I am delighted to join ICICI Bank as the Chairman of the Board ofDirectors. this esteemed organisation has a rich legacy of partnering India in its growthand development. Founded as a development finance bank in 1955 the institution has takenseveral pioneering strides in catalysing the growth of the financial industry. As afinancial conglomerate the ICICI Group has been on a continuous journey oftransformation diversification and expansion. It is a pleasure to be addressing my firstmessage to the shareholders of ICICI Bank.
The year 2017 saw positive trends in global growth across mostdeveloped and emerging economies. this was accompanied by the normalisation of monetarypolicy in major economies. In recent times differences between major economies on tradeissues have led to protectionist measures and counter-measures in some countries. thefuture course of events in this regard and their impact on global trade growth andcapital flows will have to be closely monitored. Geopolitical developments in variousregions may also affect the economy and financial markets through their impact oncommodity prices risk appetite and capital flows.
In India the first half of the fiscal year 2018 was marked by theadjustment to the demonetisation of high value currency notes and to the introduction ofthe Goods & Services tax. Both of them are welcome from a longer term perspective the first step has provided an impetus to digitisation much needed in thefinancial sector and the second to elimination of the cascading effect of diverse taxesand greater formalisation of the economy. However in the short term these reflected in amoderation in economic growth and banking system credit growth while banking systemdeposit growth continued to be high on a year-on-year basis. the second half of the yearsaw an improvement in economic growth. Banking system credit growth also improved from thepost-demonetisation lows while deposit growth normalised. Government spending has playeda significant role in boosting growth and demand. the turnaround in industrial productionand the capital goods sector is particularly encouraging as it bodes well for revival ininvestments going forward. the economic growth outlook is positive with most agenciesforecasting higher GDP growth in fiscal 2019. At the same time oil prices have risensignificantly which has implications for inflation and external sector parameters. thehardening of interest rates also represents a reversal in the declining interest rateenvironment of recent years.
The corporate lending and resolution landscape underwent a radicalshift during fiscal 2018. the Reserve Bank of India mandated the referral of largenon-performing borrowers for resolution under the Insolvency and Bankruptcy Code. Judicialdecisions as well as legislative amendments are refining the framework and process ofinsolvency and resolution under the Code. the Reserve Bank of India also issued itsrevised framework for resolution of stressed assets. these are welcome steps aimed ataccelerating resolution of existing stressed loans as well as enhancing credit disciplineand proactive resolution on a sustained basis going forward.
Against this backdrop ICICI Bank has continued to focus on improvingits portfolio mix resolving stressed assets and enhancing its customer franchise. loangrowth was driven by the retail segment backed by healthy growth in deposits. theBank's subsidiaries continued to perform well in their respective sectorsmaintaining the ICICI Group's position as a leading diversified financial servicesfranchise. the financial sector is the backbone of the economy. As India grows andfinancial penetration increases the growth opportunities for various businesses of theBank and its subsidiaries will be significant. I am sure the teams across the Group arefocusing on maximising profitable growth with the requisite focus on risk management andsustainable performance.
In recent months the Bank has seen some esteemed members on the Boardretiring as they completed the maximum permissible tenure of eight years for independentDirectors of banks under the Banking Regulation Act. Consequently there have been severalappointments to the Board to fill these vacancies. While this transition of independentDirectors has been well-handled the Bank is taking steps to ensure that going forward theretirements and induction of independent Directors are more evenly spaced out. ICICI Bankwould like to thank the former Board members for their valuable contribution and support.I also take this opportunity to welcome the new Directors who bring diverse and richexperience with them and I am sure will provide invaluable guidance to the Bank.
ICICI Bank has seen its share of challenges in the recent past due tothe elevated levels of nPAs but has been dealing with them in the best interest of allstakeholders. taking a longer term view of the past it is indeed remarkable to see howthe institution has grown and transformed over these years from essentially a developmentfinance institution with a small commercial banking business to a large and diversifiedfinancial conglomerate. Along the way the Bank has taken many pioneering initiatives thathave contributed to the development of the financial sector as a whole. the fledglingretail and insurance businesses of 2003 have grown into leading consumer banking lifeinsurance and non-life insurance franchises; the Bank has kept pace with developments intechnology and consumer preferences; and it has navigated through rapidly evolvingoperating environments capitalising on opportunities as they emerged and changing courseto address challenges.
In recent months the Bank has been facing questions with regard togovernance. the Board of Directors have instituted an enquiry to examine issues relatingto the same. the scope of enquiry will be comprehensive and we hope to conclude theuncertainties relating to this issue at the earliest. It will be my topmost priority touphold the best governance practices at this esteemed institution.
As the new Chairman of the Bank I am happy to be a part of thisorganisation and its illustrious journey. I hope that we continue to see many moreinnovations and transformational initiatives from ICICI Bank in the years to come.
With best wishes
GIRISH CHANDRA CHATURVEDI