Master Thesis 2021

A Thesis on

“CREDIT RISK MANAGEMENT AT ICICI BANK”

By
AAKASH MISHRA

URN= 2021-M-10081997

School of Management
Ajeenkya DY Patil University
Year 2022-23

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“Credit Risk Management at ICICI Bank”

SUBMITTED
BY
AAKASH MISHRA
MBA
URN= 2021-M-10081997
NAME OF GUIDE: DR. SWETA SURI

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 (Declaration by Student)

Declaration

I hereby declare that the master thesis titled. “A study on CREDIT RISK MANAGEMENT
AT ICICI BANK” submitted during finals year of the MBA Program (Batch 2021-22) in the
Academic Year 2022-23, embodies original work done by me. Due credits have been given to
the published material that has been referred to the thesis is free of any plagiarised content and
if found guilty of plagiarism, the University is free to initiate appropriate action against me.

Signature of the Student:

Name: AAKASH MISHRA
URN Number: 2021-M-10081997
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Date:

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 (Certificate from Faculty Supervisor)

CERTIFICATE

This is to certify that the master thesis titled.

“A study on Credit Risk Management at ICICI Bank”.

Submitted by the student of

Aakash Deepnarayan Mishra
URN 2021-M-10081997,
during his final year of the MBA Program Batch 2021-22) in the
Academic Year 2023-24, embodies original work done by him.
The master thesis was completed under my supervision.

Signature of Faculty Supervisor Head – School of Management

Name of

Faculty

Supervisor:

Date:
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 ACKNOWLEDGEMENT
Because there are so many of them and the amount of assistance is so great,
it is challenging to identify everyone who has helped me.

The following are idealistic avenues and novel dimensions that will help us
finish our project, I would like to acknowledge.

I'd want to use this moment to express my gratitude to the Ajeenkya D. Y.

Patil College for giving me the chance to work on this project.

I want to express my gratitude to my HOD Sir for giving the facilities

needed to complete this assignment.

I would like to thank Prof. Sweta Suri, our coordinator, for her spiritual
support and leadership.

I also want to express my profound gratitude to Prof. Sweta Suri, who was
my project's advisor and whose attention and direction made the project
successful.

I want to express my gratitude to the college library for lending me

numerous reference materials and publications for my assignment.

Last but not least, I would want to express my gratitude to everyone who
contributed in any way to the success of my project, especially my friends
and peers who helped me along the way.

Thanking all,

Aakash Mishra

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 PREFACE
In any organization, the two important financial statements are the Balance Sheet and Profit &
Loss Account of the business. Balance Sheet is a statement of financial position of an enterprise
at a particular point of time. Profit & Loss account shows the net profit or net loss of a company
for a specified period of time. When these statements of the last few year of any organization
are studied and analyzed, significant conclusions may be arrived regarding the changes in the
financial position, the important policies followed and trends in profit and loss etc. Analysis
and interpretation of financial statement has now become an important technique of credit
appraisal. The investors, financial experts, management executives and the bankers all analyze
these statements. Though the basic technique of appraisal remains the same in all the cases but
the approach and the emphasis in the analysis vary. A banker interprets the financial statement
so as to evaluate the financial soundness and stability, the liquidity position and the profitability
or the earning capacity of borrowing concern. Analysis of financial statements is necessary
because it helps in depicting the financial position on the basis of past and current records.
Analysis of financial statements helps in making the future decisions and strategies. Therefore
it is very necessary for every organization whether it is a financial or manufacturing, to make
financial statement and to analyze it.

Abstract
The study focuses on the various credit risk management techniques and strategies adopted by
ICICI Bank to mitigate credit risks and improve credit quality. The research methodology used
is a mixed-methods approach, combining quantitative analysis of financial data and qualitative
analysis of interviews conducted with ICICI Bank employees.

The thesis begins with a literature review of credit risk management theories and practices,
followed by an overview of ICICI Bank and its credit risk management framework. The study
then examines the credit risk management practices of ICICI Bank, including credit appraisal,
monitoring, and recovery strategies.

The results of the study suggest that ICICI Bank has adopted a comprehensive credit risk
management framework, which has enabled the bank to manage credit risks effectively and
improve credit quality. The bank uses various credit risk assessment techniques, such as credit
scoring, financial ratio analysis, and credit rating agencies, to evaluate the creditworthiness of
borrowers.

The study also found that ICICI Bank has implemented a robust credit monitoring and control
system, which enables it to detect early warning signals of credit risk and take appropriate
remedial actions. The bank has also implemented a proactive recovery strategy to minimize the
impact of credit losses.

Overall, the study concludes that ICICI Bank's credit risk management practices are in line
with industry best practices, and the bank has been successful in mitigating credit risks and
improving credit quality. The findings of this study have important implications for
policymakers, regulators, and practitioners in the banking industry.

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CONTENT

SR NO TOPICS NUMBERS
PREFACE
ACKNOWLEDGMENT
ABSTRACT..
1 INTRODUCTION
1 Indian banking sector
2 Company profile
2 LITERATURE REVIEW
3 RESEARCH OBJECTIVE & METHODOLOGY
1 Research objective
Research design
3 Research method…
4 PRIMARY FINDING AND ANALYSIS
5 . RECOMMENDATIONS
6 CONCLUSION & IMPLICATIONS
7 BIBLIOGRAPHY
8 ANNEXURE - COPY OF THE QUESTIONNAIRE

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 INTRODUCTION
1.1 Indian Banking sector:

