Case Analysis:

Subprime Tsunami on Indian Shores: Crisis Hits ICICI Bank

1. How do we define “Crisis” in the context of the financial sector in a country?

Answer 1-
The bitter reminder of the complexity of crises has come from the financial crisis. They affect both rich and
poor, small and large, nations. They may come from the public or commercial sectors and have domestic or
foreign roots. They may quickly spread across boundaries, come in a variety of sizes and shapes, and change
into new forms over time. They frequently need quick and thorough policy responses, demand significant
adjustments to fiscal and financial sector policies, and even demand international coordination of policies.
A financial crisis is frequently the result of a confluence of factors, including significant shifts in credit volume
and asset prices, severe disruptions in financial intermediation, particularly the availability of external
financing, significant balance sheet issues, and the requirement for significant government intervention.
Financial market crashes, whether they are broad or limited to certain industries, housing market crashes, and
bank runs are typical types of financial crises. • A financial crisis is generally understood to be any situation
where significant financial assets, such as stocks or real estate, suddenly experience a sharp decline in value. In
such a situation, a bank run occurs when many bank depositors become panicked and attempt to withdraw, all
at once, all their funds on deposit with their bank.

• Economic recessions that follow a financial crisis are typically much more severe than recessions that are not
preceded by a specific financial crisis; they are frequently preceded by periods of economic boom and
overextension of credit to borrowers.

2. What role do you think the central bank of any country play to contain such crisis not only at the
systemic level but also at the level of individual institutions? Explain the same in the context of the crisis in
ICICI Bank?

Answer2-
Economic and financial stability is largely dependent on central banks. In order to achieve low and steady
inflation, they implement monetary policy. Following the global financial crisis, central banks have added more
tools to their arsenals to address threats to financial stability and control fluctuating exchange rates.
Implementing monetary policy and managing the money supply are the responsibilities of central banks, which
are frequently tasked with preserving low inflation and steady GDP growth. To manage the cost of borrowing
and lending across an economy, central banks have an impact on interest rates and take part in open market
activities.
To maintain stable and low inflation, they employ monetary policy. Central banks have expanded the range of
resources available to them in response to the global financial crisis.
exchange rates under control and challenges to financial stability dealt with at one's disposal. However,
lowering inflation is the major goal of central banks, which they pursue in order to ensure price stability for the
currencies of their countries. Additionally, a central bank functions as a country's regulatory body for monetary
policy and is the only source and printer of legal tender for use in circulation.
3. Banks like SBI, HDFC, Bank of Baroda and Bank of India also had exposure to credit derivatives. Why do
you think that ICICI Bank was singled out? How do you think the performance indicators of the Bank
precipitated the situation?

Ansr3-
Derivatives are used by banks as hedging instruments to lower operational risk. A bank's financial profile, for
instance, can leave it open to suffering losses as a result of fluctuations in interest rates. To safeguard itself, the
bank might buy interest rate futures. Alternately, a pension fund can safeguard itself from loan default.
A fraction of the difference between premiums received and paid, adjusted to the total amount of revenue-
generating assets owned by the bank, is known as the net revenue edge (NIM). The percentage of non-interest
costs that are separated by income is known as the productivity proportion. This demonstrates how effectively
the bank's executives manage their overhead costs.

Credits/Stores Proportion (LDR) - Presented as a rate, LDR is used to compare a bank's total advances to assess
its liquidity. with its whole inventory for a comparable time. If the ratio is too high, it suggests that the bank
could not have enough liquidity to handle any unexpected asset requirements.
The assessment of the capacity to cover unusual liabilities with nearby resources is known as the liquidity
percentage. The general liquidity ratio is calculated by dividing all of our resources by the difference between
our total liabilities and our potential reserves.
Center stores/all-outside retailers The Government Store Protection Company (FDIC) guarantees center stores
up to a maximum of $250,000. Despite this advantage, center shops are often more resistant to fluctuations in
short-term lending rates than store (Album) endorsements or currency market accounts. For the majority of
financial foundations, the larger the proportion, the better.
4. What approaches did ICICI Bank adopt to develop its “Brand”? Did it result in improving its reach not
only in the domestic market but also in international markets?

