MANAGEMENT DISCUSSION & ANALYSIS

In fiscal 2023, the Bank maintained its strategic focus on profitable growth in business within the guardrails of risk and compliance. The Bank grew its credit portfolio with a focus on granularity and saw healthy growth across retail, business banking and wholesale portfolios. The Bank continued to focus on holistically serving its clients and their ecosystems. The Bank sought to maintain and enhance its liability franchise. The Bank focused on maintaining a strong balance sheet, with robust liquidity, prudent provisioning and healthy capital adequacy. The Bank’s capital adequacy ratios were significantly above regulatory requirements as of March 31, 2023.

Going forward, the Bank would focus on maximizing the profit before tax (excluding treasury gains) within the guardrails of compliance and risk management. The Bank believes there are significant opportunities for profitable growth across various sectors of the Indian economy. The Risk Appetite and Enterprise Risk Management framework articulates the Bank’s risk appetite and drills it down into a limit framework for various risk categories. The Bank will focus on growing its loan portfolio in a granular manner with a focus on risk and reward, with return of capital and containment of provisions within targeted levels being a key imperative. There are no specific targets for loan mix or segment-wise loan growth. The Bank would aim to continue to grow its deposit franchise, maintain a stable and healthy funding profile and competitive advantage in cost of funds.

See also “Integrated Report – Our Business Strategy”.

Summary

Profit before tax (excluding treasury gains) increased by 43.0% from 297.06 billion in fiscal 2022 to 424.73 billion in fiscal 2023. Core operating profit (i.e. profit before provisions and tax, excluding treasury gains) increased by 28.1% from ₹ 383.47 billion in fiscal 2022 to ₹ 491.39 billion in fiscal 2023 primarily due to an increase in net interest income by ₹ 146.63 billion and fee income by ₹ 23.14 billion, offset, in part, by an increase in operating expenses by ₹ 61.40 billion. Provisions and contingencies (excluding provision for tax) decreased by 22.9% from ₹ 86.41 billion in fiscal 2022 to ₹ 66.66 billion in fiscal 2023. Gains from treasury-related activities decreased from a gain of ₹ 9.03 billion in fiscal 2022 to a loss of ₹ 0.52 billion in fiscal 2023. Profit after tax increased from ₹ 233.39 billion in fiscal 2022 to ₹ 318.96 billion in fiscal 2023.

Net interest income increased by 30.9% from ₹ 474.66 billion in fiscal 2022 to ₹ 621.29 billion in fiscal 2023 due to an increase in the net interest margin (NIM) and an increase in the average interest-earning assets.

Fee income increased by 14.8% from ₹ 156.87 billion in fiscal 2022 to ₹ 180.01 billion in fiscal 2023. Dividend from subsidiaries/joint ventures/associates decreased by 2.5% from ₹ 18.29 billion in fiscal 2022 to ₹ 17.84 billion in fiscal 2023. Operating expenses increased by 23.0% from ₹ 267.33 billion in fiscal 2022 to ₹ 328.73 billion in fiscal 2023.

Provisions and contingencies (excluding provision for tax) decreased by 22.9% from ₹ 86.41 billion in fiscal 2022 to ₹ 66.66 billion in fiscal 2023 primarily due to a write-back of provision for non-performing and other assets, offset, in part, by an increase in contingency provisions made on a prudent basis, and provision for investments. There was a write-back of ₹ 6.23 billion in provision for non-performing and other assets in fiscal 2023 compared to a provision of ₹ 61.64 billion in fiscal 2022. During fiscal 2023, there were higher recoveries and upgrades from non-performing assets (NPA) resulting in net write-back of provision, offset, in part, by an increase in provisioning rate for certain categories of NPAs. During fiscal 2023, the Bank changed its provisioning norms on NPAs to make them more conservative. In fiscal 2022, the provision for non-performing and other assets also included provision on loans restructured under Resolution Framework for COVID-19.

The provision coverage ratio on NPAs increased from 79.2% at March 31, 2022 to 82.8% at March 31, 2023. During fiscal 2023, the Bank made a contingency provision amounting to ₹ 56.50 billion (fiscal 2022: write-back of ₹ 0.25 billion), on a prudent basis, to further strengthen the balance sheet. The Bank held a total contingency provision of ₹ 131.00 billion at March 31, 2023.

The income tax expense increased from ₹ 72.70 billion in fiscal 2022 to ₹ 105.25 billion in fiscal 2023. The effective tax rate increased from 23.7% in fiscal 2022 to 24.8% in fiscal 2023 primarily due to change in composition of income.

Net worth increased by 17.7% from ₹ 1,705.12 billion at March 31, 2022 to ₹ 2,007.16 billion at March 31, 2023 primarily due to accretion to reserves out of retained profit, offset, in part, by payment of dividend for fiscal 2022.

Total assets increased by 12.3% from ₹ 14,112.98 billion at March 31, 2022 to ₹ 15,842.07 billion at March 31, 2023. Total advances increased by 18.7% from ₹ 8,590.20 billion at March 31, 2022 to ₹ 10,196.38 billion at March 31, 2023 primarily due to an increase in domestic advances by 20.5%. Total investments increased by 16.8% from ₹ 3,102.41 billion at March 31, 2022 to ₹ 3,623.30 billion at March 31, 2023. Cash and cash equivalents decreased by 28.8% from ₹ 1,678.22 billion at March 31, 2022 to ₹ 1,194.38 billion at March 31, 2023.