The banking system in India is significantly different from that of other Asian nations
because of the country’s unique geographic, social, and economic characteristics. India has
a large population and land size, a diverse culture, and extreme disparities in come, which
are marked among its regions. There are high levels of illiteracy among a large percentage
of its population but, at the same time, the country has a large reservoir of managerial and
technologically advanced talents. Between about 30 and 35 percent of the population
resides in metro and urban cities and the rest is spread in several semi-urban and rural
centers. The country’s economic policy framework combines socialistic and capitalistic
features with a heavy bias towards public sector investment. India has followed the path of
growth-led exports rather than the “export- led growth” of other Asian economies, with
emphasis on self-reliance through import substitution. These features are reflected in the
structure, size, and diversity of the country’s banking and financial sector. The banking
system has had to serve the goals of economic policies enunciated in successive five- year
development plans, particularly concerning equitable income distribution, balanced
regional economic growth, and the reduction and elimination of private sector monopolies
in trade and industry. In order for the banking industry to serve as an instrument of state
policy, it was subjected to various nationalization schemes in different phases (1955, 1969,
and 1980). As a result, banking remained internationally isolated (few Indian banks had
presence abroad in international financial centers) because of preoccupations with domestic
priorities, especially massive branch expansion and attracting more people to the system.
Moreover, the sector has been as- signed the role of providing support to other economic
sectors such as agriculture, small-scale industries, exports, and banking activities in the
developed commercial centers (i.e., metro, urban, and a limited number of semi-urban
centers). The banking system ’ s international isolation was also due to strict branch
licensing controls on foreign banks already operating in the country as well as entry
restrictions facing new foreign banks. A criterion of reciprocity is required for any Indian
bank to open an office abroad. These features have left the Indian banking sector with
weaknesses and strengths. A big challenge facing Indian banks is how, under the current
ownership structure, to attain operational efficiency suit- able for modern financial
intermediation. On the other hand, it has been relatively easy for the public sector banks to
recapitalize, given the increases in nonperforming assets (NPAs), as their Government-
dominated ownership structure has reduced the conflicts of interest that private banks
would face.

History:

The evolution of the modern commercial banking industry in India can be traced to 1786 with
the establishment of Bank of Bengal in Calcutta. Three presidency banks were set up in
Calcutta, Bombay and Madras. In 1860, the limited liability concept was introduced in banking,
resulting in the establishment of joint stock banks like Allahabad Bank Limited, Punjab
National Bank Limited, Bank of Baroda Limited and Bank of India Limited. In 1921, the three
presidency banks were amalgamated to form the Imperial Bank of India, which took on the
role of a commercial bank, a bankers’ bank and a banker to the government. The establishment
of the RBI as the central bank of the country in 1935 ended the quasi-central banking role of
the Imperial Bank of India. In order to serve the economy in general and the rural sector in
particular, the All India Rural Credit Survey Committee recommended the creation of a state-

9
partnered and state sponsored bank taking over the Imperial Bank of India and integrating with
it, the former state owned and stateassociate banks. Accordingly, the State Bank of India
(“SBI”) was constituted in 1955. Subsequently in 1959, the State Bank of India (Subsidiary
Bank) Act was passed, enabling the SBI to take over eight former state-associate banks as its
subsidiaries. In 1969, 14 private banks were nationalized followed by six private banks in 1980.
Since 1991 many financial reforms have been introduced substantially transforming the
banking industry in India.

Reserve Bank of India:

The RBI is the central banking and monetary authority in India. The RBI manages the country’s
money supply and foreign exchange and also serves as a bank for the GoI and for the country’s
commercial banks. In addition to these traditional central banking roles, the RBI undertakes
certain developmental and promotional activities. The RBI issues guidelines, notifications,
circulars on various areas including exposure standards, income recognition, asset
classification, provisioning for non-performing assets, investment valuation and capital
adequacy standards for commercial banks, long-term lending institutions and non-banking
finance companies. The RBI requires these institutions to furnish information relating to their
businesses to the RBI on a regular basis.

Commercial Banks:

Commercial banks in India have traditionally focused on meeting the short-term financial
needs of industry, trade and agriculture. At the end of June 2009, there were 286 scheduled
commercial banks in the country, with a network of 67,097 branches. Scheduled commercial
banks are banks that are listed in the second schedule to the Reserve Bank of India Act, 1934,
and may further be classified as public sector banks, private sector banks and foreign banks.
Industrial Development Bank of India was converted into a banking company by the name of
Industrial Development Bank of India Ltd. with effect from October, 2008 and is a scheduled
commercial bank. Scheduled commercial banks have a presence throughout India, with nearly
70.2% of bank branches located in rural or semi-urban areas of the country. A large number of
these branches belong to the public sector banks.

Public Sector Banks:

Public sector banks make up the largest category of banks in the Indian banking system. There
are 27 public sector banks in India. They include the SBI and its associate banks and 19
nationalized banks. Nationalized banks are governed by the Banking Companies (Acquisition
and Transfer of Undertakings) Act 1970 and 1980. The banks nationalized under the Banking
Companies (Acquisition and Transfer of Undertakings) Act 1970 are referred to as
‘corresponding new banks’. Punjab National Bank is a public sector bank nationalized in 1969
and a corresponding new bank under the Bank Acquisition Act. At the end of June 2004, public
sector banks had 46,715 branches and accounted for 74.7% of the aggregate deposits and 70.1%
of the outstanding gross bank credit of the scheduled commercial banks.

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Regional Rural Banks:

Regional rural banks were established from 1976 to 1987 jointly by the Central Government,
State Governments and sponsoring public sector commercial banks with a view to develop the
rural economy. Regional rural banks provide credit to small farmers, artisans, small
entrepreneurs and agricultural labourers. There were 196 regional rural banks at the end of June
2009 with 14,433 branches, accounting for 3.6% of aggregate deposits and 2.9% of gross bank
credit outstanding of scheduled commercial banks.

Private Sector Banks:

After the first phase of bank nationalization was completed in 1969, the majority of Indian
banks were public sector banks. Some of the existing private sector banks, which showed signs
of an eventual default, were merged with state-owned banks. In July 1993, as part of the
banking reform process and as a measure to induce competition in the banking sector, the RBI
permitted entry by the private sector into the banking system. This resulted in the introduction
of nine private sector banks. These banks are collectively known as the ‘‘new’’ private sector
banks. There are nine “new” private sector banks operating at present.

