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Directors Report of Axis Bank Ltd.

Mar 31, 2015

Dear Members,

The Board of Directors have the pleasure of presenting the Twenty First Annual Report of the Bank together with the Audited Statement of Accounts, Auditors'' Report and the Report on business and operations of the Bank for the financial year ended 31st March 2015.

FINANCIAL PERFORMANCE

The financial highlights for the year under review are presented below:

(Rs. in crores) PARTICULARS 2014-15 2013-14 GROWTH

Deposits 322,441.94 280,944.56 14.77%

Out of which

* Savings Bank Deposits 88,292.08 77,775.94 13.52%

* Current Account Deposits 56,108.22 48,686.40 15.24%

Advances 281,083.03 230,066.76 22.17%

Out of which

* Retail Advances 111,932.27 88,028.38 27.15%

* Non-retail Advances 169,150.76 142,038.38 19.09%

Total Assets/Liabilities 461,932.39 383,244.89 20.53%

Net Interest Income 14,224.14 11,951.64 19.01%

Other Income 8,365.04 7,405.22 12.96%

Out of which

* Fee Income 6,778.98 5,985.44 13.26%

* Trading Profit (1) 1,134.94 695.99 63.07%

* Misc. Income 451.12 723.79 (37.67%)

Operating Expenses 8,798.07 7,536.84 16.73% (excluding depreciation)

Profit before Depreciation, 13,791.11 11,820.02 16.68% Provisions and Tax

Depreciation 405.67 363.93 11.47%

Provision for Tax 3,699.01 3,130.96 18.14%

Other Provisions and 2,328.61 2,107.46 10.49% Write-offs

Net Profit 357.82 6,217.67 18.34%

Appropriations:

Transfer to Statutory Reserve 1,839.46 1,554.42 18.34%

Transfer to Investment Reserve 25.49 50.03 (49.05%)

Transfer to Capital Reserve 63.14 38.87 62.44%

Transfer to/(from) Reserve Fund (1.27) 1.05 (220.95%)

Proposed Dividend 1,308.96 1,101.12 18.88%

Surplus carried over to 4,122.04 3,472.18 18.72% Balance Sheet

(1) Excluding Merchant Exchange Profit

KEY PERFORMANCE INDICATORS 2014-15 2013-14

Interest Income as a percentage 8.81% 8.78% of working funds*

Non-interest Income as a percentage 2.08% 2.12% of working funds*

Net Interest Margin 3.92% 3.81%

Return on Average Net Worth 18.57% 18.23%

Operating Profit as a percentage 3.33% 3.28% of working funds*

Return on Average Assets 1.83% 1.78%

Profit per Employee** Rs.17.07 lacs Rs.15.42 lacs

Business (Deposits less inter- Rs.13.71 crores Rs.12.30 crores bank deposits Advances) per employee**

Net non-performing assets as a 0.44% 0.40% percentage of net customer assets***

* Working funds represent average total assets

** Productivity ratios are based on average number of employees for the year *** Customer assets include advances and credit substitutes

Previous year figures have been re-grouped wherever necessary

The Bank continued to show a healthy growth in both business and earnings, with a net profit of Rs.7,357.82 crores for the year ended 31st March 2015, registering a growth of 18.34% over the net profit of Rs.6,217.67 crores last year. The robust growth in earnings was achieved on the back of a balanced business growth across all banking segments indicative of a clear strategic focus of the Bank. The key return ratios continued to remain healthy, with Return on Equity (ROE) at 18.57% and Return on Assets (ROA) at 1.83%. During the year, the Basic Earnings Per Share (EPS) was Rs.31.18.

The Bank''s total income increased by 15.24% to reach Rs.43,843.64 crores during 2014-15, compared to ''38,046.38 crores last year. Operating revenue over the same period increased by 16.70% to Rs.22,589.18 crores driven by healthy growth in the Bank''s core income streams: net interest income (NII), fees and other income. During the year, NII increased by 19.01% to Rs.14,224.14 crores from Rs.11,951.64 crores last year and constituted 62.97% of the operating revenue. Fee, trading and other income increased by 12.96% to Rs.8,365.04 crores from Rs.7,405.22 crores last year. The operating expenses grew by 16.49% to Rs.9,203.74 crores from Rs.7,900.77 crores last year. As a result, operating profit increased by 16.84% to Rs.13,385.44 crores from Rs.11,456.09 crores reported last year.

The robust growth in NII for the year 2014-15 was achieved on the back of an expansion in the Balance Sheet size and healthy growth in low-cost Current Account and Savings Bank (CASA) deposits. During the year, total earning assets, on a daily average basis, increased by 15.75% to Rs.363,186 crores from Rs.313,775 crores last year. A steady growth in low-cost CASA, which on a daily average basis, increased by 14.78% to Rs.107,328 crores from Rs.93,506 crores last year helped in containing the cost of funds. Overall, the cost of funds for the year was 6.21 % compared to 6.24% last year. During the year, the cost of deposits decreased to 6.31% from 6.43% last year, primarily due to a decrease in cost of term deposits by 16 basis points to 8.67% from 8.83% last year. During this period, the yield on earning assets marginally improved to 9.63% from 9.59% last year. As a result, the Net Interest Margin (NIM) improved to 3.92% from 3.81% last year.

Other income comprising fees, trading profit and miscellaneous income increased by 12.96% to Rs.8,365.04 crores in 2014-15 from Rs.7,405.22 crores last year and constituted 37.03% of the operating revenue of the Bank. Fee income increased by 13.26% to Rs.6,778.98 crores from Rs.5,985.44 crores last year and remains very well diversified with 38.39% from retail banking, 26.60% from corporate banking and balance contributed by treasury, business banking and SME segments. The Bank earns fee income from a diverse set of products and businesses such as client-based merchant foreign exchange trade, service charges on liability accounts, transaction banking (including cash management services), syndication and placement fees, processing fees from loans and commission on non-funded products (such as letters of credit and bank guarantees) and fee income from the distribution of third-party personnel investment products. Fee income continues to remain a significant part of the Bank''s earnings and constituted 30.01 % of its operating revenue. A key factor for the slower growth in fee income has been the slowdown in corporate banking fees due to lack of fresh new investments and projects being undertaken. During the year, proprietary trading profits increased by 63.07% to Rs.1,134.94 crores from Rs.695.99 crores last year. Miscellaneous income was lower at Rs.451.12 crores compared to Rs.723.79 crores last year.

As a result, the operating revenue of the Bank increased by 16.70% to Rs.22,589.18 crores from Rs.19,356.86 crores last year. The core income streams (NII, fee and miscellaneous income) now constitute 94.15% of the operating revenue, reflecting the stability and sustainability of the Bank''s earnings. The Bank continued to focus on reducing transaction costs besides ensuring smoothness in operations and increasing productivity. The operating expenses increased by 16.49% to Rs.9,203.74 crores from Rs.7,900.77 crores last year. The increase in operating expenses was largely due to the growth of the Bank''s network and other infrastructure required for supporting the existing and new businesses. The Cost to Income ratio of the Bank was 40.74% compared to 40.82% last year.

During the year, the operating profit of the Bank increased by 16.84% to Rs.13,385.44 crores from Rs.11,456.09 crores last year. During this period, the Bank created total provisions (excluding provisions for tax) of Rs.2,328.61 crores compared to Rs.2,107.46 crores last year. The Bank provided Rs.1,788.61 crores towards non-performing assets compared to Rs.1,295.98 crores last year and Rs.423.88 crores towards provision for standard assets including unhedged foreign currency exposure compared to Rs.290.23 crores last year. During the year, there was a write-back of provisions against restructured assets of Rs.81.88 crores compared to a charge of Rs.194.76 crores last year. During the year under review, the Bank has also created a contingent provision of Rs.220 crores against advances and other exposures as a prudent measure and as on 31st March 2015, the Bank had outstanding contingent provision of Rs.1,000 crores. During 2014-15, the Bank restructured loans of Rs.2,721.86 crores and net restructured assets ratio (net restructured assets as percentage of net customer assets) was 2.71%. The Bank continued to maintain a healthy asset-quality with a ratio of Gross NPAs to gross customer assets at 1.34%, and Net NPA ratio (Net NPAs as percentage of net customer assets) at 0.44%. With higher levels of provisions built over and above regulatory norms during the year, the Bank''s provision coverage stood at 77.73% after considering prudential write-offs.

The healthy growth in business and earnings has resulted in an all- round improvement in various financial parameters and ratios during the year. Basic Earnings Per Share (EPS) was ''31.18 compared to ''26.51 last year, while the Diluted Earnings Per Share was Rs.30.85 compared to Rs.26.45 last year. Return on Equity (RoE) was 18.57% compared to 18.23% last year, while Book Value Per Share was Rs.188.47 compared to Rs.162.69 last year. Return on Assets (RoA) was 1.83% compared to 1.78% last year. The Net Interest Margin (NIM) for the year was 3.92% compared to 3.81 % last year. Employee productivity has also improved with Profit per Employee increasing to Rs.17.07 lacs from Rs.15.42 lacs last year and Business per Employee increasing to Rs.13.71 crores from Rs.12.30 crores last year.

The Bank displayed healthy growth in several key Balance Sheet parameters for the year ended 31st March 2015. The total assets increased by 20.53% to Rs.461,932 crores from Rs.383,245 crores on 31st March 2014. The total deposits of the Bank increased by 14.77% to Rs.322,442 crores against Rs.280,945 crores last year. Savings Bank deposits increased by 13.52% to Rs.88,292 crores, while Current Account deposits increased by 15.24% to Rs.56,108 crores. As on 31st March 2015, low-cost CASA deposits increased by 14.18% to Rs.144,400 crores from Rs.126,462 crores last year, and constituted 44.78% of total deposits as compared to 45.01% last year. On a daily average basis, Savings Bank deposits increased by 16.82% to Rs.72,694 crores, while Current Account deposits increased by 10.72% to Rs.34,634 crores. The percentage share of CASA in total deposits, on a daily average basis, was at 39.53% compared to 38.89% last year. The Bank''s endeavour over the last few years has been to diversify its term deposit mix in favour of retail deposits. As on 31st March 2015, the retail term deposits grew 26.53% and stood at Rs.106,581 crores, constituting 59.86% of the total term deposits compared to 54.53% last year. As on 31st March 2015, domestic retail term deposits grew 27.75% and stood at Rs.106,049 crores, constituting 61.27% of the total domestic term deposits compared to 58.97% last year. As on 31st March 2015, CASA and retail term deposits constituted 77.84% of total deposits. The domestic CASA and retail term deposits constituted 78.87% of total domestic deposits. In accordance with RBI''s guidelines on issuance of long term bonds for financing of infrastructure and affordable housing, the Bank successfully raised Rs.5,705 crores of long term Infrastructure bonds during the year.

The slowdown in economic activity has been much more prolonged than envisaged earlier and is reflected in the non-food credit growth of 13.2% for 2014-15. Total advances of the Bank as on 31st March 2015 increased by 22.17% to Rs.281,083 crores from Rs.230,067 crores as on 31st March 2014, due to a balanced growth across all segments. Corporate advances comprised 44.89% of total loans and increased by 23.42% to Rs.126,184 crores, Retail loans comprised 39.82% of total loans and increased by 27.15% to Rs.111,932 crores, SME loans (excluding the non-retail agricultural loans) increased by 14.51% to Rs.40,651 crores, while total SME advances (including non-retail agricultural loans) grew by 7.96% to Rs.42,967 crores and constituted 15.29% of total loans. During the year, the Bank re-organised the agricultural lending business and merged the retail portion of agricultural advances with the existing portfolio of retail loans, while non-retail agricultural loans have been merged with the SME segment. With the alignment of retail agricultural lending with retail lending, the Bank intends to serve rural customers for all their financial needs - both as agriculturists and as customers. This strategy also allows the Bank to fully leverage its distribution network. The retail loans portfolio continues to be focused on secured products, predominantly mortgages. However, as indicated in the earlier years, the Bank continued its strategic intent to further diversify its retail loans portfolio during the year. Secured loans accounted for 87% of the total retail loans. The total investments of the Bank increased by 16.55% to Rs.132,343 crores, of which investments in Government and approved securities, held mainly for SLR requirement, increased by 18.15% to Rs.82,229 crores. Other investments, including corporate debt securities, increased by 14.03% to Rs.50,114 crores.

The Bank continued to expand its distribution network, which remains an integral part of the Bank''s strategy for tapping low-cost CASA deposits , lending to retail, SME segments and the distribution of third- party products. During the year under review, the Bank added 187 branches, taking the total number of branches and extension counters (ECs) to 2,589, of which 1,324 branches/ECs are in semi-urban and rural areas and 1,265 branches in metropolitan and urban areas. As on 31st March 2015, the Bank has 435 branches in rural unbanked areas. In addition, the Bank has a network of 12,355 ATMs. The overseas operations of the Bank are spread over its seven international offices with branches at Singapore, Hong Kong, DIFC (Dubai International Financial Centre), Colombo and Shanghai and representative offices at Dubai and Abu Dhabi. The international operations of the Bank have generally catered to the needs of Indian corporates who have expanded their businesses overseas and have focused on corporate lending, trade finance, syndication, investment banking and liability businesses. As on 31st March 2015, the total assets of the Bank''s overseas branches stood at Rs.49,112 crores, constituting 10.63% of the Bank''s total assets.

CAPITAL & RESERVES

The Bank is well capitalised with an overall Capital Adequacy Ratio (CAR) of 15.09% as on 31st March 2015, computed under Basel III norms, which is well above the benchmark requirement of 9% stipulated by the Reserve Bank of India (RBI). Of this, the Common Equity Tier I CAR was 12.07% (minimum regulatory requirement of 5.50%) against 12.62% last year and Tier I CAR was 12.07% (minimum regulatory requirement of 7.00%) against 12.62% last year. The Tier II CAR was at 3.02% against 3.45% last year. During the year, the Bank raised capital of Rs.850 crores by way of subordinated bonds (unsecured redeemable non-convertible subordinated debentures) qualifying as Tier II capital. The raising of this non-equity capital has helped the Bank continue its growth strategy and has strengthened its overall capital adequacy ratio

During the year, a total of 1,708,232 equity shares of face value of Rs.10 each (before sub-division of equity shares) and 12,758,274 equity shares of Rs.2 each were allotted by the Bank to its eligible directors/employees and that of its subsidiary companies pursuant to exercise of options under its Employee Stock Option Schemes. The paidup equity share capital of the Bank rose to Rs.474.10 crores, as compared to Rs.469.84 crores last year.

The shareholding pattern of the Bank as on 31st March 2015 was as under:

Sr. Name of Shareholders % of Paid-up Capital No.

i. Administrator of the Specified Undertaking 11.59 of the Unit Trust of India (SUUTI)

ii. Life Insurance Corporation of India (LIC) 12.61 & its group entities(1)

iii. General Insurance Corporation and four 3.85 PSU insurance companies

iv. Overseas investors (including FIIs/ OCBs/ 46.90 NRIs)

v. Foreign Direct Investment (GDR issue) 3.72

vi. Other Indian financial institutions/mutual 6.62 funds/banks

vii. Others 14.71

Total 100.00

(1) Includes 296,075,087 equity shares of Rs.2/- each, representing 12.49% of the total issued and paid-up equity share capital of the Bank, held by LIC.

The Bank''s shares are listed on The National Stock Exchange of India Limited (NSE) and BSE Limited (BSE). The GDRs issued by the Bank are listed on the London Stock Exchange (LSE). The Bonds issued by the Bank under the MTN programme are listed on the Singapore Stock Exchange (SSE). The listing fees relating to the Stock Exchanges for the current year have been paid.

Sub-Division of the Bank''s Equity Shares

The shareholders at the last Annual General Meeting of the Bank held on 27th June 2014 had approved the sub-division of one equity share of the Bank having a face value of Rs.10 each into five equity shares of the face value of Rs.2 each. The sub-division of equity shares came into effect from 30th July 2014, being the record date fixed for the same.

DIVIDEND

The Bank''s Diluted Earnings Per Share (EPS) for 2014-15 has risen to Rs.30.85 from Rs.26.45 of equity share of Rs.2 each (adjusted for sub-division) for the last year. In view of the overall performance of the Bank and the objective of rewarding shareholders with cash dividends while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a higher dividend of Rs.4.60 per equity share of Rs.2 each for the year ended 31st March 2015, as compared to Rs.4.00 per equity share of Rs.2 each (adjusted for sub-division) declared last year. This dividend shall be subject to tax on dividend to be paid by the Bank. This increase reflects our confidence in the Bank''s ability to consistently grow earnings over time.

BOARD OF DIRECTORS

During the year, some changes in the composition of the Board of Directors have taken place. Shri R. N. Bhattacharyya, nominee of Specified Undertaking of the Unit Trust of India (SUUTI), resigned as Director of the Bank with effect from 28th June 2014. Shri Somnath Sengupta, Executive Director of the Bank had opted for early retirement and accordingly retired as such, with effect from 1st September 2014. Shri Sanjeev K. Gupta, President & Chief Financial Officer was inducted on the Board and took charge as the Executive Director (Corporate Centre) & CFO of the Bank, with effect from 4th September 2014. Shri S. B. Mathur, attained the upper age limit of 70 years as prescribed under RBI guidelines and accordingly resigned as Director of the Bank, with effect from 30th September 2014. Shri S. Vishvanathan was appointed as an Additional Independent Director of the Bank, with effect from 11th February 2015. The Board places on record its appreciation for the valuable services rendered by Shri R. N. Bhattacharyya, Shri Somnath Sengupta and Shri S. B. Mathur, during their tenure as Director of the Bank.

During the financial year 2014-15, the approval of shareholders, by way of Postal Ballot was taken on 10th March 2015 for appointment of the existing Independent Directors of the Bank.

The said Independent Directors have given their declaration stating that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013 and revised Clause 49 of the Listing Agreement. The appointment of the Independent Directors have been done in accordance with the relevant provisions of the Companies Act, 2013 and Rules made thereunder. The details of the terms and conditions of their appointment have been hosted on the website of the Bank in compliance with revised Clause 49 of the Listing Agreement.

In terms of Section 152 of the Companies Act, 2013, Smt. Usha Sangwan shall retire at the ensuing AGM and being eligible for re-appointment, offers herself for re-appointment.

