INTRODUCTION OF ICICI BANK

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition
of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses.

In the 1990s, ICICI transformed its business from a development financial institution
offering only project finance to a diversified financial services group offering a wide
variety of products and services, both directly and through a number of subsidiaries and
affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first
bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the ICICI group's universal
banking strategy. The merger would enhance value for ICICI shareholders through the
merged entity's access to low-cost deposits, greater opportunities for earning fee-based
income and the ability to participate in the payments system and provide transaction-
banking services. The merger would enhance value for ICICI Bank shareholders through
a large capital base and scale of operations, seamless access to ICICI's strong corporate
relationships built up over five decades, entry into new business segments, higher market
share in various business segments, particularly fee-based services, and access to the vast
talent pool of ICICI and its subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger
of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal
Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The
merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the
High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature
at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the
ICICI group's financing and banking operations, both wholesale and retail, have been
integrated in a single entity.
DETAIL REGARDING MERGER OF ICICI
LTD AND ICICI BANK

Second largest Bank in India is now formally in place . RBI has given
approval for the reverse merger of ICICI Ltd with its banking arm ICICI
Bank. ICICI Bank with Rs 1 lakh crore asset base bank is second only to
State Bank of India, which is well over Rs 3 lakh crore in size. RBI also
cleared the merger of two ICICI subsidiaries, ICICI Personal Financial
Services and ICICI Capital Services with ICICI Bank.

The merger is effective from the appointed dated of March 30, 02, and the
swap ratio has been fixed at two ICICI shares for one ICICI Bank share.

Reserve Bank, approval is subject to the following conditions:

(i) Compliance with Reserve Requirements

The ICICI Bank Ltd. would comply with the Cash Reserve Requirements
(under Section 42 of the Reserve Bank of India Act, 1934) and Statutory
Liquidity Reserve Requirements (under Section 24 of the Banking
Regulation Act, 1949) as applicable to banks on the net demand and time
liabilities of the bank, inclusive of the liabilities pertaining to ICICI Ltd.
from the date of merger. Consequently, ICICI Bank Ltd. would have to
comply with the CRR/SLR computed accordingly and with reference to the
position of Net Demand and Time Liabilities as required under existing
instructions.

(ii) Other Prudential Norms

ICICI Bank Ltd. will continue to comply with all prudential requirements,
guidelines and other instructions as applicable to banks concerning capital
adequacy, asset classification, income recognition and provisioning, issued
by the Reserve Bank from time to time on the entire portfolio of assets and
liabilities of the bank after the merger.

(iii) Conditions relating to Swap Ratio

As the proposed merger is between a banking company and a financial

institution, all matters connected with shareholding including the swap
ratio, will be governed by the provisions of Companies Act, 1956, as
provided. In case of any disputes, the legal provisions in the Companies Act
and the decision of the Courts would apply.
(iv) Appointment of Directors

The bank should ensure compliance with Section 20 of the Banking

Regulation Act, 1949, concerning granting of loans to the companies in
which directors of such companies are also directors. In respect of loans
granted by ICICI Ltd. to companies having common directors, while it will
not be legally necessary for ICICI Bank Ltd. to recall the loans already
granted to such companies after the merger, it will not be open to the bank
to grant any fresh loans and advances to such companies after merger. The
prohibition will include any renewal or enhancement of existing loan
facilities. The restriction contained in Section 20 of the Act ibid, does not
make any distinction between professional directors and other directors and
would apply to all directors.

(v) Priority Sector Lending

Considering that the advances of ICICI Ltd. were not subject to the
requirement applicable to banks in respect of priority sector lending, the
bank would, after merger, maintain an additional 10 per cent over and above
the requirement of 40 per cent, i.e., a total of 50 per cent of the net bank
credit on the residual portion of the bank's advances. This additional 10 per
cent by way of priority sector advances will apply until such time as the
aggregate priority sector advances reaches a level of 40 per cent of the total
net bank credit of the bank. The Reserve Bank’s existing instructions on
sub-targets under priority sector lending and eligibility of certain types of
investments/funds for reckoning as priority sector advances would apply to
the bank.

(vi) Equity Exposure Ceiling of 5%

The investments of ICICI Ltd. acquired by way of project finance as on the

date of merger would be kept outside the exposure ceiling of 5 per cent of
advances towards exposure to equity and equity linked instruments for a
period of five years since these investments need to be continued to avoid
any adverse effect on the viability or expansion of the project. The bank
should, however, mark to market the above instruments and provide for any
loss in their value in the manner prescribed for the investments of the bank.
Any incremental accretion to the above project-finance category of equity
investment will be reckoned within the 5 per cent ceiling for equity
exposure for the bank.

