 609.47 9.5

- Domestic 138.56 140.21 1.2

- Overseas 534.68 469.26 12.2

Subordinated debt (included in
Tier-1 and Tier-2 capital)(2) 254.82 329.67(3) 29.4

- Domestic 237.66 314.47(3) 32.3

- Overseas 17.16 15.20 (11.4)

Other liabilities 182.64 155.01 (15.1)

Total liabilities Rs.3,793.01 Rs.3,634.00 (4.2)

(1) Government and other approved securities qualifying for SLR. Banks in
India are required to maintain a specified percentage, currently 25.0%
(24.0% at year-end fiscal 2009), of their net demand and time liabilities
by way of liquid assets like cash, gold or approved unencumbered
securities.

(2) Included in - 'Borrowings' in Schedule 4 of the balance sheet.

(3) Includes application money of Rs. 25.00 billion received towards
subordinated debt issued on April 5, 2010.

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

Our total assets (including the impact of exchange fluctuation on foreign
currency denominated assets) decreased by 4.2% from Rs. 3,793.01 billion at
year-end fiscal 2009 to Rs. 3,634.00 billion at year-end fiscal 2010. Net
advances decreased by 17.0% from Rs. 2,183.11 billion at year-end fiscal
2009 to Rs. 1,812.06 billion at year-end fiscal 2010, primarily due to a
decrease in retail advances. Net retail advances (including dealer
financing and developer financing portfolios) decreased by 25.6% from Rs.
1,062.03 billion at year-end fiscal 2009 to Rs. 790.45 billion at year-end
fiscal 2010 and constituted 43.6% of our total net advances at year-end
fiscal 2010. Net advances of overseas branches (including offshore banking
unit) decreased in USD terms from USD 10.7 billion at year-end fiscal 2009
to USD 10.0 billion at year-end fiscal 2010. Net advances decreased in
rupee terms on account of appreciation of the rupee relative to the US
dollar from Rs. 542.91 billion at year-end fiscal 2009 to Rs. 451.37
billion at year-end fiscal 2010 on account of appreciation of the rupee
relative to the US dollar.

Total investments increased by 17.3% from Rs. 1,030.58 billion at year-end
fiscal 2009 to Rs. 1,208.93 billion at year-end fiscal 2010 primarily due
to an increase in non-SLR investments by Rs. 128.18 billion and investments
in government and other approved securities by Rs. 50.17 billion. Non-SLR
investments include net investment in security receipts in asset
reconstruction companies of Rs. 33.94 billion. During fiscal 2010, the SLR
requirement increased by 100 basis points from 24.0% to 25.0%. At year-end
fiscal 2010, we had a gross portfolio of funded credit derivatives of Rs.
15.40 billion and non-funded credit derivatives of Rs. 32.88 billion, which
includes Rs. 0.22 billion as protection bought by us. The underlying
exposure is entirely to Indian entities.

Our equity share capital and reserves increased from Rs. 495.33 billion at
year-end fiscal 2009 to Rs. 516.18 billion at year-end fiscal 2010
primarily due to annual accretion to reserves out of profits. Total
deposits decreased by 7.5% from Rs. 2,183.48 billion at year-end fiscal
2009 to Rs. 2,020.17 billion at year-end fiscal 2010 primarily due to our
conscious strategy of reducing wholesale deposits. Term deposits decreased
from Rs. 1,556.80 billion at year-end fiscal 2009 to Rs. 1,178.01 billion
at year-end fiscal 2010. Savings account deposits increased from Rs. 410.36
billion at year-end fiscal 2009 to Rs. 532.18 billion at year-end fiscal
2010 and current account deposits increased from Rs. 216.32 billion at
year-end fiscal 2009 to Rs. 309.98 billion at year-end fiscal 2010.
Borrowings (including preference share capital and subordinated debt)
increased from Rs. 931.55 billion at year-end fiscal 2009 to Rs. 942.64
billion at year-end fiscal 2010 primarily on account of new capital-
eligible borrowings, in the nature of subordinated debt, offset, in part,
by decrease in overseas borrowings.

