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Directors Report of HDFC Bank Ltd.

Mar 31, 2015

To the Members,

The Directors take great pleasure in presenting the Twenty First Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2015.

SUMMARY OF FINANCIAL PERFORMANCE

(Rs. crore)

For the year ended March 31, 2015 March 31, 2014

Deposits and Other Borrowings 496,009.2 406,776.5

Advances 365,495.0 303,000.3

Total Income 57,466.3 49,055.2

Profit before Depreciation and Tax 15,985.0 13,443.7

Net Profit 10,215.9 8,478.4

Profit brought forward 14,654.2 11,132.2

Total Profit available for Appropriation 24,870.1 19,610.6

Appropriations:

Transfer to Statutory Reserve 2,554.0 2,119.6

Transfer to General Reserve 1,021.6 847.8

Transfer to Capital Reserve 224.9 58.3

Transfer to Investment Reserve 27.5 3.2

Proposed Dividend 2,005.2 1,643.4

Tax including Surcharge and Education cess on Dividend 408.2 279.3

Dividend (including tax / cess thereon) pertaining to previous year paid during the year 0.8 4.8

Balance carried over to Balance Sheet 18,627.9 14,654.2

The Bank posted total income and net profit of Rs. 57,466.3 crore and Rs. 10,215.9 crore respectively for the financial year ended March 31, 2015 as against Rs. 49,055.2 crore and Rs. 8,478.4 crore respectively in the previous year.

Appropriations from net profit have been effected as per the table given above.

DIVIDEND

Your Bank has had a dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital in order to maintain a healthy capital adequacy ratio to support future growth. It has had a consistent track record of moderate but steady increase in dividend declarations over its history with the dividend payout ratio ranging between 20% and 25%. Consistent with this policy and in recognition of the overall performance during this financial year, your directors are pleased to recommend a dividend of Rs. 8.00 per equity share of Rs. 2 for the year ended March 31, 2015 as against Rs. 6.85 per equity share of Rs. 2 for the previous year ended March 31, 2014. This dividend shall be subject to tax on dividend to be paid by the Bank.

AWARDS

As in the past years, awards and recognition were conferred upon your Bank by leading domestic and international organizations and publications during the financial year ended March 31, 2015.

Some of them are: Asiamoney

- Best of Best Domestic Banks - India Asiamoney FX Poll 2014

- Best Domestic Provider of FX options

- Best Domestic Provider of FX products & services

- Best Domestic Provider of FX research & market coverage

- Best Domestic Provider for FX services Barron''s List of World''s Best CEOs

- Mr Aditya Puri named in list of Top 30 Global CEOs

BrandZTM Top 50 Most Valuable Indian Brands study by Millward Brown

- India''s Most Valuable Brand Business Today - KPMG Study 2014

- Best Large Bank - Overall

- Best Large Bank - Growth

Businessworld - PwC India Best Banks Survey 2014

- Best Large Bank

- Fastest Growing Large Bank CNBC-TV18 CFO Awards

- Best performing CFO in the Banking Sector

Dun & Bradstreet - Manappuram Finance Limited Corporate Award 2014

- Best Corporate in Banking Sector

Dun & Bradstreet - Polaris Financial Technology Banking Awards 2014

- Best Bank - Managing IT Risk (Large Banks)

- Best Bank - Mobile Banking (Large Banks)

- Best Bank - Best IT Team (Private Sector Banks)

Euromoney Private Banking and Wealth Management Survey 2015

- Best Private Banking Services award for Net-worth- specific services category for super affluent clients (US$ 1 million to US$ 5 million)

- Best Private Banking Services award Asset Management.

FE Best Bank Awards

- Best Bank in the New Private sector

- Winner - Profitability

- Winner - Efficiency

Finance Asia Country Awards 2014

- Best Bank- India

Finance Asia''s poll on Asia''s best managed companies

- Best Managed Company in India

- Best CEO in India (Mr Aditya Puri) Forbes Asia

- Fab 50 Companies List for the 8th year

IDRBT Banking Technology Excellence Awards 2013-14

- Best Bank Award for Best IT team among Large Banks J. P. Morgan Quality Recognition Award

- Best in class straight Through Processing Rates Legal Era Magazine

- Best In - House Legal Team in Banking Sector

National Payment Corporation of India (NPCI) Excellence Awards

- Best Bank in Cheque Transaction System (CTS) - Large Bank Category

- Best Bank in National Automated Clearing House (NACH) - Large Bank Category

The Asset Triple A Awards 2014

- India - Best in Treasury and Working Capital - SME''s The Asian Banker

- Strongest Bank in India in the Asian Banker 500 (AB 500) Strongest Bank by Balance Sheet Ranking 2014

The Asian Banker Transaction Banking Awards 2014

- The Best Cash Management Bank in India Outlook Money 2014

- Best Bank Award

ISSUANCE OF EQUITY SHARES

Your Bank has issued 66,000,000 underlying equity shares pursuant an ADR offering in February 2015 and also allotted 18,744,142 equity shares pursuant to a Qualified Institutional Placement (QIP) offering. As a result of these issuances, the equity of your Bank increased by Rs. 9,722.8 crore, net of share issue expenses. The capital was raised for meeting capital requirements in accordance with the capital adequacy norms and to ensure adequate capital to support growth and expansion, including enhancing your Bank''s solvency and capital adequacy ratio and for general corporate purposes.

During the year under review, 22,700,740 equity shares were allotted to the employees of your Bank in respect of the equity stock options exercised under the Employee Stock Option schemes of the bank.

