F-3/A
As filed with the Securities and Exchange Commission on March 10, 2005
Registration No. 333-121664


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
Amendment No. 1 to
FORM F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ICICI BANK LIMITED
(Exact Name of Registrant as Specified in Its Charter)

VADODARA, GUJARAT, INDIA   Not Applicable   Not Applicable
(State or Other Jurisdiction of   (Translation of Registrant’s name into English)   (I.R.S. Employer
Incorporation or Organization)     Identification Number)

ICICI Bank Towers
Bandra-Kurla Complex
Mumbai 400051, India
Tel: 011-91-22-2653-1414
(Address and Telephone Number of Registrant’s Principal Executive Offices)

Mr. Madhav Kalyan
Joint General Manager, ICICI Bank
New York Representative Office
500 Fifth Avenue, Suite 2830
New York, New York 10110
Tel: (646) 827-8448
 
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 
Copies to:
Margaret E. Tahyar, Esq.
Davis Polk & Wardwell
15, avenue Matignon
75008 Paris
France
Tel. No.: 011-33-1-5659-3670
  Michael W. Sturrock, Esq.
Latham & Watkins LLP
80 Raffles Place
#14–20 UOB Plaza 2
Singapore 048624
Tel. No.: 011-65-6536-1161

      Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.
      If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o
      If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o
      If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
      
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
      If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o


CALCULATION OF REGISTRATION FEE
Title Of Securities To Be Registered(1) Number of Equity Shares(2) Proposed Maximum
Aggregate Price Per Unit(3)
Proposed Maximum
Aggregate Offering Price
Amount Of
Registration Fee(4)
      Equity Shares, par value Rs. 10 per share 22,103,832 $22.02 $243,307,933 $28,637

(1) American Depositary Shares evidenced by American Depositary Receipts issuable on deposit of the equity shares registered hereby have been registered under a separate statement on Form F-6, Registration No. 333-11504 and another separate statement on Form F-6, Registration No. 333-123236. Each American Depositary Share represents two equity shares.
(2) The number of Equity Shares being registered in this amendment is in addition to the 22,071,886 Equity Shares registered at the time of the initial filing of this Registration Statement, for a total of 44,143,772 Equity Shares registered in connection with the offering described within.
(3) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act on the basis of the average of the high and low prices of the equity shares represented by the American Depositary Shares on the New York Stock Exchange on March 7, 2005.
(4) A fee of $25,459 was previously paid for 22,071,886 Equity Shares registered at the time of the initial filing of this Registration Statement.

     The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine.






The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. Prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS DATED MARCH 10, 2005 SUBJECT TO COMPLETION

ICICI BANK LIMITED

                        American Depositary Shares

Representing                    Equity Shares

                         American Depositary Shares, or ADSs, representing                    of our equity shares are being sold by the selling shareholders. Included among the selling shareholders may be certain officers, directors and shareholders who beneficially own 5% or more of our equity shares. Each ADS offered represents two equity shares of ICICI Bank Limited. We will not receive any of the proceeds from this offering.

     Our outstanding ADSs are traded on the New York Stock Exchange under the symbol “IBN.” The last reported sales price of our ADSs on the New York Stock Exchange on March 8, 2005 was US$20.88 per ADS. Our equity shares are traded in India on The Stock Exchange, Mumbai and the National Stock Exchange of India Limited. The closing price for our equity shares on the National Stock Exchange of India Limited on March 8, 2005 was US$9.15 assuming an exchange rate of Rs. 43.58 per dollar.


Investing in our ADSs involve certain risks, see “Risk Factors” beginning on page 10.


     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


Per ADS   Total  


 
Initial Price to Public US$   US$  
Underwriting Discounts and Commissions US$   US$  
Proceeds to Selling Shareholders, Before Expenses US$   US$  
 

     The selling shareholders have granted the underwriters an option exercisable within seven days from the date of this prospectus to purchase up to an aggregate of an additional                    ADSs, representing up to an additional                    equity shares, from them at the initial price to the public, less the underwriting discounts and commissions.

     The underwriters are offering the ADSs subject to various conditions. The underwriters expect to deliver the ADSs in book-entry form only through the facilities of The Depository Trust Company against payment in New York, New York on March           , 2005.


Joint Global Coordinators and Joint Bookrunners
(listed alphabetically)

Merrill Lynch International Morgan Stanley UBS Investment Bank            
 

Prospectus dated             , 2005







TABLE OF CONTENTS

  Page
   
About This Prospectus i
Summary 1
Risk Factors 10
Recent Developments 24
Forward-Looking Statements 24
Enforceability of Certain Civil Liabilities 25
Use of Proceeds 27
Dividends 27
Market Price Information 28
Capitalization 30
Exchange Rates 31
Selected Consolidated Financial and Operating Data 32
Operating and Financial Review and Prospects 37
Selected Statistical Data 63
Business 79
Supervision and Regulation 86
Principal and Selling Shareholders 105
The Indian Invitation to Participate 107
Description of Equity Shares 108
Description of American Depositary Shares 108
Government of India Approvals 109
Taxation 110
Underwriting 115
Legal Matters 120
Experts 120
Where You Can Find More Information About Us 120
Incorporation of Documents by Reference 120
Index to US GAAP Financial Statements F-1


ABOUT THIS PROSPECTUS

     You should read this prospectus together with the additional information described under the heading “Where You Can Find More Information About Us.”

     Unless otherwise stated in this prospectus or unless the context otherwise requires, references in this prospectus to “we”, “our”, “us”, “the Company” and “ICICI Bank” are to ICICI Bank Limited and its consolidated subsidiaries and other consolidated entities. References in this prospectus to “ICICI” are to ICICI Limited prior to its amalgamation with ICICI Bank Limited.

     In this prospectus, references to “US” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to “$”  or “US$” or “dollars” or “US dollars” are to the legal currency of the United States and references to “Rs.” or “rupees” or “Indian rupees” are to the legal currency of India. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year.

     Except as otherwise stated in this prospectus, all translations from Indian rupees to US dollars are based on the noon buying rate in the City of New York on December 31, 2004, for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York which was Rs. 43.27 per $1.00. No representation is made that the Indian rupee amounts have been, could have been or could be converted into US dollars at such a rate or any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

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SUMMARY

     You should read the following summary together with the risk factors and the more detailed information about us and our financial results included elsewhere in this prospectus or incorporated by reference. See “Incorporation of Documents by Reference.”

Overview

     We are a leading Indian private sector commercial bank offering a variety of products and services. We were incorporated in India in 1994. In 2002, ICICI, a long-term financial institution and two of its subsidiaries, ICICI Personal Financial Services and ICICI Capital Services, were amalgamated with us. ICICI Personal Financial Services was engaged in the distribution and servicing of various retail credit products and other services offered by ICICI and us. ICICI Capital Services was a distributor of financial and investment products. Our products and services now include those previously offered by ICICI. As of March 31, 2004 we were the largest private sector bank in India and the second largest bank in India, in terms of assets.

     Our commercial banking operations span the corporate and the retail sector. At February 28, 2005, our principal network consisted of 478 branches, 52 extension counters and 1,880 ATMs in 348 centers across several Indian states. We offer a suite of products and services for both our corporate and retail customers. We offer a range of retail credit and deposit products and services to retail customers. The implementation of our retail strategy and the growth in our commercial banking operations for retail customers has had a significant impact on our business and operations in recent years. At December 31, 2004, consumer loans and credit card receivables represented 47.7% of our gross loans outstanding compared to 39.2% at year-end fiscal 2004 and 27.5% at year-end fiscal 2003. We have over 10 million retail customer accounts. Our corporate customers include India’s leading companies as well as growth-oriented small and middle market businesses, and the products and services offered to them include loan and deposit products and fee and commission-based products and services. Through our treasury operations, we manage our balance sheet and strive to optimize profits from our trading portfolio by taking advantage of market opportunities. We believe that the international markets present a major growth opportunity and have, therefore, expanded to countries other than India to serve our customers’ cross border needs and offer our commercial banking products to international customers.

     We offer our customers a choice of delivery channels, and we use technology to differentiate our products and services from those of our competitors. We remain focused on changes in customer needs and technological advances to remain at the forefront of electronic banking in India, and seek to deliver high quality and effective services.

Strategy

     Our objective is to enhance our position as a provider of banking and other financial services in India and to leverage our competencies in financial services and technology to develop an international business franchise. The key elements of our business strategy are to:

     Focus on Quality Growth Opportunities: From fiscal 2003, we have achieved significant growth in our commercial banking operations for retail customers. Our consumer loans and credit card receivables grew by approximately 65.7% during fiscal 2004 and 42.2% during the nine months ended December 31, 2004. We aim to focus on quality growth opportunities through several specific objectives, which include building on our leadership position in retail credit, strengthening individual customer relationships, focusing on leveraging our corporate relationships and increased capital base to increase our market share in non-fund-based working capital products and fee-based services. We aim to provide comprehensive and integrated services, and to increase the cross-selling of our products and services and maximize the value of our corporate relationships through the effective use of technology, speedy response times, quality service and the provision of products and services designed to meet specific customer needs. In April 2004, we completed a share issuance of Rs. 32.5 billion (US$ 751 million) to support growth in various areas of our business operations.

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     Strengthen Our Insurance Business: We believe that the insurance sector has significant growth potential. We believe that our subsidiaries, ICICI Prudential Life Insurance Company Limited and ICICI Lombard General Insurance Company Limited have built a platform for continued growth, high market share and profitability in the medium term based on extensive distribution efforts, brand recall and underwriting capabilities. According to statistics published by the Insurance Regulatory & Development Authority, ICICI Prudential Life Insurance is the largest private sector life insurance company in India, with a market share of approximately 33% in the private sector based on new business premiums (excluding group insurance) from April through December 2004. According to these statistics, ICICI Lombard General Insurance is the largest private sector general insurance company in India, with a market share of approximately 25% in the private sector based on gross premium from April through December 2004. We seek to leverage the synergies we have with our insurance subsidiaries.

     Build an International Presence: We believe that the international markets present a major growth opportunity. We have therefore expanded to countries other than India to cater to our customers’ cross border needs and offer our commercial banking products in select international markets, and aim to develop an international presence.

     Emphasize Conservative Risk Management Practices and Enhance Asset Quality: We believe that conservative credit risk management policies and procedures are critical to maintain competitive advantages in our business, and we continue to build on our credit risk management tools, and aim to mitigate credit risk by adopting various measures.

     Use Technology for Competitive Advantage: We seek to be at the forefront of technology usage in the financial services sector. Technology is a strategic tool for our business operations to gain competitive advantage and to improve overall productivity and efficiency of the organisation.

     Attract and Retain Talented Professionals: We have been successful in building a team of talented professionals with relevant experience. We believe a key to our success will be our ability to continue to maintain and grow a pool of strong and experienced professionals. We intend to continuously develop our management and organizational structure to allow us to respond effectively to changes in the business environment and enhance our overall performance.



     Our principal executive offices are located at ICICI Bank Towers, Bandra-Kurla Complex, Mumbai 400051, India; our telephone number is (91) 22-2653-1414 and our web site address is www.icicibank.com. Our registered agent in the United States is Mr. Madhav Kalyan, Joint General Manager, ICICI Bank, New York Representative Office, 500 Fifth Avenue, Suite 2830, New York, New York 10110. The information on our website is not a part of this prospectus.

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The Offering

ADSs offered by the selling shareholders           ADSs representing         equity shares, constituting approximately        % of our issued and outstanding equity shares.
     
Over-allotment option granted by the selling
 
shareholders   The selling shareholders have granted the underwriters an option exercisable within seven days from the date of this prospectus to purchase up to an aggregate of an additional         ADSs, representing an additional         equity shares, from them at the initial price to the public, less the underwriting discounts and commission.
     
Selling shareholders   See “Principal and Selling Shareholders” for more information on the selling shareholders in this offering. Included among the selling shareholders may be certain officers, directors and shareholders who beneficially own 5% or more of our equity shares.
     
The ADSs   Each offered ADS represents two equity shares par value Rs. 10 per share. The offered ADSs are evidenced by American Depositary Receipts, or ADRs. See “Description of American Depositary Shares” and “Description of Equity Shares.”
     
ADSs to be outstanding after this offering           (assumes no exercise of the underwriters’ over-allotment option to purchase additional ADSs).
     
Equity shares to be outstanding after this  
offering   736,325,176 (based on number of equity shares outstanding at March 4, 2005).
     
Offering price   The offered ADSs are being offered at a price of US$ per ADS.
     
Depositary   Deutsche Bank Trust Company Americas.
     
Use of proceeds   We will not receive any of the proceeds from the sale of these ADSs.
     
Listing   We are listing the offered ADSs on the New York Stock Exchange. Our outstanding equity shares are principally traded in India on The Stock Exchange, Mumbai and the National Stock Exchange of India Limited.
     
New York Stock Exchange symbol for ADSs   IBN
     
Dividends   The declaration, amount and payment of dividends are subject to the recommendation of our board of directors and the approval of our shareholders. Under Indian regulations currently in force, the declaration of dividends by banks is subject to certain additional conditions. If we comply with such conditions, we are allowed to declare a dividend but only up to a certain percentage of our profits. For any dividends beyond

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  such percentage, we are required to obtain permission from the Reserve Bank of India. Holders of equity shares and ADSs will be entitled to dividends paid, if any. In fiscal year 2005, we paid a dividend of Rs. 7.50 per equity share. See also “Dividends.”
     
Voting rights   The ADSs will have no voting rights. Under the deposit agreement, the depositary will vote the equity shares deposited with it as directed by our board of directors. See “Description of American Depositary Shares” in this prospectus and “Recent Developments – Restriction on Foreign Ownership of Indian Securities.”
     
Taxation   Dividends you receive on the ADSs or equity shares, other than certain pro rata distributions of ADSs or equity shares or rights to acquire ADSs or equity shares, will generally constitute foreign-source dividend income for US federal income tax purposes. You will generally recognize US-source capital gain or loss for US federal income tax purposes on the sale or other disposition of ADSs or equity shares. Under certain circumstances, you may be subject to Indian tax upon the disposition of equity shares. For a more detailed description of the material tax consequences to investors in ADSs and equity shares, see “Taxation.”

The Indian Invitation to Participate

     We prepared and distributed in India an invitation to participate dated February 26, 2005 which invited holders of our equity shares to offer their equity shares for sale in this offering, pursuant to Indian regulations in this regard. Our invitation to participate was mailed only to holders of our equity shares to their addresses of record in India. Holders of ADSs are not eligible to participate in the transactions contemplated by the invitation to participate. Under Indian law, an issuer in India such as us can sponsor the issue of ADSs through an overseas depositary against underlying equity shares accepted from holders of its equity shares in India. Sponsorship does not mean we are purchasing or causing the purchase of the equity shares directly or indirectly or recommending that holders participate in the offering. We are not purchasing any equity shares in this transaction. Equity shares will solely be purchased by the underwriters from the selling shareholders for sale in this offering. We have obtained the approval of the Foreign Investment Promotion Board as required by Indian regulations.

     Under the terms of the invitation to participate, the related letter of transmittal, letter of renunciation, escrow agreement and other documents, the shares to be sold by the selling shareholders are being held in escrow by The Western India Trustee & Executor Company Limited, as escrow agent, until such time as they are required to be deposited with us, as custodian on behalf of Deutsche Bank Trust Company Americas, the depositary, against the issuance of ADSs representing such shares and to be delivered to the underwriters under the terms of the underwriting agreement entered into by us, the underwriters and the selling shareholders. The successful completion of these transactions by us, the selling shareholders and the escrow agent is a condition precedent to the underwriters' obligation to purchase any ADSs in this offering.

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Summary Financial and Operating Data

     The following tables set forth our summary financial and operating data on a consolidated basis. The summary data for the annual periods contained herein have been derived from our audited consolidated financial statements as of and for each of the five years ended March 31, 2004. The summary data for the nine months ended and at December 31, 2004 and December 31, 2003 have been derived from our unaudited consolidated financial statements, prepared in accordance with generally accepted accounting principles applicable in the United States, or US GAAP, and included in this prospectus. Our consolidated financial statements for fiscal 2004 and fiscal 2003 including our consolidated statement of operations, consolidated statement of cash flows and consolidated statement of stockholders’ equity and other comprehensive income for the year ended March 31, 2002, included in our annual report on Form 20-F for the fiscal year ended March 31, 2004 were audited by KPMG LLP, UK, an independent registered public accounting firm and are incorporated by reference into this prospectus together with the reports of KPMG LLP, UK.

     You should read the following data with the more detailed information contained in ''Operating and Financial Review and Prospects” included elsewhere in this prospectus and our consolidated financial statements and the related notes included elsewhere and incorporated by reference in this prospectus. Historical results do not necessarily predict the results in the future.

  Year ended March 31, Nine months ended
December 31,
 

  2000 2001 2002   2003 2004 2003 2004 2004(1)
 















    (Unaudited)
  (in millions, except per common share data)
Selected income statement data:  
Interest income Rs. 79,296 Rs. 79,759 Rs. 78,600   Rs. 97,714 Rs. 90,688 Rs. 67,619 Rs. 66,576 US$ 1,539
Interest expense   (67,492 ) (67,893 ) (69,520 )   (83,208 ) (72,375 ) (54,720 ) (49,742 ) (1,150 )
 















Net interest income 11,804 11,866 9,080   14,506 18,313 12,899 16,834 389
Dividends 1,502 345 267   389 431 271 237 5
 















Net interest income, including  
   dividends 13,306 12,211 9,347   14,895 18,744 13,170 17,071 394
Provisions for loan losses (6,363 ) (9,892 ) (9,743 )   (19,649 ) (20,055 ) (15,289 ) (8,504 ) (197 )
 















Net interest income/(loss),  
including dividends, after  
provisions for loan losses 6,943 2,319 (396 )   (4,754 ) (1,311 ) (2,119 ) 8,567 197
Non-interest income 9,815 9,243 8,148   13,253 36,678 25,637 23,493 543
 















Net revenue 16,758 11,562 7,752   8,499 35,367 23,518 32,060 740
Non-interest expense (5,302 ) (5,479 ) (7,596 )   (18,609 ) (27,101 ) (20,138 ) (23,895 ) (552 )
Equity in earnings/(loss) of  
   affiliates 20 735 294   (958 ) (1,437 ) (336 ) (1,254 ) (29 )
Minority interest (361 ) 1 83   24 28 10 (2 )
 















Income/(loss) before income taxes    
and cumulative effect of  
   accounting changes 11,115 6,819 533   (11,044 ) 6,857 3,054 6,909 159
Income tax (expense)/benefit (2,033 ) (189 ) (251 )   3,061 (1,638 ) (730 ) (1,658 ) (38 )
 















Income /(loss) before cumulative    
effect of accounting changes,  
   net of tax 9,082 6,630 282   (7,983 ) 5,219 2,324 5,251 121
Cumulative effect of accounting  
changes, net of tax(2) 249 1,265  
 















Net income/ (loss) Rs. 9,331 Rs. 6,630 Rs. 1,547 Rs. (7,983) Rs. 5,219 Rs. 2,324 Rs. 5,251 US$ 121
Per common share(3)  
Net income/(loss) from continuing    
   operations - Basic(4) Rs. 28.90 Rs. 16.88 Rs. 3.94 Rs. (14.18) Rs. 8.50 Rs. 3.79 Rs. 7.24 US$ 0.17
Net income/(loss) from continuing    
operations - Diluted(5) 27.54 16.81 3.94   (14.18 ) Rs. 8.43 Rs. 3.76 7.19 0.17
Dividends(6) 11.00 11.00 22.00   - 7.50 7.50 7.50 0.17
Book value 180.58 193.35 181.70   150.42 153.35 151.97 166.76 3.85
Common shares outstanding at  
end of period (in millions of  
   common shares) 393 393 393   613 616 615 736

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  Year ended March 31, Nine months ended
December 31,
 

  2000 2001 2002   2003 2004 2003 2004 2004(1)
 















    (Unaudited)
  (in millions, except per common share data)
Selected income statement data:                              
Weighted average common shares                              
   outstanding - Basic (in millions                              
   of common shares)   323     393     393     563     614     614     725      
Weighted average common shares                              
   outstanding - Diluted (in                              
   millions of common shares)   344     393     393     563     619     619     731      
   

(1) Rupee amounts for the nine months ended December 31, 2004 have been translated into US dollars using the noon buying rate of Rs. 43.27 = US$ 1.00 in effect on December 31, 2004.
   
(2) In June 2001, the FASB issued SFAS No. 141, which requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed shall be recognized as goodwill. SFAS No. 141 specifies that intangible assets acquired in a purchase method business combination must be recognized and reported apart from goodwill, noting that any purchase price allocated to an assembled workforce need not be accounted separately. The excess of the fair value of the net assets over the cost of acquired entity is allocated pro rata to specified non-financial assets and remaining excess, if any, is recognized as an extraordinary gain. As of April 1, 2001, ICICI had an unamortized deferred credit of Rs. 1.3 billion (US$ 29 million) relating to the excess of the fair value of assets acquired over the cost of acquisition of ICICI. As required by SFAS No. 141, in conjunction with the early adoption of SFAS No. 142, the unamortized deferred credit as of April 1, 2001, was written-off and recognized as the effect of a change in the accounting principle.
   
(3) For fiscal years 2000, 2001 and 2002, based on the exchange ratio of 1:2 in which the shareholders of ICICI were issued shares of ICICI Bank, number of shares has been adjusted by dividing by two. Hence, these numbers are different from the numbers reported in the annual report on Form 20-F for fiscal 2002.
   
(4)  Represents net income/(loss) before dilutive impact.
   
(5) Represents net income/(loss) adjusted for full dilution. All convertible instruments are assumed to be converted to common shares at the beginning of the year, at prices that are most advantageous to the holders of these instruments. For the purpose of calculating diluted earnings per share, the net income was adjusted for interest (after tax) on convertible instruments only for fiscal 2000, as the convertible bonds were almost entirely converted/redeemed in fiscal 2001. Shares assumed to be issued have been weighted for the period the convertible instruments are outstanding. Options to purchase 2,546,675, 7,015,800, 12,610,275 and 1,098,225 equity shares granted to employees at a weighted average exercise price of Rs. 226.0, Rs. 81.3, Rs. 154.7 and Rs. 266.6 were outstanding in fiscal 2001, 2002, 2003 and 2004, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the equity shares during the period. In fiscal 2003, we reported a net loss and accordingly all outstanding options at year-end fiscal 2003 are anti-dilutive. Options to purchase 1,189,450 and 7,271,375 equity shares granted to employees at a weighted average exercise price of Rs. 266.58 and Rs. 300.1 were outstanding in the nine months ended December 31, 2003 and 2004, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the equity shares during the period.
   
(6) We declared a dividend of Rs. 7.50 per equity share for fiscal 2003, which was paid in August 2003, i.e. in the nine months ended December 31, 2003. We declared a dividend of Rs. 7.50 per equity share for fiscal 2004, which was paid out in September 2004, i.e. in the nine months ended December 31, 2004. The dividend per equity share shown above is based on the total amount of dividends paid out on the equity shares during the year, exclusive of dividend tax. This was different from the dividend declared for the year. In US dollars, dividend was US$ 0.17 per equity share in fiscal 2004.
   
(7) Certain reclassifications have been made in the financial statements of prior years to conform to classifications used in the current year. These changes have no impact on previously reported results of operations or stockholders’ equity.
   

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     The following table sets forth, for the periods indicated, selected income statement data expressed as a percentage of average total assets for the respective period (percentages for the nine months ended December 31, 2003 and December 31, 2004 are annualized).

Year ended March 31,     Nine months ended
December 31,
 

   
 
2000   2001   2002   2003   2004   2003   2004  














              (Unaudited)
Selected income statement data:              
Interest income   11.23 %   11.29 %   10.53 %   8.63 %   7.14 %   7.28 %   6.08 %
Interest expense   (9.56 )   (9.61 )   (9.31 )   (7.35 )   (5.70 )   (5.89 )   (4.54 )














Net interest income   1.67   1.68   1.22   1.28   1.44   1.39   1.54
Dividends   0.21   0.05   0.04   0.03   0.03   0.03   0.02














Net interest income, including dividends   1.88   1.73   1.25   1.32   1.48   1.42   1.56
Provisions for loan losses   (0.90 )   (1.40 )   (1.31 )   (1.73 )   (1.58 )   (1.65 )   (0.78 )














Net interest income/(loss), including              
dividends, after provisions for loan              
   losses   0.98   0.33   (0.05 )   (0.42 )   (0.10 )   (0.23 )   0.78
Non-interest income   1.39   1.31   1.09   1.17   2.89   2.76   2.14














Net revenue   2.37   1.64   1.04   0.75   2.79   2.53   2.92
Non-interest expense   (0.75 )   (0.78 )   (1.02 )   (1.64 )   (2.13 )   (2.17 )   (2.18 )
Equity in earnings/(loss) of affiliates   0.00   0.10   0.04   (0.08 )   (0.11 )   (0.04 )   (0.11 )
Minority interest   (0.05 )   0.00   0.01   0.00   0.00   0.00   0.00














Income/(loss) before income taxes and              
cumulative effect of accounting              
   changes   1.57   0.97   0.07   (0.98 )   0.54   0.32   0.63
Income tax (expense)/benefit   (0.29 )   (0.03 )   (0.03 )   0.27   (0.13 )   (0.08 )   (0.15 )














Income/(loss) before cumulative effect of              
   accounting changes, net of tax   1.28   0.94   0.04   (0.70 )   0.41   0.24   0.48
Cumulative effect of accounting changes,              
   net of tax   0.04     0.17        














Net income/(loss)   1.32 %   0.94 %   0.21 %   (0.70 )%   0.41 %   0.24 %   0.48 %















  At March 31, Nine months ended December 31,
 

  2000 2001 2002   2003 2004 2003 2004 2004(1)
 















    (Unaudited)
  (in millions, except percentages)
Selected balance sheet data:                  
Total assets Rs. 774,279   Rs. 739,892   Rs. 743,362   Rs. 1,180,263   Rs. 1,409,131   Rs. 1,287,802   Rs. 1,634,697   US$ 37,780  
Securities   18,871     18,861     60,046     280,621     310,368     317,512     358,973     8,296  
Loans, net(2)   561,448     602,023     523,601     630,421     728,520     660,159     856,597     19,797  
Troubled debt restructuring                
restructured loans), net   10,795     32,309     77,366     122,659     121,417     153,275     102,940     2,379  
Other impaired loans, net   24,240     20,081     33,187     55,319     28,764     36,847     20,430     472  
 
 
 
Total liabilities   699,073     663,829     671,754     1,087,926     1,313,556     1,193,550     1,510,872     34,919  
 
 
 
Long-term debt   436,320     492,882     511,458     400,812     373,449     373,854     353,600     8,172  
Deposits   96,682     6,072     7,380     491,290     684,955     613,047     828,898     19,156  
Redeemable preferred                
   stock(3)   10,207     698     772     853     944     921     1,019     24  
Stockholders' equity   70,908     75,927     71,348     92,213     94,525     93,494     122,723     2,836  
Common stock   3,916     3,924     3,922     6,127     6,164     6,153     7,359     170  
Period average(4):                
Total assets   706,066     706,343     746,330     1,132,638     1,269,638     1,233,134     1,454,166     33,607  
Interest-earning assets   612,452     615,164     641,141     924,573     1,017,009     988,968     1,143,372     26,424  
Loans, net(2)   513,421     570,989     591,398     606,496     662,752     644,223     767,248     17,732  
Total liabilities(5)   650,794     631,324     670,750     1,038,377     1,173,961     1,138,784     1,333,794     30,825  
Interest-bearing liabilities   583,609     576,474     613,401     905,226     977,941     955,463     1,074,317     24,828  
Long-term debt   436,718     462,916     504,103     455,347     382,674     384,922     373,637     8,635  
Stockholders' equity Rs. 55,272   Rs. 75,019   Rs. 75,580   Rs. 94,261   Rs. 95,678   Rs. 94,350   Rs. 120,372   US$ 2,782  
Profitability(6):                
Net income/(loss) as a                

7







  At March 31, Nine months ended December 31,
 

  2000 2001 2002   2003 2004 2003 2004 2004(1)
 















    (Unaudited)
  (in millions, except percentages)
   percentage of:                
     Average total assets   1.32 %   0.94 %   0.21 %   (0.70 )%   0.41 %   0.25 %   0.48 %    
     Average stockholders’                
         equity   16.88   8.84   2.05   (8.47 )   5.45   3.27   5.79    
     Average stockholders’                
               equity (including                
               redeemable preferred                
               stock(7)   15.95   8.89   2.12   (8.31 )   5.50   3.33   5.83    
Dividend payout ratio(8)   28.3   52.90   635.20   -   88.10   197.87   104.89    
Spread(9)   1.38   1.19   0.93   1.38   1.52   1.47   1.58    
Net interest margin(10)   1.93   1.93   1.42   1.57   1.80   1.73   1.95    
Cost-to-income ratio(11)   22.93   25.54   43.42   66.11   48.90   51.89   58.91    
Cost-to-average assets                
   ratio(12)   0.75   0.78   1.02   1.64   2.13   2.17   2.18    
Capital:                  
Average shareholders’ equity                
   as a percentage of average                
   total assets   7.83   10.62   10.13   8.32   7.54   7.65   8.28    
Average stockholders’ equity                
   (including redeemable                
   preferred stock) as a                
   percentage of average total                
   assets(13)   9.30   10.95   10.23   8.39   7.61   7.72   8.35    


    At or for the year ended March 31,   At or for the
nine months
ended
December 31,
    2000   2001   2002   2003   2004   2004(14)
   

 

 

 

 

 

              (Unaudited)
  (in percentages)
Asset quality:            
Net restructured loans as a percentage of net loans   1.92 %   5.37 %   14.78 %   19.45 %   16.67 %   12.02 %
Net other impaired loans as a percentage of net            
   loans   4.32   3.34   6.34   8.77   3.95   2.39
Allowance for loan losses on restructured loans as a            
   percentage of gross restructured loans   41.79   26.03   18.64   16.78   25.23   32.42
Allowance for loan losses on other impaired loans            
   as a percentage of gross impaired loans   52.07   51.89   34.61   33.48   42.74   47.52
Allowance for loan losses as a percentage of gross            
   loans   5.72   5.20   6.54   7.92   8.40   7.92


(1) Rupee amounts at December 31, 2004 have been translated into US dollars using the noon buying rate of Rs. 43.27 = US$ 1.00 in effect at December 31, 2004.
   
(2) Net of allowance for loan losses, security deposits and unearned income in respect of restructured and other impaired loans and allowances for loans not specifically identified as restructured or other impaired loan.
   
(3) ICICI had issued preferred stock redeemable at face value after 20 years. Banks in India are not currently allowed to issue preferred stock. However, we are currently exempt from this restriction.
   
(4) For the nine months ended December 31, 2003 the average balances are the average of quarterly balances outstanding at the end of March of the previous fiscal year, June, September and December of that fiscal year. For the nine months ended December 31, 2004, the average balances (except for deposits and government of India securities) are the average of quarterly balances outstanding at the end of March of the previous fiscal year, June, September, and December of that year. The average balances of deposits and government of India securities are the average of the daily balances outstanding during the period. For fiscal years 2000, 2002, 2003 and 2004, the average balances are the average of quarterly balances outstanding at the end of March of the previous fiscal year, June, September, December and March of that fiscal year. For

8




  fiscal 2001, due to deconsolidation of ICICI Bank, the average balances are calculated as the average of quarterly balances outstanding at the end of June, September, December and March of that fiscal year.
   
(5)  Represents the average of the quarterly balance of total liabilities and minority interest.
   
(6) Profitability data for the nine months ended December 31, 2003 and December 31, 2004 is annualized.
   
(7)  Represents the ratio of net income plus dividend on redeemable preferred stock to the sum of average stockholders' equity and average redeemable preferred stock. Under Indian tax laws, dividend on preferred stock is not tax deductible.
   
(8)  Represents the ratio of total dividends paid on common stock, exclusive of dividend distribution tax, as a percentage of net income.
   
(9)  Represents the difference between yield on average interest-earning assets and cost of average interest-bearing liabilities. Yield on average interest-earning assets is the ratio of interest income to average interest-earning assets. Cost of average interest-bearing liabilities is the ratio of interest expense to average interest-bearing liabilities.
   
(10)  Represents the ratio of net interest income to average interest-earning assets. The difference in net interest margin and spread arises due to the difference in the amount of average interest-earning assets and average interest-bearing liabilities. If average interest-earning assets exceed average interest-bearing liabilities, net interest margin is greater than spread, and if average interest-bearing liabilities exceed average interest-earning assets, net interest margin is less than spread.
   
(11)  Represents the ratio of non-interest expense to the sum of net interest income, dividend and non-interest income.
   
(12)  Represents the ratio of non-interest expense to average total assets.
   
(13) ICICI Bank’s capital adequacy is computed in accordance with the Reserve Bank of India’s guidelines and is based on unconsolidated financial statements prepared in accordance with Indian GAAP. At December 31, 2004, ICICI Bank’s total capital adequacy ratio was 13.50% with a Tier 1 capital adequacy ratio of 8.62% and a Tier 2 capital adequacy ratio of 4.88%.
   
(14) Percentages for the nine months ended December 31, 2004 are not annualized.

 

9





RISK FACTORS

     Investing in the securities offered using this prospectus involves risk. You should consider carefully the risks described below, together with the risks described in the documents incorporated by reference into this prospectus before you decide to buy our securities. If any of these risks actually occur you may lose all or part of your investment.

Risks Relating to Our Business

   Our business is particularly vulnerable to interest rate risk and volatility in interest rates could cause our net interest margin, the value of our fixed
   income portfolio and our income from treasury operations to decline and adversely affect our financial performance.

     As an Indian bank, we are, as a result of the Indian reserve requirements more structurally exposed to interest rate risk than banks in many other countries. Under the regulations of the Reserve Bank of India, our liabilities are subject to the statutory liquidity ratio requirement which requires that a minimum specified percentage, currently 25.0%, of a bank’s demand and time liabilities be invested in government of India securities and other approved securities. Pursuant to the amalgamation, the statutory liquidity ratio requirement was imposed on the liabilities acquired from ICICI. We earn interest on such government of India securities at rates which are less favorable than those which we typically receive in respect of our retail and corporate loan portfolio. The statutory liquidity ratio generally has a negative impact on net interest income and net interest margin since it requires us to invest in lower interest-earning securities. In a rising interest rate environment, especially if the rise is sudden or sharp, we are materially adversely affected by the decline in market value of our government securities portfolio and other fixed income securities. Our income from treasury operations is particularly vulnerable to interest rate volatility and an increasing interest rate environment adversely affects the income from our treasury operations. During fiscal 2005, the secondary market yields on government of India securities have been volatile due to a tightening of monetary policy and an increase in interest rates as a result of global trends, particularly in the United States, rising oil prices and their impact on inflation in India and an increase in credit demand in India. The yield on 10-year government of India securities increased from 5.1% at March 31, 2004 to a high of 7.3% at November 8, 2004 before declining to 6.6% at March 4, 2005. The Reserve Bank of India has increased the cash reserve ratio (i.e., the percentage of a bank’s demand and time liabilities that it must maintain in the form of cash balances with the Reserve Bank of India) from 4.5% to 4.75% effective September 18, 2004 and 5.0% effective October 2, 2004. Several banks, including us, have increased interest rates on both loans and deposits. If the yield on our interest-earning assets does not increase at the same time and to the same extent as our cost of funds, our net interest margins would be adversely impacted. Our subsidiary ICICI Securities is a primary dealer in government of India securities and its net income in fiscal 2004 had a high proportion of fixed income securities trading gains, and the rise in interest rates has adversely impacted its income. A sharp and sustained rise in interest rates could adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   A large proportion of ICICI’s loans comprised project finance assistance, a substantial portion of which was particularly vulnerable to completion risk.

     Long-term project finance assistance was a significant proportion of ICICI’s asset portfolio. Although retail loans have significantly increased in our balance sheet, long-term project finance continues to be a significant proportion of our loan portfolio. The viability of these projects depends upon a number of factors, including completion risk, market demand, government policies and the overall economic environment in India and international markets. We cannot be sure that these projects will perform as anticipated. Over the last several years, we and ICICI experienced a high level of impaired loans in our project finance loan portfolio to industrial companies as a result of the downturn in certain global commodity markets and increased competition in India. In addition, a significant portion of infrastructure and other projects financed by us are still under implementation and present risks, including delays in the commencement of operations and breach of contractual obligations by counterparties that could impact the project's ability to generate revenues. We cannot assure you that future credit losses on account of such loans would not have a materially adverse effect on our profitability. If a substantial portion of these loans were to become impaired, the quality of our loan portfolio could be adversely affected which

10




could in turn adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   We have high concentrations of loans to certain customers and to certain sectors and if a substantial portion of these loans were to become
   impaired, the quality of our loan portfolio could be adversely affected.

     At December 31, 2004, our 20 largest borrowers, based on gross outstanding balances, totaled approximately Rs. 130.3 billion (US$ 3.0 billion), which represented approximately 13.9% of our total gross loans outstanding (gross of unearned income and security deposits). Our largest single borrower by outstanding balance at that date was approximately Rs. 18.3 billion (US$ 423 million), which represented approximately 2.0% of our total gross loans outstanding. The largest borrower group of companies under the same management control accounted for approximately 3.6% of our total gross loans outstanding. Credit losses on these large single borrower and group exposures could adversely affect our business, our financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

     At December 31, 2004, we had extended loans to several industrial sectors in India. At that date, approximately 37.2% of our gross restructured loan portfolio was concentrated in three sectors: iron and steel (13.4%), crude petroleum and refining (12.4%) and telecommunications (11.4%) . At that date, approximately 50.0% of our gross other impaired loan portfolio was concentrated in three industrial sectors: power (34.9%), petrochemicals (10.5%) and basic chemicals (4.6%) . Our total loan portfolio also had a significant concentration of loans in these sectors. These sectors have been adversely affected by economic conditions over the last few years in varying degrees. Although our loan portfolio contains loans to a wide variety of businesses, financial difficulties in these sectors could increase our level of impaired loans and adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   If we are not able to control or reduce the level of impaired loans in our portfolio, our business will suffer.

     Our gross restructured loans represented 16.4% of our gross loan portfolio at December 31, 2004, 20.4% of our gross loan portfolio at year-end fiscal 2004 and 21.5% of our gross loan portfolio at year-end fiscal 2003. Our gross other impaired loans represented 4.2% of our gross loan portfolio at December 31, 2004, 6.3% of our gross loan portfolio at year-end fiscal 2004 and 12.2% of our gross loan portfolio at year-end fiscal 2003. Our net restructured loans represented 12.0% of our net loans at December 31, 2004, 16.7% of our net loans at year-end fiscal 2004 and 19.5% of our net loans at year-end fiscal 2003. Our net other impaired loans represented 2.4% of our net loans at December 31, 2004, 4.0% of our net loans at year-end fiscal 2004 and 8.8% of our net loans at year-end fiscal 2003.

     In absolute terms, our total gross restructured and other impaired loans declined by 7.8% in fiscal 2004 over fiscal 2003 and by 10.1% at December 31, 2004 over year-end fiscal 2004. In fiscal 2003, our total gross restructured and other impaired loans increased by 58.1% over the total combined gross impaired loans of ICICI and ICICI Bank at year-end fiscal 2002.

     The level of our and ICICI’s gross restructured and other impaired loans can be attributed to several factors, including increased competition arising from economic liberalization in India, variable industrial growth, the high level of debt in the financing of projects and capital structures of companies in India and the high interest rates in the Indian economy during the period in which a large number of projects contracted their borrowings, which reduced the profitability for certain borrowers, and the resultant restructuring of certain Indian companies. The decline in our total gross restructured and other impaired loans is primarily due to recoveries and reclassification of loans as unimpaired based on satisfactory performance of the borrowers’ accounts, including payment as per the contractual terms. This was offset, in part, by the continuing process of restructuring of loans to corporations in several sectors as well as classification of additional loans as impaired based on default in payment.

     Further, we have experienced rapid growth in our retail loan portfolio. Our gross consumer loans and credit card receivables increased from Rs. 188.3 billion (US$ 4.3 billion), constituting 27.5% of our gross loans at year-end fiscal 2003 to Rs. 311.9 billion (US$ 7.2 billion), constituting 39.2% of our gross loans at year-end fiscal 2004 and Rs. 443.6 billion (US$ 10.3 billion), constituting 47.7% of our gross loans at December 31, 2004. We cannot assure you that there will be no additional impaired loans on account of these retail loans and that such impaired loans will not have a materially adverse impact on the quality of our loan portfolio. The factors that could cause impaired loans

11




in our retail loan portfolio to increase are substantially similar to those factors relevant in developed countries which include rise in unemployment, prolonged recessionary conditions and a sharp and sustained rise in interest rates.

     The directed lending norms of the Reserve Bank of India require that every bank should extend 40.0% of its net bank credit to certain eligible sectors, which are categorized as “priority sectors.” Priority sectors are specific sectors such as agriculture and small-scale industries, and also include housing finance loans up to certain limits. Considering that the advances of ICICI were not subject to the requirement applicable to banks in respect of priority sector lending, the Reserve Bank of India directed us to maintain an additional 10.0% over and above the requirement of 40.0%, i.e., a total of 50.0% of our net bank credit on the residual portion of our advances (i.e., the portion of our total advances excluding advances of ICICI at year-end fiscal 2002) in the form of priority sector loans. This additional 10.0% priority sector lending requirement will apply until such time as our aggregate priority sector advances reach a level of 40.0% of our total net bank credit. We may experience a significant increase in impaired loans in our directed lending portfolio, particularly loans to the agriculture sector and small-scale industries, since economic difficulties are likely to affect those borrowers more severely and we would be less able to control the quality of this portfolio.

     A number of factors will affect our ability to control and reduce impaired loans. Some of these, including developments in the Indian economy, movements in global commodity markets, global competition, interest rates and exchange rates, are not within our control. There can be no assurance that troubled debt restructuring approved by us will be successful and the borrowers will meet their obligations under the restructured terms. Although we are increasing our efforts to improve collections and to foreclose on existing impaired loans, we cannot assure you that we will be successful in our efforts or that the overall quality of our loan portfolio will not deteriorate in the future. If we are not able to control and reduce our impaired loans, or if there is a significant increase in our impaired loans, our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs could be adversely affected.

   If there is a further deterioration in our impaired loan portfolio and we are not able to improve our allowance for loan losses as a percentage of
   impaired loans, the price of our equity shares and our ADSs could go down.

     Although we believe that our allowance for loan losses is adequate to cover all known losses in our portfolio of assets, the level of our impaired loans is significantly higher than the average percentage of impaired loans in the portfolios of banks in more developed countries.

     At December 31, 2004, our allowance for loan losses on restructured loans represented 32.4% of gross restructured loans and our allowance for loan losses on other impaired loans represented 47.5% of gross other impaired loans. At year-end fiscal 2004, our allowance for loan losses on restructured loans represented 25.2% of gross restructured loans and our allowance for loan losses on other impaired loans represented 42.7% of gross other impaired loans. At year-end fiscal 2003, our allowance for loan losses on restructured loans represented 16.8% of gross restructured loans and our allowance for loan losses on other impaired loans represented 33.5% of gross other impaired loans.

     Although we believe that our allowances for loan losses will be adequate to cover all known losses in our asset portfolio, we cannot assure you that there will be no deterioration in the allowance for loan losses as a percentage of gross impaired loans or otherwise or that the percentage of impaired loans that we will be able to recover will be similar to our and ICICI’s past experience of recoveries of impaired loans. In the event of any further deterioration in our impaired loan portfolio, there could be an adverse impact on our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   We have experienced recent and rapid growth in our retail loan portfolio and our business strategy supports continued growth in this area.
   Our inability to grow further or succeed in retail products and services may adversely affect our business.

     We are a relatively new entrant into the retail loan business and have achieved significant growth in this sector since the amalgamation. At December 31, 2004, consumer loans and credit card receivables represented 47.7% of our gross loans outstanding as compared to 39.2% of our gross loans outstanding at year-end fiscal 2004 and 27.5% of our gross loans outstanding at year-end fiscal 2003. Our present business strategy reflects continued focus on

12




further growth in this sector. While we anticipate continued significant demand in this area, we cannot assure you that our retail portfolio will continue to grow as expected. Our inability to grow further or succeed in retail products and services may adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

     Retail products and services could expose us to the risk of financial irregularities by various intermediaries and customers. We cannot assure you that our skills and management information systems will be adequate to successfully manage these retail products and services. See “System failures could adversely impact our business.” Our retail loans are relatively new and there is no assurance that there will be no additional impaired loans on account of these loans and that such impaired loans will not have a materially adverse impact on the quality of our loan portfolio.

   We may experience delays in enforcing our collateral when borrowers default on their obligations to us which may result in failure to recover
   the expected value of collateral security exposing us to a potential loss.

     A substantial portion of our loans to corporate customers, primarily comprising loans made by ICICI, is secured by real assets, including property, plant and equipment. Our loans to corporate customers also include working capital credit facilities that are typically secured by a first lien on inventory, receivables and other current assets. In some cases, we may have taken further security of a first or second lien on fixed assets, a pledge of financial assets such as marketable securities, corporate guarantees and personal guarantees. A substantial portion of our loans to retail customers is also secured by the assets financed, predominantly property and vehicles. Although in general our loans are over-collateralized, an economic downturn could result in a fall in relevant collateral values.

     In India, foreclosure on collateral generally requires a written petition to an Indian court or tribunal. An application, when made, may be subject to delays and administrative requirements that may result, or be accompanied by, a decrease in the value of the collateral. In the event a corporate borrower makes a reference to a specialized quasi-judicial authority called the Board for Industrial and Financial Reconstruction, foreclosure and enforceability of collateral is stayed. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, passed by the Indian Parliament in 2002 and subsequently amended by an order of the Supreme Court of India and an ordinance issued by the President of India, has strengthened the ability of lenders to resolve non-performing assets by granting them greater rights as to enforcement of security and recovery of dues from corporate borrowers. There can be no assurance that the legislation will have a favorable impact on our efforts to resolve non-performing assets. We cannot guarantee that we will be able to realize the full value on our collateral, as a result of, among other factors, delays in bankruptcy and foreclosure proceedings, defects in the perfection of collateral and fraudulent transfers by borrowers. A failure to recover the expected value of collateral security could expose us to a potential loss. Any unexpected losses could adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   We face greater credit risks than banks in developed countries.

     Our principal business is to provide financing to our clients, a predominant number of whom are based in India. At December 31, 2004, loans outside India constituted only 5.9% of our gross loans. In the past, ICICI focused its activities on financing large-scale projects. Increasingly, we are focusing on lending to individuals, as well as large corporate customers, many of who have strong credit ratings, as well as select small and middle market companies. Our loans to small and middle market companies can be expected to be more severely affected by adverse developments in the Indian economy than loans to large corporations. In all of these cases, we are subject to the credit risk that our borrowers may not pay in a timely fashion or may not pay at all. The credit risk of all our borrowers is higher than that in more developed countries due to the higher uncertainty in the Indian regulatory, political, economic and industrial environment and difficulties that many of our borrowers face in adapting to instability in world markets and technological advances taking place across the world. Unlike several developed countries, India does not have a fully operational nationwide credit bureau that may affect the quality of information available to us about the credit history of our borrowers, especially individuals and small businesses. In addition, increased competition arising from economic liberalization in India, variable industrial growth, a sharp decline in commodity prices, the high level of debt in the financing of projects and capital structures of companies in India and the high interest rates in the Indian economy during the period in which a large number of projects contracted their borrowings has reduced the profitability of certain of our borrowers which in turn could adversely affect our loan portfolio and accordingly our business.

13




   Our funding is primarily short-term and if depositors do not roll over deposited funds upon maturity our business could be adversely affected.

     Most of our incremental funding requirements, including replacement of maturing liabilities of ICICI which generally had longer maturities, are met through short-term funding sources, primarily in the form of deposits including inter-bank deposits. However, a large portion of our assets, primarily the assets of ICICI and our home loan portfolio, have medium or long-term maturities, creating a potential for funding mismatches. Our customer deposits are generally of less than one year maturity. If a substantial number of our depositors do not roll over deposited funds upon maturity, our liquidity position could be adversely affected. The failure to obtain rollover of customer deposits upon maturity or to replace them with fresh deposits could have a material adverse effect on our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

     In April 2003, unsubstantiated rumours believed to have originated in Gujarat, a state in India, alleged that we were facing liquidity problems, although our liquidity position was sound. We witnessed higher than normal deposit withdrawals during the period from April 11 through April 13, 2003, on account of these unsubstantiated rumours. We successfully controlled the situation, but if such situations were to arise in the future, any failure to control such situations could result in large deposit withdrawals, which would adversely impact our liquidity position.