Off Balance Sheet Items, Commitments and Contingencies:

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

Rs. in billion, except percentages
March 31, March 31, %
2009 2010 change
Claims against the Bank not
acknowledged as debts Rs. 32.82 Rs. 33.57 2.3

Liability for partly paid investments 0.13 0.13 -

Notional principal amount of
outstanding forward exchange contracts 2,583.67 1,660.69 (35.7)

Guarantees given on behalf of
constituents 580.88 618.36 6.5

Acceptances, endorsements and other
obligations 306.78 321.22 4.7

Notional principal amount of
currency swaps 569.65 524.79 (7.9)

Notional amount of Interest rate
swaps and currency options 4,146.35 4,012.14 (3.2)

Other items for which the Bank is
contingently liable 126.55 99.94 (21.0)

Total Rs.8,346.83 Rs.7,270.84 (12.9)

Off-balance sheet items, commitments and contingencies decreased by 12.9%
from Rs. 8,346.83 billion at yearend fiscal 2009 to Rs. 7,270.84 billion at
year-end fiscal 2010 primarily due to the decrease in notional principal
amount of outstanding forward exchange contracts by 35.7% from Rs. 2,583.67
billion at March 31, 2009 to Rs. 1,660.69 billion at March 31, 2010 and the
decrease in notional amount of interest rate swaps and currency options by
3.2% from Rs. 4,146.35 billion at March 31, 2009 to Rs. 4,012.14 billion at
March 31, 2010. 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 as well
as those set 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 the 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 primarily include
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 related 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 was Rs. 11.69 billion at year-end fiscal 2009
compared to Rs. 17.69 billion at year-end fiscal 2010. 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. Estimated
amounts of contracts remaining to be executed on capital account aggregated
Rs. 5.28 billion at year-end fiscal 2010 compared to Rs. 4.46 billion at
year-end fiscal 2009. The increase in fiscal 2010 was primarily on account
of new branches and office premises.

Capital Adequacy:

Our capital adequacy framework seeks to ensure that we maintain adequate
capital at all times and plan appropriately for our future capital
requirements. The capital adequacy framework is supported by a Board
approved internal capital adequacy assessment process, which encompasses
our capital planning for current and future periods by taking into
consideration our strategic focus and business plan and assessment of all
material risks including stress testing.

We are subject to the Basel II capital adequacy guidelines stipulated by
RBI. Under Pillar 1 of the RBI guidelines on Basel II, we follow the
standardised approach for credit and market risk and the basic indicator
approach for operational risk. The RBI guidelines on Basel II require us to
maintain a minimum capital to risk-weighted assets ratio (CRAR) of 9.0% and
a minimum Tier-1 CRAR of 6.0% on an ongoing basis. RBI has directed banks
to maintain capital at the higher of the minimum capital required as per
Basel II or a specified percentage of the minimum capital required as per
Basel I (80% at March 31, 2010).

Following table sets forth the capital adequacy ratios of the Bank as per
RBI guidelines on Basel I and Basel II.

Rs. in billion, except percentages
As per RBI guidelines As per RBI guidelines
on Basel I on Basel II
March 31, March 31, March 31, March 31,
2009 2010 2009 2010

Tier-1 capital Rs. 420.10 Rs. 432.61 Rs. 421.96 Rs. 410.62

Tier-2 capital 129.72 181.57 131.59 160.41

Total capital 549.81 614.18 553.55 571.03

Credit risk - risk
weighted assets (RWA) 3,171.94 2,899.15 3,151.95 2,485.59

Market risk - RWA 281.44 309.28 206.98 221.06

Operational risk - RWA N.A. N.A. 205.70 235.16

Total RWA Rs.3,453.38 Rs.3,208.43 Rs.3,564.63 Rs.2,941.81

Tier-1 CRAR 12.16% 13.48% 11.84% 13.96%
Tier-2 CRAR 3.76% 5.66% 3.69% 5.45%
Total CRAR 15.92% 19.14% 15.53% 19.41%

The key changes introduced by RBI under Pillar 1 of the Basel II guidelines
during fiscal 2010 are as follows:

* RBI issued a clarification on July 1, 2009 that special reserve (created
by banks under Section 36(1) (viii) of the Income Tax Act, 1961) should be
considered net of tax payable, in the Tier-1 capital. Previously special
reserve was considered as accounted in the financial statements.

