A STUDY ON RISK AVERSION STRATEGIES FOLLOWED BY ICICI BANK DURING INVESTMENT DECISIONS

Abstract

Risk aversion in investment decision-making represents one of the most strategically consequential dimensions of commercial bank management, directly influencing portfolio composition, asset allocation, provisioning adequacy, and ultimately the resilience of the institution during economic downturns. ICICI Bank Limited, India's largest private sector bank, has developed a sophisticated multi-layered risk aversion framework encompassing credit risk mitigation, market risk hedging, liquidity risk management, and operational risk controls that collectively govern its investment and lending decisions. This study examines the specific risk aversion strategies employed by ICICI Bank in its investment decisions over the period FY 2018–19 to FY 2022–23, analysing the effectiveness of these strategies through observable improvements in key risk metrics. The research draws on secondary data from ICICI Bank Annual Reports, RBI regulatory disclosures, and Basel III compliance reports to document credit risk management tools including AI-driven credit scoring, collateral management, loan diversification, and provision coverage; market risk controls including Value-at-Risk frameworks, interest rate swaps, and Asset-Liability Management Committee oversight; and investment portfolio risk governance including HTM/AFS/HFT classification strategy, sectoral exposure limits, and concentration risk caps. Findings confirm that ICICI Bank's risk aversion framework has delivered measurable outcomes—gross NPA ratio declining from 6.70% to 2.48%, credit cost falling from 2.58% to 0.42%, and CRAR remaining above 18%—over the study period, validating the effectiveness of its risk aversion architecture.