The weighted average high-quality liquid assets, maintained during the three months ended March 31, 2023 were ₹ 3,234.60 billion (three months ended March 31, 2022: ₹ 3,197.27 billion). The average liquidity coverage ratio was 124.13% for the three months ended March 31, 2023 as against the requirement of 100.00%.

Total deposits increased by 10.9% from ₹ 10,645.72 billion at March 31, 2022 to ₹ 11,808.41 billion at March 31, 2023. Total deposits increased by 8.3% from ₹ 10,900.08 billion at September 30, 2022 to ₹ 11,808.41 billion at March 31, 2023. Term deposits increased by 17.1% from ₹ 5,461.35 billion at March 31, 2022 to ₹ 6,395.79 billion at March 31, 2023. Current and savings account (CASA) deposits increased by 4.4% from ₹ 5,184.37 billion at March 31, 2022 to ₹ 5,412.62 billion at March 31, 2023. Average CASA deposits increased by 13.3% from
₹ 4,198.86 billion in fiscal 2022 to ₹ 4,758.90 billion in fiscal 2023. Borrowings increased by 11.3% from ₹ 1,072.31 billion at March 31, 2022 to ₹ 1,193.25 billion at March 31, 2023.

The Bank had a business center (branch) network of 5,900 branches, and network of 16,650 ATMs/CRMs at March 31, 2023.

The Bank is subject to Basel III capital adequacy guidelines stipulated by RBI. The total capital adequacy ratio of the Bank at March 31, 2023 (after deducting proposed dividend for fiscal 2023 from capital funds) in accordance with RBI guidelines on Basel III was 18.34% as compared to 19.16% at March 31, 2022. The Tier-1 capital adequacy ratio was 17.60% at March 31, 2023 as compared to 18.35% at March 31, 2022. The Common Equity Tier 1 (CET-1) ratio was 17.12% at March 31, 2023 as compared to 17.60% at March 31, 2022.

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

1. ¹ Includes merchant foreign exchange income and margin on customer derivative transactions.
2. ² All amounts have been rounded off to the nearest ₹ 10.0 million.
3. ³ 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.

1. ¹ Return on average equity is the ratio of the net profit after tax to the quarterly average equity share capital and reserves.
2. ² Return on average assets is the ratio of net profit after tax to average assets.
3. ³ Cost represents operating expense. Income represents net interest income and non-interest income.

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

Net interest income and spread analysis

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

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

Net interest income increased by 30.9% from ₹ 474.66 billion in fiscal 2022 to ₹ 621.29 billion in fiscal 2023 primarily due to an increase in the net interest margin by 52 basis points and an increase of 15.8% in the average interest-earning assets.

Net interest margin increased by 52 basis points from 3.96% in fiscal 2022 to 4.48% in fiscal 2023. The yield on average interest-earning assets increased by 66 basis points from 7.21% in fiscal 2022 to 7.87% in fiscal 2023. The cost of funds increased by 22 basis points from 3.71% in fiscal 2022 to 3.93% in fiscal 2023. The interest spread increased by 44 basis points from 3.50% in fiscal 2022 to 3.94% in fiscal 2023. The full impact of rise in interest rates from the beginning of fiscal year 2023 is expected to be reflected in the cost of domestic term deposits during fiscal 2024.

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

The yield on average interest-earning assets increased by 66 basis points from 7.21% in fiscal 2022 to 7.87% in fiscal 2023 primarily due to the following factors:

• The yield on domestic advances increased by 52 basis points from 8.64% in fiscal 2022 to 9.16% in fiscal 2023. The yield on advances increased primarily due to re-pricing of existing floating rate loans linked to the repo rate and the Bank’s Marginal Cost of funds based Lending Rate (MCLR) to a higher rate and new lending at higher rates. At March 31, 2023, of the total domestic loan book, 30% had fixed interest rates, 45% had interest rates linked to repo rate, 20% had interest rates linked to MCLR and other older benchmarks and 5% had interest rates linked to T-bills.

  RBI increased the repo rate by 250 basis points from 4.00% in May 2022 to 6.50% in February 2023. The Bank’s 1-year MCLR increased by 150 basis points in phases during fiscal 2023 from 7.25% in March 2022 to 8.75% in March 2023. The impact of increase in repo rates from May 2022 started reflecting in overall yield through repricing of the repo and T-bill linked portfolio from Q2-2023 and onwards. For MCLR linked loans, the effect on the yields is based on respective reset dates of underlying loans. Further, the future movement in the yield on advances will depend on the increase/decrease in the repo rate and the systemic interest rates.

  The yield on overseas advances increased by 239 basis points from 1.51% in fiscal 2022 to 3.90% in fiscal 2023 primarily due to repricing of floating rate advances and new lending at higher rates on account of the ongoing rate hike cycle by the US Federal Reserve. The yield on overseas advances was also positively impacted by higher interest collection on NPAs.

  The overall yield on average advances increased by 67 basis points from 8.27% in fiscal 2022 to 8.94% in fiscal 2023.

• The yield on average interest-earning investments increased by 59 basis points from 5.98% in fiscal 2022 to 6.57% in fiscal 2023. The yield on Indian government investments increased by 40 basis points from 6.22% in fiscal 2022 to 6.62% in fiscal 2023. This was primarily due to reset of floating rate bonds linked to Treasury bills (T-bills) at higher rates pursuant to a significant increase in treasury bill yields and new investment in government securities at higher yields.