* RBI in its revised Basel II guidelines issued on February 8, 2010
stipulated that banks are not permitted to use any external credit
assessment for risk weighting securitisation exposures where the assessment
is at least partly based on unfunded support provided by the bank.

* RBI in its revised Basel II guidelines issued on February 8, 2010 issued
guidance on assessment of valuation adjustments on account of illiquidity
for illiquid/less liquid positions that are subject to market risk capital
requirements. RBI also stipulated that these valuation adjustments are to
be deducted from Tier-1 capital.

The key reasons for the movement in our capital funds and RWA at the
standalone level from year-end fiscal 2009 to year-end fiscal 2010 are as
follows:

* Capital funds increased by Rs. 17.48 billion or 3.2% primarily due to
issuance of Tier-2 debt capital instruments and accretion to retained
earnings, partly offset by an increase in deductions on account of
securitisation exposures pursuant to revised RBI guidelines on Basel II
issued on February 8, 2010 and special reserves being considered net of tax
payable;

- The deductions on account of securitisation (including due to revisions
in the RBI guidelines on Basel II) increased by Rs. 41.60 billion (deducted
at 50% each from Tier-1 and Tier-2 capital).

- The RBI stipulation of reckoning special reserves net of tax payable,
resulted in an impact (decrease) of Rs. 8.99 billion.

* Credit risk RWA decreased by Rs. 666.36 billion or 21.1% primarily due to
the decrease in loan portfolio and the increased coverage of external
credit ratings on the portfolio;

* Market risk RWA increased by Rs. 14.08 billion or 6.8%; and

* Operational risk RWA increased by Rs. 29.46 billion or 14.3% due to the
increase in the average of previous three years' gross income adopted in
the computation of operational risk RWA as per the basic indictor approach.

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
contributing for a major part of overall systemic credit growth.
Accordingly, during these years, we increased our focus on retail finance
portfolio. 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. Following this trend, our gross loans and advances to retail
finance portfolio declined from 58.6% of our total gross loans and advances
at year-end fiscal 2008 to 49.3% at year-end fiscal 2009 and further to
44.4% at year-end fiscal 2010.

Our Global Credit Risk Management Group monitors all major sectors of the
economy and specifically tracks sectors in 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 table sets forth, at the dates indicated, the composition of
our gross advances (net of write-offs).

Rs. in billion, except percentages
March 31, 2009 March 31, 2010
Total % of total Total % of total
advances advances advances advances

Retail finance(1) Rs. 1,102.20 49.3 Rs. 831.19 44.4

Services - non-finance 168.05 7.5 135.21 7.2

Crude petroleum/refining
and petrochemicals 142.04 6.4 132.86 7.1

Road, ports, telecom,
urban development and
other infrastructure 94.62 4.2 103.94 5.5

Iron/steel and products 99.14 4.4 86.26 4.6

Services - finance 77.68 3.5 64.56 3.4

Food and beverages 53.57 2.4 61.54 3.3

Power 54.19 2.4 56.49 3.0

Chemical and fertilizers 51.83 2.3 46.27 2.5

Wholesale/retail trade 26.29 1.2 44.47 2.4

Electronics and
engineering 36.17 1.6 31.54 1.7

Textiles 17.38 0.8 19.16 1.0

Construction 23.86 1.1 17.91 1.0

Other industries(2) 289.19 12.9 241.74 12.9

Total Rs. 2,236.21 100.0% Rs.1,873.14 100.0%

(1) Includes home loans, automobile loans, commercial business loans, two
wheeler loans, personal loans and credit cards. Also includes dealer
funding portfolio of Rs 7.71 billion (Rs. 8.83 billion at year-end fiscal
2009) and developer financing portfolio of Rs. 32.76 billion (Rs. 24.14
billion at year-end fiscal 2009).