   Material changes in the regulations which govern us could cause our business to suffer and the price of our equity shares and our ADSs to go down.

     Banks in India operate in a highly regulated environment. The Reserve Bank of India extensively supervises and regulates banks. In addition, banks are subject generally to changes in Indian law, as well as to changes in regulation and government policies, income tax laws and accounting principles. See “Supervision and Regulation” included elsewhere in this prospectus. For example, on September 11, 2004, the Reserve Bank of India increased the cash reserve ratio from 4.5% to 4.75% effective September 18, 2004 and 5.0% effective October 2, 2004 and reduced the rate of interest that it pays on the eligible cash reserve ratio balances from the bank rate (currently 6.0%) to 3.5% . This will have a negative impact on our net interest income in fiscal 2005. The laws and regulations governing the banking sector could change in the future and any such changes could adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   A determination against us in respect of disputed tax assessments may adversely impact our financial performance.

     As at December 31, 2004, the government of India’s tax authorities had assessed an aggregate of Rs. 22.6 billion (US$ 523 million) in excess of the provision made in our accounts, in income tax, interest tax, wealth tax and sales tax demands. We have appealed each of these tax demands. While we expect that no additional liability will arise out of these disputed demands, there can be no assurance that these matters will be settled in our favor, and that no further liability will arise out of these demands. Any additional tax liability may adversely impact our financial performance and the price of our equity shares and our ADSs.

   We are involved in various litigations and any final judgment awarding material damages against us could have a material adverse impact
   on our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

     We are often involved in litigations for a variety of reasons, which generally arise because we seek to recover our dues from borrowers or because customers seek claims against us. We believe, based on the facts of the cases and consultation with counsel, that these cases generally do not involve the risk of a material adverse impact on our financial performance or stockholders’ equity. The vast majority of these cases arise in the normal course and do not involve the risk of a material adverse impact on our financial performance or stockholders’ equity. Where we assess that the risk of loss is greater than remote, it is our policy to make provisions for the loss or make disclosure in our financial statements. We have not made any provisions nor made any disclosure in our financial statements for a suit filed by Mardia Chemicals against ICICI Bank, Mr. K.V. Kamath, Managing Director and CEO and Ms. Lalita D. Gupte, Joint Managing Director, for an amount of Rs. 56.3 billion (US$ 1.3 billion) on the grounds that Mardia Chemicals had allegedly suffered financial losses on account of ICICI’s failure to provide adequate financial facilities, ICICI’s recall of the advanced amount and ICICI’s filing of a recovery action against it. We cannot guarantee that the judgment in this suit would be favorable to us and should our assessment of the risk change, our view on provisions will also change. We have also not made any provisions for nor made any disclosure in our financial statements of an arbitration proceeding in London, brought against us and other Indian lenders by certain foreign lenders in relation to a dispute under an inter-creditor agreement in connection with a power project, the principal sponsor of which has filed for bankruptcy in the United States, claiming damages against us and other Indian lenders in an aggregate amount of US$ 534 million. As a result of their guarantee to certain foreign lenders under the power purchase agreement, the government of India and the government of the state of Maharashtra are also involved in this matter. Any final judgment awarding material damages against us in this arbitration proceeding could, however, have a material adverse impact on our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs. We cannot guarantee that the arbitration will be concluded in a manner favorable to us and should our assessment of the risk change, our view on provisions will also change.

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   If we are not able to succeed in our new business areas, we may not be able to meet our projected earnings and growth targets.

     ICICI entered the life insurance business in fiscal 2001 and the non-life insurance business in fiscal 2002 through its majority-owned joint ventures, which are now majority-owned joint ventures of ICICI Bank. We are also seeking to expand internationally by leveraging on our home country links and technology competencies in financial services. We are a new entrant in the international business and the skills required for this business could be different from those for our domestic businesses. The life insurance business and the international business are expected to require substantial capital. We cannot be certain that these new businesses will perform as anticipated. Our inability to grow or succeed in new business areas may adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   We are exposed to fluctuation in foreign exchange rates.

     As a financial intermediary we are exposed to exchange rate risk. We comply with regulatory limits on our unhedged foreign currency exposure by making foreign currency loans on terms that are generally similar to our foreign currency borrowings and thereby transferring the foreign exchange risk to the borrower or through active use of cross-currency swaps and forwards to generally match the currencies of our assets and liabilities. However, we are exposed to fluctuation in foreign currency rates for our unhedged exposure. Adverse movements in foreign exchange rates may also impact our borrowers negatively which may in turn impact the quality of our exposure to these borrowers. Volatility in foreign exchange rates could adversely affect our business, our future financial performance, our shareholders’ funds and the price of our equity shares and our ADSs.

   Our business is very competitive and our growth strategy depends on our ability to compete effectively.

     We face intense competition from Indian and foreign commercial banks in all our products and services. Additionally, the Indian financial sector may experience further consolidation, resulting in fewer banks and financial institutions, some of which may have greater resources than us. Recently, the government of India has indicated its support for consolidation among government-owned banks. Pursuant to the policy decisions announced by the government of India in March 2004, the Reserve Bank of India in February 2005 issued a roadmap for the presence of foreign banks in India permitting foreign banks to establish wholly owned subsidiaries (including conversion of existing branch operations into subsidiaries and acquiring controlling stakes in a phased manner in private sector banks identified for restructuring by the Reserve Bank of India). Due to competitive pressures, we may be unable to successfully execute our growth strategy and offer products and services at reasonable returns and this may adversely impact our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   Significant security breaches in our computer system and network infrastructure and frauds could adversely impact our business.

     We seek to protect our computer systems and network infrastructure from physical break-ins as well as security breaches and other disruptive problems caused by our increased use of the Internet. Computer break-ins and power disruptions could affect the security of information stored in and transmitted through these computer systems and network infrastructure. We employ security systems, including firewalls and password encryption, designed to minimize the risk of security breaches. Although we intend to continue to implement security technology and

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establish operational procedures to prevent break-ins, damage and failures, there can be no assurance that these security measures will be successful. A significant failure in security measures could have a material adverse effect on our business, our future financial performance and the price of our equity shares and our ADSs. Our business operations are based on a high volume of transactions. Although we take adequate measures to safeguard against system related and other frauds, there can be no assurance that we would be able to prevent frauds. Our reputation could be adversely affected by significant frauds committed by employees, customers or outsiders.

   System failures could adversely impact our business.

     Given the increasing share of retail products and services and transaction banking services in our total business, the importance of systems technology to our business has increased significantly. Our principal delivery channels include ATMs, call centers and the Internet. Any failure in our systems, particularly for retail products and services and transaction banking, could significantly affect our operations and the quality of customer service and could result in business and financial losses and adversely affect the price of our equity shares and our ADSs.

   Any inability to attract and retain talented professionals may impact our business.

     Attracting and retaining talented professionals is a key element of our strategy and we believe it to be a significant source of competitive advantage. An inability to attract and retain talented professionals or the resignation or loss of key management personnel may have an adverse impact on our business, our future financial performance and the price of our equity shares and our ADSs.

Risks Relating to India

   A slowdown in economic growth in India could cause our business to suffer.

     The Indian economy has shown sustained growth over the last few years with real GDP growing at 8.2% in fiscal 2004, 4.0% in fiscal 2003 and 5.8% in fiscal 2002. GDP grew by 7.0% during the first six months of fiscal 2005. The Index of Industrial Production grew at 8.3% in the first eight months of fiscal 2005 compared to 6.9% in fiscal 2004, 5.8% in fiscal 2003 and 2.7% in fiscal 2002. Any slowdown in the Indian economy or volatility of global commodity prices, in particular oil and steel prices, could adversely affect our borrowers and contractual counterparties. With the increasing importance of retail loans to our business, any slowdown in the growth of sectors such as housing and automobiles could adversely impact our performance. Further, with the increasing importance of the agricultural sector in our business, any slowdown in the growth of the agricultural sector could also adversely impact our performance. Growth in the agricultural sector in India has been variable and dependent on climatic conditions, primarily the level and timing of rainfall. The agricultural sector grew by 1.5% during the first half of fiscal 2005 compared to a growth of 9.1% in fiscal 2004 and a decline of 5.2% during fiscal 2003. Any slowdown could adversely affect our business, including our ability to grow our asset portfolio, the quality of our assets, our financial performance, our stockholders’ equity, our ability to implement our strategy and the price of our equity shares and our ADSs.

   A significant increase in the price of crude oil could adversely affect the Indian economy, which could adversely affect our business.

     India imports approximately 70.0% of its requirements of crude oil, which were approximately 26.7% of total imports in fiscal 2004. The sharp increase in global crude oil prices during fiscal 2001 adversely affected the Indian economy in terms of volatile interest and exchange rates. This adversely affected the overall state of liquidity in the banking system leading to intervention by the Reserve Bank of India. Crude oil prices declined in fiscal 2002 due to weaker demand. During fiscal 2003, crude oil prices initially rose as a result of Middle-East tensions and in particular the US-led military action in Iraq before declining on account of the relatively short duration of the war. Conditions remain volatile in the Middle-East where most of the world’s oil production facilities are located. There has been a sharp increase in global crude oil prices over the past few months (due to increased international oil demand and tensions in the Middle East), which has contributed to a rise in inflation, higher market interest rates in the Indian economy and a higher trade deficit. While oil prices have moderated recently, any significant increase or volatility in oil prices, due to continuing or further tensions or hostilities or otherwise, could affect the Indian economy and the Indian banking and financial system, in particular through its impact on inflation, interest rates and

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the trade deficit. This could adversely affect our business including our ability to grow, the quality of our assets, our financial performance, our stockholders’ equity, our ability to implement our strategy and the price of our equity shares and our ADSs.

   A significant change in the Indian government's economic liberalization and deregulation policies could disrupt our business and cause
   the price of our equity shares and our ADSs to go down.

     Our assets and customers are predominantly located in India. The Indian government has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. Its economic policies have had and could continue to have a significant effect on private sector entities, including us, and on market conditions and prices of Indian securities, including our equity shares and our ADSs.

     The most recent parliamentary elections were completed in May 2004. A coalition government led by the Indian National Congress party has been formed with Dr. Manmohan Singh as the Prime Minister of India. A significant change in the government's policies could adversely affect business and economic conditions in India and could also adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   Financial instability in other countries, particularly emerging market countries, could disrupt our business and cause the price of
   our equity shares and our ADSs to go down.

     The Indian market and the Indian economy are influenced by economic and market conditions in other countries, particularly emerging market countries in Asia. Financial turmoil in Asia, Latin America, Russia and elsewhere in the world in the past years has affected the Indian economy even though India was relatively unaffected by the financial and liquidity crises experienced elsewhere. Although economic conditions are different in each country, investors' reactions to developments in one country can have adverse effects on the securities of companies in other countries, including India. A loss of investor confidence in the financial systems of other emerging markets may cause increased volatility in Indian financial markets and indirectly, in the Indian economy in general. Any worldwide financial instability could also have a negative impact on the Indian economy. This in turn could negatively impact the movement of exchange rates and interest rates in India, which could adversely affect the Indian financial sector, including us. Any financial disruption could have an adverse effect on our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

   If regional hostilities, terrorist attacks or social unrest in some parts of the country increase, our business could suffer and the price of
   our equity shares and our ADSs could go down.

     India has from time to time experienced social and civil unrest and hostilities both internally and with neighboring countries. In recent years, there have been military confrontations between India and Pakistan in the Kashmir region and present relations between India and Pakistan continue to be tense on the issues of terrorism, armament and Kashmir. India has also experienced terrorist attacks in some parts of the country. These hostilities and tensions could lead to political or economic instability in India and a possible adverse effect on our business, our future financial performance and the price of our equity shares and our ADSs. For example, the terrorist attacks in the United States on September 11, 2001 and subsequent military action in Afghanistan and Iraq affected markets all over the world. The United States’ continuing battle against terrorism could lengthen these regional hostilities and tensions. Further, India has also experienced social unrest in some parts of the country. If such tensions occur in other parts of the country leading to overall political and economic instability, it could have an adverse effect on our business, our future financial performance and the price of our equity shares and our ADSs.

   Trade deficits could cause our business to suffer and the price of our equity shares and our ADSs to go down.

     India's trade relationships with other countries can also influence Indian economic conditions. In fiscal 2004, India experienced a trade deficit of Rs. 628.7 billion (US$ 14.4 billion), an increase of Rs. 268.7 billion (US$ 6.2 billion) from fiscal 2003. In fiscal 2005 (through December 2004), the trade deficit increased significantly to Rs. 914.7 billion (US$ 21.1 billion) as compared to Rs. 543.6 billion (US$ 12.6 billion) in the corresponding period of the previous year, mainly due to the rise in global crude oil prices. International crude oil prices increased from US$ 35.75 per barrel at March 31, 2004 to a peak of US$ 56.17 per barrel at October 22, 2004 and were at US$ 53.78 per

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barrel at March 4, 2005. If trade deficits increase or are no longer manageable, the Indian economy, and therefore our business, our financial performance, our stockholders’ equity and the price of our equity shares and our ADSs, could be adversely affected.

   Natural calamities could have a negative impact on the Indian economy and could cause our business to suffer and the price of
   our equity shares and our ADSs to go down.

     India has experienced natural calamities such as earthquakes, floods and drought in the past few years. The extent and severity of these natural disasters determine their impact on the Indian economy. In fiscal 2003, many parts of India received significantly less than normal rainfall. As a result of the drought conditions in the economy during fiscal 2003, the agricultural sector recorded a negative growth of 5.2% . According to the India Meteorological Department, rainfall for the period June 1, 2004 to September 30, 2004 has been 87.0% of the normal level. The erratic progress of the monsoon in 2004 has adversely affected sowing operations for certain crops. We currently expect that the Tsunami wave which hit the South-eastern coast of India on December 26, 2004, though horrible in its human and emotional consequences, will not have a material adverse impact on our financial results and operations. However, we cannot be sure of its impact on the Indian economy and its future growth, which could have a significant effect on our business. Natural calamities and disasters or further prolonged spells of below normal rainfall in the country could have a negative impact on the Indian economy, affecting our business and causing the price of our equity shares and our ADSs to go down.

   Financial difficulty and other problems in certain financial institutions in India could cause our business to suffer and the price of
   our equity shares and our ADSs to go down.

     As an Indian bank, we are exposed to the risks of the Indian financial system which in turn may be affected by financial difficulties and other problems faced by certain Indian financial institutions. See “Overview of the Indian Financial Sector” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus. As an emerging market system, the Indian financial system faces risks of a nature and extent not typically faced in developing countries, including the risk of deposit runs notwithstanding the existence of a national deposit insurance scheme. For example, in April 2003, unsubstantiated rumours, believed to have originated in Gujarat, a state in India, alleged that we were facing liquidity problems, although our liquidity position was sound. We witnessed higher than normal deposit withdrawals from April 11 through April 13, 2003 on account of these unsubstantiated rumours. We successfully controlled the situation, but if such situations were to arise in future, any failure to control such situations could result in large deposit withdrawals which would adversely impact our liquidity position.

     In addition, certain Indian financial institutions have experienced difficulties in recent years. In July 2004, on an application by the Reserve Bank of India, the Indian government issued an order of moratorium on Global Trust Bank, a new private sector bank, and restricted withdrawals by depositors. The Reserve Bank of India subsequently announced a merger of Global Trust Bank with Oriental Bank of Commerce, a public sector bank. Some cooperative banks have also faced serious financial and liquidity crises. The problems faced by individual Indian financial institutions and any instability in or difficulties faced by the Indian financial system generally could create adverse market perception about Indian financial institutions and banks. This in turn could adversely affect our business, our future financial performance, our shareholders’ funds and the price of our equity shares and our ADSs.

   A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian economy which could adversely impact us.

     India’s foreign exchange reserves increased 47.5% during fiscal 2004 and 23.0% during fiscal 2005 (through February 25, 2005) to US$ 129.4 billion. A decline in these reserves could result in reduced liquidity and higher interest rates in the Indian economy. Reduced liquidity or an increase in interest rates in the economy following a decline in foreign exchange reserves could adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs. See also “– Risks Relating to Our Business.”

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   Any downgrading of India’s debt rating by an international rating agency could cause our business to suffer and the price of
   our equity shares and our ADSs to go down.

     Any adverse revisions to India’s credit ratings for domestic and international debt by international rating agencies may adversely affect our business, our future financial performance, our stockholders’ equity and the price of our equity shares and our ADSs.

Risks Relating to the ADSs and Equity Shares

   You will not be able to vote your ADSs.

     ADS holders have no voting rights unlike holders of the equity shares who have voting rights. The depositary will exercise its right to vote on the equity shares represented by the ADSs as directed by our board of directors. However, under the Banking Regulation Act, no person holding shares in a banking company can exercise more than 10.0% of the total voting power. This means that the depositary, which owned approximately 21.7% of our equity shares as of January 20, 2005, could vote only 10.0% of our equity shares. If you wish, you may withdraw the equity shares underlying the ADSs and seek to vote the equity shares you obtain from the withdrawal. However, for foreign investors, this withdrawal process may be subject to delays. For a discussion of the legal restrictions triggered by a withdrawal of the equity shares from the depositary facility upon surrender of ADSs, see ''Restriction on Foreign Ownership of Indian Securities'' in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

   US investors will be subject to special tax rules, including the possible imposition of interest charges, if ICICI Bank is considered to be
   a passive foreign investment company.

     Based upon certain proposed Treasury regulations, which are proposed to be effective for taxable years beginning after December 31, 1994, and upon certain management estimates, ICICI Bank does not expect to be a passive foreign investment company (a “PFIC”) for its current taxable year or in the foreseeable future. ICICI Bank has based the expectation that it is currently not a PFIC on, among other things, provisions in the proposed Treasury regulations that provide that certain restricted reserves (including cash and securities) of banks are assets used in connection with banking activities and are not passive assets, as well as the composition of ICICI Bank’s income and assets from time to time. Since there can be no assurance that the proposed Treasury regulations will be finalized in their current form, the manner of the application of the proposed regulations is not entirely clear, and the composition of ICICI Bank’s income and assets will vary over time, there can be no assurance that ICICI Bank will not be considered a PFIC for any taxable year. If ICICI Bank is a PFIC for any taxable year during which a US investor holds equity shares or ADSs, the US investor would be subject to special tax rules, including the possible imposition of interest charges. See “Taxation – United States Taxation.”

   Your ability to withdraw equity shares from the depositary facility is uncertain and may be subject to delays.

     India's restrictions on foreign ownership of Indian companies limit the number of shares that may be owned by foreign investors and generally require government approval for foreign ownership. Investors who withdraw equity shares from the depositary facility will be subject to Indian regulatory restrictions on foreign ownership upon withdrawal. It is possible that this withdrawal process may be subject to delays. For a discussion of the legal restrictions triggered by a withdrawal of equity shares from the depositary facility upon surrender of ADSs, see “Restriction on Foreign Ownership of Indian Securities” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

   Your ability to sell in India any equity shares withdrawn from the depositary facility may be subject to delays if specific approval of
   the Reserve Bank of India is required.

     The Reserve Bank of India has given general permission to effect sales of existing shares (including equity shares underlying ADSs) or convertible debentures of an Indian company by a non-resident to a resident, subject to certain conditions, including conditions regarding the price at which the shares may be sold. Additionally, except under certain limited circumstances, if an investor seeks to convert the rupee proceeds from a sale of equity shares in India into a foreign currency and then repatriate that foreign currency from India, the investor will have to obtain

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Reserve Bank of India approval for each such transaction. The required approval from the Reserve Bank of India or any other government agency may not be obtained on terms favorable to a non-resident investor or at all. Because of possible delays in obtaining the requisite approvals, investors in equity shares may be prevented from realizing gains during periods of price increases or limiting losses during periods of price declines.

   Restrictions on withdrawal of ADSs from the depositary facility and redeposit of equity shares in the depositary facility could adversely
   affect the price of our ADSs.

     Under current Indian regulations, an ADS holder who surrenders an ADS and withdraws equity shares may not be able to redeposit those equity shares in the depositary facility in exchange for ADSs. An investor who has purchased equity shares in the Indian market is permitted to deposit them in the ADS program. However, the deposit of equity shares may be limited by securities law restrictions and will be restricted so that the cumulative aggregate number of equity shares that can be deposited as of any time cannot exceed the cumulative aggregate number represented by ADSs converted into underlying equity shares as of such time. An investor who has purchased equity shares in the Indian market could, therefore, face restrictions in depositing them in the ADS program. This increases the risk that the market price of the ADSs will be below that of the equity shares. For a discussion of the legal restrictions triggered by withdrawal of ADSs from the depositary facility and redeposit of equity shares in the depositary facility, see “Recent Developments – Restriction on Foreign Ownership of Indian Securities.”

   Certain shareholders own a large percentage of our equity shares. Their actions could adversely affect the price of our equity shares and our ADSs.

     Life Insurance Corporation of India, General Insurance Corporation of India and government-owned general insurance companies, each of which is directly or indirectly controlled by the Indian government, are among our principal shareholders. At March 4, 2005, government-controlled entities owned approximately 15.8% of our outstanding equity shares. Deutsche Bank Trust Company Americas holds the equity shares represented by 80.0 million ADSs outstanding and equivalent to 21.7% of our outstanding equity shares, as depositary on behalf of the holders of the ADSs. The ADSs are listed on the New York Stock Exchange. Our other large equity shareholders include Allamanda Investments Pte. Limited (a subsidiary of Temasek Holdings Pte Limited), the Government of Singapore, HWIC Asia Fund, an affiliate of Fairfax Financial Holdings Limited and Bajaj Auto Limited, an Indian private sector company. Any substantial sale of our equity shares by these or other large shareholders could adversely affect the price of our equity shares and our ADSs.

   Conditions in the Indian securities market may affect the price or liquidity of our equity shares and our ADSs.

     The Indian securities markets are smaller and more volatile than securities markets in developed economies. The Indian stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities.

     Indian stock exchanges have also experienced problems that have affected the market price and liquidity of the securities of Indian companies. These problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. The Stock Exchange, Mumbai, or the BSE, was closed for three days in March 1995 following a default by a broker. In March 2001, the BSE dropped 667 points or 15.6% and there were also rumors of insider trading in the BSE leading to the resignation of the BSE president and several other members of the governing board. In the same month, the Kolkata Stock Exchange, formerly known as the Calcutta Stock Exchange, suffered a payment crisis when several brokers defaulted and the exchange invoked guarantees provided by various Indian banks. In April 2003, the decline in the price of the equity shares of a leading Indian software company created volatility in the Indian stock markets and created temporary concerns regarding our exposure to the equity markets. On May 17, 2004, the BSE Sensex fell by 565 points from 5,070 to 4,505, creating temporary concerns regarding our exposure to the equity markets. Both the BSE and the National Stock Exchange of India Limited halted trading on the exchanges on May 17, 2004 in view of the sharp fall in prices of securities. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Further, from time to time, disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment. In recent years, there have been changes in laws and regulations for the taxation of dividend income, which have impacted the Indian equity capital markets. See “Dividends.” Similar

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problems or changes could occur in the future and, if they did, they could affect the market price and liquidity of our equity shares and our ADSs.

   An active or liquid trading market for our ADSs is not assured.

     Although our ADSs are listed and traded on the New York Stock Exchange and this offering increases the number of ADSs publicly trading in the United States, we cannot be certain that an active, liquid market for our ADSs will be sustained, or that the present price will correspond to the future price at which our ADSs will trade in the public market. Indian legal restrictions may also limit the supply of ADSs. Loss of liquidity could increase the price volatility of our ADSs. The only way to add to the supply of ADSs would be through an additional issuance.

   Settlement of trades of equity shares on Indian stock exchanges may be subject to delays.

     The equity shares represented by the ADSs are currently listed on the Stock Exchange, Mumbai and the National Stock Exchange of India Limited. Settlement on those stock exchanges may be subject to delays and an investor in equity shares withdrawn from the depositary facility upon surrender of ADSs may not be able to settle trades on such stock exchanges in a timely manner.

   As a result of changes in Indian government regulation of foreign ownership, changes in investor preferences or an increase in
   the number of ADSs outstanding, the price of our ADSs could go down.

     Foreign ownership of Indian securities is heavily regulated and is generally restricted. ADSs issued by companies in certain emerging markets, including India, may trade at a discount or premium to the underlying equity shares, in part because of the restrictions on foreign ownership of the underlying equity shares. See “Recent Developments – Restriction on Foreign Ownership of Indian Securities,” Historically, our ADSs have traded at a premium to the trading prices of our underlying equity shares on the Indian stock exchanges. See “Market Price Information” for the underlying data. We believe that this price premium has resulted from the limited portion of our market capitalization represented by ADSs, restrictions imposed by Indian law on the conversion of equity shares into ADSs and an apparent preference for some investors to trade dollar-denominated securities. The offering described in this prospectus will increase the number of ADS we have outstanding and we may conduct similar transactions in the future. Also, over time, some of the restrictions on the issuance of ADSs imposed by Indian law have been relaxed and we expect that other restrictions may be relaxed in the future. As a result, any premium enjoyed by the ADSs as compared to the equity shares may be reduced or eliminated as a result of this offering, or similar transactions in the future, or due to a change in Indian law permitting further conversion of equity shares into ADSs or a change in investor preferences.

   Your holdings may be diluted by additional issuances of equity and any dilution may adversely affect the market price of our equity shares and ADSs.

     Subsequent to year-end fiscal 2004, we issued 115,920,758 new equity shares, representing 18.8% of our outstanding equity shares at year-end fiscal 2004. In addition, up to 5.0% of our issued equity shares may be issued in accordance with our employee stock option scheme to eligible employees. At December 31, 2004, ICICI Bank had granted a total of 28,956,975 stock options, of which 7,068,790 had been exercised, 4,412,687 had vested but had not been exercised and 2,780,540 had lapsed or been forfeited at that date. At December 31, 2004, the total stock options granted, less options lapsed or forfeited, were 3.6% of our issued equity shares. There is a risk that growth in our business, including in our international operations and our insurance business, could require us to fund this growth through additional equity offerings. Any future issuance of equity shares would dilute the positions of investors in the ADSs and equity shares, and could adversely affect the market price of our equity shares and our ADSs.

   You may be unable to exercise preemptive rights available to other shareholders.

     A company incorporated in India must offer its holders of equity shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any new equity shares, unless these rights have been waived by at least 75.0% of the company's shareholders present and voting at a shareholders' general meeting. US investors in ADSs may be unable to exercise preemptive rights for

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equity shares underlying ADSs unless a registration statement under the Securities Act of 1933, as amended (the “Securities Act”) is effective with respect to such rights or an exemption from the registration requirements of the Securities Act is available. Our decision to file a registration statement will depend on the costs and potential liabilities associated with any such registration statement as well as the perceived benefits of enabling US investors in ADSs to exercise their preemptive rights and any other factors we consider appropriate at the time. We do not commit that we would file a registration statement under these circumstances. If ICICI Bank issues any such securities in the future, such securities may be issued to the depositary, which may sell such securities in the securities markets in India for the benefit of the investors in the ADSs. There can be no assurance as to the value, if any, the depositary would receive upon the sale of these securities. To the extent that investors in ADSs are unable to exercise preemptive rights, their proportional interests in ICICI Bank would be reduced.

   Because the equity shares underlying the ADSs are quoted in rupees in India, you may be subject to potential losses arising out of exchange rate risk on the Indian rupee and risks associated with the conversion of rupee proceeds into foreign currency.

     Investors that purchase ADSs are required to pay for the ADSs in US dollars. Investors are subject to currency fluctuation risk and convertibility risks since the equity shares are quoted in rupees on the Indian stock exchanges on which they are listed. Dividends on the equity shares will also be paid in rupees, and then converted into US dollars for distribution to ADS investors. Investors that seek to convert the rupee proceeds of a sale of equity shares withdrawn upon surrender of ADSs into foreign currency and export the foreign currency will need to obtain the approval of the Reserve Bank of India for each such transaction. In addition, investors that seek to sell equity shares withdrawn from the depositary facility will have to obtain approval from the Reserve Bank of India, unless the sale is made on a stock exchange or in connection with an offer made under the regulations regarding takeovers. Holders of rupees in India also generally may not purchase foreign currency without general or special approval from the Reserve Bank of India. However, dividends received by the depositary in rupees and, subject to approval by the Reserve Bank of India, rupee proceeds arising from the sale on an Indian stock exchange of equity shares, which have been withdrawn from the depositary facility, may be converted into US dollars at the market rate.

     On an average annual basis, the rupee has declined against the US dollar since 1980. The rupee has depreciated against the dollar by 0.4% during fiscal 2005 (through February 28, 2005). In addition, in the past, the Indian economy has experienced severe foreign exchange shortages.

   You may be subject to Indian taxes arising out of capital gains.

     Generally, capital gains, whether short-term or long-term, arising on the sale of the underlying equity shares are subject to Indian capital gains tax. For the purpose of computing the amount of capital gains subject to tax, Indian law specifies that the cost of acquisition of the equity shares received upon redemption of ADSs will be the share price prevailing on The Stock Exchange, Mumbai or the National Stock Exchange of India Limited on the date the depositary advises the custodian to redeem receipts in exchange for underlying equity shares. The holding period of such equity shares, for determining whether the gain is long-term or short-term, commences on the date such notice is given by the depositary to the custodian. The Finance (No. 2) Act, 2004 introduced a securities transaction tax effective October 1, 2004, which is levied at the rate of 0.075% on the value of sales of equity shares on a recognized stock exchange in India settled by actual delivery or transfer, and is payable by both the seller and the buyer. Where the securities transaction tax is applicable, the long-term capital gains are exempt from tax and short-term capital gains are taxed at a lower rate. Investors are advised to consult their own tax advisers and to consider carefully the potential tax consequences of an investment in the ADSs. See “Taxation - Indian Tax.”

   There may be less company information available in Indian securities markets than securities markets in developed countries.

     There is a difference between the level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants and that of markets in the United States and other developed countries. The Securities and Exchange Board of India is responsible for improving disclosure and other regulatory standards for the Indian securities markets. The Securities and Exchange Board of India has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly

22




available information about Indian companies than is regularly made available by public companies in developed countries.

23




RECENT DEVELOPMENTS

Restriction on Foreign Ownership of Indian Securities

     Restrictions on transfers of shares of Indian companies between residents and non-residents were relaxed significantly as of October 2004. As a result, the transfer of shares from a non-resident to a resident, in the case of shares of a banking company, and any transfer of shares between a resident and a non- resident, in the case of any other company, can be made without the approval of the Reserve Bank of India or the government of India. This is subject to compliance with applicable pricing guidelines, takeover regulations and foreign ownership restrictions. See “Restriction on Foreign Ownership of Indian Securities” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

FORWARD-LOOKING STATEMENTS

     We have included statements in this prospectus or documents incorporated by reference herein which contain words or phrases such as “will”, “would”, “aim”, “aimed”, “will likely result”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, “anticipate”, “estimate”, “estimating”, “intend”, “plan”, “contemplate”, “seek to”, “seeking to”, “trying to”, “target”, “propose to”, “future”, “objective”, “goal”, “project”, “should”, “can”, “could”, “may”, “will pursue”, “our judgment” and similar expressions or variations of such expressions, that are “forward-looking statements.” These statements are intended as “Forward-Looking Statements” under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those suggested by the forward-looking statements due to certain risks or uncertainties associated with our expectations with respect to, but not limited to, the actual growth in demand for banking and other financial products and services, our ability to successfully implement our strategy, our ability to integrate recent or future mergers or acquisitions into our operations, future levels of impaired loans, our growth and expansion, the adequacy of our allowance for credit and investment losses, technological changes, investment income, our ability to market new products, cash flow projections, the outcome of any legal or regulatory proceedings we are or become a party to, the future impact of new accounting standards, our ability to implement our dividend policy, the impact of Indian banking regulations on us, which includes the assets and liabilities of ICICI, a former financial institution not subject to Indian banking regulations, our ability to roll over our short-term funding sources, our exposure to market risks and the market acceptance of and demand for Internet banking services. By their nature, certain of the market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result,

24




actual future gains, losses or impact on net interest income and net income could materially differ from those that have been estimated.

     In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this prospectus or documents incorporated by reference herein include, but are not limited to, general economic and political conditions in India, southeast Asia, and the other countries which have an impact on our business activities or investments, political or financial instability in India or any other country caused by any factor including any terrorist attacks in India, the United States or elsewhere, any anti-terrorist or other attacks by the United States, a United States-led coalition or any other country or any other acts of terrorism worldwide, the monetary and interest rate policies of India, political or financial instability in India or any other country caused by political uncertainty, tensions between India and Pakistan related to the Kashmir region or military armament or social unrest in any part of India, inflation, deflation, unanticipated turbulence in interest rates, changes in the value of the rupee, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets and level of Internet penetration in India and globally, changes in domestic and foreign laws, regulations and taxes, changes in competition and the pricing environment in India and regional or general changes in asset valuations. For a further discussion on the factors that could cause actual results to differ, see the discussion under “Risk Factors” included elsewhere in this prospectus.

     The forward-looking statements made in this prospectus speak only as of the date of this prospectus. We do not intend to publicly update or revise these forward-looking statements to reflect events or circumstances after the date of this prospectus, and we do not assume any responsibility to do so.

ENFORCEABILITY OF CERTAIN CIVIL
LIABILITIES

     ICICI Bank is a limited liability company under the laws of India. Substantially all of our directors and executive officers and certain experts named in this prospectus reside outside the United States, and a substantial portion of our assets and the assets of such persons are located outside the United States. As a result, it may be difficult for investors to effect service of process upon such persons within the United States or to enforce against us or such persons in US courts judgments obtained in US courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States.

     India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments. We have been advised by our Indian legal counsel, Amarchand & Mangaldas & Suresh A. Shroff & Co., that in India the statutory basis for recognition of foreign judgments is found in Section 13 of the Indian Code of Civil Procedure 1908, or the Civil Code, which provides that a foreign judgment shall be conclusive as to any matter directly adjudicated upon except: (i) where the judgment has not been pronounced by a court of competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where the judgment appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases where such law is applicable; (iv) where the proceedings in which the judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; or (vi) where the judgment sustains a claim founded on a breach of any law in force in India. Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a court in any country or territory outside India which the government of India has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. The United States has not been declared by the government of India to be a reciprocating territory for purposes of Section 44A. Accordingly, a judgment of a court in the United States may be enforced in India only by a suit upon the judgment, not by proceedings in execution. The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with Indian practice. A party seeking to enforce a foreign judgment in India is required to obtain approval from the Reserve Bank of India under the Foreign Exchange Management Act, 1999 to execute such a judgment or to repatriate any amount recovered. We have also been advised by our Indian counsel that a party may

25




file suit in India against us, our directors or our executive officers as an original action predicated upon the provisions of the federal securities laws of the United States.

 

26





USE OF PROCEEDS

     All ADSs sold in the offering will be sold on behalf of the selling shareholders. We will not receive any of the proceeds from the sale of these ADSs.

 

DIVIDENDS

     Under Indian law, a company pays dividends upon a recommendation by its board of directors and approval by a majority of the shareholders at the annual general meeting of shareholders held within six months of the end of each fiscal year. The shareholders have the right to decrease but not increase the dividend amount recommended by the board of directors. Under Indian regulations currently in force, the declaration of dividends by banks is subject to certain additional conditions. If we comply with such conditions, we are allowed to declare a dividend but only up to a certain percentage of our profits. For any dividends beyond such percentage, we are required to obtain permission from the Reserve Bank of India.

     The following table sets forth, for the periods indicated, the dividend per equity share and the total amount of dividends paid out on the equity shares during the fiscal year by ICICI Bank, each exclusive of dividend tax. This may be different from the dividend declared for the year.

Dividend per
equity share
    Total amount
of
dividends paid
 


    (in millions)  
Dividend paid during the fiscal year    
                 
2001 Rs. 1.50   Rs. 247  
2002(1)   4.00 (1 )     881  
2003        
2004   7.50     4,598  
                 
2005   7.50     5,440  


(1) Includes dividend of Rs. 2.00 per share declared for each of the fiscal years 2001 and 2002.

      The government of India’s budget for fiscal 2004 exempted dividend income from being taxable in the hands of the investors. Until March 31, 2005, we are required to pay a 13.1% tax (including surcharge) on distributed profits. For a description of the tax consequences of dividends paid to shareholders, see “Taxation.”

     Future dividends will depend upon our revenues, cash flow, financial condition, the regulations of the Reserve Bank of India and other factors. Owners of ADSs will be entitled to receive dividends payable in respect of the equity shares represented by such ADSs. The equity shares represented by ADSs rank pari passu with existing equity shares.

     See also “Dividends” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

 

27




MARKET PRICE INFORMATION

Equity Shares

     Our outstanding equity shares are currently listed and traded on The Stock Exchange, Mumbai or the BSE and on the National Stock Exchange of India Limited or the NSE. For information regarding conditions in the Indian securities markets, see “Risk Factors – Risks Relating to the ADSs and Equity Shares – Conditions in the Indian securities markets may affect the price or liquidity of our equity shares and our ADSs.”

     At February 28, 2005, 736 million equity shares were outstanding. The prices for equity shares as quoted in the official list of each of the Indian stock exchanges are in Indian rupees.

      The following table shows:

  Price per equity share(1)
 
  High     Low       High       Low  
 


 


 


 


Annual prices:      
   Fiscal 2000 Rs. 267.05     Rs. 23.35   US$ 6.12     US$ 0.53
   Fiscal 2001 247.45   109.20   5.28   2.33
   Fiscal 2002 188.35   67.95   3.86   1.39
   Fiscal 2003 161.75   110.55   3.40   2.32
   Fiscal 2004 348.25   120.80   8.02   2.78
Quarterly prices:      
Fiscal 2003:      
   First Quarter 161.75   111.70   3.31   2.27
   Second Quarter 154.50   132.30   3.19   2.73
   Third Quarter 149.50   110.55   3.11   2.30
   Fourth Quarter 149.95   132.65   3.15   2.79
Fiscal 2004:      
   First Quarter 150.15   120.80   3.24   2.60
   Second Quarter 204.50   145.10   4.47   3.17
   Third Quarter 302.20   204.40   6.63   4.49
   Fourth Quarter 348.25   267.75   8.02   6.17
Fiscal 2005:      
   First Quarter 319.35   230.40   6.94   5.01
   Second Quarter 295.35   234.40   6.43   5.11
   Third Quarter 374.00   285.35   8.64   6.59
   Fourth Quarter (through March 8, 2005)   399.30   337.50   9.16   7.74  
Monthly prices:      
   August 2004 279.10   265.00   6.02   5.72
   September 2004 295.35   262.45   6.43   5.72
   October 2004 299.05   285.35   6.60   6.30
   November 2004 339.75   296.30   7.64   6.66
   December 2004 374.00   339.75   8.64   7.85
   January 2005 373.90   337.50   8.58   7.74
   February 2005   383.15   361.10   8.79   8.29  
   March 2005 (through March 8, 2005)   399.30   372.25   9.16   8.54  


(1) Data from the NSE. The prices quoted on the BSE and other stock exchanges may be different.

     At March 8, 2005, the closing price of equity shares on the NSE was Rs. 398.95 equivalent to US$ 9.15 per equity share (US$ 18.31 per ADS on an imputed basis) translated at the noon buying rate of Rs. 43.58 per US$ 1.00 on March 8, 2005.

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     At February 28, 2005, there were approximately 456,006 holders of record of equity shares, of which 106 had registered addresses in the United States and held an aggregate of approximately 102,490 equity shares.

ADSs

     Our ADSs, each representing two equity shares, were originally issued in March 2000 in a public offering and are listed and traded on the New York Stock Exchange under the symbol IBN. The equity shares underlying the ADSs are currently listed on The Stock Exchange, Mumbai and the National Stock Exchange of India Limited.

     At February 28, 2005, we had approximately 80 million ADSs, equivalent to 160 million equity shares, outstanding. At this date, there were 87 record holders of our ADSs, 85 of which have registered addresses in the United States.

     The following table sets forth, for the periods indicated, the reported high and low closing prices on the New York Stock Exchange for our outstanding ADSs traded under the symbol IBN.

Price per ADS

High   Low






   Fourth Quarter (from March 28, 2000) US$ 15.38   US$ 14.38
Annual prices:  
   Fiscal 2001 18.75   4.62
   Fiscal 2002 7.50   2.70
   Fiscal 2003 8.26   4.84
   Fiscal 2004 18.33   5.27
Quarterly prices:  
   Fiscal 2003:  
   First Quarter 8.26   4.99
   Second Quarter 7.34   5.50
   Third Quarter 7.00   4.84
   Fourth Quarter 7.13   6.10
Fiscal 2004:  
   First Quarter 7.27   5.27
   Second Quarter 10.56   7.23
   Third Quarter 17.91   10.90
   Fourth Quarter 18.33   13.50
Fiscal 2005:  
   First Quarter 17.25   11.57
   Second Quarter 13.91   11.25
   Third Quarter 20.45   13.76
   Fourth Quarter (through March 8, 2005)   22.65   18.27  
Monthly prices:  
   July 2004 13.02   11.25
   August 2004 13.55   11.99
   September 2004 13.91   12.20
   October 2004 15.76   13.76
   November 2004 18.85   15.55
   December 2004 20.45   18.61
   January 2005 19.77   18.27
   February 2005   22.65   20.20  
   March 2005 (through March 8, 2005)   22.50   20.88  

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CAPITALIZATION

     The following table sets forth our capitalization as of December 31, 2004 prepared in accordance with US GAAP in Indian rupees and, for convenience, in US dollars:

  As of December 31, 2004
 
    (Rupees in
millions)
  (US dollars in
millions)
Indebtedness:    
Short-term liabilities(1)    
Deposits (2) Rs. 710,867 US$ 16,429
Short-term borrowings   98,375   2,274
Long-term debt maturing within one year   71,527   1,653
   
   
 
Total short-term liabilities   880,769   20,356
     
Long-term liabilities    
Deposits   118,031   2,728
Long-term debt, net of current maturities   282,073   6,519
   
   
 
Total long-term liabilities   400,104   9,247
   
 
Total indebtedness   1,280,873   29,602
             
Stockholders’ equity:    
Common stock(3)   7,359   170
Additional paid-in capital   96,686   2,234
Retained earnings   17,302   400
Deferred compensation   (74 )   (2 )
Other comprehensive income(4)   1,450   34
   
   
 
Total stockholders’ equity   122,723   2,836
   
 
Total capitalization   Rs. 1,403,596   US$ 32,438
   
 


(1) Short-term liabilities have residual maturity of less than one year while long-term liabilities have residual maturity of one year and more.
   
(2) Includes current and savings deposits that have no contractual maturity.
   
(3) Common stock at Rs. 10 par value; 1,550,000,000 shares authorized as of December 31, 2004; 735,928,149 shares issued and outstanding as of December 31, 2004.
   
(4)  Represents unrealized gains and losses on marketable equity securities and debt securities available for sale.
   

30






EXCHANGE RATES

     Fluctuations in the exchange rate between the Indian rupee and the US dollar will affect the US dollar equivalent of the Indian rupee price of the equity shares on the Indian stock exchanges and, as a result, will affect the market price of our ADSs in the United States. These fluctuations will also affect the conversion into US dollars by the depositary of any cash dividends paid in Indian rupees on our equity shares represented by ADSs.

     During fiscal 2005 (through March 8, 2005), the rupee has depreciated against the dollar by 0.4%. The following table sets forth, for the periods indicated, certain information concerning the exchange rates between Indian rupees and US dollars based on the noon buying rate.

Fiscal Year Period End(1)   Average(1)(2)




             
1999 42.50     42.27  
2000 43.65     43.46  
2001 46.85     45.88  
2002 48.83     47.81  
2003 47.53     48.36  
2004 43.40     45.78  
2005 (through March 8, 2005)   43.58     44.87

Month   High   Low







July 2004   46.45     45.66  
August 2004   46.40     46.21  
September 2004   46.35     45.81  
October 2004   45.87     45.30  
November 2004   45.40     44.47  
December 2004   44.52     43.27  
January 2005   43.82     43.35  
February 2005   43.73     43.28
March 2005 (through March 8, 2005)   43.64     43.58

(1)  The noon buying rate at each period end and the average rate for each period differed from the exchange rates used in the preparation of our financial statements.
   
(2)  Represents the average of the noon buying rate on the last day of each month during the period.
   

     See also the section “Exchange Rates” in our annual report on Form 20-F for the fiscal year ended March 31, 2004 which is incorporated by reference into this prospectus.

31






SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

     The following tables set forth our summary financial and operating data on a consolidated basis. The summary date for the annual periods contained herein have been derived from our audited consolidated financial statements as of and for each of the five years ended March 31, 2004. The summary data for the nine months ended and at December 31, 2004 and December 31, 2003 have been derived from our unaudited consolidated financial statements, prepared in accordance with generally accepted accounting principles applicable in the United States, or US GAAP, and included in this prospectus. Our consolidated financial statements for fiscal 2004 and fiscal 2003 including our consolidated statement of operations, consolidated statement of cash flows and consolidated statement of stockholders’ equity and other comprehensive income for the year ended March 31, 2002, included in our annual report on Form 20-F for the fiscal year ended March 31, 2004 were audited by KPMG LLP, UK, an independent registered public accounting firm and are incorporated by reference into this prospectus together with the reports of KPMG LLP, UK.

     You should read the following data with the more detailed information contained in ''Operating and Financial Review and Prospects” included elsewhere in this prospectus and our consolidated financial statements and the related notes included elsewhere and incorporated by reference in this prospectus. Historical results do not necessarily predict the results in the future.

Year ended March 31,   Nine months ended
December 31,

 
    2000   2001   2002   2003   2004   2003   2004   2004 (1)  
   





 









 
          (Unaudited)  
      (in millions, except per common share data)
Selected income statement data:    
Interest income   Rs. 79,296 Rs. 79,759 Rs. 78,600 Rs 97,714. Rs. 90,688 Rs. 67,619 Rs. 66,576 US$ 1,539
Interest expense     (67,492 )   (67,893 )   (69,520 )   (83,208 )   (72,375 )   (54,720 )   (49,742 ) 1,150


 

 

 



 

 

 

 
Net interest income   11,804 11,866 9,080   14,506 18,313 12,899 16,834 389
Dividends   1,502 345 267   389 431 271 237 5


 

 

 



 

 

 

 
Net interest income, including    
   dividends   13,306 12,211 9,347   14,895 18,744 13,170 17,071 394
Provisions for loan losses   (6,363 ) (9,892 ) (9,743 )   (19,649 )   (20,055 )   (15,289 ) (8,504 ) (197 )


 

 

 



 

 

 

 
Net interest income/(loss),    
including dividends, after    
provisions for loan losses   6,943 2,319 (396 )   (4,754 ) (1,311 ) (2,119 ) 8,567 197
Non-interest income   9,815 9,243 8,148   13,253 36,678 25,637 23,493 543


 

 

 



 

 

 

 
Net revenue   16,758 11,562 7,752   8,499 35,367 23,518 32,060 740
Non-interest expense   (5,302 ) (5,479 ) (7,596 )   (18,609 )   (27,101 )   (20,138 )   (23,895 ) (552 )
Equity in earnings/(loss) of    
   affiliates   20 735 294   (958 ) (1,437 ) (336 ) (1,254 ) (29 )
Minority interest   (361 ) 1 83   24 28 10 (2 )


 

 

 



 

 

 

 
Income/(loss) before income taxes    
and cumulative effect of    
   accounting changes   11,115 6,819 533   (11,044 ) 6,857 3,054 6,909 159
Income tax (expense)/benefit   (2,033 ) (189 ) (251 )   3,061 (1,638 ) (730 ) (1,658 ) (38 )


 

 

 



 

 

 

 
Income /(loss) before cumulative    
effect of accounting changes,    
   net of tax   9,082 6,630 282   (7,983 ) 5,219 2,324 5,251 121


 

 

 



 

 

 

 
Cumulative effect of accounting    
   changes, net of tax(2)   249 1,265    
Net income/ (loss)   Rs. 9,331 Rs. 6,630 Rs. 1,547 Rs. (7,983) Rs. 5,219 Rs. 2,324 Rs. 5,251 US$ 121


 

 

 



 

 

 

 
Per common share(3)    
Net income/(loss) from continuing    
   operations - Basic(4)   Rs. 28.90 Rs. 16.88 Rs. 3.94 Rs. (14.18) Rs. 8.50 Rs. 3.79 Rs. 7.24 US$ 0.17
Net income/(loss) from continuing    
   operations - Diluted(5)   27.54 16.81 3.94   (14.18 ) Rs. 8.43 Rs. 3.76 7.19 0.17
Dividends(6)   11.00 11.00 22.00   - 7.50 7.50 7.50 0.17
Book value   180.58 193.35 181.70   150.42 153.35 151.97 166.76 3.85
Common shares outstanding at    
   end of period (in millions of      
   common shares)   393 393 393   613 616 615 736
Weighted average common shares   323 393 393   563 614 614 725

32







Year ended March 31,   Nine months ended
December 31,

 
    2000   2001   2002   2003   2004   2003   2004   2004(1)  
   


 





          (Unaudited)  
    (in millions, except per common share data)  
Selected income statement data:                
   outstanding - Basic (in millions                
   of common shares)                
Weighted average common shares                
   outstanding - Diluted (in                
   millions of common shares)   344   393   393   563   619   619   731    

(1) Rupee amounts for the nine months ended December 31, 2004 have been translated into US dollars using the noon buying rate of Rs. 43.27 = US$ 1.00 in effect on December 31, 2004.
 