Foreign Banks:

At the end of June 2009, there were around 33 foreign banks with 200 branches operating in
India, accounting for 4.7% of aggregate deposits and 7.3% of outstanding gross bank credit of
scheduled commercial banks. The Government of India permits foreign banks to operate
through (i) branches; (ii) a wholly owned subsidiary or (iii) a subsidiary with aggregate foreign
investment of up to 74% in a private bank. The primary activity of most foreign banks in India
has been in the corporate segment. However, some of the larger foreign banks have made
consumer financing a significant part of their portfolios. These banks offer products such as
automobile finance, home loans, credit cards and household consumer finance. The GoI in
2008 announced that wholly owned subsidiaries of foreign banks would be permitted to
incorporate wholly-owned subsidiaries in India. Subsidiaries of foreign banks will have to
adhere to all banking regulations, including priority sector lending norms, applicable to
domestic banks. In March 2008, the Ministry of Commerce and Industry, GoI announced that
the foreign direct investment limit in private sector banks has been raised to 74% from the
existing 49% under the automatic route including investment by FIIs. The announcement also
stated that the aggregate of foreign investment in a private bank from all Bsources would be
allowed up to a maximum of 74% of the paid up capital of the bank. The RBI notification
increasing the limit to 74% is however still awaited

Cooperative Banks:

Cooperative banks cater to the financing needs of agriculture, small industry and selfemployed
businessmen in urban and semi-urban areas of India. The state land development banks and the
primary land development banks provide long-term credit for agriculture. In light of the
liquidity and insolvency problems experienced by some cooperative banks in fiscal 2006, the
RBI undertook several interim measures to address the issues, pending formal legislative
changes, including measures related to lending against shares, borrowings in the call market
and term deposits placed with other urban cooperative banks. The RBI is currently responsible
for supervision and regulation of urban co-operative societies, the National Bank for

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Agriculture and Rural Development, state co-operative banks and district central co-operative
banks. The Banking Regulation (Amendment) and Miscellaneous Provisions Bill, 2007, which
was introduced in the Parliament in 2007, proposed the regulation of all co-operative banks by
the RBI. The Bill has not yet been ratified by the Indian Parliament and is not in force.

Term Lending Institutions:

Term lending institutions were established to provide medium-term and long-term financial
assistance to various industries for setting up new projects and for the expansion and
modernization of existing facilities. These institutions provide fund-based and nonfund based
assistance to industry in the form of loans, underwriting, and direct subscription to shares,
debentures and guarantees. The primary long-term lending institutions include Industrial
Development Bank of India (converted into a banking company with effect from October,
2008), IFCI Ltd., Infrastructure Development Finance Company Limited, and Industrial
Investment Bank of India and Industrial Credit Corporation of India Limited (prior to its
amalgamation).

Banking Sector Reforms:

In the wake of the last decade of financial reforms, the banking industry in India has undergone
a significant transformation, which has covered almost all important facets of the industry.
Most large banks in India were nationalized in 1969 and thereafter were subject to a high degree
of control until reform began in 1991. In addition to controlling interest rates and entry into the
banking sector, the regulations also channeled lending into priority sectors. Banks were
required to fund the public sector through the mandatory acquisition of low interest-bearing
government securities or statutory liquidity ratio bonds to fulfill statutory liquidity
requirements. As a result, bank profitability was low, nonperforming assets were comparatively
high, capital adequacy was diminished, and operational flexibility was hindered.

Opportunities and Challenges for Players:

The bar for what it means to be a successful player in the sector has been raised. Four challenges
must be addressed before success can be achieved. First, the market is seeing discontinuous
growth driven by new products and services that include opportunities in credit cards,
consumer finance and wealth management on the retail side, and in feebased income and
investment banking on the wholesale banking side. These require new skills in sales &
marketing, credit and operations. Second, banks will no longer enjoy windfall treasury gains
that the decade-long secular decline in interest rates provided. This will expose the weaker
banks. Third, with increased interest in India, competition from foreign banks will only
intensify. Fourth, given the demographic shifts resulting from changes in age profile and
household income, consumers will increasingly demand enhanced institutional capabilities and
service levels from banks industry utilities and service bureaus. Management success will be
determined on three fronts: fundamentally upgrading organizational capability to stay in tune
with the changing market; adopting value-creating M&A as an avenue for growth; and
continually innovating to develop new business models to access untapped opportunities.
Through these scenarios, we paint a picture of the events and outcomes that will be the
consequence of the actions of policy makers and bank managements. These actions will have
dramatically different outcomes; the costs of inaction or insufficient action will be high.
Specifically, at one extreme, the sector could account for over 7.7 per cent of GDP with over

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Rs.. 7,500 billion n market cap, while at the other it could account for just 3.3 per cent of GDP
with a market cap of Rs. 2,400 billion. Banking sector intermediation, as measured by total
loans as a percentage of GDP, could grow marginally from its current levels of -30 per cent to
-45 per cent or grow significantly to over 100 per cent of GDP. In all of this, the sector could
generate employment to the tune of 1.5 million compared to 0.9 million today. Availability of
capital would be a key factor — the banking sector will require as much as Rs. 600 billion
(US$ 14 billion) in capital to fund growth in advances, non-performing loan (NPL) write offs
and investments in IT and human capital up-gradation to reach the high-performing scenario.
Three scenarios can be defined to characterize these outcomes:

• High performance:

In this scenario, policy makers intervene only to the extent required to ensure system
stability and protection of consumer interests, leaving managements free to drive far-
reaching changes. Changes in regulations and bank capabilities reduce intermediation
costs leading to increased growth, innovation and productivity. Banking becomes an
even greater driver of GDP growth and employment and large sections of the population
gain access to quality banking products. Management is able to overhaul bank
organizational structures, focus on industry consolidation and transform the banks into
industry shapers. In this scenario we witness consolidation within public sector banks
(PSB5) and within private sector banks. Foreign banks begin to be active in M&A,
buying out some old private and newer private banks. Some M&A activity also begins
to take place between private and public sector banks. As a result, foreign and new
private banks grow at rates of 50 per cent, while PSBs improve their growth rate to 15
per cent. The share of the private sector banks (including through mergers with PSB5)
increases to 35 per cent and that of foreign banks increases to 20 per cent of total sector
assets. The shares of banking sector value add in GDP increases to over 7.7 per cent,
from current levels of 2.5 per cent. Funding this dramatic growth will require as much
as Rs. 600 billion in capital over the next few years.