(2) Other industries primarily include automobiles, cement, drugs and
pharmaceuticals, FMCG, gems and jewellery, manufacturing products excluding
metal, metal and products (excl iron and steel), mining and shipping 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
March 31, 2009 March 31, 2010
Total % of total Total % of total
retail retail retail retail
advances advances advances advances

Home loans(1) Rs. 575.88 52.2 Rs. 474.72 57.1
Automobile loans 133.05 12.1 85.13 10.2
Commercial business 164.40 14.9 136.75 16.5
Two-wheeler loans 16.91 1.5 4.65 0.6
Personal loans 108.66 9.9 57.14 6.9
Credit cards 90.02 8.2 59.33 7.1
Loans against
securities and others(2) 13.28 1.2 13.47 1.6
Total retail finance
portfolio Rs.1,102.20 100.0% Rs. 831.19 100.0%

(1) Includes developer financing of Rs. 24.14 billion and Rs. 32.76 billion
at year-end fiscal 2009 and year-end fiscal 2010 respectively.

(2) Includes dealer financing portfolio of Rs. 8.83 billion and Rs 7.71
billion at year-end fiscal 2009 and year-end fiscal 2010 respectively.

Pursuant to RBI guidelines, our exposure to an individual borrower
generally must not exceed 15.0% of our capital funds, unless the exposure
is in respect of an infrastructure project. 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 generally 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 are permitted, in exceptional circumstances, with the
approval of their boards, enhance the exposure by 5.0% of capital funds
(i.e. up to 20.0% of capital funds for an individual borrower and up to
45.0% of capital funds for a group of companies under the same management)
and are required to make appropriate disclosures in this regard in their
annual reports. Exposure for funded and non-funded credit facilities is
calculated as the total committed amount or the outstanding amount
whichever is higher (for term loans, as the sum of undisbursed commitments
and the outstanding amount). Investment exposure is considered at book
value.

During the year ended March 31, 2010, our exposures to any single borrower
and borrower group were within the limits prescribed by the Reserve Bank of
India except in the cases of Reliance Industries Limited, Barclays Bank PLC
and ICICI Prudential Flexible Income Plan where exposure to single
borrowers were above the stipulated ceiling of 15.0% of capital funds. At
March 31, 2010, the exposure to these borrowers as a percentage of capital
funds was - Reliance Industries Limited: 15.7%, Barclays Bank PLC: 10.7%
and ICICI Prudential Flexible Income Plan: 5.4%. The excess exposure in all
the above cases was duly approved/confirmed by the Board of Directors of
the Bank with exposures being within 20.0% of the Bank's capital funds in
accordance with the guidelines issued by the RBI.

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 sector
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, all
other service enterprises, micro credit, education loans 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 of ICICI Limited and ICICI Bank Limited, 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 2010, our total
investments in such bonds were Rs. 101.10 billion.

As per RBI guidelines, banks are also required to lend 10.0% of adjusted
net bank credit or credit equivalent amount of off-balance sheet exposures,
whichever is higher, to weaker sections. 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, as on
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 26, 2010, which
was the last reporting Friday for fiscal 2010, our priority sector loans
were Rs. 626.98 billion, constituting 51.3% of our residual adjusted net
bank credit against the requirement of 50.0%. At that date, qualifying
agriculture loans were 18.7% of our residual net bank credit as against the
requirement of 18.0%. Our advances to weaker sections were Rs. 56.30
billion constituting 4.6% 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. 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 reschedulement 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 a provision is
made to the extent of the diminution involved. Similar guidelines apply to
sub-standard loans. The sub-standard or doubtful accounts which have been
subject 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. In December 2008,
RBI provided a one-time relaxation to banks to restructure the loans
classified as real estate exposures. Similarly, banks were also permitted
to undertake, for accounts that were previously restructured, a second
restructuring without downgrading the account to the non-performing
category. These relaxations were available till June 30, 2009. RBI also
permitted banks to restructure as standard accounts all eligible accounts
which met the basic criteria for restructuring, and which were classified
as standard at September 1, 2008 irrespective of their subsequent asset
classification. This relaxation was subject to banks receiving an
application from the borrower for restructuring the advance on or before
March 31, 2009 and the implementation of the restructuring the package
within 120 days from the date of receipt of the application. During fiscal
2010, we restructured loans aggregating Rs. 53.08 billion extended to 3,933
borrowers which included 3,875 retail mortgage borrowers (including eight
borrowal accounts restructured for a second time with asset classification
benefit up to June 30, 2009, aggregating to Rs. 24.29 billion). During
fiscal 2009, we had restructured loans aggregating Rs. 11.31 billion.