As at 31st March 2015, the issued, subscribed and paid- up capital of your bank stood at Rs. 501.30 crore comprising 2,506,495,317 equity shares of Rs. 21- each.

EMPLOYEE STOCK OPTIONS

The information pertaining to Employee Stock Options is given in as ANNEXURE 1 to this report.

CAPITAL ADEQUACY RATIO

Your Bank''s total Capital Adequacy Ratio (CAR) calculated in line with Basel III capital regulations stood at 16.8%, well above the regulatory minimum of 9.0%. Of this, Tier I CAR was 13.7%.

SUBSIDIARY COMPANIES

Your Bank has two subsidiaries, HDB Financial Services Limited (''HDBFS'') and HDFC Securities Limited (''HSL)

HDB FINANCIAL SERVICES LIMITED

HDBFS is a non-deposit taking non-bank finance company (''NBFC''). The customer segments being addressed by HDBFS are typically under serviced by larger commercial banks, and thus create a profitable niche for the company. Apart from lending to individuals, the company grants loans to micro, small and medium business enterprises. It also runs call centers for collection services to the Bank''s retail loan products.

As on March 31, 2015, HDBFS had 425 branches in 265 cities. During the financial year ended March 31, 2015, the company''s total income increased by 50% to Rs. 2,527.3 crore as compared to Rs. 1,688.3 crore in the previous year. During the same period the company''s net profit after tax grew 67% to reach Rs. 349.4 crore compared to Rs. 209.2 crore in the previous year.

During the year ended March 31, 2015, HDBFS issued 185,153,857 equity shares under the Rights Issue at a ratio of 9:25 (nine shares for every twenty five shares held). Your bank subscribed 180,000,000 shares under the Rights Issue at Rs. 65 per share (includes premium of Rs. 55 per share). As on 31 March 2015, your bank held 97.2 per cent stake in HDBFS. Further 565,800 equity shares were also issued under Employees Stock Options Scheme.

HDFC SECURITIES LIMITED

HDFC Securities Limited (HSL) continued to be a strong player in the financial services space offering complete financial services along with the core broking product. During the year under review, your Bank has further consolidated its stake in HSL by buying the shares from the other minority shareholders. Consequently, your Bank held 97.9 per cent stake in HSL as on March 31, 2015.

HSL increased its distribution network by a further fifty branches during the year, and by the end of the year had 250 branches across 186 cities in the country. During the year under review, HSLs total income has increased by over 58% to Rs. 417.0 crore as against Rs. 263.1 crore in the previous year. During the same period, the net profit after tax more than doubled to Rs. 165.0 crore compared to Rs. 78.4 crore in the previous year.

During the year under review, HSL received the following awards

- "Best e-Brokerage Award - 2014" in the Outlook Money Awards in the runner up category.

- "Best Market Analyst Award 2014" in the Equity Banking category by Zee Business and

- "Best Financial Markets Technology Implementation - 2014" during the eighth Asian Bankers Awards Program, 2014.

Shareholders who wish to have a copy of the annual accounts and detailed information on HDBFS and HSL may write to the Bank for the same. Further, the said documents shall also be available for inspection by shareholders at the registered offices of the Bank, HDBFS and HSL.

RELATED PARTY TRANSACTIONS

The details of transactions entered into with related parties are enclosed as ANNEXURE 4 to this report pursuant to Section 134 (3) (h) of the Companies Act, 2013 and Rule 8 of the Companies (Accounts) Rules, 2014.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business. As required by Section 186 (4) of Companies Act, 2013, the particulars of investments made by the Bank are disclosed in Schedule 8 of the financial statements as per the applicable provisions of Banking Regulation Act, 1949.

FINANCIAL STATEMENTS OF SUBSIDIARIES AND ASSOCIATES

In terms of Section 134 of the Companies Act, 2013 and read with Rule 8 (1) of the Companies (Accounts) Rules, 2014 the performance and financial position of the Bank''s subsidiaries and associates are enclosed as ANNEXURE 5 to this report. There were no entities which became or ceased to be the Bank''s subsidiaries, associates or joint ventures during the year.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Bank has adopted a Whistle Blower Policy pursuant to which employees of the Bank can raise their concerns relating to fraud, malpractice or any other activity or event which is against the interest of the Bank or society as a whole. Details of complaints received and the action taken are reviewed by the Audit Committee.

The functioning of the Whistle Blower mechanism is reviewed by the Audit Committee from time to time. None of the Bank''s personnel have been denied access to the Audit Committee.

DECLARATION BY INDEPENDENT DIRECTORS

Mrs. Shyamala Gopinath, Mr. Partho Datta, Mr. Bobby Parikh, Mr. Anami Roy and Dr. Pandit Palande are Independent Directors on the Board of the Bank. All the above named Independent Directors have given their respective declarations under Section 149 (6) and Section 149 (7) of Companies Act, 2013 and the Rules made thereunder. In the opinion of the Board, the Independent Directors fulfill the conditions relating to their status as Independent Directors as specified in Section 149 of the Companies Act, 2013 and rules made thereunder.

BOARD PERFORMANCE EVALUATION

The Nomination and Remuneration Committee (NRC) has approved a framework/policy for evaluation of the Board, Committees of the Board and the individual members of the Board. A questionnaire for the evaluation of the Board and its Committees, designed in accordance with the said framework and covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in Corporate Governance was sent out to the directors. The responses received to the questionnaire on evaluation of the Board and its Committees were placed before the meeting of the Independent Directors for consideration. The assessment of the Independent Directors on the performance of the Board and its

Committees was subsequently discussed by the Board at its meeting. The framework/policy for evaluation of the Board, Committees and the directors is subject to an annual review.