  The yield on non-SLR investments increased by 144 basis points from 4.72% in fiscal 2022 to 6.16% in fiscal 2023 primarily due to an increase in yield on bonds and debentures, foreign government securities and commercial paper.

• The yield on other interest-earning assets decreased by 66 basis points from 4.04% in fiscal 2022 to 3.38% in fiscal 2023. The decrease was primarily due to a decrease in interest income on funding swaps and an increase in average balance with RBI which does not earn any interest. During first quarter of fiscal 2023, RBI had increased the cash reserve ratio from 4.00% to 4.50%. The decrease in yield on other interest-earning assets was offset, in part, by an increase in yield on call money lent and an increase in yield on balance with other banks.

  Interest on income tax refund decreased from ₹ 2.43 billion in fiscal 2022 to ₹ 1.14 billion in fiscal 2023. The receipt, amount and timing of such income depends on the nature and timing of determinations by tax authorities and are hence neither consistent nor predictable.

The cost of funds increased by 22 basis points from 3.71% in fiscal 2022 to 3.93% in fiscal 2023 primarily due to the following factors:

• The cost of average deposits increased from 3.53% in fiscal 2022 to 3.66% in fiscal 2023 primarily due to an increase in cost of domestic term deposits. The cost of domestic term deposits increased by 23 basis points from 4.57% in fiscal 2022 to 4.80% in fiscal 2023. The peak rate for retail term deposits increased significantly in phases from 5.75% in May 2022 to 7.10% in February 2023 on account of significant increase in repo rate by the Reserve Bank of India.

The full impact of the rise in interest rates on deposits from the beginning of fiscal year 2023 will be reflected in the cost of domestic term deposits during fiscal 2024.

The cost of savings account deposits increased marginally from 3.15% in fiscal 2022 to 3.16% in fiscal 2023. The average CASA deposits increased from 44.5% of total average deposits in fiscal 2022 to 44.7% of total average deposits in fiscal 2023. Average CASA deposits were 39.7% of the total funding (i.e., deposits and borrowings) for fiscal 2023 as compared to 40.1% for fiscal 2022.

• The cost of borrowings increased by 60 basis points from 5.37% in fiscal 2022 to 5.97% in fiscal 2023. The cost of domestic borrowings increased by 28 basis points from 6.38% in fiscal 2022 to 6.66% in fiscal 2023 primarily due to an increase in cost of short term money market borrowings and refinance borrowings, offset, in part, by a decrease in cost of bond borrowings. The cost of overseas borrowings increased by 218 basis points from 1.11% in fiscal 2022 to 3.29% in fiscal 2023 primarily due to an increase in cost of term borrowings on account of ongoing rate hike cycle by the US Federal Reserve.

The Bank’s interest income, yield on advances, net interest income and net interest margin are impacted by systemic liquidity, the competitive environment, level of additions to non-performing loans, regulatory developments, monetary policy and economic and geopolitical factors. Interest rates on about 49.9% of Bank’s domestic loans are linked to external market benchmarks. The differential movements in the external benchmark rates compared to cost of funds of the Bank impact the Bank’s net interest income and net interest margin in fiscal 2024.

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

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

The average interest-earning assets increased by 15.8% from ₹ 11,979.51 billion in fiscal 2022 to ₹ 13,872.53 billion in fiscal 2023 due to an increase in average advances by ₹ 1,674.28 billion and average investments by ₹ 436.42 billion, offset, in part, by a decrease in average other interest-earning assets by ₹ 217.68 billion.

Average advances increased by 21.7% from ₹ 7,716.34 billion in fiscal 2022 to ₹ 9,390.62 billion in fiscal 2023 due to an increase of 23.0% in average domestic advances, offset, in part, by a decrease of 1.7% in average overseas advances.

Average interest-earning investments increased by 15.9% from ₹ 2,744.51 billion in fiscal 2022 to ₹ 3,180.93 billion in fiscal 2023 primarily due to an increase in average investment in Indian government securities, offset, in part, by a decrease in average investments in foreign government securities.

Average other interest-earning assets decreased by 14.3% from ₹ 1,518.66 billion in fiscal 2022 to ₹ 1,300.98 billion in fiscal 2023 primarily due to a decrease in call money lent and Rural infrastructure development fund (RIDF) and related deposits, offset, in part, by an increase in balance with RBI.

Average interest-bearing liabilities increased by 14.5% from ₹ 10,478.20 billion in fiscal 2022 to ₹ 11,998.16 billion in fiscal 2023 primarily due to an increase in average deposits by ₹ 1,201.52 billion and an increase in average borrowings by ₹ 318.45 billion.

Average deposits increased by 12.7% from ₹ 9,433.39 billion in fiscal 2022 to ₹ 10,634.91 billion in fiscal 2023 due to an increase in average term deposits and average CASA deposits.

Average borrowings increased by 30.5% from ₹ 1,044.80 billion in fiscal 2022 to ₹ 1,363.25 billion in fiscal 2023 primarily due to an increase in bond borrowings, term money borrowings, refinance borrowings and repo borrowings.

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

Fee income increased by 14.8% from ₹ 156.87 billion in fiscal 2022 to ₹ 180.01 billion in fiscal 2023 primarily due to an increase in transaction banking fees, income from foreign exchange and derivatives products and lending linked fees, offset, in part, by a decrease in fee income from third party product distribution. The fee income during the first half of fiscal 2023 increased by 24.1% as compared to the first half of fiscal 2022 primarily due to the lower base effect resulting from the second-wave of Covid-19 pandemic.