• Evolution:

Policy makers adopt a pro-market stance but are cautious in liberalizing the industry.
As a result of this, some constraints still exist. Processes to create highly efficient
organizations have been initiated but most banks are still not best-inclass operators.
Thus, while the sector emerges as an important driver of the economy and wealth in
2010, it has still not come of age in comparison to developed markets. Significant
changes are still required in policy and regulation and in capability-building measures,
especially by public sector and old private sector banks. In this scenario, M&A activity
is driven primarily by new private banks, which take over some old private banks and
also merge among themselves. As a result, growth of these banks increases to 35 per
cent. Foreign banks also grow faster at 30 per cent due to a relaxation of some
regulations. The share of private sector banks increases to 30 per cent of total sector
assets, from current levels of 18 per cent, while that of foreign banks increases to over
12 per cent of total assets. The share of banking sector value adds to GDP increases to
over 4.7 per cent.

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 • Stagnation:

In this scenario, policy makers intervene to set restrictive conditions and management
is unable to execute the changes needed to enhance returns to shareholders and provide
quality products and services to customers. As a result, growth and productivity levels
are low and the banking sector is unable to support a fast-growing economy. This
scenario sees limited consolidation in the sector and most banks remain sub-scale. New
private sector banks continue on their growth trajectory of 25 per cent. There is a
slowdown in PSB and old private sector bank growth. The share of foreign banks
remains at 7 per cent of total assets. Banking sector value add, meanwhile, is only 3.3
per cent of GDP.

Major Development:

Major developments highlighting the strong performance of Indian banks in the global market:

State Bank of India (SBI) reported a net profit of US$ 1.56 billion for the nine months ended
December 2009, up 14.43 per cent from the same period the previous year. SBI has also been
expanding its foreign branch network, adding 23 new branches abroad and bringing its foreign
branch network number to 160 by March 2010, cementing its position as the bank with the
largest global presence among local peers.

Axis Bank's net profit surged by 32 per cent to US$ 115.4 million on 21.2 per cent rise in total
income to US$ 852.16 million in the second quarter of 2009-10, over the corresponding period
the previous year.

HDFC Bank reported a 32 per cent rise in its net profit at US$ 175.4 million for the quarter
ended December 31, 2009, over the figure of US$ 128.05 million for the same quarter in the
previous year.

ICICI Bank, India's second-largest private sector bank, reported a net profit of US$ 1.31 billion
for the quarter ended December 31, 2021, up 26.4 per cent from the same period the previous
year.

Kotak Mahindra Bank reported a net profit of US$ 195 million for the quarter ended December
31, 2021, up 25.8 per cent from the same period the previous year.

These developments indicate that Indian banks are continuing to perform strongly in the global
market, with solid financial results and expansion of their global footprint. The growth of
Indian banks is a positive indicator of the strength and resilience of the Indian economy.

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COMPANY PROFILE

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1.2 COMPANY PROFILE

ICICI BANK

ICICI Bank is an Indian multinational banking and financial services company headquartered
in Mumbai, India. It is the second-largest private sector bank in India, with a total asset base
of over US$ 200 billion as of 2021.

ICICI Bank offers a range of financial products and services to corporate and retail customers
through its network of branches in India and abroad, as well as through digital channels. Its
product offerings include savings and current accounts, fixed deposits, loans, insurance, and
investment services.

The bank was founded in 1994 as ICICI Limited, which was a wholly-owned subsidiary of
Industrial Credit and Investment Corporation of India (ICICI), a government-owned financial
institution. In 2002, ICICI Limited became a publicly-listed company and its banking
subsidiary, ICICI Bank, was merged with it.

ICICI Bank has a presence in 17 countries, including India. It operates through a network of
over 5,300 branches and 15,000 ATMs in India, and has branches in countries such as the
United States, United Kingdom, Canada, Singapore, and Bahrain.

The bank has won numerous awards and recognition for its products, services, and innovation.
It was ranked as the top bank in India in the Brand Top 75 Most Valuable Indian Brands 2021
report, and was also recognized as the Best Bank in India and Best Investment Bank in India
by Euromoney Awards for Excellence 2021.

ICICI Bank is committed to sustainability and social responsibility, and has undertaken
initiatives in areas such as renewable energy, financial inclusion, education, and healthcare. It
has also established the ICICI Foundation to support social development programs in India.

History of ICICI bank:

ICICI Bank is a leading private sector bank in India. It was founded in 1994 by the Industrial
Credit and Investment Corporation of India (ICICI), which was established in 1955. ICICI
Bank was created to provide banking and financial services to customers in India and
internationally.

Here is a brief history of ICICI Bank:

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In 1994, ICICI Bank was incorporated as a wholly-owned subsidiary of ICICI Limited, a
leading financial institution in India.
In 1998, ICICI Bank became the first Indian company to list on the New York Stock Exchange
(NYSE).

In 2000, ICICI Bank merged with Bank of Madura, expanding its network to over 250
branches.

In 2001, ICICI Bank acquired the personal financial services subsidiary of Tata Finance
Limited, adding over 500,000 customers to its base.

In 2002, ICICI Bank launched its internet banking platform, allowing customers to access their
accounts and conduct transactions online.

In 2003, ICICI Bank acquired the privately-owned Bank of Rajasthan, adding over 300
branches to its network.

In 2006, ICICI Bank acquired Sangli Bank, adding over 200 branches to its network.

In 2009, ICICI Bank launched its mobile banking platform, allowing customers to access their
accounts and conduct transactions using their mobile devices.

In 2010, ICICI Bank became the first Indian bank to launch a Facebook banking application,
allowing customers to access their accounts and conduct transactions through the social media
platform.