The Bank has in place a process wherein declarations are obtained from the Directors regarding fulfillment of "Fit and Proper" criteria in accordance with the guidelines of the Reserve Bank of India. The declarations from the Directors other than members of the NRC are placed before the NRC and the declarations of the members of the NRC are placed before the Board. Assessment on whether the directors fulfill the said criteria is made by the NRC and the Board on an annual basis. In addition, the framework/policy approved by the NRC provides for a performance evaluation of the non- independent directors by the Independent Directors on key personal and professional attributes and a similar performance evaluation of the independent directors by the Board, excluding the director being evaluated.

POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Nomination and Remuneration Committee (NRC) recommends the appointment of Directors to the Board. The NRC identifies persons who are qualified to become directors on the Board and evaluates criteria such as academic qualifications, previous experience, track record and integrity of the persons identified before recommending their appointment to the Board.

The remuneration policy for whole time Directors is governed by the compensation policy of the Bank. The compensation policy of the bank, duly reviewed and recommended by the Nomination and Remuneration committee has been articulated in line with the Reserve Bank of India guidelines.

Your Bank''s compensation policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long term success. Compensation policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective is to provide a fair and transparent structure that helps the Bank to retain and acquire the talent pool critical to building competitive advantage and brand equity.

Your Bank''s approach is to have a pay for performance culture based on the belief that the performance management system provides a sound basis for assessing performance holistically The compensation system should also take into account factors like roles, skills / competencies, experience and grade / seniority to differentiate pay appropriately on the basis of contribution, skill and availability of talent on account of competitive market forces. The details of the compensation policy are also included in Schedule 18 - Notes forming part of the Accounts-Note No.23.

Non-executive directors are paid remuneration by way of sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory prescriptions. Non-executive directors are also reimbursed expenses incurred by them for attending meetings of the Board and its Committees at actuals. The remuneration payable to the non-executive directors and Independent Directors is governed by the provisions of the Banking Regulation Act, 1949, RBI guidelines issued from time to time and the provisions of the Companies Act, 2013 and related rules to the extent it is not inconsistent with the provisions of the Banking Regulation Act, 1949 and RBI guidelines.

None of the Directors of your Bank other than Mr. Kaizad Bharucha is a Director of the Bank''s subsidiaries. During the year Mr. Bharucha has not received any commission from the subsidiary in which he is a Director.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS

During the year under review no significant or material Orders were passed by any regulators against the Bank other than those disclosed separately in the financial statements and in the Corporate Governance Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mr. Paresh Sukthankar and Mr. Kaizad Bharucha will retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

Mr. CM. Vasudev ceased to be the Chairman of the Bank from the close of business hours on August 26, 2014 pursuant to his retirement. Mr. Vijay Merchant ceased to be a director of the Bank with effect from the close of business hours on October 4, 2014 on attaining the age of 70 years, the maximum age limit prescribed as per the guidelines of the Reserve Bank of India for non-executive directors. Your directors wish to place on record their sincere appreciation of the contributions made by Mr. Vasudev and Mr. Merchant during their tenures as Directors of the Bank.

Mrs. Shyamala Gopinath was appointed as the non-executive, part time Chairperson of the Bank for a period of three (3) years and she assumed office on January 2, 2015. Mrs. Gopinath has a rich and varied experience in various facets of banking and finance.

Mr. Malay Patel was appointed as an additional director with effect from March 31, 2015 to hold office till the conclusion of the ensuing Annual General Meeting. Mr.Patel has been appointed as a Director possessing specialized knowledge and experience in the "Small Scale Industries" sector as per the provisions of Section 10-A (2 a) of the Banking Regulation Act, 1949. In terms of the provisions of Section 149 of the Companies Act, 2013, it is proposed to appoint Mr. Malay Patel as an Independent Director for a tenure of five (5) years determined in accordance with the applicable provisions of the Banking Regulation Act, 1949 and the guidelines of the Reserve Bank of India in this regard. The Bank has received a notice from a member proposing the candidature of Mr. Malay Patel as Director of the Bank at the ensuing Annual General Meeting.

The brief resume/details relating to Directors who are to be appointed/re-appointed as above are furnished in the report on Corporate Governance.

There have been no changes in the Directors and Key Managerial Personnel of the Bank other than the above.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

The various programmes undertaken for familiarizing Independent Directors with the functions and procedures of the Bank are disclosed in the Corporate Governance Report.

PARTICULARS OF EMPLOYEES

The information in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given in ANNEXURE 6 to this report.

The Bank had 76,286 employees as on March 31, 2015. 224 employees employed throughout the year were in receipt of remuneration of more than Rs. 60 lacs per annum and 20 employees employed for part of the year were in receipt of remuneration of more than Rs. 5 lacs per month. The details of such employees in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are appended separately and form part of this report. The Report and Accounts are being sent to the shareholders excluding these particulars and any shareholder interested in obtaining the said details may write to the Company Secretary at the Registered Office of the Bank.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

(A) Conservation of Energy

Your Bank has undertaken several initiatives in the conservation of energy, to name a few:

- Installed energy capacitors at its high consumption offices to control the power factor and to reduce energy consumption.

- Installed energy saving electrical devices for saving energy and supporting go-green initiative.(Device in ACs)

- Advocated switching off of lights and ACs when not required, turning off of PCs when not in use, (post 10 pm thru remote control) setting higher temperatures on air conditioners etc. to reduce consumption.

