Merger of Bank of Rajasthan with Icici Bank

MERGER OF THE BANK OF RAJASTHAN LIMITED WITH ICICI BANK The Bank of Rajasthan Limited (Bank of Rajasthan), a banking company incorporated within the meaning of Companies Act, 1956 and licensed by Reserve Bank of India (RBI) under the Banking Regulation Act, 1949 was amalgamated with ICICI Bank Limited (ICICI Bank/the Bank) with effect from close of business on August 12, 2010 in terms of the Scheme of Amalgamation (the Scheme) approved by RBI vide its order DBOD No. PSBD 2599/16. 01. 056/2010-11 dated August 12, 2010 under sub section (4) of section 44A of the Banking Regulation Act, 1949.

The consideration for the amalgamation was 25 equity shares of ICICI Bank of the face value of Rs. 10 each fully paid-up for every 118 equity shares of Rs. 10 each of Bank of Rajasthan. Accordingly, ICICI Bank allotted 31,323,951 equity shares to the shareholders of Bank of Rajasthan on August 26, 2010 and 2,860,170 equity shares, which were earlier kept in abeyance pending civil appeal, on November 25, 2010. During the year, we acquired The Bank of Rajasthan which substantially enhanced our branch network and strengthened our presence in northern and western India.

The merger of Bank of Rajasthan added over 450 branches to our network. Including these, our branch network has increased from 1,707 branches at March 31, 2010 to 2,529 branches at March 31, 2011. We also increased our ATM network from 5,219 ATMs at March 31, 2010 to 6,055 ATMs at March 31, 2011. During the year, the integration of Bank of Rajasthan into the Bank was a major exercise which was successfully completed. The integration process focused both on business as well as cultural integration.

The people and cultural integration was achieved through well-planned communication of the Bank's values and culture. The Bank reached out to all employees of Bank of Rajasthan and addressed their expectations and concerns. This was achieved through communication from the top management of the Bank, open house sessions jointly conducted by senior managers from Bank of Rajasthan and ICICI Bank and one-on-one sessions wherever required. Further, to align the skill sets of Bank of Rajasthan employees, special training programs were designed and conducted by the Bank.

Pursuant to the merger of the Bank of Rajasthan, we also enabled seamless transactions for the customers of Bank of Rajasthan in a short timeframe and combined the ATM and branch networks and technology infrastructure. To enable better customer service, our branch staff has been equipped with a comprehensive and single view of customer relationships. We have also enhanced our Interactive Voice Response system at our call centres to support regional Indian languages. Amalgamation of The Bank of Rajasthan

On May 23, 2010, the Board of Directors of ICICI Bank and the Board of Directors of The Bank of Rajasthan Limited (Bank of Rajasthan), an old private sector bank, at their respective meetings approved an all-stock amalgamation of Bank of Rajasthan with ICICI Bank at a share exchange ratio of 25 shares of ICICI Bank for 118 shares of Bank of Rajasthan. The shareholders of ICICI Bank and Bank of Rajasthan approved the scheme of amalgamation at their respective extra-ordinary general meetings.

RBI approved the scheme of amalgamation with effect from close of business on August 12, 2010. We have issued 31. 3 million shares in August 2010 and 2. 9 million shares in November 2010 to shareholders of Bank of Rajasthan. The total assets of Bank of Rajasthan represented 4. 0% of total assets of ICICI Bank at August 12, 2010. At August 12, 2010, Bank of Rajasthan had total assets of Rs. 155. 96 billion, deposits of Rs. 134. 83 billion, loans of Rs. 65. 28 billion and investments of Rs. 70. 96 billion. It incurred a loss of Rs. 1. 02 billion in fiscal 2010.

The results for fiscal 2011 include results of Bank of Rajasthan for the period from August 13, 2010 to March 31, 2011. The assets and liabilities of Bank of Rajasthan have been accounted at the values at which they were appearing in the books of Bank of Rajasthan at August 12, 2010 and provisions were made for the difference between the book values appearing in the books of Bank of Rajasthan and the fair value as determined by ICICI Bank. The amalgamation was part of our strategy to expand our branch network with a view to growing our deposit base.

We believe that the combination of Bank of Rajasthan's branch franchise with our strong capital base would enhance the ability of the combined entity to capitalise on the growth opportunities in the Indian economy. Total assets increased by 11. 8% from Rs. 3,634. 00 billion at March 31, 2010 to Rs. 4,062. 34 billion at March 31, 2011. Total deposits increased by 11. 7% from Rs. 2,020. 17 billion at March 31, 2010 to Rs. 2,256. 02 billion at March 31, 2011. Current and savings account (CASA) deposits increased by 20. 7% from Rs. 842. 6 billion at March 31, 2010 to Rs. 1,016. 47 billion at March 31, 2011 while term deposits increased marginally from Rs. 1,178. 01 billion at March 31, 2010 to Rs. 1,239. 55 billion at March 31, 2011. The ratio of CASA deposits to total deposits increased from 41. 7% at March 31, 2010 to 45. 1% at March 31, 2011. Total advances increased by 19. 4% from Rs. 1,812. 06 billion at March 31, 2010 to Rs. 2,163. 66 billion at March 31, 2011 primarily due to an increase in domestic corporate loans, overseas corporate loans and loans taken over from Bank of Rajasthan.