Dividend from Subsidiaries/joint ventures/associates decreased by 2.5% from ₹ 18.29 billion in fiscal 2022 to ₹ 17.84 billion in fiscal 2023.

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

1. ¹ 0.00 represents insignificant amount.
2. ² All amounts have been rounded off to the nearest ₹ 10.0 million.

Other income

Other income remained at a similar level at ₹ 0.98 billion in fiscal 2022 and fiscal 2023.

Operating expenses

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

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

Operating expenses primarily include employee expenses, depreciation on assets and other administrative expenses.

Operating expenses increased by 23.0% from ₹ 267.33 billion in fiscal 2022 to ₹ 328.73 billion in fiscal 2023.

Payments to and provisions for employees

Employee expenses increased by 24.7% from ₹ 96.73 billion in fiscal 2022 to ₹ 120.60 billion in fiscal 2023 primarily due to an increase in salary cost, provision for retirement benefit obligations, provision for performance bonus and performance-linked retention pay and fair value accounting of employee stock options. Salary cost increased primarily due to impact of annual increments, promotions and an increase in average staff strength (number of employees at March 31, 2022: 105,844 and at March 31, 2023: 129,020). Provision for retirement benefit obligations increased primarily due to impact of change in assumptions for salary escalation and dearness allowance.

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

Other administrative expenses

Other administrative expenses primarily include rent, taxes and lighting, advertisements, sales promotion, repairs and maintenance, direct marketing expenses, depreciation, premium paid towards priority sector lending certificates and other expenditure. Other administrative expenses increased by 22.0% from ₹ 170.60 billion in fiscal 2022 to ₹ 208.13 billion in fiscal 2023 primarily due to an increase in technology related expenses, advertisement and sales promotion expenses and direct marketing agency expenses.

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

Loss from treasury-related activities was ₹ 0.52 billion in fiscal 2023 as compared to a gain of ₹ 9.03 billion in fiscal 2022.

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

1. Includes restructuring related provision

2. Includes contingency provision amounting to ₹ 56.50 billion on a prudent basis for the year ended March 31, 2023 (March 31, 2022: write-back of ₹ 0.25 billion).

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

For a discussion on provisioning norms and policies, see “Financial Statement (Schedule 17- Significant Accounting Policies) – Provision/write-offs on loans and other credit facilities”.

Provisions and contingencies (excluding provisions for tax) decreased from ₹ 86.41 billion in fiscal 2022 to ₹ 66.66 billion in fiscal 2023 primarily due to a decrease in provision for non-performing and other assets, offset, in part, by an increase in contingency provisions made on a prudent basis, and provision for investments.

Provision for non-performing and other assets decreased from a provision of ₹ 61.64 billion in fiscal 2022 to a write-back of ₹ 6.23 billion in fiscal 2023. During fiscal 2023, there were higher recoveries and upgrades from non-performing assets resulting in net write-back of provision, offset, in part, by an increase in provisioning rate for certain categories of non-performing assets. In fiscal 2022, the provision for non- performing and other assets also included provision on loans restructured under Resolution Framework for COVID-19.

The provision coverage ratio (excluding cumulative technical/prudential write-offs) on NPAs increased from 79.2% at March 31, 2022 to 82.8% at March 31, 2023.

Provision for investments increased from ₹ 3.77 billion in fiscal 2022 to ₹ 13.00 billion in fiscal 2023 primarily due to an increase in provision on debentures, equity shares and security receipts.

Provision for standard assets increased from ₹ 4.49 billion in fiscal 2022 to ₹ 5.80 billion in fiscal 2023. The cumulative general provision held at March 31, 2023 was ₹ 47.02 billion (March 31, 2022: ₹ 40.94 billion).

Other provisions and contingencies increased from ₹ 16.51 billion in fiscal 2022 to ₹ 54.09 billion in fiscal 2023. During fiscal 2023, the Bank made a contingency provision amounting to ₹ 56.50 billion (fiscal 2022: write-back of ₹ 0.25 billion), on a prudent basis, to further strengthen the balance sheet. The Bank holds a total contingency provision of ₹ 131.00 billion at March 31, 2023.

The income tax expense increased from ₹ 72.70 billion in fiscal 2022 to ₹ 105.25 billion in fiscal 2023. The effective tax rate increased from 23.7% in fiscal 2022 to 24.8% in fiscal 2023 primarily due to change in composition of income.

Assets

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

1. Banks in India are required to maintain a specified percentage, currently 18.00% (at March 31, 2023), of their net demand and time liabilities by way of investments in instruments referred as SLR securities by RBI or liquid assets like cash and gold.

2. Bill Rediscounting Scheme (BRDS)/Interbank Participatory Certificate (IBPC).

3. Deposits made in Rural Infrastructure Development Fund and other related deposits pursuant to shortfall in the amount required to be lent to certain specified sectors called priority sector as per RBI guidelines.

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

Total assets of the Bank increased by 12.3% from ₹ 14,112.98 billion at March 31, 2022 to ₹ 15,842.07 billion at March 31, 2023, due to a 18.7% increase in advances and a 16.8% increase in investments, offset, in part, by a 28.8% decrease in cash and cash equivalents.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and balances with RBI and other banks, including money at call and short notice. Cash and cash equivalents decreased by 28.8% from ₹ 1,678.22 billion at March 31, 2022 to ₹ 1,194.38 billion at March 31, 2023 primarily due to a decrease in short term lending to RBI and foreign currency term money lent.