Apart from the above, no other Director was appointed or has resigned during the financial year 2014-15.

Key Managerial Personnel

Smt. Shikha Sharma, MD & CEO, Shri V. Srinivasan, Executive Director & Head (Corporate Banking), Shri Sanjeev K. Gupta, Executive Director (Corporate Centre) & Chief Financial Officer and Shri Sanjeev Kapoor, Company Secretary of the Bank are deemed to be Key Mangerial Personnel of the Bank as per the provisions of the Companies Act, 2013 and Rules made thereunder and that they were already in office before the commencement of the Companies Act, 2013.

Meetings

A calendar of Meetings is prepared and circulated in advance to the Directors. During the year, seven Board Meetings were convened and held, the details of which are given in the Report on Corporate Governance, which is forming a part of this report. The intervening gap between the said Board Meetings was within the period prescribed under the Companies Act, 2013 and revised Clause 49 of the Listing Agreement.

Selection and Appointment of Directors

The charter of Nomination and Remuneration Committee of the Board empowers it to review the structure, size, composition, diversity of the Board, evaluation of existing skills, defining gaps and making necessary recommendations to the Board. The Board of the Bank is constituted in accordance with the provision of Section 10A of the Banking Regulation Act, 1949, Companies Act, 2013 and Rules made thereunder and revised Clause 49 of the Listing Agreement. The Bank has adhered to the process and methodology as prescribed by the Reserve Bank of India in respect of ''Fit & Proper'' criteria as applicable to Private Sector Banks. The same has been followed at the time of appointment and re-appointment of Directors of the Bank.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and revised Clause 49 of the Listing Agreement, the Board has carried out an annual evaluation of its performance, of the Directors individually as well as the evaluation of the working of its Committees. The manner in which the evaluation was carried out was explained in the Report on Corporate Governance, which is forming a part of this report.

Audit Committee

The composition and the functions of the Audit Committee of the Board of Directors of the Bank is disclosed in the Report on Corporate Governance, which is forming a part of this report.

Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committee of the Board of Directors of the Bank formulated and adopted a policy for the selection and appointment of its MD & CEO, Executive Directors, Senior Management and their remuneration. The details of the Remuneration Policy have been stated in the Report on Corporate Governance, which is forming a part of this report.

WHISTLE BLOWER POLICY AND VIGIL MECHANISM

The details of the Whistle Blower Policy and Vigil Mechanism have been explained in the Report on Corporate Governance, which is forming a part of this report and hosted on the website of the Bank.

SUBSIDIARIES

As on 31st March 2015, the Bank has eight unlisted subsidiaries: Axis Asset Management Company Ltd., Axis Bank UK Ltd., Axis Capital Ltd., Axis Finance Ltd., Axis Mutual Fund Trustee Ltd., Axis Private Equity Ltd., Axis Securities Ltd. and Axis Trustee Services Ltd.

i) Axis Asset Management Company Ltd. undertakes the activities of managing the mutual fund business.

ii) Axis Bank UK Ltd. is the banking subsidiary of the Bank in the United Kingdom and undertakes the activities of banking.

iii) Axis Capital Ltd. provides services relating to investment banking, equity capital markets, institutional stock broking, mergers and acquisition advisory, etc.

iv) Axis Finance Ltd. is an NBFC and carries on the activities of loan against shares, margin funding, IPO financing, etc.

v) Axis Mutual Fund Trustee Ltd. acts as the trustee for the mutual fund business.

vi) Axis Private Equity Ltd. primarily carries on the activities of managing equity investments and provides venture capital support to businesses.

vii) Axis Securities Ltd. is primarily in the business of marketing of credit cards and retail asset products and also provides retail broking services.

viii) Axis Trustee Services Ltd. is engaged in trusteeship activities, acting as debenture trustee and as trustee to various securitisation trusts.

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statement including all of its subsidiaries, which is forming part of this report. The financial position and performance of its subsidiaries are given in the statement containing salient features of the financial statements of the said subsidiaries, which forms part of the consolidated financial statements.

In accordance with third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and the consolidated financial statements has been hosted on its website www.axisbank.com. Further, as per fourth proviso to the said section, the audited annual accounts of each of the said subsidiary companies of the Bank have also been hosted on the Bank''s website www.axisbank.com. Any shareholder who may be interested in obtaining a copy of the aforesaid documents may write to the Company Secretary at the Bank''s Registered Office. Further, please note that the said documents will be available for examination by the shareholders of the Bank at its Registered Office during business hours. The said documents have been hosted on the website of the concerned subsidiary companies of the Bank, in compliance with the said section.

During the year, the Bank has divested its entire stake in its Joint Venture, Bussan Auto Finance India Private Ltd.

RELATED PARTY TRANSACTIONS

All related party transactions entered into during the financial year were on an arm''s length basis and in the ordinary course of the business of the Bank. Accordingly, Form AOC-2 is not applicable to the Bank. All related party transactions are placed before the Audit Committee of the Board of Directors for its approval. Prior omnibus approval of the Audit Committee of the Board of Directors is obtained for the transactions, which are of foreseen and repetitive nature. A statement giving details of all related party transactions, entered pursuant to the omnibus approval so granted, is placed before the Audit Committee of the Board of Directors for their review on a quarterly basis. The Bank has developed a Standard Operating Procedure for the purpose of identification and monitoring of such transactions. The policy on Related Party Transactions as approved by the Board is hosted on the Bank''s website. During the year under reference, the Bank has not entered into any transaction with any related party, which may be deemed to be material, in terms of the proviso to revised Clause 49 VII C of the Listing Agreement.

EMPLOYEE STOCK OPTION PLAN (ESOP)

The Bank has instituted an Employee Stock Option Scheme. The objective of the Scheme is to enhance employee motivation, enable employees to participate, whether directly or indirectly, in the long-term growth and financial success of the Bank, to act as a retention mechanism by enabling employee participation in the business as an active stakeholder to usher in an ''owner-manager'' culture. Under the Scheme 240,087,000 (adjusted for sub-division) options can be granted to the eligible Directors/employees of the Bank and its subsidiaries including its Key Managerial Personnel. The Employee Stock Option Scheme has been formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999/Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. The eligibility and number of options to be granted to eligible Directors/employees is determined on the basis of their work performance and is approved by the Board of Directors.

During the period February 2001 to July 2013, the Bank''s shareholders approved plans for the issuance of stock options to employees on six occasions. Under the first two plans and upto the grants made on 29th April 2004, the option conversion price was set at the average daily high-low price of the Bank''s equity shares traded during the 52 weeks preceding the date of grant at the Stock Exchange which had the maximum trading volume of the Bank''s equity share during that period. Under the third plan and subsequent plans and with effect from the grants made by the Bank on 10th June 2005 and thereafter, the pricing formula has been changed to the latest available closing price of the equity shares of the Bank prevailing on the NSE (as the NSE recorded more trading volume than BSE), on the day prior to the grant date. Along with approving the sub-division of the Bank''s equity shares, the shareholders at the AGM held on 27th June 2014 also approved the consequent adjustments to the stock options granted to its eligible Directors/employees under its various schemes such that all stock options available for grant (including lapsed and forfeited options available for reissue) and those already granted but not exercised as on record date fixed for the purpose of sub-division were proportionately converted into options for shares of face value of Rs.2/- each and the grant price of all the outstanding stock options (vested, unvested and unexercised) on the said record date were proportionately adjusted by dividing the existing grant price by 5. The record date for this purpose was 30th July 2014.

All the numbers given herein and in the Annexure I to this report pertaining to stock options are post sub-division of shares as stated above.

The Nomination and Remuneration Committee of the Board of Directors and erstwhile HR and Remuneration Committee of the Board of Directors granted options under these plans on fourteen occasions aggregating to 231,975,450 options. The options granted, which are non-transferable, vest at rates of 30%, 30% and 40% on each of three successive anniversaries following the respective grant, subject to standard vesting conditions and must be exercised within three/five years of the date of respective vesting, as the case may be. As of 31st March 2015, 166,703,149 options had been exercised and 41,829,791 options were still in force.

Other statutory disclosures as required under the SEBI (Employee Stock Options & Employee Share Purchase Scheme) Guidelines, 1999 has been given in the Annexure I to this report.

CORPORATE GOVERNANCE

The Bank is committed to achieve the highest standards of Corporate Governance and it aspires to benchmark itself with international best practices in this regard. The Corporate Governance practices followed by the Bank are enclosed as an Annexure to this report. The Corporate Governance framework of the Bank incorporates all the recommendations as set out in revised Clause 49 of the Listing Agreement.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Board of Directors hereby declares and confirms the following statements in terms of Section 134(3)(c) of the Companies Act, 2013:

a. That in the preparation of the annual accounts for the year ended 31st March 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures.

b. That such accounting policies as mentioned in Note 17 of the Notes to the Financial Statements have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at 31st March 2015 and of the profit of the Bank for the year ended on that date.

c. That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

d. That the annual accounts have been prepared on a going concern basis.

e. That internal financial controls to be followed by the Bank, were in place and that the same were adequate and were operating effectively.

f. That proper system to ensure compliance with the provisions of all applicable laws was in place and the same were adequate and operating effectively.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT 9 is given in Annexure II to this report.

STATUTORY DISCLOSURE

Considering the nature of activities of the Bank, the provisions of Section 134(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 relating to conservation of energy and technological absorption do not apply to the Bank. The Bank is however, constantly pursuing its goal of technological up-gradation in a cost- effective manner for delivering quality customer service.

The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Bank forms part of Annexure III to this Report. The Bank had 139 employees who were employed throughout the year and were in receipt of remuneration more than Rs.60 lakhs per annum and 23 employees were employed for part of the year and were in receipt of remuneration of more than Rs.5 lakh per month. In terms of Section 136 of the Companies Act, 2013, the copy of the financial statements of the Bank, including the consolidated financial statements, the auditor''s report and relevant annexures to the said financial statements and reports are being sent to the Members and other persons entitled thereto, excluding the information in respect of the said employees containing the particulars as specified in Rule 5(2) of the said Rules, which is available for inspection by the Members at its Registered Office during business hours on working days of the Bank up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, he may write to the Company Secretary of the Bank at its Registered Office. The financial statements, reports etc. of the Bank have been hosted on the website of the Bank, www.axisbank.com.

MANAGEMENT''S DISCUSSION AND ANALYSIS REPORT

The Management''s Discussion and Analysis Report for the year under review, as stipulated under revised Clause 49 of the Listing Agreement with the Stock Exchanges is given in Annexure IV to this report.

BUSINESS RESPONSIBILITY REPORT

The Securities and Exchange Board of India (SEBI) through its Circular CIR/CFD/DIL/8/2012 dated 13th August 2012 has mandated the inclusion of Business Responsibility (BR) Report as part of the Annual Report for Top 100 listed entities based on market capitalisation at BSE and NSE as on 31st March 2012. The Bank''s Business Responsibility Report has been hosted on the Bank''s website, www.axisbank.com. Any shareholder interested in obtaining a physical copy of the same may write to the Company Secretary at the Registered Office of the Bank.

RISK MANAGEMENT POLICY

Pursuant to revised Clause 49 of the Listing Agreement, the Bank constituted a Risk Management Committee of the Board of Directors of the Bank. The details of the said Committee and its terms of reference are set out in the Corporate Governance Report, which is forming a part of this report. The Bank has formulated and adopted a robust risk management framework. Whilst the Board is responsible for framing, implementing and monitoring the said risk management framework, it has delegated its powers relating to monitoring and reviewing of risk associated with the business of the Bank to the said Committee. The details of the risk management framework and issues related thereto have been explained in the Management''s Discussion and Analysis Report which is annexed to this report.

CORPORATE SOCIAL RESPONSIBILITY

The Bank has constituted the Corporate Social Responsibility Committee (CSR) of the Board of Directors in accordance with the provisions of Section 135 of the Companies Act, 2013 read with The Companies (Corporate Social Responsibility) Rules, 2014. The brief outline of the CSR Policy, including overview of the program proposed to be undertaken, the composition of the CSR Committee, average net profits of the Bank for the past three financial years, prescribed CSR expenditure and details of amount spent on CSR activities during the year have been disclosed in Annexure V to this Report, as mandated under the said Rules.

AUDITORS

Statutory Auditors

M/s S. R. Batliboi & Co. LLP, Chartered Accountants, Statutory Auditors of the Bank (Membership No.301003E) will retire at the conclusion of the Twenty First Annual General Meeting of the Bank and are eligible for re-appointment, subject to the approval of Reserve Bank of India and ratification by the shareholders of the Bank. As recommended by the Audit Committee of the Board of Directors, the Board of Directors has proposed the ratification of re-appointment of M/s S. R. Batliboi & Co. LLP, Chartered Accountants as Statutory Auditors of the Bank for the financial year 2015-16 by the shareholders of the Bank at the ensuing Annual General Meeting. The shareholders are requested to ratify their re-appointment and the remuneration as decided by the Audit Committee of the Board of Directors.

As required under revised Clause 41 I (h) of the Listing Agreement, the Statutory Auditors have confirmed that they have subjected themselves to the peer review process of the Institute of Chartered Accountants of India (ICAI) and that they hold a valid certificate issued by the Peer Review Board of ICAI.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank has appointed M/s Mehta & Mehta, Company Secretaries in Practice (Membership No. P1996MH007500) to conduct Secretarial Audit of the Bank. The Secretarial Audit Report is given in Annexure VI to this report.

There are no qualifications, reservations or adverse remarks made by M/s S. R. Batliboi & Co. LLP, Chartered Accountants, Statutory Auditors of the Bank, in their Auditors'' report or by M/s Mehta & Mehta, Company Secretaries in Practice, Secretarial Auditors of the Bank in their Secretarial Audit Report.

SIGNIFICANT AND MATERIAL ORDER PASSED BY REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND OPERATIONS OF THE BANK

During the financial year 2014-15, no significant or material orders were passed by Regulators, Courts or Tribunals against the Bank, which could impact its going concern status and operations.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS

The Board has inter alia reviewed the adequacy and effectiveness of the Bank''s internal financial controls relating to its financial statements.

The Board has discussed with the Management of the Bank the major financial risk exposures and the steps taken by it to monitor and control such exposures, overseen and reviewed the functioning of the Whistle Blower Mechanism (which is a part of the Banks'' Fraud Risk Management Policy) and reviewed the findings in respect of investigations into frauds which were material in nature and the actions taken by the Bank in this regard.

CEO & CFO CERTIFICATION

Certificate issued by Smt. Shikha Sharma, Managing Director & CEO and Shri Sanjeev K. Gupta, Executive Director (Corporate Centre) and CFO of the Bank, in terms of revised Clause 49 (IX) of the Listing Agreement, for the year under review was placed before the Board of Directors at its meeting held on 29th April 2015.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, other government and regulatory authorities, financial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the shareholders and also places on record its sincere thanks to its valued clients and customers for their continued patronage. The Board also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, teamwork, commitment and initiative, which has led to the Bank making commendable progress in today''s challenging environment.

For and on behalf of the Board of Directors

Place : Mumbai Sanjiv Misra Date : 29th April 2015 Chairman


Mar 31, 2014

The Board of Directors is pleased to present the Twentieth Annual Report of the Bank together with the Audited Statement of Accounts, Auditors'' Report and the report on business and operations of the Bank for the fnancial year ended 31st March 2014.

FINANCIAL PERFORMANCE

The fnancial highlights for the year under review are presented below:

(Rs. in crores)

PARTICULARS 2013-14 2012-13 GROWTH

Deposits 280,944.56 252,613.59 11.22% Out of which

- Savings Bank Deposits 77,775.94 63,777.73 21.95%

- Current Account Deposits 48,686.40 48,322.10 0.75%

Advances 230,066.76 196,965.96 16.81%

Out of which

- Retail Advances 74,491.24 53,959.79 38.05%

- Non-retail Advances 155,575.52 143,006.17 8.79%

Total Assets/Liabilities 383,244.89 340,560.66 12.53%

Net Interest Income 11,951.64 9,666.26 23.64%

Other Income 7,405.22 6,551.11 13.04%

Out of which

- Trading Proft (1) 695.99 754.60 (7.77%)

- Fee and other income 6,709.23 5,796.51 15.75%

Operating Expenses (excluding depreciation) 7,536.84 6,562.51 14.85%

Proft before Depreciation, Provisions and Tax 11,820.02 9,654.86 22.43%

Depreciation 363.93 351.73 3.47%

Provision for Tax 3,130.96 2,373.26 31.93%

Other Provisions and Write offs 2,107.46 1,750.44 20.40%

Net Proft 6,217.67 5,179.43 20.05%

Appropriations:

Transfer to Statutory Reserve 1,554.42 1,294.86 20.05%

Transfer to Investment Reserve 50.03 53.46 (6.42%)

Transfer to Capital Reserve 38.87 141.46 (72.52%)

Transfer to Reserve Fund 1.05 2.61 (59.77%)

Proposed Dividend 1,101.12 987.24 11.54%

Surplus carried over to Balance Sheet 3,472.18 2,699.80 28.61%

(1) Excluding Merchant Exchange Proft

KEY PERFORMANCE INDICATORS 2013-14 2012-13

Interest Income as a percentage of working funds* 8.78% 8.90%

Non-interest Income as a percentage of working funds* 2.12% 2.15%

Net Interest Margin 3.81% 3.53%

Return on Average Net Worth 18.23% 20.51%

Operating Proft as a percentage of working funds* 3.28% 3.05%

Return on Average Assets 1.78% 1.70%

Proft per Employee** Rs.15.42 lacs Rs.14.58 lacs

Business (Deposits less inter-bank deposits Advances) per employee** Rs.12.30 crores Rs.12.15 crores

Net non-performing assets as a percentage of net customer assets*** 0.40% 0.32%

* Working funds represent average total assets.

** Productivity ratios are based on average number of employees for the year.

*** Customer assets include advances and credit substitutes.

Previous year fgures have been re-grouped wherever necessary.

The Bank continued to deliver a steady growth in both business and earnings, in the midst of a moderation in economic growth and intensifying competitive fnancial landscape. The Bank reported a net proft of Rs.6,217.67 crores for the year ended 31st March 2014, registering a growth of 20.05% over the net proft of Rs.5,179.43 crores last year. The healthy growth in earnings was a result of robust business growth across banking segments indicative of a clear strategic focus. During the year, the Basic Earnings Per Share (EPS) was Rs.132.56 and a Return on Equity (ROE) was 18.23%.