Net non- performing assets decreased by 37. 0% from Rs. 39. 01 billion at March 31, 2010 to Rs. 24. 58 billion at March 31, 2011 and the net non-performing asset ratio decreased from 1. 9% at March 31, 2010 to 0. 9% at March 31, 2011. We continued to expand our branch network in India. Our branch network in India increased from 1,707 branches and extension counters at March 31, 2010 to 2,529 branches and extension counters at March 31, 2011. We also increased our ATM network from 5,219 ATMs at March 31, 2010 to 6,104 ATMs at March 31, 2011.

These include branches and ATMs of Bank of Rajasthan. The total capital adequacy ratio of ICICI Bank on a standalone basis at March 31, 2011 in accordance with the RBI guidelines on Basel II was 19. 5% with a tier I capital adequacy ratio of 13. 2% compared to a total capital adequacy of 19. 4% and tier I capital adequacy of 14. 0% at March 31, 2010 Average advances increased marginally from Rs. 1,915. 39 billion in fiscal 2010 to Rs. 1,926. 52 billion in fiscal 2011 which includes advances taken over from Bank of Rajasthan. Retail advances increased by 5. % from Rs. 790. 62 billion at March 31, 2010 to Rs. 836. 75 billion at March 31, 2011. In US dollar terms, the net advances of overseas branches increased by 22. 8% from US$ 10. 1 billion at March 31, 2010 to US$ 12. 4 billion at March 31, 2011. In rupee terms, the net advances of overseas branches increased by 22. 1% from Rs. 451. 37 billion at March 31, 2010 to Rs. 550. 97 billion at March 31, 2011. Payments to and provisions for employees Employee expenses increased by 46. 3% from Rs. 19. 26 billion in fiscal 2010 to Rs. 28. 17 billion in fiscal 2011.

Employee expenses increased primarily due to addition of employees of Bank of Rajasthan, annual increase in salaries and provision for payment of performance bonus and performance- linked retention pay during the period and increase in the employee base, including sales executives, employees on fixed term contracts and interns, from 41,068 employees at March 31, 2010 to 56,969 employees at March 31, 2011 (including employees of Bank of Rajasthan). Tax expense The income tax expense (including wealth tax) increased by 22. 0% from Rs. 13. 20 billion in fiscal 2010 to Rs. 16. 10 billion in fiscal 2011.

The effective tax rate of 23. 8% in fiscal 2011 was lower compared to the effective tax rate of 24. 7% in fiscal 2010 primarily due to change in mix of taxable profits with a higher component of exempt income in the current fiscal year and tax benefits from the amalgamation of Bank of Rajasthan. The total assets increased by 11. 8% from Rs. 3,634. 00 billion at March 31, 2010 to Rs. 4,062. 34 billion at March 31, 2011 (including Rs. 155. 96 billion of Bank of Rajasthan at August 12, 2010), primarily due to increase in investments and advances. Investments increased by 11. 4% from Rs. 1,208. 3 billion at March 31, 2010 to Rs. 1,346. 86 billion at March 31, 2011. The net advances increased by 19. 4% from Rs. 1,812. 06 billion at March 31, 2010 to Rs. 2,163. 66 billion at March 31, 2011. Investments Total investments increased by 11. 4% from Rs. 1,208. 93 billion at March 31, 2010 to Rs. 1,346. 86 billion at March 31, 2011 (including Rs. 70. 96 billion of Bank of Rajasthan at August 12, 2010), primarily due to an increase in investment in corporate bonds and debentures by Rs. 125. 1 1 billion, RIDF and other related investments in lieu of shortfall in directed lending requirements by Rs. 49. 0 billion (including Rs. 21. 34 billion of Bank of Rajasthan at August 12, 2010) and investments in commercial paper and certificate of deposits by Rs. 31. 21 billion. The investment in pass- through certificates decreased by Rs. 15. 93 billion at March 31, 2011 compared to March 31, 2010. At March 31, 2011, we had an outstanding net investment of Rs. 28. 31 billion in security receipts issued by asset reconstruction companies in relation to sale of non-performing assets compared to Rs. 33. 94 billion at March 31, 2010. At March 31, 2011, we had a gross portfolio of funded credit derivatives of Rs. 0. 60 billion and non-funded credit derivatives of Rs. 28. 17 billion, which includes Rs. 0. 22 billion as protection bought by us. Advances Net advances increased by 19. 4% from Rs. 1,812. 06 billion at March 31, 2010 to Rs. 2,163. 66 billion at March 31, 2011 primarily due to increase in domestic corporate loans, overseas corporate loans and loans taken over from Bank of Rajasthan amounting to Rs. 65. 28 billion at August 12, 2010. Net retail advances increased by 5. 8% from Rs. 790. 62 billion at March 31, 2010 to Rs. 836. 75 billion at March 31, 2011.