Investments

Total investments increased by 16.8% from ₹ 3,102.41 billion at March 31, 2022 to ₹ 3,623.30 billion at March 31, 2023. Investments in Indian government securities increased from ₹ 2,563.78 billion at March 31, 2022 to ₹ 3,057.69 billion at March 31, 2023. Other investments increased from ₹ 538.63 billion at March 31, 2022 to ₹ 565.61 billion at March 31, 2023 primarily due to an increase in investment in bonds and debentures and pass through certificates, offset, in part, by a decrease in investment in foreign government securities.

At March 31, 2023, the Bank had an outstanding net investment of ₹ 2.11 billion in security receipts issued by asset reconstruction companies as compared to ₹ 8.07 billion at March 31, 2022.

RBI through its circular dated December 8, 2022, extended the dispensation of enhanced HTM limit of 23.0% of Net Demand and Time Liabilities (NDTL) up to March 31, 2024. The enhanced HTM limit of 23.0% shall be restored to 19.5% in a phased manner, beginning from the quarter ending June 30, 2024.

Advances

Net advances (gross of BRDS/IBPC) increased by 20.2% from ₹ 8,603.70 billion at March 31, 2022 to ₹ 10,345.09 billion at March 31, 2023. Net advances (net of BRDS/ IBPC) increased by 18.7% from ₹ 8,590.20 billion at March 31, 2022 to ₹ 10,196.38 billion at March 31, 2023 primarily due to an increase in retail advances.

Net domestic advances increased by 20.5% from ₹ 8,177.36 billion at March 31, 2022 to ₹ 9,855.28 billion at March 31, 2023. Retail advances increased by 22.7% from ₹ 4,546.35 billion at March 31, 2022 to ₹ 5,578.17 billion at March 31, 2023. Advances of rural business increased by 13.8% from ₹ 768.30 billion at March 31, 2022 to ₹ 874.31 billion at March 31, 2023. The business banking portfolio increased by 34.9% from ₹ 534.37 billion at March 31, 2022 to ₹ 721.12 billion at March 31, 2023. SME advances increased by 19.2% from ₹ 404.50 billion at March 31, 2022 to ₹ 482.21 billion at March 31, 2023. The domestic corporate portfolio increased by 21.2% year-on-year.

Net advances of overseas branches decreased by 17.4% from ₹ 412.84 billion at March 31, 2022 to ₹ 341.10 billion at March 31, 2023.

Fixed and other assets

Fixed assets (net block) increased by 2.4% from ₹ 93.74 billion at March 31, 2022 to ₹ 96.00 billion at March 31, 2023.

Other assets increased by 12.9% from ₹ 648.41 billion at March 31, 2022 to ₹ 732.01 billion at March 31, 2023 primarily due to an increase in mark-to-market on foreign exchange and derivative transactions and interest accrued on loans and investments, offset, in part, by a decrease in RIDF and related deposits. The Bank is an active participant in the interest and foreign exchange derivative market. While the positive mark-to-market on such transactions are accounted in ‘Other Assets’, the negative mark-to-market on offsetting transactions are accounted in ‘Other Liabilities’.

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

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

Total liabilities (including capital and reserves) increased by 12.3% from ₹ 14,112.98 billion at March 31, 2022 to ₹ 15,842.07 billion at March 31, 2023, due to a 17.7% increase in net worth, a 10.9% increase in deposits and a 20.8% increase in other liabilities.

Deposits

Deposits increased by 10.9% from ₹ 10,645.72 billion at March 31, 2022 to ₹ 11,808.41 billion at March 31, 2023.

Term deposits increased by 17.1% from ₹ 5,461.35 billion at March 31, 2022 to ₹ 6,395.79 billion at March 31, 2023. Savings account deposits increased by 5.5% from ₹ 3,599.57 billion at March 31, 2022 to ₹ 3,797.76 billion at March 31, 2023 and current account deposits increased by 1.9% from ₹ 1,584.80 billion at March 31, 2022 to ₹ 1,614.86 billion at March 31, 2023. CASA deposits increased by 4.4% from ₹ 5,184.37 billion at March 31, 2022 to ₹ 5,412.62 billion at March 31, 2023.

The average current account deposits increased by 13.5% from ₹ 1,167.28 billion in fiscal 2022 to ₹ 1,324.77 billion in fiscal 2023. The average savings account deposits increased by 13.3% from ₹ 3,031.58 billion in fiscal 2022 to ₹ 3,434.14 billion in fiscal 2023. Average CASA deposits increased by 13.3% from ₹ 4,198.86 billion in fiscal 2022 to ₹ 4,758.90 billion in fiscal 2023. The average CASA deposits were 44.7% of total average deposits for fiscal 2023 as compared to 44.5% for fiscal 2022. Average CASA deposits were 39.7% of the total funding (i.e., deposits and borrowings) for fiscal 2023 as compared to 40.1% for fiscal 2022.

Deposits of overseas branches increased by 50.7% from ₹ 98.11 billion at March 31, 2022 to ₹ 147.82 billion at March 31, 2023.

Total deposits remained at similar level at 90.8% of the funding (i.e., deposits and borrowings) at March 31, 2023 and March 31, 2022.

