The RBI directed ICICI Bank to make additional provisions of ₹1,283 crore after discovering that loans worth ₹20,000–25,000 crore had been misclassified as agricultural priority sector lending. The issue emerged during the RBI's annual supervisory review of the bank's loan portfolio.
The bank's Q3 profit fell 4% year-on-year to ₹11,318 crore, a decline the bank attributed primarily to this provision. Without the adjustment, the bank's profit would have grown 4% in the same period, underscoring the material impact of the RBI's directive.
ICICI Bank has clarified that the issue concerns classification accuracy only—not credit quality or asset performance. The bank stated no change has been made to asset classification status or loan terms, and described this as a one-time adjustment rather than an ongoing compliance issue.
The misclassification relates to priority sector lending (PSL), a regulatory mandate requiring Indian banks to lend a minimum percentage of advances to agriculture and other designated sectors. Accurate classification is essential for banks to demonstrate PSL compliance to regulators.
The disclosure triggered a 2% decline in ICICI Bank's share price, reflecting investor reaction to the regulatory finding and the scale of the provision.