(2) In June 2001, the FASB issued SFAS No. 141, which requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed shall be recognized as goodwill. SFAS No. 141 specifies that intangible assets acquired in a purchase method business combination must be recognized and reported apart from goodwill, noting that any purchase price allocated to an assembled workforce need not be accounted separately. The excess of the fair value of the net assets over the cost of acquired entity is allocated pro rata to specified non-financial assets and remaining excess, if any, is recognized as an extraordinary gain. As of April 1, 2001, ICICI had an unamortized deferred credit of Rs. 1.3 billion (US$ 29 million) relating to the excess of the fair value of assets acquired over the cost of acquisition of ICICI. As required by SFAS No. 141, in conjunction with the early adoption of SFAS No. 142, the unamortized deferred credit as of April 1, 2001, was written-off and recognized as the effect of a change in the accounting principle.
 
(3) For fiscal years 2000, 2001 and 2002, based on the exchange ratio of 1:2 in which the shareholders of ICICI were issued shares of ICICI Bank, number of shares has been adjusted by dividing by two. Hence, these numbers are different from the numbers reported in the annual report on Form 20-F for fiscal 2002.
 
(4) Represents net income/(loss) before dilutive impact.
 
(5) Represents net income/(loss) adjusted for full dilution. All convertible instruments are assumed to be converted to common shares at the beginning of the year, at prices that are most advantageous to the holders of these instruments. For the purpose of calculating diluted earnings per share, the net income was adjusted for interest (after tax) on convertible instruments only for fiscal 2000, as the convertible bonds were almost entirely converted/redeemed in fiscal 2001. Shares assumed to be issued have been weighted for the period the convertible instruments are outstanding. Options to purchase 2,546,675, 7,015,800, 12,610,275 and 1,098,225 equity shares granted to employees at a weighted average exercise price of Rs. 226.0, Rs. 81.3, Rs. 154.7 and Rs. 266.6 were outstanding in fiscal 2001, 2002, 2003 and 2004, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the equity shares during the period. In fiscal 2003, we reported a net loss and accordingly all outstanding options at year-end fiscal 2003 are anti-dilutive. Options to purchase 1,189,450 and 7,271,375 equity shares granted to employees at a weighted average exercise price of Rs. 266.58 and Rs. 300.1 were outstanding in the nine months ended December 31, 2003 and 2004, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the equity shares during the period.
 
(6) We declared a dividend of Rs. 7.50 per equity share for fiscal 2003, which was paid in August 2003, i.e. in the nine months ended December 31, 2003. We declared a dividend of Rs. 7.50 per equity share for fiscal 2004, which was paid out in September 2004, i.e. in the nine months ended December 31, 2004. The dividend per equity share shown above is based on the total amount of dividends paid out on the equity shares during the year, exclusive of dividend tax. This was different from the dividend declared for the year. In US dollars, dividend was US$ 0.17 per equity share in fiscal 2004.
 
(7) Certain reclassifications have been made in the financial statements of prior years to conform to classifications used in the current year. These changes have no impact on previously reported results of operations or stockholders’ equity.
 

33






     The following table sets forth, for the periods indicated, selected income statement data expressed as a percentage of average total assets for the respective period (percentages for the nine months ended December 31, 2003 and December 31, 2004 are annualized).

Year ended March 31,   Nine months ended
December 31,
   
 
    2000   2001   2002   2003   2004   2003   2004  
   

 

 

 

 

 

 

                  (Unaudited)  
Selected income statement data:              
Interest income   11.23 %   11.29 %   10.53 %   8.63 %   7.14 %   7.28 %   6.08 %
Interest expense   (9.56 )   (9.61 )   (9.31 )   (7.35 )   (5.70 )   (5.89 )   (4.54 )














Net interest income   1.67   1.68   1.22   1.28   1.44   1.39   1.54
Dividends   0.21   0.05   0.04   0.03   0.03   0.03   0.02














Net interest income, including dividends   1.88   1.73   1.25   1.32   1.48   1.42   1.56
Provisions for loan losses   (0.90 )   (1.40 )   (1.31 )   (1.73 )   (1.58 )   (1.65 )   (0.78 )














Net interest income/(loss), including              
    dividends, after provisions for loan              
   losses   0.98   0.33   (0.05 )   (0.42 )   (0.10 )   (0.23 )   0.78
Non-interest income   1.39   1.31   1.09   1.17   2.89   2.76   2.14














Net revenue   2.37   1.64   1.04   0.75   2.79   2.53   2.92
Non-interest expense   (0.75 )   (0.78 )   (1.02 )   (1.64 )   (2.13 )   (2.17 )   (2.18 )
Equity in earnings/(loss) of affiliates   0.00   0.10   0.04   (0.08 )   (0.11 )   (0.04 )   (0.11 )
Minority interest   (0.05 )   0.00   0.01   0.00   0.00   0.00   0.00














Income/(loss) before income taxes and              
    cumulative effect of accounting              
   changes   1.57   0.97   0.07   (0.98 )   0.54   0.32   0.63
Income tax (expense)/benefit   (0.29 )   (0.03 )   (0.03 )   0.27   (0.13 )   (0.08 )   (0.15 )














Income/(loss) before cumulative effect of              
   accounting changes, net of tax   1.28   0.94   0.04   (0.70 )   0.41   0.24   0.48
Cumulative effect of accounting changes,              
   net of tax   0.04     0.17        














Net income/(loss)   1.32 %   0.94 %   0.21 %   (0.70 )%   0.41 %   0.24 %   0.48 %
















At March 31,   Nine months ended
December 31,

 
    2000   2001   2002   2003   2004   2003   2004   2004 (1)  
   





 









 
          (Unaudited)  
      (in millions, except per common share data)
Selected balance sheet data:                    
Total assets   Rs. 774,279   Rs. 739,892   Rs. 743,362   Rs. 1,180,263   Rs. 1,409,131   Rs. 1,287,802   Rs. 1,634,697   US$ 37,780  
Securities     18,871     18,861     60,046     280,621     310,368     317,512     358,973     8,296  
Loans, net(2)     561,448     602,023     523,601     630,421     728,520     660,159     856,597     19,797  
Troubled debt restructuring                
    restructured loans), net     10,795     32,309     77,366     122,659     121,417     153,275     102,940     2,379  
Other impaired loans, net     24,240     20,081     33,187     55,319     28,764     36,847     20,430     472  
Total liabilities     699,073     663,829     671,754     1,087,926     1,313,556     1,193,550     1,510,872     34,919  
Long-term debt     436,320     492,882     511,458     400,812     373,449     373,854     353,600     8,172  
Deposits     96,682     6,072     7,380     491,290     684,955     613,047     828,898     19,156  
Redeemable preferred                
   stock(3)     10,207     698     772     853     944     921     1,019     24  
Stockholders' equity     70,908     75,927     71,348     92,213     94,525     93,494     122,723     2,836  
Common stock     3,916     3,924     3,922     6,127     6,164     6,153     7,359     170  
Period average(4):                
Total assets     706,066     706,343     746,330     1,132,638     1,269,638     1,233,134     1,454,166     33,607  
Interest-earning assets     612,452     615,164     641,141     924,573     1,017,009     988,968     1,143,372     26,424  
Loans, net(2)     513,421     570,989     591,398     606,496     662,752     644,223     767,248     17,732  
Total liabilities(5)     650,794     631,324     670,750     1,038,377     1,173,961     1,138,784     1,333,794     30,825  
Interest-bearing liabilities     583,609     576,474     613,401     905,226     977,941     955,463     1,074,317     24,828  
Long-term debt     436,718     462,916     504,103     455,347     382,674     384,922     373,637     8,635  
Stockholders' equity   Rs.  55,272   Rs.  75,019   Rs.   75,580   Rs.  94,261   Rs.  95,678     94,350     120,372     2,782  
Profitability (6):                
Net income/(loss) as a                

34







At March 31,   Nine months ended
December 31,

 
    2000   2001   2002   2003   2004   2003   2004   2004 (1)  
   





 









 
          (Unaudited)  
      (in millions, except per common share data)
      percentage of:                
     Average total assets     1.32 %   0.94 %   0.21 %   (0.70 )%   0.41 %   0.25 %   0.48 %    
     Average stockholders’                
         equity     16.88   8.84   2.05   (8.47 )   5.45   3.27   5.79    
     Average stockholders’                
        equity (including redeemable                
        preferred stock(7)     15.95   8.89   2.12   (8.31 )   5.50   3.33   5.83    
Dividend payout ratio(8)     28.3   52.90   635.20   -   88.10   197.87   104.89    
Spread(9)     1.38   1.19   0.93   1.38   1.52   1.47   1.58    
Net interest margin(10)     1.93   1.93   1.42   1.57   1.80   1.73   1.95    
Cost-to-income ratio(11)     22.93   25.54   43.42   66.11   48.90   51.89   58.91    
Cost-to-average assets                
   ratio(12)     0.75   0.78   1.02   1.64   2.13   2.17   2.18    
Capital:                  
Average shareholders’ equity                
   as a percentage of average                
   total assets     7.83   10.62   10.13   8.32   7.54   7.65   8.28    
Average stockholders’ equity                
   (including redeemable                
   preferred stock) as a                
   percentage of average total                
   assets(13)     9.30   10.95   10.23   8.39   7.61   7.72   8.35    


At or for the year ended March 31,   At or for the
nine months
ended
December 31,

 
    2000     2001     2002     2003     2004     2004(14)
   

 

 

 

 



          (Unaudited)
(in percentages)
Asset quality:            
Net restructured loans as a percentage of net loans   1.92 %   5.37 %   14.78 %   19.45 %   16.67 %   12.02 %
Net other impaired loans as a percentage of net            
   loans   4.32   3.34   6.34   8.77   3.95   2.39
Allowance for loan losses on restructured loans as a            
   percentage of gross restructured loans   41.79   26.03   18.64   16.78   25.23   32.42
Allowance for loan losses on other impaired loans            
   as a percentage of gross impaired loans   52.07   51.89   34.61   33.48   42.74   47.52
Allowance for loan losses as a percentage of gross            
   loans   5.72   5.20   6.54   7.92   8.40   7.92


(1) Rupee amounts at December 31, 2004 have been translated into US dollars using the noon buying rate of Rs. 43.27 = US$ 1.00 in effect at December 31, 2004.
   
(2)  Net of allowance for loan losses, security deposits and unearned income in respect of restructured and other impaired loans and allowances for loans not specifically identified as restructured or other impaired loan.
   
(3) ICICI had issued preferred stock redeemable at face value after 20 years. Banks in India are not currently allowed to issue preferred stock. However, we are currently exempt from this restriction.
   
(4) For the nine months ended December 31, 2003, the average balances are the average of quarterly balances outstanding at the end of March of the previous fiscal year, June, September and December of that year. For the nine months ended December 31, 2004, the average balances (except for deposits and government of India securities) are the average of quarterly balances outstanding at the end of March of the previous fiscal year, June, September, and December of that year. The average balances of deposits and government of India securities are the average of the daily balances outstanding during the period. For fiscal years 2000, 2002, 2003 and 2004, the average balances are the average of quarterly balances outstanding at the end of March of the previous fiscal year, June, September, December and March of that fiscal year. For fiscal 2001, due to
   

35








  deconsolidation of ICICI Bank, the average balances are calculated as the average of quarterly balances outstanding at the end of June, September, December and March of that fiscal year.
   
(5) Represents the average of the quarterly balance of total liabilities and minority interest.
   
(6) Profitability data for the nine months ended December 31, 2003 and December 31, 2004 is annualized.
   
(7)  Represents the ratio of net income plus dividend on redeemable preferred stock to the sum of average stockholders' equity and average redeemable preferred stock. Under Indian tax laws, dividend on preferred stock is not tax deductible.
   
(8) Represents the ratio of total dividends paid on common stock, exclusive of dividend distribution tax, as a percentage of net income.
   
(9)  Represents the difference between yield on average interest-earning assets and cost of average interest-bearing liabilities. Yield on average interest-earning assets is the ratio of interest income to average interest-earning assets. Cost of average interest-bearing liabilities is the ratio of interest expense to average interest-bearing liabilities.
   
(10) Represents the ratio of net interest income to average interest-earning assets. The difference in net interest margin and spread arises due to the difference in the amount of average interest-earning assets and average interest-bearing liabilities. If average interest-earning assets exceed average interest-bearing liabilities, net interest margin is greater than spread, and if average interest-bearing liabilities exceed average interest-earning assets, net interest margin is less than spread.
   
(11)  Represents the ratio of non-interest expense to the sum of net interest income, dividend and non-interest income.
   
(12)  Represents the ratio of non-interest expense to average total assets.
   
(13)  ICICI Bank’s capital adequacy is computed in accordance with the Reserve Bank of India’s guidelines and is based on unconsolidated financial statements prepared in accordance with Indian GAAP. At December 31, 2004, ICICI Bank’s total capital adequacy ratio was 13.50% with a Tier 1 capital adequacy ratio of 8.62% and a Tier 2 capital adequacy ratio of 4.88%.
   
(14) Percentages for the nine months ended December 31, 2004 are not annualized.
 

 

36






OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim consolidated financial statements included elsewhere in this prospectus and our audited consolidated financial statements in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus. The following discussion is based on our unaudited interim financial statements and our audited financial statements and accompanying notes, which have been prepared in accordance with US GAAP.

Indian Economy and Banking Sector

     The rate of GDP growth was 7.0% in the first six months of fiscal 2005. In the same period, industry and services sectors grew by 8.2% and 8.4% respectively while agriculture grew by 1.5% .

     During fiscal 2005 to date, there has been an increase in inflationary trends in India, with the average annual rate of inflation measured by the Wholesale Price Index rising significantly during the second quarter before moderating more recently. The average annual rate of inflation measured by the Wholesale Price Index was 6.7% in fiscal 2005 (through February 19, 2005), with the year-on-year rate of inflation peaking at 8.74% for the week ended August 28, 2004. The year-on-year rate of inflation for the week ended February 19, 2005 was 4.8%. These inflationary trends were primarily due to the increase in international crude oil prices as well as prices of certain commodities. Given that India imports approximately 70.0% of its requirements of crude oil which constituted approximately 26.7% of total imports in fiscal 2004 and 29.2% of total imports from April through December 2004, an increase in international crude oil prices affects the Indian economy. The average annual rate of inflation measured by the Consumer Price Index for industrial workers was 4.2% for November 2004. In addition, during fiscal 2005 (through January 24, 2005), the rupee depreciated against the US dollar by 0.8% . Foreign exchange reserves were US$ 129.4 billion at January 14, 2005.

     The impact of these and other factors and the overall growth in industry, agriculture and services will affect the performance of the banking sector as it will affect the level of credit disbursed by banks, and the overall growth prospects of our business, including our ability to grow, the quality of our assets, the value of our investment portfolio and our ability to implement our strategy.

     During fiscal 2005 (through February 18, 2005), deposits of scheduled commercial banks grew by 11.9% and bank credit of scheduled commercial banks grew by 21.7% (not including the impact of the conversion of Industrial Development Bank of India into a scheduled commercial bank in October 2004).

     In September 2004, the Reserve Bank of India indicated a tightening of monetary policy through an increase in the cash reserve ratio, in response to an increase in the rate of inflation. In October 2004, in its mid-term review of the annual policy statement for fiscal 2005, the Reserve Bank of India increased the reverse repo rate (i.e., the annualized interest earned by the lender in a repurchase transaction or between a bank and the Reserve Bank of India) by 0.25% to 4.75% . The bank rate, however, was kept unchanged at 6.0% . The Reserve Bank of India also increased the risk weight for housing loans from 50.0% to 75.0% and for consumer credit, including personal loans and credit cards, from 100.0% to 125.0%, as a temporary counter-cyclical measure given the rapid growth in these segments. The inflationary trends in fiscal 2005 have resulted in an increase in benchmark secondary market yields on government securities and an increase in lending and deposit rates of banks. The yield on 10-year government of India securities increased from 5.1% at March 31, 2004 to a high of 7.3% at November 8, 2004 before declining to 6.6% at March 4, 2005.

Results of Operations

     From fiscal 2002, we have experienced major changes and developments in our business and strategy. An understanding of these events and developments is necessary for an understanding of the discussion and analysis that follows. These changes are reflected in our financial statements in connection with or since the amalgamation of ICICI Limited into ICICI Bank. The first change reflects the impact of our history upon our average cost of funds. ICICI was a non-bank financial institution which funded itself primarily in the wholesale debt markets and had a higher cost of funding relative to banks in India. Consequent to the amalgamation, the businesses formerly conducted by ICICI became subject for the first time to various regulations applicable to banks. These include the prudential reserve and liquidity requirements, namely the statutory liquidity ratio under Section 24 of the Indian Banking Regulation Act, 1949 and the cash reserve ratio

37






under Section 42 of the Reserve Bank of India Act, 1934. The statutory liquidity ratio is required to be maintained in the form of government of India securities and other approved securities, currently a minimum of 25.0% of our net demand and time liabilities. The cash reserve ratio has to be maintained in the form of cash balances with the Reserve Bank of India, which has increased the cash reserve ratio from 4.50% to 4.75% of our net demand and time liabilities, excluding inter-bank deposits, effective September 18, 2004 and to 5.00% effective October 2, 2004. While we have benefited from the lower cost of funding as a bank as compared to ICICI as a non-bank financial institution, the imposition of the statutory liquidity ratio and the cash reserve ratio on the higher cost liabilities of ICICI (which were not originally subject to these requirements) have impacted our spread. As the average yield on investments in government of India securities and cash balances maintained with the Reserve Bank of India is typically lower than the yield on other interest-earning assets, our net interest margin has been adversely impacted. As a result, our net interest margin has been and is expected to continue to be lower than other banks in India until we repay the borrowings of ICICI. We are expanding our deposit base and changing the mix of our liabilities away from the legacy ICICI liabilities towards the lower average cost deposits. The increase in investment in government securities has substantially increased our exposure to market risk. In a declining interest rate environment, we made gains on sale of government securities. A rise in interest rates would cause the value of our fixed income portfolio to decline and adversely affect the income from our treasury operations.

     Another key change reflects the implementation of our strategy to grow our retail loan portfolio. The results of our implementation of this strategy can be seen in the rapid growth in the retail loan portfolio. While we cannot guarantee that growth will continue at the same rate, we see continued significant demand for retail loans.

     Long-term project finance was a major proportion of ICICI's asset portfolio and continues to be a significant portion of our loan portfolio, though we have diversified our lending towards retail loans and working capital financing. Over the past several years, we and ICICI experienced a high level of impaired loans in our loan portfolio as a result of downturn in certain global commodity markets, increased competition in India, the high level of debt in the financing of projects and capital structures of Indian companies and high interest rates in the Indian economy during the period in which a large number of projects contracted their borrowings, as well as delays experienced in enforcement of collateral when borrowers defaulted on their obligations to us. Our loan portfolio includes loans to projects under implementation and there are risks and uncertainties associated with the timely completion and viability of these projects. Our retail loans have grown rapidly and the level of impaired loans in our retail portfolio could increase if there is a rise in unemployment, prolonged recessionary conditions and a sharp and sustained rise in interest rates in India.

     In addition to the above, the directed lending norms of Reserve Bank of India require commercial banks to lend 40.0% of their net bank credit to specific sectors (known as priority sectors), such as agriculture, small-scale industry, small businesses and housing finance. Prior to the amalgamation, the advances of ICICI were not subject to the requirement applicable to banks in respect of priority sector lending. Pursuant to the terms of Reserve Bank of India’s approval to the amalgamation, we are required to maintain a total of 50.0% of our net bank credit on the residual portion of our advances (i.e., the portion of our total advances excluding advances of ICICI at year-end fiscal 2002) in the form of priority sector advances. This additional requirement of 10.0% by way of priority sector advances will apply until such time as the aggregate priority sector advances reach a level of 40.0% of our net bank credit. The Reserve Bank of India’s existing instructions on sub-targets under priority sector lending and eligibility of certain types of investments and funds for reckoning as priority sector advances also apply to us. See “Supervision and Regulation - Directed Lending - Priority Sector Lending” included elsewhere in this prospectus and “Business - Loan Portfolio - Directed Lending - Priority Sector Lending” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

   Consequences of Tsunami

     The Tsunami wave which hit the east coast of India on December 26, 2004, while horrible in its human and emotional consequences, is not expected to have a material adverse impact on our results and financial operations as our operations are concentrated in other areas of the country and in other sectors of the Indian economy. See also “Risk Factors – Risks Relating to India – Natural calamities could have a negative impact on the Indian economy and could cause our business to suffer and the price of our equity shares and our ADSs to go down.” In response to the crisis, we decided to facilitate contributions to the relief effort through our branches and other channels,

38






including by waiving transaction charges, and we donated Rs. 50 million to the Fund. In addition, our employees have made donations out of their salaries to aid the relief and rehabilitation efforts.

   Average Balance Sheet

     For the nine months ended December 31, 2003, the average balances are the average of quarterly balances outstanding at the end of March of the previous fiscal year, June, September and December of that year. For the nine months ended December 31, 2004, the average balances (except for deposits and government of India securities) are the average of quarterly balances outstanding at the end of March of the previous fiscal year, June, September, and December of that year. The average balances of deposits and government of India securities are the average of the daily balances outstanding during the period. The average yield on average interest-earning assets is the ratio of interest income to average interest-earning assets. The amortized portion of loan origination fees (net of loan origination costs) was included in interest income on loans, representing an adjustment to the yield. The average cost on average interest-bearing liabilities is the ratio of interest expense to average interest-bearing liabilities. The average balances of loans include impaired loans and are net of allowance for loan losses. We did not recalculate tax-exempt income on a tax-equivalent basis because we believed that the effect of doing so would not be significant. Total interest income also includes other interest income, which is primarily interest on refund of income tax.

     The following table sets forth, for the periods indicated, the average balances of the assets and liabilities outstanding, which are major components of interest income, interest expense and net interest income. The average balances of loans include impaired loans and are net of allowance for loan losses.

 

39







Nine months ended December 31,

2003   2004

 
    Average
Balance
      Interest
income/expense
      Average
yield/cost(1)
    Average
balance
      Interest/income
expense
      Average
yield/cost(1)
 

















Assets:                        
Cash, cash equivalents and                        
   trading assets:                        
       Rupee Rs. 59,843     Rs. 3,048       6.76 %   Rs. 56,159       2,448       5.79 %
       Foreign currency   9,072   112       1.63       32,071       294       1.22
 





     





     
Total cash, cash equivalents and                          
   trading assets   68,915   3,160       6.09       88,230       2,742       4.12
Securities—debt:                        
       Rupee   275,544   12,032       5.80       287,692       11,045       5.10
       Foreign currency   286   2       0.97       202       3       1.54
 





     





     
Total securities—debt   275,830   12,034       5.79       287,894       11,048       5.09
Loans, net:                        
       Rupee   574,092   48,293       11.17       668,193       47,104       9.36
       Foreign currency   70,131   3,143       5.95       99,055       4,395       5.89
 





     





     
Total loans, net   644,223   51,436       10.60       767,248       51,499       8.91
Other interest income   -   989               1,287      
Interest-earning assets:                        
       Rupee   909,479   64,362       9.39       1,012,044       61,884       8.12
       Foreign currency   79,489   3,257       5.44       131,328       4,692       4.74
 





     





     
Total interest-earning assets   988,968   67,619       9.07       1,143,372       66,576       7.73
Securities—equity:                        
       Rupee   26,924   271       1.34       26,762       237       1.18
       Foreign currency                            
 





     





     
Total securities—equity   26,924   271       1.34       26,762       237       1.18
Earning assets:                        
       Rupee   936,403   64,633       9.16       1,038,806       62,121       7.94
       Foreign currency   79,489   3,257       5.44       131,328       4,692       4.74
 





     





     
Total earning assets   1,015,892   67,890       8.87       1,170,134       66,813       7.58
Cash and cash equivalents   52,779           70,460            
Acceptances   47,098           84,252            
Property and equipment   21,973           22,826            
Other assets   95,392           106,494            
 





     





     
Total non-earning assets   217,242           284,032            
 





     





     
Total assets Rs. 1,233,134     Rs. 67,890       Rs. 1,454,166     Rs. 66,813      
 





     





     

40







Nine months ended December 31,

2003   2004

 
    Average
Balance
      Interest
income/expense
      Average
yield/cost(1)
    Average balance       Interest
income/expense
      Average
yield/cost(1)
 

















Savings account deposits:                          
       Rupee Rs. 50,144     Rs. 902       2.39 %   Rs. 86,174     1,536       2.37 %
       Foreign currency   69         0.48       107           0.11
 





     





     
Total savings account deposits   50,213   902       2.38       86,281     1,536       2.36
Time deposits:                          
       Rupee   437,307   21,410       6.50       498,783     20,902       5.56
       Foreign currency   12,946   280       2.87       30,200     737       3.24
 





     





     
Total time deposits   450,253   21,690       6.39       528,983     21,639       5.43
Long-term debt:                          
       Rupee   335,307   28,003       11.08       308,619     21,415       9.21
       Foreign currency   49,615   1,333       3.57       65,018     2,130       4.35
 





     





     
Total long-term debt   384,922   29,336       10.12       373,637     23,545       8.36
Redeemable preferred stock   887   68       10.17       982     75       10.14
Trading account and other                          
   liabilities:                          
       Rupee   51,406   2,504       6.47       52,824     2,572       6.46
       Foreign currency   17,782   220       1.64       31,610     375       1.58
 





     





     
Total trading account and other                          
   liabilities   69,188   2,724       5.23       84,434     2,947       4.63
Interest-bearing liabilities:                          
       Rupee   875,051   52,887       8.02       947,382     46,500       6.51
       Foreign currency   80,412   1,833       3.03       126,935     3,242       3.39
 





     





     
Total interest-bearing liabilities   955,463   54,720       7.60       1,074,317     49,742       6.15
Non-interest-bearing deposits:                          
       Rupee   48,805               81,771          
       Foreign currency   7               90          
 





     


           
Total non-interest-bearing deposits   48,812               81,861          
Other liabilities   134,509               177,616          
 





     


           
Total non-interest-bearing                          
   liabilities   183,321               259,477          
Total liabilities Rs. 1,138,784     Rs. 54,720             1,333,794          
 





     


           
Stockholders' equity Rs. 94,350               120,372          
 





     


           
Total liabilities and stockholders’                          
   equity Rs. 1,233,134     Rs. 54,720           Rs. 1,454,166     Rs. 49,742      
 





     





     


(1) Average yield and average cost for the nine months ended December 31, 2003 and 2004 are annualized.
   

41






   Analysis of changes in interest income and interest expense volume and rate analysis

     The following table sets forth, for the periods indicated, the changes in the components of net interest income. The changes in net interest income between periods have been reflected as attributed either to volume or rate changes. For the purpose of this table, changes, which are due to both volume and rate, have been allocated solely to volume.

    Nine months ended December 31, 2004 vs.
Nine months ended December 31, 2003
   
    Increase (decrease) due to
   
    Net change   Change in
average volume
  Change in
average rate
   


 


 


    (in millions)
Interest Income :      
Cash, cash equivalents and trading assets:      
       Rupee   Rs. (600 )   Rs. (160 )   Rs. (440 )
       Foreign currency   182   211   (29 )









Total cash, cash equivalents and trading Assets   (418 )   51   (469 )
Securities:      
       Rupee   (987 )   466   (1,453 )
       Foreign currency   1   (1 )   2









Total securities   (986 )   465   (1,451 )
Loans:      
       Rupee   (1,189 )   6,634   (7,823 )
       Foreign currency   1,252   1,284   (32 )









Total loans   63   7,918   (7,855 )
Other interest income   298   298  









Total interest income:      
       Rupee   (2478 )   7,238   (9,716 )
       Foreign currency   1,435   1,494   (59 )









Total interest income   Rs. (1,043 )   Rs. 8,732   Rs. (9,775 )
Interest expense:      
Savings account deposits:      
       Rupee   Rs. 634   Rs. 642   (8 )
       Foreign currency      









Total savings account deposits   Rs. 634   Rs. 642   Rs. (8 )
Time deposits:      
       Rupee   (508 )   2,577   (3,085 )
       Foreign currency   457   421   36









Total time deposits   (51 )   2,998   (3,049 )
Long-term debt:      
       Rupee   (6,588 )   (1,853 )   (4,735 )
       Foreign currency   797   505   292









Total long-term debt   (5,791 )   (1,348 )   (4,443 )
Redeemable preferred stock(1)   7   7  
Trading account and other liabilities:      
       Rupee   68   69   (1 )
       Foreign currency   155   163   (8 )









Total trading account and other liabilities   223   232   (9 )
Total interest expense:      
       Rupee   (6,387 )   1,442   (7,829 )
       Foreign currency   1,409   1,089   320









Total interest expense   Rs. (4,978 )   Rs. 2,531   Rs. (7,509 )
Net interest income:      

42







    Nine months ended December 31, 2004 vs.
Nine months ended December 31, 2003
   
    Increase (decrease) due to
   
    Net change   Change in
average volume
  Change in
average rate
   


 


 


    (in millions)
       Rupee   3,909   5,796   (1,887 )
       Foreign currency   26   405     (379 )









Total net interest income   Rs. 3,935   Rs. 6,201   Rs. (2,266 )











(1) Banks in India are not allowed to issue preferred stock. However, we have been currently exempted from this restriction.
   

    Yields, Spreads and Margins

     The following table sets forth, for the periods indicated, the yields, spreads and net interest margins on interest-earning assets.

    Year Ended March 31   Nine months ended
December 31
   
 
      2002     2003     2004   2003   2004
   


 


 


 

 

Interest income   Rs. 78,600   Rs. 97,714   Rs. 90,688   67,619   66,576
Average interest-earning assets   641,141     924,573     1,017,009   988,968   1,143,372
Interest expense   69,520     83,208     72,375   54,720   49,742
Average interest-bearing liabilities   613,401     905,226     977,941   955,463   1,074,317
Average total assets   746,330     1,132,638     1,269,638   1,233,134   1,454,166
Average interest-earning assets as a percentage of              
   average total assets   85.91 %     81.63 %     80.10 %   80.20 %   78.63 %
Average interest-bearing liabilities as a percentage of                
   average total assets   82.19     79.92     77.03   77.48   73.88
Average interest-earning assets as a percentage of              
   average interest-bearing liabilities   104.52     102.14     103.99   103.51   106.43
                                     
Yield(1)   12.26     10.57     8.92   9.07   7.73
       Rupee   12.98     11.06     9.19   9.39   8.12
       Foreign currency   7.17     5.42     5.73   5.44   4.74
                                     
Cost of funds(1)   11.33     9.19     7.40   7.60   6.15
       Rupee   12.26     9.82     7.83   8.02   6.51
       Foreign currency   6.34     3.59     3.03   3.03   3.39
                                     
Spread (1) (2)   0.93     1.38     1.52   1.47   1.58
       Rupee   0.72     1.24     1.36   1.37   1.61
       Foreign currency   0.84     1.84     2.69   2.41   1.35
                                     
Net interest margin (1) (3)   1.42     1.57     1.80   1.73   1.95
       Rupee   1.69     1.59     1.74   1.67   2.02
       Foreign currency   -0.48     1.35     2.45   2.38   1.46


(1) Yield, cost of funds, spread and net interest margin are annualized for the nine months ended December 31, 2003 and 2004.
   
(2) Spread is the difference between yield on average interest-earning assets and cost of average interest-bearing liabilities. Yield on average interest-earning assets is the ratio of interest income to average interest-earning assets. Cost of average interest-bearing liabilities is the ratio of interest expense to average interest-bearing liabilities.
   
(3) Net interest margin is the ratio of net interest income to average interest-earning assets. The difference in net interest margin and spread arises due to the difference in amount of average interest-earning assets and average interest-bearing liabilities. If average interest-earning assets exceed average interest-bearing liabilities, net interest margin is greater than the spread and if average interest-bearing liabilities exceed average interest-earning assets, net interest margin is less than the spread.
   

Summary for the nine months ended December 31, 2004, compared to the nine months ended December 31, 2003

     Net income amounted to Rs. 5.3 billion (US$ 121 million) for the nine months ended December 31, 2004 compared to Rs. 2.3 billion (US$ 54 million) for the nine months ended December 31, 2003, primarily due to a

43






30.5% increase in net interest income (excluding dividends) before provisions for loan losses to Rs. 16.8 billion (US$ 389 million) for the nine months ended December 31, 2004 from Rs. 12.9 billion (US$ 298 million) for the nine months ended December 31, 2003 and a 44.4% decrease in provisions for loan losses to Rs. 8.5 billion (US$ 197 million) for the nine months ended December 31, 2004 from Rs. 15.3 billion (US$ 353 million) for the nine months ended December 31, 2003.

Net Interest Income

     The following table sets forth, for the periods indicated, the principal components of net interest income, excluding income from dividends.

  Nine months ended December 31,
 
                2004/2003
  2003 2004 2004   % change
 




  (in millions, except percentages)
Interest income Rs. 67,619 Rs. 66,576 US$ 1,539   (1.5 )%
Interest expense (54,720 ) (49,742 ) (1,150 )   (9.1 )









Net interest income, excluding income  
   from dividends Rs. 12,899 Rs. 16,834 US$ 389   30.5 %










     Net interest income increased 30.5% to Rs. 16.8 billion (US$ 389 million) for the nine months ended December 31, 2004 from Rs. 12.9 billion (US$ 298 million) for the nine months ended December 31, 2003 reflecting mainly the following:

44






     The average volume of interest-earning rupee assets increased by 11.3% or Rs. 102.6 billion (US$ 2.4 billion) to Rs. 1,012.0 billion (US$ 23.4 billion) for the nine months ended December 31, 2004 from Rs. 909.5 billion (US$ 21.0 billion) for the nine months ended December 31, 2003, primarily due to the increase in the volume of loans. The average volume of loans increased by 19.1% to Rs. 767.2 billion (US$ 17.7 billion) for the nine months ended December 31, 2004 from Rs. 644.2 billion (US$ 14.9 billion) for the nine months ended December 31, 2003. The average volume of rupee loans increased by 16.4% or Rs. 94.1 billion (US$ 2.2 billion) to Rs. 668.2 billion (US$ 15.4 billion) for the nine months ended December 31, 2004 from Rs. 574.1 billion (US$ 13.3 billion) for the nine months ended December 31, 2003. This increase in average loans was primarily due to increased disbursements of retail finance loans offset, in part, by sell-down/securitization and repayments of loans. The average volume of foreign currency loans increased 41.2% to Rs. 99.1 billion (US$ 2.3 billion) for the nine months ended December 31, 2004 from Rs. 70.1 billion (US$ 1.6 billion) for the nine months ended December 31, 2003.

     Our gross loans increased 17.0% to Rs. 930.3 billion (US$ 21.5 billion) at December 31, 2004, from Rs. 795.3 billion (US$ 18.4 billion) at year-end fiscal 2004, primarily due to the increase in gross consumer loans and credit card receivables. Gross rupee loans at December 31, 2004 increased 14.7% to Rs. 809.6 billion (US$ 18.7 billion) compared to Rs. 705.7 billion (US$ 16.3 billion) at year-end fiscal 2004. Gross consumer loans and credit card receivables at December 31, 2004 increased 42.2% to Rs. 443.6 billion (US$ 10.3 billion) from Rs. 311.9 billion (US$ 7.2 billion) at year-end fiscal 2004, driven by the growth in the consumer credit market and our continued strategic focus on this area. Our project and corporate finance and working capital finance loans increased 9.5% to Rs. 438.2 billion (US$ 10.1 billion) at December 31, 2004 compared to Rs. 400.2 billion (US$ 9.2 billion) at year-end fiscal 2004, in view of repayments of the existing project finance portfolio and limited new lending to corporate clients. Gross foreign currency loans at December 31, 2004 increased 34.7% to Rs. 120.7 billion (US$ 2.8 billion) compared to Rs. 89.6 billion (US$ 2.1 billion) at year-end fiscal 2004 primarily due to increase in loans outstanding at our branch in Singapore and subsidiary in the United Kingdom.

     The average volume of cash, cash equivalents and trading account assets increased by 28.0% to Rs. 88.2 billion (US$ 2.0 billion) for the nine months ended December 31, 2004 from Rs. 68.9 billion (US$ 1.6 billion) for the nine months ended December 31, 2003. Trading account assets decreased by Rs. 59.9 billion (US$ 1.4 billion) to Rs. 15.3 billion (US$ 353 million) at December 31, 2004, from Rs. 75.2 billion (US$ 1.7 billion) at year-end fiscal 2004 primarily due to reduction in trading activity due to unfavorable conditions in the fixed income markets.

     Total interest income (excluding dividend) decreased 1.5 % to Rs. 66.6 billion (US$ 1.5 billion) for the nine months ended December 31, 2004 from Rs. 67.6 billion (US$ 1.6 billion) for the nine months ended December 31, 2003 primarily due to a decline of 127 basis points in the yield on interest-earning rupee assets, off-set, in part, by an increase of 11.3% in the average interest- earning rupee assets to Rs. 1,012.0 billion (US$ 23.4 billion) for the nine months ended December 31, 2004 from Rs. 909.5 billion (US$ 21.0 billion) for the nine months ended December 31, 2003. The yield on interest-earning rupee assets decreased 127 basis points to 8.1% for the nine months ended December 31, 2004 from 9.4% for the nine months ended December 31, 2003 primarily due to a decline in the yield on loans. There was a decline of 169 basis points in the yield on loans from 10.6% for the nine months ended December 31, 2003 to 8.9% for the nine months ended December 31, 2004 primarily due to origination of new loans at lower rates and the decline in our cost of funding, and a reduction in higher yield loans.

     Total interest expense decreased 9.1% to Rs. 49.7 billion (US$ 1.2 billion) for the nine months ended December 31, 2004 from Rs. 54.7 billion (US$ 1.3 billion) for the nine months ended December 31, 2003 primarily due to a decline of 145 basis points in the cost of liabilities off-set, in part by 12.4% increase in average interest bearing liabilities to Rs. 1,074.3 billion (US$ 24.8 billion) for the nine months ended December 31, 2004 from Rs. 955.5 billion (US$ 22.1 billion) for the nine months ended December 31, 2003. The average cost of rupee liabilities decreased 151 basis points to 6.5% for the nine months ended December 31, 2004 from 8.0% for the nine months ended December 31, 2003 primarily due to repayment of high cost borrowings. Average deposits, with an average cost of 4.4% for the nine months ended December 31, 2004, constituted 64.9% of total average interest-bearing liabilities compared to 57.5% of the total average interest-bearing liabilities with an average cost of 5.5% for the nine months ended December 31, 2003. While the average cost of long-term rupee debt decreased to

45






9.2% from 11.1%, the average cost of short-term rupee borrowings remained at the same level of 6.5% for the nine months ended December 31, 2004 compared to the nine months ended December 31, 2003. The average cost of foreign currency liabilities increased to 3.4% for the nine months ended December 31, 2004 from 3.0% for the nine months ended December 31, 2004. The foreign currency spread decreased 106 basis points to 1.4% for the nine months ended December 31, 2004 from 2.4% for the nine months ended December 31, 2003. The yield on the Company’s interest-earning foreign currency assets decreased to 4.7% for the nine months ended December 31, 2004 from 5.4% for the nine months ended December 31, 2003.

     The net interest margin increased by 22 basis points to 2.0% for the nine months ended December 31, 2004 from 1.7% for the nine months ended December 31, 2003 as rupee net interest margin increased by 35 basis points and foreign currency net interest margin decreased by 92 basis points. A 1.5% decline in the cost of funds was offset, in part, by a 1.3% decline in the yield on average interest-earning assets. While our margin has increased, it still continues to be lower than that of other banks in India primarily due to maintenance of statutory liquidity ratio and cash reserve ratio on ICICI’s liabilities, which were not subject to these ratios prior to the amalgamation. The average cost of our total deposits, including non-interest bearing deposits, was 4.4% for the nine months ended December 31, 2004 compared to 5.5% for the nine months ended December 31, 2003. While our cost of deposits is in line with the cost of deposits of other banks in India, our total cost of funding is higher compared to other banks in India as a result of the higher-cost borrowings of ICICI.

   Non-Interest Income

      The following table sets forth, for the periods indicated, the principal components of non-interest income.

  Nine months ended December 31,
 
    2003     2004     2004     2004/2003
% change
 
 

 

 

 

 
  (in millions, except percentages)
Fees, commission and brokerage Rs. 6,024   Rs. 12,086 US$ 279   100.6 %
Trading account revenue (1) 3,783   (1,119 ) (26 )   (129.6 )
Securities transactions (2) 8,696   3,413 79   (60.8 )
Foreign exchange transactions (3) 1,244   1,611 37   29.5
Gain on sale of loans 3,370   3,841 89   14.0
Software development and services 753   1,094 25   45.3
Profit on sale of certain premises and equipment 338   (63 ) (1 )   (118.6 )
Other income 1,429   2,630 61   84.0








Total non-interest income Rs. 25,637   Rs. 23,493 US$ 543   (8.4 )










(1)  Primarily reflects income from trading in government of India securities and corporate debt securities.
   
(2) Primarily reflects capital gains/(losses) realized on the sale of securities, including fixed income and equity, venture capital investments and revenues from investment banking subsidiary less other than temporary diminution.
   
(3) Arises primarily from purchase and sale of foreign exchange on behalf of corporate clients and revaluation of foreign currency assets and liabilities and outstanding forward contracts.

     Non-interest income decreased by 8.4% for the nine months ended December 31, 2004 to Rs. 23.5 billion (US$ 543 million), from Rs. 25.6 billion (US$ 592 million) for the nine months ended December 31, 2003 primarily due to decrease in trading account revenue and income on securities transactions, offset by an increase in income from fees, commission and brokerage.

     Fees, commission and brokerage increased 100.6% to Rs. 12.1 billion (US$ 279 million) for the nine months ended December 31, 2004 from Rs. 6.0 billion (US$ 139 million) for the nine months ended December 31, 2003 with growth across all our fee generating businesses. The large increase was primarily due to growth in retail liability product income such as account servicing charges, and transaction banking fee income from small enterprises, as well as an increase in transaction banking and other fee income from corporate banking. During this period we increased charges and introduced fresh charges for some of the services that we offer to our deposit

46






customers. During this period there was a significant increase in business volumes of transaction banking services such as bankers acceptances, bank guarantees and cash management services.

     Trading account revenue and gain on securities transactions decreased 81.6% to Rs. 2.3 billion (US$ 53 million) for the nine months ended December 31, 2004 from Rs. 12.5 billion (US$ 288 million) for the nine months ended December 31, 2003 as the interest rates increased during this period. The yield on 10-year government of India securities increased by 1.43% to 6.60% during the nine months ended December 31, 2004. During the nine months ended December 31, 2003, the yield on 10-year government of India securities had declined by 106 basis points as compared to March 31, 2003 and we had capitalized on this decline to realize a high level of trading account revenue and gains on fixed income securities. The level of trading account revenue and gain on securities transactions is volatile as it depends on specific market conditions which may or may not be favorable.

     In the nine months ended December 31, 2004, gain on the sale of loans (including credit substitutes) increased by 14.0% to Rs. 3.8 billion (US$ 89 million) from Rs. 3.4 billion (US$ 78 million) in the nine months ended December 31, 2003. We view securitization and sell-down of corporate and retail loans as a key element of our business strategy, seeking to leverage our strong origination capabilities to meet the investment requirements of other financial intermediaries that have access to funding but relatively limited origination capabilities.

     Income from software development and services increased 45.3% to Rs. 1.1 billion (US$ 25 million) for the nine months ended December 31, 2004 from Rs. 753 million (US$ 17 million) for the nine months ended December 31, 2003 primarily due to addition of new clients and increased sale of software products by 3i Infotech Limited (formerly ICICI Infotech Limited).

     Other income has increased on account of increase in income from transaction processing services, earned by ICICI OneSource Limited to Rs. 2.2 billion (US$ 51 million) for the nine months ended December 31, 2004 from Rs. 1.2 billion (US$ 28 million) for the nine months ended December 31, 2003.

   Non-Interest Expense

      The following table sets forth, for the periods indicated, the principal components of non-interest expense.

  Nine months ended December 31,
 
    2003     2004     2004     2004/2003
% change
 
 

 

 

 

 
  (in millions, except percentages)
Employee expense:          
     Salaries Rs. 5,145   Rs. 7,165   US$ 166     39.3 %
     Employee benefits 2,698     1,009   23     (62.6 )
Total employee expense 7,843     8,174   189     4.2
Premises and equipment expense 4,511     5,265   122     16.7
Administration and other expense 7,329     10,003   231     36.5
Amortization of goodwill and intangible assets 455     453   10     (0.4 )
 

 

 

   
 
Total non-interest expense Rs. 20,138   Rs. 23,895   US$ 552     18.7 %
 

 

 

   
 

     Non-interest expense increased by 18.7% for the nine months ended December 31, 2004 to Rs. 23.9 billion (US$ 552 million) from Rs. 20.1 billion (US$ 465 million) for the nine months ended December 31, 2003 primarily due to an increase in administration expense and salary expenses.

     Total employee expense for the nine months ended December 31, 2003, included an amount of Rs. 1.9 billion (US$ 44 million) on account of payments under the Early Retirement Option Scheme in which 1,495 had availed the option in July 2003. Excluding the payments under the Early Retirement Option Scheme, employee expenses increased 37.8% to Rs. 8.2 billion (US$ 189 million) for the nine months ended December 31, 2004 from Rs. 5.9 billion (US$ 137 million) for the nine months ended December 31, 2003, primarily due to increase in the number of employees in ICICI Bank to 17,024 employees at December 31, 2004 from 12,475 employees at December 31, 2003. The increase in employees is commensurate with the growth in our retail business.

47






     Premises and equipment expense increased 16.7% to Rs. 5.3 billion (US$ 122 million) for the nine months ended December 31, 2004 from Rs. 4.5 billion (US$ 104 million) for the nine months ended December 31, 2003, primarily due to increased maintenance and depreciation expenses on premises, branches, ATMs, computers and computer software. Our number of ATMs increased from 1,758 at December 31, 2003 to 1,850 at December 31, 2004 and the number of branches and extension counters increased from 455 at December 31, 2003 to 505 at December 31, 2004.

     Administrative and other expenses increased 36.5% to Rs. 10.0 billion (US$ 231 million) for the nine months ended December 31, 2004 from Rs. 7.3 billion (US$ 169 million) for the nine months ended December 31, 2003, primarily due to an increase in advertisement expense, repairs and maintenance and retail business expenses in line with increase in business volumes and increased expenses of Internet-based brokering services subsidiary and business process outsourcing subsidiary.

Provisions for Loan Losses

     The following table set forth, at the dates indicated, certain information regarding restructured and other impaired loans.