Borrowings

Borrowings increased by 11.3% from ₹ 1,072.31 billion at March 31, 2022 to ₹ 1,193.25 billion at March 31, 2023 primarily due to an increase in refinance borrowings and bond borrowings, offset, in part, by a decrease in subordinated debt, foreign currency term money borrowings and foreign currency bond borrowings. Net borrowings of overseas branches decreased from ₹ 319.21 billion at March 31, 2022 to ₹ 258.14 billion at March 31, 2023.

Other liabilities

Other liabilities increased by 20.8% from ₹ 689.83 billion at March 31, 2022 to ₹ 833.25 billion at March 31, 2023 primarily due to an increase in mark-to-market on foreign exchange and derivative transactions and contingency provision. The Bank is an active participant in the interest and foreign exchange derivative market. While the positive mark-to-market on such transactions are accounted in ‘Other Assets’, the negative mark-to-market on offsetting transactions are accounted in ‘Other Liabilities’.

Equity share capital and reserves

Equity share capital and reserves increased by 17.7% from ₹ 1,705.12 billion at March 31, 2022 to ₹ 2,007.16 billion at March 31, 2023 primarily due to accretion to reserves out of retained profit, offset, in part, by payment of dividend for fiscal 2022.

At March 31, 2023, the Bank’s Tier-1 capital adequacy ratio was 17.60% as against the requirement of 9.70% and total capital adequacy ratio was 18.34% as against the requirement of 11.70%.

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

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

The Bank enters into foreign exchange contracts in its normal course of business, to exchange currencies at a prefixed price at a future date. With respect to the transactions entered into with its customers, the Bank generally enters into off-setting transactions in the inter-bank market. This results in generation of a higher number of outstanding transactions, and hence a large value of gross notional principal of the portfolio, while the net market risk is lower. The notional principal amount of outstanding forward exchange contracts increased from ₹ 10,645.24 billion at March 31, 2022 to ₹ 15,330.22 billion at March 31, 2023 primarily due to an increase in trading and market making activities in forwards to facilitate client flow and capture opportunities in the forward market.

The Bank is an active market participant in the interest rate and foreign exchange derivative market for trading and market making purposes, which are carried out primarily for customer transactions and managing the proprietary position on interest rate and foreign exchange risk. The notional amount of interest rate swaps and currency options decreased from ₹ 25,912.44 billion at March 31, 2022 to ₹ 25,089.18 billion at March 31, 2023.

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

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

The exposure to the top 20 non-bank borrowers as a percentage of total exposure decreased from 9.6% of total exposure of the Bank at March 31, 2022 to 8.5% at March 31, 2023. All top 20 borrowers as of March 31, 2023 are rated A+ and above internally. The exposure to the top 10 borrower groups decreased from 10.3% of total exposure of the Bank at March 31, 2022 to 10.1% at March 31, 2023.

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

The Bank’s capital allocation framework is focused on growth in granular retail, SME/ business banking and rural lending and lending to the corporate sector with a focus on increase in lending to higher rated corporates. Net retail advances increased by 22.7% in fiscal 2023 compared to an increase of 18.7% in total advances. The share of net retail advances increased from 52.9% of net advances at March 31, 2022 to 53.9% of net advances at March 31, 2023. Including nonfund based outstanding, the share of retail portfolio was 45.7% of the total portfolio at March 31, 2023.

The overseas loan portfolio in USD terms declined by 23.8% year-on-year at March 31, 2023. The year-on-year decrease in the overseas loan portfolio was primarily due to decline in the India-linked trade finance book. The overseas loan portfolio was 3.3% of the overall loan book at March 31, 2023. The corporate fund and non-fund outstanding, net of cash/bank/financial institutions/insurance backed lending, was USD 2.70 billion at March 31, 2023. Out of USD 2.70 billion, 88.7% of the outstanding was to Indian corporates and their subsidiaries and joint ventures and 7.4% of the outstanding was to non-India companies with Indian or India-linked operations and activities. The portfolio in this segment are primarily to well rated companies and the Indian operations of these companies are target customers for the Bank’s deposit and transaction banking franchise. The Bank would continue to pursue risk-calibrated opportunities in this segment. The non-India linked corporate portfolio reduced by 52.3% from about USD 641.2 million year-on-year to USD 305.6 million at March 31, 2023.

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

1. Includes loans against securities and dealer financing.

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

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

1. Based on internal ratings.

2. Includes net non-performing loans.

3. Includes business banking, SME, domestic, corporate and overseas loans.

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

1. Include advances, lease receivables and credit substitutes like debentures and bonds. Excludes preference shares.

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

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

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

2. Include advances, lease receivables and credit substitutes like debentures and bonds. Excludes preference shares.

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

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

1. Includes home loans, automobile loans, commercial business loans, dealer financing, personal loans, credit cards and loans against securities.

2. Other industries primarily include textile, metal and metal products, shipping, food and beverages, chemical and fertilizers, services-finance, cement, drugs and pharmaceuticals, FMCG, automobiles and developer financing.

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

The gross additions to NPAs were ₹ 186.41 billion in fiscal 2023 (₹ 192.91 billion in fiscal 2022). The net additions to NPAs were ₹ 20.38 billion in fiscal 2023 (₹ 29.28 billion in fiscal 2022). In fiscal 2023, the Bank recovered/upgraded non-performing assets amounting to ₹ 166.03 billion (₹ 163.63 billion in fiscal 2022), wrote-off non-performing assets amounting to ₹ 44.66 billion (₹ 99.46 billion in fiscal 2022) and sold non-performing assets amounting to ₹ 3.08 billion (₹ 4.35 billion in fiscal 2022). As a result, gross NPAs (net of write-offs) of the Bank decreased from ₹ 339.20 billion at March 31, 2022 to ₹ 311.84 billion at March 31, 2023.