The following table sets forth, at March 31, 2009 and March 31, 2010,
information regarding the classification of our gross customer assets (net
of write-offs, interest suspense and derivatives income reversal).

Rs. in billion
March 31, 2009 March 31, 2010
Standard assets Rs. 2,316.10 Rs. 2,057.29
Of which: Restructured loans 61.27 55.87
Non-performing assets 98.03 96.27
Of which: Sub-standard assets 61.67 50.20
Doubtful assets 31.04 40.30
Loss assets 5.32 5.77
Total customer assets(1) Rs. 2,414.13 Rs. 2,153.56

(1) Customer assets include advances, lease receivables and credit
substitutes like debentures and bonds but exclude preference shares.

(2) 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 (NPAs).

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

March 31, 2008 75.88 35.64 2,384.84 1.49%
March 31, 2009 98.03 46.19 2,358.24 1.96%
March 31, 2010 96.27 39.01 2,091.22 1.87%

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

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

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

At year-end fiscal 2010, the gross non-performing assets (net of write-
offs, interest suspense and derivatives income reversal) were Rs. 96.27
billion compared to Rs. 98.03 billion at year-end fiscal 2009. Net non-
performing assets were Rs. 39.01 billion at year-end fiscal 2010 compared
to Rs. 46.19 billion at year-end fiscal 2009. The ratio of net non-
performing assets to net customer assets decreased from 1.96% at year-end
fiscal 2009 to 1.87% at year-end fiscal 2010. During the fiscal 2010, we
wrote-off NPAs, including retail NPAs, with an aggregate outstanding of Rs.
28.48 billion. These NPAs were fully provided for at the time of the write-
off.

Our provision coverage ratio (i.e. total provisions made against non-
performing assets as a percentage of gross non-performing assets), at year-
end fiscal 2010 was 59.5%. RBI guidelines require banks to achieve a
provision coverage ratio of 70% by September 30, 2010. We have been
permitted by RBI to achieve the stipulated level of provision coverage
ratio of 70% in a phased manner by March 31, 2011. At year-end fiscal 2010,
total general provision held against standard assets was Rs. 14.36 billion
against the requirement of Rs. 7.30 billion. The excess provision was not
reversed in line with the RBI guidelines.

The increased level of non-performing assets was due to higher level of
non-performing assets in the retail assets portfolio. Provisions against
retail non performing loans increased due to seasoning of the secured loan
portfolio, losses on the unsecured loan portfolio, challenges in
collections and the impact of the adverse macro-economic environment
experienced in fiscal 2009. At year-end fiscal 2010, the net non-performing
loans in the retail portfolio were 3.05% of net retail loans as compared
with 2.94% at year-end fiscal 2009. The increase in the ratio was primarily
on account of the overall decline in our retail loans during fiscal 2009
and fiscal 2010. At year-end fiscal 2010, the net non-performing loans in
the collateralised retail portfolio were 1.92% of the net collateralised
retail loans and net non-performing loans in the non-collateralised retail
portfolio (including overdraft financing against automobiles) were about
12.00% of net non-collateralised retail loans.

Our aggregate investments in security receipts issued by asset
reconstruction companies were Rs. 33.94 billion at year-end fiscal 2010.

Classification of Non-Performing Assets by Industry:

The following table sets forth, at March 31, 2009 and March 31, 2010, the
composition of gross non-performing assets by industry sector.