    March 31, 2004   December 31,
2004
  December 31,
2004
  December/March
% change
 


 

 

 

 
  (in millions, except percentages)
Gross restructured loans Rs. 162,398 Rs. 152,329 US$ 3,520   (6.2 )%
Allowance for loan losses on restructured    
   loans   (40,981 )   (49,389 ) (1,141 )   20.5


 

 

       
Net restructured loans   121,417   102,940 2,379   (15.2 )


 

 

       
Gross other impaired loans   50,238   38,931 900   (22.5 )
Allowance for loan losses on other impaired    
   loans   (21,474 )   (18,501 ) (428 )   (13.8 )


 

 

       
Net other impaired loans   28,764   20,430 472   (29.0 )


 

 

       
Gross restructured and other impaired loans   212,636   191,260 4,420   (10.1 )
Allowance for loan losses(1)   (62,455 )   (67,890 ) (1,569 )   8.7


 

 

       
Net restructured and other impaired loans   150,181   123,370 2,851   (17.9 )


 

 

       
Gross total loans   795,287   930,313 21,500   17.0
Net total loans   728,520   856,597 19,797   17.6
Gross restructured loans as a percentage of    
   gross loans(2)   20.42 %   16.37 %    
Gross other impaired loans as a percentage    
   of gross loans(2)   6.32   4.18  
Net restructured loans as a percentage of net    
   loans(2)   16.67   12.02  
Net other impaired loans as a percentage of    
   net loans(2)   3.95   2.39  
Allowance for loans losses on restructured    
loans as a percentage of gross restructured    
   loans(2)   25.23   32.42  
Allowance for loan losses on other impaired    
   loans as a percentage of gross other    
   impaired loans(2)   42.74   47.52  
Allowance on loan losses as a percentage of    
   gross loans(2)   8.40   7.92  


(1) Does not include provisions on loans not specifically identified as restructured or other impaired loans.
   
(2) Percentages for the nine months ended December 31, 2004 are not annualized.

     The following table sets forth, for the periods indicated, certain information regarding provisions for loan losses.

48






  Nine months ended December 31,
 
    2003   2004 2004   % change  


 

 

 

 
  (in millions, except percentages)
Total provisions for the year Rs. 15,289 Rs. 8,504 US$ 197     (44.4 )%
Provision for loans losses as a percentage of      
   net loans   2.32 % 0.99 %    

     Gross restructured loans decreased 6.2% to Rs. 152.3 billion (US$ 3.5 billion) at December 31, 2004 from Rs. 162.4 billion (US$ 3.8 billion) at year-end fiscal 2004 primarily due to reclassification of certain loans as unimpaired based on satisfactory performance of the borrower accounts, offset in part, by restructuring of loans to certain companies in the telecom and automobile industries and reclassification of other impaired loans that were restructured or transferred to an asset reconstruction company during the year. Gross other impaired loans decreased 22.5% to Rs. 38.9 billion (US$ 900 million) at December 31, 2004 from Rs. 50.2 billion (US$ 1.2 billion) at year-end fiscal 2004 primarily due to reclassification of other impaired loans that were restructured or transferred to an asset reconstruction company during the year, as restructured loans, and reclassification of certain loans as unimpaired based on satisfactory performance of the borrower accounts. As a percentage of net loans, net restructured loans were 12.0% at December 31, 2004 and 16.7% at year-end fiscal 2004 and net other impaired loans were 2.4% at December 31, 2004 and 3.9% at year-end fiscal 2004. During the nine months ended December 31, 2004, we transferred impaired loans of Rs. 11.0 billion (US$ 255 million) to Asset Reconstruction Company (India) Limited. However, none of this amount was recognized as a sale in our US GAAP financial statements and all of this amount is included in our restructured loans.

     Provisions for loan losses for the nine months ended December 31, 2004 decreased 44.4% to Rs. 8.5 billion (US$ 197 million) from Rs. 15.3 billion (US$ 353 million) for the nine months ended December 31, 2003 primarily due to lower additions to gross restructured and other impaired loans. The coverage ratio on gross restructured loans increased to 32.4% at December 31, 2004 from 25.2% at year-end fiscal 2004 primarily due to reclassification of certain loans as unimpaired based on satisfactory performance of the borrower accounts, offset in part, by restructuring of loans to certain companies in the telecom and automobile industries and reclassification of other impaired loans that were restructured. The coverage ratio on other impaired loans increased to 47.5% at December 31, 2004 from 42.7% at year-end fiscal 2004.

   Income Tax Expense

     Income tax expense amounted to Rs. 1.7 billion (US$ 38 million) for the nine months ended December 31, 2004 compared to income tax expense of Rs. 730 million (US$ 17 million) for the nine months ended December 31, 2003. The effective rate of tax expense was 24.0% for the nine months ended December 31, 2004 compared to effective tax expense of 23.9% for the nine months ended December 31, 2003. The effective tax rate of 24.0% for the nine months ended December 31, 2004 was lower compared to statutory tax rate of 36.6% primarily due to exempt interest and dividend income and the charging of certain income at rates other than statutory tax rate.

   Financial Condition

      Assets

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

    March 31, 2004   December 31,
2004
  December 31,
2004
  December/March
% change
 


 

 

 

 
  (in millions, except percentages)
Cash and cash equivalents Rs. 98,985   Rs. 138,284   US$ 3,196     39.7 %
Trading account assets (1) 75,155   15,281   353     (79.7 )
Securities, excluding venture capital        
   investments (2) 305,226   355,485   8,215     16.5
Venture capital investments 5,142   3,488   81     (32.2 )
Investments in affiliates 3,619   3,307   76     (8.6 )

49








    March 31, 2004   December 31,
2004
  December 31,
2004
  December/March
% change
 


 

 

 

 
  (in millions, except percentages)
Loans, net:        
       Rupee   705,685   809,591   18,710   14.7
       Foreign currency   89,602   120,722   2,790   34.7
       Less: Allowances   (66,767 )   (73,716 )   (1,703 )   10.4



   

Total loans, net   728,520   856,597   19,797   17.6
Acceptances   65,142   95,735   2,213   47.0
Property and equipment   23,183   23,805   550   2.7
Other assets   104,159   142,715   3,299   37.0






Total assets Rs. 1,409,131 Rs. 1,634,697   US$ 37,780   16.0 %








(1) Primarily includes government of India securities and corporate debt securities.
   
(2)  Primarily includes government of India securities and to a much smaller extent, corporate debt securities and equity securities.

     Our total assets increased 16.0% to Rs. 1,634.7 billion (US$ 37.8 billion) at December 31, 2004 compared to Rs. 1,409.1 billion (US$ 32.6 billion) at year-end fiscal 2004, primarily due to an increase in loans, securities and other assets.

     Our net loans increased 17.6% to Rs. 856.6 billion (US$ 19.8 billion) at December 31, 2004 compared to Rs. 728.5 billion (US$ 16.8 billion) at year-end fiscal 2004. Gross consumer loans and credit card receivables increased 42.2% to Rs. 443.6 billion (US$ 10.3 billion) at December 31, 2004 from Rs. 311.9 billion (US$ 7.2 billion) at year-end fiscal 2004 in accordance with our strategy to grow our retail asset portfolio.

     Securities, excluding venture capital investment increased 16.5% to Rs. 355.5 billion (US$ 8.2 billion) at December 31, 2004 from Rs. 305.2 billion (US$ 7.1 billion) at year-end fiscal 2004. Venture capital investments declined 32.2% to Rs. 3.5 billion (US$ 81 million) at December 31, 2004 compared to year-end fiscal 2004 primarily due to sale of investments. Cash, cash equivalents and trading account assets decreased 11.8% to Rs. 153.6 billion (US$ 3.5 billion) at December 31, 2004 from Rs. 174.1 billion (US$ 4.0 billion) at year-end fiscal 2004.

     Investment in affiliates decreased to Rs. 3.3 billion (US$ 76 million) at December 31, 2004 from Rs. 3.6 billion (US$ 84 million) at year-end fiscal 2004. Acceptances increased 47.0% to Rs. 95.7 billion (US$ 2.2 billion) at December 31, 2004 from Rs. 65.1 billion (US$ 1.5 billion) at year-end fiscal 2004 reflecting our focus on increasing revenues from non-fund based businesses. Property and equipment increased to Rs. 23.8 billion (US$ 550 million) at December 31, 2004 from Rs. 23.2 billion (US$ 536 million) at year-end fiscal 2004.

     Other assets increased 37.0% to Rs. 142.7 billion (US$ 3.3 billion) at December 31, 2004 from Rs. 104.2 billion (US$ 2.4 billion) at year-end fiscal 2004. At December 31, 2004, other assets included deferred tax asset of Rs. 11.8 billion (US$ 273 million), intangible assets (including goodwill) of Rs. 10.9 billion (US$ 251 million) and Rs. 5.6 billion (US$ 129 million) of assets held for sale, which were primarily acquired through foreclosure of loans.

      Liabilities and Stockholders' Equity

     The following table sets forth, at the dates indicated, the principal components of liabilities and stockholders' equity.

    March 31, 2004   December 31,
2004
  December 31,
2004
  December/March
% change
 


 

 

 

 
  (in millions, except percentages)
Deposits Rs.

684,955

  Rs. 828,898   US$ 19,156     21.0 %
Trading account liabilities   26,079     40,051     926     53.6
Short-term borrowings   57,364     58,324     1,348     1.7
Acceptances   65,142     95,735     2,213     47.0
Long-term debt:              

50








Rupee   311,668     286,663     6,625     (8.0 )
Foreign currency   61,781     66,937     1,547     8.3


 

 

       
Total long-term debt   373,449     353,600     8,172     (5.3 )
Other liabilities   85,443     112,515     2,601     31.7
Taxes and dividends payable   20,180     20,730     479     2.7
Redeemable preferred stock (1)   944     1,019     24     7.9


 

 

       
Total liabilities   1,313,556     1,510,872     34,919     15.0
Minority interest   1,050     1,102     25     5.0
Stockholders' equity   94,525     122,723     2,836     29.8


 

 

       
Total liabilities and stockholders’ equity Rs. 1,409,131   Rs. 1,634,697   US$ 37,780     16.0 %


 

 

       


(1) In line with the existing regulatory requirements in India, preferred stock issued by ICICI needed to be compulsorily redeemed within a specified time period. Accordingly, all series of preferred stock issued by ICICI were redeemable in accordance with the terms of the issue.

     Deposits increased by 21.0% to Rs. 828.9 billion (US$ 19.2 billion) at December 31, 2004 from Rs. 685.0 billion (US$ 15.8 million) at year-end fiscal 2004. This significant growth in deposits was primarily achieved through increased focus on retail and corporate customers by offering a wide range of products designed to meet varied individual and corporate needs and leveraging on our network of branches, extension counters and ATMs. Our long-term debt decreased 5.3% to Rs. 353.6 billion (US$ 8.2 billion) at December 31, 2004 from Rs. 373.4 billion (US$ 8.6 billion) at year-end fiscal 2004 on account of 8.0% decrease in long-term rupee debt and 8.3% increase in long-term foreign currency debt. Our short-term borrowings increased 1.7% to Rs. 58.3 billion (US$ 1.3 billion) at December 31, 2004 compared to Rs. 57.4 billion (US$ 1.3 billion) at year-end fiscal 2004. Trading account liabilities increased to Rs. 40.1 billion (US$ 926 million) at December 31, 2004 compared to Rs. 26.1 billion (US$ 603 million) at year-end fiscal 2004. Taxes and dividends payable increased 2.7% to Rs. 20.7 billion (US$ 479 million) at December 31, 2004 from Rs. 20.2 billion (US$ 466 million) at year-end fiscal 2004. The carrying amount of redeemable preferred stock increased to Rs. 1,019 million (US$ 24 million) at December 31, 2004 from Rs. 944 million (US$ 22 million) at year-end fiscal 2004. Minority interest increased to Rs. 1,102 million (US$ 25 million) at December 31, 2004 from Rs. 1,050 million (US$ 24 million) at year-end fiscal 2004. Stockholders’ equity increased 29.8% at December 31, 2004 to Rs. 122.7 billion (US$ 2.8 billion) from Rs. 94.5 billion (US$ 2.2 billion) at year-end fiscal 2004.

Off Balance Sheet Items, Commitments and Contingencies

   Foreign Exchange and Derivative Contracts

     We enter into foreign exchange forwards, options, swaps and other derivative products to enable customers to transfer, modify or reduce their foreign exchange and interest rate risks and to manage our own interest rate and foreign exchange positions. These instruments are used to manage foreign exchange and interest rate risk relating to specific groups of on-balance sheet assets and liabilities. Since adoption of SFAS No. 133 and SFAS No. 138 effective April 1, 2001, all derivatives have been recorded as assets or liabilities on the balance sheet at their respective fair values with unrealized gains or losses recorded either in accumulated other comprehensive income or in the statement of income, depending on the purpose for which the derivative is held. Derivatives that do not meet the criteria for designation as a hedge under SFAS No. 133 at inception, or fail to meet the criteria thereafter, are accounted for in “Other assets” with changes in fair value recorded in the statement of income.

51






      The following table sets forth, at the dates indicated, the notional amount of derivative contracts.

  Notional principal amounts   Balance sheet credit exposure(1)  
 
 
 
  At March 31   At December 31   At March 31   At December 31  
 
 
 
 
 
  2003   2004   2004     2004   2003 2004 2004 2004
















      (in millions)
Interest rate products:          
Swap agreements Rs. 324,893   Rs. 1,456,182   Rs 1,243,749   US$ 28,744   Rs. 137 Rs. 1,552 Rs. 398 US$ 9
Others -   43,073   740,549     17,115   43 (175 ) (4 )
















Total interest rate products Rs. 324,893   Rs. 1,499,255   Rs. 1,984,298   US$ 45,859   Rs. 137 Rs. 1,595 Rs. 223 US$ 5
















Foreign exchange products:          
Forward contracts Rs. 277,280   Rs. 620,415   Rs. 615,267   US$ 14,219   Rs. (116 ) Rs. 398 Rs. 1,518 US$ 35
Swap agreements 14,611   46,724   131,436     3,038   539 263 (172 ) (4 )
Others   44,401   76,139     1,760   (345 ) (79 ) (2 )
















Total foreign exchange products Rs. 291,891   Rs. 711,540   Rs. 822,842   US$ 19,017   Rs. 423 Rs. 316 Rs. 1,267 US$ 29


















(1) Denotes the mark-to-market impact of the derivative and foreign exchange products on the reporting date.

     The notional principal amount of interest rate products increased to Rs. 1,984.3 billion (US$ 45.9 billion) at December 31, 2004 compared to Rs. 1,499.3 billion (US$ 34.6 billion) at year-end fiscal 2004. The notional principal amount of foreign exchange products increased to Rs. 822.8 billion (US$ 19.0 billion) at December 31, 2004 compared to Rs. 711.5 billion (US$ 16.4 billion) at year-end fiscal 2004. This significant increase in the volumes of interest rates swaps and foreign exchange forward contracts was primarily due to increased transactions carried out by us on behalf of our customers and growth in the market for such products. Market volumes have also increased significantly during this period. As an active player and market-maker in swap and forward exchange contract markets and due to the fact that reduction in positions is generally achieved by entering into offsetting transactions rather than termination/cancellation of existing transactions, we have seen a substantial increase in the notional principal of our swap portfolio during this period.

     An interest rate swap does not entail exchange of notional principal and the cash flow arises on account of the difference between the interest rate pay and receive legs of the swap which is generally much lower than the notional principal of the swap. A large proportion of interest rate swaps, currency swaps and forward exchange contracts are on account of market making which involves providing regular two-way prices to customers or inter-bank counter-parties. This results in generation of a higher number of outstanding transactions, and hence a large value of gross notional principal of the portfolio. For example, if a transaction entered into with a customer is covered by an exactly opposite transaction entered into with another counter-party, the net market risk of the two transactions will be zero whereas, the notional principle of the portfolio will be the sum of both transactions.

      Securitization

     We primarily securitize commercial loans through “pass-through” securitizations. In the nine months ended December 31, 2004, we securitized loans and credit substitutes which resulted in gains of Rs. 3.8 billion (US$ 89 million) in the nine months ended December 31, 2004 compared to Rs. 3.4 billion (US$ 78 million) in the nine months ended December 31, 2003. The gains are reported as a component of gain on sale of loans and credit substitutes. After the securitization, we generally continue to maintain customer account relationships and service loans transferred to the securitization trust. The securitizations are either with or without recourse. In certain cases, we may enter into derivative transactions such as written put options and interest rate swaps with the transferees.

     In certain cases, we write put options, which require us to purchase, upon request of the holders, securities issued in certain securitization transactions. The put options seek to provide liquidity to holders of such instruments. If exercised, we are obligated to purchase the securities at the pre-determined exercise price. At December 31, 2004, we had sold loans and credit substitutes with an aggregate put option exercise price of Rs. 80.1 billion (US$ 1.9 billion) compared to Rs. 38.3 billion (US$ 885 million) at year ended fiscal 2004.

52






      Variable Interest Entities

     During the year, we transferred certain impaired loans to borrower specific funds/trusts managed by an asset reconstruction company set up under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and guidelines issued by the Reserve Bank of India. The trusts/funds (which are separate legal entities) issued security receipts to us and other transferors as consideration for the transaction. Certain transfers did not qualify for sale accounting under SFAS No. 140 and continue to be reflected as loans on our balance sheet. Other transfers qualified for sale accounting but were impacted by FIN 46/FIN 46R. We have consolidated entities in which we are the prime beneficiary at December 31, 2004. Funds/trusts which are VIEs but in which we are not the prime beneficiary have not been consolidated.

     Our venture capital subsidiary is accounted for pursuant to specialized industry guidance applicable to investment companies. Pursuant to this guidance investment holdings are accounted for at estimated fair value irrespective of the level of equity ownership. Some of these investment holdings may be deemed to be VIEs as defined in FIN 46R. The FASB permitted non-registered investment companies to defer consolidation of VIEs in which they are involved until the proposed Statement of Position on the clarification of the scope of the Investment Company Audit Guide is finalized. Following issuance of the Statement of Position, the FASB will consider further modification to FIN 46R to provide an exception for companies that qualify to apply the revised Audit Guide. We applied this deferral provision and did not consolidate additional assets in potential VIEs in which we are involved at December 31, 2004. Following issuance of the revised Audit Guide and further modification, if any, to FIN 46R, we will assess the effect of such guidance on our venture capital subsidiary.

      Loan Commitments

     We have outstanding undrawn commitments to provide loans and financing to customers. These loan commitments aggregated Rs. 59.9 billion (US$ 1.4 billion) at December 31, 2004. The interest rate on these commitments is dependent on the lending rates on the date of the loan disbursement. Further, the commitments have fixed expiration dates and are contingent upon the borrower’s ability to maintain specific credit standards.

      Capital Commitments

     We are obligated under a number of capital contracts. Capital contracts are job orders of a capital nature, which have been committed. Estimated amounts of contracts remaining to be executed on capital account aggregated Rs. 449 million (US$ 10.4 million) at December 31, 2004 compared to Rs. 294 million (US$ 6.8 million) at year-end fiscal 2004 signifying the unpaid amount for acquisition of fixed assets as per contracts entered into with suppliers.

   Operating Lease Commitments

     We have commitments under long-term operating leases principally for premises. The following table sets forth, a summary of future minimum lease rental commitments at December 31, 2004, for non-cancelable leases.

Lease rental commitments for period/year ended March 31,   (in millions)


       
2005   Rs. 184
2006   744
2007   716
2008   698
2009   688
2010   588
Thereafter   2,970
   

Total minimum lease commitments   Rs. 6,588
   


   Guarantees

     As a part of our financing activities, we issue guarantees to enhance the credit standing of our customers. The guarantees are generally for a period not exceeding 10 years. The credit risk associated with these products, as well

53




as the operating risks, are similar to those relating to other types of financial instruments. We have the same appraisal process for guarantees as that for any other loan product. Guarantees increased by 21.8% to Rs. 149.0 billion (US$ 3.4 billion) at December 31, 2004 from Rs. 122.3 billion (US$ 2.8 billion) at year-end fiscal 2004.

The following table sets forth, at the dates indicated, guarantees outstanding.

    March 31, 2004   At December 31,
2004
  At December 31,
2004
  Mar/Dec
% change
 


 

 

 

 
  (in millions, except percentages)
Financial guarantees(1) Rs. 57,344   Rs. 63,794   US$ 1,474     11.2 %
Performance guarantees(2) 65,000   85,177   1,969     31.0

Total guarantees Rs. 122,344   Rs. 148,971   US$ 3,443     21.8 %



(1) Consists of instruments guaranteeing the timely contractual payment of loan obligations, primarily to foreign lenders on behalf of project companies.
   
(2) Consists of instruments guaranteeing the performance by a company of an obligation, such as exports.

     The following table sets forth contractual obligations on long-term debt and operating lease at December 31, 2004.

 Payments due by period

Contractual Obligations   Total   Up to March
2005
  Between April
2005 and March
2008
  Between April
2008 and
March 2010
  From April
2008 onwards
 

  (in millions)
Long term debt obligations Rs. 354,179   Rs. 30,689   Rs. 179,112   Rs. 76,800   Rs. 67,578  
Operating lease obligations   6,588   184     2,158   1,276 2,970  

Total Rs. 360,767   Rs. 30,873   Rs. 181,270   Rs. 78,076   Rs. 70,548  

      The following table sets forth contractual obligations on guarantees at the nine months ended December 31, 2004.

Payments due by period

Contractual Obligations   Total     Less than
1 year
  1-3 years   3-5 years   More than
5 years



 







(in millions)
Guarantees            
Financial guarantees   63,794     34,588   9,818   9,314   10,074  
Performance guarantees   85,177     32,792   31,283   18,213   2,889  

Total Rs. 148,971   Rs. 67,380   Rs. 41,101   Rs. 27,527   Rs. 12,963  

Capital Resources

     ICICI Bank is subject to the capital adequacy requirements of the Reserve Bank of India, which are primarily based on the capital adequacy accord reached by the Basel Committee of Banking Supervision, Bank of International Settlements in 1988. ICICI Bank is required to maintain a minimum ratio of total capital to risk adjusted assets of 9.0%, at least half of which must be Tier 1 capital.

     At December 31, 2004, ICICI Bank’s capital adequacy ratio calculated in accordance with the Reserve Bank of India guidelines and based on its unconsolidated financial statements prepared in accordance with Indian GAAP was 13.5%. Using the same basis of calculation, at December 31, 2004, ICICI Bank’s Tier 1 capital adequacy ratio was 8.6% and its Tier 2 capital adequacy ratio was 4.9%.

     ICICI Bank has raised additional Tier 1 capital through a public issue of equity shares aggregating to Rs. 32.5 billion (US$ 750 million), after year-end fiscal 2004.

54




     The following table sets forth, at the dates indicated, risk-based capital, risk-weighted assets and risk-based capital adequacy ratios computed in accordance with the applicable Reserve Bank of India guidelines and based on ICICI Bank’s unconsolidated financial statements prepared in accordance with Indian GAAP.

  At December 31, 2004
 
  (in millions)
Tier 1 capital Rs. 101,251   US$ 2,340  
Tier 2 capital 57,346   1,325  





 
Total capital Rs. 158,597   US$ 3,665  





 
On- balance sheet risk weighted assets Rs. 930,465   US$ 21,504  
Off-balance sheet risk weighted assets 244,172   5,643  





 
Total risk weighted assets Rs. 1,174,637   US$ 27,147  





 
Tier 1 capital adequacy ratio 8.6 %  
Tier 2 capital adequacy ratio 4.9  



Total capital adequacy ratio 13.5 %  



     The principal off-balance sheet items for ICICI Bank were loan commitments, guarantees, put options and lease and capital commitments. ICICI Bank entered into these arrangements for normal business purposes. See “Operating and Financial Review and Prospects – Off Balance Sheet Items, Commitments and Contingencies” included elsewhere in this prospectus. Capital was provided for these items based on the existing capital adequacy guidelines of the Reserve Bank of India. See “Supervision and Regulation – Capital Adequacy Requirements” included elsewhere in this prospectus. Lease commitments were not expected to materially affect capital requirements. ICICI Bank provides capital on the put options outstanding and forward contracts and derivatives contracts outstanding at December 31, 2004 as per existing capital adequacy guidelines of the Reserve Bank of India. From time to time, we may access the capital markets through additional equity or debt offerings to increase our capital resources.

      In particular, in the near future we expect to offer senior debt securities in the international markets to fund the growth of our international operations. The aggregate amount of such offering is expected to be consistent with the aggregate amount of our international debt offerings over the last year. Any plans to raise debt, and the size of any potential offering, are subject to market and interest rate conditions and our plans may change at any time.

Capital Expenditure

     The following tables set forth, for the periods indicated, certain information related to capital expenditure by category of fixed assets.

  Nine months ended December 31, 2004  
 
 
Cost at March
31, 2004
Additions/
transfers
Deletions/
transfers
  Depreciation Net assets at
December 31, 2004
 






 


 
  (in millions)
Land Rs. 1,526   Rs. 187   Rs. (65 ) Rs. 268   Rs. 1,380   US$ 32  
Buildings   12,313     568   (21 ) 1,636     11,224   259  
Equipment, furniture and              
   others (1)   16,399     2,590   (172 ) 8,869     9,948   230  
Construction in progress   988     415   (143 ) 7     1,253   29  






 





 
Total Rs. 31,226   Rs. 3,760   Rs. (401 ) Rs. 10,780   Rs. 23,805   US$ 550  
 

 

 

 

 

 

 


(1)      Includes equipment and furniture, and others category as specified in Note 14 to our consolidated financial statements.

     Our capital expenditure on property and equipment was Rs. 3.8 billion (US$ 87 million) for the nine months ended December 31, 2004. Capital expenditure of Rs. 2.6 billion (US$ 60 million) on equipment, furniture and others included Rs. 766 million (US$ 18 million) on computers and software.

Significant Changes

     Except as stated in this prospectus, no significant changes have occurred to our business since the date of the interim consolidated financial statements as of December 31, 2004, contained in this prospectus.

55




Segment Revenues and Assets

     Subsequent to the amalgamation, the composition of our operating segments has changed. Our operations are now classified into the following segments: commercial banking segment, investment banking segment and others. Segment data for previous periods has been reclassified on a comparable basis.

     The commercial banking segment provides medium-term and long-term project and infrastructure financing, securitization, factoring, lease financing, working capital finance and foreign exchange services to clients. Further, it provides deposit and loan products to retail customers. The investment banking segment includes ICICI Bank’s treasury operations and the operations of ICICI Securities, and deals in the debt, equity and money markets and provides corporate advisory products such as mergers and acquisition advice, loan syndication advice and issue management services. Others consist of various operating segments that do not meet the requirements to be reported as an individual reportable segment as defined in SFAS No. 131 on Disclosure about Segments of an Enterprise and Related Information.

     Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The chief operating decision maker evaluates performance and allocates resources based on an analysis of various performance indicators for each of the above reportable segments. Components of profit and loss are evaluated for commercial banking and investment banking segments. Further, the chief operating decision maker specifically reviews assets of our retail loan operations, which are part of the commercial banking segment.

     The results of ICICI Bank were reported under the equity method of accounting for fiscal 2002. However, for management reporting, the entire results of ICICI Bank continue to be reported as if the business were a consolidated entity. The segment-wise information presented below is consistent with the management reporting.

   Commercial Banking Segment

     Net income of the commercial banking segment was Rs. 4.2 billion (US$ 98 million) for the nine months ended December 31, 2004 as compared to a net loss of Rs. 3.2 billion (US$ 75 million) for the nine months ended December 31, 2003, primarily due to lower provisions for loan losses of Rs. 8.5 billion (US$ 197 million) for the nine months ended December 31, 2004 compared to Rs. 15.3 billion (US$ 353 million) for the nine months ended December 31, 2003 and an increase in net interest income by Rs. 1.7 billion (US$ 39 million) and non-interest income by Rs. 3.3 billion (US$ 75 million) for the nine months ended December 31, 2004 as compared to the nine months ended December 31, 2003.

      Provisions for loan losses decreased 44.4% to Rs. 8.5 billion (US$ 197 million) for the nine months ended December 31, 2004 from Rs. 15.3 billion (US$ 354 million) for the nine months ended December 31, 2003 primarily due to lower additions to gross restructured and other impaired loans. Non-interest income increased 26.5% to Rs. 15.6 billion (US$ 360 million) for the nine months ended December 31, 2004 from Rs. 12.3 billion (US$ 284 million) for the nine months ended December 31, 2003 primarily due to an increase in non interest income from both corporate and retail customers to Rs. 15.3 billion (US$ 354 million) for the nine months ended December 31, 2004 from Rs. 10.8 billion (US$ 251 million) for the nine months ended December 31, 2003. The large increase was primarily due to growth in retail liability product income like account servicing charges and transaction banking fee income from small enterprises, as well as an increase in transaction banking and other fee income from corporate banking. During this period we increased charges and introduced new charges for some of the services that we offer to our deposit customers. During this period there was a significant increase in business volume of transaction banking services like bankers acceptances, bank guarantees and cash management services. Net interest income, including dividends, increased 11.6% to Rs. 16.4 billion (US$ 380 million) for the nine months ended December 31, 2004 from Rs. 14.7 billion (US$ 341 million) for the nine months ended December 31, 2003. Non-interest expense increased 14.6% to Rs. 18.2 billion (US$ 421 million) for the nine months ended December 31, 2004 from Rs. 15.9 billion (US$ 367 million) for the nine months ended December 31, 2003 primarily due to an increase in salary and other administration expenses.

56






   Investment Banking Segment

     Net income for the investment banking segment decreased 62.9% to Rs. 2.2 billion (US$ 51 million) for the nine months ended December 31, 2004 compared to Rs. 6.0 billion (US$ 138 million) for the nine months ended December 31, 2003, primarily due to a decrease in trading account revenue and a decrease in gains from securities transactions offset by an increase in net interest income. Trading account revenue and gains on securities transactions decreased 81.6% to Rs. 2.3 billion (US$ 53 million) for the nine months ended December 31, 2004 from Rs. 12.5 billion (US$ 288 million) for the nine months ended December 31, 2003 as the interest rates increased during this period. The yield on 10-year government of India securities increased by 1.44% to 6.60% during the nine months ended December 31, 2004.

     Net interest income, including dividends, increased to Rs. 807 million (US$ 19 million) for the nine months ended December 31, 2004 from a loss of Rs. 1.5 billion (US$ 34 million) for the nine months ended December 31, 2003 primarily due to a reduction in interest expense on long term debt and trading account liabilities to Rs. 13.2 billion (US$ 305 million) for the nine months ended December 31, 2004 from Rs. 16.6 billion (US$ 383 million) for the nine months ended December 31, 2003. Non-interest expense decreased 24.3% to Rs. 2.7 billion (US$ 61 million) for the nine months ended December 31, 2004 from Rs. 3.5 billion (US$ 81 million) for the nine months ended December 31, 2003.

Related Party Transactions

     We conduct transactions with our affiliates and directors and employees. The following represent the significant transactions between us and such related parties:

      Insurance Services

     During the nine months ended December 31, 2004, we paid insurance premium to our insurance subsidiaries amounting to Rs. 152 million (US$ 4 million) compared to Rs. 121 million (US$ 3 million) for the nine months ended December 31, 2003.

      Referral Fees

     During the nine months ended December 31, 2004 we received referral fees amounting to Rs. 128 million (US$ 3 million) from ICICI Prudential Life Insurance Company compared to Rs. 23 million (US$ 531,546) for the nine months ended December 31, 2003 and Rs. 115 million (US$ 3 million) from ICICI Lombard General Insurance Company compared to Rs. nil for the nine months ended December 31, 2003.

      Lease of Premises and Facilities

     During the nine months ended December 31, 2004, we received Rs. 153 million (US$ 4 million) for lease of premises, facilities and other administrative costs from ICICI Prudential Life Insurance Company compared to Rs. 116 million (US$ 3 million) for the nine months ended December 31, 2003, and Rs. 11 million (US$ 254,218) from Prudential ICICI Asset Management Company compared to Rs. 3 million (US$ 69,332) for the nine months ended December 31, 2003, and Rs. 137 million (US$ 3 million) from ICICI Lombard General Insurance Company compared to Rs. 40 million (US$ 924,428) for the nine months ended December 31, 2003.

      Secondment of Employees

     During the nine months ended December 31, 2004, we received Rs. 0.42 million (US$ 9,706) for seconded employees from ICICI Prudential Life Insurance Company compared to Rs. 0.36 million (US$ 8,320) for the nine months ended December 31, 2003, Rs. 7 million (US$ 161,775) from ICICI Lombard General Insurance Company compared to Rs. 11 million (US$ 254,218) for the nine months ended December 31, 2003.

57






      Asset Management Services

     During the nine months ended December 31, 2004, we provided asset management services to TCW and earned fees of Rs. 3 million (US$ 69,332) compared to Rs. 6 million (US$ 129,420) for the nine months ended December 31, 2003.

      Deposits and Borrowings

     During the nine months ended December 31, 2004, we paid interest on bonds/deposits/call borrowings to its affiliated companies, Rs. 3 million (US$ 69,332) compared to Rs. 18 million (US$ 421,308) for the nine months ended December 31, 2003.

      Interest and Dividend

     During the nine months ended December 31, 2004, we received interest on car loans from its affiliated companies, amounting to Rs. 0.29 million (US$ 6,702) compared to Rs. 0.13 million (US$ 3,004) for the nine months ended December 31, 2003 and dividend of Rs. 136 million (US$ 3 million) compared to Rs. 42 million (US$ 1 million) for the nine months ended December 31, 2003.

      Employee Loans

     We have advanced housing, vehicle and general purpose loans to our employees, bearing interest ranging from 2.5% to 6%. The tenure of these loans range from five years to 25 years. The loans are generally secured by the assets acquired by the employees. Employee loan balances outstanding as of December 31, 2004, of Rs. 4,329 million (US$ 100 million) are included in other assets.

      Related Party Balances

      The following balances payable to/receivable from related parties are included in the balance sheet:

As of December 31,2004

(in millions)
Other assets Rs. 125   US$ 3  
Deposits 639     15  
Other liabilities 14     0 .3

Critical Accounting Policies

     In order to understand our financial condition and results of operations, it is important to understand our significant accounting policies and the extent to which we use judgments and estimates in applying those policies. Our accounting and reporting policies are in accordance with US GAAP and conform to standard accounting practices relevant to our products and services and the businesses in which we operate. US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported income and expenses during the reported period. Accordingly, we use a significant amount of judgment and estimates based on assumptions for which the actual results are uncertain when we make the estimation.

     We have identified three critical accounting policies, based on the judgments and estimates required in the application of these policies. These include valuation of securities and accounting for derivative transactions and hedging activities, allowance for loan losses and accounting for securitization transactions. Additional information about these policies can be found in Note 1 to our consolidated financial statements. The statements below contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. See “Forward-Looking Statements.”

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      Allowance for Loan Losses

     The allowance for loan losses represents management’s estimate of probable losses inherent in the portfolio. We have developed appropriate policies and procedures for assessing the adequacy of the allowance for loan losses that reflect our careful evaluation of credit risk considering all information available to us. In developing this assessment, we must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require an increase or a decrease in the allowance for loan losses.

     Larger balance, non-homogenous exposures representing significant individual credit exposures are evaluated based upon the borrower’s overall financial condition, resources and payment record and the realizable value of any collateral. Loans identified as trouble debt restructuring or other impaired with a balance of Rs. 100 million and above are individually reviewed and an allowance is determined based on the difference between the loan’s carrying value and the loan’s fair value. Fair value is based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, less disposal costs, if the loan is collateral dependent. No other allowance is provided on impaired loans that are individually reviewed.

     Each portfolio of smaller-balance, homogenous loans, including consumer loans and credit card receivables, is evaluated for impairment. The allowance for loan losses attributed to these loans is established by a process that includes an estimate of probable losses inherent in the portfolio. These include historical delinquency and credit loss experience and current trends and conditions.

     These evaluation processes are subject to numerous estimates and judgments. The use of different estimates or assumptions could produce different results. We regularly monitor qualitative and quantitative trends in the loan portfolio, including changes in the levels of restructured loans and other impaired loans. The distribution of the allowance as described above does not diminish the fact that the entire allowance is available to absorb credit losses in the loan portfolio. Our principal focus, therefore, is on the adequacy of the total allowance for loan losses.

      Valuation of Securities and Accounting for Derivatives Transactions and Hedging Activities

     Our securities are classified into available for sale securities, trading securities, venture capital investments and non-readily marketable securities. The classification into available for sale and trading securities is based on management’s intention at the time of purchase. We no longer classify investments in debt securities as held to maturity, due to sale of certain held to maturity securities in fiscal 2002 by ICICI for reasons other than those specified in SFAS No. 115. Further, we offer derivative products to our customers to transfer, modify or reduce their foreign exchange and interest rate risks and to manage our own interest rate and foreign exchange positions. The derivatives market in India is evolving and our derivative volumes have increased significantly since the amalgamation.

     The fair values of quoted securities are determined based on market prices. The fair value of securities for which quoted market prices are not available is estimated as follows:

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     Changes in values of available-for-sale securities are recognized net of taxes as a component of stockholders’ equity, unless the value is impaired and the impairment is not considered to be temporary. Impairment losses that are not considered temporary are recognized in the income statement. We conduct regular reviews to assess whether other-than-temporary impairment exists. Changes in the fair values of trading account assets are recognized in the income statement.

     Equity securities, forming part of our securities portfolio, are considered as publicly traded if they have been traded on a securities exchange within six months prior to the relevant fiscal year-end. The fair value of such securities is the last quoted price. Non-readily marketable equity securities are recorded at cost and a provision is made for other than temporary diminution. Equity securities acquired by conversion of loans in a troubled debt restructuring are stated at their fair values and accounted for in the same manner as equity investments acquired for cash.

     The fair values of publicly traded venture capital investments are generally based upon quoted market prices. In certain situations, including thinly traded securities, large block holdings, restricted shares or other special situations, the quoted market price is adjusted to produce an estimate of the attainable fair value for the securities. For securities that are not publicly traded, fair value is determined in good faith pursuant to procedures established by the board of directors of the venture capital subsidiary. In determining the fair value of these securities, consideration is given to the financial conditions, operating results and prospects of the underlying companies, and any other factors deemed relevant. Since the valuations are inherently uncertain, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed. Changes in fair values of venture capital investments are recognized in the income statement.

     SFAS No. 133 and SFAS No. 138 require that all derivative instruments be recorded on the balance sheet at their respective fair values with unrealized gains and losses recorded either in accumulated other comprehensive income or in the statement of income, depending on the purpose for which the derivative was held.

     We provide forward contracts to our customers for hedging their short-term exchange rate risk on foreign currency denominated receivables and payables. We generally provide this facility for a term of up to six months and occasionally up to 12 months. We also offer interest rate and currency swaps to our customers for hedging their medium and long-term risks due to interest rate and currency exchange rate movements. We offer these swaps for a period ranging from three to 10 years. We also hedge our own exchange rate risk related to our foreign currency trading portfolio with products from banking counterparties.

     At the inception of a hedge transaction, we formally document the hedge relationship and the risk management objective and strategy for undertaking the hedge. This process includes identification of the hedging instrument, hedged item, risk being hedged and the methodology for measuring effectiveness of the hedge. In addition, we assess both at the inception of the hedge and on an ongoing basis, whether the derivative used in the hedging transaction has been highly effective in offsetting changes in fair value or cash flows of the hedged item, and whether the derivative is expected to continue to be highly effective. Derivatives that do not meet the criteria for designation as a hedge under SFAS No. 133 at inception, or fail to meet the criteria thereafter, are accounted for in other assets with changes in fair value recorded in the statement of income.

     We discontinue hedge accounting prospectively when it is either determined that the derivative is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item; the derivative expires or is sold, terminated or exercised; the derivative is de-designated because it is unlikely that a forecasted transaction would occur; or management determines that designation of the derivative as a hedging instrument is no longer appropriate.

     Changes in the fixed income, equity, foreign exchange markets would impact our estimate of fair value in the future, potentially affecting principal trading revenues. Similarly, pricing models and their underlying assumptions

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impact the amount and timing of unrealized gains and losses recognized, and the use of different pricing models or assumptions could produce different financial results.

      Securitization

     We primarily securitize commercial loans through “pass-through” securitizations. After the securitization, we generally continue to maintain customer account relationships and service loans transferred to the securitization trust. Transfers that do not meet the criteria for a sale under SFAS No. 140, are required to be recorded as secured borrowings with a pledge of collateral, and such secured borrowings are required to be reported as a component of other borrowings. Recourse and servicing obligations and put options written are recorded as proceeds of the sale.

     Retained beneficial interests in the loans and servicing rights are measured by allocating the carrying value of the loans between the assets sold and the retained interest, based on the relative fair value at the date of the securitization. The fair values are determined using financial models or quoted market prices or sale value of similar assets.

     Financial models and their underlying assumptions relating to delinquency, prepayments, servicing costs and conversions from floating rate loans to fixed rate loans, impact the amount and timing of gains and losses recognized and the valuation of retained interests, and the use of different financial models or assumptions could produce different financial results.

Recently Issued Accounting Standards

      Share Based Payment

     On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair value. SFAS No. 123(R) would be applicable to all awards granted, modified or settled in the first reporting period under US GAAP that begins after June 15, 2005.

      Statement 123(R) permits public companies to adopt its requirements using one of two methods:

     We plan to adopt Statement 123 using the modified-prospective method. As permitted by Statement 123, we currently account for share-based payments to employees using Opinion 25’s intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. The impact of adoption of Statement 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of Statement 123 as described in the disclosure of pro forma net income and earnings per share in our consolidated financial statements. Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption.

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      Other-than-temporary Impairments of Securities

     In November 2003, FASB ratified a consensus on the disclosure provisions of Emerging Issues Task Force (EITF) Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. In March 2004, the FASB reached a consensus regarding the application of a three-step impairment model to determine whether investments accounted for in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and other cost method investments are other-than-temporarily impaired. However, with the issuance of FASB Staff Position EITF 03-1-1, the provisions of the consensus relating to the measurement and recognition of other-than-temporary impairments have been deferred pending reassessment by the FASB.

     The remaining provisions of this standard, which primarily relate to disclosure, have been applied to all investments accounted for in accordance with SFAS No. 115 and other cost method investments. We cannot determine the impact of EITF 03-1 until after FASB completes its reassessment.

      Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equities

     In May 2003, FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equities. SFAS No. 150 requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. Generally, SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of SFAS No. 150 did not have a material impact on our consolidated financial statements.

      Derivative Instruments and Hedging Activities

     In April 2003, FASB issued SFAS No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. Adoption of SFAS No. 149 did not have a material impact on our consolidated financial statements.

Consolidation of Variable Interest Entities

     In January 2003, FASB issued FIN No. 46, Consolidation of Variable Interest Entities which is an interpretation of Accounting Research Bulletin No. 51. FIN No. 46 is applicable to all variable interest entities created after January 31, 2003. In respect of variable interest entities created before February 1, 2003, FIN No. 46 will be applicable from fiscal periods beginning after June 15, 2003. There are no variable interest entities that require disclosure under FIN 46. Further, in December 2003, the FASB issued a revision to FIN No. 46 to clarify some of the provisions of FIN No. 46 and to exempt certain entities from its requirements. We have transferred certain impaired loans to borrower specific funds/trusts managed by an asset reconstruction company which are VIEs within the definition contained in FIN 46/ FIN 46R. Accordingly, we have consolidated these entities at year-end fiscal 2004 and December 31, 2004. There is no significant impact on the financial statements of previous years as a result of adoption of FIN 46 / FIN 46R as the transfers to the trusts created by an asset reconstruction company were made in fiscal 2004, which was also the year of adoption of FIN 46 / FIN 46R.

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SELECTED STATISTICAL DATA

     You should read the following discussion and selected statistical data together with our unaudited interim consolidated financial statements included elsewhere in this prospectus and our audited consolidated financial statements and the section “Business” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus. The following discussion is based on our unaudited interim financial statements and our audited financial statements and accompanying notes, which have been prepared in accordance with US GAAP.

Funding

     Our funding operations are designed to ensure stability of funding, minimize funding costs and effectively manage liquidity. Subsequent to the amalgamation, our primary source of funding is deposits raised from both retail and corporate customers. We also raise funds through short-term rupee borrowings and domestic and overseas bond issuances pursuant to specific regulatory approvals. As a financial institution, ICICI was not allowed to raise banking deposits and so its primary sources of funding, prior to the amalgamation, were rupee borrowings from a wide range of institutional investors, and retail bonds. ICICI also obtained funds through foreign currency borrowings from multilateral institutions such as the Asian Development Bank and the World Bank, which were guaranteed by the government of India, as well as through commercial foreign currency borrowings.

     Our deposits constituted 54.9% of our total liabilities at December 31, 2004, compared to 52.1% of our total liabilities at year-end fiscal 2004. Our borrowings constituted 29.9% of out total liabilities at December 31, 2004, compared to 34.8% of our total liabilities at year-end fiscal 2004. Our long-term debt decreased 5.3% to Rs. 353.6 billion (US$ 8.2 billion) compared to Rs. 373.4 billion (US$ 8.6 billion) at year-end fiscal 2004 in line with scheduled maturities, offset, in part, by new borrowings made by us. Going forward, we will continue to repay our borrowings in accordance with their scheduled maturities and raise new funds primarily in the form of lower-cost deposits.

     Our deposits increased 21.0% to Rs. 828.9 billion (US$ 19.2 billion) compared to Rs. 685.0 billion (US$ 15.8 billion) at year-end fiscal 2004. This significant growth in deposits was achieved primarily through increased focus on retail and corporate customers by offering a wide range of products designed to meet varied individual and corporate needs and leveraging on our network of branches, extension counters and ATMs.

     The following table sets forth, for the periods indicated, the average volume and average cost of deposits by type of deposit.

  Nine months ended December 31, (1)
 
  2003 2004
    Amount     Cost (2)   Amount     Amount     Cost (2)
 

 



 

 

  (in millions, except percentages)
Interest-bearing deposits:                
Savings deposits Rs. 50,213     2.38 % Rs. 86,281   US$ 1,994     2.36 %
Time deposits   450,253     6.39   528,983     12,225     5.43
Non-interest-bearing deposits:                
Demand deposits   48,812     -   81,861     1,892     -
 

       

 

       
Total deposits Rs. 549,278     5.46 % Rs. 697,125   US$ 16,111     4.41 %
 

       

 

       


(1)  Average of quarterly balances at the end of March of the previous fiscal year and June, September and December for each of the nine months ended December 31, 2003 and average of the daily outstanding balances during the period for the nine months ended December 31, 2004. The average cost for each of the nine months ended December 31, 2003 and December 31, 2004 is annualized.
   
(2)  Represents interest expense divided by the average of quarterly balances.

     Our average deposits for the nine months ended December 31, 2004 were Rs. 697.1 billion (US$ 16.1 billion) at an average cost of 4.4% compared to average deposits of Rs. 549.3 billion (US$ 12.7 billion) at an average cost of 5.5% for the nine months ended December 2003. Our average time deposits for the nine months ended December 31, 2004 were Rs. 529.0 billion (US$ 12.2 billion ) at an average cost of 5.4% compared to average deposits of Rs. 450.3 billion (US$ 10.4 billion) at an average cost of 6.4% for the nine months ended December 2003.

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The following table sets forth, at the date indicated, the maturity profile of time deposits.

  At December 31, 2004
 
  Up to one year   After one year and
within three years
  After three
years
  Total
 
  (in millions)
Time deposits 38,441   484,092   107,948   630,481


(1) There is no contractual maturity for savings and demand deposits.

     The following table sets forth, for the periods indicated, average outstanding rupee borrowings based on quarterly balance sheets and by category of borrowing and the percentage composition by category of borrowing. The average cost (interest expense divided by average of quarterly balances) for each category of borrowings is provided in the footnotes. The average cost for the nine months ended December 31, 2003 and December 31, 2004 is annualized.

Nine months ended December 31,(1)  

 
  2003 2004  



 
  (in millions, except percentages)  
    Amount     % to total     Amount     Amount     % to total  




 





 
SLR bonds(2) Rs. 14,815     3.8 % Rs. 14,815   US$ 342     4.1 %
Borrowings from Indian              
    Government(3)   5,835     1.5   4,804   111     1.3
Other borrowings(4)(5)   366,063     94.7   341,824   7,900     94.6




 





 
Total(6) Rs. 386,713     100.0 % Rs. 361,443   US$ 8,353     100.0 %


(1) Average of quarterly balances at the end of March of the previous fiscal year and June, September and December for each of the nine months ended December 31, 2003 and 2004 .
   