During the year, the Bank''s total income increased by 12.78% to reach Rs.38,046.38 crores as compared to Rs.33,733.68 crores last year. Operating revenue over the same period increased by 19.36% to Rs.19,356.86 crores while operating proft increased by 23.14% to Rs.11,456.09 crores. The growth in earnings was mainly due to a strong growth in net interest income (NII). During the year, NII increased by 23.64% to Rs.11,951.64 crores from Rs.9,666.26 crores last year and constituting 61.74% of the operating revenue. Fee, trading and other income increased by 13.04% to Rs.7,405.22 crores from Rs.6,551.11 crores last year.

The operating expenses grew at a slower pace by 14.27% to Rs.7,900.77 crores from Rs.6,914.24 crores last year.

During the year under review, the growth in NII was attributable to an expansion in the balance sheet size, healthy growth in low-cost Current Account and Savings Bank (CASA) deposits and continued focus on increasing retail term deposits. During 2013-14, the total earning assets on a daily average basis increased by 14.63% to Rs.313,775 crores, compared to Rs.273,738 crores last year. The cost of funds improved over the year to 6.24% from 6.55% last year due to a combination of various factors. The healthy growth in low-cost CASA deposits, which on a daily average basis, increased to Rs.93,506 crores from Rs.80,941 crores, comprised 38.89% of total deposits compared to 36.28% in the previous year. Secondly, the increase in the share of retail term deposits at 54.53% of total term deposits, compared to 43.67% last year, enabled the Bank to contain its cost of funds apart from providing a stable funding base in the midst of signifcant volatility in interest rates witnessed mainly during the second quarter of the year. The raising of equity capital in the fourth quarter of the last fnancial year also contributed to the lowering of the cost of funds. During the year, the cost of deposits decreased to 6.43% from 6.73% last year primarily due to decrease in cost of term deposits by 27 basis points (from 9.10% to 8.83%). During the same period, the yield on earning assets decreased by 16 basis points to 9.59% from 9.75% last year.

Other income comprising fees, trading proft and miscellaneous income increased by 13.04% to Rs.7,405.22 crores in 2013-14 from Rs.6,551.11 crores last year and constituted 38.26% of the operating revenue of the Bank. Fee income increased by 8.41% to Rs.5,985.45 crores from Rs.5,520.93 crores last year and remains very well diversifed with 32% from retail banking, 30% from corporate banking and balance contributed by treasury, business banking, SME and agriculture segments. The main sources of fee income are client-based merchant foreign exchange trade, service charges on liability accounts, transaction banking (including cash management services), syndication and placement fees, processing fees from loans and commission on non-funded products (such as letters of credit and bank guarantees) and fee income from the distribution of third-party investment products. Fee income though has moderated slightly but continues to remain a signifcant part of the earnings and constituted 30.92% of the operating revenue of the Bank. A key factor for the muted growth in fee income has been slowdown in corporate banking fees which has been impacted by the economic slowdown resulting in lower corporate credit demand and lack of fresh new investments and projects being undertaken. During the year, proprietary trading profts decreased by 7.77% to Rs.695.99 crores from Rs.754.60 crores last year. Miscellaneous income increased to Rs.723.79 crores from Rs.275.58 crores last year.

During the year, the operating revenue of the Bank increased by 19.36% to Rs.19,356.86 crores from Rs.16,217.37 crores last year. The core income streams (NII, fee and miscellaneous income) now constitute 96.40% of the operating revenue, refecting the sustainability of the Bank''s earnings. The Bank continued to focus on business process re-engineering to reduce transaction costs besides ensuring smoothness in operations and increasing productivity. As a result, the operating expenses increased at a slower pace by 14.27% to Rs.7,900.77 crores from Rs.6,914.24 crores last year. The increase in operating expenses was largely due to the growth of the Bank''s network and other infrastructure required for supporting the existing and new businesses. The Cost to Income ratio of the Bank was 40.82% compared to 42.63% last year.

The operating proft of the Bank increased 23.14% to Rs.11,456.09 crores during the year, compared to Rs.9,303.13 crores last year. During this period, the Bank created total provisions (excluding provisions for tax) of Rs.2,107.46 crores compared to Rs.1,750.44 crores last year. The Bank provided Rs.1,295.98 crores towards non-performing assets compared to Rs.1,179.22 crores last year and Rs.290.23 crores towards provision for standard assets compared to Rs.196.68 crores last year. The Bank also provided Rs.194.76 crores compared to Rs.103.95 crores last year against restructured assets. The Bank has also created a contingent provision of Rs.405.00 crores against advances and other exposures as a prudent measure. As on 31st March 2014, the Bank had outstanding contingent provision of Rs.780.00 crores. During 2013-14, the Bank restructured loans of Rs.3,456.95 crores. The ratio of Gross NPAs to gross customer assets was 1.22% compared to 1.06% last year and Net NPA ratio (Net NPAs as percentage of net customer assets) was 0.40% compared to 0.32% last year. With higher levels of provisions built over and above regulatory norms during the year, the Bank''s provision coverage stood at 78.10% after considering prudential write- offs.

The various fnancial parameters and ratios continue to remain healthy. Basic Earnings Per Share (EPS) was Rs.132.56 compared to Rs.119.67 last year, while the

Diluted Earnings Per Share was Rs.132.23 compared to Rs.118.85 last year. Return on Equity (RoE) was 18.23% compared to 20.51% last year and Book Value Per Share increased from Rs.707.50 to Rs.813.47. Return on Assets (RoA) was 1.78% compared to 1.70% last year. The Net Interest Margin (NIM) for the year was 3.81% compared to 3.53% last year.

The Bank has continued to focus on the quality of growth and displayed healthy growth in key balance sheet parameters for the year ended 31st March 2014. The total assets increased by 12.53% to Rs.383,245 crores on 31st March 2014 from Rs.340,561 crores on 31st March 2013. The total deposits of the Bank increased by 11.22% to Rs.280,945 crores against Rs.252,614 crores last year. Savings Bank deposits increased by 21.95% to Rs.77,776 crores, while Current Account deposits increased by 0.75% to Rs.48,686 crores. Low-cost CASA deposits increased by 12.81% to Rs.126,462 crores as on 31st March 2014 compared to Rs.112,100 crores last year. As on 31st March 2014, CASA deposits constituted 45.01% of total deposits as compared to 44.38% last year. On a daily average basis, Savings Bank deposits increased by 19.11% to Rs.62,225 crores, while Current Account deposits increased by 9.00% to Rs.31,281 crores. The percentage share of CASA in total deposits, on a daily average basis, improved to 38.89% from 36.28% last year. The Bank''s endeavour over the last few years has been to diversify its term deposit mix in favour of retail deposits. As on 31st March 2014, the retail term deposits grew 37.29% and stood at Rs.84,233 crores, constituting 54.53% of the total term deposits compared to 43.67% last year. As on 31st March 2014, domestic retail term deposits grew 36.46% YoY and stood at Rs.83,010 crores, constituting 58.97% of the total domestic term deposits compared to 47.93% last year. However, excluding the FCNR(B) deposits raised to avail the concessional swap facility provided by RBI, domestic retail term deposits grew 20.87%, constituting 56.01% of domestic term deposits. During the year, the Bank mobilised foreign currency funds amounting to ~ USD 1.8 billion, including funds raised under the FCNR (B) deposit scheme, to avail the concessional swap facility provided by RBI. As on 31st March 2014, CASA and retail Term Deposits constituted 75% of total deposits. The domestic CASA and Retail Term Deposits constituted 78.36% of total domestic deposits.

The slowdown in economic growth was refected in the slower loan growth of corporate loans. Total advances of the Bank as on 31st March 2014, increased by 16.81% to Rs.230,067 crores from Rs.196,966 crores as on 31st March 2013 primarily driven by retail and SME segments. Corporate advances (comprising large, infrastructure and mid-corporate accounts) increased by 4.07% to Rs.102,238 crores, SME loans increased by 18.65% to Rs.35,502 crores, retail loans increased by 38.05% to Rs.74,491 crores and agricultural loans (including micro fnance) increased by 20.14% to Rs.17,836 crores. Excluding the effect of retail lending undertaken against FCNR(B) deposits raised under RBI''s special window, the growth in retail loans would have been 31.18% and comprised 31.27% of total loans compared to 27.40% last year. The retail loan portfolio continues to be focused on secured products, predominantly mortgages. However, the strategic intent as indicated in the previous year to further diversify into multi-product portfolio continued during the current fnancial year. Secured loans accounted for 87% of the total retail loans. The total investments of the Bank decreased by 0.17% to Rs.113,548 crores and investments in Government and approved securities, held mainly for SLR requirement, decreased by 4.02% to Rs.69,600 crores. Other investments, including corporate debt securities, increased by 6.62% to Rs.43,948 crores. As on 31st March 2014, the total assets of the Bank''s overseas branches stood at Rs.43,130 crores, constituting 11.25% of the Bank''s total assets.

As one of the key drivers of business growth and customer-acquisition, the Bank continued to enlarge its distribution network. Widening geographical reach is seen to be critical for tapping growth opportunities in newer markets, especially low- cost CASA deposits, lending to retail, agriculture and SME segments and the distribution of third-party products. During the year under review, the Bank added 455 new branches, taking the total number of branches and extension counters (ECs) to 2,402, of which 1,254 branches/ECs are in semi-urban and rural areas and 1,148 branches in metropolitan and urban areas. As on 31st March 2014, the Bank has 438 branches in rural unbanked areas. The Bank also increased its ATM network to 12,922, as compared to 11,245 ATMs last year. The overseas operations of the Bank are spread over its seven international offces with branches at Singapore, Hong Kong, DIFC (Dubai International Financial Centre), Colombo and Shanghai and representative offces at Dubai and Abu Dhabi. During the year, the Bank has upgraded its representative offce in Shanghai, China to a branch to become the frst Indian private sector bank to set up a branch in China. During the year, the Bank''s overseas subsidiary namely Axis Bank UK Ltd. commenced banking operations. The international operations of the Bank have generally catered to the needs of Indian corporates who have expanded their businesses overseas and have focused on corporate lending, trade fnance, syndication, investment banking and liability businesses.

CAPITAL & RESERVES

In terms of RBI guidelines, banks are required to compute and disclose capital adequacy ratios under Basel III capital regulations from the quarter ended 30th June 2013. The Bank is well capitalised with an overall Capital Adequacy Ratio (CAR) computed under Basel III norms as on 31st March 2014 of 16.07%, well above the benchmark requirement of 9% stipulated by Reserve Bank of India (RBI). Of this, the Common Equity Tier I CAR was 12.62% (against minimum regulatory requirement of 5%) and Tier I CAR was 12.62% (against minimum regulatory requirement of 6.5%). The capital adequacy ratio of the Bank computed under Basel II norms as on 31st March 2013 was 17.00% with Tier I CAR of 12.23% and Tier II CAR of 4.77%.

During the year, 1,890,085 equity shares were allotted to employees of the Bank/subsidiary companies pursuant to the exercising of options under the Employee Stock Option Scheme. The paid-up capital of the Bank has risen to Rs.469.84 crores, as compared to Rs.467.95 crores last year. The shareholding pattern of the Bank as of 31st March 2014 was as under:

Sr. No. Name of Shareholders % of Paid-up Capital

i. Administrator of the Specifed Undertaking of the Unit Trust of India (SUUTI) 11.70

ii. Life Insurance Corporation of India (LIC) & its group entities (1) 13.72

iii. General Insurance Corporation and four PSU insurance companies 4.22

iv. Overseas investors (including FIIs/OCBs/NRIs) 49.13

v. Foreign Direct Investment (GDR issue) 3.26

vi. Other Indian fnancial institutions/ mutual funds/banks 5.37

vii. Others 12.60

Total 100.00

(1) Includes 63,978,711 equity shares, equivalent to 13.62% of the total paid-up capital of the Bank, held by LIC.

The Bank''s shares are listed on the NSE and the BSE. The GDRs issued by the Bank are listed on the London Stock Exchange (LSE). The Bonds issued by the Bank under the MTN programme are listed on the Singapore Stock Exchange. The listing fees relating to all stock exchanges for the current year have been paid.

Sub-Division of the Bank''s Equity Shares

In order to make equity shares of the Bank affordable for small retail investors, the Board of Directors has considered and approved the sub-division of one equity share of the Bank having a face value of Rs.10 each into fve equity shares of face value of Rs.2 each. The sub-division of shares is subject to approval of the shareholders and any other statutory and regulatory approvals, as applicable.

DIVIDEND

The Bank''s Diluted Earnings Per Share (EPS) for 2013-14 has risen to Rs.132.23 from Rs.118.85 last year. In view of the overall performance of the Bank and the objective of rewarding shareholders with cash dividends while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a higher dividend of Rs.20.00 per equity share, compared to Rs.18.00 per equity share declared last year. This dividend shall be subject to tax on dividend to be paid by the Bank. This increase refects our confdence in the Bank''s ability to consistently grow earnings over time.

BOARD OF DIRECTORS

During the year, some changes in the composition of the Board of Directors have taken place. Shri A. K. Dasgupta, nominee of Life Insurance Corporation of India (LIC), resigned as Director with effect from 4th June 2013 consequent upon his appointment as Insurance Ombudsman at Mumbai. Smt. Usha Sangwan was nominated by LIC as its nominee Director in place of Shri A. K. Dasgupta and was, accordingly, appointed as an Additional Director of the Bank with effect from 17th October 2013. The Board places on record its appreciation for the valuable services rendered by Shri A. K. Dasgupta during his tenure as Director of the Bank.

In order to comply with the provisions of the Companies Act, 2013, Shri K. N. Prithviraj and Shri V. Srinivasan are being considered for retiring by rotation at the Twentieth Annual General Meeting and, being eligible, offer themselves for re-appointment as Directors of the Bank.

SUBSIDIARIES

As on 31st March 2014, the Bank has eight subsidiaries: Axis Capital Ltd., Axis Securities Ltd., Axis Finance Ltd., Axis Private Equity Ltd., Axis Trustee Services Ltd., Axis Asset Management Company Ltd., Axis Mutual Fund Trustee Ltd. and Axis Bank UK Ltd.

Axis Capital Ltd. provides services relating to investment banking, equity capital markets, institutional stock broking, mergers and acquisition advisory etc. During the year, the business of marketing of credit cards and retail asset products and the business of retail broking services undertaken by Axis Capital Ltd. were demerged into Axis Securities Ltd., a wholly-owned subsidiary of Axis Capital Ltd. Subsequently, during the year, the Bank also acquired the remaining stake of Axis Capital Ltd. in Axis Securities Ltd. and consequently Axis Securities Ltd. has become a wholly-owned subsidiary of the Bank. Axis Securities Ltd. is primarily in the business of marketing of credit cards and retail asset products and also provides retail broking services. Axis Finance Ltd., is an NBFC and carries on the activities of loan against shares, margin funding, IPO fnancing etc. Axis Private Equity Ltd. primarily carries on the activities of managing equity investments and provides venture capital support to businesses. Axis Trustee Services Ltd. is engaged in trusteeship activities, acting as debenture trustee and as trustee to various securitisation trusts. Axis Asset Management Company Ltd. undertakes the activities of managing the mutual fund business. Axis Mutual Fund Trustee Ltd. acts as the trustee for the mutual fund business. Axis Bank UK Ltd. commenced banking operations during the year after receipt of approval from the Financial Services Authority on 19th April 2013.

In terms of the General Circular No. 2/2011 dated 8th February 2011 issued by the Ministry of Corporate Affairs, Government of India, the copies of Directors'' Reports, Auditors'' Reports and the fnancial statements of the eight subsidiaries have not been attached to the accounts of the Bank for the fnancial year ended 31st March 2014. Any shareholder who may be interested in obtaining a copy of the aforesaid documents may write to the Company Secretary at the Registered Offce of the Bank. These documents will also be available for examination by shareholders of the Bank at its Registered Offce. The documents related to individual subsidiaries will similarly be available for examination at the respective registered offces of the companies. In line with the Accounting Standard 21 (AS-21) issued by the Institute of Chartered Accountants of India, the consolidated fnancial results of the Bank along with its subsidiaries for the year ended 31st March 2014 are enclosed as an Annexure to this report.

EMPLOYEE STOCK OPTION PLAN (ESOP)

The Bank has instituted an Employee Stock Option Scheme. The objective of the Scheme is to enhance employee motivation, enable employees to participate, whether directly or indirectly, in the long-term growth and fnancial success of the Bank, to act as a retention mechanism by enabling employee participation in the business as an active stakeholder to usher in an ''owner- manager'' culture. Under the Scheme 48,017,400 options can be granted to the employees of the Bank and its subsidiaries including Whole-time Directors. The employee stock option scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of the employee''s work performance and is approved by the Board of Directors.

Over the period February 2001 to July 2013, the Bank''s shareholders approved plans for the issuance of stock options to employees on six occasions. Under the frst two plans and upto the grant made on 29th April 2004, the option conversion price was set at the average daily high-low price of the Bank''s equity shares traded during the 52 weeks preceding the date of grant at the Stock Exchange which has had the maximum trading volume of the Bank''s equity share during that period. Under the third plan and with effect from the grant made by the Bank on 10th June 2005, the pricing formula has been changed to the closing price on the day previous to the grant date. The HR and Remuneration Committee and the erstwhile Remuneration and Nomination Committee granted options under these plans on thirteen occasions: 1,118,925 during 2000-01, 1,779,700 during 2001-02, 2,774,450 during 2003-04, 3,809,830 during 2004-05, 5,708,240 during 2005-06, 4,695,860 during 2006- 07, 6,729,340 during 2007-08, 2,677,355 during 2008-09, 4,413,990 during 2009-10, 2,915,200 during 2010-11, 3,268,700 during 2011-12, 2,516,000 during 2012-13 and 2,003,000 during 2013-14. The options granted, which are non-transferable, vest at rates of 30%, 30% and 40% on each of three successive anniversaries following the grant, subject to standard vesting conditions, and must be exercised within three years of the date of vesting. As of 31st March 2014, 29,080,743 options had been exercised and 10,845,556 options were in force.