In 2015, ICICI Bank launched its contactless payment solution, allowing customers to make
payments using their mobile devices.

In 2020, ICICI Bank was named the "Best Retail Bank in India" by The Asian Banker.

Today, ICICI Bank has over 5,000 branches and 15,000 ATMs in India, as well as a presence
in 17 other countries. It offers a wide range of banking and financial services to customers,
including retail banking, corporate banking, and wealth management.

Controversy:

ICICI Bank, one of the largest private sector banks in India, has been the subject of controversy
on several occasions in recent years. Some of the major controversies surrounding the bank
are:

Videocon loan case: In 2018, allegations surfaced that ICICI Bank had granted loans to the
Videocon group despite objections from the bank's internal committees. It was alleged that the
bank's former CEO, Chanda Kochhar, had played a role in approving the loans in return for
personal benefits. The case was investigated by multiple agencies, including the Central Bureau
of Investigation (CBI), the Securities and Exchange Board of India (SEBI), and the Reserve
Bank of India (RBI). In January 2019, Chanda Kochhar was forced to resign from the bank,

17
and in March 2021, the RBI imposed a monetary penalty of Rs 3 crore on ICICI Bank for
violating certain banking regulations in connection with the case.

Bankruptcy of ICICI Securities: In 2019, ICICI Securities, a subsidiary of ICICI Bank, was
accused of misusing client securities for its own benefit. The allegations led to a significant
drop in the stock price of ICICI Securities and raised concerns about the bank's risk
management practices.

Alleged money laundering: In 2020, ICICI Bank was accused of facilitating money laundering
through its branches in India. The allegations were based on leaked documents from the
Financial Crimes Enforcement Network (FinCEN) of the US Department of Treasury. The
bank denied the allegations and stated that it had a robust anti-money laundering framework in
place.

Conflict of interest: In 2021, ICICI Bank's CEO Sandeep Bakhshi came under scrutiny for his
alleged conflict of interest in a deal involving his brother's company. Bakhshi's brother's firm
had reportedly received a large loan from ICICI Bank, and there were concerns that Bakhshi
may have used his position to influence the loan approval process.

These controversies have raised questions about ICICI Bank's corporate governance practices
and the effectiveness of its internal control mechanisms. However, the bank has maintained
that it has complied with all applicable laws and regulations and has taken steps to address any
lapses or deficiencies that may have occurred.

Corporate profile:

ICICI Bank is one of the largest private sector banks in India, with a network of over 5,500
branches and 15,000 ATMs across the country. The bank offers a wide range of financial
products and services, including personal banking, corporate banking, investment banking, and
insurance.

ICICI Bank was founded in 1994 by the Industrial Credit and Investment Corporation of India
(ICICI), which was established in 1955 as a development finance institution. In the years since
its founding, ICICI Bank has grown rapidly, and today it is one of the leading banks in India
in terms of assets, deposits, and market capitalization.

The bank is headquartered in Mumbai and has a strong presence in urban and semi-urban areas
across India. It has also expanded its operations globally, with branches in the United States,
Canada, the United Kingdom, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar, and Dubai.

ICICI Bank is known for its innovative products and services, including digital banking
solutions such as mobile banking, internet banking, and digital wallets. The bank has also been
at the forefront of initiatives to promote financial inclusion in India, and has launched several
programs to bring banking services to underprivileged communities.

The bank is led by Sandeep Bakhshi, who was appointed as CEO in 2018. ICICI Bank is listed
on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), and has a
market capitalization of over Rs 4 lakh crore as of March 2023.

18
Awards:

ICICI Bank has won several awards and recognitions for its performance and innovation in the
banking industry. Some of the notable awards won by the bank in recent years are:

Best Retail Bank in India: ICICI Bank has won the award for the Best Retail Bank in India at
the Asian Banker Awards for five consecutive years from 2016 to 2020.

Best Digital Bank in India: The bank has won the award for the Best Digital Bank in India at
the Asiamoney Best Bank Awards for three consecutive years from 2018 to 2020.

Best Trade Finance Bank in India: ICICI Bank has been named the Best Trade Finance Bank
in India by Global Finance magazine for six consecutive years from 2016 to 2021.

Best Bank for SMEs: The bank has been named the Best Bank for SMEs in India by Asiamoney
for two consecutive years in 2019 and 2020.

Best Mobile Banking Initiative: ICICI Bank's mobile banking app iMobile has won several
awards for its innovative features and user experience. The app has won the Best Mobile
Banking Initiative award at the Asiamoney Best Bank Awards for two consecutive years in
2018 and 2019.

These awards reflect ICICI Bank's commitment to delivering innovative and customer-centric
financial solutions and services, and its leadership position in the Indian banking industry.

A leader in banking technology:

ICICI Bank is widely recognized as a leader in banking technology in India. The bank has been
at the forefront of digital innovation, and has consistently introduced new and advanced digital
solutions to enhance customer experience and improve operational efficiency.

Some of the notable technology initiatives of ICICI Bank are:

iMobile: ICICI Bank's mobile banking app, iMobile, is one of the most popular banking apps
in India. The app offers a wide range of features, including fund transfers, bill payments, loan
applications, and investment services.

Pockets: ICICI Bank's digital wallet, Pockets, is a popular mobile wallet app that allows users
to make payments, transfer money, and pay bills.

Touch Banking: ICICI Bank's Touch Banking service enables customers to perform banking
transactions using their mobile phones, without the need for internet connectivity.

AI-based chatbots: ICICI Bank has developed AI-based chatbots, such as iPal and Niki, that
enable customers to perform banking transactions using natural language commands.

19
Blockchain-based solutions: ICICI Bank has been exploring the use of blockchain technology
to enhance its services, such as trade finance and supply chain management.

ICICI Bank's focus on technology has enabled it to improve its operational efficiency, reduce
costs, and enhance customer experience. The bank has won several awards and recognitions
for its technology initiatives, including the Best Digital Bank in India award at the Asiamoney
Best Bank Awards for three consecutive years from 2018 to 2020.