(vii) Investments in Other Companies

The bank should ensure that its investments in any of the companies in
which ICICI Ltd. had investments prior to the merger are in compliance
with Section 19 (2) of Banking Regulation Act, 1949, prohibiting holding of
equity in excess of 30 per cent of the paid-up share capital of the company
concerned or 30 per cent of its own paid-up share capital and reserves,
whichever is less.

(viii) Subsidiaries

(a) While taking over the subsidiaries of ICICI Ltd. after merger, the bank
should ensure that the activities of the subsidiaries comply with the
requirements of permissible activities to be undertaken by a bank under
Section 6 of the Banking Regulation Act, 1949 and Section 19 (1) of the
Act ibid.

(b) The take over of certain subsidiaries presently owned by ICICI Ltd. by
ICICI Bank Ltd. will be subject to approval, if necessary, by other
regulatory agencies, viz., IRDA, SEBI, NHB, etc.

(ix) Preference Share Capital

Section 12 of the Banking Regulation Act, 1949 requires that capital of a

banking company shall consist of ordinary shares only (except preference
share issued before 1944). The inclusion of preference share capital of Rs.
350 crore (350 shares of Rs.1 crore each issued by ICICI Ltd. prior to
merger), in the capital structure of the bank after merger is, therefore,
subject to the exemption from the application of the above provision of
Banking Regulation Act, 1949, granted by the Central Government in terms
of Section 53 of the Act ibid for a period of five years.

x) Valuation and Certification of the Assets of ICICI Ltd

ICICI Bank Ltd. should ensure that fair valuation of the assets of the ICICI
Ltd. is carried out by the statutory auditors to its satisfaction and that
required provisioning requirements are duly carried out in the books of
ICICI Ltd. before the accounts are merged. Certificates from statutory
auditors should be obtained in this regard and kept on record.
RBI APPROVES ICICI LTD-ICICI BANK
MERGER( 27 April 2002 )
ICICI Bank Ltd, which was granted approval by the Reserve Bank of India (RBI) on 26
April 2002 for the merger of ICICI Ltd with it, will have to lend an additional 10 per cent
to the priority sector, over and above the mandatory 40 per cent of the total advances
applicable to other banks.

This additional 10 per cent on incremental advances will apply until such time the
aggregate priority sector advances (including that of ICICI that were not subject to
mandatory norms) reaches 40 per cent.

The merger will be effective from 30 March 2002 as approved by the high courts of
Mumbai and Gujarat. According to the RBI, the bank will have to comply with both CRR
and SLR requirements. Currently, the CRR is 5.5 per cent and the SLR is 25 per cent.

The RBI has also approved the merger of two of ICICIs subsidiaries ICICI Personal
Financial Services Ltd and ICICI Capital Services Ltd with ICICI Bank, said an ICICI
Bank press release.

FINANCIAL HIGHLIGHTS
The financial performance for fiscal 2003 is summarised in the following table:

Rs. billion, except percentages Fiscal 2002 Fiscal 2003 % change

Net interest income and other income 159.70 155.92 (2.4)
Operating profit 89.25 97.32 9.0
Provisions & contingencies1 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 afterprovisions and
contingencies of Rs. 43.87 billion and all expenses. The disposable profitis Rs. 68.35
billion, taking into account the balance of Rs. 28.10 billion brought forwardfrom the
previous year. Your Directors have recommended a dividend at the rate of Rs. 12per
equity share of face value Rs. 10 for the year and have appropriated the disposableprofit
as follows:

Fiscal Fiscal
Rs. billion
2002 2003
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)
2.50 3.00
(viii) of the Income-tax Act, 1961, making in all Rs. 26.44 billion
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
12.25 13.38
2009)1
– On preference shares (Rs.) 35,000 35,000
– Corporate dividend tax 1.51 1.64
Leaving balance to be carried forward to the next year2 28.10 34.64

DIVERSIFIED PORTFOLIO
MARCH 2001 PROFORMA MERGED MARCH 2002PROFORMA MERGED

7%
5% 23%
33% Project finance
Corporate finance
Retail finance

12% Reserves & cash

Investments
4% Other assets
23%
12% 36% 34%
3%
8%
 Benefits of merger
1 Improved ability to further diversify asset portfolio and business revenues
2 Lower funding costs
 Ability to accept/ offer checking accounts
 Availability of float money due to active participation in the payments
system
 Diversified fund raising due to access to retail funds
3 Increased fee income opportunities
 Ability to offer all banking products

4 “Forward leap” in the hierarchy of Indian banks

 A discontinuous jump in size and scale
5 Achieve size and scale of operations
 Leverage ICICI’s capital and client base to increase fee income
 Higher profitability by leveraging on technology and low cost structure
6 Offer a complete product suite with immense cross-selling opportunities
 ICICI’s presence in retail finance, insurance, investment banking and
venture capital
7 Access to the ICICI group’s talent pool
COMPETETIVE ADVANTAGE OF MERGED
COMPANY