Other statutory disclosures as required by the SEBI guidelines on ESOPs are given in the Annexure to this report.

CORPORATE GOVERNANCE

The Bank is committed to achieve the highest standards of corporate governance, and it aspires to benchmark itself with international best practices in this regard. The corporate governance practices followed by the Bank are enclosed as an Annexure to this report. The Ministry of Corporate Affairs had issued Corporate Governance Voluntary Guidelines 2009. The Corporate Governance framework of the Bank incorporates majority of the recommendations contained in the above guidelines.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Board of Directors hereby declares and confrms that:

l The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations have been furnished, relating to material departures.

l Accounting policies have been selected and applied consistently and reasonably, and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Bank and of the Proft and Loss of the Bank for the fnancial year ended 31st March 2014.

- Proper and suffcient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Companies (Amendment) Act, 2000, for safeguarding the assets of the Bank, and for preventing and detecting fraud and other irregularities.

l The annual accounts have been prepared on a going concern basis.

l The Bank has in place a system to ensure compliance of all laws applicable to the Bank.

STATUTORY DISCLOSURE

Considering the nature of activities of the Bank, the provisions of Section 217(1)(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of technological upgradation in a cost-effective manner for delivering quality customer service.

The statement containing particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the rules hereunder is given in an Annexure appended hereto and forms part of this report. In terms of Section 219(1)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Offce of the Bank.

BUSINESS RESPONSIBILITY REPORT

The Securities and Exchange Board of India (SEBI) through its circular CIR/CFD/DIL/8/2012 dated 13th August 2012 has mandated the inclusion of Business Responsibility (BR) Report as part of the Annual Report for top 100 listed entities based on market capitalisation at Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) as on 31st March 2012. The Bank''s Business Responsibility Report has been hosted on the Bank''s website, www.axisbank.com. Any shareholder interested in obtaining a physical copy of the same may write to the Company Secretary at the Registered Offce of the Bank.

AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants, had been appointed by the shareholders at the Nineteenth Annual General Meeting as Statutory Auditors of the Bank for the year 2013-14 and will be retiring at the conclusion of the forthcoming Annual General Meeting. Deloitte Haskins & Sells have been the Statutory Auditors of the Bank since 2010-11. As per the regulations of Reserve Bank of India, the same auditors cannot be re-appointed for a period beyond 4 years. It is, accordingly, proposed to appoint M/s S. R. Batliboi & Co. LLP, Chartered Accountants, as the Bank''s new Statutory Auditors subject to the approval by the shareholders. The shareholders are requested to consider their appointment on the remuneration to be decided by the Audit Committee of the Board. The Board of Directors places on record their appreciation of the professional services rendered by Deloitte Haskins & Sells, as the Statutory Auditors of the Bank.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, other government and regulatory authorities, fnancial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the shareholders and also places on record its sincere thanks to its valued clients and customers for their continued patronage. The Board also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, teamwork, commitment and initiative, which has led to the Bank making commendable progress in today''s challenging environment.

For and on behalf of the Board of Directors

K. N. Prithviraj Shikha Sharma

Director Managing Director & CEO

Somnath Sengupta V. Srinivasan

Place : Mumbai Executive Director Executive Director

Date : 26th April 2014 & Head (Corporate Centre) & Head (Corporate Banking)


Mar 31, 2013

The Board of Directors is pleased to present the Nineteenth Annual Report of the Bank together with the Audited Statement of Accounts, Auditors'' Report and the report on business and operations of the Bank for the financial year ended 31st March 2013.

FINANCIAL PERFORMANCE

The financial highlights for the year under review are presented below:

(Rs. in crores)

PARTICULARS 2012-13 2011-12 GROWTH

Deposits 252,613.59 220,104.30 14.77%

Out of which

- Savings Bank Deposits 63,777.73 51,667.96 23.44%

- Current Account Deposits 48,322.10 39,754.07 21.55%

Advances 196,965.96 169,759.54 16.03%

Out of which

- Retail Advances 53,959.79 37,570.33 43.62%

- Non-retail Advances 143,006.17 132,189.21 8.18%

Total Assets/Liabilities 340,560.66 285,627.79 19.23%

Net Interest Income 9,666.26 8,017.75 20.56%

Other Income 6,551.11 5,420.22 20.86%

Out of which

- Trading Profit (1) 754.60 361.56 108.71%

- Fee and other income 5,796.51 5,058.66 14.59%

Operating Expenses (excluding depreciation) 6,562.51 5,664.86 15.85%

Profit before Depreciation, Provisions and Tax 9,654.86 7,773.11 24.21%

Depreciation 351.73 342.24 2.77%

Provision for Tax 2,373.26 2,045.63 16.02%

Other Provisions and Write offs 1,750.44 1,143.03 53.14%

Net Profit 5,179.43 4,242.21 22.09%

Appropriations:

Transfer to Statutory Reserve 1,294.86 1,060.55 22.09%

Transfer to Investment Reserve 53.46 - -

Transfer to Capital Reserve 141.46 51.90 172.56%

Transfer to Reserve Fund 2.61 - -

Proposed Dividend 987.24 770.08 28.20%

Surplus carried over to Balance Sheet 2,699.80 2,359.68 14.41%

(1) Excluding Merchant Exchange Profit

KEY PERFORMANCE INDICATORS 2012-13 2011-12

Interest Income as a percentage of working funds* 8.90% 8.71%

Non-Interest Income as a percentage of working funds* 2.15% 2.15%

Net Interest Margin 3.53% 3.59%

Return on Average Net Worth 20.51% 21.22%

Operating Profit as a percentage of working funds* 3.05% 2.94%

Return on Average Assets 1.70% 1.68%

Profit per employee** Rs.14.58 lacs Rs.14.34 lacs

Business (Deposits less inter- bank deposits Advances) per employee** Rs.12.15 crores Rs.12.76 crores

Net non-performing assets as a percentage of net customer assets*** 0.32% 0.25%

- Working funds represent average total assets.

** Productivity ratios are based on average number of employees for the year.

*** Customer assets include advances and credit substitutes.

Previous year figures have been re-grouped wherever necessary.

The Bank continued to grow steadily, both in business and earnings, in an increasingly competitive financial market and reported a net profit of Rs.5,179.43 crores for the year ended 31st March 2013, registering a growth of 22.09% over the net profit of Rs.4,242.21 crores last year. The strong performance in earnings resulted from the robust growth across all segments. During the year, the Bank''s total income increased by 23.05% to reach Rs.33,733.68 crores, compared to Rs.27,414.86 crores last year. Operating revenue during this period increased by 20.68% to Rs.16,217.37 crores while operating profit increased by 25.20% to Rs.9,303.13 crores. The growth in earnings may be attributed to the performance of the Bank''s core income streams: net interest income (NII), fee and other income. NII increased by 20.56% to Rs.9,666.26 crores from Rs.8,017.75 crores last year. Fee, trading and other income increased by 20.86% to Rs.6,551.11 crores from Rs.5,420.22 crores last year. The increase in earnings was partly offset by an increase in operating expenses by 15.10% to Rs.6,914.24 crores.

During the year under review, the growth in NII is attributable to an expansion in the balance sheet size and healthy low- cost Current Account and Savings Bank (CASA) deposits. During the year, the total earning assets on a daily average basis increased by 22.64% to Rs.273,738 crores, compared to Rs.223,206 crores last year. A steady growth of low-cost CASA deposits, which on a daily average basis increased to Rs.80,941 crores from Rs.70,845 crores, helped in containing the cost of funds, which had risen over the period due to the hardening of interest rates on term deposits. Overall, the daily average cost of funds in the year increased to 6.55% from 6.28% last year. During the year, the cost of deposits increased to 6.73% from 6.47% last year primarily due to an increase in cost of term deposits by 18 basis points (from 8.92% to 9.10%). During the same period, the yield on earning assets increased by 9 basis points to 9.75% from 9.66% last year.

Other income comprising fees, trading profit and miscellaneous income increased by 20.86% to Rs.6,551.11 crores in 2012-13 from Rs.5,420.22 crores last year and constituted 40.40% of the operating revenue of the Bank. Fee income constituted 34.04% of the operating revenue of the Bank and increased by 16.80% to Rs.5,520.93 crores from Rs.4,726.94 crores last year. The Bank earns fee income from a diverse set of products and businesses such as client-based merchant foreign exchange trade, transaction banking (including cash management services), syndication and placement fees, processing fees from loans and commission on non-funded products (such as letters of credit and bank guarantees), inter-change fees on ATM-sharing arrangements and fee income from the distribution of third-party personal investment products. During the year, proprietary trading profits increased by 108.71% to Rs.754.60 crores from Rs.361.56 crores last year. Miscellaneous income decreased by 16.92% to Rs.275.58 crores from Rs.331.72 crores last year mainly due to lower recoveries of loans/investments written-off in earlier years. During the year, such recoveries accounted for Rs.268.51 crores.

As a result, the operating revenue of the Bank increased by 20.68% to Rs.16,217.37 crores from Rs.13,437.97 crores last year The core income streams (NII, fee and miscellaneous income) now constitute 95.35% of the operating revenue, reflecting the sustainability of the Bank''s earnings. Operating expenses increased by 15.10% to Rs.6,914.24 crores from Rs.6,007.10 crores last year, largely as a result of the growth of the Bank''s network and other infrastructure required for supporting the existing and new businesses. The Cost to Income ratio of the Bank was 42.63% compared to 44.70% last year.

During the year, the operating profit of the Bank increased by 2 5.20% to Rs.9,303.13 crores from Rs.7,430.87 crores last year. During this period, the Bank created total provisions (excluding provisions for tax) of Rs.1,750.44 crores compared to Rs.1,143.03 crores last year. The Bank provided Rs.1,179.22 crores towards non-performing assets compared to Rs.860.43 crores last year and Rs.196.68 crores towards provision for standard assets compared to Rs.150.30 crores last year. The Bank also provided Rs.103.95 crores compared to Rs.88.86 crores last year against restructured assets. The Bank has also created a contingent provision of Rs.375 crores against advances and other exposures as a prudent measure. During 2012- 13, the Bank restructured loans of Rs.2,110.09 crores. The ratio of Gross NPAs to gross customer assets was 1.06% compared to 0.94% last year and Net NPA ratio (Net NPAs as percentage of net customer assets) was 0.32% compared to 0.25% last year With higher levels of provisions built over and above regulatory norms during the year, the Bank has maintained its provision coverage to 79.15% (after considering prudential write-offs).

The healthy growth in business and revenue has been reflected in a set of financial parameters and ratios during the year Basic Earnings Per Share (EPS) was Rs.119.67 compared to Rs.102.94 last year, while the Diluted Earnings Per Share was Rs.118.85 compared to Rs.102.20 last year. Return on Equity (RoE) was 20.51% compared to 21.22% last year and Book Value Per Share increased from Rs.551.99 to Rs.707.50. Return on Assets (RoA) is 1.70% compared to 1.68% last year. The net interest margin (NIM) for the year was 3.53% compared to 3.59% last year.

The Bank displayed healthy growth in several key balance sheet parameters for the year ended 31st March 2013. The balance sheet size increased by 19.23% to Rs.340,561 crores on 31st March 2013 from Rs.285,628 crores on 31st March 2012. As on 31st March 2013, the total deposits of the Bank stood at Rs.252,614 crores against Rs.220,104 crores last year, increasing by 14.77% over last year. Savings Bank deposits increased by 23.44% to Rs.63,778 crores, while Current Account deposits increased by 21.55% to Rs.48,322 crores. Low-cost demand deposits: Current Accounts and Savings Bank (CASA) deposits were Rs.112,100 crores as on 31st March 2013 as compared to Rs.91,422 crores last year, rising 22.62% over the year. As on 31st March 2013, CASA deposits constituted 44.38% of total deposits as compared to 41.54% last year. On a daily average basis, Savings Bank deposits increased by 20.26% to Rs.52,243 crores, while Current Account deposits increased by 4.73% to Rs.28,698 crores. The percentage share of CASA in total deposits, on a daily average basis, was 36.28% compared to 37.65% last year. In order to broaden the term deposit base, the Bank continued to focus on increasing the share of retail term deposits in total term deposits. As on 31st March 2013, the retail term deposits grew 24.37% and stood at Rs.59,531 crores, constituting 42.37% of the total term deposits compared to 37.20% last year. Total advances of the Bank were Rs.196,966 crores as on 31st March 2013, increasing by 16.03% from Rs.169,760 crores as on 31st March 2012. Of this, corporate advances (comprising large, infrastructure and mid-corporate accounts) increased 7.89% to Rs.98,239 crores and SME loans increased 25.75% to Rs.29,922 crores. Agricultural lending (including micro finance) stood at Rs.14,845 crores, decreasing 14.39% over the last year. Retail loans increased by 43.62% to Rs.53,960 crores. The percentage share of retail loans to total advances has increased to 27.40% from 22.13% last year. The retail loan portfolio continues to be focused on secured products. However, a diversification into multi- product portfolio continued during the year. Secured loans accounted for 87.14% of the total retail loans. The total investments of the Bank increased by 22.05% to Rs.1 13,737 crores and investments in government and approved securities, held mainly for SLR requirement, increased by 23.89% to Rs.72,518 crores. Other investments, including corporate debt securities, increased by 18.93% to Rs.41,219 crores. As on 31st March 2013, the total assets of the Bank''s overseas branches stood at Rs.37,152 crores, constituting 10.91% of the Bank''s total assets.

The Bank continued to enlarge its distribution network by widening its geographical reach, which is seen to be critical for tapping low-cost CASA deposits, lending to retail, agriculture and SME segments and the distribution of third- party products. During the year under review, the Bank added 325 new branches, taking the total number of branches and extension counters (ECs) to 1,947, of which 883 branches/ECs are in semi-urban and rural areas and 1,064 branches are in metropolitan and urban areas. The Bank is present in all the States and Union Territories (except Lakshadweep), covering a total of 1,263 centres. The Bank also increased its ATM network to 1 1,245, as compared to 9,924 ATMs last year. Apart from this, the Bank has an overseas presence in the form of branches at Singapore, Hong Kong, DIFC (Dubai International Financial Centre) and Colombo and representative offices at Shanghai, Dubai and Abu Dhabi.

CAPITAL & RESERVES

During the year under review, the Bank raised capital in the form of equity and debt to support future growth. It raised Tier I capital in the form of equity capital through a Qualified Institutional Placement (QIP) and a preferential allotment of equity shares to the promoters of the Bank. The Bank mobilised an aggregate of Rs.5,537.47 crores through this offering, by issuing 34,000,000 equity shares through a QIP offering and 5,837,945 shares to promoters (Life Insurance Corporation of India, General Insurance Corporation of India, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited) in order to maintain their percentage shareholding of the Bank''s promoters at the pre-QIP offering levels. The equity shares offered under the QIP offering and preferential allotment were both priced at Rs.1,390 per share.

During the year, the Bank also raised capital of Rs.2,500 crores by way of sub-ordinated bonds (unsecured redeemable non- convertible debentures) qualifying as Tier II capital. These measures have significantly strengthened the capital position of the Bank, particularly core Tier I capital, providing adequate support for future growth. The Bank is well capitalised with an overall capital adequacy ratio (CAR) of 17.00% at the end of the year, well above the benchmark requirement of 9% stipulated by Reserve Bank of India (RBI). Of this, Tier I CAR was 12.23% against 9.45% last year, while the Tier II CAR was at 4.77% against 4.21% last year. During the year, a total of 2,822,571 equity shares were allotted to employees of the Bank/subsidiary companies pursuant to exercise of options under its Employee Stock Option Scheme. The paid-up capital of the Bank rose to Rs.467.95 crores, as compared to Rs.413.20 crores last year. The shareholding pattern of the Bank as of 31st March 2013 was as under:

Sr. No. Name of Shareholders % of Paid-up Capital

i. Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) 20.78

ii. Life Insurance Corporation of India (LIC) (1) 9.26

iii. General Insurance Corporation and four PSU insurance companies 3.84

iv. Overseas investors (including FIIs/OCBs/NRIs) 41.13

v. Foreign Direct Investment (GDR issue) 8.16

vi. Other Indian financial institutions/mutual funds/banks 4.50

vii. Others 12.33

Total 100.00

(1) As per Benpos dated 31st March 2013, save and except 44,445,460 shares equivalent to 9.26% of the total paid-up capital of the Bank held by LIC, all other holdings are not considered for arriving at the Promoter''s shareholding

The Bank''s shares are listed on the NSE and the BSE. The GDRs issued by the Bank are listed on the London Stock Exchange (LSE). The Bonds issued by the Bank under the MTN programme are listed on the Singapore Stock Exchange. The listing fees relating to all stock exchanges for the current year have been paid.

DIVIDEND

The Diluted Earnings Per Share (EPS) for 2012-13 rose to Rs.118.85 from Rs.102.20 last year. In view of the overall performance of the Bank and the objective of rewarding shareholders with cash dividends while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a higher dividend of Rs.18.00 per equity share, compared to Rs.16.00 per equity share declared last year. This dividend shall be subject to tax on dividend to be paid by the Bank. This increase reflects our confidence in the Bank''s ability to consistently grow earnings over time.

BOARD OF DIRECTORS

During the year, some changes in the composition of the Board of Directors have taken place. The term of Dr. Adarsh Kishore as non-executive Chairman of the Bank ended on 7th March 2013. Dr. Sanjiv Misra, former Secretary, Department of Expenditure, Ministry of Finance, Government of India, former member of Finance Commission and nominee of the Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) was appointed as the non-executive Chairman with effect from 8th March 2013. Reserve Bank of India vide its letter dated 6th March 2013 has granted approval for the appointment of Dr. Sanjiv Misra as the Chairman of the Bank.