A loyal Symantec customer for six years and counting:

ICICI Bank has been a loyal customer of Symantec, a leading provider of cybersecurity
solutions, for over six years. The bank has relied on Symantec's products and services to
safeguard its digital assets and protect against cyber threats.

Some of the cybersecurity solutions that ICICI Bank has implemented from Symantec are:

Endpoint Protection: ICICI Bank uses Symantec Endpoint Protection to protect its endpoints,
including desktops, laptops, and servers, from malware and other cyber threats.

Data Loss Prevention: The bank has also implemented Symantec Data Loss Prevention to
prevent data breaches and protect sensitive information.

SSL/TLS Certificates: ICICI Bank uses Symantec SSL/TLS Certificates to secure its websites
and ensure secure online transactions.

Security Analytics: The bank also relies on Symantec Security Analytics to detect and respond
to cyber threats in real-time.

ICICI Bank's partnership with Symantec has enabled the bank to maintain a strong
cybersecurity posture and protect against evolving cyber threats. The bank has won several
awards and recognitions for its cybersecurity initiatives, including the Best Bank in
Cybersecurity in India award at the IDC Digital Transformation Awards in 2020.

Targeting high availability for the end user:

ICICI Bank has a strong focus on high availability for its end users, which refers to ensuring
that its banking services and systems are always available and accessible to customers, even
during peak usage periods or in the event of unexpected disruptions.

To achieve high availability, ICICI Bank has implemented several measures, including:

Multiple Data Centers: The bank has set up multiple data centers across India and globally,
which operate in an active-active mode to ensure redundancy and quick failover in case of an
outage.

20
Robust Network Infrastructure: ICICI Bank has built a robust network infrastructure with high-
speed connectivity and low-latency links to ensure fast and reliable access to its banking
services.

Disaster Recovery Solutions: The bank has implemented disaster recovery solutions, such as
backup and recovery systems, to ensure that its critical systems and applications can be quickly
restored in case of a disaster or outage.

Cloud Infrastructure: ICICI Bank has also adopted cloud infrastructure solutions to improve
scalability and availability of its banking services.

Continuous Monitoring: The bank continuously monitors its systems and applications for
performance and availability, using advanced monitoring tools and techniques.

ICICI Bank's focus on high availability has helped the bank to maintain a high level of customer
satisfaction and loyalty. The bank has won several awards and recognitions for its high
availability initiatives, including the Best Bank for Digital Payments award at the IAMAI India
Digital Awards in 2020.

21
LITERATURE REVIEW

22
LITERATURE REVIEW
(20)

V.Subbulaxmi and Reshma Abraham(52)

discuss the common causes of crises and their impact on the economic conditions. Banking
crises may lead to rapid change in the environment in which the Bank operates. Sooner the
restructuring programme is initiated, the faster the recovery and the lower the cost of recovery.
The two fundamental objectives behind every resolution programme are:

1) Restoration of the functioning of the payments system and

2)Minimisation of the public funds used in the restructuring process

The authors discuss the various options of resolution available depending on the intensity and
the cause of the crises. As there is no single medicine that would cure the problem an analytical
approach is suggested to deal with the crises situations.

Addresses of the Governors of the Reserve Bank of India at various conventions and Fora
provide valuable insights into the Regulators views on the Reform Process. SICOM Silver
Jubilee Memorial Lecture delivered by Mr.C.Rangarajan in 1998 at Mumbai gave a graphic
account of the (53) maladies of the Indian Banking System and also outlined measures to be
taken for their better working. Most of his observations dealt with the financial health of the
Banks and the underlying need to bring the Indian Banks on par with international standards.

Dr.Y.V.Reddy presented Papers at World Bank International Monetary Fund and Brookings
Institution Conference on Financial Sector Governance, The (54) roles of Public and Private
Sectors, Public Sector Banks and the Governance Challenge: Indian Experience, Monetary and
Financial Sector Reforms in India: A Practitioner’s Perspective (Indian Economy Conference,
Cornell University, USA (2003), ‘Towards Globalisation in the Financial Sector in (55) India’
– Inaugural address at the Twenty Fifth Bank Economists Conference, Mumbai. In these
addresses Dr.Reddy discussed the various initiatives being taken by the Reserve Bank of India
to ensure financial health of the Banks.

The regulatory changes initiated by the Reserve Bank of India, the shift from micro-prudential
regulation to macro regulation have been discussed. The changes initiated have brought about
a sea change in the ownership of the Banks, a marked improvement in the soundness parameters
like the return on assets, staff productivity, technology, asset quality etc.

Mr.G.Ramathilagam and Ms.S.Preethi(56)

attempted to evaluate the cost efficiency of Indian Commercial Banks during the post reform
period. They used data for 10 years from 1992. They found that during the post reform period
Banks have improved their cost efficiency by as much as 10 per cent. They suggested that
Banks have to be more cost conscious. As per them the Banks Auditors and internal audit
machinery do not attach much importance to the cost aspects. There is no proper utilization of
the resources of the Bank resulting in underutilisation of the same

23
RESEARCH OBJECTIVE AND METHODOLOGY

24
RESEARCH OBJECTIVE AND METHODOLOGY

3.1 RESEARCH OBJECTIVES: -

Analysis of Credit Risk Management: -

To know the various Parameters/Risks taken for consideration while loan

To know the process of the Back End Operation.

i) Payment System
ii) C.L.P.U (Central Loan Processing Unit)
iii) Internal Services

3.2 RESEARCH METHODOLOGY:

3.2.1 RESEARCH DESIGN

Type of research - Descriptive research

It describes data and characteristics about the population or phenomenon being studied.
Descriptive research answers the questions who, what, where, when and how. Such
research design are used to fulfil the objectives.

3.2.2 Data collection

Primary Data :

Tool of data collection : Questionnaire

Sample Size : 250

Traders : 16 Companies
Contractors : 6 Companies
SME : 18 Companies.