(2)  With an average cost of 11.24% for the nine months ended December 31, 2003 and 11.33% for the nine months ended December 31, 2004.
   
(3)  With an average cost of 10.11% for the nine months ended December 31, 2003 and 10.32% for the nine months ended December 31, 2004.
   
(4) With an average cost of 8.05% for the nine months ended December 31, 2003 and 8.68% for the nine months ended December 31, 2004.
   
(5) Includes publicly and privately placed bonds, borrowings from institutions and wholesale deposits such as inter- corporate deposits certificate of deposits and call borrowings.

     The following table sets forth, at the date indicated, the maturity profile of our rupee term deposits of Rs. 10 million (US$ 231,107) or more

  At December 31,
 
  2004   % of total
deposits
 
 
  (in millions, except percentages)
Less than three months Rs. 144,885   US$ 3,348     17.5 %
Above three months and less than six months 56,527   1,306     6.8
Above six months and less than 12 months 89,898   2,078     10.8
More than 12 months 52,828   1,221     6.4
Total deposits of Rs. 10 million and more Rs. 344,138   US$ 7,953     41.5 %

     The following table sets forth, at the dates indicated, certain information related to short-term rupee borrowings, which consist of certificates of deposits, inter-corporate deposits and borrowings from government-owned companies, known commonly as public sector units.

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  At December 31,(1)
 
  2003   2004
 
 
  (in millions, except percentages)
Period-end balance Rs. 39,092   Rs. 48,977
Average balance during the period (2)   51,406   52,824
Maximum quarter-end balance   53,714   57,787
Average interest rate during the period (3)   6.47 %   6.46 %
Average interest rate at period-end (4)   4.85 %   5.05 %


(1)  Short-term borrowings include trading liabilities, such as borrowings in the call market and repurchase agreements.
   
(2)  Average of quarterly balances at the end of March of the previous fiscal year, June, September and December for each of the nine months ended December 31, 2003 and 2004.
   
(3) Represents the ratio of interest expense on short-term borrowings to the average of quarterly balances of short- term borrowings. The average interest rate for the nine months ended December 31, 2003 and December 31, 2004 is annualized.
   
(4) Represents the weighted average rate of the short-term borrowings outstanding at period end.

     The following table sets forth, at the dates indicated, average outstanding volume of foreign currency borrowings based on quarterly balance sheets by source and the percentage composition by source. The average cost (interest expense divided by average of quarterly balances) for each source of borrowings is provided in the footnotes. The average cost for the nine months ended December 31, 2003 and December 31, 2004 is annualized.

Nine months ended December 31, (1)

2003 2004


  Amount   % to
total
    Amount   Amount   % to
total
 












  (in millions, except percentages)
Commercial borrowings (2) Rs. 42,157     62.6 %   Rs. 71,516   US$ 1,653     74.0 %
Multilateral borrowings (3) Rs. 25,240     37.4   25,112   580     26.0












Total Rs. 67,397     100.0 %   Rs. 96,628   US$ 2,233     100.0 %














(1)  Average of quarterly balances at the end of March of the previous fiscal year, June, September and December for each of the nine months period ended December 31, 2003 and 2004.
   
(2)  With an average cost of 3.1% for the nine months period ended December 31, 2003 and 3.6% for the nine months period ended December 31, 2004.
   
(3)  With an average cost of 3.1% for nine months period ended December 31, 2003 and 3.1% for the nine months period ended December 31, 2004.

Risk Management

   Quantitative and Qualitative Disclosures About Market Risk

     Market risk is the possibility of loss arising from changes in the value of a financial instrument as a result of changes in market variables such as interest rates, exchange rates and other asset prices. The prime source of market risk for us is the interest rate risk we are exposed to as a financial intermediary, which arises on account of our asset liability management activities. In addition to interest rate risk, we are exposed to other elements of market risk such as liquidity or funding risk, price risk on trading portfolios, and exchange rate risk on foreign currency positions. See “Risk Management – Quantitative and Qualitative Disclosures About Market Risk” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus, for a description of our market risk management procedures and our approach towards managing interest rate risk.

      The following table sets forth, at the date indicated, our asset-liability gap position.

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    At December 31, 2004(1)-(4)
   
    Less than or equal
to one year
  Greater than one
year and up to
five years
  Greater than five
years
  Total
   
 
 
 
    (in millions)
Loans, net   Rs.   459,630   Rs.   271,771   Rs.   125,196   Rs.   856,597
Securities     183,916     122,213     71,433     377,562
Fixed assets     3,018     17,222     15,937     36,177
Other assets(5)     92,162     41,540     230,659     364,362














Total assets     738,726     452,747     443,224     1,634,697
Stockholders' equity     -     -     122,725     122,725
Debt(5)     803,274     270,473     167,075     1,240,822
Other liabilities     23,076     28,607     219,467     271,150














Total liabilities     826,350     299,080     509,267     1,634,697
Total gap before risk management positions     (87,624 )     153,666     (66,042 )    
Risk management positions     (44,543 )     47,905     (3,362 )    














Total gap after risk management positions   Rs.   (132,167 )   Rs.   201,571   Rs.   (69,404 )   Rs.  
   


 


 


   


___________
(1)      Assets and liabilities are classified into the applicable categories, based on residual maturity or re-pricing whichever is earlier. Classification methodologies are generally based on Asset Liability Management Guidelines issued by the Reserve Bank of India, effective from April 1, 2000.
 
(2)      Items that neither mature nor re-price are included in the “greater than five years” category. This includes equity share capital and a substantial part of fixed assets.
 
(3)      Impaired loans of residual maturity less than three years are classified in the “greater than one year and up to five years” category and impaired loans of residual maturity between three to five years are classified in the “greater than five years” category.
 
(4)      The risk management positions comprise foreign currency and rupee swaps.
 
(5)      The categorization for these items is different from that reported in the financial statements.
 

     The following table sets forth, at the date indicated, the amount of our loans with residual maturities greater than one year that had fixed and variable interest rates.

  At December 31, 2004
 
  Fixed rate
loans
  Variable rate
loans
  Total





    (in millions)  
Loans   Rs. 363,232   Rs. 202,885   Rs. 566,117

Price Risk (Banking book)

     The following table sets forth, using the balance sheet at December 31, 2004 as the base, one possible prediction of the impact of adverse changes in interest rates on net interest income for the next one year assuming a parallel shift in yield curve at December 31, 2004.

  At December 31, 2004
 
  Change in interest rates
(in basis points)
 
  (100)     (50)   50   100
















  (in millions, except percentages)
Rupee portfolio   Rs.   303   Rs.   151   Rs.   (151 )   Rs.   (303 )
Foreign currency portfolio     42     21     (21 )     (42 )



















Total   Rs.   344   Rs.   172   Rs.   (172 )   Rs.   (344 )



















                 

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     Based on our asset and liability position at December 31, 2004, the sensitivity model shows that net interest income from the banking book for the next one year would fall by Rs. 344 million (US$ 8 million) if interest rates increased by 100 basis points during the next one year. Conversely, the sensitivity model shows that if interest rates decreased by 100 basis points during the next one year, net interest income for the next one year would rise by an equivalent amount of Rs. 344 million (US$ 8 million). Interest rate risk numbers at December 31, 2004 are low primarily due to the low duration of government securities portfolio maintained by us and the large proportion of floating rate loans in the housing loans.

     Sensitivity analysis, which is based upon a static interest rate risk profile of assets and liabilities, is used for risk management purposes only and the model above assumes that during the course of the year no other changes are made in the respective portfolios. Actual changes in net interest income will vary from the model.

Price Risk (Trading book)

     We undertake trading activities to enhance earnings through profitable trading for our own account. ICICI Securities, our investment-banking subsidiary, is a primary dealer in government of India securities, and a significant proportion of its portfolio consists of government of India securities.

     The following tables sets forth, using the fixed income portfolio at December 31, 2004 as the base, one possible prediction of the impact of changes in interest rates on the value of our rupee fixed income trading portfolio for the next one year, assuming a parallel shift in yield curve.

    At December 31, 2004
Change in interest rates
(in basis points)
   
      Portfolio
Size
      (100)     (50)         50     100












 







  (in millions)
Government of India securities   Rs.   8,863     Rs.   504   Rs.   255     Rs.   (206 )   Rs.   (420 )
Corporate debt securities       1,141       53     26     (25 )     (50 )
























Total   Rs.   10,004     Rs.   557   Rs.   281 Rs.   (232 )   Rs.   (470 )
























     At December 31, 2004, the total value of our rupee fixed income portfolio was Rs. 10.0 billion (US$ 231 million). The sensitivity model shows that if interest rates increase by 100 basis points during the next one year, the value of the trading portfolio, would fall by Rs. 470 million (US$ 11 million). Conversely, if interest rates fell by 100 basis points during the next one year, under the model, the value of this portfolio would rise by Rs. 557 million (US$ 13 million).

     As noted above, sensitivity analysis is used for risk management purposes only and the model used above assumes that during the course of the year no other changes are made in the respective portfolios. Actual changes in the value of the fixed income portfolio will vary from the model above.

     We revalue our trading portfolio on a daily basis and recognize aggregate re-valuation losses in our profit and loss account. The asset liability management policy stipulates an interest rate risk limit which seeks to cap the risk on account of the mark-to-market impact on the mark-to-market book (under the Indian GAAP classification which is different from the US GAAP classification - see “Supervision and Regulation – Banks’ Investment Classification and Valuation Norms” included elsewhere in this prospectus and the earnings at risk on the banking book, based on a sensitivity analysis of a 100 basis points parallel and immediate shift in interest rates.

     In addition, the Risk Management Group stipulates risk limits including position limits and stop loss limits for the trading book. These limits are monitored on a daily basis and reviewed periodically. In addition to risk limits, we also have risk monitoring tools such as Value-at-Risk models for measuring market risk in our trading portfolio.

     ICICI Bank is required to invest a specified percentage, currently 25.0%, of its liabilities in government of India securities to meet the statutory ratio requirement prescribed by the Reserve Bank of India. As a result, we have a

67






very large portfolio of government of India securities and these are primarily classified as available for sale securities. Our available for sale securities included Rs. 295.5 billion (US$ 6.8 billion) of government of India securities at December 31, 2004. These are not included in the trading book analysis presented above.

Loan Portfolio

     Our gross loan portfolio, which includes loans structured as debentures and preferred stock, was Rs. 930.3 billion (US$ 21.5 billion) at December 31, 2004, an increase of 17.0% over gross loan portfolio of Rs. 795.3 billion (US$ 18.4 billion), at year-end fiscal 2004. At year-end fiscal 2004, our gross loan portfolio increased 16.2% to Rs. 795.3 billion (US$ 18.4 billion) as compared to our gross loan portfolio of Rs. 684.6 billion (US$ 15.8 billion) at year-end fiscal 2003. Approximately 87.0% of our gross loans were rupee loans at December 31, 2004. At December 31, 2004, our balance outstanding in respect of loans to corporates outside India was Rs. 54.7 billion (US$ 1.3 billion), representing approximately 5.9 % of our total gross loan portfolio.

Loan Portfolio by Categories

     The following table sets forth, at the dates indicated our gross rupee and foreign currency loans by business category.

    At March 31,   At December 31,
   

 

  2003   2004   2004

















  (in millions)
Wholesale banking (1)   Rs.   385,143   Rs.   316,801   Rs.   319,558     US$ 7,385
       Rupee     297,030     244,668     251,594   5,814
       Foreign currency     88,113     72,133     67,964   1,571
Working capital finance     74,422     80,505     116,640   2,695
       Rupee     70,092     63,268     70,497   1,629
       Foreign currency     4,330     17,237     46,143   1,066
Leasing and related activities (2)     17,862     16,015     12,250   283
       Rupee     17,862     16,015     12,250   283
       Foreign currency              
Consumer loans and credit card receivables     188,254     311,907     443,641   10,253
       Rupee     188,254     311,690     442,790   10,233
       Foreign currency     -     217     851   20
Other(3)     18,959     70,059     38,224   883
       Rupee     18,959     70,044     32,460   750
       Foreign currency         15     5,764   133
Gross loans              
       Rupee     592,197     705,685     809,591   18,710
       Foreign currency     92,443     89,602     120,722   2,790












 



Total gross loans     684,640     795,287     930,313   21,500
Allowance for loan losses     (54,219 )     (66,767 )     (73,716 )       (1,704 )












 



Net loans   Rs.   630,421   Rs.   728,520   Rs.   856,597     US$   19,796












 



______________
(1)      Wholesale banking includes project finance, corporate finance and receivable financing but excludes leasing and related activities.
 
(2)      Leasing and related activities includes leasing and hire purchase.
 
(3)      Other includes bills discounted and inter-corporate deposits.

     Loan Concentration

     We follow a policy of portfolio diversification and evaluate our total financing exposure in a particular industry in light of our forecasts of growth and profitability for that industry. ICICI Bank’s Risk Management Group monitors all major sectors of the economy and specifically follows industries in which ICICI Bank has credit exposures. We seek to respond to any economic weakness in an industrial segment by restricting new credits to that

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industry segment and any growth in an industrial segment by increasing new credits to that industry segment, resulting in active portfolio management. ICICI Bank’s policy was to limit its loan portfolio to any particular industry (other than retail loans) to 15.0% . With effect from June 1, 2004, this limit has been revised to 12.0% .

     Pursuant to the guidelines of the Reserve Bank of India, ICICI Bank’s credit exposure to individual borrowers must not exceed 15.0% (20.0% including infrastructure financing) of its capital funds comprising Tier 1 and Tier 2 capital, calculated pursuant to the guidelines of the Reserve Bank of India, under Indian GAAP. ICICI Bank’s exposure to a group of companies under the same management control must not exceed 40.0% (50.0% including infrastructure financing) of its capital funds. With effect from June 1, 2004, banks may, in exceptional circumstances, enhance the exposure by 5.0% of capital funds with approvals from their board and making appropriate disclosures in their annual reports. Pursuant to the Reserve Bank of India guidelines, exposure for funded facilities is calculated as the total approved limit or the outstanding funded amount, whichever is higher (for term loans, as undisbursed commitments plus the outstanding amount). Exposure for non-funded facilities is calculated as 100.0% of the approved amount or the outstanding non-funded amount whichever is higher. At December 31, 2004, ICICI Bank is in compliance with these guidelines.

      The following table sets forth, at the dates indicated, our gross loans outstanding, including loans structured as debentures and preferred stock, by the borrower's industry or economic activity.

    At March 31,   At December 31,
   

 

    2003   2004   2004






















     (in millions, except percentages)
Consumer loans and credit card              
   receivables   Rs. 188,254   27.5 %   Rs. 311,907   39.2 . %   Rs 443,641   US$ 10,253   47.7 %
Iron and steel   72,473   10.6   62,354   7.8       58,681   1,356   6.3
Power   56,091   8.2   45,199   5.7       38,640   893   4.1
Services   45,443   6.6   33,435   4.2       33,264   769   3.6
Crude petroleum and petroleum              
   refining   24,556   3.6   20,807   2.6       29,618   684   3.2
Telecom   27,458   4.0   27,919   3.5       28,341   655   3.0
Textiles   40,279   5.9   29,941   3.8       27,516   636   3.0
Electronics   20,722   3.0   18,239   2.3       14,684   339   1.6
Transport Equipment   12,872   1.9   13,068   1.6       13,799   319   1.5
Metal products   9,094   1.3   15,716   2.0       13,034   301   1.4
Other(1)   187,398   27.4   216,702   27.3       229,095   5,295   24.6










 







Gross loans   Rs. 684,640   100.0 %   Rs. 795,287   100.0 %   Rs. 930,313   US$ 21,500   100.0 %




       

Allowance for loan losses   (54,219 )     (66,767 )         (73,716 )   (1,704 )  






 





Net loans   Rs. 630,421     Rs. 728,520         Rs 856,597   US$ 19,796  






     





____________
(1)      Other principally includes shipping, agriculture, construction, printing, mineral products, glass and glass products, watches, healthcare, gems and jewelry, leather and wood products industries.
 

     Our gross loan portfolio at December 31, 2004 increased by 17.0% compared to the gross loan portfolio at year-end fiscal 2004. The largest increase was in consumer loans and credit card receivables, which constituted 47.7% of gross loans at December 31, 2004 compared to 39.2% at year-end fiscal 2004. Our gross loans to the iron and steel sector as a percentage of gross loans decreased to 6.3% at December 31, 2004 compared to 7.8% at year-end fiscal 2004. Our gross loans to the power sector as a percentage of gross loans decreased to 4.1% at December 31, 2004 compared to 5.7% at year-end fiscal 2004. Consumer loans and credit card receivables accounted for 13.6% of our gross other impaired loans at December 31, 2004. The iron and steel sector accounted for 13.4% of our gross restructured loans and 3.7% of our gross other impaired loans at December 31, 2004. The power sector accounted for 0.8% of our gross restructured loans and 34.9% of our gross other impaired loans at December 31, 2004. See also “-Impaired Loans.”

     At December 31, 2004, our 20 largest borrowers accounted for approximately 13.9% of our gross loan portfolio (gross of unearned income and security deposits), with the largest borrower accounting for approximately 2.0% of our gross loan portfolio. The largest group of companies under the same management control accounted for approximately 3.6% of our gross loan portfolio.

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     Geographic Diversity

     Except as described below, our portfolios were geographically diversified throughout India, primarily reflecting the location of our corporate borrowers. The state of Maharashtra, being the most industrialized state in India, accounted for the largest proportion of our gross loans outstanding at December 31, 2004.

Directed Lending

     The Reserve Bank of India requires banks to lend to certain sectors of the economy. Such directed lending is comprised of priority sector lending, export credit and housing finance.

Priority Sector Lending

     The Reserve Bank of India has established guidelines requiring banks to lend 40.0% of their net bank credit (total domestic loans less marketable debt instruments and certain exemptions permitted by the Reserve Bank of India from time to time) to certain specified sectors called priority sectors. Priority sectors include small-scale industries, the agricultural sector, food and agri-based industries, small businesses and housing finance up to certain limits. Out of the 40.0%, banks are required to lend a minimum of 18.0% of their net bank credit to the agriculture sector and the balance to certain specified sectors, including small scale industries (defined as manufacturing, processing and services businesses with a limit on investment in plant and machinery of Rs. 10 million), small businesses, including retail merchants, professional and other self employed persons and road and water transport operators, housing loans up to certain limits and to specified state financial corporations and state industrial development corporations.

     While granting its approval for the amalgamation, the Reserve Bank of India stipulated that since ICICI’s loans transferred to us were not subject to the priority sector lending requirement, we are required to maintain priority sector lending of 50.0% of our net bank credit on the residual portion of our advances (i.e. the portion of our total advances excluding advances of ICICI at year-end fiscal, 2002, henceforth referred to as residual net bank credit). This additional 10.0% priority sector lending requirement will apply until such time as our aggregate priority sector advances reach a level of 40.0% of our total net bank credit. The Reserve Bank of India’s existing instructions on sub-targets under priority sector lending and eligibility of certain types of investments/ funds for qualification as priority sector advances apply to us.

     We are required to comply with the priority sector lending requirements at the end of each fiscal year. Any shortfall in the amount required to be lent to the priority sectors may be required to be deposited with government sponsored Indian development banks such as the National Bank for Agriculture and Rural Development and the Small Industries Development Bank of India. These deposits have a maturity of up to five years and carry interest rates lower than market rates.

     At December 24, 2004, our priority sector loans were Rs. 157.5 billion (US$ 3.6 billion), constituting 57.7% of our residual net bank credit against the requirement of 50.0% . The following table sets forth our priority sector loans, at December 24, 2004, broken down by the type of borrower.

    At December 24,   a% of residual
net bank credit
at December 24,
  2004   2004   2004






  (in millions, except percentages)
Small scale industries   Rs. 2,346   US$ 54   0.9 %
Others including small businesses   117,502   2,716   43.0
Agricultural sector   37,689   871   13.8






Total   Rs. 157,537   US$ 3,641   57.7 %






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     Export Credit

     As part of directed lending, the Reserve Bank of India also requires banks to make loans to exporters at concessional rates of interest. Export credit is provided for pre-shipment and post-shipment requirements of exporter borrowers in rupees and foreign currencies. At the end of the fiscal year, 12.0% of a bank’s net bank credit is required to be in the form of export credit. This requirement is in addition to the priority sector lending requirement but credits extended to exporters that are small scale industries or small businesses may also meet part of the priority sector lending requirement. The Reserve Bank of India provides export refinancing for an eligible portion of total outstanding export loans at the bank rate prevailing in India from time to time. The interest income earned on export credits is supplemented through fees and commissions earned from these exporter customers from other fee-based products and services taken by them from us, such as foreign exchange products and bill handling. At December 31, 2004 our export credit was Rs. 5.9 billion (US$ 137 million), constituting 2.2% of our residual net bank credit.

Housing Finance

     The Reserve Bank of India requires banks to lend up to 3.0% of their incremental deposits in the previous fiscal year for housing finance. This can be in the form of home loans to individuals or investments in the debentures and bonds of the National Housing Bank and housing development institutions recognized by the government of India. Housing finance also qualifies as priority sector lending. At December 24, 2004, our housing finance qualifying as priority sector advances was Rs. 108.1 billion (US$ 2.5 billion).

Impaired Loans

     The following discussion on impaired loans is based on US GAAP. For classification of impaired loans under Indian regulatory requirements, see “Supervision and Regulation – Loan Loss Provisions and Non-Performing Assets” included elsewhere in this prospectus.

     Impact of Economic Environment on the Industrial Sector

     In 1991, India commenced a program of industrial liberalization involving, among other things, the abolition of industrial licensing, reduction in import tariff barriers and greater access for foreign companies to the Indian markets. In the period following the opening up of the economy, a number of Indian companies commenced large projects in expectation of growth in demand in India. These projects generally had relatively high levels of debt relative to equity, given inadequate depth in the equity capital markets in India at that time. However, the negative trends in the global marketplace in the late 1990s, particularly the South-east Asian economic crisis, a downturn in the commodities markets and recessionary conditions in various economies, impaired the operating environment for the Indian industrial sector. The manufacturing sector was also impacted by increased competition arising from economic liberalization in India and volatility in industrial demand and growth. These factors led to stress on the operating performance of Indian corporations in certain sectors and the impairment of a significant amount of loan assets in the financial system, including loan assets of ICICI and ICICI Bank. Certain Indian corporations have come to terms with this new competitive reality through a process of restructuring and repositioning, including rationalization of capital structures and production capacities. The increase in commodity prices since fiscal 2003 has had a favorable impact on the operations of corporations in several sectors.

Recognition of Impaired Loans

     We identify a loan as impaired when it is probable that we will be unable to collect the scheduled payments of principal and interest due under the contractual terms of the loan agreement. Until year-end fiscal 2003, a loan was considered to be impaired if interest or principal was overdue for more than 180 days. From fiscal 2004, an asset is classified as impaired when principal or interest has remained overdue for more than 90 days, except in case of certain categories of agricultural loans where on extended period of 180 days, linked to agricultural production cycle, is stipulated by the Reserve Bank of India. In addition, delays or shortfalls in loan repayments are evaluated along with other factors to determine if a loan should be placed on non-accrual status. Generally, loans with delinquencies below 90 days are placed on non-accrual status only if specific conditions indicate that impairment is probable. The decision to place a loan on non-accrual status is also based on an evaluation of the borrower’s financial condition, collateral, liquidation value, and other factors that affect the borrower’s ability to repay the loan

71






in accordance with the contractual terms. Generally, when a loan is placed on non-accrual status, interest accrued and uncollected on the loan in the current fiscal year is reversed from income, and interest accrued and uncollected from the prior year is charged off against the allowance for loan losses. Thereafter, interest on non-accrual loans is recognized as interest income only to the extent that cash is received and future collection of principal is not in doubt. When borrowers demonstrate over an extended period the ability to repay a loan in accordance with the contractual terms of a loan, which we had classified as non-accrual, the loan is returned to accrual status.

     We classify a loan as a troubled debt restructuring where we have made concessionary modifications, that we would not otherwise consider, to the contractual terms of the loan to a borrower experiencing financial difficulties. Such loans are placed on a non-accrual status. For these loans, cash receipts are normally applied to principal and interest in accordance with the terms of the restructured loan agreement. With respect to restructured loans, performance prior to the restructuring or significant events that coincide with the restructuring are evaluated in assessing whether the borrower can meet the rescheduled terms and may result in the loan being returned to accrual status after a performance period.

     Consumer loans are generally identified as impaired when principal or interest has remained overdue for more than 90 days. Consumer loans when identified as impaired are placed on non-accrual status.

     The value of impaired loans is measured as the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the recovery of the loan is solely collateral dependent. If the value of the impaired loan is less than the recorded investment in the loan, we recognize this impairment by creating a valuation allowance with a corresponding charge to the provision for loan losses.

     Our gross restructured loans decreased 6.2% during the nine months ended December 31, 2004 to Rs. 152.3 billion (US$ 3.5 billion) from Rs. 162.4 billion (US$ 3.7 billion) at year-end fiscal 2004. This was primarily due to reclassification of certain loans as unimpaired based on satisfactory performance of the borrower accounts, offset in part, by restructuring of certain loans to companies in the telecom and automobile industries and reclassification of other impaired loans that were restructured or transferred to an asset reconstruction company during the year. Gross other impaired loans decreased 22.5% during the nine months ended December 31, 2004 to Rs. 38.9 billion (US$ 0.9 billion) from Rs. 50.2 billion (US$ 1.2 billion) at year-end fiscal 2004. This was primarily due to reclassification of other impaired loans that were restructured or transferred to an asset reconstruction company during the year, as restructured loans, and reclassification of certain loans as unimpaired based on satisfactory performance of the borrower accounts. As a percentage of net loans, net restructured loans were 12.0% at December 31, 2004 compared to 16.7% at year-end fiscal 2004 and net other impaired loans were 2.4% at December 31, 2004 compared to 3.9% at year-end fiscal 2004. During the nine months ended December 31, 2004, we transferred impaired loans of Rs. 11.0 billion (US$ 255 million) to Asset Reconstruction Company (India) Limited, none of which was recognized as a sale in our US GAAP financial statements. These loans are included in our restructured loans.

     The following table sets forth, at the dates indicated, our gross restructured rupee and foreign currency loan portfolio by business category.

    March 31, 2004   December 31, 2004
   
 
    (in millions, except percentages
Wholesale banking(1)   Rs. 149,724   Rs. 144,354   US$ 3,336
       Rupee     115,262     125,554   2,902
       Foreign currency     34,462     18,800   434
Working capital finance     11,525     7,652   177
       Rupee     11,525     7,652   177
       Foreign currency          
Leasing and related activities(2)     1,149     324   7
       Rupee     1,149     324   7
       Foreign currency           -
Consumer loans and credit card and others           -
       Rupee           -

72







  March 31, 2004   December 31, 2004
 
 
    (in millions, except percentages
       Foreign currency             -
Total restructured loans      
       Rupee     127,937     133,529     3,086
       Foreign currency     34,462     18,800     434









Gross restructured loans     162,398     152,329     3,520
Allowance for loan losses     (40,981 )     (49,389 )     (1,141 )









Net restructured loans   Rs. 121,417   Rs. 102,940   US$ 2,379









Gross loan assets   Rs. 795,287   Rs. 930,313   US$ 21,500
Net loan assets(3)     728,520     856,597     19,797
Gross restructured loans as a      
     percentage of gross loan assets     20.42 %     16.37 %  
Net restructured loans as a      
     percentage of net loan assets     16.67 %     12.02 %  

(1)      Includes project finance, corporate finance and receivables financing, excluding leasing and related activities.
 
(2)      Includes leasing and hire purchase.
 
(3)      Net of provisions including unallocated provisions on lending assets not specifically identified as restructured loans or other impaired loans.

     The following table sets forth, at the dates indicated, our gross other impaired rupee and foreign currency loan portfolio by business category.

  March 31, 2004   December 31, 2004
 

 

  (in millions, except percentages)
Wholesale banking(1)   Rs. 42,842   Rs. 31,331     US$ 724
       Rupee   34,945   25,624   592
       Foreign currency   7,897   5,707   132
Working capital finance   2,978   1,755   41
       Rupee   2,978   1,755   41
       Foreign currency      
Leasing and related activities(2)   746   453   10
       Rupee   746   453   10
       Foreign currency      
Consumer loans and credit card receivables and others   3,672   5,392   125
       Rupee   3,672   5,392   125
       Foreign currency      
Total other impaired loans      
       Rupee   42,341   33,224   768
       Foreign currency   7,897   5,707   132






 


Gross other impaired loans   50,238   38,931   900
Allowance for loan losses   (21,474 )   (18,501 )     (428 )






 


Net other impaired loans   Rs. 28,764   Rs. 20,430     US$ 472






 


Gross loan assets   Rs. 795,287   Rs. 930,313     US$ 21,500
Net loan assets(3)   728,520   856,597   19,797
Gross other impaired loans as a      
 percentage of gross loan assets   6.32 %   4.18 %    
Net other impaired loans as a      
 percentage of net loan assets   3.95 %   2.39 %    

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____________
(1)      Includes project finance, corporate finance and receivables financing, excluding leasing and related activities
 
(2)      Includes leasing and hire purchase.
 
(3)      Net of provisions including unallocated provisions on lending assets not specifically identified as restructured loans or other impaired loans.
 

     The following table sets forth, at the dates indicated, gross restructured loans by borrowers' industry or economic activity and as a percentage of total gross restructured loans.

    March 31, 2004   December 31, 2004
   
 
  (in millions, except percentages)
Iron and steel   Rs. 31,839   19.6 %   Rs. 20,385   US$ 471   13.4 %
Crude petroleum/refining     17,462   10.8       18,956   438   12.4
Telecommunications     8,674   5.3       17,414   402   11.4
Textiles     16,356   10.1       15,344   355   10.1
Transport equipment     7,282   4.5       8,533   197   5.6
Cement     7,447   4.6       6,964   161   4.6
Metal products     6,210   3.8       6,435   149   4.2
Fertilizers and pesticides     6,308   3.9       6,223   144   4.1
Electronics     5,855   3.6       5,375   124   3.5
Machinery     3,674   2.3       3,809   88   2.5
Plastics     3,471   2.1       3,705   86   2.4
Man-made fibers     4,297   2.6       3,616   84   2.4
Sugar     4,678   2.9       3,405   79   2.2
Services     2,915   1.8       2,901   67   1.9
Electrical equipment     1,957   1.2       2,512   58   1.6
Basic chemicals     2,886   1.8       2,362   54   1.6
Drugs     2,276   1.4       2,189   50   1.4
Paper and paper products     6,971   4.3       1,965   45   1.3
Power     1,284   0.8       1,151   27   0.8
Non-ferrous metals     1,144   0.7       1,132   26   0.7
Construction     -   -       1,016   23   0.7
Tea     951   0.6       774   18   0.5
Petrochemicals     2,685   1.7       557   13   0.4
Rubber and rubber products     500   0.3       507   12   0.3
Food products     589   0.4       434   10   0.3
Other chemicals     -   -       7   -   -
Other(1)     14,687   9.0       14,659   339   9.6
   

 

 

 

 

Total gross restructured loans   Rs. 162,398   100.0 %   Rs. 152,329   US$ 3,520   100.0 %
   

 

 

 

 

____________
(1)  Others principally includes shipping, real estate, wood, non-bank finance companies, glass, computer software, agriculture, vegetable oil, fishing, printing, floriculture and leather.

74






     The following table sets forth, at the dates indicated, gross other impaired loans by borrowers' industry or economic activity and as a percentage of total gross other impaired loans.

    March 31, 2004 December 31, 2004
   


  (in millions, except percentages)
Power   Rs. 11,890     23.7 %   Rs. 13,584   US$ 314   34.9 %
Consumer loans and credit card            
   receivables   3,672     7.3       5,159   119   13.3
Petrochemicals   3,651     7.3       4,097   95   10.5
Basic chemicals   3,021     6.0       1,784   41   4.6
Iron and steel   5,632     11.2       1,456   34   3.7
Services   1,873     3.7       1,374   32   3.5
Electrical equipment   1,873     3.7       1,195   28   3.1
Textiles   2,351     4.7       1,063   25   2.7
Electronics   1,456     2.9       902   21   2.3
Food products   1,126     2.2       886   20   2.3
Transport equipment   1,784     3.6       721   17   1.9
Man-made fibers   884     1.8       677   16   1.7
Construction   1,160     2.3       543   13   1.4
Paper and paper products   950     1.9       535   12   1.4
Metal products   1,124     2.2       473   11   1.2
Plastics   684     1.4       403   9   1.0
Drugs   412     0.8       258   6   0.7
Rubber and rubber products     288     0.6       251   6   0.6
Other chemicals   259     0.5       249   6   0.6
Non-ferrous metals   253     0.5       242   6   0.6
Machinery   1,235     2.5       230   5   0.6
Cement   870     1.7       229   5   0.6
Fertilizers and pesticides   71     0.1       50   1   0.1
Sugar   70     0.1       11    
Crude petroleum/refining             9    
Other(1)   3,649     7.3       2,550   58   6.7
   

   

 

 

 

Total gross other impaired loans   Rs. 50,238     100.0 %   Rs. 38,931   US$ 900   100.0 %
   

   

 

 

 

____________
(1)      Includes non-bank finance companies, shipping, vegetable oil, health care, printing, computer software, road, wood, mineral product, glass, agriculture, fishing, trade, leather, gems and jewelry and mining.

     The largest proportion of our restructured and other impaired loans was to the power, iron and steel, crude petroleum/refining, telecommunications and textiles industries. There is a risk that restructured and other impaired loans in each of these and other sectors could increase if Indian economic conditions deteriorate, there is a negative trend in global commodity prices or projects under implementation are unable to achieve profitable commercial operations.

     Power. At December 31, 2004, we classified 3.0% of our total loans to the power sector as restructured loans and 35.1% as other impaired loans. Other impaired loans primarily include loans to a large private sector power generation project in the state of Maharashtra, the implementation of which is currently suspended on account of a dispute between the power project and the purchaser, the state electricity board. The matter is currently pending before the Indian courts, while parallel efforts are continuing for an out of court settlement, including re-negotiation of the power tariff. The principal sponsor of the project has filed for bankruptcy in the United States. The assets of the project are in the possession of a receiver appointed by the High Court of Judicature at Bombay on a plea by the lenders to the project, including us. Efforts are continuing to sell the project to new sponsors.

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     Iron and steel. Until fiscal 2003, a persistent downward trend in international steel prices to historic lows had a significant impact on companies in this sector. In addition, a significant reduction in import tariffs in India led to price competition from certain countries, significantly reducing domestic prices. In fiscal 2004, the sector witnessed an increase in prices as well as an increase in exports resulting in overall improved performance. While most of the projects for which we have loans outstanding have now been completed, a part of these loans is for projects still under implementation. At December 31, 2004, we had classified 34.7% of our gross loans in this sector as restructured loans and 2.5% as other impaired loans.

     Crude petroleum and refining. At December 31, 2004, we had classified 64.0% of our total loans to the crude petroleum and refining sector as restructured loans. Restructured loans include loans to a large private sector refinery project, the implementation of which was delayed due to natural calamities and other factors, resulting in an overrun in the cost of the project compared to the original appraised cost. The Corporate Debt Restructuring Forum has approved the restructuring of this project. See “Overview of the Indian Financial Sector – Corporate Debt Restructuring Forum” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

     Telecommunications. At December 31, 2004, we had classified 61.4% of our gross loans in this sector as restructured loans. Our restructured loans in this sector mainly include loans to a specific group of companies that have been restructured under the Corporate Debt Restructuring Forum.

     Textiles. Over the last few years, the textiles sector was adversely affected by the impact of erratic monsoons on cotton production, the South-east Asian economic crisis, the small economic size and unviable capacity of several textile units and competitive pressures from other low cost textile producing countries. A substantial portion of our loans to this sector has been classified as impaired. At December 31, 2004, we had classified 55.8% of our gross loans in this sector as restructured loans and 3.9% as other impaired loans.

Interest Foregone

     The amount of interest foregone by us in respect of loans on which accrual of interest was suspended at December 31, 2004, was Rs. 7.6 billion (US$ 176 million).

Allowance for Loan Losses

     The following table sets forth, at the dates indicated, movements in our allowances for loan losses.

  December 31, 2003   March 31, 2004   December 31, 2004













  (in millions)
Aggregate allowance for loan losses at the        
   beginning of the year   Rs. 54,219   Rs. 54,219   Rs. 66,767   US$ 1,543
Add: Provisions for loan losses        
       Wholesale banking(1)     14,675   18,940   6,974   161
       Working capital finance     (401 )   77   (97 )   (2 )
       Leasing and related activities (2)     49   (48 )   (98 )   (2 )
       Others (3)     965   1,086   1,725   40
Total provisions for loan losses   Rs. 15,289   Rs. 20,055   8,504   US$ 197
Write offs     (1,555 )   (7,507 )   (1,555 )   (36 )












Aggregate allowance for loan losses at the end of            
   the year   Rs. 67,953   Rs. 66,767   Rs. 73,716   US$ 1,704












Ratio of net provisions for loan losses during the            
   period to average loans outstanding(4)     2.4 %   3.0 %   1.5 %  
____________
(1)      Includes project finance, corporate finance and receivables financing, excluding leasing and related activities. Provisions include unallocated provisions on lending assets not specifically identified as restructured loans or other impaired loans.
 
(2)      Includes leasing and hire purchase.

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(3)      Includes consumer loans and credit card receivables and bills discounted.
 
(4)      Annualised for the nine months ended December 31, 2004.

     We conduct a comprehensive analysis of our loan portfolio on a periodic basis. The analysis considers both qualitative and quantitative criteria including, among others, the account conduct, future prospects, repayment history and financial performance. This comprehensive analysis includes an account by account analysis of the entire loan portfolio, and an allowance is made for any probable loss on each account. In estimating the allowance, we consider the net realizable value on a present value basis by discounting the future cash flows over the expected period of recovery. Further, we also consider past history of loan losses and value of underlying collateral. For further discussions on allowances for loan losses, see “Operating and Financial Review and Prospects – Summary for the nine months ended December 31, 2004, compared to the nine months ended December 31, 2003 – Provisions for Loan Losses” and “ – Critical Accounting Policies – Allowance for Loan Losses.”

     Under US GAAP, the analysis of the provisions for restructured and other impaired loans requires that we take into account the time delay in our ability to foreclose upon and sell collateral. The net present value of a restructured and other impaired loan includes the net present value of the underlying collateral, if any. As a result, even though our loans are generally over-collateralized, additional allowances are required under US GAAP because US GAAP takes into account the time value of money.

     Each portfolio of smaller-balance, homogenous loans, including consumer mortgage, instalment, revolving credit and most other consumer loans, is individually evaluated for impairment. The allowance for loan losses attributed to these loans is established via a process that includes an estimate of probable losses inherent in the portfolio, based upon various statistical analysis. These include migration analysis, in which historical delinquency and credit loss experience is applied to the current ageing of the portfolio, together with an analysis that reflects current trends and conditions. The use of different estimates or assumptions could produce different provisions for smaller balance homogeneous loan losses.

     For restructured and other impaired loans in excess of Rs. 100 million (US$ 2 million), which were 89.8% of our gross restructured and other impaired loan portfolio at December 31, 2004, we followed a detailed process for each account to determine the allowance for loan losses to be provided. For the balance of smaller loans in the restructured and other impaired loan portfolio, we follow the classification detailed below for determining the allowance for loan losses.

Settlement Cases

     In settlement cases allowances are calculated as per the scheme of settlement on an individual basis.

Enforcement Cases

     Enforcement cases are those cases (excluding cases referred to the Board for Industrial and Financial Reconstruction or BIFR) in which we have commenced litigation. We expect that only the secured portion of these loans is recoverable, after a specified number of years from the date the loan is recalled. The realizable value of these loans on a present value basis is determined by discounting the estimated cash flow at the end of the specified number of years from the date of the recall by the average interest implicit in these loans.

Non-Enforcement BIFR Cases

     Non-enforcement BIFR cases include cases which have been referred to the Board for Industrial and Financial Reconstruction, which are further categorized into accounts where the plant is under operation and accounts where the plant is closed. We expect that in accounts where the plant is operational, the secured portion of the loan is recoverable over specified annual payments. In respect of those accounts where the plant is closed, we expect that the secured portion of the loan will be recoverable at the end of a specified number of years based upon historical experience.

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     Non-Enforcement Non-BIFR Cases and other loans

     Non-enforcement non-BIFR cases include cases, which are neither under litigation nor referred to the Board for Industrial and Financial Reconstruction. This category is also divided into accounts where the plant is under operation and accounts where the plant is closed. We expect that in those accounts where the plant is operational, the secured portion of the loan is recoverable over specified annual payments together with a recovery in interest due at a specified rate. In respect of those loans where the plant is closed, we expect that the secured portion of the loan will be recoverable over specified annual payments.

     The following table sets forth, for the period indicated, the results of our restructured and other impaired loan classification scheme.

  At December 31, 2004
 
  Gross impaired
loans
  Percentage
expected to be
realized on a net
present value
basis
  Impaired loans,
net of allowance
for loan losses






  (in millions, except percentages)
Gross principal greater than Rs. 100 million   Rs. 171,780   66.4 %   Rs. 114,050
Settlement cases     612   70.4     431
Enforcement cases     3,872   66.7     2,582
Non-enforcement BIFR cases     1,772   38.8     687
Non-enforcement non-BIFR cases     13,223   42.5     5,620






Total   Rs. 191,259   64.5 %   Rs. 123,370






     We believe that the process for ascertaining allowance for loan losses described above adequately captures the known losses on our entire loan portfolio. We believe that our allowance for loan losses is adequate to cover all known losses in our portfolio.

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BUSINESS

Overview

     You should read the following summary together with the section “Business” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

     We offer a wide range of banking products and services to corporate and retail customers through a variety of delivery channels. In the nine-month period ended December 31, 2004, we made a net profit of Rs. 5.25 billion (US$ 121 million) compared to a net profit of Rs. 2.32 billion (US$ 54 million) in the nine-month period ended December 31, 2003. In fiscal 2004, we made a net profit of Rs. 5.2 billion (US$ 120 million) compared to a net loss of Rs. 8.0 billion (US$ 184 million) in fiscal 2003. At December 31, 2004, we had assets of Rs. 1,634.7 billion (US$ 37.8 billion) and stockholders' equity of Rs. 122.7 billion (US$ 2.8 billion).

     We were organized under the laws of India as a private sector commercial bank in 1994. We were an affiliate company of ICICI. ICICI was organized under the laws of India in 1955 and together with its subsidiaries and affiliates was a diversified financial services group. In April 2002, ICICI and two of its subsidiaries, ICICI Personal Financial Services and ICICI Capital Services merged with and into us in an all-stock amalgamation.

     We offer products and services in the areas of commercial banking to corporate and retail customers, both domestic and international, investment banking and other products including insurance.

     Our commercial banking products and services for retail customers include both retail loans and retail liability products and services. We offer a wide range of retail credit products including home loans, automobile loans, commercial vehicle loans, two wheeler loans, dealer financing, personal loans, credit cards, loans against time deposits and loans against shares. We also offer loans and fee-based services to small enterprises, which include suppliers and dealers of large corporations, and clusters of small enterprises that have a homogeneous profile. We take rupee and foreign currency deposits from customers in India as well as non-resident Indians. Our deposit products include checking accounts and time deposits, with specific products for customers in various segments, such as student accounts, payroll accounts, accounts for small businesses and non-resident Indian accounts. We also offer retail bond products. Our other retail products and services include private banking, debit cards, fund transfer facilities and utility bill payment services. We also distribute third party investment products, including government of India Relief Bonds, mutual funds and insurance policies issued by our joint ventures, ICICI Prudential Life Insurance Company and ICICI Lombard General Insurance Company.

     Our commercial banking operations for corporate customers include a range of products and services for India's leading corporations and growth-oriented middle market businesses. Our products and services for corporate customers include loan products and fee and commission-based products and services. Our loan products consist of project finance, corporate finance and working capital loans, including cash credit facilities and bill discounting. Fee and commission-based products and services include documentary credits, standby letters of credit, project finance guarantees, cash management services, escrow and trust and retention accounts, cross-border trade services, payment services, custodial services and loan syndication. We also take rupee or foreign currency deposits with fixed or floating interest bases from our corporate customers. Our deposit taking products include certificates of deposit, checking accounts and time deposits. We also offer agricultural financing products.

     Our investment banking business includes our treasury operations. Our treasury operations include maintenance and management of regulatory reserves, proprietary trading in equity, fixed income and foreign exchange, a range of products and services for corporate customers, such as forward contracts and interest rate and currency swaps, and foreign exchange products and services. Through our treasury operations, we manage our balance sheet including the maintenance of required regulatory reserves and seek to optimize profits from our trading portfolio by taking advantage of market opportunities. There is no restriction on active management of our regulatory portfolio through sales and purchases of securities. Our investment banking business also includes corporate advisory services, including advice on financing and strategic transactions, underwriting and placement of equity offerings and brokering, and fixed income operations, including primary dealership in government securities and proprietary operations in various money market instruments, all of which are undertaken by ICICI Securities Limited, our investment banking subsidiary. Funds managed by our subsidiary ICICI Venture Funds Management

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Company Limited provide venture capital funding to start-up companies, as well as private equity to a range of companies.

     Our other businesses include life insurance and non-life insurance. ICICI Prudential Life Insurance Company, our joint venture with Prudential plc, offers a range of life insurance products to individuals in India. ICICI Lombard General Insurance Company, our joint venture with Fairfax Financial Holdings Limited, through its subsidiary Lombard Canada Limited, offers property and other non-life insurance products to companies and individuals in India.

     We believe that the international markets present a major growth opportunity and have, therefore, expanded the range of our commercial banking products to international customers. Our strategy for growth in international markets is based on leveraging home country links and technology for international expansion by capturing market share in select international markets. We have identified North America, the United Kingdom, the Middle-East and South-East Asia as the key regions for establishing our international presence. We currently have subsidiaries in the United Kingdom and Canada, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates and Bangladesh. We have also received regulatory approval to set up a representative office in South Africa and propose to establish a subsidiary in Russia. In September 2004, we filed an application for a branch license in Sri Lanka. In June 2004, we filed an application for a branch license in the United States with the Federal Reserve. In February 2005, we received approval from the Reserve Bank of India for establishing a branch in Hong Kong. We are in the process of applying to the Hong Kong Monetary Authority for a branch license.

     We offer our customers a choice of delivery channels including physical branches, ATMs, telephone banking call centers and the Internet. In recent years, we have expanded our physical delivery channels, including bank branches and ATMs, in 348 centers throughout India at February 28, 2005.

     We have consistently used technology to differentiate our products and services from those of our competitors. For example, we were among the first banks in India to offer Internet banking. Our technology-driven products also include cash management services, mobile phone banking services and electronic commerce-based business-to-business and business-to-consumer banking solutions. To support our technology initiatives, we have set up online real time transaction processing systems. We remain focused on changes in customer needs and technological advances and seek to remain at the forefront of electronic banking in India.

Strategy

     Our objective is to enhance our position as a premier provider of banking and other financial services in India and to leverage our competencies in financial services and technology to develop an international business franchise.

     The key elements of our business strategy are to:

 
  • focus on quality growth opportunities by:
     
        —   maintaining and enhancing our strong retail franchise;
     
        maintaining and enhancing our strong corporate franchise;
     
        building an international presence; and
     
        strengthening our insurance business.
     
     
  • emphasize conservative risk management practices and enhance asset quality;
     
     
  • use technology for competitive advantage; and
     
     
  • attract and retain talented professionals.
     

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    Focus on Profitable, Quality Growth Opportunities by:

         Maintaining and Enhancing our Strong Retail Franchise

         We believe that the Indian retail financial services market is likely to continue to experience sustained growth. With upward migration of household income levels, increasing affordability of retail finance and acceptance of use of credit to finance purchases, retail credit has emerged as a rapidly growing opportunity for banks that have the necessary skills and infrastructure to succeed in this business. We have capitalized on the growing retail opportunity in India and believe that we have emerged, on an incremental basis, as a market leader in retail credit. The key dimensions of our retail strategy are innovative products, parity pricing, customer convenience, wide distribution, strong processes, prudent risk management and customer focus. We are also focusing on growth in our retail deposit base to diversify our funding towards more stable and lower cost funding sources. We earn fee income from our commercial banking services to retail customers, including retail loan processing fees, credit card and debit card fees, and retail transaction fees. We have also entered the credit card acquiring business, in which we earn income on transactions executed at merchant point of sale terminals owned by us. We also offer our customers depositary share accounts and direct sales of third party mutual funds and government of India Relief Bonds, for which we earn fee income. Cross selling of the entire range of credit and investment products and banking services to our customers is a critical aspect of our retail strategy. We will also continue to securitize a portion of the retail assets originated by us.