Shri Somnath Sengupta and Shri V. Srinivasan who were inducted in the Board, took charge as the Executive Directors of the Bank with effect from 15th October 2012. Smt. Ireena Vittal, Independent Strategic Advisor was appointed as an Additional Independent Director of the Bank with effect from 3rd November 2012. Shri Rohit Bhagat, former Chairman, Asia Pacific, BlackRock Inc. was appointed as an Additional Independent Director of the Bank with effect from 16th January 2013. Smt. Rama Bijapurkar ceased to be a director with effect from 17th January 2013 on completion of her term of eight years pursuant to provisions of section 10A(2A)(i) of the Banking Regulation Act, 1949. The Board of Directors places on record its deep appreciation and gratitude to Dr. Adarsh Kishore for his valuable contribution as Chairman of the Bank. The Board also places on record its appreciation to Smt. Rama Bijapurkar for the valuable services rendered by her during her tenure as Director of the Bank.

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Bank, Shri S. B. Mathur, Shri Prasad R. Menon and Shri R. N. Bhattacharyya retire by rotation at the Nineteenth Annual General Meeting and, being eligible, offer themselves for re-appointment as Directors of the Bank.

SUBSIDIARIES

As on 31st March 2013, the Bank has seven subsidiaries: Axis Capital Ltd. (formerly Axis Securities and Sales Ltd.), Axis Finance Private Ltd. (formerly Enam Finance Private Ltd.), Axis Private Equity Ltd., Axis Trustee Services Ltd., Axis Asset Management Company Ltd., Axis Mutual Fund Trustee Ltd., and Axis U.K. Ltd.

Axis Capital Ltd. was primarily in the business of marketing of credit cards and retail asset products and also provides retail broking services. Pursuant to receipt of regulatory approvals to the Revised Scheme of Arrangement, certain businesses of Enam Securities Private Ltd. were demerged into Axis Capital Ltd., with effect from 20th October 2012. Consequently, Axis Capital Ltd. now also provides services relating to investment banking, equity capital markets, institutional stock broking, mergers and acquisition, etc. During the year, the Bank also acquired the entire share capital of Axis Finance Private Ltd., a wholly owned subsidiary of Axis Capital Ltd., and pursuant to such acquisition, Axis Finance Private Ltd. has become a direct subsidiary of the Bank. Axis Finance Private Ltd., is a NBFC and carries on the activities of loan against shares, margin funding, IPO financing etc. Axis Private Equity Ltd. primarily carries on the activities of managing equity investments and provides venture capital support to businesses. Axis Trustee Services Ltd. is engaged in trusteeship activities (e.g. acting as debenture trustee and as trustee to various securitisation trusts). Axis Asset Management Company Ltd. undertakes the activities of managing the mutual fund business. Axis Mutual Fund Trustee Ltd. was formed to act as the trustee for the mutual fund business. Axis U.K. Ltd. had filed an application with the Financial Services Authority (FSA), UK for a banking license and to create the necessary infrastructure for banking business. Till the 31st March 2013, pending receipt of the approval, it did not commence operations. Approval has been received from the FSA on the 19th April, 2013 to commence banking operations and subsequently, the name of the Company has been changed to Axis Bank UK Ltd.

In terms of the General Circular No. 2/2011 dated 8th February 2011 issued by the Ministry of Corporate Affairs, Government of India, the copies of Directors'' Reports, Auditors'' Reports and the financial statements of the seven subsidiaries have not been attached to the accounts of the Bank for the financial year ended 31st March 2013. Any shareholder who may be interested in obtaining a copy of the aforesaid documents may write to the Company Secretary at the Registered Office of the Bank. These documents will also be available for examination by shareholders of the Bank at its Registered Office. The documents related to individual subsidiaries will similarly be available for examination at the respective registered offices of the companies. In line with the Accounting Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the consolidated financial results of the Bank along with its subsidiaries for the year ended 31st March 2013 are enclosed as an Annexure to this report.

EMPLOYEE STOCK OPTION PLAN (ESOP)

The Bank has instituted an Employee Stock Option Scheme to enable its employees and the employees of its subsidiaries including Whole-time Directors, to participate in the future growth and financial success of the Bank. Under the Scheme 40,517,400 options can be granted to employees. The employee stock option scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of the employee''s work performance and is approved by the Board of Directors.

Over the period February 2001 to June 2010, the Bank''s shareholders approved plans for the issuance of stock options to employees on five occasions. Under the first two plans and upto the grant made on 29th April 2004, the option conversion price was set at the average daily high-low price of the Bank''s equity shares traded during the 52 weeks preceding the date of grant at the Stock Exchange which has had the maximum trading volume of the Bank''s equity share during that period. Under the third plan and with effect from the grant made by the Bank on 10th June 2005, the pricing formula has been changed to the closing price on the day previous to the grant date. The Remuneration and Nomination Committee granted options under these plans on twelve occasions: 1,1 18,925 during 2000-01, 1,779,700 during 2001-02, 2,774,450 during 2003-04, 3,809,830 during 2004-05, 5,708,240 during 2005-06, 4,695,860 during 2006-07, 6,729,340 during 2007-08, 2,677,355 during 2008- 09, 4,413,990 during 2009-10, 2,915,200 during 2010-11, 3,268,700 during 2011-12 and 2,516,000 during 2012-13. The options granted, which are non-transferable, vest at rates of 30%, 30% and 40% on each of three successive anniversaries following the grant, subject to standard vesting conditions, and must be exercised within three years of the date of vesting. As of 31st March 2013, 27,190,658 options had been exercised and 10,865,025 options were in force.

Other statutory disclosures as required by the revised SEBI guidelines on ESOPs are given in the Annexure to this report.

CORPORATE GOVERNANCE

The Bank is committed to achieve the highest standards of corporate governance, and it aspires to benchmark itself with international best practices in this regard. The corporate governance practices followed by the Bank are enclosed as an Annexure to this report.

The Bank has adopted a major part of the recommendations contained in the Corporate Governance Voluntary Guidelines 2009 issued by the Ministry of Corporate Affairs and is examining the possibility of implementing the remaining recommendations.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Board of Directors hereby declares and confirms that:

- The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations have been furnished, relating to material departures.

- Accounting policies have been selected and applied consistently and reasonably, and prudent judgements and estimates have been made so as to give a true and fair view of the state of affairs of the Bank and of the Profit and Loss of the Bank for the financial year ended 31st March 2013.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Companies (Amendment) Act, 2000, for safeguarding the assets of the Bank, and for preventing and detecting fraud and other irregularities.

- The annual accounts have been prepared on a going concern basis.

- The Bank has in place a system to ensure compliance of all laws applicable to the Bank.

STATUTORY DISCLOSURE

Considering the nature of activities of the Bank, the provisions of Section 217(1)(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of technological upgradation in a cost-effective manner for delivering quality customer service.

The statement containing particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the rules hereunder is given in an Annexure appended hereto and forms part of this report. In terms of Section 219(1)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Bank.

BUSINESS RESPONSIBILITY REPORT

The Securities and Exchange Board of India (SEBI) through its circular CIR/CFD/DIL/8/2012 dated 13th August 2012 has mandated the inclusion of Business Responsibility (BR) Report as part of the Annual Report for top 100 listed entities based on market capitalisation at Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) as on 31st March 2012. The Business Responsibility Report of the Bank has been enclosed as an Annexure to this report.

AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants, Statutory Auditors of the Bank will retire on the conclusion of the Nineteenth Annual General Meeting and are eligible for re-appointment, subject to the approval of Reserve Bank of India and the shareholders. As recommended by the Audit Committee of the Board, the Board of Directors has proposed the appointment of M/s Deloitte Haskins & Sells, Chartered Accountants as Statutory Auditors for the financial year 2013-14. The shareholders are requested to consider their appointment on the remuneration to be decided by the Audit Committee of the Board.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, other government and regulatory authorities, financial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the shareholders and also places on record its sincere thanks to its valued clients and customers for their continued patronage. The Board also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, teamwork, commitment and initiative, which has led to the Bank making commendable progress in today''s challenging environment.

For and on behalf of the Board of Directors

Place : Mumbai Sanjiv Misra

Date : 24th April, 2013 Chairman


Mar 31, 2012

The Board of Directors is pleased to present the Eighteenth Annual Report of the Bank together with the Audited Statement of Accounts, Auditors' Report and the report on business and operations of the Bank for the financial year ended 31st March 2012.

FINANCIAL PERFORMANCE

The financial highlights for the year under review are presented below:

(Rs in crores)

PARTICULARS 2011-12 2010-11 GROWTH

Deposits 220,104.30 189,237.80 16.31%

Out of which

- Savings Bank Deposits 51,667.96 40,850.31 26.48%

- Current Account Deposits 39,754.07 36,917.09 7.68%

Advances 169,759.54 142,407.83 19.21% Out of which

- Retail Advances 37,570.33 27,759.23 35.34%

- Non-retail Advances 132,189.21 114,648.60 15.30%

Total Assets/Liabilities 285,627.79 242,713.37 17.68%

Net Interest Income 8,017.75 6,562.99 22.17%

Other Income 5,420.22 4,632.13 17.01% Out of which

- Trading Profit (1) 361.56 496.97 (27.25%)

- Fee and other income 5,058.66 4,135.16 22.33%

Operating Expenses (excluding depreciation) 5,664.86 4,489.84 26.17%

Profit before depreciation, provisions and tax 7,773.11 6,705.28 15.93%

Depreciation 342.24 289.59 18.18%

Provision for Tax 2,045.63 1,747.17 17.08%

Other Provisions and Write offs 1,143.03 1,280.03 (10.70%)

Net Profit 4,242.21 3,388.49 25.19%

Appropriations:

Transfer to Statutory Reserve 1,060.55 847.12 25.19%

Transfer to/(from) Investment Reserve - (14.94) -

Transfer to Capital Reserve 51.90 4.76 -

Transfer to/(from) General Reserve - 338.85 -

Proposed Dividend 770.08 670.36 14.88%

Surplus carried over to Balance Sheet 2,359.68 1,542.34 52.99%

(1) Excluding Merchant Exchange Profit

KEY PERFORMANCE INDICATORS 2011-12 2010-11

Interest Income as a percentage of working funds* 8.71% 7.49%

Non-Interest Income as a percentage of working funds* 2.15% 2.29%

Net Interest Margin 3.59% 3.65%

Return on Average Net Worth 21.22% 20.13%

Operating Profit as a percentage of working funds* 2.94% 3.17%

Return on Average Assets 1.68% 1.68%

Profit per employee** Rs 14.34 lacs Rs 14.35 lacs

Business (Deposits less inter-bank deposits Advances) per employee** Rs 12.76 crores Rs 13.66 crores

Net non-performing assets as a percentage of net customer assets*** 0.25% 0.26%

- Working funds represent average total assets.

** Productivity ratios are based on average number of employees for the year.

*** Customer assets include advances and credit substitutes.

Previous year figures have been regrouped wherever necessary.

The Bank continued to show a steady growth both in business and earnings with a net profit of Rs4,242.21 crores for the year ended 31st March 2012, registering a growth of 25.19% over the net profit of Rs3,388.49 crores last year. The strong growth in earnings was a result of robust business growth across all banking segments indicative of a clear strategic focus. During the year, the Basic Earnings Per Share (EPS) was at Rs102.94 and a Return on Equity (ROE) at 21.22%.

During the year, the total income of the Bank increased by 38.55% to reach Rs27,414.87 crores as compared to Rs19,786.94 crores last year. Operating revenue increased by 20.03% to Rs13,437.97 crores while operating profit increased by 15.82% to Rs7,430.87 crores. The growth in earnings was mainly due to a rise in core income streams such as net interest income (NII) and fee income. NII increased by 22.17% to Rs8,017.75 crores as compared to Rs6,562.99 crores last year. Fee, trading and other income increased by 17.01 % to Rs5,420.22 crores from Rs4,632.13 crores last year. The strong growth in income was partly offset by an increase in operating expenses including depreciation by 25.69% to Rs6,007.10 crores.

During the year, the growth in NII may be attributed to an expansion in the balance sheet size and healthy low-cost Current Account and Savings Bank (CASA) deposits. The total earning assets on a daily average basis increased by 24.30% to Rs223,206 crores, as compared to Rs179,573 crores last year. This was partly offset by a rise in funding costs due to hardening of general interest rates, particularly on term deposits during the year. The steady growth of low-cost CASA deposits, which on a daily average basis increased by 18.96% to Rs70,845 crores from Rs59,551 crores last year, helped in containing the cost of funds. Overall, the daily average cost of funds in the year increased to 6.28% from 4.96% last year. During the year, the cost of deposits increased to 6.47% from 4.96% last year primarily due to an increase in cost of term deposits by 211 basis points (from 6.81 % to 8.92%) as well as the cost of savings bank deposits. During the year, the yield on earning assets increased by 125 basis points to 9.66% from 8.41% last year.

Other income comprising fees, trading profit and miscellaneous income increased by 17.01% to Rs5,420.22 crores in 2011-12 from Rs4,632.13 crores last year and constituted 40.34% of operating revenue of the Bank. Fee income is a significant part of the earnings and is generated from a diverse set of businesses in the Bank. The main sources of fee income are client- based merchant foreign exchange trade, service charges from account maintenance, transaction banking (including cash management services), syndication and placement fees, processing fees from loans and commission on non- funded products (such as letters of credit and bank guarantees), inter-change fees on ATM-sharing arrangements and fee income from the distribution of third-party personal investment products. During the year, proprietary trading profits fell by 27.25% to Rs361.56 crores from Rs496.97 crores last year, owing to adverse market conditions in the debt and equity markets. Miscellaneous income dropped by 3.79%, mainly due to lower recoveries of loans written-off in earlier years. During the year, such recoveries accounted to Rs291.84 crores.

During the year, the operating revenue of the Bank increased by 20.03% to Rs13,437.97 crores, as compared to Rs11,195.12 crores last year. The core income streams (NII, fee and miscellaneous income) constituted 97.31% of the operating revenue, reflecting the stability and sustainability of the Bank's earnings. Operating expenses increased by 25.69% to Rs6,007.10 crores from Rs4,779.43 crores last year, as a result of the growth of the Bank's network and other infrastructure required for supporting the existing and new businesses. The Cost to Income ratio of the Bank was 44.70% compared to 42.69% last year.

During the year, the operating profit of the Bank increased by 15.82% to Rs7,430.87 crores from Rs6,415.69 crores last year. During this period, the Bank created total provisions (excluding provisions for tax) of Rs1,143.03 crores compared to Rs1,280.03 crores last year. Of this, the Bank provided Rs860.43 crores towards loan/investment losses compared to Rs955.12 crores last year, while the provision for standard assets was Rs150.30 crores. The Bank also provided Rs88.86 crores compared to Rs15.06 crores last year against restructured assets. During the year, the Bank restructured loans of Rs1,300.29 crores. The Bank continued to maintain a healthy asset-quality with a ratio of Gross NPAs to gross customer assets of 0.94%, as compared to 1.01 % last year, and a Net NPA ratio (Net NPAs as percentage of net customer assets) of 0.25% compared to 0.26% last year. With higher levels of provisions built over and above regulatory norms during the year, the Bank has maintained its provision coverage to 80.91% (after considering prudential write-offs).

The Bank has also shown an all-round improvement in various financial parameters and ratios during the year. Basic Earnings Per Share (EPS) was Rs102.94 as compared to Rs82.95 last year, while the Diluted Earnings Per Share was Rs102.20 compared to Rs81.61 last year. Return on Equity (RoE) improved to 21.22% from 20.13% last year and Book Value Per Share increased from Rs462.77 to Rs551.99. Return on Assets (RoA) is maintained at 1.68% as last year. The hardening of interest rates led to a contraction in the net interest margin (NIM) by 6 basis points for the year to 3.59% from 3.65% last year. On quarter-on- quarter basis, the NIM was 3.28% in Q1, 3.78% in Q2, 3.75% in Q3 and 3.55% in Q4.

The Bank has shown robust growth in several key balance sheet parameters for the year ended 31st March 2012. The total assets increased by 17.68% to Rs285,628 crores on 31st March 2012 from Rs242,713 crores on 31st March 2011. Total deposits increased by 16.31% and stood at Rs220,104 crores. Savings Bank deposits increased by 26.48% to Rs51,668 crores, while Current Account deposits increased by 7.68% to Rs39,754 crores. Low-cost demand deposits: Current Accounts and Savings Bank (CASA) deposits were Rs91,422 crores as on 31st March 2012, as compared to Rs77,767 crores last year. As on 31st March 2012, CASA deposits constituted 41.54% of total deposits as compared to 41.10% last year. On a daily average basis, Savings Bank deposits increased by 20.43% to Rs43,442 crores, while Current Account deposits increased by 16.71 % to Rs27,403 crores. The percentage share of CASA in total deposits, on a daily average basis, was 37.65% compared to 39.40% last year. The total advances of the Bank increased by 19.21% to Rs169,760 crores. Out of this, corporate advances (comprising large, infrastructure and mid-corporate accounts) increased by 19.93% to Rs91,053 crores and SME loans increased by 11.16% to Rs23,795 crores. Agricultural lending (including micro finance) stood at Rs17,340 crores, increasing 0.11% over the last year. Retail loans increased by 35.34% to Rs37,570 crores. The percentage share of retail loans to total advances has increased to 22.13% from 19.49% last year. The total investments of the Bank increased by 29.45% to Rs93,192 crores and investments in government and approved securities, held mainly for SLR requirement, increased by 32.43% to Rs58,533 crores. Other investments, including corporate debt securities, increased by 24.70% to Rs34,659 crores. As on 31st March 2012, the total assets of the Bank's overseas branches stood at Rs32,302 crores, constituting 11.31% of the Bank's total assets.

During the year, the Bank continued to expand its distribution network to enlarge its reach in geographical centres with potential for growth, especially in the areas with potential for low-cost CASA deposits, lending to retail, agriculture and SME segments and the distribution of third-party products. This year, the Bank has added 231 new branches and 1 extension counter, taking the total number of branches and extension counters (ECs) to 1,622, of which 674 branches/ECs are in semi-urban and rural areas and 948 branches are in metropolitan and urban areas. The Bank is present in all the States and Union Territories (except Lakshadweep), covering a total of 1,050 centres. The Bank has also increased its ATM network to 9,924, as compared to 6,270 ATMs last year. In addition to domestic branches, during the year the Bank opened an international branch office in Colombo, Sri Lanka to finance cross-border trade and manufacturing activities. This is in addition to the existing branches at Singapore, Hong Kong and DIFC (Dubai International Finance Centre) and representative offices at Shanghai, Dubai and Abu Dhabi.