Age group : 20-30 years of age

Income group : Rs. 10000 – Rs. 50000

Secondary Data is collected from the Annual Report of the Bank and other concern
agencies as well as studies & research available.

• Previous Report
• Magazines
• Journals
• Website

25
• Balance sheet and Profit & Loss Account.

The information for the literature survey has been obtained mainly from: News published
in Indian & International news paper on the subject of Payment Systems.

PRIMARY FINDINGS AND ANALYSIS

Less than 2 years 70%

2 to less than 4 years 4%

4 to less than 6 years 13%

More than 6 years 13%

Count of Q1. From how many years you have been working in
your organization?

More than 6 years 26

Less than 2 years 145

4 to less than 6 years 28

2 to less than 4 years 8

0 20 40 60 80 100 120 140 160

26
 Total

4%
13%
13%

2 to less than 4 years

4 to less than 6 years
Less than 2 years
More than 6 years

70%

70% respondents replied that they working in their organization from less than 2 years
but 4% respondents replied that they are working in their organization from 2 to less
than 4 years.

27
Q2. Are you involved in credit risk management process of your organization?

Yes 36%

No 64%

Count of Q2. Are you involved in credit risk

management process of your organization?
140

120

100

80

60

40

20

0
No Total Yes
Total 133 74

36%
No
Yes
64%

36% respondents replied yes that they are involved in the credit risk management process
of their organization.

28
Q3. In the following, which technique is mostly applied by your bank in case of mitigating
the risk?

Collateralization 19%

Guarantor 12%

Insurance 56%

Securitization 13%

Count of Q3. in the following which technique is

mostly applied by your bank in case of mitigating
the risk?

Securitization

Insurance

Guarantor

Collateralization

0 20 40 60 80 100 120 140

Total

13%
19%

Collateralization
Guarantor
12%
Insurance
Securitization

56%

19% respondents replied that collateralization is mostly applied by their bank in case of
mitigating the risk but 12% respondents replied that guarantor is mostly applied by their
bank in case of mitigating the risk.

29
Q4. In the following, which is the most import collateral instrument in your bank?

Equities 19%

Mutual Funds 29%

Cash on deposit with bank 52%

Count of Q4. which is the most import collateral

instrument in your bank?

Mutual Funds

Equities

Cash on deposit with bank

0 20 40 60 80 100 120

Total

29%

Cash on deposit with bank

Equities
52%
Mutual Funds

19%

30
52% respondents replied that cash on deposit with bank is the most import collateral
instrument in their bank but 29% respondents replied that Mutual Funds is the most
import collateral instrument in their bank.

Q5. In the following, which type of guarantee mostly accepted by your bank?

Count of Q5.which type of guarantee mostly accepted by

your bank?

Guarantees from inter-bank/inter-branch

Guarantees from government

Guarantees from director/trustees of the company

Guarantee from a third party

0 10 20 30 40 50 60 70 80 90

Guarantees from government 40%

Guarantees from director/trustees of the 21%
company
Guarantees from inter-bank/inter-branch 14%
Guarantee from a third party 25%

Total

14% Guarantee from a third

25% party

Guarantees from
director/trustees of the
company
Guarantees from
40% 21% government

Guarantees from inter-

bank/inter-branch

31
21% respondents replied that guarantees from director/trustees of the company mostly
accepted by their bank but 14% respondents replied that guarantees from
interbank/interbranch of the company mostly accepted by their bank.

Q6. In the following, which type of security mostly accepted by your bank?

Jewellery 10%
Debentures 15%
Life Insurance Policy 8%
Cash Deposit 9%
Land 20%
Assets 25%
Share 13%

Count of Q6. which type of security mostly

accepted by your bank?

Life Insurance Policy

Land

Jewellery

Cash Deposit

Assets

0 10 20 30 40 50 60 70 80

32
 Total

8%
15%

Assets
Cash Deposit
13%
Jewellery
37%
Land
Life Insurance Policy
27%

13% respondents replied that land mostly accepted by their bank as a security but 8%
respondents replied that assets mostly accepted by their bank as a security.

Q7. In the following, which credit reminder period used by your bank?

After 1-3 months default payment 51%

After 3-6 months default payment 36%
After 6-9 months default payment 13%

Count of Q7. which credit reminder period used by

your bank?

After 6-9 months default payment

After 3-6 months default payment

After 1-3 months default payment

0 20 40 60 80 100 120

33
 Total

13%

After 1-3 months default

payment
After 3-6 months default
51% payment
36% After 6-9 months default
payment

36% respondents replied that after 3-6 months default payment used by their bank but
13% respondents replied that after 6-9 months default payment used by their bank

Q8. In the following, which action is mostly applied by your bank to recuperate loan?

Public auction 19%

Claim with insurance 27%
Use collateral as security 29%
Sue customer by court 13%
Ask customer pay loan 12%
without interest

Count of Q8. which action is mostly applied by your bank

to recuperate loan?

Use collateral as security

Sue customer by court

Public auction

Claim with insurance

Ask customer pay loan without interest

0 10 20 30 40 50 60

34
 Total

12% Ask customer pay loan

without interest
29% Claim with insurance

Public auction
27%
Sue customer by court
13%
Use collateral as security
19%

27% respondents replied that claim with insurance action is mostly applied by their bank
to recuperate loan but 29% respondents replied that use collateral as security is mostly
applied by their bank to recuperate loan.

35
Q10. Gender

Count of Gender
180
160
140
120
100
80
60
40
20
0
Female Male
Total 43 164

Total

21%

Female
Male

79%

36
Q11. Age

Count of Age
100
90
80
70
60
50
40
30
20
10
0
18-24 25-34 35-44
Total 82 95 30

Total

14%

40% 18-24
25-34
35-44

46%

37
Q12. Name of state where are live

Count of Name of State where are live

160

140

120

100

80

60

40

20

0
Gujrat Maharashtra others
Total 34 138 35

Total

17% 16%

Gujrat
Maharashtra
others

67%

38
Q13. Marital and family

Count of Marital and family

160

140

120

100

80

60

40

20

0
Married single
Total 57 143

Total

28%

Married
single

72%

39
RECOMMENDATION

40
RECOMMENDATION

The need for Credit Risk Rating has arisen due to the following:

1. With dismantling of State control, deregulation, globalization and allowing things to

shape on the basis of market conditions, Indian Industry and Indian Banking face new
risks and challenges. Competition results in the survival of the fittest. It is therefore
necessary to identify these risks, measure them, monitor and control them.