- All main Sign Boards in Branches switched off during the night post 10 pm

- Put Controls on usage of Lifts, Air Conditioners, Common Passage lights and other electrical equipments.

(B) Technology Absorption

(i) The efforts made towards technology absorption;

Your Bank continues to make substantial investments in its technology platforms and systems and spread its electronically linked branch network. Telecom infrastructure is skeletal and of lower capacity in semi-urban and rural areas. Besides using the conventional VSAT technology in such geographies, where data connectivity is weak, to offer state-of-art IT enabled core banking services, your Bank has implemented CDMA (mobile data) based networking options, to link your Bank branches to its data centers, besides using traditional Radio Frequency based network options, where available and feasible. Your Bank also implemented Desktop Virtualization, a Cloud Technology solution, which reduces the bandwidth consumption to one-third of what a conventional desktop requires to run core banking services, in semi-urban or rural branches. Over 10,000 such virtual desktops have been deployed in the past two years, to ensure that your Bank is serving you in semi-urban and rural India.

Your Bank''s direct banking platforms continue to be stable and robust, supporting ever increasing transaction volumes. Due to technology initiatives implemented, the availability of your Bank''s NetBanking platform has improved considerably. Besides having over 75 on-line real time transacting features in Mobile Banking App in both Hindi and English across cross-section of Mobile devices, your Bank has also implemented cutting edge innovative Person-to-Person Payment solution, in partnership with relevant industry players. This has made paying to your friends, domestic help people, taxi drivers, tuition teachers of your children and others easier, at the click of a button on your smart mobile phone!

Your Bank is also committed to bring you the best deals in the town and offer a higher value proposition on your HDFC Bank Credit and Debit Cards or while using Bank''s Mobile Apps. SmartBuy is one such initiative in partnership with respective industry and technology platform providers, where you can enjoy offers which have higher level of discounts vis-a-vis the popular on-line travel portals or e-commerce sites. Your bank has used CLOUD services to Host SmartBuy, so that, it can dynamically scale on demand.

Your Bank supported over 2 million payment transactions on the peak day last year. This was possible through 4X scalability implemented through innovative Performance Engineering techniques on our RTGS and NEFT platforms and numerous Middleware components in the path of such Payment Transactions. Numerous e-tailing brands, on-line travel portals, government''s very own and country''s largest e-commerce platform for railway tickets, to high volume on-line retailers, your bank successfully processed more than 50% of the entire Credit Cards, Debit Cards and Direct Debit Payment Modes linked volumes of such e-commerce portals on their peak season sales days. Your bank has already initiated measures to double such e-commerce processing capability in the coming fiscal, on many of its relevant Payment processing platforms. Your Bank also plans to implement electronic Wallet and technologies like Contactless Cards.

With a view to support the Digital initiatives and focusing squarely on customer-centricity your Bank has set up and augmented systems for data warehouse, analytics, campaign management and lead management. Your Bank has embarked on a program to equip its Core Banking System with more processing capacity to meet the scale and transaction volume requirements in the coming years.

Your Bank has implemented a Private Virtual Cloud in its data centers, to ensure that its IT infrastructure usage is highly optimized. Over 3,000 virtual machines now run over much smaller physical technology infrastructure footprint to power numerous IT enabled business services.

Live switch-over and switch-back drills of major IT applications have successfully been completed, as part of your Bank''s Business Continuity and Disaster Recovery management strategy, thereby enhancing your Bank''s readiness in responding to emergency situations. These switch-over and switch-back drills have also been successfully completed for your Bank''s Primary Data Centre.

RBI had issued guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds and provided recommendations for implementation. Your Bank had embarked on a program to implement these guidelines and is nearing full implementation of the requirements stated in the guidelines.

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution

Technology has continued to provide business and customers with state of the art products and services. Through use of carefully evaluated and implemented technology solutions, business has been able to offer world class products and customer services at optimal costs. Your bank continues to achieve first mover advantage with introduction of products like Chillr and Smart Buy. While offering these products your bank is equally focused on security of our customers and mitigation of risks due to increasing cyber threats. Using superlative combination of Real time decisioning, self-learning model and on line tie back with host system, your Bank has restricted cyber frauds to minimum levels.

Technology initiatives in the areas of enterprise data warehousing and advanced analytics have further enabled your Bank with much more effective and targeted campaigns and acquisition as well as heightened cross sell opportunities and customer retentions.

In order to optimize costs and offer products and services at reasonably lower costs to customers, your Bank has evaluated and implemented cutting edge technologies like desktop virtualization and server virtualization, storage virtualization, data compression techniques and private cloud.

Apart from product improvisations & optimizing costs your Bank has focused on ensuring uninterrupted services are made available to its customers by strengthening its technology infrastructure so that there are no single points of failure. Towards this front, your Bank has also strengthened its DR BCP initiative and conducted regular mock drills so that DR BCP serves meaningfully when it is required.

(iv) the expenditure incurred on Research & Development.

Being in the Financial Services space, your Bank evaluates innovative technology solutions that are readily available or near-ready for deployment and broadly fit its business requirements. Solutions that are commercially viable are then tested in collaboration with the relevant technology partners. Once proven, the technology solutions are then procured and commissioned for active business use.

Research and Development expenses are not applicable to IT solutions absorption in the Bank given the above technology introduction process & strategy of your bank.