         We have integrated our strategy with regard to small enterprises with our strategy for retail products and services. We are focusing on offering working capital loans and other banking products and services to suppliers or dealers of large corporations, and clusters of small enterprises that have a homogeneous profile.

         Maintaining and Enhancing our Strong Corporate Franchise

         Our commercial banking services to corporate customers will continue to focus on leveraging our strong corporate relationships and increased capital base to increase our market share in non-fund based working capital products and fee-based services. Our corporate lending activities will continue to focus on structured finance, corporate finance and working capital lending to highly rated corporations. We will also focus on achieving directed lending obligations to the agricultural sector through carefully structured credit products. The government policy focus on infrastructure development, including resolution of certain issues through legislation, and the repositioning and emerging global competitiveness of the Indian industry offer growth opportunities in the area of project financing. We believe that a number of Indian companies in both the public and private sector have significant investment plans for setting up infrastructure facilities as well as industrial production capacities. We will continue to focus on structuring and syndication of financing for large projects by leveraging our expertise in project financing, and on actively managing our project finance portfolio to reduce portfolio concentration and to manage portfolio risk. We view ourselves not only as a provider of project finance but also as an arranger and facilitator, creating appropriate financing structures that may serve as financing and investment vehicles for a wider range of market participants.

         Our goal is to provide a comprehensive and integrated service to corporate treasurers through our client bankers. We aim to increase the cross selling of our products and services and maximize the value of our corporate

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    relationships through the effective use of technology, speedy response times, quality service and the provision of products and services designed to meet specific customer needs. We will continue to actively manage our asset portfolio through securitization of assets as well as through acquisition of credit portfolios from other institutions and banks, to diversify the portfolio, reduce long-term balance sheet exposures and maximize risk-adjusted returns.

    Building an International Presence

         We believe that the international markets present a major growth opportunity and have therefore expanded the range of our commercial banking products in international markets. Our initial strategy for growth in international markets is based on leveraging home country links for international expansion by capturing market share in select international markets. The initial focus areas are supporting Indian companies in raising corporate and project finance for their investments abroad, trade finance, personal financial services for non-resident Indians and international alliances to support domestic businesses. We have over the last few years built a large network of correspondent relationships across all major countries. Most of these countries have significant trade and other relationships with India.

         We have identified North America, the United Kingdom, the Middle-East and South-East Asia as the key regions for establishing our international presence. We currently have subsidiaries in the United Kingdom and Canada, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates and Bangladesh. We have also received regulatory approval to set up a representative office in South Africa and propose to establish a subsidiary in Russia. In addition, we have filed an application for a branch license in Sri Lanka and applied to the Federal Reserve for a branch license in the United States. We have entered into alliances with existing banks in various markets, to leverage our complementary capabilities, primarily the banks’ existing physical distribution network in the overseas markets and our India-linked products and services for the Indian community. We have entered into alliances with Lloyds TSB in the United Kingdom, Bank of Montreal in Canada, DBS Bank in Singapore, Emirates Bank in the United Arab Emirates and Wells Fargo in the United States.

         With the establishment of a presence in key overseas locations, we aim to expand our offering to include local banking to non-resident Indians as well as to the broader local market. We propose to increase our scale of operations in each of these locations by launching appropriate products that leverage our technological capabilities and relative cost efficiencies.

    Strengthen Our Insurance Business

         Following the deregulation of the insurance sector in India, private sector companies were allowed to enter the insurance business. We have a joint venture partnership with Prudential plc of the United Kingdom for the life insurance business. We have a 74.0% interest in this joint venture. This joint venture company, ICICI Prudential Life Insurance Company Limited, obtained the license to conduct life insurance business in November 2000 and commenced business operations in December 2000. ICICI Prudential Life Insurance Company is the largest private sector life insurance company in India, with a market share of approximately 33% in the private sector based on new business premiums (excluding group insurance) in fiscal 2005 (through December 2004). ICICI Bank distributes life insurance policies issued by ICICI Prudential Life Insurance Company through ICICI Bank’s branch network, based on a customer referral arrangement.

         In the non-life insurance sector, we have a joint venture with Fairfax Financial Holdings, through its subsidiary Lombard Canada Limited. We have a 74.0% interest in this joint venture. The joint venture company, ICICI Lombard General Insurance Company Limited, obtained the license to conduct general insurance business in August 2001 and subsequently commenced operations. ICICI Lombard General Insurance Company is the largest private sector general insurance company in India, with a market share of approximately 25% in the private sector in fiscal 2005 (through December 2004). ICICI Lombard General Insurance Company offers general insurance products to corporate and retail customers and seeks to capitalize on our customer relationships.

         The key dimensions of our strategy for growth in the insurance business are innovative products, a wide distribution network, a prudent portfolio mix and sound risk management practices. In addition, we are focused on leveraging our corporate and retail customer base for cross selling insurance products.

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       Emphasize Conservative Risk Management Practices and Enhance Asset Quality

         We believe that conservative risk management policies, processes and controls are critical for long-term sustainable competitive advantages in our business. Our Risk Management Group is an independent, centralized group responsible for establishing and implementing company-wide risk management policies, with an increasing focus on enhancing asset quality. An independent, centralized Compliance and Audit Group and a Middle Office Group monitor adherence to regulations, policies and procedures. We continue to build on our credit risk management procedures, credit evaluation and rating methodology, credit risk pricing models, proprietary analytics and monitoring and control mechanisms. We expect to enter new product markets only after conducting detailed risk analysis and pilot testing programs.

         To reduce risk, we have diversified our loan portfolio towards retail lending and shorter-term working capital, while continuing to focus on corporate lending to highly-rated corporate customers and structured finance. In addition, we seek to lower the credit risk profile of the project and corporate loan portfolio through the increased use of financing structures based on a security interest in the cash flows generated from the business of the borrower and increased collateral, including additional security in the form of liquid assets, such as investment securities and readily marketable real property. We are also trying to mitigate project risk through the allocation of risk to various project counterparties, such as construction contractors, operations and maintenance contractors and raw material and fuel suppliers, by entering into rigorous project contracts with those counterparties. We seek to control credit risk in the retail loan portfolio, the small enterprises loan portfolio and the agricultural financing portfolio through carefully designed approval criteria and credit controls and efficient collection and recovery systems. We have placed emphasis on recruiting experienced retail credit professionals to staff our retail credit approval function. We have also established standards and investigative verification procedures for selection of our marketing and processing agents. While our lending to the agricultural sector and small scale industries to comply with the priority sector lending norms of the Reserve Bank of India may result in higher credit risk, we are seeking to develop appropriate credit approval criteria and credit delivery structures to mitigate this risk.

         Management has placed great emphasis on asset quality and this focus has been institutionalized across the organization. We believe we are the market driver in India in achieving early settlements with troubled borrowers, thus maximizing our cash flows from these loans. Our Special Asset Management Group has the responsibility for managing large impaired loans and accounts under watch.

    Use Technology for Competitive Advantage

         We seek to be at the forefront of technology usage in the financial services sector. Information technology is a strategic tool for our business operations to gain a competitive advantage and to improve overall productivity and efficiency of the organization. All of our technology initiatives are aimed at enhancing value, offering customer convenience and improving service levels while optimizing costs.

         We expect to continue with our policy of making investments in technology to achieve a significant competitive advantage. The key objectives behind our information technology strategy continue to be:

    Attract and Retain Talented Professionals

         We believe a key to our success will be our ability to continue to maintain and grow a pool of strong and experienced professionals. We have been successful in building a team of talented professionals with relevant experience, including experts in credit evaluation, risk management, retail consumer products, treasury, technology and marketing. Recruitment is a key management activity and we continue to attract graduates from the premier

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    Indian business schools as well as employees with other professional qualifications. Recruitment and assimilation of talented professionals from other organizations is a key element of our strategy.

         Our management team is committed to enhancing shareholder value and our performance targets seek to meet this primary objective. We believe we have created the right balance of performance bonuses, stock options and other economic incentives for our employees so that they will be challenged to develop business, achieve profitability targets and control risk. We intend to continuously re-engineer our management and organizational structure to allow us to respond effectively to changes in the business environment and enhance our overall profitability.

    Shareholding Structure and Relationship with the Government of India

         The following table sets forth, at March 4, 2005, certain information regarding the ownership of our equity shares.

        Percentage of
    total equity
    shares
    outstanding
      Number of equity
    shares held


    Government-controlled shareholders:    
             Life Insurance Corporation of India   9.71   71,531,991
             General Insurance Corporation of India and government-owned general      
                   insurance companies   5.82   42,821,453
             Other government-controlled institutions, corporations and banks   0.31   2,291,015


    Total government-controlled shareholders   15.84   116,644,459


    Other Indian investors:    
             Individual domestic investors (1) (2)   6.81   50,107,871
             Bajaj Auto Limited   3.10   22,790,381
             Indian corporates and others (excluding Bajaj Auto Limited)   1.73   12,754,854
             Mutual funds and banks (other than government-controlled banks)   1.41   10,400,046


    Total other Indian investors   13.05   96,053,152


    Total Indian investors   28.89   212,697,611


    Foreign investors:    
             Deutsche Bank Trust Company Americas, as depositary   21.73   160,025,318
             Allamanda Investments Pte. Limited   9.00   66,234,627
             HWIC Asia Fund   4.61   33,965,361
             Government of Singapore   4.20   30,958,244
             Foreign institutional investors, foreign banks, overseas corporate bodies      
                   and non-resident Indians (excluding Allamanda Investments Pte.    
                   Limited, HWIC Asia    
             Fund and Government of Singapore) (2)   31.57   232,444,015
    Total foreign investors   71.11   523,627,565


    Total   100.00   736,325,176


    ____________
    (1)      Executive officers and directors as a group held less than 0.5% of the equity shares as of this date.
     
    (2)      No single shareholder in this group owned 5.0% or more of our equity shares as of this date.

         In April 2004, we issued 115,920,758 equity shares to foreign and domestic institutional investors and domestic retail investors at a price of Rs. 280 (US$ 6) per share, totaling Rs. 32.5 billion (US$ 750 million).

         We operate as an autonomous and commercial enterprise, making decisions and pursuing strategies that are designed to maximize shareholder value, and the Indian government has never directly held any of our shares. There is no shareholders’ agreement or voting trust relating to the ownership of the shares held by the government-

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    controlled shareholders. We do not have any agreement with our government-controlled shareholders regarding management control, voting rights, anti-dilution or any other matter. The government of India has guaranteed certain of our domestic and multilateral borrowings. Under the terms of these loan and guarantee facilities provided by the government of India to us, the government of India is entitled to appoint and has appointed one representative to our board. We invite a representative of each of the government-controlled insurance companies that are among our principal institutional shareholders, Life Insurance Corporation of India and General Insurance Corporation of India, generally their respective chairman, on our board. Mr. P.C. Ghosh, the then current chairman of the General Insurance Corporation of India was appointed as a director effective January 31, 2003. Mr. S.B. Mathur, the then chairman of Life Insurance Corporation of India was appointed as a director effective January 29, 2004. See ''Management-Directors and Executive Officers'' in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus for a discussion of the composition of our board of directors.

         Under the Indian Banking Regulation Act, no person holding shares in a banking company can exercise more than 10.0% of the total voting power. This means that Deutsche Bank Trust Company Americas, as depositary, which owned approximately 21.7% of our equity shares as of March 4, 2005, could only vote 10.0% of our equity shares, in accordance with the directions of our board of directors. See “Overview of the Indian Financial Sector – Recent Structural Reforms – Proposed Amendments to the Banking Regulation Act” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus. Except as stated above, no shareholder has differential voting rights. See also “Recent Developments – Restriction on Foreign Ownership of Indian Securities” and “Supervision and Regulation – Reserve Bank of India Regulations – Ownership Restrictions” included elsewhere in this prospectus and “Restriction on Foreign Ownership of Indian Securities” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

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    SUPERVISION AND REGULATION

         The main legislation governing commercial banks in India is the Banking Regulation Act. Other important laws include the Reserve Bank of India Act, the Negotiable Instruments Act and the Banker’s Books Evidence Act. Additionally, the Reserve Bank of India, from time to time, issues guidelines to be followed by the bank. Compliance with all regulatory requirements, including the requirements discussed in this section, is evaluated with respect to financial statements under Indian GAAP.

    Reserve Bank of India Regulations

         Commercial banks in India are required under the Banking Regulation Act to obtain a license from the Reserve Bank of India to carry on banking business in India. Before granting the license, the Reserve Bank of India must be satisfied that certain conditions are complied with, including (i) that the bank has the ability to pay its present and future depositors in full as their claims accrue; (ii) that the affairs of the bank will not be or are not likely to be conducted in a manner detrimental to the interests of present or future depositors; (iii) that the bank has adequate capital and earnings prospects; and (iv) that the public interest will be served if such license is granted to the bank. The Reserve Bank of India can cancel the license if the bank fails to meet the above conditions or if the bank ceases to carry on banking operations in India.

         ICICI Bank, being licensed as a banking company, is regulated and supervised by the Reserve Bank of India. The Reserve Bank of India requires ICICI Bank to furnish statements, information and certain details relating to its business. It has issued guidelines for commercial banks on recognition of income, classification of assets, valuation of investments, maintenance of capital adequacy and provisioning for impaired assets. The Reserve Bank of India has set up a Board for Financial Supervision, under the chairmanship of the Governor of the Reserve Bank of India. The appointment of the auditors of banks is subject to the approval of the Reserve Bank of India. The Reserve Bank of India can direct a special audit in the interest of the depositors or in the public interest.

       Regulations relating to the Opening of Branches

         Banks are required to obtain licenses from the Reserve Bank of India to open new branches. Permission is granted based on factors such as the financial condition and history of the company, its management, adequacy of capital structure and earning prospects and the public interest. The Reserve Bank of India may cancel the license for violations of the conditions under which it was granted. Under the banking license granted to ICICI Bank by the Reserve Bank of India, ICICI Bank is required to have at least 25.0% of its branches located in rural and semi-urban areas. A rural area is defined as a center with a population of less than 10,000. A semi-urban area is defined as a center with a population of greater than 10,000 but less than 100,000. These population figures relate to the 1991 census conducted by the government of India.

       Capital Adequacy Requirements

         ICICI Bank is subject to the capital adequacy requirements of the Reserve Bank of India, which, based on the guidelines of the Basel Committee on Banking Regulations and Supervisory Practices, 1998, require ICICI Bank to maintain a minimum ratio of capital to risk adjusted assets and off-balance sheet items of 9.0%, at least half of which must be Tier 1 capital.

         The total capital of a banking company is classified into Tier 1 and Tier 2 capital. Tier 1 capital, the core capital, provides the most permanent and readily available support against unexpected losses. It comprises paid-up capital and reserves consisting of any statutory reserves, free reserves and capital reserve pursuant to the Indian Income-tax Act as reduced by equity investments in subsidiaries, intangible assets and losses in the current period and those brought forward from the previous period. In fiscal 2003, the Reserve Bank of India issued a guideline requiring a bank’s deferred tax asset to be treated as an intangible asset and deducted from its Tier 1 capital.

         Tier 2 capital consists of undisclosed reserves, revaluation reserves (at a discount of 55.0%), general provisions and loss reserves (allowed up to a maximum of 1.25% of risk weighted assets), hybrid debt capital instruments (which combine certain features of both equity and debt securities) and subordinated debt. The government of India, while announcing its budget for fiscal 2006, proposed to permit banks to issue preference shares. See also “Overview of the Indian Financial Sector – Recent Structural Reforms – Proposed Amendments to the Banking Regulation Act” in our annual report on Form 20-F for fiscal 2004, which is incorporated by reference in this prospectus. Any subordinated debt is subject to progressive discounts each year for inclusion in Tier 2 capital and total subordinated debt considered as Tier 2 capital cannot exceed 50.0% of Tier 1 capital. Tier 2 capital cannot exceed Tier 1 capital.

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         Risk adjusted assets and off-balance sheet items considered for determining the capital adequacy ratio are the risk weighted total of specified funded and non-funded exposures. Degrees of credit risk expressed as percentage weighting have been assigned to various balance sheet asset items and conversion factors to off-balance sheet items. The value of each item is multiplied by the relevant weight or conversion factor to produce risk-adjusted values of assets and off-balance-sheet items. Standby letters of credit or financial guarantees and documentary credits are treated as similar to funded exposure and are subject to similar risk weight. All foreign exchange open position limits of the bank carry a 100.0% risk weight. Capital requirements have also been prescribed for open positions in gold. In December 2004, the Reserve Bank of India increased the risk weights on housing loans from 50.0% to 75.0% and on consumer credit including personal loans and credit card receivables from 100.0% to 125.0% as a temporary counter-cyclical measure given the rapid growth of this segment.

         Effective March 31, 2001, banks and financial institutions were required to assign a risk weight of 2.5% in respect of the entire investment portfolio to cover market risk, over and above the existing risk weights for credit risk in non-government and non-approved securities. In fiscal 2002, with a view to the building up of adequate reserves to guard against any possible reversal of the interest rate environment in the future due to unexpected developments, the Reserve Bank of India advised banks to build up an investment fluctuation reserve of a minimum of 5.0% of the bank’s investment portfolio within a period of five years, by fiscal 2006. This reserve has to be computed with respect to investments in “held for trading” and “available for sale” categories. Investment fluctuation reserve is included in Tier 2 capital. In June 2004, the Reserve Bank of India issued guidelines on capital for market risk. The guidelines prescribe the method of computation of risk-weighted assets in respect of market risk. The aggregate risk weighted assets are required to be taken into account for determining the capital adequacy ratio. Banks would be required to maintain a capital charge for market risk in respect of their trading book exposure (including derivatives) by year-end fiscal 2005 and securities included under available for sale category by year-end fiscal 2006.

          In February 2005, the Reserve Bank of India issued draft guidelines for implementation of the revised capital adequacy framework of the Basel Committee. These draft guidelines which are proposed to be effective from April 1, 2006, prescribe a 75% risk weight for retail credit exposures, differential risk weights for other credit exposures linked to their credit rating, and a capital charge for operational risk based on a factor of 15% of the sum of a bank's net interest income and non-interest income (excluding extraordinary income).

       Loan Loss Provisions and Non-Performing Assets

         In April 1992, the Reserve Bank of India issued formal guidelines on income recognition, asset classification, provisioning standards and valuation of investments applicable to banks, which are revised from time to time. These guidelines are applied for the calculation of impaired assets under Indian GAAP.

         The principal features of these Reserve Bank of India guidelines, which have been implemented with respect to ICICI Bank’s loans, debentures, lease assets, hire purchases and bills are set forth below.

          Asset Classification

         Until year-end fiscal 2003, an impaired asset (also called non-performing assets pursuant to the Reserve Bank of India guidelines) was an asset in respect of which any amount of interest or principal was overdue for more than two quarters. In particular, an advance was an impaired asset where:

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         Effective fiscal 2004, banks are now required to classify an asset as impaired when principal or interest has remained overdue for more than 90 days. Interest in respect of impaired assets is not recognized or credited to the income account unless collected.

         In line with the Reserve Bank of India master circular on income recognition, asset classification and provisioning pertaining to advances portfolio of banks, issued in July 2004, non-performing assets are classified as described below.

         Sub-Standard Assets. Assets that are non-performing assets for a period not exceeding 18 months (12 months effective year-end fiscal 2005). In such cases, the current net worth of the borrower / guarantor or the current market value of the security charged is not enough to ensure recovery of dues to the banks in full. Such an asset has well-defined credit weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the bank will sustain some loss, if deficiencies are not corrected.

         Doubtful Assets. Assets that are non-performing assets for more than 18 months (12 months effective year-end fiscal 2005). A loan classified as doubtful has all the weaknesses inherent in assets that are classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

         Loss Assets. Assets on which losses have been identified by the bank or internal or external auditors or the Reserve Bank India inspection but the amount has not been written off fully.

         There are separate guidelines for projects under implementation which are based on the achievement of financial closure and the date of approval of the project financing.

         The Reserve Bank of India also has separate guidelines for restructured loans. A fully secured standard asset can be restructured by reschedulement of principal repayment and/or the interest element, but must be separately disclosed as a restructured asset. The amount of sacrifice, if any, in the element of interest, measured in present value terms, is either written off or provision is made to the extent of the sacrifice involved. Similar guidelines are applicable to sub-standard assets. The sub-standard accounts which have been subjected to restructuring, whether in respect of principal installment or interest amount, by whatever modality, are eligible to be upgraded to the standard category only after the specified period, i.e., a period of one year after the date when first payment of interest or of principal, whichever is earlier, falls due, subject to satisfactory performance during the period.

         To put in place an institutional mechanism for the restructuring of corporate debt, the Reserve Bank of India has devised a corporate debt restructuring system. See “Overview of the Indian Financial Sector – Recent Structural Reforms — Corporate Debt Restructuring Forum” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

          Provisioning and Write-Offs

         Provisions are based on guidelines specific to the classification of the assets. The following guidelines apply to the various asset classifications:

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         In July 2004, the Reserve Bank of India introduced additional provisioning requirements for non-performing assets classified as ‘doubtful for more than three years’. Effective year-end fiscal 2005, 100.0% provision will have to be made for the secured portion of assets classified as doubtful for more than three years on or after April 1, 2004. For the secured portion of assets classified as doubtful for more than three years at March 31, 2004, a provision of 60.0% will have to be made by year-end fiscal 2005, 75.0% by year-end fiscal 2006 and 100.0% by year-end fiscal 2007.

         While the provisions indicated above are mandatory, a higher provision in a loan amount is required if considered necessary by the management.

       Regulations relating to Making Loans

         The provisions of the Banking Regulation Act govern the making of loans by banks in India. The Reserve Bank of India issues directions covering the loan activities of banks. Some of the major guidelines of Reserve Bank of India, which are now in effect, are as follows:

         Legislation introduced in the Parliament of India to amend the Banking Regulation Act has proposed to prohibit lending to relatives of directors and to non-subsidiary companies that are under the same management as the banking company, joint ventures, associates or the holding company of the banking company. See also “The Indian Financial Sector—Recent Structural Reforms—Proposed Amendments to the Banking Regulation Act” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

          There are guidelines on loans against equity shares in respect of amount, margin requirement and purpose.

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       Regulations relating to Sale of Assets to Asset Reconstruction Companies

         The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 provides for sale of financial assets by banks and financial institutions to asset reconstruction companies. Reserve Bank of India has issued guidelines to banks on the process to be followed for sales of financial assets to asset reconstruction companies. These guidelines provide that a bank may sell financial assets to an asset reconstruction company provided the asset is a non-performing asset. A bank may sell a standard asset only if the borrower has a consortium or multiple banking arrangement, at least 75.0% by value of the total loans to the borrower are classified as non-performing and at least 75.0% by value of the banks and financial institutions in the consortium or multiple banking arrangement agree to the sale. The banks selling financial assets should ensure that there is no known liability devolving on them and that they do not assume any operational, legal or any other type of risks relating to the financial assets sold. Further, banks may not sell financial assets at a contingent price with an agreement to bear a part of the shortfall on ultimate realization. However, banks may sell specific financial assets with an agreement to share in any surplus realized by the asset reconstruction company in the future. While each bank is required to make its own assessment of the value offered in the sale before accepting or rejecting an offer for purchase of financial assets by an asset reconstruction company, in consortium or multiple banking arrangements where more than 75.0% by value of the banks or financial institutions accept the offer, the remaining banks or financial institutions are obliged to accept the offer. Consideration for the sale may be in the form of cash, bonds or debentures or security receipts or pass through certificates issued by the asset reconstruction company or trusts set up by it to acquire the financial assets.

          In November 2004, the government of India issued an ordinance amending the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the ‘Securitisation Act’). The Securitisation Act, as amended, now provides that a borrower may make an objection or representation to a secured creditor after a notice is issued by the secured creditor to the borrower under the Securitisation Act demanding payment of dues. The secured creditor has to give reasons to the borrower for not accepting the objection or representation. The ordinance also introduces a deposit requirement for borrowers if they wish to appeal the decision of the debt recovery tribunal. Further, the ordinance permits a lender to take over the business of a borrower under the Securitisation Act under certain circumstances (unlike the earlier provisions under which only assets could be taken over). See “Overview of the Indian Financial Sector Recent Structural Reforms Legislative Framework for Recovery of Debts Due to Banks” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

       Directed Lending

           Priority Sector Lending

         The Reserve Bank of India requires commercial banks to lend a certain percentage of their net bank credit to specific sectors (the priority sectors), such as agriculture, small-scale industry, small businesses and housing finance. Total priority sector advances should be 40.0% of net bank credit with agricultural advances required to be 18.0% of net bank credit and advances to weaker sections required to be 10.0% of net bank credit, and 1.0% of the previous year’s net bank credit required to be lent under the Differential Rate of Interest scheme. Any shortfall in the amount required to be lent to the priority sectors may be required to be deposited with the National Bank for Agriculture and the Rural Development. These deposits can be for a period of one year or five years.

         The Reserve Bank of India requires banks to lend up to 3.0% of their incremental deposits in the previous fiscal year towards housing finance. This can be in the form of home loans to individuals or subscription to the debentures and bonds of the National Housing Bank and housing development institutions recognized by the government of India.

         Prior to the amalgamation, the advances of ICICI were not subject to the requirement applicable to banks in respect of priority sector lending. Pursuant to the terms of the Reserve Bank of India’s approval of the amalgamation, ICICI Bank is required to maintain a total of 50.0% of its net bank credit on the residual portion of its advances (i.e., the portion of its total advances excluding advances of ICICI at year-end fiscal 2002) in the form of priority sector advances. This additional requirement of 10.0% by way of priority sector advances will apply until such time as the aggregate priority sector advances reach a level of 40.0% of the total net bank credit of ICICI Bank.

          Export Credit

         The Reserve Bank of India also requires commercial banks to make loans to exporters at concessional rates of interest. This enables exporters to have access to an internationally competitive financing option. Pursuant to existing guidelines, 12.0% of a bank’s net bank credit is required to be in the form of export credit. ICICI Bank provides export credit for pre-shipment and post-shipment requirements of exporter borrowers in rupees and foreign currencies.

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       Credit Exposure Limits

         As a prudent measure aimed at better risk management and avoidance of concentration of credit risk, the Reserve Bank of India has prescribed credit exposure limits for banks and long-term lending institutions in respect of their lending to individual borrowers and to all companies in a single group (or sponsor group).

         The limits currently set by the Reserve Bank of India are as follows:

          ICICI Bank is in compliance with these limits.

         To ensure that exposures are evenly spread, the Reserve Bank of India requires banks to fix internal limits of exposure to specific sectors. These limits are subject to periodical review by the banks. ICICI Bank has fixed a ceiling of 12.0% on its exposure to any one industry (other than retail loans) and monitors its exposures accordingly.

       Regulations relating to Investments and Capital Market Exposure Limits

         Pursuant to the Reserve Bank of India guidelines, the exposure of banks to capital markets by way of investments in shares, convertible debentures, units of equity oriented mutual funds and loans to brokers, should not exceed 5.0% of total advances (including commercial paper) at March 31 of the previous fiscal year and investments in shares, convertible debentures and units of equity oriented mutual funds should not exceed 20.0% of the bank's net worth. Pursuant to the terms of the Reserve Bank of India’s approval for the amalgamation, ICICI’s project finance related investments are excluded from the computation of these limits for a period of five years from the amalgamation. In addition, the Reserve Bank of India has approved the exclusion of specific equity investments acquired by conversion of debt under restructuring schemes approved by the Corporate Debt Restructuring Forum. The Reserve Bank of India also announced that it will permit banks to have a higher level of capital market exposure subject to specific approval of the Reserve Bank of India on fulfillment of certain criteria.

         In November 2003, the Reserve Bank of India issued guidelines on investments by banks in non-Statutory Liquidity Ratio securities issued by companies, banks, financial institutions, central and state government sponsored institutions and special purpose vehicles. These guidelines apply to primary market subscriptions and secondary market purchases. Pursuant to these guidelines, banks are prohibited from investing in non-Statutory Liquidity Ratio securities with an original maturity of less than one year, other than commercial paper and certificates of deposits. Banks are also prohibited from investing in unrated securities. A bank’s investment in unlisted non-Statutory Liquidity Ratio securities may not exceed 10.0% of its total investment in non-Statutory Liquidity Ratio securities as at the end of the preceding fiscal year. These guidelines will not apply to investments in security receipts issued by securitization or reconstruction companies registered with Reserve Bank of India and asset backed securities and mortgage backed securities with a minimum investment grade credit rating. These guidelines are effective April 1, 2004, with provision for compliance in a phased manner by January 1, 2005.

         In April 1999, the Reserve Bank of India, in its monetary and credit policy, stated that the investment by a bank in subordinated debt instruments, representing Tier 2 capital, issued by other banks and financial institutions should not exceed 10.0% of the investing bank’s capital including Tier 2 capital and free reserves. In July 2004, the Reserve Bank of India imposed a ceiling of 10.0% of capital funds (Tier 1 plus Tier 2 capital) on investments by banks and financial institutions in equity shares, preference shares eligible for capital status, subordinated debt instruments, hybrid debt capital instruments and any other instrument approved as in the nature of capital, issued by other banks

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    and financial institutions. Investments in the instruments which are not deducted from Tier I capital of the investing bank or financial institution, will attract 100.0% risk weight for credit risk for capital adequacy purposes. Further, banks and financial institutions cannot acquire any fresh stake in a bank's equity shares, if by such acquisition, the investing bank's or financial institution's holding exceeds 5.0% of the investee bank's equity capital. Banks with investments in excess of the prescribed limits were required to apply to the Reserve Bank of India with a roadmap for reduction of the exposure. The Reserve Bank of India may permit a higher level of shareholding in case of restructuring of problem banks or weak banks or in the interest of consolidation in the banking industry. We have equity shareholding in excess of the prescribed limits in two Indian private sector banks, Federal Bank Limited and South Indian Bank Limited, and have submitted a roadmap for reduction of our shareholding to the Reserve Bank of India.

       Consolidated Supervision Guidelines

         In fiscal 2003, the Reserve Bank of India issued guidelines for consolidated accounting and consolidated supervision for banks. These guidelines became effective April 1, 2003. The principal features of these guidelines are:

         Consolidated Financial Statements. Banks are required to prepare consolidated financial statements intended for public disclosure.

         Consolidated Prudential Returns. Banks are required to submit to the Reserve Bank of India, consolidated prudential returns reporting their compliance with various prudential norms on a consolidated basis, excluding insurance subsidiaries. Compliance on a consolidated basis is required in respect of the following main prudential norms:

         ICICI Bank is in compliance with these guidelines, except for the consolidated capital market exposure limits. ICICI Bank has submitted to the Reserve Bank of India that the limit of 2.0% of consolidated advances and 10.0% of consolidated net worth effectively reduces the standalone capital market exposure limit of 5.0% of advances and 20.0% of net worth.

         In June 2004, the Reserve Bank of India published the report of a working group on monitoring of financial conglomerates, which proposed the following framework:

         The framework covers entities under the jurisdiction of the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the National Housing Bank and would in due course be extended to entities regulated by the proposed Pension Fund Regulatory and Development

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    Authority. The Reserve Bank of India has identified ICICI Bank and its related entities as a financial conglomerate with ICICI Bank as the designated entity responsible for reporting to the Reserve Bank of India.

       Banks’ Investment Classification and Valuation Norms

         Based on the comments to the Report of the Informal Group on Banks’ Investment Portfolio, the Reserve Bank of India finalized its guidelines on categorization and valuation of banks’ investment portfolio. These guidelines were effective from September 30, 2000. The salient features of the guidelines are given below.

         In September 2004, the Reserve Bank of India announced that it would set up an internal group to review the investment classification guidelines to align them with international practices and the current state of risk management practices in India, taking into account the unique requirement applicable to banks in India of maintenance of a statutory liquidity ratio equal to 25.0% of their demand and time liabilities. In the meanwhile, the Reserve Bank of India has permitted banks to exceed the limit of 25.0% of investments for the held to maturity category provided the excess comprises only statutory liquidity ratio investments and the aggregate of such investments in the held to maturity category do not exceed 25.0% of the demand and time liabilities. The Reserve Bank of India has permitted banks to transfer additional securities to the held to maturity category as a one time measure during fiscal 2005, in addition to the transfer permitted under the earlier guidelines. The transfer would be done at the lower of acquisition cost, book value or market value on the date of transfer.

         Held to maturity securities are not marked to market and are carried at acquisition cost or at an amortized cost if acquired at a premium over the face value.

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         Available for sale and held for trading securities are valued at market or fair value as at the balance sheet date. Depreciation or appreciation for each basket within the available for sale and held for trading categories is aggregated. Net appreciation in each basket, if any, that is not realized is ignored, while net depreciation is provided for.

         Investments in security receipts or pass through certificates issued by asset reconstruction companies or trusts set up by asset reconstruction companies should be valued at the net asset value announced periodically by the asset reconstruction company based on the valuation of the underlying assets.

       Limit on Transactions through Individual Brokers

         Guidelines issued by the Reserve Bank of India require banks to empanel brokers for transactions in securities. These guidelines also require that a disproportionate part of the bank’s business should not be transacted only through one broker or a few brokers. The Reserve Bank of India specifies that not more than 5.0% of the total transactions through empanelled brokers can be transacted through one broker. If for any reason this limit is breached, the Reserve Bank of India has stipulated that the board of directors of the bank concerned should ratify such action.

       Prohibition on Short-Selling

         The Reserve Bank of India does not permit short selling of securities by banks. The Reserve Bank of India has permitted banks to sell government of India securities already contracted for purchase provided the purchase contract is confirmed and the contract is guaranteed by Clearing Corporation of India Limited or the security is contracted for purchase from the Reserve Bank of India. Each security is deliverable or receivable on a net basis for a particular settlement cycle.

    Regulations relating to Deposits

         The Reserve Bank of India has permitted banks to independently determine rates of interest offered on term deposits. However, banks are not permitted to pay interest on current account deposits. Further, banks may only pay interest of up to 3.5% per annum on savings deposits. In respect of savings and time deposits accepted from employees, ICICI Bank is permitted by the Reserve Bank of India to pay an additional interest of 1.0% over the interest payable on deposits from the public.

         Until October 31, 2004, domestic time deposits have a minimum maturity of 15 days (seven days in respect of deposits over Rs. 1.5 million (US$ 34, 666) with effect from April 19, 2001) However, effective November 1, 2004, in order to provide uniformity in the tenor of term deposits, banks have been permitted by the Reserve bank of India to reduce the minimum tenor of domestic/ NRO term deposits even below Rs. 1.5 million (US$ 34, 666) from 15 days to 7 days. Time deposits from non-resident Indians denominated in foreign currency have a minimum maturity of one year and a maximum maturity of three years. Starting April 1998, the RBI has permitted banks the flexibility to offer varying rates of interests on domestic deposits of the same maturity subject to the following conditions:

         We stipulate a minimum balance of Rs. 10,000 (US$ 231) for a non-resident rupee savings deposit. Interest rates on non-resident rupee term deposits of one to three years maturity are not permitted to exceed the LIBOR/SWAP rates for US dollar of corresponding maturity. Interest rates on non-resident rupee savings deposits are not permitted to exceed the LIBOR/SWAP rate for six months maturity on US dollar deposits and are fixed quarterly on the basis of the LIBOR/SWAP rate of US dollar on the last working day of the preceding quarter.

       Regulations relating to Knowing the Customer and Anti-Money Laundering

         The Parliament of India has passed the Prevention of Money Laundering Act in 2002. However, the provisions of this Act are yet to be declared effective by the Government of India.

         The Reserve Bank of India has issued detailed guidelines to banks on “Know Your Customer” and “Anti-Money Laundering” in November 2004. Banks are required to comply with this guideline by December 31, 2005. The key features of these guidelines are:

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       Foreign Currency Dealership

         The Reserve Bank of India has granted ICICI Bank a full-fledged authorized dealers’ license to deal in foreign exchange through its designated branches. Under this license, ICICI Bank has been granted permission to:

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         ICICI Bank’s foreign exchange operations are subject to the guidelines specified by the Reserve Bank of India in the exchange control manual. As an authorized dealer, ICICI Bank is required to enroll as a member of the Foreign Exchange Dealers Association of India, which prescribes the rules relating to foreign exchange business in India.

         Authorized dealers, like ICICI Bank, are required to determine their limits on open positions and maturity gaps in accordance with the Reserve Bank of India’s guidelines and these limits are approved by the Reserve Bank of India. Further, ICICI Bank is permitted to hedge foreign currency loan exposures of Indian corporations in the form of interest rate swaps, currency swaps and forward rate agreements, subject to certain conditions.

       Ownership Restrictions

         The government of India regulates foreign ownership in Indian banks. The total foreign ownership in a private sector bank, like ICICI Bank, cannot exceed 74.0% of the paid-up capital and shares held by foreign institutional investors under portfolio investment schemes through stock exchanges cannot exceed 49.0% of the paid-up capital.

         The Reserve Bank of India’s acknowledgement is required for the acquisition or transfer of a bank’s shares which will take the aggregate holding (both direct and indirect, beneficial or otherwise) of an individual or a group to equivalent of 5.0% or more of its total paid up capital. Reserve Bank of India, while granting acknowledgement, may take into account all matters that it considers relevant to the application, including ensuring that shareholders whose aggregate holdings are above specified thresholds meet fitness and propriety tests. In determining whether the acquirer or transferee is fit and proper to be a shareholder, Reserve Bank of India may take into account various factors including, but not limited to the acquirer or transferee’s integrity, reputation and track record in financial matters and compliance with tax laws, proceedings of a serious disciplinary or criminal nature against the acquirer or transferee and the source of funds for the investment.

         While granting acknowledgement for acquisition or transfer of shares that takes the acquirer’s shareholding to 10.0% or more and up to 30.0% of a private sector bank’s paid-up capital, Reserve Bank of India may consider additional factors, including but not limited to:

         While granting acknowledgement for acquisition or transfer of shares that takes the acquirer’s shareholding to 30.0% or more of a private sector bank’s paid-up capital, Reserve Bank of India may consider additional factors, including but not limited to whether or not the acquisition is in the public interest and shareholder agreements and their impact on the control and management of the bank’s operations.

         In February 2005, the Reserve Bank of India issued guidelines on ownership and governance in private sector banks. This policy became effective from February 28, 2005. The key provisions of the guidelines on ownership are:

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       Restrictions on Payment of Dividends

         In April 2004, the Reserve Bank of India issued guidelines stating that a bank would require the prior approval of the Reserve Bank of India for payment of dividends if any of the following conditions are not satisfied:

       Subsidiaries and Other Investments

         ICICI Bank requires the prior permission of Reserve Bank of India to incorporate a subsidiary. ICICI Bank is required to maintain an “arms’ length” relationship in respect of its subsidiaries and in respect of mutual funds sponsored by it in regard to business parameters such as taking undue advantage in borrowing/lending funds, transferring/ selling/buying of securities at rates other than market rates, giving special consideration for securities transactions, in supporting/financing the subsidiary and financing its clients through them when it itself is not able or not permitted to do so. ICICI Bank and its subsidiaries have to observe the prudential norms stipulated by Reserve Bank of India, from time to time, in respect of its underwriting commitments. Pursuant to such prudential norms, ICICI Bank’s underwriting or the underwriting commitment of its subsidiaries under any single obligation shall not exceed 15% of an issue. ICICI Bank also requires the prior specific approval of Reserve Bank of India to participate in the equity of financial services ventures including stock exchanges and depositories notwithstanding the fact that such investments may be within the ceiling (lower of 30.0% of the paid up capital of the investee company and 30.0% of the investing bank’s own paid up capital and reserves) prescribed under Section 19(2) of the Banking Regulation Act. Further investment by ICICI Bank in a subsidiary, financial services company, financial institution cannot exceed 10.0% of its paid-up capital and reserves and its aggregate investments in all such companies and financial institutions put together cannot exceed 20.0% of its paid-up capital and reserves.

    Deposit Insurance

         Demand and time deposits of up to Rs. 100,000 (US$ 2,304) accepted by Indian banks have to be mandatorily insured with the Deposit Insurance and Credit Guarantee Corporation, a wholly-owned subsidiary of the Reserve Bank of India. Banks are required to pay the insurance premium for the eligible amount to the Deposit Insurance and Credit Guarantee Corporation on a semi-annual basis. The cost of the insurance premium cannot be passed on to the customer.

    Statutes Governing Foreign Exchange and Cross-Border Business Transactions

         The foreign exchange and cross border transactions undertaken by banks are subject to the provisions of the Foreign Exchange Management Act. All branches should monitor all non-resident accounts to prevent money laundering.

         The Reserve Bank of India issued guidelines on External Commercial Borrowings vide its Master Circular in July 2004, which stated that no financial intermediary, including banks, will be permitted to raise such borrowings or provide guarantees in favor of overseas lenders for such borrowings. Eligible borrowers may raise such borrowings to finance the import of equipment and to meet foreign exchange needs of infrastructure projects.

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    Legal Reserve Requirements

       Cash Reserve Ratio

         A banking company such as ICICI Bank is required to maintain a specified percentage of its net demand and time liabilities, excluding inter-bank deposits, by way of cash reserve with itself and by way of balance in current account with the Reserve Bank of India. The cash reserve ratio can be a minimum of 3.0% and a maximum of 20.0% pursuant to section 42 of the Reserve Bank of India Act. The government of India while announcing its budget for fiscal 2006 proposed to remove these minimum and maximum levels. On September 11, 2004, the Reserve Bank of India announced an increase in the cash reserve ratio from 4.5% to 4.75% effective September 18, 2004 and 5.0% effective October 2, 2004.

         The following liabilities are excluded from the calculation of the demand and time liabilities to determine the cash reserve ratio:

         The Reserve Bank of India pays no interest on the cash reserves up to 3.0% of the demand and time liabilities and effective September 18, 2004, pays interest in the balance at 3.5% per annum. Prior to that date, the rate of interest paid was the bank rate (currently 6.0%) .

         The cash reserve ratio has to be maintained on an average basis for a fortnightly period and should not be below 70.0% of the required cash reserve ratio on any day of the fortnight.

       Statutory Liquidity Ratio

         In addition to the cash reserve ratio, a banking company such as ICICI Bank is required to maintain a specified percentage of its net demand and time liabilities by way of liquid assets like cash, gold or approved unencumbered securities. The percentage of this liquidity ratio is fixed by the Reserve Bank of India from time to time, and it can be a minimum of 25.0% and a maximum of 40.0% pursuant to section 24 of the Banking Regulation Act. At present, the Reserve Bank of India requires banking companies to maintain a liquidity ratio of 25.0% . The Banking Regulation (Amendment) and Miscellaneous Provisions Bill, 2003 recently introduced in the Parliament of India proposes to amend section 24 of the Banking Regulation Act to remove the minimum Statutory Liquidity Ratio stipulation, thereby giving the Reserve Bank of India the freedom to fix the Statutory Liquidity Ratio below this level. See also “Overview of the Indian Financial Sector Recent Structural Reforms Proposed Amendments to the Banking Regulation Act” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus. The government of India while announcing its budget for fiscal 2006 also proposed to remove these minimum and maximum levels.

    Requirements of the Banking Regulation Act

       Prohibited Business

         The Banking Regulation Act specifies the business activities in which a bank may engage. Banks are prohibited from engaging in business activities other than the specified activities.

       Reserve Fund

         Any bank incorporated in India is required to create a reserve fund to which it must transfer not less than 25.0% of the profits of each year before dividends. If there is an appropriation from this account, the bank is required to

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    report the same to the Reserve Bank of India within 21 days, explaining the circumstances leading to such appropriation. The government of India may, on the recommendation of the Reserve Bank of India, exempt a bank from requirements relating to its reserve fund.

       Payment of Dividend

         Pursuant to the provisions of the Banking Regulation Act, a bank can pay dividends on its shares only after all its capitalized expenses (including preliminary expenses, share selling commission, brokerage, amounts of losses and any other item of expenditure not represented by tangible assets) have been completely written off. The Indian government may exempt banks from this provision by issuing a notification on the recommendation of the Reserve Bank of India. We have been exempted from this provision in respect of expenses relating to the Early Retirement Option offered by us in fiscal 2004. We have obtained permission from the Reserve Bank of India to write off these expenses over a five-year period in our Indian GAAP accounts.

       Restriction on Share Capital and Voting Rights

         Banks can issue only ordinary shares. The Banking Regulation Act specifies that no shareholder in a banking company can exercise voting rights on poll in excess of 10.0% of total voting rights of all the shareholders of the banking company.

         Only banks incorporated before January 15, 1937 can issue preferential shares. Prior to the amalgamation, ICICI had preference share capital of Rs. 3.5 billion (US$ 81 million). The government of India, on the recommendation of the Reserve Bank of India, has granted an exemption to ICICI Bank which allows the inclusion of preference capital in the capital structure of ICICI Bank for a period of five years, though ICICI Bank is a bank incorporated after January 15, 1937.

         Legislation introduced in the Parliament of India proposes to amend the Banking Regulation Act to remove the limit of 10.0% on the maximum voting power exercisable by an shareholder in a banking company and allow banks to issue redeemable and non-redeemable preference shares. See also “Overview of the Indian Financial Sector Recent Structural Reforms Proposed Amendments to the Banking Regulation Act” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

       Restrictions on Investments in a Single Company

         No bank may hold shares in any company exceeding 30.0% of the paid up share capital of that company or 30.0% of its own paid up share capital and reserves, whichever is less.

       Regulatory Reporting and Examination Procedures

         The Reserve Bank of India is empowered under the Banking Regulation Act to inspect a bank. The Reserve Bank of India monitors prudential parameters at quarterly intervals. To this end and to enable off-site monitoring and surveillance by the Reserve Bank of India, banks are required to report to the Reserve Bank of India on aspects such as:

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         The Reserve Bank of India conducts annual inspections of banks in India under the provisions of the Banking Regulation Act. The inspection report, along with the report on actions taken by ICICI Bank, has to be placed before our board of directors. On approval by our board of directors, we are required to submit the report on actions taken by it to the Reserve Bank of India. The Reserve Bank of India also discusses the report with the management team including the Managing Director & CEO. We undertake a regular dialogue with the Reserve Bank of India on the issues raised in the reports of these inspections. These reports are strictly confidential and the Reserve Bank of India does not permit their disclosure. All disclosures in this prospectus are on the basis of our financial statements and management records.

         The Reserve Bank of India also conducts on-site supervision of selected branches of ICICI Bank with respect to their general operations and foreign exchange related transactions.

       Appointment and Remuneration of the Chairman, Managing Director and Other Directors

         ICICI Bank is required to obtain prior approval of the Reserve Bank of India before it appoints its chairman and managing director and any other wholetime directors and fixes their remuneration. The Reserve Bank of India is empowered to remove an appointee to the posts of chairman, managing director and wholetime directors on the grounds of public interest, interest of depositors or to ensure the proper management of ICICI Bank. Further, the Reserve Bank of India may order meetings of our board of directors to discuss any matter in relation to ICICI Bank, appoint observers to such meetings and in general may make such changes to the management as it may deem necessary and may also order the convening of a general meeting of the shareholders of ICICI Bank to elect new directors. ICICI Bank cannot appoint as a director any person who is a director of another banking company. In July 2004, the Reserve Bank of India issued guidelines on ‘fit and proper’ criteria for directors of banks.

       Issue of Bonus Shares

         ICICI Bank would require the prior permission of Reserve Bank of India and its shareholders’ approval to issue bonus shares.

       Penalties

         The Reserve Bank of India may impose penalties on banks and its employees in case of infringement of regulations under the Banking Regulation Act. The penalty may be a fixed amount or may be related to the amount involved in any contravention of the regulations. The penalty may also include imprisonment.

       Assets to be Maintained in India

         Every bank is required to ensure that its assets in India (including import-export bills drawn in India and Reserve Bank of India approved securities, even if the bills and the securities are held outside India) are not less than 75.0% of its demand and time liabilities in India.

       Restriction on Creation of Floating Charge

         Prior approval of the Reserve Bank of India is required for creating floating charge on ICICI Bank’s undertaking or property. Currently, all ICICI Bank’s borrowings including bonds are unsecured.