CAPITAL & RESERVES

During the year, the Bank has raised capital of Rs3,425 crores by way of sub-ordinated bonds (unsecured redeemable non-convertible debentures) qualifying as Tier II capital. The raising of this non- equity capital has helped the Bank continue its growth strategy and has strengthened its capital adequacy ratio. The Bank is well capitalised with an overall capital adequacy ratio (CAR) of 13.66% at the end of the year, well above the benchmark requirement of 9% stipulated by Reserve Bank of India (RBI). Of this, Tier I CAR was 9.45%, as against 9.41 % last year, while the Tier II CAR was at 4.21%, as against 3.24% last year.

During the year, a total of 2,658,109 equity shares were allotted to employees of the Bank pursuant to the exercise of options under its Employee Stock Option Scheme. The paid-up capital of the Bank rose to Rs413.20 crores, as compared to Rs410.55 crores last year. The shareholding pattern of the Bank as of 31st March 2012 was as under:

Sr. No. Name of Shareholders % of Paid-up Capital

i. Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) 23.53

ii. Life Insurance Corporation of India (LIC) 9.69(1)

iii. General Insurance Corporation and four PSU insurance companies 4.16

iv. Overseas investors (including FIIs/OCBs/NRIs) 33.19

v. Foreign Direct Investment (GDR issue) 8.54

vi. Other Indian financial institutions/mutual funds/banks 6.45

vii. Others 14.44

Total 100.00

(1) Save and except 4,00,40,156 shares equivalent to 9.69% of the total paid up capital of the Bank held by LIC, all other holdings are not considered for arriving at the Promoter's shareholding.

The Bank's shares are listed on the NSE and the BSE. The GDRs issued by the Bank are listed on the London Stock Exchange (LSE). The Bonds issued by the Bank under the MTN programme are listed on the Singapore Stock Exchange. The listing fees relating to all stock exchanges for the current year have been paid.

DIVIDEND

The Diluted Earnings Per Share (EPS) for 2011-12 has risen to Rs102.20 from Rs81.61 last year. In view of the overall performance of the Bank and the objective of rewarding shareholders with cash dividends while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a higher dividend of Rs16.00 per equity share, compared to Rs14.00 per equity share declared last year. This dividend shall be subject to tax on dividend to be paid by the Bank. This increase reflects our confidence in the Bank's ability to consistently grow earnings over time.

BOARD OF DIRECTORS

During the year, some changes in the composition of the Board of Directors have taken place. Shri J. R. Varma ceased to be a Director of the Bank at the conclusion of the last Annual General Meeting with effect from 17th June 2011. Shri S. K. Roongta, resigned as a Director of the Bank with effect from 20th June 2011. Shri R. B. L. Vaish tendered his resignation as a Director on completion of his tenure as LIC Nominee with effect from 5th September 2011. Shri S. K. Chakrabarti, Deputy Managing Director, retired from the services of the Bank on 30th September 2011 and accordingly ceased to be a Director of the Bank with effect from 1st October 2011. Shri M. V. Subbiah resigned as a director with effect from 26th April, 2012. Prof. Samir K. Barua, Director, Indian Institute of Management, Ahmedabad was appointed as an Additional Independent Director of the Bank with effect from 22nd July 2011. Shri A. K. Dasgupta was nominated by LIC as its Nominee Director in place of Shri R. B. L. Vaish and was accordingly appointed as an Additional Director of the Bank with effect from 5th September 2011. Shri Som Mittal, President of NASSCOM was appointed as an Additional Independent Director of the Bank with effect from 22nd October 2011. We report with sadness the demise of Dr. R. H. Patil who passed away on 12th April 2012. The Board of Directors places on record its deep appreciation and gratitude to Dr. R. H. Patil, Shri M. V. Subbiah, Shri J. R. Varma, Shri S. K. Roongta, Shri R. B. L. Vaish and Shri S. K. Chakrabarti for the valuable services rendered by them during their tenure as Directors of the Bank.

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Bank, Smt. Rama Bijapurkar and Shri V. R. Kaundinya retire by rotation at the Eighteenth Annual General Meeting and, being eligible, offer themselves for re-appointment as Directors of the Bank.

The Board of Directors of the Bank at its meeting held on 13th February 2012, has re-appointed Smt. Shikha Sharma as Managing Director & CEO for a further period of three years i.e. from 1st June 2012 till 31st May 2015. The re-appointment is subject to approval of Reserve Bank of India and the shareholders. Further, the Board of Directors of the Bank at its meeting held on 27th April, 2012, has decided to appoint Shri V. Srinivasan and Shri Somnath Sengupta, Executive Directors of the Bank as the Whole-time Directors of the Bank with effect from the date as may be approved by RBI.

SUBSIDIARIES

The Bank has set up six wholly-owned subsidiaries: Axis Securities and Sales Ltd., Axis Private Equity Ltd., Axis Trustee Services Ltd., Axis Asset Management Company Ltd., Axis Mutual Fund Trustee Ltd., and Axis U.K. Ltd.

Axis Securities and Sales Ltd. is primarily in the business of marketing of credit cards and retail asset products and also provides retail broking services. The primary objective of Axis Securities and Sales Ltd. is to build a specialised force of sales personnel and optimise operational efficiency by providing greater control over the sales functions, as compared to a Direct Sales Agent (DSA) model as well as undertake retail broking business. Axis Private Equity Ltd. primarily carries on the activities of managing equity investments and provides venture capital support to businesses. Axis Trustee Services Ltd. is engaged in trusteeship activities (e.g. acting as debenture trustee and as trustee to various securitisation trusts). Axis Asset Management Company Ltd. undertakes the activities of managing the mutual fund business. Axis Mutual Fund Trustee Ltd. was formed to act as the trustee for the mutual fund business. Axis U.K. Ltd. is a private limited company registered in the UK. It was formed with the main purpose of filing an application with Financial Services Authority (FSA), UK for a banking license in the UK and for the creation of necessary infrastructure for the subsidiary to commence banking business in the UK. As of 31st March 2012, Axis U.K. Ltd. has not commenced operations.

In terms of the General Circular No. 2/2011 dated 8th February 2011 issued by the Ministry of Corporate Affairs, Government of India, the copies of Directors' Reports, Auditors' Reports and the financial statements of the six subsidiaries have not been attached to the accounts of the Bank for the financial year ended 31st March 2012. Any shareholder who may be interested in obtaining a copy of the aforesaid documents may write to the Company Secretary at the Registered Office of the Bank. These documents will also be available for examination by shareholders of the Bank at its Registered Office. The documents related to individual subsidiaries will similarly be available for examination at the respective registered offices of the companies. In line with the Accounting Standard 21 (AS-21) issued by the Institute of Chartered Accountants of India, the consolidated financial results of the Bank along with its subsidiaries for the year ended 31st March 2012 are enclosed as an Annexure to this report.

PROPOSED ACQUISITION OF ENAM SECURITIES PVT. LTD.

On 17th November, 2010, the Board of Directors of the Bank had approved the acquisition of certain financial services business undertaken by Enam Securities Private Limited (ESPL) directly and through its wholly owned subsidiaries, by Axis Securities and Sales Limited (ASSL), a wholly owned subsidiary of the Bank by way of a demerger. However, pursuant to conditions prescribed by the Reserve Bank of India, certain modifications have been carried out to the demerger structure in terms of a revised Scheme of Arrangement under Sections 391-394 and other relevant provisions of the Companies Act, 1956. Accordingly, the acquisition will now comprise (a) a demerger of the financial services businesses from ESPL to the Bank, in consideration of which the Bank will issue shares to the shareholders of ESPL, and (b) immediately upon completion of the demerger under the Scheme, a simultaneous sale of the financial services businesses will be undertaken from the Bank to ASSL for a cash consideration, with both the aforesaid steps occurring simultaneously. The Reserve Bank of India has on 30th March, 2012, conveyed its no objection to the Scheme. Further, on 27th April, 2012, the Board of Directors of the Bank have approved the reassessment of the valuation of the ESPL business at Rs1,396 crores and consequently, in consideration for the demerger of the financial services business of ESPL, the Bank will issue shares in the ratio of 5 equity shares of the Bank (aggregating 12,090,000 equity shares) of the face value of Rs10 each for every 1 equity share (aggregating 2,418,000 equity shares) of Rs10 each held by the shareholders of ESPL. The sale of the financial services business will be simultaneously undertaken from the Bank to ASSL for a cash consideration of Rs274 crores only. The appointed date under the Scheme is 1st April, 2010, and the parties shall proceed with filing the Revised Scheme and other necessary documents with the relevant High Courts and other regulatory authorities for their approval.

EMPLOYEE STOCK OPTION PLAN (ESOP)

The Bank has instituted an Employee Stock Option Scheme to enable its employees and the employees of its subsidiaries including Whole-time Directors, to participate in the future growth and financial success of the Bank. Under the Scheme 40,517,400 options can be granted to employees. The employee stock option scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of the employee's work performance and is approved by the Board of Directors.

The Bank's shareholders approved plans for the issuance of stock options to employees in February 2001, June 2004, June 2006, June 2008 and June 2010. Under the first two plans and upto the grant made on 29th April 2004, the option conversion price was set at the average daily high-low price of the Bank's equity shares traded during the 52 weeks preceding the date of grant at the Stock Exchange which has had the maximum trading volume of the Bank's equity share during that period. Under the third plan and with effect from the grant made by the Bank on 10th June 2005, the pricing formula has been changed to the closing price on the day previous to the grant date. The Remuneration and Nomination Committee granted options under these plans on eleven occasions: 1,118,925 during 2000-01, 1,779,700 during 2001-02, 2,774,450 during 2003-04, 3,809,830 during 2004-05, 5,708,240 during 2005-06, 4,695,860 during 2006-07, 6,729,340 during 2007-08, 2,677,355 during 2008-09, 4,413,990 during 2009-10, 2,915,200 during 2010-11 and 3,268,700 during 2011-12. The options granted, which are non-transferable, vest at rates of 30%, 30% and 40% on each of three successive anniversaries following the grant, subject to standard vesting conditions, and must be exercised within three years of the date of vesting. As of 31st March 2012, 24,368,087 options had been exercised and 11,428,248 options were in force.

Other statutory disclosures as required by the revised SEBI guidelines on ESOPs are given in the Annexure to this report.

CORPORATE GOVERNANCE

The Bank is committed to achieve the highest standards of corporate governance, and it aspires to benchmark itself with international best practices in this regard. The corporate governance practices followed by the Bank are enclosed as an Annexure to this report.

The Bank has adopted a major part of the recommendations contained in the Corporate Governance Voluntary Guidelines 2009 issued by the Ministry of Corporate Affairs and is examining the possibility of implementing the remaining recommendations.

DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors hereby declares and confirms that:

- The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations have been furnished, relating to material departures.

- Accounting policies have been selected and applied consistently and reasonably, and prudent judgements and estimates have been made so as to give a true and fair view of the state of affairs of the Bank and of the Profit and Loss of the Bank for the financial year ended 31st March 2012.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Companies (Amendment) Act, 2000, for safeguarding the assets of the Bank, and for preventing and detecting fraud and other irregularities.

- The annual accounts have been prepared on a going concern basis.

- The Bank has in place a system to ensure compliance of all laws applicable to the Bank.

STATUTORY DISCLOSURE

Considering the nature of activities of the Bank, the provisions of Section 217(1 )(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of technological upgradation in a cost-effective manner for delivering quality customer service.

The statement containing particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the rules hereunder is given in an Annexure appended hereto and forms part of this report. In terms of Section 219(1 )(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Bank.

AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants, Statutory Auditors of the Bank will retire on the conclusion of the Eighteenth Annual General Meeting and are eligible for re-appointment, subject to the approval of Reserve Bank of India and the shareholders. As recommended by the Audit Committee of the Board, the Board of Directors has proposed the appointment of M/s Deloitte Haskins & Sells, Chartered Accountants as Statutory Auditors for the financial year 2012-13. The shareholders are requested to consider their appointment on the remuneration to be decided by the Audit Committee of the Board.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, other government and regulatory authorities, financial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the shareholders and also places on record its sincere thanks to its valued clients and customers for their continued patronage. The Board also expresses its appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, teamwork, commitment and initiative, which has led to the Bank making commendable progress in today's challenging environment.

For and on behalf of the Board of Directors

Place : Mumbai Adarsh Kishore

Date : 27th April, 2012 Chairman


Mar 31, 2011

The Board of Directors is pleased to present the Seventeenth Annual Report of the Bank together with the Audited Statement of Accounts, Auditors Report and the report on business and operations of the Bank for the financial year ended 31 March, 2011.

FINANCIAL PERFORMANCE

The financial highlights for the year under review are presented below:

(Rs. in crores)

PARTICULARS 2010-11 2009-10 Growth

Deposits 189,237.80 141,300.22 33.93%

Out of which

- Savings Bank Deposits 40,850.31 33,861.80 20.64%

- Current Account Deposits 36,917.09 32,167.74 14.76%

Advances 142,407.83 104,340.95 36.48%

Out of which

Retail Advances 27,759.23 20,820.73 33.32%

Non-retail Advances 114,648.60 83,520.22 37.27%

Total Assets/Liabilities 242,713.37 180,647.85 34.36%

Net Interest Income 6,562.995,00 4.49 31.14%

Other Income 4,632.13 3,945.78 17.39%

Out of which

- Trading Profit 496.97 822.38 (39.57%)

. Fee & other income 4,135.16 3,123.40 32.39%

Operating Expenses excl. depreciation 4,489.8 43,475.40 29.19%

Profit before depreciation, provisions and tax 6,705.28 5,474.87 22.47%

Depreciation 289.59 234.32 23.59%

Provision for Tax 1,747.17 1,336.83 30.70%

Other Provisions & Write offs 1,280.03 1,389.19 (7.86%)

Net Profit 3,388.49 2,514.53 34.76%

Appropriations:

Transfer to Statutory Reserve 847.126 28.63 34.76%

Transfer to/(from) Investment Reserve (14.94) 14.88 -

Transfer to Capital Reserve 4.76 223.92 (97.87%)

Transfer to General Reserve 338.85 0.31 -

Proposed Dividend 670.36 567.45 18.14%

Surplus carried over to Balance Sheet 1,542.34 1,079.34 42.90%

(1) Excluding Merchant Exchange Profit

KEY PERFORMANCE INDICATORS 2010-11 2009-10

Interest Income as a percentage of working funds* 7.49% 7.73%

Non-Interest Income as a percentage of working funds* 2.29% 2.62%

Net Interest Margin 3.65% 3.75%

Return on Average Net Worth 20.13% 19.89%

Operating Profit as a percentage of working funds* 3.17% 3.48%

Return on Average Assets 1.68% 1.67%

Profit per employee** 14.35 lacs 11.63 lacs

Business (Deposits less inter-bank deposits + Advances) per employee** 13.66 crores 1.11 crores

Net non performing assets as a percentage of net customer assets *** 0.26% 0.36%

- Working funds represent average total assets.

** Productivity ratios are based on average number of employees for the year. *** Customer Assets include advances and credit substitutes.

Previous year figures have been regrouped wherever necessary.

In 2010-11 both business and earnings grew strongly with the Bank reporting a net profit of Rs.3,388.49 crores for the year ended 31 March, 2011, rising 34.76% over the net profit of Rs.2,514.53 crores in the previous year. The solid growth of business across segments has been reflected in a set of robust financial indicators.

The Banks total income increased 26.97% to reach Rs.19,786.94 crores during 2010- 11, compared to Rs.15,583.80 crores last year. Operating revenue during this period increased 25.08% to Rs.11,195.12 crores while operating profit increased by 22.42% to Rs. 6,415.69 crores. The growth in revenues may be attributed to the performance of the Banks core income streams: net interest income (Nil), fee and other income. Nil increased by 31.14% to Rs.6,562.99 crores from ^5,004.49 crores last year, while fee and other income increased by 17.39% to Rs.4,632.13 crores from ^3,945.78 crores last year. Nil increased by 31.14% as a result of healthy growth of both assets and low-cost Current Account and Savings Bank (CASA) deposits, on a daily average basis. During the year, total earning assets, on a daily average basis, rose 34.70% to Rs.179,573 crores from Rs.133,309 crores last year. A 32.81 % growth of low-cost CASA deposits, on a daily average basis, from ^44,839 crores last year to Rs.59,551 crores, helped the Bank contain funding costs, which had risen in the last quarter of the year due to the hardening of interest rates on term deposits.

Other income comprising fees, trading profit and miscellaneous income also rose 17.39% to ^4,632.13 crores in 2010-11 from Rs.3,945.78 crores last year. Fee income constituted 33.86% of the operating revenue of the Bank and rose 29.59% to Rs.3,790.37 crores from Rs.2,924.96 crores last year. The Bank earns fee income from a diverse set of products and businesses such as client- based merchant foreign exchange trade, service charges from account maintenance, transaction banking including cash management services, syndication and placement fees, processing fees from loans and commission on non-funded products such as letters of credit and bank guarantees, inter-change fees on ATM-sharing arrangements and fee income from the distribution of third-party personal investment products. During the year, proprietary trading profits fell 39.57% to Rs.496.97 crores from Rs.822.38 crores last year, primarily due to adverse market conditions in the debt and equity markets. Miscellaneous income was buoyant, rising 73.75% mainly due to strong recoveries of loans and derivative receivables written-off in previous years. During the year, such recoveries amounted to Rs.325.22 crores compared to Rs.174.43 crores last year.

During the year, the operating revenue of the Bank increased 25.08% to Rs.11,195.12 crores from Rs.8,950.27 crores last year. The core income streams (Nil, fee and miscellaneous income) constituted 95.56% of the operating revenue, reflecting the stability and sustainability of the Banks earnings. Operating expenses increased by 28.84% to ^4,779.43 crores from Rs.3,709.72 crores last year, on the back of the continuing growth of the Banks network and infrastructure required for supporting existing and new businesses. During the year, the Cost: Income ratio was 42.69% compared to 41.45% last year.