(C) Foreign Exchange Earnings and Outgo:

During the year the total foreign exchange earned by the Bank was Rs. 1,028.0 crore (on account of net gains arising on all exchange / derivative transactions) and the total foreign exchange outgo was about Rs. 196.1 crore towards the operating and capital expenditure requirements.

SECRETARIAL AUDIT

In terms of Section 204 of the Companies Act, 2013 and the rules made thereunder, M/s. BNP & Associates, practicing Company Secretaries have been appointed as Secretarial Auditors of the Bank for the financial year 2014-15. The Report of the Secretarial Auditors is enclosed as ANNEXURE 7 to this Report. The observations in the said report are self explanatory and no further comments/explanations are called for.

CORPORATE GOVERNANCE

In compliance with the provisions of Clause 49 of the Listing Agreement, a separate report on Corporate Governance along with a certificate from the Secretarial Auditors of its compliance, forms an integral part of this Report.

BUSINESS RESPONSIBILITY REPORT

The Bank''s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its web site www.hdfcbank.com.

INFORMATION UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The relevant information is included in Section E-Principle 3 of the Business Responsibility Report for 2014-15.

ACKNOWLEDGEMENT

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank''s employees and look forward to their continued contribution in building a World Class Indian Bank.

On behalf of the Board of Directors

Mrs. Shyamala Gopinath Chairperson

Mumbai, April 23, 2015


Mar 31, 2014

The Directors take great pleasure in presenting the Twentieth Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2014.

FINANCIAL PERFORMANCE

(Rs. crore) For the year ended

March 31, 2014 March 31, 2013

Deposits and Other Borrowings 406,776.5 329,253.6

Advances 303,000.3 239,720.6

Total Income 49,055.2 41,917.5

Profit before Depreciation and Tax 13,443.7 10,402.3

Net Profit 8,478.4 6,726.3

Profit brought forward 11,132.2 8,399.6

Total Profit available for Appropriation 19,610.6 15,125.9

Appropriations:

Transfer to Statutory Reserve 2,119.6 1,681.6

Transfer to General Reserve 847.8 672.6

Transfer to Capital Reserve 58.3 85.8

Transfer to / (from) Investment Reserve 3.2 17.7

Proposed Dividend 1,643.4 1,309.1

Tax Including Surcharge and Education cess on Dividend 279.3 222.5

Dividend (including tax / cess thereon) pertaining to previous year paid during the year 4.8 4.5

Balance carried over to Balance Sheet 14,654.2 11,132.2

The Bank posted total income and net profit of Rs. 49,055.2 crore and Rs. 8,478.4 crore respectively for the financial year ended March 31, 2014 as against Rs. 41,917.5 crore and Rs. 6,726.3 crore respectively in the previous year.

Appropriations from net profit have been effected as per the table given above.

DIVIDEND

Your Bank has had a dividend policy that balances the dual objectives of appropriately rewarding shareholders through dividends and retaining capital in order to maintain a healthy capital adequacy ratio to support future growth. It has had a consistent track record of moderate but steady increase in dividend declarations over its history with the dividend payout ratio ranging between 20% and 25%. Consistent with this policy and in recognition of the overall performance during this financial year, your directors are pleased to recommend a dividend of Rs. 6.85 per equity share of Rs. 2 for the year ended March 31, 2014 as against Rs. 5.50 per equity share of Rs. 2 for the previous year ended March 31, 2013. This dividend shall be subject to tax on dividend to be paid by the Bank.

AWARDS

As in the past years, awards and recognition were conferred upon your Bank by leading domestic and international organizations and publications during the financial year ended March 31, 2014.

Some of them are :

Asiamoney

- Best Domestic Bank in India

- Best Local Cash Management Bank in India

- Aditya Puri - Best Executive in India

Business India

- Best Bank

Business Standard

- Aditya Puri - Banker of the Year

Business Today - KPMG Best Banks Survey

- Best Bank

Businessworld

- Best Bank in India (Large Banks)

Dun & Bradstreet Corporate Awards

- Best in Banking Sector

Dun & Bradstreet Polaris Financial Technology Banking Awards

- Best Private Sector Bank - Technology Adoption

- Best Private Sector Bank - Retail

- Overall Best Private Sector Bank

FE-EY Best Banks Survey

- Best Bank - New Private Sector

- Best in Strength and Soundness

- Best in Profitability

Finance Asia Country Awards for Achievement

- Best Bank- India Forbes Asia

- Fab 50 Companies List (for the 7th Year) Global Finance Survey -World''s Best Banks

- Best Bank in India

GUINNESS WORLD RECORDTM

- Largest Blood Donation Drive across multiple venues, in a single day

IBA Banking Technology Awards

- Best Technology Bank of the Year

- Best Internet Bank

- Best Customer Management Initiative

- Best Use of Mobility Technology in Banking

IBA Innovation Awards

- Most Innovative Use of Technology

Institute for Development and Research in Banking Technology Awards

- Best Bank - Managing IT Risk (Large Banks)

- Best Bank - Mobile Banking (Large Banks)

- Best Bank - Best IT Team (Private Sector Banks)

Institutional Investor

- Best Investor Relations Company (Banking Sector)

- Best CEO (Banking Sector)

- Best CFO (Banking Sector)