In rupee terms, net advances of overseas branches (including offshore banking unit) increased by 22. 1% from Rs. 451. 37 billion at March 31, 2010 to Rs. 550. 97 billion at March 31, 2011. Fixed and other assets Fixed assets increased by 47. 7% from Rs. 32. 13 billion at March 31, 2010 to Rs. 47. 44 billion at March 31, 2011 (including Rs. 5. 15 billion of Bank of Rajasthan at August 12, 2010) primarily due to part capitalisation of the Bank's new building in Hyderabad and increase in the branch network and other offices. Other assets decreased by 14. 9% from Rs. 192. 15 billion at March 31, 2010 to Rs. 163. 8 billion at March 31, 2011. Total liabilities (including capital and reserves) increased by 11. 8% from Rs. 3,634. 00 billion at March 31, 2010 to Rs. 4,062. 34 billion at March 31, 2011 (including Rs. 155. 96 billion of Bank of Rajasthan at August 12, 2010), primarily due to an increase in deposits and borrowings. Deposits increased from Rs. 2,020. 17 billion at March 31, 2010 to Rs. 2,256. 02 billion at March 31, 2011. Deposits Deposits increased by 11. 7% from Rs. 2,020. 17 billion at March 31, 2010 to Rs. 2,256. 02 billion at March 31, 2011 (including Rs. 134. 83 billion of Bank of Rajasthan at August 12, 2010).

Term deposits increased from Rs. 1,178. 01 billion at March 31, 2010 to Rs. 1,239. 55 billion at March 31, 2011 (including Rs. 88. 02 billion of Bank of Rajasthan at August 12, 2010), while savings deposits increased from Rs. 532. 18 billion at March 31, 2010 to Rs. 668. 69 billion at March 31, 2011 (including Rs. 34. 48 billion of Bank of Rajasthan at August 12, 2010) and current deposits increased from Rs. 309. 98 billion at March 31, 2010 to Rs. 347. 78 billion at March 31, 2011 (including Rs. 12. 32 billion of Bank of Rajasthan at August 12, 2010). Total deposits at March 31, 2011 formed 67. % of the funding (i. e. deposits and borrowings, other than preference share capital). During fiscal 2010 and fiscal 2011, we focussed on our strategy of increasing the share of current and savings account deposits in total deposits and re-balancing our funding mix. The current and savings account deposits increased from Rs. 842. 16 billion at March 31, 2010 to Rs. 1,016. 47 billion at March 31, 2011 (including Rs. 46. 80 billion of Bank of Rajasthan at August 12, 2010) and the ratio of current and savings account deposits to total deposits increased from 41. 7% at March 31, 2010 to 45. % at March 31, 2011. Total liabilities (including capital and reserves) increased by 11. 8% from Rs. 3,634. 00 billion at March 31, 2010 to Rs. 4,062. 34 billion at March 31, 2011 (including Rs. 155. 96 billion of Bank of Rajasthan at August 12, 2010), primarily due to an increase in deposits and borrowings. Deposits increased from Rs. 2,020. 17 billion at March 31, 2010 to Rs. 2,256. 02 billion at March 31, 2011. Deposits Deposits increased by 11. 7% from Rs. 2,020. 17 billion at March 31, 2010 to Rs. 2,256. 02 billion at March 31, 2011 (including Rs. 134. 83 billion of Bank of Rajasthan at August 12, 2010).

Term deposits increased from Rs. 1,178. 01 billion at March 31, 2010 to Rs. 1,239. 55 billion at March 31, 2011 (including Rs. 88. 02 billion of Bank of Rajasthan at August 12, 2010), while savings deposits increased from Rs. 532. 18 billion at March 31, 2010 to Rs. 668. 69 billion at March 31, 2011 (including Rs. 34. 48 billion of Bank of Rajasthan at August 12, 2010) and current deposits increased from Rs. 309. 98 billion at March 31, 2010 to Rs. 347. 78 billion at March 31, 2011 (including Rs. 12. 32 billion of Bank of Rajasthan at August 12, 2010). Total deposits at March 31, 2011 formed 67. % of the funding (i. e. deposits and borrowings, other than preference share capital). During fiscal 2010 and fiscal 2011, we focussed on our strategy of increasing the share of current and savings account deposits in total deposits and re-balancing our funding mix. The current and savings account deposits increased from Rs. 842. 16 billion at March 31, 2010 to Rs. 1,016. 47 billion at March 31, 2011 (including Rs. 46. 80 billion of Bank of Rajasthan at August 12, 2010) and the ratio of current and savings account deposits to total deposits increased from 41. 7% at March 31, 2010 to 45. 1% at March 31, 2011.

Equity share capital and reserves Equity share capital and reserves increased from Rs. 516. 18 billion at March 31, 2010 to Rs. 550. 91 billion at March 31, 2011 (including statutory reserve of Rs. 2. 00 billion taken over from Bank of Rajasthan at August 12, 2010) primarily due to allotment of shares to the shareholders of Bank of Rajasthan and annual accretion to reserves out of profit. Excess of paid-up value of equity shares issued over the fair value of the net assets acquired in the amalgamation and amalgamation expenses, amounting to Rs. 2. 10 billion have been adjusted against the securities premium account.