    Secrecy Obligations

         ICICI Bank’s obligations relating to maintaining secrecy arise out of common law principles governing its relationship with its customers. ICICI Bank cannot disclose any information to third parties except under clearly defined circumstances. The following are the exceptions to this general rule:

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         ICICI Bank is required to comply with the above in furnishing any information to any parties. ICICI Bank is also required to disclose information if ordered to do so by a court. The Reserve Bank of India may, in the public interest, publish the information obtained from the bank. Under the provisions of the Banker’s Books Evidence Act, a copy of any entry in a bankers’ book, such as ledgers, day books, cash books and account books certified by an officer of the bank may be treated as prima facie evidence of the transaction in any legal proceedings.

    Regulations governing Offshore Banking Units

         The government and Reserve Bank of India have permitted banks to set up Offshore Banking Units in Special Economic Zones, which are specially delineated duty free enclaves deemed to be foreign territory for the purpose of trade operations, duties and tariffs. ICICI Bank has an Offshore Banking Unit located in the Santacruz Electronic Exports Promotion Zone, Mumbai. The key regulations applicable to Offshore Bank Units include, but are not limited to, the following:

    Regulations and Guidelines of the Securities and Exchange Board of India

         The Securities and Exchange Board of India was established to protect the interests of public investors in securities and to promote the development of, and to regulate, the Indian securities market. ICICI Bank is subject to Securities and Exchange Board of India regulations for its capital issuances, as well as its underwriting, custodial, depositary participant, investment banking, registrar and transfer agents, brokering and debenture trusteeship activities. These regulations provide for its registration with the Securities and Exchange Board of India for each of these activities, functions and responsibilities. ICICI Bank is required to adhere to a code of conduct applicable for these activities.

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    Public Financial Institution Status

         ICICI was a public financial institution under the Indian Companies Act, 1956. The special status of public financial institutions is also recognized under other statutes including the Indian Income-tax Act, 1961, Sick Industrial Companies (Special Provisions) Act, 1985 and Recovery of Debts Due to Banks and Financial Institutions Act, 1993. ICICI Bank is not a public financial institution. As a public financial institution, ICICI was entitled to certain benefits under various statutes. These benefits included the following:

         ICICI’s cessation as a public financial institution would have constituted an event of default under certain of ICICI’s loan agreements related to its foreign currency borrowings. Prior to the amalgamation becoming effective, such event of default was waived by the respective lenders pursuant to the terms of such foreign currency borrowing agreements.

    Special Status of Banks in India

         The special status of banks is recognized under various statutes including the Sick Industrial Companies Act, 1985, Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the Securitisation Act. As a bank, ICICI Bank is entitled to certain benefits under various statutes including the following:

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    creditors can without court approval take over management control of a borrower company upon default and/or sell assets charged as security, in accordance with the provisions of the Securitisation Act.

    Income Tax Benefits

         As a banking company, ICICI Bank is entitled to certain tax benefits under the Indian Income-tax Act including the following:

    Regulations governing Insurance Companies

         ICICI Prudential Life Insurance Company and ICICI Lombard General Insurance Company, the subsidiaries of ICICI Bank offering life insurance and non-life insurance respectively, are subject to the provisions of the Insurance Act, 1938 and the various regulations prescribed by the Insurance Regulatory and Development Authority. These regulations regulate and govern, among other things, registration as an insurance company, investment, licensing of insurance agents, advertising, sale and distribution of insurance products and services and protection of policyholders' interests. In May 2002, the Parliament of India approved the Insurance (Amendment) Act 2002, which facilitates the appointment of corporate agents by insurance companies and prohibits intermediaries and brokers from operating as surrogate insurance agents.

    Regulations governing International Operations

          Our international operations are governed by regulations in the countries in which we have a presence.

       Overseas Banking Subsidiaries

         Our wholly-owned subsidiary in the United Kingdom, ICICI Bank UK Limited is authorized by the Financial Services Authority, which granted our application under Part IV of the Financial Services and Markets Act, 2000 on August 8, 2003. Our wholly-owned subsidiary in Canada, ICICI Bank Canada, was incorporated on September 12, 2003 as a Schedule II Bank in Canada. ICICI Bank Canada has obtained the approval of the Canada Deposit Insurance Corporation (CDIC) for deposit insurance and is regulated by the Office of the Superintendent of Financial Institutions.

       Offshore Branches

         In Singapore, we have an offshore branch, regulated by the Monetary Authority of Singapore. The Branch is allowed to accept deposits from Singapore residents with a minimum size of US$ 100,000 or S$ 250,000. It is also

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    subject to minimum reserve requirements with respect to its Domestic Banking Unit book. The Asian Currency Unit book is not subject to reserve requirements, but the Branch is required to maintain minimum adjusted capital funds of S$ 10 million. In Bahrain, we have an offshore branch, regulated by the Bahrain Monetary Agency. The branch is permitted to transact banking business with approved financial institutions within Bahrain and individuals or institutions outside Bahrain. It is also permitted to offer banking services to non-resident Indians in Bahrain.

       Representative Offices

         Our representative office in New York in the United States is licensed and regulated by the State of New York Banking Department and the Federal Reserve Board. Our representative office in Dubai in the United Arab Emirates is regulated by the Central Bank of the United Arab Emirates. Our representative office in Shanghai in China is regulated by the China Banking Regulatory Commission. Our representative office in Bangladesh is regulated by the Bangladesh Bank.

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    PRINCIPAL AND SELLING SHAREHOLDERS

         The following table sets forth as of March 4, 2005, certain information with respect to beneficial ownership of our equity shares by:

         Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission (the “SEC”), which generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and includes equity shares issuable pursuant to the exercise of stock options or warrants that are immediately exercisable or exercisable within 60 days of February 25, 2005. These shares are deemed to be outstanding and to be beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, all information with respect to the beneficial ownership of any principal or selling shareholder has been furnished by such shareholder and, unless otherwise indicated, we believe that persons named in the table have sole voting and sole investment power with respect to all the equity shares shown as beneficially owned, subject to community property laws where applicable. Except as otherwise noted below, the address for each person listed on the table is c/o ICICI Bank Limited, ICICI Bank Towers, Bandra-Kurla Complex, Mumbai 400051, India.

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         The share numbers and percentages listed below are based on 736.3 million equity shares outstanding, and include shares issuable upon exercise of outstanding options or warrants within 60 days of March 4, 2005. Amounts representing less than 1% are indicated with an “*.”

    Name and Address of Beneficial Owner   Beneficial Ownership of Principal
    Shareholders Prior to the Offering
    Number of
    Equity Shares
    Offered(1)
    Beneficial Ownership of Principal
    Shareholders After the
    Offering(1)
       

        Number   Percentage Number Percentage
       
     



    Directors and Executive Officers:      
    All directors and officers, as a group      
       (29 persons)(2)   6,173,991     *                   
    5% or Greater Shareholders    
       Life Insurance Corporation      
             of India   71,531,991   9.71              
             Yogakshema    
             Jeevan Bima Marg    
             Mumbai 400 021, India    
       Allamanda Investments Pte.      
             Limited(3)   66,234,627   9.00              
             5th Floor    
             Anglo Mauritius House    
             4 Intendance Street    
             Port Louis, Mauritius    
    Selling Shareholders    
       Selling shareholders who own      
       1% or greater of our    
       outstanding equity shares    
                             
       All other selling shareholders as a      
       group who each beneficially own      
       less than 1% of our equity shares,      
       as a group    


    (1) Assuming no exercise of the underwriters’ over-allotment option.
       
    (2) Includes options, which are immediately exercisable, to purchase 1,922,974 equity shares.
       
    (3)  Allamanda Investments Private Limited is wholly-owned by Asia Financial Holdings Private Limited, which is wholly- owned by Fullerton Management Private Limited, which is wholly-owned by Temasek Holdings (Private) Limited.
       

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    THE INDIAN INVITATION TO PARTICIPATE

         We prepared and distributed in India an invitation to participate dated February 26, 2005 which invited holders of our equity shares to offer their equity shares for sale in this offering, pursuant to Indian regulations in this regard. Our invitation to participate was mailed only to holders of our equity shares to their addresses of record in India. Holders of ADSs are not eligible to participate in the transactions contemplated by the invitation to participate. Under Indian law, an issuer in India such as us can sponsor the issue of ADSs through an overseas depositary against underlying equity shares accepted from holders of its equity shares in India. Sponsorship does not mean we are purchasing or causing the purchase of the equity shares directly or indirectly or recommending that holders participate in the offering. We are not purchasing any equity shares in this transaction. Equity shares will solely be purchased by the underwriters from the selling shareholders for sale in this offering. We have obtained the approval of the Foreign Investment Promotion Board as required by Indian regulations.

         Under the terms of the invitation to participate, the related letter of transmittal, letter of renunciation, escrow agreement and other documents, the shares to be sold by the selling shareholders are being held in escrow by The Western India Trustee & Executor Company Limited, as escrow agent, until such time as they are required to be deposited with us, as custodian on behalf of Deutsche Bank Trust Company Americas, the depositary, against the issuance of ADSs representing such shares and to be delivered to the underwriters under the terms of the underwriting agreement entered into by us, the underwriters and the selling shareholders. The successful completion of these transactions by us, the selling shareholders and the escrow agent is a condition precedent to the underwriters' obligation to purchase any ADSs in this offering.

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    DESCRIPTION OF EQUITY SHARES

         For a description of our equity shares, see the section “Description of Equity Shares,” which is incorporated by reference in this prospectus (see “Incorporation of Documents by Reference”).

    DESCRIPTION OF AMERICAN DEPOSITARY SHARES

         Deutsche Bank Trust Company Americas, as depositary, will issue the ADRs evidencing the ADSs. Each ADS will represent an ownership interest in two equity shares. The equity shares will be deposited with us, as custodian. Our office, as custodian, is located at Empire Complex, Senapati Bapat Marg, Lower Parel, Mumbai 400013, India. The depositary’s principal executive office is located at 60 Wall Street, New York, New York 10005.

         You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, you are an ADS holder. The section “Description of the American Depositary Shares,” which is incorporated by reference in this prospectus (see “Incorporation of Documents by Reference”) assumes that you hold your ADSs directly. If you hold the ADSs indirectly, you will hold your ADSs through the Depository Trust Company (“DTC”) and you must rely on the procedures of your brokers or other financial institutions to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

          DTC has provided us with the following information: DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the United States Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered under the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its direct participants deposit with DTC. DTC also records the settlement among direct participants of securities transactions, such as transfers and pledges, in deposited securities through computerized records for direct participant's accounts. This eliminates the need to exchange certificates. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Euroclear and Clearstream Banking are direct participants. DTC's book entry system is also used by other organizations such as securities brokers and dealers, banks and trust companies that work through a direct participant. The rules that apply to DTC and its participants are on file with the Securities and Exchange Commission. DTC is owned by a number of its direct participants and by The New York Stock Exchange, Inc., The American Stock Exchange, LLC and the National Association of Securities Dealers, Inc.

          It is DTC's current practice, upon receipt of any cash payment, to credit direct participants' accounts on the payment date according to their respective holdings of beneficial interests in the ADSs as shown on DTC's records. Payments by participants to holders of beneficial interests in the ADSs and voting by participants will be governed by the customary practices between the participants and owners of beneficial interests, as is the case with securities held for the account of customers registered in “street name.” Disbursement of payments to direct participants will be the responsibility of DTC, and disbursement of payments to the holders of beneficial interests in the ADSs will be the responsibility of direct and indirect participants.

         As the depositary will actually be the legal owner of the equity shares, you must rely on it to exercise the rights of a shareholder. The obligations of the depositary are set out in a deposit agreement among Deutsche Bank Trust Company Americas, you, as an ADS holder, and us. The deposit agreement and the ADSs are generally governed by New York law.

         The section “Description of the American Depositary Shares,” which is incorporated by reference in this prospectus (see “Incorporation of Documents by Reference”) contains a summary of the material provisions of the deposit agreement. As it is a summary, it does not contain all the information that may be important to you. For more complete information, you should read the entire deposit agreement and the ADR. Copies of the deposit agreement and the form of ADR will be available for inspection at the Corporate Trust Office of the depositary and at the office of the custodian set forth above.

    Voting Rights

         You will have no voting rights with respect to the deposited equity shares. The depositary will exercise voting rights in respect of the deposited equity shares as directed by our board of directors. However, under the Banking Regulation Act, no person holding shares in a banking company can exercise more than 10.0% of the company’s total voting power. As a result, the depositary, which owned approximately 21.7% of our equity shares as of January 20, 2005, can vote only 10.0% of our equity shares. The depositary will not, under any circumstances, be obliged to exercise any discretion in relation to the exercise or non-exercise of voting rights.

         Equity shares which have been withdrawn from the depositary facility and transferred on our register of shareholders to a person other than the depositary or its nominee may be voted by that person. However, you may not receive sufficient advance notice of shareholder meetings to enable you to withdraw the underlying equity shares and vote at such meetings.

         Notwithstanding the foregoing, if a foreign institutional investor, non-resident Indian or overseas corporate body were to withdraw its equity shares from the depositary facility, its investment in the equity shares would be subject to the general restrictions on foreign ownership noted under “Recent Developments – Restriction on Foreign Ownership of Indian Securities” included elsewhere in this prospectus and “Restriction on Foreign Ownership of Indian Securities” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

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    GOVERNMENT OF INDIA APPROVALS

         The approval of the Foreign Investment Promotion Board is required for this offering in accordance with the Reserve Bank of India regulations relating to sponsored ADS offerings. Pursuant to such regulations, an issuer in India, such as us, can sponsor the issue of ADSs through an overseas depositary against underlying equity shares accepted from holders of its equity shares in India. The guidelines specify that:

         The Foreign Investment Promotion Board granted its approval of this offering in its letter dated February 22, 2005. Further, our equity shareholders have approved this offering by way of resolution passed by way of a postal ballot.

         Shareholders resident outside India that intend to sell or otherwise transfer equity shares within India should seek the advice of Indian counsel to understand the requirements applicable at that time.

         See “Recent Developments – Restriction on Foreign Ownership of Indian Securities” included elsewhere in this prospectus and “Restriction on Foreign Ownership of Indian Securities” in our annual report on Form 20-F for the fiscal year ended March 31, 2004, which is incorporated by reference in this prospectus.

     

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    TAXATION

    Indian Tax

         The following discussion is the opinion of Amarchand & Mangaldas & Suresh A. Shroff & Co. The discussion of material Indian tax consequences to investors in ADSs and equity shares who are not resident in India whether of Indian origin or not (each a “non-resident”) is based on the provisions of the Indian Income-tax Act, 1961 (the “Income-tax Act”), including the special tax regime for ADSs contained in Section 115AC, which has been extended to cover additional ADSs that an investor may acquire in an amalgamation or restructuring of the company, and certain regulations implementing the Section 115AC regime. The Income-tax Act is amended every year by the Finance Act of the relevant year. Some or all of the tax consequences described herein may be amended or modified by future amendments to the Income-tax Act. The Finance Bill, 2005 was introduced in the Parliament of India on February 28, 2005. Until the Finance Bill is enacted, investors may avail the beneficial provisions as proposed by the Finance Bill in accordance with the provisions of section 294 of the Act.

         The summary is not intended to constitute a complete analysis of the tax consequences under Indian law of the acquisition, ownership and sale of ADSs and equity shares by non-resident investors. Potential investors should, therefore, consult their own tax advisers regarding the tax consequences of such acquisition, ownership and sale, including the tax consequences under Indian law, the law of the jurisdiction of their residence, any tax treaty between India and their country of residence, and in particular the application of the regulations implementing the Section 115AC regime.

       Residence

         For the purpose of the Income-tax Act, an individual is a resident of India during any fiscal year, if he (i) is in India in that year for 182 days or more or (ii) having been in India for a period or periods aggregating 365 days or more during the four years preceding that fiscal year, is in India for a period or periods aggregating 60 days or more in that fiscal year. The period of 60 days is substituted by 182 days in the case of an Indian citizen or person of Indian origin who being resident outside India comes on a visit to India during the fiscal year or an Indian citizen who leaves India for the purposes of his employment during the fiscal year. A company is resident in India in any fiscal year if it is registered in India or the control and management of its affairs is situated wholly in India in that year. A firm or other association of persons is resident in India except where the control and management of its affairs are situated wholly outside India.

       Taxation of Distributions

         Dividends paid are not subject to any Indian withholding or other tax payable by the shareholders. However, we are required to pay tax at the rate of 13.1% (14.0% for fiscal 2006 as proposed by the Finance Bill, 2005) on the dividends distributed by us. The dividend so paid is not taxable under section 115AC in the hands of the ADS holders.

       Taxation on Redemption of ADSs

         The acquisition of equity shares upon redemption of ADSs by a non-resident investor will not give rise to a taxable event for Indian tax purposes.

       Taxation on Sale of ADSs or Equity Shares

         Any transfer of ADSs outside India by a non-resident investor to another non-resident investor will not give rise to Indian capital gains tax in the hands of the transferor.

         Subject to any relief under any relevant double taxation treaty, gain arising from the sale of an equity share will generally give rise to a liability for Indian capital gains tax in the hands of the transferor. Such tax is required to be withheld at source. Where the equity share has been held for more than 12 months (measured from the date of advice of redemption of the ADS by the depositary as specified below), the rate of tax is 10.2% (including education cess) where the total income does not exceed Rs. 850,000 (US$ 19,644) (Rs. 10,00,000 (US$ 23,110) for fiscal 2006 as proposed by the Finance Bill, 2005) or 11.22% (including applicable surcharges and an additional surcharge by way of education cess) where the total income exceeds Rs. 850,000 (US$ 19,644) (Rs. 10,00,000 (US$ 23,110) for fiscal 2006 as proposed by the Finance Bill, 2005). Where the equity share has been held for 12 months or less, the rate of tax varies and the gain will be subject to tax at normal rates of income tax applicable to non-residents under the provisions of the Income-tax Act, subject to a maximum of 41.82% (including applicable surcharges and education cess) in the case of foreign companies. The

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    actual rate depends on a number of factors, including without limitation the nature of the non-resident investor. The Finance (No. 2) Act, 2004, introduced the securities transaction tax effective October 1, 2004, which is levied on purchase/sale transactions of equity shares entered into on a recognized stock exchange in India at the specified rates in accordance with the provisions of Chapter VII thereunder. The transaction of equity shares entered into on a recognised stock exchange in India settled by actual delivery or transfer will be subject to securities transaction tax at the rate of 0.075% (0.1% with effect from June 1, 2005 as proposed by the Finance Bill, 2005), on the value of the transaction, payable by both the seller and the buyer. In cases where securities transaction tax is payable, the resulting long-term capital gains will be exempt from tax and short-term capital gains will be taxable at a lower tax rate of 10.2% (including education cess) where the total income does not exceed Rs. 850,000 (US$ 19,644) (Rs. 10,00,000 (US$ 23,110) for fiscal 2006 as proposed by the Finance Bill, 2005) or 11.22% (including applicable surcharges and an additional surcharge by way of education cess) where the total income exceeds Rs. 850,000 (US$ 19,644) (Rs. 10,00,000 (US$ 23,110) for fiscal 2006 as proposed by the Finance Bill, 2005). For transactions that are not subject to securities transaction tax, the normal capital gains tax regime will apply. During the period that the underlying equity shares are held by non-resident investors following a transfer from the depositary upon redemption, the provisions of a double taxation treaty entered into by the government of India with the country of residence of the non-resident investors will apply in determining the taxation of any capital gains arising on a transfer of the equity shares. The double taxation treaty between the United States and India does not provide US residents with any relief from Indian tax on capital gains.

          For purposes of determining the amount of capital gains arising on a sale of an equity share for Indian tax purposes, the cost of acquisition of an equity share received upon redemption of an ADS will be the price of the share prevailing on The Stock Exchange, Mumbai or the National Stock Exchange on the date on which the depositary advises the custodian to redeem receipts in exchange for underlying equity shares, not the acquisition cost of the ADS being redeemed. The holding period of an equity share received upon redemption of an ADS will commence on the date of advice of redemption by the depositary.

       Rights

         Distributions to non-resident investors of additional ADSs or equity shares or rights to subscribe for equity shares made with respect to ADSs or equity shares are not subject to Indian tax in the hands of the non-resident investor.

         It is unclear whether capital gains derived from the sale of rights outside India by a non-resident investor that is not entitled to exemption under a tax treaty to another non-resident investor will be subject to Indian capital gains tax. If the rights are deemed by the Indian tax authorities to be situated within India, because our situs is in India, then the capital gains realized on the sale of rights will be subject to customary Indian capital gains taxation as discussed above.

    Stamp Duty

         A transfer of ADSs is not subject to Indian stamp duty. Normally, upon the receipt of equity shares in physical form from the depositary in exchange for ADSs representing such equity shares, a non-resident investor would be liable for Indian stamp duty applicable on re-issuance in physical form, which is the same as stamp duty payable on the original issuance in physical form subject to a maximum of Rs. 20 per share certificate. Similarly, a sale of equity shares in physical form by a non-resident investor would also be subject to Indian stamp duty at the rate of 0.25% of the market value of the equity shares on the trade date, although customarily such tax is borne by the transferee, that is, the purchaser. However, our equity shares are compulsorily delivered in non-physical form except for trades up to 500 shares only, which may be delivered in physical form. Under Indian stamp law, no stamp duty is payable on the acquisition or transfer of equity shares in non-physical form. As per the Finance Act, 2004, all delivery based sales on a recognized stock exchange in India of equity shares are subject to transaction tax at the rate of 0.075% of the value of the securities transacted.

       Other Taxes

         At present, there are no taxes on wealth, gifts or inheritance which apply to the ADSs or underlying equity shares.

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       Service Tax

         Brokerage fees paid to stockbrokers in connection with the sale or purchase of shares which are listed on any recognized stock exchange in India are subject to a service tax at a rate of 10.2% (including applicable education cess). The stockbroker is responsible for collecting the service tax and paying it to the relevant authority.

    United States Taxation

         In the opinion of Davis Polk & Wardwell, the following are the material US federal income tax consequences of purchasing, owning and disposing of ADSs or equity shares to the US Holders described herein, but is not a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to acquire such securities. This discussion does not address US state, local and non-US tax consequences. The discussion applies only to US Holders who hold ADSs or equity shares as capital assets for US federal income tax purposes and it does not address special classes of holders, such as:

         As used herein, a ‘‘US Holder’’ is a beneficial owner of ADSs or equity shares that is, for US federal income tax purposes: (i) a citizen or resident of the United States; (ii) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or (iii) an estate or trust the income of which is subject to US federal income taxation regardless of its source.

         This discussion is based on the Internal Revenue Code of 1986, as amended, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. This discussion is also based in part on representations by the depositary and assumes that each obligation under the deposit agreement and any related agreements will be performed in accordance with its terms.

         For US federal income tax purposes, if a US Holder own an ADS, such holder should generally be treated as the owner of the equity shares underlying the ADS. The US Treasury has expressed concerns that parties to whom ADSs are pre-released may be taking actions that are inconsistent with the claiming of foreign tax credits by US Holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate US Holders. Accordingly, the availability of the reduced tax rate for dividends received by certain non-corporate US Holders could be affected by actions taken by parties to whom ADSs are pre-released.

         Please consult your tax adviser with regard to the application of the US federal income tax laws to the ADSs or equity shares in your particular circumstances, as well as any tax consequences arising under the laws of any US state, local or other taxing jurisdiction.

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         This discussion assumes that ICICI Bank is not, and will not become, a passive foreign investment company (as discussed below).

       Taxation of Dividends

         Distributions received by US Holders with respect to the ADSs or equity shares, other than certain pro rata distributions of equity shares or rights to acquire equity shares, will constitute foreign-source dividend income for US federal income tax purposes to the extent paid out of ICICI Bank’s current or accumulated earnings and profits, as determined in accordance with US federal income tax principles. The amount of the dividend a US Holder will be required to include in income will equal the US dollar value of the rupees, calculated by reference to the exchange rate in effect on the date the payment is received by the depositary (in the case of ADSs) or by the US Holder (in the case of equity shares) regardless of whether the payment is converted into US dollars on the date of receipt. If a US Holder realizes gain or loss on a sale or other disposition of rupees, it will be US-source ordinary income or loss. Corporate US Holders will not be entitled to claim the dividends-received deduction with respect to dividends paid by ICICI Bank. Subject to applicable limitations, dividends received by certain non-corporate US Holders in taxable years beginning before January 1, 2009 will be taxable at a maximum rate of 15.0% . Non-corporate US Holders should consult their own tax advisers to determine whether they are subject to any special rules that limit their ability to be taxed at this favorable rate. A US Holder will not be able to claim a US foreign tax credit for any Indian taxes paid by ICICI Bank with respect to distributions on ADSs or equity shares (as discussed under “Taxation – Indian Tax – Taxation of Distributions”).

       Taxation of Capital Gains

         A US Holder will generally recognize US-source capital gain or loss for US federal income tax purposes on the sale or other disposition of ADSs or equity shares, which will be long-term capital gain or loss if the ADSs or equity shares were held for more than one year. The amount of gain or loss will be equal to the difference between the US Holder’s tax basis in the ADSs or equity shares disposed of and the amount realized on the disposition. Under certain circumstances as described under “Taxation – Indian Taxation – Taxation on Sale of ADSs or Equity Shares,” a US Holder may be subject to Indian tax upon the sale or other disposition of equity shares. US Holders should consult their own tax advisers with respect to their ability to credit this Indian tax against their US federal income tax liability.

       Passive Foreign Investment Company Rules

         Based upon certain proposed Treasury regulations, which are proposed to be effective for taxable years beginning after December 31, 1994, and upon certain management estimates, ICICI Bank does not expect to be a passive foreign investment company (a “PFIC”) for its current taxable year or in the foreseeable future. ICICI Bank has based the expectation that it is currently not a PFIC on, among other things, provisions in the proposed Treasury regulations that provide that certain restricted assets (including cash and securities) of banks are assets used in connection with banking activities and are not passive assets, as well as the composition of ICICI Bank’s income and assets from time to time. In general, a foreign corporation is a PFIC for any taxable year if: (i) 75.0% or more of its gross income consists of passive income (such as dividends, interest, rents and royalties) or (ii) 50.0% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. Since there can be no assurance that the proposed Treasury regulations will be finalized in their current form, the manner of the application of the proposed regulations is not entirely clear, and the composition of ICICI Bank’s income and assets will vary over time, there can be no assurance that ICICI Bank will not be considered a PFIC for any taxable year.

         If ICICI Bank were treated as a PFIC for any taxable year during which a US Holder held an ADS or equity share and such holder has not made the mark-to-market election, as described below, such holder will be subject to special rules generally intended to eliminate any benefits from the deferral of US federal income tax that a US Holder could derive from investing in a foreign corporation that does not distribute all of its earnings on a current basis. Upon a disposition of ADSs or equity shares, including, under certain circumstances, a disposition pursuant to an otherwise tax-free reorganization, gain recognized by a US Holder would be allocated ratably over the holder’s holding period for the ADSs or equity shares. The amounts allocated to the taxable year of the disposition and to any year before ICICI Bank became a PFIC would be taxed as ordinary income. The amount allocated to each other

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    taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on the amount allocated to such taxable years. Further, any distribution in respect of ADSs or equity shares in excess of 125.0% of the average of the annual distributions on ADSs or equity shares received by a US Holder during the preceding three years or such holder’s holding period, whichever is shorter, would be subject to taxation as described above.

         If the ADSs or equity shares are “regularly traded” on a “qualified exchange,” a US Holder may make a mark-to-market election. The ADSs or equity shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of the ADSs or equity shares, as the case may be, are traded on a qualified exchange on at least 15 days during each calendar quarter. A “qualified exchange” includes a foreign exchange that is regulated by a governmental authority in which the exchange is located and with respect to which certain other requirements are met. The Internal Revenue Service has not yet identified specific foreign exchanges that are “qualified” for this purpose. The New York Stock Exchange on which the ADSs are traded is a qualified exchange for US federal income tax purposes.

         If a US Holder makes the mark-to-market election, such holder generally will include as ordinary income the excess, if any, of the fair market value of the ADSs or equity shares at the end of each taxable year over their adjusted basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of the ADSs or equity shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). If a US Holder makes the election, such holder’s basis in the ADSs or equity shares will be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of ADSs or equity shares will be treated as ordinary income.

         If a US Holder owns ADSs or equity shares during any year in which ICICI Bank is a PFIC, such holder must file Internal Revenue Service Form 8621.

         In addition, if ICICI Bank were to be treated as a PFIC in a taxable year in which it pays a dividend or for the prior taxable year, the 15.0% dividend rate discussed above with respect to dividends paid to certain non-corporate US Holders would not apply.

       Information reporting and backup withholding

         Payment of dividends and sales proceeds that are made within the United States or through certain US-related financial intermediaries generally are subject to information reporting and to backup withholding unless the US Holder is a corporation or other exempt recipient or, in the case of backup withholding, such holder provides a correct taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. The amount of any backup withholding from a payment to a US Holder will be allowed as a credit against such holder’s US federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the Internal Revenue Service.

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    UNDERWRITING

         We, the selling shareholders and the underwriters for the offering, or the Underwriters, named below have entered into an underwriting agreement dated the date of this prospectus with respect to the ADSs being offered. Subject to the conditions set forth in the underwriting agreement, including, without limitation the successful completion of the Indian invitation to participate, each Underwriter has severally agreed to purchase from the selling shareholders the number of ADSs indicated in the following table. Merrill Lynch International, Morgan Stanley & Co. International Limited and UBS AG are the representatives of the Underwriters.

    Underwriters   Number of ADSs


    Merrill Lynch International  
    Morgan Stanley & Co. International Limited  
    UBS AG  

         Total  


         The Underwriters are, provided certain conditions are satisfied, committed to take and pay for all of the ADSs being offered by this prospectus, if any are taken, other than the ADSs covered by the option described below.

         In addition, the Underwriters have an option to buy up to an additional                ADSs, representing up to an additional                 equity shares, from the selling shareholders. They may exercise that option within seven days of the date of this prospectus. If any ADSs are purchased pursuant to this option, the Underwriters will severally, subject to the conditions set forth in the underwriting agreement, purchase additional ADSs in approximately the same proportion as set forth in the table above.

         The following table shows the per ADS and total underwriting discounts and commissions to be paid to the Underwriters by the selling shareholders. Such amounts are shown assuming both no exercise and full exercise of the Underwriters' option to purchase                 additional ADSs, representing up to an additional I equity shares.

    Paid by the Selling Shareholders
      No Exercise   Full Exercise


    Per ADS    
    Total    

         The ADSs sold by the Underwriters to the public will initially be offered at the initial price to public set forth on the cover of this prospectus. Any ADSs sold by the Underwriters to securities dealers may be sold at a discount of up to US$                 per ADS from the initial price to public. Any such securities dealers may resell any ADSs purchased from the Underwriters to certain other brokers or dealers at a discount of up to US$                 per ADS from the initial price to public. If all the ADSs are not sold at the initial price to public, the representatives may change the offering price and the other selling terms.

         Our ADSs are quoted on the New York Stock Exchange under the symbol “IBN.” Our equity shares, including those underlying the ADSs, are listed on the National Stock Exchange and The Stock Exchange, Mumbai.

         We estimate that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately US$                , including registration fees of US$                , estimated printing fees of US$                , estimated legal fees and expenses of US$                 , estimated accounting fees and expenses of US$                , directors’ and officers’ insurance premiums relating to this offering of approximately US$                , and other estimated miscellaneous fees and expenses of US$                .

         The selling shareholders are paying all the expenses of the offering, including underwriting discounts and commissions, except listing expenses which are borne by us, and except that the Underwriters are paying for expenses of the offering, up to a maximum amount of 0.5% of the gross aggregate proceeds of the offering (before deducting underwriting discounts and commissions, and expenses), and reasonable costs and expenses relating to investor presentations on any “road shows” undertaken in connection with the marketing of the offering.

         We have agreed with the Underwriters not to issue any equity shares, ADSs or securities convertible into or exchangeable for ADSs or equity shares or any similar securities during the period from the date of this prospectus

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    continuing through the date 120 days after the date of this prospectus, except with the prior written consent of the representatives, and subject to certain exceptions.

         A prospectus in electronic format may be made available on the website maintained by one or more underwriters or securities dealers. The representatives of the Underwriters may agree to allocate a number of ADSs to the Underwriters for sale to their online brokerage account holders. ADSs to be sold pursuant to an Internet distribution will be allocated by the representatives to the Underwriters that may make Internet distributions on the same basis as other allocations. In addition, ADSs may be sold by the Underwriters to securities dealers who resell ADSs to online brokerage account holders.

         The Underwriters reserve the right to withdraw, cancel or modify the offering and to completely or partially reject any orders.

         In order to facilitate the offering of ADSs, the Underwriters may purchase and sell equity shares and/or ADSs in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the Underwriters of a greater number of ADSs than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the Underwriters' option to purchase additional ADSs from the selling shareholders in the offering. The Underwriters may close out any covered short position by either exercising their option to purchase additional ADSs or purchasing additional ADSs in the open market. In determining the source of ADSs to close out the covered short position, the Underwriters will consider, among other things, the price of ADSs available for purchase in the open market as compared to the price at which they may purchase ADSs through the over-allotment option. “Naked” short sales are any sales in excess of such option. The Underwriters must close out any naked short position by purchasing ADSs in the open market. A naked short position is more likely to be created if the Underwriters are concerned that there may be downward pressure on the price of ADSs in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids or purchases of ADSs made by the Underwriters in the open market prior to the completion of the offering.

         The Underwriters also may impose a penalty bid. This occurs when a particular Underwriter repays to the Underwriters a portion of the underwriting discount received by it because the representatives have repurchased ADSs sold by or for the account of such Underwriter in stabilizing or short covering transactions.

         Any of these activities by the Underwriters may stabilize, maintain or otherwise affect the market price of the ADSs. As a result, the price of the ADSs may be higher than the price that otherwise might exist in the open market. The Underwriters are not required to engage in these activities. If these activities are commenced, they may be discontinued by the Underwriters at any time. These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise.

         The Underwriters and certain of their affiliates have been and are currently our clients to whom we provide, from time to time, ordinary course commercial banking services.

         From time to time, the Underwriters and certain of their affiliates have provided and continue to provide commercial and investment banking services to us for which they have received, and may in the future receive, customary compensation.

         As of February 28, 2005, affiliates of Merrill Lynch International, Morgan Stanley & Co. International Limited and UBS AG owned approximately (i) 2,430,810, (ii) 2,178,982, and (iii) 2,945,423 of our equity shares, respectively. These affiliates of the Underwriters have chosen to sell a portion of their equity shares and are participating in the Indian invitation to participate on a pari passu basis and upon the same terms and conditions applicable to all holders of our equity shares. Gross proceeds to these affiliates of the Underwriters are estimated to be approximately US$                (and approximately US$                if the Underwriters exercise their option to purchase additional ADSs in full).

         The number of shares being sold by the selling shareholders in the offering, including those that may be sold by affiliates of our Underwriters, will not be determined until the closing of the Indian invitation to participate, which will occur shortly before pricing of the offering. As such, there is a possibility that 10% or more of the net offering

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    proceeds, not including underwriting compensation, may be paid to NASD members participating in the distribution of the offering or associated or affiliated persons of such members. In such an event, the offering will be made pursuant to the provisions of Rule 2710(h) of the Conduct Rules of the National Association of Securities Dealers, Inc.

         We and the selling shareholders have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act.

         We have been advised by the Underwriters that Merrill Lynch International expects to make offers and sales in the United States through its registered broker-dealer affiliate, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. International Limited expects to make offers and sales in the United States through its registered broker-dealer affiliate, Morgan Stanley & Co. Incorporated and UBS AG expects to make offers and sales in the United States through its registered broker-dealer affiliate, UBS Securities LLC.

         The representatives of the Underwriters may be contacted at the following address: Merrill Lynch International, Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ, United Kingdom; Morgan Stanley & Co. International Limited, Cabot Square, Canary Wharf, London E14 4UA, United Kingdom; and UBS AG, 52/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong.

    Selling Restrictions

         No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of the ADSs, or the possession, circulation or distribution of this prospectus or any other material relating to us or the ADSs in any jurisdiction where action for that purpose is required. Accordingly, the ADSs may not be offered or sold, directly or indirectly, and neither this prospectus nor any other offering material or advertisements in connection with the ADSs may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction.

         Australia. This prospectus is not a disclosure document under Part 6D of the Corporations Act 2001 (Cth) (the “Australian Corporations Act”), will not be lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under the Australian Corporations Act.

         Accordingly, (i) the offer of ADSs under this prospectus is only made to persons to whom it is lawful to offer ADSs without disclosure to investors under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in Section 708 of the Australian Corporations Act, (ii) this prospectus will be made available in Australia to persons set forth in (i) above, and (iii) the Underwriters must send the offeree a notice stating in substance that by accepting the offer of ADSs, the offeree represents that it is such a person as set forth in (i) above and agrees not to sell or offer for sale with Australia any ADSs sold to the offeree within 12 months after their transfer to the offeree under this prospectus.

          Canada. The ADS will not be sold in Canada or to residents of Canada other than in compliance with applicable Canadian securities laws (“Canadian Securities Laws”). Without limiting the foregoing, each Underwriter will only make offers and sales of the ADSs included in this offering in Canada or to residents of Canada (i) through an appropriately registered securities dealer or in accordance with an available exemption from the applicable registered securities dealer requirements under the Canadian Securities Laws and (ii) pursuant to an exemption from the prospectus requirements under Canadian Securities Laws.

         France. The ADSs will not be offered or sold, directly or indirectly, to the public in the Republic of France and all offers and sales of ADSs will be made in the Republic of France only to qualified investors as defined and in accordance with Articles L.411-1 and L.411-2 of the French Code monétaire et financier and Decree No 98-880 dated October 1, 1998 relating to offers to qualified investors. In addition, neither this prospectus nor any offering material relating to the ADSs has been distributed or caused to be distributed or will be distributed or caused to be distributed in the Republic of France, other than to those investors to whom offers and sales of the ADSs may be made as described in this paragraph.

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         Germany. This prospectus is not a Securities Selling Prospectus within the meaning of the German Securities Sales Prospectus Act of September 8, 1998 and has not been filed with and approved by the German Federal Supervisory Authority (Bundesanstalt für Finanzdienstlienstleistungsaufsicht) or any other competent German governmental authority under the relevant laws. No ADSs have been offered or sold, no ADSs may be offered or sold, and no copies of this prospectus or any document relating to the ADSs may be distributed, directly or indirectly, in Germany except to persons falling within the scope of section 2 numbers 1 (persons who as part of their profession, occupation or business, purchase or sell securities for their own account or for the account of third parties), 2 (a restricted circle of persons) and 3 (employees by their employer or related group companies) of the German Securities Sales Prospectus Act of September 8, 1998 and no steps have been, or will be, taken which would constitute a public offering of the ADSs in Germany.

         Hong Kong. The ADSs will not be offered or sold in Hong Kong by means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong. No advertisement, invitation or document relating to the ADSs, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws in Hong Kong) will be issued other than with respect to ADSs which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder.

         Italy. The offering of the ADSs has not been registered with the Commissione Nazionale per le Società e la Borsa, or CONSOB, in accordance with Italian securities legislation. Sales of the ADSs in the Republic of Italy shall be effected in accordance with all Italian securities, tax and other applicable laws and regulations; and (ii) no ADSs have been offered, sold or delivered, no ADSs may be offered sold or delivered, and no copies of this prospectus or any other document relating to the ADSs may be distributed, in the Republic of Italy, unless such offer, sale or delivery of ADSs or distribution of copies of this prospectus or other documents relating to the ADSs in the Republic of Italy is to qualified investors (operatori qualificati), as defined by Articles 25 and 31(2) of CONSOB Regulation no. 11522 of 1 July 1998 as subsequently modified (Regulation 11522), except for individuals referred to in Article 31(2) of Regulation 11522 who exercise administrative, managerial or supervisory functions at a registered securities dealing firm (a Società di Intermediazione Mobiliare or SIM), management companies (società di gestione del risparmio) authorized to manage individual portfolios on behalf of third parties and fiduciary companies authorized to manage individual portfolios pursuant to Article 60(4) of Legislative Decree no. 415 of 23 July 1996, and may not be reproduced or redistributed or passed on, directly or indirectly, to any other person or published in whole or in part. Any offer, sale or delivery of the ADSs or distribution of copies of this prospectus in Italy must be made solely by entities which are duly authorized to conduct such activities in Italy and must be in full compliance with the provisions contained in Legislative Decree no. 58 of 24 February 1998, Legislative Decree no. 385 of 1 September 1993 and any other applicable laws and regulations and possible requirements or limitations which may be imposed by the Italian competent authorities.

         Japan. The ADSs have not been and will not be registered under the Securities and Exchange Law of Japan and are not being offered or sold and may not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan, except (i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and (ii) in compliance with any other applicable requirements of Japanese law.

         Netherlands. The ADSs will not be offered, distributed, transferred, delivered or sold, directly or indirectly, in or from The Netherlands as part of any initial distribution or as part of any re-offering, and the ADSs will not be distributed or any other document in respect of the offering in or from The Netherlands, other than to individuals or legal entities, who or which trade or invest in securities in the conduct of their profession or trade business within the meaning of article 2 of the Exemption Regulation under the Securities Transactions Supervision Act 1995 (“Vrijstellingsregeling Wet toezicht effectenverkeer 1995”) (which includes banks, brokers, investment banks, securities firms, insurance companies, pension funds, other institutional investors and treasury departments and finance companies of large enterprises, who or which regularly trade or invest in securities in a professional capacity).

         Singapore. This prospectus has not been registered as an offering memorandum or information memorandum with the Monetary Authority of Singapore. No advertisement may be made offering or calling attention to an offer or intended offer of the ADSs to the public in Singapore. No ADSs may be offered or sold, no ADSs will be made the subject of an invitation for subscription or purchase, and this prospectus or any other document or material in

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    connection with the offer or sale, or invitation for subscription or purchase, of ADSs may not be circulated or distributed, whether directly or indirectly, to the public or any member of the public in Singapore other than:

         Switzerland. This prospectus does not constitute a offering memorandum within the meaning of Article 652a and Article 1156 of the Swiss Code of Obligations (Schweizerisches Obligationenrecht). This Offer or the ADSs have not been and will not be approved by any Swiss regulatory authority.

         United Arab Emirates. This prospectus is not intended to constitute an offer, sale or delivery of shares or other securities under the laws of the United Arab Emirates (U.A.E.). The ADSs have not been and will not be registered under Federal Law No. 4 of 2000 Concerning the Emirates Securities and Commodities Authority and the Emirates Security and Commodity Exchange, or with the U.A.E. Central Bank, the Dubai Financial Market, the Abu Dhabi Securities Market or with any other U.A.E. exchange.

          United Kingdom. The ADSs may not be offered or sold prior to the date six months after the date of delivery of the ADSs to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995. All sales of ADSs will comply with all applicable provisions of the Financial Services and Markets Act 2000 (the “FSMA”) with respect to anything done in relation to the offering and the ADSs in, from or otherwise involving the United Kingdom. No person may communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the sale of any ADSs in circumstances in which Section 21(1) of the FSMA does not apply to us.

     

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    LEGAL MATTERS

         Certain US legal matters will be passed upon for us by Davis Polk & Wardwell, our US counsel, and for the underwriters by Latham & Watkins LLP, US counsel to the underwriters. The validity of the ADSs offered by us in this prospectus and the validity of the equity shares represented by the ADSs and certain other Indian legal matters will be passed upon by Amarchand & Mangaldas & Suresh A. Shroff & Co., our Indian counsel, and by Little & Co., Indian counsel to the underwriters. Davis Polk & Wardwell may rely upon Amarchand & Mangaldas & Suresh A. Shroff & Co. and Latham & Watkins LLP may rely upon Little & Co. with respect to all matters of Indian law.

    EXPERTS

         Our consolidated balance sheets as of March 31, 2004 and 2003 and the related consolidated statements of earnings, stockholders’ equity, cash flows and other comprehensive income for each of the years in the three-year period ended March 31, 2004 have been incorporated by reference herein in reliance upon the report of KPMG LLP, an independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

         With respect to the unaudited condensed interim consolidated financial statements as of December 31, 2004 and 2003, and for the nine months then ended, included herein, KPMG LLP has reported that they applied limited procedures in accordance with professional standards for a review of such information. However, their report with respect thereto, included herein, states that they did not audit and they do not express an opinion on such condensed interim consolidated financial statements. Accordingly, the degree of reliance on their report on such condensed interim statements should be restricted in light of the limited nature of the review procedures applied. The accountants are not subject to the liability provisions of Section 11 of the Securities Act for their report on the unaudited condensed interim financial statements because that report is not a report or a part of the registration statement prepared or certified by the accountants within the meaning of Sections 7 and 11 of the Securities Act.

    WHERE YOU CAN FIND MORE INFORMATION ABOUT US

         We will furnish to you, through the depositary, English language versions of any reports, notices and other communications that we generally transmit to holders of our equity shares.

         We are subject to the registration requirements of the Securities Exchange Act of 1934, as amended and, in accordance with this act, we file annual reports and other information with the SEC. You may read and copy any of this information in the SEC’s Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You may also obtain copies of this information by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. You can obtain information on the operation of the SEC’s Public Reference Room in Washington, D.C. by calling the SEC at 1-800-SEC-0330.

         The SEC also maintains an Internet web site that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is http://www.sec.gov.

    INCORPORATION OF DOCUMENTS BY REFERENCE

         The SEC allows us to “incorporate by reference” the information we file with them. This means that we can disclose important information to you by referring you to those documents. Each document incorporated by reference is current only as of the date of such document, and the incorporation by reference of such documents shall not create any implication that there has been no change in our affairs since the date thereof or that the information contained therein is current as of any time subsequent to its date. The information incorporated by reference is considered to be a part of this prospectus and should be read with the same care. When we update the information contained in documents that have been incorporated by reference by making future filings with the SEC, the information incorporated by reference in this prospectus is considered to be automatically updated and superseded. In other words, in the case of a conflict or inconsistency between information contained in this

    120






    prospectus and information incorporated by reference into this prospectus, you should rely on the information contained in the document that was filed later.

          We incorporate by reference the documents listed below:

         Our annual report on Form 20-F for the fiscal year ended March 31, 2004 contains a description of our business and audited consolidated financial statements with a report by our independent auditors. These financial statements and our unaudited consolidated financial statements for the nine months ended and at December 31, 2004 and December 31, 2003 are prepared in accordance with US GAAP.

         Copies of all documents incorporated by reference in this prospectus, other than exhibits to those documents unless such exhibits are specially incorporated by reference in this prospectus, will be provided at no cost to each person, including any beneficial owner, who receives a copy of this prospectus on the written or oral request of that person made to:

    Mr. Rakesh Jha or Mr. Anindya Banerjee
    ICICI Bank Limited
    ICICI Bank Towers
    Bandra-Kurla Complex
    Mumbai 400051
    India
    Tel. No.: 011-91-22-2653-6157
    Tel. No.: 011-91-22-2653-7131

         You should rely only on the information that we incorporate by reference or provide in this prospectus. We have not authorized anyone to provide you with different information. We are not making any offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of those documents.

     

    121






    INDEX TO US GAAP FINANCIAL STATEMENTS

      Page
    Report of Independent Registered Public Accounting Firm   F-2
    Unaudited Consolidated Balance Sheets   F-3
    Unaudited Consolidated Statements of Operations   F-4
    Unaudited Consolidated Statements of Stockholders’ Equity and Other Comprehensive Income   F-6
    Unaudited Consolidated Statements of Cash Flows   F-7
    Notes to the Unaudited Consolidated Financial Statements   F-9

     

    F-1


    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    The Board of Directors and Stockholders
    ICICI Bank Limited

    We have reviewed the accompanying condensed consolidated balance sheets of ICICI Bank Limited and subsidiaries (the “Company”) as of December 31, 2004, the related condensed consolidated statements of operations, stockholders’ equity and other comprehensive income, and cash flows for each of the nine months periods ended 31 December 2004 and 2003. These condensed consolidated financial statements are the responsibility of the Company’s management.

    We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

    Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with US generally accepted accounting principles.

    We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of March 31, 2004, and the related consolidated statements of operations, stockholders’ equity and other comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated May 22, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. The United States dollar amounts are presented in accompanying condensed consolidated financial statements solely for the convenience of the readers and have been translated into United States dollar on the basis described in Note 1 to the consolidated financial statements.