MACCIA Awards

- Best in Financial Services - Bank Category

NDTV Profit Business Leadership Awards

- Winner in the Banking Category

Outlook Money Awards

- Best Bank in Large Banks Category

Sunday Standard Best Banker Awards

- Best Private Sector Bank - Large

- Safest Bank - Large

- Aditya Puri - Top Achiever

The Asian Banker Achievement Awards

- International Transaction Banking

UTI Mutual Fund CNBC TV 18 Financial Advisory Awards

- Best Performing Bank - Private

RATINGS

Instrument Rating Rating Agency

Fixed Deposit Program CARE AAA (FD) CARE Ratings

tAAA (ind) India Ratings

Certificate of Deposits CARE A1 CARE Ratings Program

A1 (ind) India Ratings

Long term unsecured, CARE AAA CARE Ratings

subordinated

(Lower Tier 2) Bonds

AAA (ind) with a India Ratings Stable outlook

Tier 1 Perpetual Bonds CARE AAA CARE Ratings

AAA Stable CRISIL

Upper Tier 2 Bonds CARE AAA CARE Ratings

AAA stable CRISIL

Comments

Instruments with this rating are considered to have very strong

degree of safety regarding timely payment of financial obligations.

Such instruments carry lowest credit risk.

Instruments with this rating are considered to have very strong

degree of safety regarding timely payment of financial obligations.

Such instruments carry lowest credit risk.

Instruments with this rating are considered to have very strong

degree of safety regarding timely payment of financial obligations.

Such instruments carry lowest credit risk.

Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk

ISSUANCE OF EQUITY SHARES

During the year under review, 196.3 lac shares were allotted to the employees of your Bank in respect of the stock options exercised. These include the shares allotted under the Employee Stock Option Schemes of the erstwhile Centurion Bank of Punjab.

EMPLOYEE STOCK OPTIONS

The information pertaining to Employee Stock Options is given in an annexure to this report.

CAPITAL ADEQUACY RATIO

The Reserve Bank of India issued the Basel III capital regulations which were effective from April 1, 2013. Accordingly Bank''s in India are now required to report Capital Adequacy ratios under Basel III guidelines. Your Bank''s total Capital Adequacy Ratio (CAR) calculated in line with Basel III capital regulations stood at 16.1%, well above the regulatory minimum of 9.0%. Of this, Tier I CAR was 11.8%.

SUBSIDIARY COMPANIES

Your Bank has two subsidiaries, HDB Financial Services Limited (''HDBFS'') and HDFC Securities Limited (''HSL)

HDB FINANCIAL SERVICES LIMITED

HDBFS is a non-deposit taking non-bank finance company (''NBFC''). The customer segments being addressed by HDBFS are typically underserviced by larger commercial banks, and thus create a profitable niche for the company. Apart from lending to individuals, the company grants loans to micro, small and medium business enterprises. It also runs call centers for collection services to the Bank''s retail loan products.

As on March 31, 2014, HDBFS had 275 branches in 202 cities. During the financial year ended March 31, 2014, the company''s total income increased by over 75% to Rs. 1,688.3 crore as compared to Rs. 963.2 crore in the previous year. During the same period the company''s net profit after tax grew 104% to reach Rs. 209.2 crore compared to Rs. 102.5 crore in the previous year.

During the year ended March 31, 2014, HDBFS issued 10,26,91,469 shares at Rs. 56 per share (includes premium of Rs. 46) on right basis at 1:4 ratio (one share for every four shares held). Your bank subscribed 10,00,00,000 shares in the issue at Rs. 56 per share .

HDFC SECURITIES LIMITED

HDFC Securities Limited has emerged as a strong player in the financial services space offering complete financial services along with the core broking product. The Company continued strengthening its distribution network and by the end of the year had 200 branches across 160 cities in the country. During the year under review, the Company''s total income amounted to Rs. 263.1 crore as against Rs. 232.1 crore in the previous year. The operations have resulted in a net profit after tax of Rs. 78.4 crore as against Rs. 66.8 crore in the previous year.

During the year under review, your Bank increased its stake in HSL by buying out the entire shareholding (27.82 per cent) of the minority partner Indocean e-Securities Holdings Ltd. Consequently, your Bank held 89.24 per cent stake in HSL as on March 31, 2014.

Shareholders who wish to have a copy of the annual accounts and detailed information on HDBFS and HSL may write to the Bank for the same. Further, the said documents shall also be available for inspection by shareholders at the registered offices of the Bank, HDBFS and HSL.

Financial Performance

The financial performance of your Bank during the financial year ended March 31, 2014 remained healthy with total net revenues (net interest income plus other income) increasing by 16.5% to Rs. 26,402.3 crore from Rs. 22,663.7 crore in the previous financial year. Revenue growth was driven by an increase in both, net interest income and other income. Net interest income grew by 16.9% due to acceleration in loan growth of 26.4% coupled with a net interest margin (NIM) of 4.4% for the year ending March 31, 2014.

Other income grew 15.6% over that in the previous year to Rs. 7,919.6 crore during the financial year ended March 31, 2014. The largest component of other income was fees and commissions, which increased by 11.0% to Rs. 5,734.9 crore with the primary drivers being commissions on debit and credit cards, transactional charges, fees on deposit accounts, processing fees on retail assets and commission on distribution of Insurance products. Foreign exchange and derivatives revenues were Rs. 1,401.1 crore, gain on revaluation / sale of investments were Rs. 110.5 crore and recoveries from written- off accounts were Rs. 622.6 crore in the financial year ended March 31, 2014.

Operating (non-interest) expenses increased from Rs. 11,236.1 crore in the previous financial year to Rs. 12,042.2 crore in the year under consideration. During the year, your Bank opened 341 new branches and 513 ATMs which resulted in higher infrastructure and staffing expenses. Staff expenses also increased on account of annual wage revisions. Cost to income ratio was at 45.6% for the year ended March 31, 2014, as against 49.6% for the previous year.