2. It provides a basis for Credit Risk Pricing i.e., fixation of rate of interest on lending to
different borrowers based on their credit risk rating thereby balancing Risk & Reward
for the Bank.

3. The Basel Accord and consequent Reserve Bank of India guidelines requires that the
level of capital required to be maintained by the Bank will be in proportion to the risk
of the loan in Bank's Books for measurement of which proper Credit Risk Rating
system is necessary.

The credit risk rating can be a Risk Management tool for prospecting fresh borrowers in
addition to monitoring the weaker parameters and taking remedial action.

• The Credit Risk Rating method is used by Bank's Credit officers,

• To gather key information about risk areas of a borrower and
• To arrive at a risk score that would reflect the borrower's creditworthiness/degree of
risk

41
CONCLUSION & IMPLICATIONS

42
 CONCLUSION & IMPLICATIONS

Credit Risk is the potential that a bank borrower/counter party fails to meet the obligations on
agreed terms. There is always scope for the borrower to default from his commitments for one
or the other reason resulting in crystallization of credit risk to the bank. These losses could take
the form outright default or alternatively, losses from changes in portfolio value arising from
actual or perceived deterioration in credit quality that is short of default.

Credit risk is inherent to the business of lending funds to the operations linked closely to market
risk variables. The objective of credit risk management is to minimize the risk and maximize
bank's risk adjusted rate of return by assuming and maintaining credit exposure within the
acceptable parameters.

Credit risk consists of primarily two components, viz Quantity of risk, which is nothing but the
outstanding loan balance as on the date of default and the quality of risk, viz, the severity of
loss defined both Probability of Default as reduced by the recoveries that could be made in the
event of default.
Thus, credit risk is a combined outcome of Default Risk and Exposure Risk.

Today, the focus for many banks is to adopt an enterprise credit risk management approach to
achieve an integrated view of risk. Best practice in credit risk management should demonstrate
centralization, standardization, timeliness, active portfolio management and efficient tools for
managing exposures. This is encouraged by the pressure from regulatory requirements such as
Basel II. By constantly enhancing existing tools and methods, banks are able to work toward
achieving best practice.

Today, the focus for many banks is to adopt an enterprise credit risk management approach to
achieve an integrated view of risk. Best practice in credit risk management should demonstrate
centralization, standardization, timeliness, active portfolio management and efficient tools for
managing exposures. This is encouraged by the pressure from regulatory requirements such as
Basel II. By constantly enhancing existing tools and methods, banks are able to work toward
achieving best practice.

43
BIBLIOGRAPHY

44
 BIBLIOGRAPHY

1. Altman E. and Sabato, G. (2005) `Effects of the New Basel Capital Accord on
Bank Capital Requirements for SMEs´, Journal of Financial Services Research,
28 (1-3): 15-42.

2. Altman, E. I., Bharath, S. T. and Saunders, A. (2002) `Credit Ratings and the
BIS Capital Adequacy Reform Agenda´, Journal of Banking & Finance, 26 (5):
909- 921.

3. Basel Committee on Banking Supervision (2000) Range of Practice in Banks´

Internal Ratings Systems. Basel: Bank for International Settlements.

4. Basel Committee on Banking Supervision (2004) Basel II: International

Convergence of Capital Measurement and Capital Standards: a Revised
Framework. Basel: Bank for International Settlements.

5. Cardone, C., Casasola, Mª J. and Samartín, M. (2005) `Do banking relationships

improve credit conditions for Spanish SMEs?´ WP 05-28; Business Economics
Series 06, UCIIIM.

Website:

1. Bank IFSC Code Search for All Banks in India, Find IFSC & MICR Code
(mapsofindia.com)
2. Finance in India (mapsofindia.com)
3. Principles for the Management of Credit Risk (bis.org)
4. Improving Banks' Credit Risk Management (ercim.eu)

45
ANNEXURE

46
ANNEXURE
COPYF OT THE QUESTIONNAIRE

Q1. From how many years you have been working in your organization?

• Less than 2 years

• to less than
• years 4 to less than 6 years
• More than 6 years

Q2. Are you involved in credit risk management process of your organization?

• Yes
• No

Q3. In the following, which technique is mostly applied by your bank in case of
mitigating the risk?

• Collateralization
• Guarantor
• Insurance
• Securitization

Q4. In the following, which is the most import collateral instrument in your bank?

• Cash on deposit with bank

• Lending bank
• Equities
• Mutual Funds

Q5. In the following, which type of guarantee mostly accepted by your bank?

• Guarantees from government

• Guarantees from director/trustees of the company
• Guarantees from inter-bank/inter-branch
• Guarantee from a third party

Q6. In the following, which type of security mostly accepted by your bank?

• Jewellery
• Debentures
• Life Insurance Policy
• Cash Deposit
• Land
• AssetsShares

47
Q7. In the following, which credit reminder period used by your bank?

• After 1-3 months default payment

• After 3-6 months default payment
• After 6-9 months default payment

Q8. In the following, which action is mostly applied by your bank to recuperate loan?

• Public auction
• Claim with insurance Use collateral as security
• Sue customer by court
• Ask customer pay loan without interest

Q9. Gander

• Female
• Male

Q10.Age

• 18-24
• 25-34
• 35-44
• And above

Q11. Name of state where are live

• Gujrat
• Maharashtra
• Odisha
• west Bengal
• others

Q12. Marital and family

• Single
• Married

Q13. Please provide your suggestion to improve the credit risk management in your
bank?

Thanks for your

support

48