Answer4-
According to the brokerage, the bank is now using a corporate 360-degree strategy, and the corporate
relationship manager's position has been altered to one of co-anchor, curator, connector, and facilitator. As the
Indian business sectors became increasingly integrated with the global economy, ICICI considered providing
various financial services and products to a larger client base, such as speculative banking, catastrophe
protection, finance, and resource management. The ICICI Establishment incorporated ICICI Bank in 1994. It
became the first Indian company and the first financial institution to be listed on the New York Stock Exchange
in 1999. Additionally, ICICI and its subsidiaries were combined in 2002 in a process termed as a "converse
consolidation," in which a privately held Without obtaining cash and with the help of another public
organization, a firm becomes a public organization. In most financial situations, people may find it difficult to
work out the specifics and effectively manage their affluence. Additionally, maintaining customer loyalty and
trust has become increasingly challenging for banks and financial administration companies due to growth,
unemployment, and other similar winning risks. ICICI strives to provide its customers and clients with better
experiences. In the long run, ICICI bank expanded its organization to Level 2 and 3 metropolitan areas in India,
opening up banking and financial services to larger, more diverse segments.

5. How did the “Market Sentiment” and the “Media Sentiment” pan out in the precipitation process of the
“crisis” of the Bank?

Answer-5
As the Indian business sectors became increasingly integrated with the global economy, ICICI considered
providing various financial services and products to a larger client base, such as speculative banking,
catastrophe protection, finance, and resource management. The ICICI Establishment incorporated ICICI Bank
in 1994. It became the first Indian company and the first financial institution to be listed on the New York
Stock Exchange in 1999. In addition, in 2002, ICICI and its subsidiaries were combined in a process known as
a "converse consolidation," in which a privately held company becomes a public entity through the acquisition
of another public entity and without having to raise funds. Typically, people may struggle to understand the
specifics and cope with financial issues. utilize their riches effectively. Additionally, maintaining customer
loyalty and trust has become increasingly challenging for banks and financial administration companies due to
growth, unemployment, and other similar winning risks. ICICI strives to provide its customers and clients with
better experiences. In the long run, ICICI bank expanded its organization to Level 2 and 3 metropolitan areas in
India, opening up banking and financial services to larger, more diverse segments. The bank employed
respected public relations agencies; ICICI worked with Hanmer and Partners during the 2008 financial crisis,
while Fleishman Hillard43 carried out a thorough assessment of the company's communication plan. The bank
interacted with the media via press releases and one-on-one interviews with the bank's top management. The
business' The company's investor relations team's main information source was its website.
The bank employed respected public relations agencies; ICICI worked with Hanmer and Partners during the
2008 financial crisis, while Fleishman Hillard43 carried out a thorough assessment of the company's
communication plan. The bank interacted with the media via press releases and one-on-one interviews with the
bank's top management. The company's investor relations team's main information source was the website.

6. During the entire phase, what communication strategies did the Bank adopt to contain the crisis? How
successful was it to fend the “Tsunami”?
Answer-6
As the Indian business sectors became more integrated with the global economy, ICICI came out with new
financial services and products to a wider client base, including speculative banking, catastrophe protection,
finance, and resource management. The ICICI Establishment incorporated ICICI Bank in 1994. It became the
first Indian company and the first financial institution to be listed on the New York Stock Exchange in 1999. In
addition, in 2002, ICICI and its subsidiaries were combined in a process known as a "converse consolidation,"
in which a privately held company becomes a public entity through the acquisition of another public entity and
without having to raise funds. Typically, people may struggle to understand the specifics and cope with
financial issues. utilize their riches effectively. Additionally, maintaining customer loyalty and trust has become
increasingly challenging for banks and financial administration companies due to growth, unemployment, and
other similar winning risks. ICICI strives to provide its customers and clients with better experiences. In the
long run, ICICI bank expanded its organization to Level 2 and 3 metropolitan areas in India, opening up
banking and financial services to larger, more diverse segments.