During the year, the operating profit of the Bank increased 22.42% to Rs.6,41 5.69 crores from Rs.5,240.55 crores last year. During this period, provisions (excluding provisions for tax) charged to the Profit & Loss account were Rs.1,280.03 crores compared to Rs.1,389.19 crores last year. Of this, provisions for loan losses were ^955.12 crores compared to Rs.1,357.04 crores last year, while the provision for standard assets was Rs.166.16 crores. The Bank accelerated its provisioning requirements in some portfolios as a measure of prudence, increasing the overall provision coverage. The Bank also provided Rs.15.06 crores compared to Rs.56.47 crores last year against restructured assets. During 2010-11, the Bank restructured loans of Rs.404 crores, significantly lower than Rs.1,633 crores last year. The Bank continued to maintain a generally healthy asset-quality with a ratio of Gross NPAs to gross customer assets of 1.01% compared to 1.13% last year and a Net NPA ratio (percentage of Net NPAs as percentage of net customer assets) of 0.26% compared to 0.36% last year. With higher levels of provisions, built over and above regulatory norms during the year, the Bank has further improved its provision-coverage to 80.90% (after considering prudential write-offs) from 72.38% last year.

Due to a consistent trajectory of core earnings, there has been an all-round improvement in various financial metrics. The Return on Equity (RoE) improved to 20.13% from 19.89% last year. Basic Earnings Per Share (EPS) rose to Rs.82.95 from Rs.65.78 last year, while the Diluted Earnings Per Share was Rs.81.61 compared to Rs.64.31 last year. The Book Value Per Share increased from Rs.395.99 on 31 March, 2010 to Rs.462.77 on 31 March, 2011, while Return on Assets (RoA) improved to 1.68% from 1.67% last year. Employee productivity has also improved with Profit per Employee increasing to Rs.14.35 lacs from ^11.63 lacs last year and Business per Employee increasing to Rs.13.66 crores from Rs.11.11 crores last year. Hardening of interest rates on Term Deposits in the final quarter of the year pushed up the cost of funds, compressing the Net interest Margin by 10 basis points of the year to 3.65% from 3.75% last year. The quarterly NIMs during the year were as follows: 3.71% in Q1, 3.68% in Q2, 3.81% in Q3 and 3.44% in Q4.

The total assets of the Bank were Rs.242,713 crores, rising 34.36% from
As a conscious strategy of building a network of branches and ATMs with effective penetration, the Bank continued to enlarge its geographical coverage of centres with potential for growth, especially in the areas with potential for low- cost CASA deposits, lending to retail, agriculture and SME segments and the distribution of third party products. During the year, 407 new branches were added to the Banks network taking the total number of branches and extension counters

(ECs) to 1,390. Of these, 564 branches/ECs are in semi-urban and rural areas and 826 branches/ECs are in metropolitan and urban areas. The Bank is present in all states and Union Territories (except Lakshadweep) covering 921 centres. The ATM network of the Bank increased from 4,293 last year to 6,270 as on 31 March, 2011. During the year, the Bank also opened a Representative Office in Abu Dhabi. This was in addition to the existing branches at Singapore, Hong Kong and DIFC (Dubai International Financial Centre) and representative offices at Shanghai and Dubai.

CAPITAL & RESERVES

The Bank is well capitalised at present with an overall Capital Adequacy Ratio (CAR) of 12.65% at the end of the year, well above the benchmark requirement of 9% stipulated by Reserve Bank of India. Of this, Tier I CAR was 9.41 % against 11.18% a year earlier, while the Tier II CAR was at 3.24% against 4.62% a year earlier.

During the year under review, 5,371,724 equity shares were allotted to employees of the Bank pursuant to the exercise of options under its Employee Stock Option Scheme. The paid-up capital of the Bank as on 31 March, 2011 rose toRs.410.55 crores from ^405.17 crores as on 31 March, 2010. The shareholding pattern of the Bank as of 31 March, 2011 is stated below.

Sr.No. Name of Shareholders % of Paid Up Capital

i. Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) 23.68

ii. Life Insurance Corporation of India 9.56

iii. General Insurance Corporation and four PSU Insurance Companies 3.97

iv. Overseas Investors including Flls/OCBs/NRIs 37.89

v. Foreign Direct Investment (GDR issue) 9.19

vi. Other Indian Financial Institutions/ Mutual Funds/Banks 5.12

vi Others 10.59

Total 100.00

The Banks shares are listed on the NSE and the BSE. The GDRs issued by the Bank are listed on the London Stock Exchange (LSE). The Bonds issued by the Bank under the MTN programme are listed on the Singapore Stock Exchange. The listing fees relating to all stock exchanges for the current year have been paid. With effect from 26 March, 2001, the shares of the Bank have been included and traded in the BSEs Group A stocks. With effect from 27 March, 2009, the Banks shares have been included and traded as part of the main NIFTY Index of the NSE. Earlier, the shares of the Bank were part of the NIFTY Junior Index of the NSE.

DIVIDEND

In view of the overall performance of the Bank and the objective of rewarding shareholders with cash dividends while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a higher dividend of Rs.14.00 per equity share, compared to Rs.12.00 per equity share declared for 2009-10. This dividend shall be subject to tax on dividend to be paid by the Bank. This increase reflects our confidence in the Banks ability to consistently grow earnings over time.

BOARD OF DIRECTORS

During the year, some changes have taken place in the composition of the Board of Directors. Shri M. S. Sundara Rajan, former Chairman and Managing Director of Indian Bank, was appointed as an Additional Independent Director with effect from 8 June, 2010. He resigned with effect from 22 February, 2011. Shri S. K. Roongta, former Chairman of SAIL, was appointed as an Additional Independent Director with effect from 15 July, 2010. Shri S. K. Chakrabarti, former Executive Director (Retail Banking, SME and Agri.) of the Bank was appointed as the Deputy Managing Director of the Bank with effect from 27 September, 2010. Shri Prasad R. Menon, former Managing Director, Tata Power Limited, was appointed as an Additional Independent Director with effect from 9 October, 2010. Shri R. N. Bhattacharyya, former IPS officer and nominee of the Specified Undertaking of the Unit Trust of India (SUUTI) was appointed as an Additional Director with effect from 17January, 2011.

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Bank, Shri R. B. L. Vaish and Shri K. N. Prithviraj retire by rotation at the Seventeenth Annual General Meeting and, being eligible, offer themselves for re-appointment as Directors of the Bank. Shri J. R. Varma also retires by rotation but he has expressed his desire not to be re-appointed as his term of continuous period of eight years as Director under the provisions of Section 10-A(2-A)(i) of the Banking Regulation Act, 1949, comes to an end with effect from 25 June, 2011.

SUBSIDIARIES

The Bank has set up six wholly-owned subsidiaries: Axis Securities and Sales Ltd., Axis Private Equity Ltd., Axis Trustee Services Ltd., Axis Asset Management Company Ltd., Axis Mutual Fund Trustee Ltd. and Axis U.K. Ltd.

Axis Securities and Sales Ltd. is primarily in the business of marketing of credit cards and retail asset products as well as retail broking. The objective of this subsidiary is to build a specialised force of sales personnel and optimise operational efficiency by providing greater control over the sales functions, as compared to a Direct Sales Agent (DSA) model, as well as undertake retail broking business. Axis Private Equity Ltd., primarily carries on the activities of managing equity investments and provides venture capital support to businesses. Axis Trustee Services Ltd. is engaged in trusteeship activities (e.g. acting as debenture trustee and as trustee to various securitisation trusts). Axis Asset Management Company Ltd. primarily undertakes the activities of managing a mutual fund business and the Axis Mutual Fund Trustee Ltd. was set up to act as the trustee for the mutual fund business. On 7 March, 2011, the Bank has incorporated a new subsidiary namely Axis U.K. Ltd. as a private limited company registered in the United Kingdom (UK) with the main purpose of filing an application with Financial Services Authority (FSA), UK for a banking license in the UK and for the creation of necessary infrastructure for the subsidiary to commence banking business in the UK. As on 31 March, 2011, Axis U.K. Ltd. had not commenced operations.

In terms of an exemption received from the Ministry of Corporate Affairs, Government of India through its letter no. 47/19/2011-CL-lll dated 21 January, 2011, under Section 212(8) of the Companies Act, 1956, copies of Directors Reports, Auditors Reports and the financial statements of the five subsidiaries (Axis Securities and Sales Ltd., Axis Private Equity Ltd., Axis Trustee Services Ltd., Axis Asset Management Company Ltd. and Axis Mutual Fund Trustee Ltd.) have not been attached to the accounts of the Bank for the financial year ended 31 March, 2011. Any shareholder who may be interested in obtaining a copy of the aforesaid documents may write to the Company Secretary at the Registered Office of the Bank. These documents will also be available for examination by shareholders of the Bank at its Registered Office. Documents related to individual subsidiaries will similarly be available for examination at the respective registered offices of the five companies. In line with the Accounting Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the consolidated financial results of the Bank along with its subsidiaries for the year ended 31 March, 2011 are enclosed as an Annexure to this report.

PROPOSED ACQUISITION OF ENAM SECURITIES PVT. LTD. BY AXIS SECURITIES AND SALES LTD.

At their meetings held on 17 November, 2010, the Board of Directors of the Bank, Enam Securities Private Limited (ESPL) and Axis Securities and Sales Limited (ASSL), a wholly-owned subsidiary of the Bank, approved the acquisition of certain businesses undertaken by ESPL directly and through its wholly owned subsidiaries, by ASSL by way of a demerger. It is envisaged that these businesses will be transferred to ASSL, pursuant to a Scheme of Arrangement, as may be approved by the relevant High Courts under Sections 391 to 394 and other relevant provisions of the Companies Act, 1956 and subject to receipt of necessary requisite approvals. The appointed date for the purpose of the Demerger under the Scheme shall be 1 April, 2010. The valuation of ESPL business was assessed at ^2,067 cores in consideration for the demerger, the Bank will issue shares in the ratio of 5.7 equity shares of the Bank (aggregating 13,782,600 equity shares) of the face value of Rs.10 for every 1 equity share (aggregating 2,418,000 equity shares) of Rs.10 each held by shareholders of ESPL.

EMPLOYEE STOCK OPTION PLAN (ESOP)

The Bank has instituted an Employee Stock Option Scheme to enable its employees and the employees of its subsidiaries including whole-time Directors, to participate in the future growth and financial success of the Bank. Under the Scheme 40,517,400 options can be granted to employees. The employee stock option scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of the employees work performance and is approved by the Board of Directors.

The Banks shareholders approved plans for the issuance of stock options to employees in February 2001, June 2004, June 2006, June 2008 and June 2010. Under the first two plans and upto the grant made on 29 April, 2004, the option conversion price was set at the average daily high-low price of the Banks equity shares traded during the 52 weeks preceding the date of grant at the Stock Exchange which has had the maximum trading volume of the Banks equity share during that period. Under the third plan and with effect from the grant made by the Bank on 10 June, 2005, the pricing formula has been changed to the closing price on the day previous to the grant date. The Remuneration and Nomination Committee granted options under these plans on ten occasions: 1,118,925 during 2000-01, 1,779,700 during 2001 -02, 2,774,450 during 2003-04, 3,809,830 during 2004-05, 5,708,240 during 2005-06, 4,695,860 during 2006-07, 6,729,340 during 2007-08, 2,677,355 during 2008-09, 4,413,990 during 2009-10 and 2,915,200 during 2010-11.

The options granted, which are non-transferable, vest at rates of 30%, 30% and 40% on each of three successive anniversaries following the grant, subject to standard vesting conditions, and must be exercised within three years of the date of vesting. As of 31 March, 2011, 21,709,978 options had been exercised and 11,122,518 options were in force.

Other statutory disclosures as required by the revised SEBI guidelines on ESOPs are given in the Annexure to this report.

CORPORATE GOVERNANCE

The Bank is committed to achieving the highest standards of corporate governance and it aspires to benchmark itself with international best practices in this regard. The corporate governance practices followed by the Bank are enclosed as an Annexure to this report.

The Bank has adopted a major part of the recommendations contained in the Corporate Governance Voluntary Guidelines 2009 issued by the Ministry of Corporate Affairs and is examining the possibility of implementing the remaining recommendations.

DIRECTORS RESPONSIBILITY STATEMENT

The Board of Directors hereby declares and confirms that:

i. The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations have been furnished, relating to material departures.

ii. Accounting policies have been selected, and applied consistently and reasonably, and prudent judgements and estimates have been made so as to give a true and fair view of the state of affairs of the Bank and of the Profit & Loss of the Bank for the financial year ended 31 March, 2011.

iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Companies (Amendment) Act, 2000, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

iv. The annual accounts have been prepared on a going concern basis.

v. The Bank has in place a system to ensure compliance of all laws applicable to the Bank.

STATUTORY DISCLOSURE

Considering the nature of activities of the Bank, the provisions of Section 217(1 )(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of technological upgradation in a cost-effective manner for delivering quality customer service.

The statement containing particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the rules thereunder, is given in an Annexure appended hereto and forms part of this report. In terms of Section 219(1) (iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Bank.

AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants, Statutory Auditors of the Bank will retire on the conclusion of the Seventeenth Annual General Meeting and are eligible for re-appointment, subject to the approval of Reserve Bank of India and of the shareholders. As recommended by the Audit Committee of the Board, the Board of Directors has proposed the appointment of M/s Deloitte Haskins & Sells, Chartered Accountants as Statutory Auditors for the financial year 2011-12. The shareholders are requested to consider their appointment on the remuneration to be decided by the Audit Committee of the Board.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, other government and regulatory authorities, financial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the shareholders and also places on record its sincere thanks to its valued clients and customers for their continued patronage. The Board also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, team work, commitment, and initiative which has led to the Bank making commendable progress in todays challenging environment.

For and on behalf of the Board of Directors

Place : Mumbai Adarsh Kishore Date : 22nd April, 2011 Chairman


Mar 31, 2010

The Board of Directors is pleased to present the Sixteenth Annual Report of your Bank together with the Audited Statement of Accounts, Auditors Report and the report on business and operations of the Bank for the financial year ended 31st March 2010.

FINANCIAL PERFORMANCE

The financial highlights for the year under review are presented below:

(Rs. in crores)

PARTICULARS 2009-10 2008-09 Growth

Deposits 141,300.22 117,374.11 20.38% Out of which

- Savings Bank Deposits 33,861.80 25,822.12 31.13%

» Current Account Deposits 32,167.74 24,821.61 29.60%

Advances 104,343.12 81,556.77 27.94%

Out of which - Retail Advances 20,822.90 16,051.78 29.72%

- Non-retail Advances 83,520.22 65,504.99 27.50%

Total Assets/Liabilities 180,647.85 147,722.05 22.29%

Net Interest Income 5,004.49 3,686.21 35.76%

Other Income 3,945.78 2,896.88 36.21%

Out of which

- Trading Profit (1) 822.38 373.86 119.97%

- Fee & other income 3,123.40 2,523.02 23.80%

Operating Expensesexcl. depreciation 3,475.40 2,669.55 30.19%

Profit before depreciation, provisions and tax 5,474.87 3,913.54 39.90%

Depreciation 234.32 188.66 24.20%

Provision for Tax 1.336.83 969.84 37.84%

Other Provisions & Writeoffs 1,389.19 939.68 47.84%

Net Profit 2,514.53 1,815.36 38.51%

Appropriations:

Transfer to Statutory Reserve 628.63 453.84 38.51%

Transferto Investment Reserve 14.88 0.06 -

Transferto Capital Reserve 223.92 146.72 52.62%

Transferto General Reserve 0.31 - -

Proposed Dividend 567.45 420.52 34.94%

Surplus carried overto Balance Sheet 1,079.34 794.22 35.90%

(1) Excluding Merchant Exchange Profit

KEY PERFORMANCE INDICATORS 2009-10 2008-09

Interest Income as a percentage of working funds* 7.73% 8.59%

Non-Interest Income as a percentage of working funds 2.62% 2.30%

Net Interest Margin 3.75% 3.33%

Return on Average Net Worth 19.89% 19.93%

Operating Profit as a percentage of working funds 3.48% 2.95%

Return on Average Assets 1.67% 1.44%

Profit per employee** Rs. 11.63 lacs Rs. 10.02 lacs

Business (Deposits less inter bank deposits + Advances) per employee** Rs. 11.11 crores Rs. 10.60 crores

NetNon performing assets as a percentage of net customer assets*** 0.36% 0.35%

- Working funds represent average total assets.

** Productivity ratios are based on average number of employees for the year.

*** Customer Assets include advances and credit substitutes.

Previous year figures have been regrouped wherever necessary.

In a difficult year for the financial sector, the Bank has delivered a very strong performance with a net profit of Rs. 2,514.53 crores (38.51 % higher than the net profit of Rs. 1,81 S.36 crores last year), Basic Earnings per Share (EPS) of Rs. 65.78 (29.97% higher than the EPS of Rs. 50.61 in 2008-09) and a Return on Equity (ROE) of 19.89% compared to 19.93% last year.

In 2009-10, the total income was Rs. 15,583.80 crores, increasing by Rs. 1,851.44 crores or 13.48% over last year. During the period the operating revenue rose 35.96% to Rs. 8,950.27 crores, while operating profit increased by 40.69% to Rs. 5,240.55 crores, due to a robust growth of core income streams. The Net Interest Income (Nil) grew by Rs. 1,318.28 crores to Rs. 5,004.49 crores, rising 35.76%, due in large measure, to lower cost of deposits supported by the solid and sustained growth of the low-cost current account and savings bank (CASA) deposits as well as a sharp fall in the cost of term deposits. Nil also grew on the back of strong asset growth across business segments and on a daily average basis, the total earning assets of the Bank increased by 20.46% to Rs. 133,308.75 crores from Rs. 110,663.96 crores last year.

During the year the yield on earning assets declined by 101 basis points from 9.73% last year to 8.72% in line with the general decline in lending rates facilitated by an accommodating monetary policy. The decline in the cost of funds, on the other hand, was steeper, falling 130 basis points from 6.50% last year to 5.20%, mainly on account of the reasons stated above. The share of CASA deposits in the total deposits of the Bank on a daily average basis rose sharply by 429 basis points from 36.10% last year to 40.39% while the cost of term deposits fell 189 basis points from 9.41% last year to 7.52%. As a result, the Net Interest Margin (NIM) climbed 42 basis points over the year. In the last four quarters, the NIM has consistently improved: from 3.34% in Q1, to 3.52% in Q2,4.00% in Q3 and 4.09% in Q4.