Vast
talent
pool Technology
-enabled
Large distribution
capital base
architecture

Complete Low
product Extensive operating
suite customer
costs
relationship
s & strong
brand
franchise

Merger process - highlights

1 Valuation
 Independently appointed investment bankers
 ICICI - JM Morgan Stanley
 ICICI Bank - DSP Merrill Lynch
 Jointly appointed independent accountant to recommend the final
exchange ratio
 Deloitte, Haskins & Sells appointed
 Recommended one share of ICICI Bank for two shares of
ICICI, which was approved by the respective Boards
2 Transfer of ICICI’s shareholding in ICICI Bank to an SPV prior to the
merger
 Divestment in FY2003 by way of appropriate placement
3 Consolidation of retail operations
 Merger of ICICI PFS and ICICI Capital Services with ICICI Bank
 Merger process - regulatory issues
1 Merger effective on
 March 31, 2002 or the date of RBI approval, whichever is later
 Shareholders’ approval
 High court approval
2 Accounting for the merger in line with international best practices
 Purchase method, mandatory under US GAAP, to be adopted under
Indian GAAP as well

PROFIT AND LOSS STATEMENT

Q4 - Q4 - Inc
FY01 FY02
FY01 FY02 %
Interest income 3.69 6.77 12.42 21.52 73.3
Interest expense 2.44 5.33 8.38 15.59 86.0
Net interest income 1.25 1.44 4.04 5.93 46.8
Non -interest income 1.00 1.77 2.20 5.75 161.4
- Core fee income 0.61 0.99 1.71 2.83 65.5
- Trading gains 0.39 0.78 0.49 2.92 495.9
Operating expenses 1.22 1.84 3.34 6.23 86.5
Operating profit 1.03 1.37 2.90 5.45 87.9
Prov. & contingencies 0.53 0.80 1.29 2.87 122.5
Profit after tax 0.50 0.57 1.61 2.58 60.2
 BALANCE SHEET – ASSET

FY02 FY02
FY01
Standalone Merged
Cash, balances with 77.06 286.14 357.64
banks &SLR
- Cash&balances 35.94 86.48 129.71
withRBI &banks
- SLRinvestments 41.12 199.66 227.93
Advances 70.31 48.32 470.35
Debentures &bonds 30.70 28.25 75.41
Oth erinvestments 10.05 4.62 55.58
Fixedassets 3.84 4.35 42.39
Otherassets 5.40 10.06 39.73
Total assets 197.36 381.74 1,041.10

BALANCE SHEET – LIABILITIES

FY02 FY02
FY01
Standalone Merged
Net worth 13.13 15.45 62.49
- Equitycapital 2.20 2.20 6.13
- Reserves 10.93 13.25 56.36
Preferencecapital - - 3.50
Deposits 163.78 325.13 320.85
- Savings deposits 18.81 24.97 24.97
- Current deposits 26.22 29.57 27.36
- Termdeposits 118.75 270.59 268.52
Borrowings 12.00 28.90 589.70
Of which: Sub -debt 1.68 3.95 97.51
Otherliabilities 8.45 12.26 64.56
Total liabilities 197.36 381.74 1,041.10
INCOME STATEMENT

FY01 FY02 Inc. %

Interest revenue 12.41 20.84 67.9

Interest expense 8.41 15.12 79.8
NII 4.00 5.72 43.0
Provision for credit losses 1.08 1.72 59.3
Non -interest revenue 1.75 5.21 197.7
Non -interest expense 3.10 6.26 101.9
Income before tax 1.57 2.95 87.9
Income tax & others 0.26 0.91 265.4
Net income 1.31 2.04 55.7

NET RECONCILIATIONS

FY2001 FY2002
As per Indian GAAP 1.61 2.58
Profit of ICICI, ICICI Capital & ICICI PFS - (0.08)
for two days included under Indian GAAP
Deferred taxation 0.44 0.21
Provision for credit losses (0.40) 0.10
MTM on trading & AFS portfolio (0.41) (0.05)
Premium & processing fee amortisation (0.10) (0.34)
Business combination in respect of Bank of - (0.17)
Madura merger
Others 0.16 (0.21)
Total adjustments as per US GAAP (0.30) (0.54)
As per US GAAP 1.31 2.04
 CONCLUSION

Having complied with all regulatory requirements, the merged entity, with an established
brand and strong technology focus, is now well placed to harness the vast retail potential
and consolidate its position in corporate banking to emerge as the leading financial
solutions provider in India . ThIS merger will create a strong entity, which will redefine
banking in the highly competitive era of globalization and liberalization .