Rs. in billion, except percentages
March 31, 2009 March 31, 2010
Amount % Amount %
Retail finance1 Rs. 71.50 72.9% Rs. 64.73 67.2%
Chemicals and fertilisers 1.96 2.0 2.47 2.6
Services - finance 1.29 1.3 2.43 2.5
Wholesale/retail trade 1.47 1.5 2.17 2.3
Textiles 1.77 1.8 1.90 2.0
Food and beverages 1.03 1.1 1.62 1.7
Iron/steel and products 0.36 0.4 1.43 1.5
Electronics and engineering 0.79 0.8 0.69 0.7
Metal and metal products 0.20 0.2 0.68 0.7
Automobiles 0.32 0.3 0.59 0.6
Services - non finance 0.35 0.4 0.38 0.4
Power 0.15 0.1 0.14 0.1
Paper and paper products 0.04 0.1 0.03 0.0
Shipping 1.02 1.0 0.01 0.0
Other Industries(2) 15.78 16.1 17.00 17.7
Total Rs. 98.03 100.0% Rs. 96.27 100.0%

(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. 0.42 billion at
March 31, 2010 and Rs. 0.44 billion at March 31, 2009.

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

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

SEGMENTAL INFORMATION:

RBI has issued revised guidelines on segment reporting applicable from
fiscal 2008. As per the guidelines, the business operations of the Bank
have the 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 the Basel Committee on Banking Supervision's
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 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.

During fiscal 2010, the profit before tax of the retail banking segment was
impacted by continued credit losses in the unsecured retail asset
portfolio. The retail banking segment reported a loss of Rs. 13.34 billion
in fiscal 2010 as compared to a profit before tax of Rs. 0.58 billion in
fiscal 2009. The retail assets portfolio also witnessed higher prepayments
and lower level of incremental lending resulting in lower level of net
interest income and loan-related fees.

Profit before tax of the wholesale banking segment was higher at Rs. 36.45
billion in fiscal 2010 as compared to Rs. 34.13 billion in fiscal 2009. The
increase was primarily due to the increase in the net interest income
following the decrease in the interest rates in the banking system which
resulted in lower level of in inter-segment interest expense on the
wholesale banking portfolio. However, the increase during fiscal 2010, fee
income in the wholesale banking segment was impacted by the moderation in
credit demand during the year. Profit before tax of the treasury segment
was higher at Rs. 27.89 billion in fiscal 2010 as compared to Rs. 12.84
billion in fiscal 2009. The increase was primarily due to the significant
recovery in equity markets resulting in realised profit and reversal of
mark-to-market provision held on equity investments. Further, a contraction
in credit spreads due to improved global market conditions resulted in the
reversal of mark-to-market provisions on our India linked credit
derivatives portfolio.

Profit before tax of the other banking segment was lower at Rs. 2.45
billion in fiscal 2010 as compared to Rs. 3.61 billion in fiscal 2009.

CONSOLIDATED FINANCIALS AS PER INDIAN GAAP:

The consolidated profit after tax including the results of operations of
our subsidiaries and other consolidating entities increased from Rs. 35.77
billion in fiscal 2009 to Rs. 46.70 billion in fiscal 2010 due to improved
financial performance by most of the subsidiaries. The consolidated return
on average equity increased from 7.83% in fiscal 2009 to 9.59% in fiscal
2010.

Profit after tax of ICICI Bank UK PLC increased from Rs. 0.31 billion in
fiscal 2009 to Rs. 1.76 billion in fiscal 2010 due to increase in fee
income, lower operating expenses and lower impairment losses in fiscal
2010, offset, in part, by lower net interest income following a decline in
net interest margin (NIM) and lower gains on buyback of bonds.

Profit after tax of ICICI Bank Canada increased from Rs. 1.39 billion in
fiscal 2009 to Rs. 1.54 billion in fiscal 2010 primarily due to increased
realisation of gains on sale of insured mortgages and mark-to-market gains
on investments, as well as reduced provisions on loans, offset, in part, by
a reduction in net interest income and a decrease in fee income during
fiscal 2010.

ICICI Prudential Life Insurance Company Limited recorded a profit after tax
of Rs. 2.58 billion in fiscal 2010 compared to loss of Rs. 7.80 billion in
fiscal 2009 due to an increase in net premium earned, fund management fees,
risk charges, policy fees and other charges and due to lower operating and
commission expenses.