Total provisions and contingencies were Rs. 1,588.0 crore for the financial year ended March 31, 2014 as compared to Rs. 1,677.0 crore during the previous year. Your Bank''s provisioning policies for specific loan loss provisions remain higher than regulatory requirements. The coverage ratio based on specific provisions alone without including write-offs was 73%, and including general and floating provisions was 176% as on March 31, 2014. Your Bank made general provisions of Rs. 221.3 crore during the financial year ended March 31, 2014.

Your Bank''s profit before tax was Rs. 12,772.1 crore, an increase of 31.0% over the year ended March 31, 2013. With the effective tax rate for the year at 33.6% as against 31.0% for the previous year, the net profit for year ended March 31, 2014 was Rs. 8,478.4 crore, up 26.0%, over the year ended March 31, 2013. Return on average net worth was 20.9% while the basic earnings per share increased from Rs. 28.5 to Rs. 35.5 per equity share.

As at March 31, 2014, your Bank''s total balance sheet was at Rs. 491,600 crore, an increase of 22.8% over Rs. 400,332 crore as at March 31, 2013. Total deposits increased 24.0% from Rs. 296,247 crore as on March 31, 2013 to Rs. 367,337 crore as on March 31, 2014. These included US$ 3.4 billion deposits raised under the RBI window for attracting Foreign Currency Non-Resident (FCNR) deposits. Under this window the Bank could raise foreign currency denominated deposits and swap them into rupees with RBI at a concessional rate. Savings account deposits grew by 16.9% to Rs. 103,133 crore while current account deposits grew by 17.5% to Rs. 61,488 crore as on March 31, 2014. The proportion of current and savings deposits to total deposits was at 44.8% as on March 31, 2014.

During the financial year under review, net advances grew by 26.4% to Rs. 303,000 crore. Your Bank''s retail advances grew by 20.8% to reach Rs. 164,763 crore. Adjusted for the one time increase in FCNR deposits swapped with RBI under the special window and the related foreign currency loans, core deposits and advances growth for the year ended March 31, 2014 was 16.9% and 21.8% respectively. The Bank had a market share of approximately 4.4% and 4.7% in total domestic system deposits and advances respectively. Your Bank''s Credit Deposit (CD) Ratio was 82.5% as on March 31, 2014.

Business Segments'' Update

Consistent with its past performance, your Bank has achieved healthy growth across various operating and financial parameters in the last financial year. This performance reflected the strength and diversity of three primary business franchises -retail banking, wholesale banking and treasury and of its disciplined approach to risk-reward management.

Retail Banking

Your Bank caters to various customer segments with a wide range of products and services. Your Bank is a ''one stop shop'' financial services provider of various deposit products, of retail loans (auto loans, personal loans, commercial vehicle loans, mortgages, business banking, loan against gold jewellery etc.), credit cards, debit cards, depository (custody services), bill payments and several transactional services. Apart from its own products, your Bank distributes third party financial products such as mutual funds and life and general insurance.

The growth in your Bank''s retail banking business was robust during the financial year ended March 31, 2014. Your Bank''s total retail deposits grew by 29.4% to Rs. 287,157 crore in the financial year ended March 31, 2014, driven by retail term deposits which grew faster at 42.7% during the same period. Adjusted for US$ 3.4 billion deposits raised under the RBI window for attracting Foreign Currency Non-Resident (FCNR) deposits, core total retail deposits and retail term deposits growth was 20.0% and 22.8% respectively for the year ended March 31, 2014.

The Bank''s retail advances grew 20.8% to Rs. 164,763 crore during the financial year ended March 31, 2014 driven primarily by a growth in personal loans, home loans, mortgage loans and credit cards. Retail advances include loans which fulfill the criteria of orientation, nature of product, granularity and low value of individual exposures for retail exposures as laid down by the Basel Committee. The auto finance business grew at relatively lower pace and commercial transportation finance de- grew in line with the general market conditions.

During this year your Bank expanded its distribution network from 3,062 branches in 1,845 cities / towns as on March 31, 2013 to 3,403 branches in 2,171 cities / towns as on March 31, 2014. Number of ATMs increased from 10,743 to 11,256 during the same period. The Bank''s focus on semi-urban and under- banked markets continued, with over 80% of the Bank''s new branches in semi-urban and rural areas. The Bank''s customer base currently stands at 28.9 million customers.

In order to provide its customers greater choices, flexibility and convenience, your Bank continued to make significant headway in its multichannel servicing strategy, offering its customers the use of ATMs, internet, phone and Mobile Banking in addition to its expanded branch network to serve their banking needs. Phone Banking services are available even for Non Resident Indian (NRI) customers of your Bank across the globe.

Your Bank''s Mobile Banking product has been developed keeping in mind data connections which can be either 2G or 3G. Technology has played a key role in the push into rural hinterlands. For local customers there are Hindi Mobile App, Hindi SMS Banking and a Toll Free number to carry out basic banking activities. A great response was received on the toll-free service from our customers in Rural and Semi-Urban centers, since they could get instant updates on account balance, last 3 transactions etc through an instant SMS response from the Bank by simply giving a missed call on a toll-free number.

The Bank continued its focus on internal customers for its credit cards portfolio with over 70% of new cards issued to internal customers. During the year, the Bank launched three premium variants of credit cards as part of the Diners brand under an exclusive arrangement with Diners. This will enable the Bank to cater to the specific need of super-premium customers requiring global card benefits. As part of its strategy to drive usage of its credit cards the Bank also has a significant presence in the ''merchant acquiring'' business with the total number of point-of- sale (POS) terminals installed at over 215,000.