Net NPAs decreased from ₹ 69.61 billion at March 31, 2022 to ₹ 51.55 billion at March 31, 2023. The ratio of net NPAs to net customer assets decreased from 0.76% at March 31, 2022 to 0.48% at March 31, 2023. The provision coverage ratio at March 31, 2023 was 82.8% as compared to 79.2% at March 31, 2022.

At March 31, 2023, gross non-performing loans in the retail portfolio were 1.28% of gross retail loans compared to 1.76% at March 31, 2022 and net non-performing loans in the retail portfolio were 0.47% of net retail loans compared to 0.74% at March 31, 2022.

The total non-fund based outstanding to borrowers classified as non-performing was ₹ 37.80 billion at March 31, 2023 (March 31, 2022: ₹ 36.40 billion). The Bank held a provision of ₹ 20.05 billion at March 31, 2023 (March 31, 2022: ₹ 20.51 billion) against these non-fund based outstanding.

The gross outstanding loans to borrowers whose facilities have been restructured decreased from ₹ 82.67 billion at March 31, 2022 to ₹ 45.08 billion at March 31, 2023. The net outstanding loans to borrowers whose facilities have been restructured decreased from ₹ 79.84 billion at March 31, 2022 to ₹ 43.30 billion at March 31, 2023. The aggregate non-fund based outstanding to borrowers whose loans were restructured was ₹ 3.32 billion at March 31, 2023 (March 31, 2022: ₹ 5.65 billion). Additionally, Bank holds provision of ₹ 12.02 billion on restructured accounts.

At March 31, 2023, the outstanding loans and non-fund facilities to borrowers in the corporate and small and medium enterprises portfolio rated BB and below were ₹ 47.04 billion which includes the outstanding loans and non-funded facilities under resolution amounting to ₹ 7.74 billion.

For a discussion on accounting policy for classification on loans, see “Financial Statement (Schedule 17- Significant Accounting Policies) – Provision/write-offs on loans and other credit facilities”.

RBI in its guidelines on "segmental reporting” has stipulated specified business segments and their definitions, for the purpose of public disclosures on business information for banks in India. The business segments as defined by RBI for standalone segmental report are Retail Banking, Wholesale Banking, Treasury and Other Banking. Additionally, Unallocated includes items such as income tax paid in advance net of provision for tax, deferred tax and provisions to the extent reckoned at entity level.

Framework for transfer pricing

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

Retail banking segment

The profit before tax of the segment increased from ₹ 114.00 billion in fiscal 2022 to ₹ 175.34 billion in fiscal 2023 primarily due to an increase in net interest income and non-interest income and a decrease in provisions, offset, in part, by an increase in operating expenses.

Wholesale banking segment

The profit before tax of the segment increased from ₹ 90.53 billion in fiscal 2022 to ₹ 157.85 billion in fiscal 2023 primarily due to an increase in net interest income and non-interest income and a decrease in provisions, offset, in part, by an increase in operating expenses.

Treasury segment

The profit before tax of the segment increased from ₹ 98.20 billion in fiscal 2022 to ₹ 142.72 billion in fiscal 2023 primarily due to an increase in net interest income, offset, in part, by a decrease in non- interest income and an increase in provisions and operating expenses.

Other banking segment

Profit before tax of the other banking segment increased from ₹ 3.11 billion in fiscal 2022 to ₹ 4.80 billion in fiscal 2023.

Unallocated

During fiscal 2023, the Bank on a prudent basis has made an additional contingency provision of ₹ 56.50 billion as compared to a write-back of ₹ 0.25 billion in fiscal year 2022. The contingency provision was not allocated to any segment and included in unallocated.

The consolidated profit after tax increased from ₹ 251.10 billion in fiscal 2022 to ₹ 340.37 billion in fiscal 2023 primarily due to an increase in the profit of ICICI Bank and subsidiaries namely ICICI Home Finance Company, ICICI Bank Canada, ICICI Prudential Asset Management Company and ICICI Prudential Life Insurance Company and an increase in share of profit from associate namely ICICI Lombard General Insurance Company, offset, in part, by a decrease in profit of certain subsidiaries namely ICICI Securities and ICICI Securities Primary Dealership.

The consolidated assets of the Bank and its subsidiaries and other consolidating entities increased from ₹ 17,526.37 billion at March 31, 2022 to ₹ 19,584.90 billion at March 31, 2023. Consolidated advances increased from ₹ 9,203.08 billion at March 31, 2022 to ₹ 10,838.66 billion at March 31, 2023.

At March 31, 2023, the Bank’s consolidated Tier-1 capital adequacy ratio was 17.33% as against the requirement of 9.70% and consolidated total capital adequacy ratio was 18.09% as against the requirement of 11.70%.

ICICI Bank Canada

The core operating profit of ICICI Bank Canada increased from CAD 26.2 million in fiscal 2022 to CAD 61.2 million in fiscal 2023 primarily due to an increase in net interest income and fee income, offset, in part, by an increase in operating expenses. The profit after tax of ICICI Bank Canada increased from CAD 29.2 million (₹ 1.74 billion) in fiscal 2022 to CAD 46.4 million (₹ 2.82 billion) in fiscal 2023 primarily due to an increase in core operating profit.