Profit after tax of ICICI Lombard General Insurance Company Limited
increased from Rs. 0.24 billion in fiscal 2009 to Rs. 1.44 billion in
fiscal 2010 primarily due to increase in operational efficiency and higher
gains on sale of investments following improved market conditions in fiscal
2010.

Profit after tax of ICICI Securities Limited increased from Rs. 0.04
billion in fiscal 2009 to Rs. 1.23 billion in fiscal 2010 on account of
improved capital market conditions.

Profit after tax of ICICI Prudential Asset Management Company increased
from Rs. 0.01 billion in fiscal 2009 to Rs. 1.28 billion in fiscal 2010
primarily due to the increase in management fees on account of higher funds
under management and due to scheme support expenses of Rs. 0.92 billion
incurred in fiscal 2009. Consolidated assets of the Bank and its
subsidiaries and other consolidating entities increased from Rs. 4,826.91
billion at year-end fiscal 2009 to Rs. 4,893.47 billion at year-end fiscal
2010. Consolidated advances of the Bank and its subsidiaries decreased from
Rs. 2,661.30 billion at year-end fiscal 2009 to Rs. 2,257.78 billion at

year-end fiscal 2010.

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

Rs. in billion
Company Fiscal 2009 Fiscal 2010
ICICI Bank UK PLC 0.31 1.76
ICICI Bank Canada 1.39 1.54
ICICI Bank Eurasia Limited Liability Company (0.07) 0.53
ICICI Prudential Life Insurance Company Limited (7.80) 2.58
ICICI Lombard General Insurance Company Limited 0.24 1.44
ICICI Securities Limited 0.04 1.23
ICICI Securities Primary Dealership Limited 2.72 0.85
ICICI Home Finance Company Limited 1.43 1.61
ICICI Prudential Asset Management Company Limited 0.01 1.28
ICICI Venture Funds Management Company Limited 1.48 0.51

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
world. Many countries have adopted IFRS and some of them, including India,
are in the process of adopting the same.

Various Indian regulators in India have laid down a roadmap towards
implementation of IFRS in India. Based on the recommendations of a Core
Group set up to facilitate IFRS convergence in India, the Ministry of
Corporate Affairs (MCA), in consultation with RBI, has announced the
approach and timelines for achieving convergence by financial institutions
including banks, insurance companies and non-banking finance companies
(NBFCs), which requires a phased approach to achieve convergence for banks.
As per the roadmap, all scheduled commercial banks will convert their
opening balance sheet as at April 1, 2013 in compliance with the IFRS
converged Indian Accounting Standards.

RBI in its monetary policy statement for fiscal 2011 has proposed to
undertake a study of the implications of the IFRSs convergence process and
also to issue operational guidelines as appropriate and to disseminate
information through learning programmes with a view to preparing banks and
other entities to adhere to the roadmap.

SEBI has issued a circular on amendments to the Equity Listing Agreement
which provides for an option for listed entities to submit their
consolidated financial results either in accordance with the accounting
standards specified in Section 211 (3C) of the Companies Act, 1956 or in
accordance with IFRS as issued by the International Accounting Standards
Board (IASB). It also provides that entities shall provide a reconciliation
of significant differences between the figures as per IFRS and figures as
per the notified accounting standards. Submission of standalone financial
results to the stock exchanges shall continue to be in accordance with the
Indian GAAP requirements.

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.

Currently, IASB has undertaken a project which will replace the current
standards on financial instruments, particularly IAS 39, in a phased
manner. As a part of this project, IASB has issued IFRS 9 - 'Financial
Instruments' which introduces a new classification and measurement regime
for financial assets within its scope. Additionally, the IASB has released
exposure drafts on amortised cost and impairment', fair value option for
financial liabilities'. The exposure draft on hedge accounting is expected
to be released shortly by IASB. These revisions are expected to be
significantly different from existing IAS 39 as issued by IASB, and AS30 as
issued by ICAI.

Currently, we report our financials under Indian GAAP and also report a
reconciliation of shareholders' equity and net profit under Indian GAAP to
US GAAP. We are in the process of migrating our consolidated financial
statements to the IFRS converged Indian Accounting Standards as per the
roadmap announced by MCA.