    London, United Kingdom   KPMG LLP
    January 27, 2005    

    F-2


    Unaudited Consolidated Balance Sheets

    In millions, except share data

      As of March 31, 2004   As of December 31, 2004   Convenience translation
    into US$
    As of December 31, 2004
    Assets    
    Cash and cash equivalents Rs. 98,985   Rs. 138,284   US$ 3,196
    Trading assets 75,155   15,281   353
    Securities:    
       Available for sale 296,605   349,930   8,087
       Non-readily marketable equity securities 8,621   5,555   128
       Venture capital investments 5,142   3,488   81
    Investments in affiliates 3,619   3,307   76
    Loans, net of allowance for loan losses, security      
       deposits and unearned income 728,520   856,597   19,797
    Customers’ liability on acceptances 65,142   95,735   2,213
    Property and equipment, net 23,183   23,805   550
    Assets held for sale 4,829   5,587   129
    Goodwill 5,403   6,785   157
    Intangible assets, net 4,513   4,074   94
    Deferred tax assets 7,937   11,820   273
    Interest and fees receivable 6,529   12,908   298
    Other assets   74,948     101,541     2,348
    Total assets Rs. 1,409,131   Rs. 1,634,697   US$ 37,780
     
    Liabilities    
    Interest bearing deposits Rs. 611,178   Rs. 737,629   US$ 17,047
    Non-interest bearing deposits 73,777   91,269   2,109
    Trading liabilities 26,079   40,051   926
    Short-term borrowings 57,364   58,324   1,348
    Bank acceptances outstanding 65,142   95,735   2,213
    Long-term debt 373,449   353,600   8,172
    Redeemable preferred stock 944   1,019   24
    Taxes and dividends payable 20,180   20,730   479
    Deferred tax liabilities 614   505   12
    Other liabilities 84,829   112,010   2,589
    Total liabilities Rs. 1,313,556   Rs. 1,510,872   US$ 34,919
     
    Commitments and contingencies (Note 8)    
     
    Minority interest 1,050   1,102   25
     
    Stockholders’ equity:    

    Common stock at Rs. 10 par value: 1,550,000,000 shares authorized as of March 31, 2004 and December 31, 2004; Issued and outstanding 616,391,905 and 735,928,149 shares as of March 31, 2004 and December 31, 2004, respectively

    6,164   7,359   170
    Additional paid-in capital 65,341   96,686   2,234
    Retained earnings 18,279   17,302   400
    Deferred compensation   (74 )   (2 )
    Accumulated other comprehensive income 4,741   1,450   34
    Total stockholders’ equity 94,525   122,723   2,836
    Total liabilities and stockholders’ equity Rs. 1,409,131   Rs. 1,634,697   US$ 37,780

    See accompanying notes to the unaudited consolidated financial statements.


    F-3

    Unaudited Consolidated Statements of Operations

    In millions, except share data

      For the nine months ended
    December 31,
        Convenience translation
    into US$
    For the nine months
    ended December 31,
     
      2003     2004     2004  
    Interest and dividend income    
    Interest and fees on loans Rs. 51,436   Rs. 51,499   US$ 1,190
    Interest and dividends on securities 12,305   11,285   261
    Interest and dividends on trading assets 2,150   1,432   33
    Interest on balances and deposits with banks 802   1,024   24
    Other interest income   1,197     1,573     36
    Total interest and dividend income   67,890     66,813     1,544
    Interest expense    
    Interest on deposits 22,592   23,175   536
    Interest on long-term debt 29,404   23,620   546
    Interest on short-term borrowings 1,207   1,606   37
    Interest on trading liabilities 1,454   1,221   28
    Other interest expense 63     120     3
    Total interest expense 54,720   49,742   1,150
    Net interest income 13,170   17,071   394
    Provision for loan losses 15,289   8,504   197
    Net interest income/ (loss) after provision for loan      
       losses (2,119 )   8,567   197
    Non-interest income    
    Fees, commission and brokerage 6,024   12,086   279
    Net gain/(loss) on trading activities 3,783   (1,119 )   (26 )
    Net gain/(loss) on venture capital investments (36 )   40   1
    Net gain/(loss) on other securities 8,732   3,373   78
    Net gain on sale of loans and credit substitutes 3,370   3,841   89
    Foreign exchange income/(loss) 1,244   1,611   37
    Software development and services 753   1,094   25
    Gain/(loss) on sale of property and equipment 338   (63 )   (1 )
    Rent 98   120   3
    Transaction processing services 1,206   2,189   51
    Other non-interest income 125   321   7
    Total non-interest income 25,637   23,493   543
    Non-interest expense    
    Salaries and employee benefits 7,843   8,174   189
    General and administrative expenses 11,840   15,268   353
    Amortization of intangible assets 455     453     10
    Total non-interest expense   20,138     23,895     552
    Income before equity in earning of affiliates,    
    minority interest, income taxes and cumulative      
       effect of accounting changes 3,380   8,165   188
    Equity in earning/(loss) of affiliates (336 )   (1,254 )   (29 )
    Minority interest   10     (2 )    
    Income/(loss) before income taxes and cumulative      
       effect of accounting changes 3,054   6,909   159
    Income tax (expense)/benefit (730 )   (1,658 )   (38 )
    Net income Rs. 2,324   Rs. 5,251   US$ 121

    F-4


    Unaudited Consolidated Statements of Operations

    In millions, except share data

      For the nine months ended
    December 31,
      Convenience
    translation into
    US$
    For the nine
    months ended
    December 31,
      2003   2004   2004
    Earnings per equity share: Basic (Rs.) Rs. 3.79   Rs. 7.24   US$ 0.17
                     
    Earnings per equity share: Diluted (Rs.) Rs. 3.76   Rs. 7.19   US$ 0.17
           
    Weighted average number of equity shares used in computing      
       earnings per equity share (millions)    
    Basic 614   725  
    Diluted 619   731  

    See accompanying notes to the unaudited consolidated financial statements.

    F-5


    Unaudited Consolidated Statements of Stockholders’ Equity and Other Comprehensive Income

    In millions, except share data


      Common Stock
    No. of shares(1)
        Amount     Additional paid-
    in capital
        Retained earnings   Deferred
    compensation
      Accumulated
    other
    comprehensive
    Income, net of tax
      Total stockholder’s equity
                                                 
    Balance as of March 31, 2003 613,034,404     Rs. 6,127     Rs. 64,863     Rs. 18,246   Rs.   Rs. 2,977   Rs. 92,213

    Common stock issued on exercise of stock options

    2,267,038     23   301               324
    Receipt of calls in arrears     3                 3
    Forfeiture of shares                    
    Amortization of compensation                    
    Comprehensive income                    
      Net income/(loss)         2,324             2,324
     

    Net unrealized gain/(loss) on securities, net of realization (net of tax)

                    3,880     3,880
      Translation adjustments (net of tax)                 (64 )     (64 )
    Comprehensive income/ (loss)                     6,140

    Cash dividends declared (Rs. 7.5 per common share)

            (5,186 )             (5,186 )
    Balance as of December 31, 2003 615,301,442     Rs. 6,153     Rs. 65,164     Rs. 15,384   Rs.   Rs. 6,793   Rs. 93,494
    Balance as of December 31, 2003 (US$)     142   1,506   356         157     2,161
    Balance as of March 31, 2004 616,391,905     6,164     Rs. 65,341     Rs. 18,279   Rs.   Rs. 4,741   Rs. 94,525
    Common stock issued 115,920,758     1,158   30,744               31,902

    Common stock issued on exercise of stock options

    3,678,236     37   493               530

    Compensation related to employee stock option plan

          108       (108 )        
    Amortization of compensation             34         34
    Comprehensive income                    
        Net income/(loss)         5,251             5,251

     

    Net unrealized gain/(loss) on securities, net of realization (net of tax)

                    (3,285 )     (3,285 )

       

    Translation adjustments (net of tax)                 (6 )     (6 )
    Comprehensive income/ (loss)                     1,960

    Cash dividends declared (Rs. 7.5 per common share)

            (6,228 )             (6,228 )
    Balance as of December 31, 2004 735,990,899       7,359     Rs. 96,686     Rs. 17,302   Rs. (74 )   Rs. 1,450   Rs. 122,723
    Balance as of December 31, 2004 (US$)     170   2,234   400     (2 )     34     2,836
                         
    See accompanying notes to the unaudited consolidated financial statements.
     
       1) Restated for reverse acquisition.                    

    F-6

    Unaudited Consolidated Statements of Cash Flows

    In millions, except share data

     

      For the nine months ended December 31,   Convenience
    translation into US$
    For the nine months
    ended December 31,
     
      2003     2004   2004  
    Operating activities      
    Net income/(loss) Rs. 2,324   Rs. 5,251   US$ 121
    Adjustments to reconcile net income to net cash (used    
       in)/provided by operating activities:    
       Provision for loan and other credit losses 15,289   8,504   197
       Depreciation 2,259   2,594   60
       Amortization (1,168 )   (413 )   (10 )
        Amortization of discounts and expenses on borrowings 707   349   8
       Deferred income tax (2,959 )   (5,322 )   (123 )
       Unrealized loss/(gain) on trading assets (249 )   2,423   56
       Unrealized loss/(gain) on venture capital Investments 36   (40 )   (1 )
       Other than temporary decline in value of other securities 936   635   15
       Undistributed equity in (earning)/loss of affiliates 384   1,417   33
       Minority interest (10 )   2  
       (Gain)/loss on sale of property and equipment, net (338 )   63   1
       (Gain)/loss on sale of securities available for sale (8,732 )   (3,373 )   (78 )
       Gain on sale of loans (3,370 )   (3,841 )   (89 )
       Change in assets and liabilities    
           Trading account assets 5,418   57,451   1,328
           Interest and fees receivable 3,045   (6,379 )   (147 )
           Other assets (7,589 )   (27,417 )   (634 )
           Trading account liabilities 197   13,972   323
           Taxes payable 2,503   550   13
           Other liabilities 4,102   27,306   631
    Net cash (used in)/provided by operating activities 12,785   73,732   1,704
    Investing activities    
    Purchase of available for sale securities (414,098 )   (162,773 )   (3,762 )
    Purchase of venture capital investments (250 )   (231 )   (5 )
    Purchase of non-readily marketable equity securities (282 )   (1,854 )   (43 )
    Proceeds from sale of available for sale securities 388,577   109,461   2,530
    Proceeds from sale of venture capital investments 407   978   23

    Proceeds from sale of non-readily marketable equity securities

    1,174   4,920   114
    Origination of loans, net (29,738 )   (131,570 )   (3,040 )
    Purchase of property and equipment (3,894 )   (3,420 )   (79 )
    Proceeds from sale of property and equipment 464   141   3
    Investments in affiliates (2,351 )   (1,105 )   (26 )
    Payment for business acquisition, net of cash acquired (1,322 )   (1 )  
    Net cash (used in)/provided by investing activities (71,187 )   (185,454 )   (4,285 )


    F-7


    Unaudited Consolidated Statements of Cash Flows

    In millions, except share data


      For the nine months
    ended December 31,
        Convenience
    translation into US$
    For the nine months
    ended December 31,
     
      2003     2004     2004 
                     
    Financing activities      
    Increase in deposits, net Rs. 121,814   Rs. 143,986     US$ 3,328
    Proceeds/ repayment from short-term borrowings, net (6,878 )   960     22
                           
    Proceeds from issuances of long-term debt 48,042   49,923     1,154
    Repayment of long term debt (75,707 )   (70,121 )     (1,621 )
    Proceeds from issuance of common stock 327   32,501     751
    Cash dividends paid (5,186 )   (6,228 )     (144 )
    Net cash provided by/(used in) financing activities 82,412   151,021     3,490
                           
    Net increase/(decrease) in cash and cash equivalents 24,010   39,299     908
    Cash and cash equivalents at the beginning of the period 72,453   98,985     2,288
    Cash and cash equivalents at the end of the period Rs. 96,463   Rs. 138,284     US$ 3,196
    Supplementary information:      
    Cash paid for:      
           Taxes Rs. 4,336   Rs. 4,797     US$ 111
    Non-cash items:      
           Foreclosed assets 5,041   5,630     130
           Conversion of loan to equity shares 1,115   373     9

           Change in unrealized gain/(loss) on securities available for sale, net

    3,880   (3,285 )     (76 )
           Acquisitions      
           Fair value of net assets acquired, excluding cash and cash equivalents 642      
           Shares issued 2,193,213     119,536,244      

    See accompanying notes to the unaudited consolidated financial statements.

    F-8


    Notes to the Unaudited Consolidated Financial Statements

    1.   Significant accounting policies

       Overview

    ICICI Bank Limited (ICICI Bank) together with its subsidiaries and affiliates (collectively, the Company) is a diversified financial services group providing a variety of banking and financial services including project and corporate finance, working capital finance, venture capital finance, investment banking, treasury products and services, retail banking, broking and insurance. Further, the Company also has interests in the software development, software services and business process outsourcing businesses. The Company is headquartered in Mumbai, India.

    Effective April 1, 2002, ICICI Bank (which for periods prior to April 1, 2002 is referred to as the “acquiree”) and ICICI Limited (ICICI) consummated a transaction whereby shareholders of ICICI were issued shares of the acquiree in the ratio of 1:2. The transaction has been treated as a reverse acquisition for financial reporting purposes with ICICI (the “acquirer) as the accounting acquirer.

       Basis of preparation

    The accounting and reporting policies of the Company used in the preparation of these consolidated financial statements reflect general industry practices and conform to generally accepted accounting principles in the United States (US GAAP). In the opinion of the management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation, have been reflected. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the annual report in Form 20F.

    The preparation of consolidated financial statements in conformity with US GAAP requires that management makes estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported income and expense for the reporting period. The Company makes estimates for valuation of derivatives and securities, where no ready market exists, determining the level of allowance for loan losses and assessing recoverability of goodwill, intangible assets and deferred tax assets. Management believes that the estimates used in the preparation of the consolidated financial statements are prudent and reasonable. The actual results could differ from these estimates.

    Certain financial information that is normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, but is not required for interim reporting purposes has been condensed or omitted.

    Solely for the convenience of the readers, the unaudited consolidated financial statements as of and for the period ended December 31, 2004, have been translated into United States dollar at the noon buying rate in New York City on December 31, 2004, for cable transfers in Indian rupees, as certified for customs purposes by the Federal Reserve of New York of US$ 1 = Rs. 43.27. No representation is made that the Indian rupee amounts have been, could have been or could be converted into United States dollars at such a rate or any other certain rate on December 31, 2004, or at any other certain date.

       Equity issue

    Subsequent to March 31, 2004, the Company issued common stock consisting of 115,920,758 equity shares (including 6,992,187 equity shares issued by exercise of green shoe option) of Rs. 10 each at a premium of Rs. 270 per share aggregating Rs. 32,457.8 million under the Prospectus dated April 12, 2004. The expenses of the issue have been charged to the additional paid in capital account, in accordance with the objects of the issue stated in the Prospectus.

    F-9

    Notes to the Unaudited Consolidated Financial Statements (Continued)

       Stock-based compensation

    The Company uses the intrinsic value based method of Accounting Principle Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, to account for its employee stock-based compensation plans. Compensation cost for fixed and variable stock based awards is measured by the excess, if any, of the fair market price of the underlying stock over the exercise price. Compensation cost for fixed awards is measured at the grant date, while compensation cost for variable awards is estimated until the number of shares an individual is entitled to receive and the exercise price are known (measurement date).

    In December 2002, FASB issued SFAS No. 148 Accounting for Stock Based Compensation-transition and disclosures, an amendment of FASB No. 123. SFAS No. 148 amends SFAS No. 123. Accounting for Stock Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock based employee compensation and the effect of the method used on reported results. The disclosure provisions of SFAS No. 148 are applicable for fiscal periods beginning after December 15, 2002.

    Had compensation cost been determined in a manner consistent with the fair value approach described in SFAS No. 123, the Company’s net income and earnings per share as reported would have changed to the amounts indicated below.

         
      For the nine months period ended
    December 31,
     
        2003   2004 
    Net income/(loss) (in millions)  
    As reported Rs. 2,324   Rs. 5,251
    Add: Stock based employee compensation expense included in reported    
    net income, net of tax effects   34
    Less: Stock based employee compensation expense determined under fair    
    value based method, net of tax effects (234 )   (357 )
    Pro forma net income/ (loss) 2,090   4,928
                     
    Earnings/ (loss) per share: Basic (in Rs.)  
    As reported 3.79   7.24
    Pro forma 3.41   6.80
    Earnings/ (loss) per share: Diluted (in Rs.)  
    As reported 3.76   7.19
    Pro forma 3.38   6.74

    The fair value of the options is estimated on the date of the grant using the Black-Scholes options pricing model, with the following assumptions:

      For the nine months period ended
    December 31,
      2003   2004
    Dividend yield 4.1 %   2.73%
    Expected life 10 years   3-6 years
    Risk free interest rate 5.1%-5.9%   4.6%-6.1%
    Volatility 40 %   39%

    F-10

    Notes to the Unaudited Consolidated Financial Statements (Continued)

       Reclassifications

    Certain other reclassifications have been made in the financial statements of prior years to conform to classifications used in the current period. These changes had no impact on previously reported results of operations or stockholders’ equity.

    2.   Segmental disclosures and related information

       Segmental disclosures

    SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information, establishes standards for the reporting of information about operating segments. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance. The Company consummated the reverse acquisition with the acquiree effective April 1, 2002. Subsequent to the reverse acquisition, the Company changed the structure of its internal organization, which changed the composition of its operating segments. The Company’s operations have been classified into the following segments: Commercial Banking segment, Investment Banking segment and Others.

    The Commercial Banking segment provides medium-term and long-term project and infrastructure financing, securitization, factoring, lease financing, working capital finance and foreign exchange services to clients. Further, it provides deposit and loan products to retail customers. The Investment Banking segment deals in the debt, equity and money markets and provides corporate advisory products such as mergers and acquisition advice, loan syndication advice and issue management services.

    Others consist of various operating segments that do not meet the requirements to be reported as on individual reportable segment as defined in SFAS No. 131.

    The CODM evaluates the Company’s performance and allocates resources based on performance indicators (components of profit and loss) of each of the segments. Further, the CODM specifically reviews assets of the consumer loans division, which is a part of commercial banking segment.

    The profit and loss of reportable segments is set out below.


      Commercial Banking
    For the nine months ended
    December 31,
      Investment Banking
    For the nine months ended
    December 31,
      2003     2004   2003     2004
      (in millions)   (in millions)
    Income from external customers        
    Interest income Rs. 52,863   Rs. 52,914   Rs. 14,998   Rs. 13,897
    Non-interest income 10,844   15,336     12,266   4,377
    Income from other operating        
       segments        
    Interest income 9,055   6,652     98   94
    Non-interest income 1,458   224   300   244
    Total income Rs. 74,220   Rs. 75,126   Rs. 27,662   Rs. 18,612
    Interest expense Rs. 47,179   Rs. 43,118   Rs. 16,553   Rs. 13,184
    Depreciation 1,513   1,942     444   275
    Provision for loan losses 15,292   8,508     (3 )   (4 )
    Other expenses   14,366     16,255     3,068     2,382
    Income/ (loss) before taxes Rs. (4,130 )   Rs. 5,303   Rs. 7,600   Rs. 2,775
    Income tax (expense)/ benefit 891   (1,077 )     (1,638 )   (564 )

    F-11




    Notes to the Unaudited Consolidated Financial Statements (Continued)

      Commercial Banking
    For the nine months ended
    December 31,
      Investment Banking
    For the nine months ended
    December 31,
     
     
      2003   2004   2003   2004








      (in millions)   (in millions)
    Cumulative effect of accounting          
       changes, net of tax          








    Net income/ (loss) Rs. (3,239 ) Rs. 4,226   Rs. 5,962   Rs. 2,211

          A listing of certain assets of reportable segments is set out below.


      Commercial
    Banking
      Investment
    Banking
      Others   Total
     

     

     

     

      As of December 31, 2004
     










      (in millions)
    Property and equipment Rs. 18,703   Rs. 1,689   Rs. 3,413   Rs. 23,805
    Investment in equity affiliates   47   3,260   3,307

    Inter segment transactions are generally based on transfer pricing measures as determined by management. Income, expenses, assets and liabilities are either specifically identifiable with individual segments or have been allocated to segments on a systematic basis. Corporate overheads and assets have also been allocated to segments on a systematic basis.

    A reconciliation between the segment income and consolidated totals of the Company is set out below.

      Total income Income/(loss) before taxes and
    accounting changes
    Net income/(loss)
     


      For the nine months ended
    December 31,
    For the nine months ended
    December 31,
    For the nine months ended
    December 31,
     


        2003     2004   2003   2004   2003   2004


     

     

     

     

     

     
                     (in millions)
    Commercial banking Rs. 74,220   Rs. 75,126 Rs. (4,130) Rs. 5,303 Rs. (3,239) Rs. 4,226
    Investment banking   27,662   18,612   7,600   2,775   5,962   2,211
    Others   3,165   4,394   (416 )   (1,169 )   (399 )   (1,186 )
    Other reconciling adjustments   (11,520 )   (7,826 )        


     

     

     

     

     

     
    Consolidated Total Rs. 93,527 Rs. 90,306 Rs. 3,054 Rs. 6,909 Rs. 2,324 Rs. 5,251


     

     

     

     

     

     

    A reconciliation between the segments and consolidated total assets of the Company is set out below.

      As of
    March 31, 2004
    As of
    December 31, 2004
     

      (in millions)
    Commercial Banking(1) Rs. 902,442 Rs. 1,091,150
    Investment Banking 484,439 523,903
    Others 12,232 14,315


     

     
    Total segment assets Rs. 1,399,113 Rs. 1,629,368
                 
    Unallocable assets 20,718 23,169
    Eliminations (10,700 ) (17,840 )


     

     
    Consolidated total assets Rs. 1,409,131 Rs. 1,634,697


     

     

    F-12






    Notes to the Unaudited Consolidated Financial Statements (Continued)

    1)      Commercial banking includes assets of consumer loans division of Rs. 454,105 million (March 31, 2004: Rs. 297,517 million), which are reviewed separately by the CODM.
     
      Geographic distribution
     

    The business operations of the Company are largely concentrated in India. Activities outside India include resource mobilization in the international markets and operations of certain software development and services subsidiaries in the United States.

         Major customers

    The Company provides banking and financial services to a wide base of customers. There is no major customer, which contributes more than 10% of total income.

    3.   Securitization activity

    The Company primarily securitizes commercial loans through ‘pass-through’ securitizations. After the securitization, the Company generally continues to maintain customer account relationships and services loans transferred to the securitization trust. The securitizations are either with or without recourse. In a few cases, the Company may enter into derivative transactions such as written put options and interest rate swaps with the transferees.

    During the nine months period ended December 31, 2004, the Company securitized loans and credit substitutes which resulted in gains of Rs. 3,841 million. Transfers that do not meet the criteria for a sale under SFAS No. 140, are required to be recorded as secured borrowings with a pledge of collateral, and such secured borrowings are required to be reported as a component of other borrowings. However, there have been no transfers which have not met the criteria for a sale under SFAS No. 140, and consequent no recording or reporting has been entailed.

    As discussed above, the Company has written put options, which require the Company to purchase, upon request of the holders, securities issued in certain securitization transactions. The put options seek to provide liquidity to holders of such instruments. If exercised, the Company will be obligated to purchase the securities at the predetermined exercise price.

    4.   Investments in affiliates

    The Company accounts for its 74% ownership interest in ICICI Prudential Life Insurance Limited (“ICICI Prulife”) and ICICI Lombard General Insurance Company Limited (“ICICI Lombard”) by the equity method of accounting because of substantive participative rights held by the minority shareholders.

    The carrying value of the investment in these companies as of December 31, 2004, was Rs. 2,905 million (March 31, 2004: Rs. 3,165 million). The Company’s equity in the loss of these affiliates for the nine months period ended December 31, 2004 was Rs. 1,292 million (December 31, 2003: Rs. 407 million).

    F-13




    Notes to the Unaudited Consolidated Financial Statements (Continued)

    The summarized balance-sheets and statements of operations of these entities as of and for the nine months period ended December 31, 2004 is set out below.

      As of
    December 31, 2004
     
     




     
    Balance Sheet ICICI Prulife   ICICI Lombard  
     

     

     
      (in millions)  
    Cash and cash equivalents Rs. 743   Rs. 31  
    Securities 8,895   4,909  
    Assets held to cover linked liabilities 17,561    
    Other assets 3,829   2,638  




     
    Total assets Rs. 31,028   Rs. 7,578  




     
                 
    Provision for linked liabilities Rs. 17,561   Rs.  
    Other liabilities 11,818   5,309  
    Stockholders’ equity 1,649   2,269  




     
    Total liabilities and stockholders’ equity Rs. 31,028   Rs. 7,578  




     

      For the nine months period ended
    December 31, 2004
     




    Statement of income ICICI Prulife ICICI Lombard
     



      (in millions)
    Interest income Rs. 389 Rs. 162
    Interest expense


     


    Net interest income Rs. 389 Rs. 162
    Non-interest income 3,609 2,047


     


    Non-interest expense (5,864 ) (1,926 )
    Income tax (expense)/benefit (115 ) (47 )


     


                 
    Net income/(loss) Rs. (1,981 ) Rs. 236


     


    5. Loans

    A listing of loans by category is set out below.

      As of
    March 31, 2004
    As of
    December 31, 2004
     



      (in millions)
    Project and corporate finance(1)(2) Rs. 319,646 Rs. 321,551
    Working capital finance (including working capital term loans) 80,505 116,640
    Lease financing 26,165 20,183
    Consumer loans and credit card receivables 309,006 440,615
    Other 70,059 38,224






    Gross loans Rs. 805,381 Rs. 937,213
    Unearned income (7,482 ) (4,273 )
    Security deposits (2,612 ) (2,627 )






    Loans, net of unearned income and security deposits Rs. 795,287 Rs. 930,313
    Allowances for loan losses (66,767 ) (73,716 )








    F-14






    Notes to the Unaudited Consolidated Financial Statements (Continued)

      As of
    March 31, 2004
    As of
    December 31, 2004
     



      (in millions)
    Loans, net Rs. 728,520   Rs. 856,597  




     

    1)      Non-readily marketable privately placed debt instruments are classified as loans to reflect the substance of such transactions as substitutes for direct lending (credit substitutes).
         
    2)      Includes Rs. 40,370 million (March 31, 2004: Rs. 50,069 million) of credit substitutes classified as loans.
         

    Project and corporate finance loans are generally secured by property, plant and equipment and other tangible assets. Generally, the working capital loans are secured by a first lien on current assets, principally comprising inventory and receivables. Additionally, in certain cases the Company may obtain additional security for working capital loans through a first or second lien on property and equipment, pledge of financial assets like marketable securities and corporate/personal guarantees.

    6.   Allowance for loan losses

         Changes in the allowance for loan losses

    Movements in the allowance for loan losses are set out below.

      For the nine months
    period ended
    December 31, 2003
    For the nine months
    period ended
    December 31, 2004




      (in millions)
    Allowance for loan losses at the beginning of the period Rs. 54,219 Rs. 66,767
    Provisions for loan losses, net of releases of provisions as a result of cash  
       collections 15,289 8,504





     
    Rs. 69,508 Rs. 75,271
                 
    Loans charged-off (1,555 ) (1,555 )





     
    Allowances for loan losses at the end of the period Rs. 67,953 Rs. 73,716


     

     

    7.   Employee benefits

         Gratuity

    In accordance with Indian regulations, the Company provides for gratuity, a defined benefit retirement plan covering all employees. The plan provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee’s salary and the years of employment with the Company. The gratuity benefit provided by the Company to its employees is equal to or greater than the statutory minimum.

    In respect of the parent company, the gratuity benefit is provided to the employee either through a fund administered by a Board of Trustees and managed by Life Insurance Corporation of India (LIC)/ ICICI Prudential Life Insurance Company Limited (“ICICI Prulife”) or through a fund administered and managed by a Board of Trustees. The Company is responsible for settling the gratuity obligation through contributions to the fund. The plan is fully funded.

    In respect of the remaining entities within the group, the gratuity benefit is provided through annual contributions to a fund administered and managed by the LIC. Under this scheme, the settlement obligation remains with the Company, although the LIC administers the scheme and determines the contribution premium required to be paid by the Company.

    F-15




    Notes to the Unaudited Consolidated Financial Statements (Continued)

    The following table sets forth the funded status of the plans and the amounts recognized in the financial statements:

      As of December 31, 2004
    Charge in benefit obligations

      (in million)
    Projected benefit obligations at beginning of the period Rs. 804
           
    Service cost 112
    Interest cost 42
    Benefits paid (11 )
    Actuarial (gain)/loss on obligations (73 )
    Unrecognized prior service cost


     
    Projected benefit obligations at the end of period Rs. 874


     
           
    Change in plan assets
    Fair value of plan assets at beginning of the period Rs. 514
           
    Actual return on plan assets 38
    Employer contributions 122
    Benefits paid (11 )
    Actuarial (gain)/loss



    Plan assets at the period end Rs. 663



           
    Funded status Rs. (211 )
    Unrecognized actuarial loss 204
    Unrecognized transitional obligation (15 )
    Unrecognized prior service cost 57


     
    Net prepaid gratuity cost Rs. 35


     
           
    Accumulated benefit obligation for the period end Rs. 376
    The components of the net gratuity cost are set out below.

      For the nine months ended
    December 31,
     




        2003 2004
     



      (in millions)
    Service cost Rs. 75 Rs. 112
    Interest cost 55 42
    Expected return on assets (51 ) (34 )
    Amortization of transition asset/liability (1 ) (1 )
    Amortization of prior service cost 4 4
    Actuarial (gain)/loss 2 8
    Curtailment (gain)/loss 25


     

     
    Net gratuity cost Rs. 109 Rs. 131


     

     

    F-16




    Notes to the Unaudited Consolidated Financial Statements (Continued)

    Weighted average assumptions used to determine net periodic benefit cost for the period:

    As of December 31, 2004
     
    Discount rate 7 %
    Rate of increase in the compensation levels 7 %
    Rate of return on plan assets 7.5 %
         
    Weighted average assumptions used to determine benefit obligations:  
         
    As of December 31, 2004
     
    Discount rate 7 %
    Rate of increase in the compensation levels 7 %

    As of December 31, 2004, of the total plan assets Rs. 119 million (March 31, 2004 Rs. 113 million) has been invested in debt securities of the Company.

         Plan Assets

    The Company determines its assumptions for the expected rate of return on plan assets based on the expected average long term rate of return over the next 15 to 20 years.

    The Company’s asset allocation for the gratuity at the end of the year ended March 31, 2004 and for the nine months ended December 31, 2004 and the target allocation for year ending March 31, 2005 by asset category based on fair values is as follows:

    Asset Category Target asset
    allocation 2005
      Post-retirement
    asset at
    Mar. 31, 2004
      Post-retirement
    asset at
    Dec. 31, 2004
     
     
     
    Debt Securities 0 %   0 %   0 %
    Other investments 100 %   100 %   100 %
     
     
     
                     
    Total 100 %   100 %   100 %
     
     
     

    The plan assets are either maintained by LIC/ ICICI Prulife or through a fund administrated and managed by a Board of Trustees.

    The investment strategy is to invest in a prudent manner for providing benefits to the participants of the scheme. The strategies are targeted to produce a return that, when combined with the Company’s contribution to the funds will maintain the fund’s ability to meet all required benefit obligations.

    The benefit expected be paid in each of the next five fiscal years and in the five fiscal years thereafter is as follows:

    (in millions)
         
    Expected company contributions to the fund during the year 2005 Rs. 186
    Expected benefit payments from the fund during:
    2005 29
    2006 54
    2007 42
    2008 58
    2009 89
    2010 to 2014 614 

     

    F-17




    Notes to the Unaudited Consolidated Financial Statements (
    Continued)

         Pension

    The Company provides for pension, a deferred retirement plan covering certain employees. The plan provides for a pension payment on a monthly basis to these employees on their retirement based on the respective employee’s salary and years of employment with the Company. Employees covered by the pension plan are not eligible for benefits under the provident fund plan, a defined contribution plan. The pension plan pertained to the acquiree which was acquired with effect from April 2003.

    The pension plan is funded through periodic contributions to a fund set-up by the Company and administrated by a Board of Trustees. Such contributions are actuarially determined.

    The following table sets forth the funded status of the plan and the amounts recognized in the financial statements.

      As of December 31,
     
      2004
     
      (in millions)
     
    Change in benefit obligations
    Projected benefit obligations at beginning of the period Rs. 1,034
    Service cost 8
    Interest cost 53
    Benefits paid (46 )
    Actuarial (gain)/loss on obligations (58 )
     
    Projected benefit obligations at the end of the period Rs. 991
     
    Change in plan assets
    Fair value of plan assets at beginning of the period Rs. 1,047
    Actual return on plan assets 88
    Employer contributions 15
    Gain/(loss) on plan assets
    Benefits paid (46 )
     
    Plan assets at the end of period Rs. 1,104
     
    Funded status Rs. 113
    Unrecognized actuarial loss/(gain) (106 )
    Unrecognized transitional obligation
    Unrecognized prior service cost
     
    Net Amount Recognized Rs. 7
     
    Accumulated benefit obligation at period end Rs. 923
     
           
    The components of the net pension cost are set out below.

      For the nine months ended
    December 31,
     
      2003   2004
     
     
      (in millions)
     
    Service cost 18   8
    Interest cost 49   53
    Expected return on assets (63 )   (58 )
     
     
    Net pension cost 4   3
     
     

    F-18





    Notes to the Unaudited Consolidated Financial Statements (
    Continued)

    Weighted average assumptions used to determine net periodic benefit cost for the period:

    As of December 31,
     
    2004
     
    Discount rate 7.5 %
    Rate of increase in the compensation levels 7 %
    Rate of return on plan assets 7.5 %
    Pension increases 3 %
    Discount rate 7.5 %
    Rate of increase in the compensation levels 7 %
    Pension increases 3 %

    Weighted average assumptions used to determine benefit obligations:

    As of December 31,
     
    2004
     
    Discount rate 7.5 %
    Rate of increase in the compensation levels 7 %
    Pension increases 3 %

    Plan Assets

    The Company determines its assumptions for the expected rate of return on plan assets based on the expected average long-term rate of return over the next 15 to 20 years.

    The Company’s asset allocation for the pension at the end of the year ended March 31, 2004 and for the nine months period ended December 31, 2004 and the target allocation for year ending March 31, 2005 by asset category based on fair values are as follows:

    Asset Category   Target asset
    allocation
    2005
      Pension assets
    at Mar. 31
    2004
      Pension assets
    at Dec. 31
    2004
       
     
     
    Debt Securities   100 %   100 %   100 %
    Other investments   0 %   0 %   0 %
       
     
     
    Total   100 %   100 %   100 %
       
     
     

    The plan assets are maintained through a fund administered and managed by a Board of Trustees.

    The investment strategy of the Company is to invest in a prudent manner for providing benefits to the participants of the scheme. The strategies are targeted to produce a return that, when combined with the Company’s contribution to the funds will maintain the fund’s ability to meet all required benefit obligations. Risk is reduced by investment in GOI Securities or relatively low risk securities.

         Superannuation

    The permanent employees of the Company are entitled to receive retirement benefits under the superannuation scheme operated by the Company. Superannuation is a defined contribution plan under which the Company contributes annually a sum equivalent to 15% of the employee’s eligible annual salary to LIC, the manager of the fund, which undertakes to pay the lump sum and annuity payments pursuant to the scheme. The Company contributed, Rs. 85 million and Rs. 76 million, to the employees superannuation plan for the nine month period ended December 31, 2004 and 2003 respectively.

    F-19




    Notes to the Unaudited Consolidated Financial Statements (
    Continued)

         Provident fund

    In accordance with Indian regulations, employees of the Company (excluding those covered under the pension scheme) are entitled to receive benefits under the provident fund, a defined contribution plan, in which, both the employee and the Company contribute monthly at a determined rate. These contributions are made to a fund set up by the Company and administered by a Board of Trustees. The contribution to the employees provident fund amounted to Rs. 181 million and Rs. 177 million for the nine months period ended December 31, 2004 and 2003 respectively.

    8. Commitments and contingencies

         Loan commitments

    The Company has outstanding undrawn commitments to provide loans and financing to customers. These loan commitments aggregated Rs. 59,857 million as of December 31, 2004 (March 31, 2004: Rs. 73,903 million). The interest rate on these commitments is dependent on the lending rates on the date of the loan disbursement. Further, the commitments have fixed expiration dates and are contingent upon the borrower’s ability to maintain specific credit standards.

         Guarantees

    As a part of its project financing and commercial banking activities, the Company has issued guarantees to enhance the credit standing of its customers. These generally represent irrevocable assurances that the Company will make payments in the event that the customer fails to fulfill its financial or performance obligations. Financial guarantees are obligations to pay a third party beneficiary where a customer fails to make payment towards a specified financial obligation. Performance guarantees are obligations to pay a third party beneficiary where a customer fails to perform a non-financial contractual obligation. The guarantees are generally for a period not exceeding 10 years.

    The credit risk associated with these products, as well as the operating risks, are similar to those relating to other types of financial instruments.

    The current carrying amount of the liability for the Company’s obligations under the guarantee amounted to Rs. 1,093 million (March 31, 2004: Rs. 1,229 million).

    Details of guarantees outstanding are set out below.

      Maximum potential amount of future payments under guarantee
                                 
    Nature of guarantee Less than
    1 year
      1-3 year   3-5 year   Over 5 year   Total
     
     
     
     
     
      (in millions)
    Financial guarantees Rs. 34,588   Rs. 9,818   Rs. 9,314   Rs. 10,074   Rs. 63,794
    Performance guarantees   32,792     31,283     18,213     2,889     85,177
    Total Rs. 67,380   Rs. 41,101   Rs. 27,527   Rs. 12,963   Rs. 148,971

    The Company has collateral available to reimburse potential losses on its guarantees. Margins available to the Company to reimburse losses realized under guarantees amounted to Rs. 3,358 million (March 31, 2004: Rs. 2,055 million). Other property may also be available to the Company to cover these losses under guarantees.

         Capital commitments

    The Company is obligated under a number of capital contracts. Capital contracts are job orders of a capital nature, which have been committed. As of the balance sheet date, work had not been completed to this extent. Estimated amounts of contracts remaining to be executed on capital account aggregated Rs. 449 million as of December 31, 2004 (March 31, 2004: Rs. 294 million).

     

    F-20




    Notes to the Unaudited Consolidated Financial Statements (
    Continued)

         Tax contingencies

    Various tax-related legal proceedings are pending against the Company at various levels of appeal either with the tax authorities or in the courts. Potential liabilities, if any, have been adequately provided for, and the Company does not estimate any incremental liability in respect of these proceedings.

    As of December 31, 2004 the Company has been assessed an aggregate of Rs. 22,422 million (March 31, 2004: Rs. 25,151 million) in excess of the provision made in the unaudited financial statements in income tax, interest tax, wealth tax and sales tax demands by the Government of India’s tax authorities for past years. The Company has appealed each of these tax demands. The Company believes that the tax authorities are not likely to be able to substantiate their income tax, interest tax, wealth tax and sales tax assessments and accordingly has not provided for these tax demands as of December 31, 2004.

         Litigation

    Various litigation and claims against the Company and its subsidiaries are in process and pending. Based upon a review of open matters with legal counsel, management believes that the outcome of such matters will not have a material effect upon the Company’s consolidated financial position, results of operations or cash flows.

         Operating lease commitments

    The Company has commitments under long-term operating leases principally for premises and automated teller machines. The following is a summary of future minimum lease rental commitments as of December 31, 2004, for non-cancelable leases:

    (in millions)
    Lease rental commitments for the three month ending March 31, 2005 Rs. 184
    Lease rental commitments for the year ending March 31,
    2006 744
    2007 716
    2008 698
    2009 688
    2010 588
    Thereafter 2,970
     
    Total minimum lease commitments Rs. 6,588
     

    F-21







    ICICI BANK LIMITED

                      American Depositary Shares

    Representing                  Equity Shares

     

     

     

     

    Merrill Lynch International

    Morgan Stanley

    UBS Investment Bank

     

     

     

     

     

    Prospectus dated                     , 2005




    PART II OF FORM F-3

    INFORMATION NOT REQUIRED IN PROSPECTUS

    Item 8. Indemnification of Directors and Officers

         Under Section 201 of the Indian Companies Act, 1956, a company is prohibited from indemnifying any officer of the company or any person employed by the company as an auditor against any liability which, by virtue of any rule of law, would otherwise attach to him in respect of any negligence, default, misfeasance, or breach of duty of which he may be guilty in relation to ICICI Bank.

         Article 215 of ICICI Bank's Articles of Association provides that the directors and officers of ICICI Bank shall be indemnified by ICICI Bank against all costs, losses and expenses which any director or officer may incur or become liable for by reason of any contract entered into or act done by him in his capacity as director or officer, including any liability incurred by him in defending any proceeding brought against directors and officers in their capacity if the indemnified director or officer receives judgment in his favor or is acquitted in such proceeding.

         The form of Underwriting Agreement to be filed as Exhibit 1.1 to this registration statement will also provide for indemnification of ICICI Bank and its directors and officers.

         ICICI Bank has obtained directors and officers insurance providing indemnification for certain of ICICI Bank's directors, officers or employees for certain liabilities.

    II-1

     




    Item 9. Exhibits

      Exhibit  
      Number   Description of Document
           
      1.11         Form of Underwriting Agreement.
           
      4.12         Deposit Agreement among ICICI Bank, Deutsche Bank and the holders from time to time of American Depositary Receipts issued thereunder (including as an exhibit, the form of American Depositary Receipt).
           
      4.23        Letter Agreements dated February 19, 2002 and April 1, 2002 amending and supplementing the Deposit Agreement.
           
      4.3         Letter Agreement dated March 8, 2005 amending and supplementing the Deposit Agreement.
           
      4.42         ICICI Bank’s Specimen Certificate for Equity Shares.
           
      5.11         Opinion of Amarchand & Mangaldas & Suresh A. Shroff & Co.
           
      8.1        Opinion of Amarchand & Mangaldas & Suresh A. Shroff & Co. as to certain Indian tax matters (included under “Taxation – Indian Tax” in the Prospectus included as part of the Registration Statement).
           
      8.2        Opinion of Davis Polk & Wardwell as to certain US tax matters (included under “Taxation
          – United States Taxation” in the Prospectus included as part of this Registration Statement).
           
      15.11       . Letter of KPMG LLP, independent registered public accounting firm, as to unaudited interim financial information.
           
      23.14        Consent of KPMG LLP, independent registered public accounting firm.
           
      23.2        Consent of Amarchand & Mangaldas & Suresh A. Shroff & Co. (included in Exhibit 5.1).
           
      23.3        Consent of Davis Polk & Wardwell.
           
      24.14        Power of Attorney by Mr. Narayanan Vaghul.
           
      24.24        Power of Attorney by Mr. Uday Madhav Chitale.
           
      24.34        Power of Attorney by Mr. Somesh Ramchandra Sathe
           
      24.44      Power of Attorney by Mr. Mahendra Kumar Sharma.
           
      24.54        Power of Attorney by Prof. Marti Gurunath Subrahmanyam.
           
      24.64        Power of Attorney by Mr. Kundapur Vaman Kamath.
     

    1 To be filed by an amendment to this registration statement.
     
    2 Incorporated herein by reference to ICICI Bank’s Registration Statement on Form F-1 (File No. 333-30132), filed on February 11, 2000.
     
    3 Incorporated herein by reference to ICICI Bank’s Annual Report on Form 20-F for the fiscal year ended March 31, 2002 filed on September 30, 2002.
     
    4 Previously filed.

    II-2





      24.74   Power of Attorney by Ms. Lalita Dileep Gupte.
           
      24.84   Power of Attorney by Ms. Kalpana Morparia.
           
      24.94   Power of Attorney by Ms. Chanda Kochhar.
           
      24.104   Power of Attorney by Mr. Narayanan Srinivasa Kannan.
           
           

    II-3



    Item 10. Undertakings

         The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

         Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

         The undersigned registrant hereby undertakes that:

      (1)      For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
         
      (2)      For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
         

    II-4




    SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, ICICI Bank Limited certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-3 and has duly caused Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Mumbai, India on March 10, 2005.

    ICICI Bank Limited
         
         
    By: /s/ Jyotin Mehta
     
      Name: Mr. Jyotin Mehta
      Title: General Manager and Company Secretary
       





         Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

    Signature   Title   Date
             
    *   Chairman  

       
    Mr. Narayanan Vaghul    
             
    *   Non-Executive Director  

       
    Mr. Uday Madhav Chitale      
             
    *   Non-Executive Director  

       
    Mr. Somesh Ramchandra Sathe      
             
    *   Non-Executive Director  

       
    Mr. Mahendra Kumar Sharma      
           
    *   Non-Executive Director  

       
    Prof. Marti Gurunath Subrahmanyam      
             
    *   Managing Director and Chief Executive Officer    

       
    Mr. Kundapur Vaman Kamath      
             
    *   Joint Managing Director  

       
    Ms. Lalita Dileep Gupte    
             
    *   Deputy Managing Director  

       
    Ms. Kalpana Morparia    
             
    *   Executive Director  

       
    Ms. Chanda Kochhar    
             
    *   Chief Financial Officer  

       
    Mr. N.S. Kannan    
             


    *By: /s/ Nilesh Trivedi March 10, 2005
     
      Mr. Nilesh Trivedi
      Attorney-in-Fact
           
           
    Authorized Representative
           
           
           
      /s/ Madhav Kalyan March 10, 2005
     
     
      Mr. Madhav Kalyan, as duly authorized
    representative of ICICI Bank Limited in the United States.
     
         
       



      Exhibit  
      Number   Description of Document
           
      1.11         Form of Underwriting Agreement.
           
      4.12         Deposit Agreement among ICICI Bank, Deutsche Bank and the holders from time to time of American Depositary Receipts issued thereunder (including as an exhibit, the form of American Depositary Receipt).
           
      4.23        Letter Agreements dated February 19, 2002 and April 1, 2002 amending and supplementing the Deposit Agreement.
           
      4.3         Letter Agreement dated March 8, 2005 amending and supplementing the Deposit Agreement.
           
      4.42         ICICI Bank’s Specimen Certificate for Equity Shares.
           
      5.11         Opinion of Amarchand & Mangaldas & Suresh A. Shroff & Co.
           
      8.1        Opinion of Amarchand & Mangaldas & Suresh A. Shroff & Co. as to certain Indian tax matters (included under “Taxation – Indian Tax” in the Prospectus included as part of the Registration Statement).
           
      8.2        Opinion of Davis Polk & Wardwell as to certain US tax matters (included under “Taxation
          – United States Taxation” in the Prospectus included as part of this Registration Statement).
           
      15.11       . Letter of KPMG LLP, independent registered public accounting firm, as to unaudited interim financial information.
           
      23.14        Consent of KPMG LLP, independent registered public accounting firm.
           
      23.2        Consent of Amarchand & Mangaldas & Suresh A. Shroff & Co. (included in Exhibit 5.1).
           
      23.3        Consent of Davis Polk & Wardwell.
           
      24.14        Power of Attorney by Mr. Narayanan Vaghul.
           
      24.24        Power of Attorney by Mr. Uday Madhav Chitale.
           
      24.34        Power of Attorney by Mr. Somesh Ramchandra Sathe
           
      24.44      Power of Attorney by Mr. Mahendra Kumar Sharma.
           
      24.54          Power of Attorney by Prof. Marti Gurunath Subrahmanyam.
           
      24.64         Power of Attorney by Mr. Kundapur Vaman Kamath.
           
      24.74   Power of Attorney by Ms. Lalita Dileep Gupte.
           
      24.84   Power of Attorney by Ms. Kalpana Morparia.

    1 To be filed by an amendment to this registration statement.
     
    2 Incorporated herein by reference to ICICI Bank’s Registration Statement on Form F-1 (File No. 333-30132), filed on February 11, 2000.
     
    3 Incorporated herein by reference to ICICI Bank’s Annual Report on Form 20-F for the fiscal year ended March 31, 2002 filed on September 30, 2002.
     
    4 Previously filed.





      24.94   Power of Attorney by Ms. Chanda Kochhar.
           
      24.104   Power of Attorney by Mr. Narayanan Srinivasa Kannan.