The total assets increased from CAD 5.74 billion at March 31, 2022 to CAD 5.98 billion at March 31, 2023. Loans and advances increased from CAD 4.98 billion at March 31, 2022 to CAD 5.17 billion at March 31, 2023. The net impairment ratio increased from 0.01% at March 31, 2022 to 0.08% at March 31, 2023. ICICI Bank Canada had a total capital adequacy ratio of 17.3% at March 31, 2023 as compared to 17.2% at March 31, 2022.

ICICI Bank UK PLC (ICICI Bank UK)

The core operating profit of ICICI Bank UK increased from USD 11.7 million in fiscal 2022 to USD 18.3 million in fiscal 2023 primarily due to an increase in net interest income and fee income, offset, in part, by a decrease in other income. Profit after tax of ICICI Bank UK increased from USD 10.9 million (₹ 0.81 billion) in fiscal 2022 to USD 13.0 million (₹ 1.05 billion) in fiscal 2023 primarily due to higher core operating profit, offset, in part, by an increase in impairment provisions.

Total assets decreased from USD 2.24 billion at March 31, 2022 to USD 2.14 billion at March 31, 2023. Net advances decreased from USD 1.32 billion at March 31, 2022 to USD 1.09 billion at March 31, 2023. The net impairment ratio increased from 2.0% at March 31, 2022 to 3.3% at March 31, 2023. ICICI Bank UK had a total capital adequacy ratio of 27.1% at March 31, 2023 compared to 23.0% at March 31, 2022.

ICICI Prudential Life Insurance Company (ICICI Life)

The Annualised Premium Equivalent of ICICI Life increased by 11.7% from ₹ 77.33 billion for fiscal 2022 to ₹ 86.40 billion for fiscal 2023. The Value of New Business (VNB) increased by 27.8% from ₹ 21.63 billion for fiscal 2022 to ₹ 27.65 billion for fiscal 2023. The VNB margin increased from 28.0% for fiscal 2022 to 32.0% in fiscal 2023. The total premium earned increased by 6.6% from ₹ 374.58 billion in fiscal 2022 to ₹ 399.33 billion in fiscal 2023. The total assets under management increased from ₹ 2,404.92 billion at March 31, 2022 to ₹ 2,511.91 billion at March 31, 2023.

Net premium earned increased by 6.2% from ₹ 363.21 billion in fiscal 2022 to ₹ 385.60 billion in fiscal 2023. The profit after tax increased from ₹ 7.54 billion in fiscal 2022 to ₹ 8.11 billion in fiscal 2023 primarily due to lower Covid-19 related death claims (net of reinsurance), offset, in part, by a decrease in shareholder surplus.

ICICI Lombard General Insurance Company (ICICI General)

The Gross Domestic Premium Income of ICICI General increased by 17.0% year-on-year from ₹ 179.77 billion in fiscal 2022 to ₹ 210.25 billion in fiscal 2023. The profit after tax increased from ₹ 12.71 billion in fiscal 2022 to ₹ 17.29 billion in fiscal 2023 primarily due to an increase in premium income and reversal of tax provision, offset, in part, by an increase in claims and benefits paid.

ICICI Prudential Asset Management Company (ICICI Prudential AMC)

As per Indian GAAP, the profit after tax of ICICI Prudential AMC increased from ₹ 14.36 billion in fiscal 2022 to ₹ 15.08 billion in fiscal 2023 primarily due to an increase in fee income, offset, in part, by an increase in operating expenses.

ICICI Securities

As per Indian GAAP, the consolidated profit after tax of ICICI Securities decreased from ₹ 13.98 billion in fiscal 2022 to ₹ 11.40 billion in fiscal 2023 primarily due to decrease in fee income.

ICICI Securities Primary Dealership (I-Sec PD)

As per Indian GAAP, the profit after tax of I-Sec PD decreased from ₹ 3.30 billion in fiscal 2022 to ₹ 1.28 billion in fiscal 2023 primarily due to a decrease in net interest income and lower trading gains.

ICICI Home Finance Company Limited (ICICI HFC)

As per Indian GAAP, profit after tax increased from ₹ 0.93 billion in fiscal 2022 to ₹ 3.65 billion in fiscal 2023 primarily due to an increase in core operating profit and decrease in provisions. The core operating profit increased primarily due to an increase in net interest income and fee income, offset, in part, by an increase in operating expenses.

Net NPAs decreased from ₹ 5.16 billion at March 31, 2022 to ₹ 3.53 billion at March 31, 2023.

ICICI Venture Funds Management Company (ICICI Venture)

The profit after tax of ICICI Venture increased from ₹ 2.2 million in fiscal 2022 to ₹ 61.9 million in fiscal 2023 primarily due to an increase in management fees received from launch of new fund, offset, in part, by an increase in operating expenses.

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

1. Total assets are as per classification used in the consolidated financial statements and hence the total assets as per subsidiary’s financial statements may differ.

2. The entity have been accounted as per the equity method as prescribed by Accounting Standard – 23 – “Accounting for Investments in Associates in Consolidated Financial Statements”.

3. Total assets as per financial statements of ICICI Lombard General Insurance Company Limited.

4. 0.00 represents insignificant amount.

5. See also “Financials- Statement pursuant to Section 129 of the Companies Act, 2013”.

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