Other income comprising fees, trading profit and miscellaneous income was Rs. 3,945.78 crores, at the end of the year, rising 36.21% or by Rs. 1,048.90 crores over the year. Fee income comprised 32.68% of the operating revenue of the Bank, generated by products and services of diverse businesses such as client-based merchant foreign exchange trade, service charges from account maintenance, transaction banking including cash management services, syndication and placement fees, processing fees from loans and commission on non-funded products such as letters of credit and bank guarantees, inter-change fees on ATM-sharing arrangements and fee income from the distribution of third-party personal investment products. There was also a healthy increase in treasury income by way of proprietary trading profit which grew 119.97% over the year to Rs. 822.38 crores, from Rs. 373.86 crores last year. Miscellaneous income rose 162.24% mainly on account of higher recoveries of loans written-off in earlier years. During the year, such recoveries amounted to Rs. 174.43 crores against Rs. 62.95 crores last year.

The Bank continued to add to its network of branches, ATMs and other channels, contributing in part to the growth of operating expenses of the Bank which rose 29.79% to Rs. 3,709.72 crores over last year. However, the Cost: Income ratio which reflects operational efficiency, improved to 41.45% in 2009-10 from 43.42% last year.

During the year, the Bank created total provisions (excluding provisions for tax) of Rs. 1,389.19 crores against Rs. 939.68 crores last year. Of this, provisions for loan losses were Rs. 1,357.04 crores (against Rs. 732.21 crores last year) as some loan segments came under stress in the wake of the economic slowdown. The Bank accelerated its provisioning requirements in several portfolios as a measure of prudence, increasing the overall provision coverage. The Bank also provided Rs. 56.47 crores against restructured assets. Global recessionary conditions and the consequential impact upon the Indian economy led to a sharp rise of restructured assets in the banking sector during the year. Although the Bank restructured assets of Rs. 1,632.97 crores during the year, it has been able to maintain the quality of its loans, ending the year with a ratio of Gross NPAs to gross customer assets of 1.13% (against 96 basis points last year) and a net NPA ratio (net NPAs as percentage of net customer assets) of 0.36% (against 35 basis points last year). With higher levels of provisions, built over and above the regulatory norms during the year, the Bank achieved a provision-coverage of 72.38% after considering prudential write-offs.

Given the strong revenue growth, key financial parameters and ratios for the year have improved. The ROE declined marginally from 19.93% in 2008-09 to 19.89%. Basic EPS rose to Rs. 65.78 from Rs. 50.61 last year, while diluted EPS was Rs. 64.31 compared to Rs. 50.27 last year. The Book Value per share rose from Rs. 284.50 on 31st March 2009 to Rs. 395.99 on 31" March 2010 while Return on Assets (ROA) improved to 1.67% from 1.44% last year. Employee productivity also improved, profit per employee increasing to Rs. 11.63 lacs from Rs. 10.02 lacs last year and business per employee increasing to Rs. 11.11 crores from Rs. 10.60 crores last year.

Despite relatively subdued growth during the first three quarters of the year, the Bank finished the year with a healthy growth of the balance sheet at Rs. 180,647.85 crores, increasing by Rs. 32,925.80 crores, or 22.29% over last year. Total deposits were Rs. 141,300.22 crores, increasing by Rs. 23,926.11 crores, or 20.38% over last year. Low-cost demand deposits (savings bank and current accounts) (CASA) were Rs. 66,029.54 crores, rising by Rs. 15,385.81 crores, or 30.38% over the year. As on 31st March 2010, the percentage share of low-cost demand deposits (CASA) in total deposits rose to 46.73% from 43.15% last year. Savings bank account deposits grew 31.13% to Rs. 33,861.80 crores, while current account deposits grew 29.60% to Rs. 32,167.74 crores. Total advances were Rs. 104,343.12 crores, growing 27.94% by Rs. 22,786.35 crores from last year. Of this, corporate advances (comprising large and mid-corporate accounts) were Rs. 52,503.53 crores, growing by Rs. 11,292.63 crores or 27.40% over last year. During the same period, advances to the SME segment (including micro finance) were Rs. 19,482.65 crores, increasing by Rs. 3,405.95 crores, or 21.19% over last year, while agricultural lending stood at Rs. 11,534.04 crores, increasing by Rs. 3,316.65 crores or 40.36% over the year. Retail loans wereRs. 20,822.90 crores, increasing by Rs. 4,771.12 crores or 29.72% from last year. The Banks total investments were Rs. 55,974.82 crores, increasing by Rs. 9,644.47 crores or 20.82% over last year. Investments in government and approved securities, mainly held to meet the Banks SLR requirement, were Rs. 34,195.88 crores increasing by Rs. 6,473.01 crores or 23.35% over last year. Other investments, including corporate debt securities, were Rs. 21,778.94 crores increasing by Rs. 3,171.46 crores or 17.04% over last year. The total assets of the Banks overseas branches as on 31" March 2010 were Rs. 13,921.42 crores, increasing by Rs. 2,245.93 crores or 19.24% over last year, constituting 7.71% of the Banks total assets.

As one of the key planks for business growth and customer-acquisition, the Bank continued to enlarge its distribution network. Widening geographical reach is critical for extending service delivery and for tapping growth opportunities in newer markets, especially in the areas of low-cost CASA deposits, lending to retail, agriculture and SME segments and the sale of third party products. The distribution network now covers 643 centres in India and 4 centres in overseas as on 31 "March 2010. The Bank crossed a landmark on 29* March opening its 1000th branch at Bandra West, Mumbai. The Bank is now present in all states and Union Territories (except Lakshadweep) and is present in 401 of the 626 district headquarters in the country. During 2009-10, 200 branches (including service branches/CPC) were added to the Banks network, taking the total number of branches and Extension Counters (ECs) to 1,035 as on 31" March 2010 from 835 last year. Of these, 320 branches are in semi-urban and rural areas and 707 branches are in metropolitan and urban areas. The ATM network of the Bank grew from 3,595 last year to 4,293 at the end of FY 2010.

CAPITAL & RESERVES

During the year under review, the Bank raised capital in the form of equity and debt to support future growth. It raised Tier I capital in the form of equity capital through simultaneous offerings in the form of a follow-on Global Depositary Receipt (GDR) issue, a Qualified Institutional Placement (QIP) and a preferential allotment of equity shares to the promoters of the Bank. The Bank mobilised an aggregate of Rs. 3,816.14 crores through the three-way offering, of which the Bank raised US Dollars 95.56 million (equivalent to Rs. 459.43 crores) through allotment of 5,055,500 GDRs each representing one equity share of the Bank at a price of US Dollars 18.90 per GDR. The Bank also raised Rs. 2,996.15 crores by issuing 33,044,500 equity shares through a QIP offering, which was priced along with the GDR at Rs. 906.70 per share (equivalent to the price offered under the GDR offering). In order to maintain the percentage shareholding of the Banks promoters at the pre-GDR/QIP offering levels. Life Insurance Corporation of India and New India Assurance Company Ltd. participated in a preferential offer by subscribing to 3,976,632 equity shares aggregating Rs. 360.56 crores. The equity shares offered under the preferential allotment were also priced at Rs. 906.70 per share (equivalent to price at which both GDR and QIP was offered). Under its Employee Stock Option Plan, the Bank allotted 4,092,369 equity shares to employees during the year under review. The Bank also raised Rs. 2,000 crores by way of subordinated bonds (unsecured redeemable non-convertible debentures) qualifying asTier II capital.

The Bank is thus well capitalized, with a capital adequacy ratio of 15.80% at the end of the year, of which the Tier I capital adequacy ratio was 11.18% against 9.26% a year earlier, while the Tier II Capital Adequacy Ratio was 4.62% against 4.43% in FY 2009. These measures have significantly strengthened the capital position of the Bank, particularly core Tier I capital, providing adequate support for its growth plans in future.

The paid up capital of the Bank as on 31st March 2010 rose to Rs. 405.17 crores from Rs. 359.01 crores as on 31" March 2009. The shareholding pattern of the Bank as of 31st March 2010 is stated below:

Sr. No. Name of Shareholders % of Paid Up Capital

i. Administrator of the Specified Undertaking of the Unit Trust of India (UTI-I) 24.00

ii. Life Insurance Corporation of India 10.27

iii. General Insurance Corporation and four PSU Insurance Companies 4.27

iv. Overseas Investors including Flls/OCBs/NRIs 33.68

v. Foreign Direct Investment (GDR issue) 8.37

vi. Other Indian Financial Institutions/ Mutual Funds/ Banks 7.07

vii. Others 12.34

Total 100.00

The Banks shares are listed on the NSE and the BSE. The GDRs issued by the Bank are listed on the London Stock Exchange (LSE).

The Bonds issued by the Bank under the MTN programme are listed on the Singapore Stock Exchange. The listing fees relating to all stock exchanges for the current year have been paid. With effect from 26" March 2001, the shares of the Bank have been included and traded in the BSE Group A. Further, with effect from 27th March 2009, the Banks shares have been included and traded as part of the main NIFTY Index of the NSE. Earlier, the shares of the Bank were part of the NIFTY Juniorlndexof the NSE.

The Banks shares were voluntarily delisted from the Ahmedabad Stock Exchange with effect from 17th August 2009 as there was no trading of the Banks shares at this Stock Exchange and the only trading which took place for the last few years was that of a few shares in February 2000.

DIVIDEND

The Banks diluted EPS for 2009-10 has risen to Rs. 64.31 from Rs. 50.27 during 2008-09. In view of the overall performance of the Bank, future outlook and the objective of rewarding shareholders with cash dividends while retaining capital to maintain a healthy capital adequacy ratio to support future growth, the Board of Directors has recommended a higher dividend of Rs. 12.00 per share on equity shares, compared to Rs. 10.00 per share declared for the last year. This increase reflects our confidence in the Banks ability to consistently grow earnings over time.

BOARD OF DIRECTORS

During the year, some changes in the Board of Directors have taken place. Dr. P.J. Nayak, former Chairman and CEO of the Bank retired with effect from 20th April 2009. Shri A. T. Pannir Selvam, nominee Director of the Specified Undertaking of the Unit Trust of India (SUUTI) passed away on 21" April 2009. Shri Ramesh Ramanathan, Independent Director resigned with effect from 14th July 2009. Five new Directors have been inducted in the Board during the year. Smt. Shikha Sharma was appointed as Managing Director and CEO of the Bank with effect from 1" June 2009. RBI gave its approval for the appointment of Shri M. M. Agrawal, former Executive Director (Corporate Banking) of the Bank as Deputy Managing Director with effect from 10th February 2010. Shri V. R. Kaundinya, Managing Director, Advanta India Ltd. was appointed as an Additional Independent Director with effect from 12th October 2009. Dr. Adarsh Kishore, former Finance Secretary, Government of India and former Executive Director, International Monetary Fund and nominee of the Specified Undertaking of the Unit Trust of India (SUUTI) was appointed as an Additional Director with effect from 15th January 2010. RBI gave its approval for the appointment of Dr. Adarsh Kishore as a non-executive Chairman of the Bank with effect from 8th March 2010. Shri S. B. Mathur, former Chairman of LIC and the National Stock Exchange of India was appointed as an Additional Independent Director with effect from 15th January 2010.

The Board of Directors places on record its appreciation and gratitude to Dr. P.J. Nayak for the pivotal role played by him in shaping the strategies of and building the Bank to its present pre-eminent position in the banking sector. The Board of Directors also places on record its appreciation and gratitude to Shri A. T. Pannir Selvam and Shri Ramesh Ramanathan for the valuable services rendered by them during their tenure as Directors of the Bank.

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Bank, Dr. R. H. Patil and Smt. Rama Bijapurkar retire by rotation at the Sixteenth Annual General Meeting and, being eligible, offer themselves for re-appointment as Directors of the Bank.

SUBSIDIARIES

The Bank has set up five wholly-owned subsidiaries: Axis Securities and Sales Ltd., Axis Private Equity Ltd., Axis Trustee Services Ltd., Axis Asset Management Company Ltd. and Axis Mutual Fund Trustee Ltd.

Axis Securities and Sales Ltd. was set up in December 2005 (originally incorporated as UBL Sales Ltd., renamed as Axis Sales Ltd. in 2007 and now rechristened as Axis Securities and Sales Ltd. on 5th April 2010) to market credit cards and retail asset products. The objective of setting up the subsidiary was to build a specialised force of sales personnel and optimize operational efficiency by providing greater control over the sales effort in comparison with a Direct Sales Agent (DSA) model. The scope of activities of the subsidiary has now been enlarged to include retail broking. In October 2006, the Bank set up Axis Private Equity Ltd., primarily to carry on the activities of managing equity investments and provide venture capital support to businesses. Axis Trustee Services Company Ltd. was established in May 2008 to engage in trusteeship activities (e.g. acting as a debenture trustee, the trustee to various securitisation trusts as well as other trusteeship businesses). Axis Asset Management Company Ltd. was set up primarily to carry on the activities of managing a mutual fund business in January 2009 and in the same year, Axis Mutual Fund Trustee Ltd. was set up, to act as the trustee for the mutual fund business.

In terms of an exemption received from the Ministry of Corporate Affairs, Government of India through its letter no. 47/39/2010-CL-lll dated 25,h January 2010 under Section 212(8) of the Companies Act 1956, copies of the Directors Report, report of the auditors of the five subsidiaries [Axis Sales Ltd. (now renamed as Axis Securities and Sales Ltd.), Axis Private Equity Ltd., Axis Trustee Services Ltd., Axis Asset Management Company Ltd. and Axis Mutual Fund Trustee Ltd.] along with financial statements have not been attached to the accounts of the Bank for the financial year ended 31st March 2010.

Any shareholder who is interested in obtaining a copy of these details may write to the Company Secretary at the Registered Office of the Bank. These documents will also be available for examination by shareholders of the Bank at its Registered Office and also at the registered offices of the five subsidiary companies. In line with the Accounting Standard 21 (AS 21) issued by the Institute of Chartered Accountants of India, the consolidated financial results of the Bank along with its subsidiaries for the year ended 31st March 2010 are enclosed as an Annexureto this report.

EMPLOYEE STOCK OPTION PLAN (ESOP)

To enable employees including whole-time Directors of the Bank to participate in the future growth and financial success of the Bank, the Bank instituted in 2001 an Employee Stock Option Scheme under which 35,770,000 options can be granted to employees. The employee stock option scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee

Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of the employees work performance and is approved by the Board of Directors.

The Banks shareholders approved plans in February 2001, June 2004, June 2006 and June 2008 for the issuance of stock options to employees. Under the first two plans and upto the grant made on 29th April 2004, the option conversion price was set at the average daily high-low price of the Banks equity shares traded during the 52 weeks preceding the date of grant at the Stock Exchange which has had the maximum trading volume of the Banks equity share during that period. Under the third plan and with effect from the grant made by the Bank on 10"June 2005, the pricing formula has been changed to the closing price on the day previous to the grant date. The Remuneration and Nomination Committee granted options under these plans on nine occasions: 1,118,925 during 2000-01, 1,779,700 during 2001-02, 2,774,450 during 2003-04, 3,809,830 during 2004-05, 5,708,240 during 2005-06, 4,695,860 during 2006-07, 6,729,340 during 2007-08, 2,677,355 during 2008-09 and 4,413,990 during 2009-10. The options granted, which are non-transferable, vest at rates of 30%, 30% and 40% on each of three successive anniversaries following the grant, subject to standard vesting conditions, and must be exercised within three years of the date of vesting. As of 31st March 2010, 16,338,254 options had been exercised and 13,897,518 options were in force.

Other statutory disclosures as required by the revised SEBI guidelines on ESOPs are given in the Annexure to this report.

CORPORATE GOVERNANCE

The Bank is committed to achieving the highest standards of corporate governance and it aspires to benchmark itself with international best practices in this regard. The corporate governance practices followed by the Bank are enclosed as an Annexure to this report.

The Bank has adopted a major part of the recommendations contained in the Corporate Governance Voluntary Guidelines 2009 issued by the Ministry of Corporate Affairs and is examining the possibility of implementing the remaining recommendations.

DIRECTORS RESPONSIBILITY STATEMENT

The Board of Directors hereby declares and confirms that:

i. The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations have been furnished, relating to material departures.

ii. Accounting policies have been selected, and applied consistently and reasonably, and prudent judgements and estimates have been made so as to give a true and fair view of the state of affairs of the Bank and of the Profits Loss of the Bank for the financial year ended 31s March 2010.

iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Companies (Amendment) Act, 2000, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

iv. The annual accounts have been prepared on a going concern basis.

v. The Bank has in place a system to ensure compliance of all laws applicable to the Bank.

STATUTORY DISCLOSURE

Considering the nature of activities of the Bank, the provisions of Section 217(1 )(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of technological upgradation in a cost-effective mannerfordelivering quality customer service.

The statement containing particulars of employees as required under Section 217(2A) of the Companies Act, 1956 and the rules thereunder, is given in an Annexure appended hereto and forms part of this report. In terms of Section 219(1) (iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the Annexure may write to the Company Secretary at the Registered Office of the Bank.

AUDITORS

M/s S. R. Batliboi & Co., Chartered Accountants, had been appointed by the shareholders at the fifteenth Annual General Meeting as Statutory Auditors of the Bank for the year 2009-10 and will be retiring at the conclusion of the forthcoming Annual General Meeting. M/s S. R. Batliboi & Co. have been the Statutory Auditors of the Bank since 2006. As per the regulations of Reserve Bank of India, the same auditors cannot be re-appointed for a period beyond 4 years. It is, accordingly, proposed to appoint M/s Deloitte Haskins & Sells, Chartered Accountants, as the Banks new Statutory Auditors subject to the approval by the shareholders. The Board of Directors place on record their appreciation of the professional services rendered by IWs S. R. Batliboi & Co., as the Statutory Auditors of the Bank.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, other government and regulatory authorities, financial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the shareholders and also places on record its sincere thanks to its valued clients and customers for their continued patronage. The Board also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, team work, commitment, and initiative which has led to the Bank making commendable progress in todays challenging environment.

For and on behalf of the Board of Directors

Place: Mumbai Adarsh Kishore

Date : April 20,2010 Chairman



 
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