In addition to the aforementioned products the Bank does home loans in conjunction with HDFC Limited. Under this arrangement the Bank sells loans provided by HDFC Limited through its branches. HDFC Limited approves and disburses the loans, which are booked in their books, with the Bank receiving a sourcing fee for these loans. The Bank has the option but not an obligation to purchase up to 70% (or 55% in case all the loans purchased qualified for priority sector) of the fully disbursed home loans sourced under this arrangement either through the issue of mortgage backed pass through certificates (PTCs) or by a direct assignment of loans; the balance is retained by HDFC Limited. A fee is paid to HDFC Limited for the administration and servicing of the loans. As required by the current securitization guidelines, the loan assignments bought during the year are without credit enhancement. Your Bank originated an average Rs. 1,000 crore of home loans every month in the financial year ended March 31, 2014. During the year, the Bank purchased from HDFC Limited under the "loan assignment" route approximately Rs. 5,560 crore of home loans which also qualified as priority sector advances.

Your Bank also distributes life, general insurance and mutual fund products through its tie-ups with insurance companies and mutual fund houses. Changes in regulations and product mix have adversely impacted fees from these sources, though increase in volumes has offset to some extent the drop in commission rates. Third party distribution income contributes approximately 11% of total fee income for the year ended March 31, 2014, compared to 15% of the total fee income for the previous year.

The Bank''s data warehouse, Customer Relationship Management (CRM) and analytics solutions have helped it target existing and potential customers in a cost effective manner and offer them products appropriate to their profile and needs. Apart from reducing costs of acquisition, this has also helped in deepening of customer relationships and greater efficiency in fraud control and collections activities resulting in lower credit losses. The Bank is committed to investing in advanced technology in this area which will provide a cutting edge in the Bank''s product and service offerings.

Wholesale Banking

Your Bank provides its corporate and institutional clients a wide range of commercial and transactional banking products, backed by high quality service and relationship management. The Bank''s commercial banking business covers not only the top end of the corporate sector but also the emerging corporate segments and small and medium enterprises (SMEs). Your Bank has a number of business groups catering to various segments of its wholesale banking customers with a wide range of banking services covering their working capital, term finance, trade services, cash management, investment banking services, foreign exchange and electronic banking requirements.

Your Bank''s financial institutions and government business group (FIG) offers commercial and transaction banking products to financial institutions, mutual funds, public sector undertakings, central and state government departments. The main focus for this segment remained the offering of various deposit and transaction banking products to this segment besides deepening these relationships by offering funded, non- funded, treasury and foreign exchange products. Your Bank is authorised to collect Direct Taxes & made total collection of Rs. 139,433 crore during the year and was ranked No.2 in terms of total collections made by any bank. Your Bank is also authorised to collect Excise & Service Tax and collected Rs. 53,019 crore, during the year. Governments of 12 States have authorised your Bank to collect State Taxes / duties. These mandates enable a greater convenience to the customers and help the exchequer in mobilizing resources in a seamless manner.

Your Bank''s wholesale deposits grew around 7.8%, while wholesale advances showed a growth of 33.6%. Your Bank provides its customers access to both working capital and term financing. Although the Bank witnessed an increase in the proportion of its medium tenor term lending, working capital loans and short tenor term loans continued to account for a large share of its wholesale advances.

During the financial year ended March 31, 2014, growth in the wholesale banking business continued to be driven by new customer acquisition and higher cross-sell with a focus on optimizing yields and increasing product penetration. Your Bank''s cash management, vendor and distributor (supply chain) finance products continued to be an important contributor to growth in the corporate banking business. Your Bank further consolidated its position as a leading player in the cash management business (CMS) (covering all outstation collection, disbursement and electronic fund transfer products across the Bank''s various customer segments) with volumes of over Rs. 33 trillion. The Bank is one of the front runners in making significant progress in web-enabling its CMS business. The Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share by offering customised solutions. From customised ERP integrations to high end SAP certified solutions, the Bank has been a leading proponent of adopting innovative technology. The Bank continues to be the market leader in cash settlement services for major stock & commodity exchanges in the country.

Your Bank''s Investment Banking Group established itself as a leading player in debt capital markets and is now ranked amongst the top 5 book runners in Rupee corporate loans and bonds. The group arranged financing for client relationships across sectors including telecom, toll roads, steel, energy, LNG terminals, chemicals and cement. The group managed to close Rs. 120 billion worth of corporate bonds across public sector undertakings, financial institutions and corporate clients of the bank. In the advisory business, the Bank advised and closed transactions in capital goods, agrochemicals and BFSI sector. In the capital markets business, Bank advised clients on public offerings and buy-back of shares and is now well positioned to offer the entire gamut of investment banking services.

The Bank met the overall priority sector lending requirement of 40% of net bank credit and also strived for healthy growth in the sub-targets such as weaker sections, direct agriculture, and the micro and SME segments.

International Operations

Your Bank currently has two overseas branches: a wholesale banking branch in Bahrain and a branch in Hong Kong. Your Bank also has three representative offices in Dubai, Abu Dhabi and Kenya. The Bank also has RBI approval to open a branch at DIFC Dubai and the office is likely to be operational in the next year. The overseas branches offer multiple banking services including treasury products, trade finance and loans to customers. The representative offices are engaged in offering wealth management products, remittance facilities and marketing deposits to the non-resident Indian (NRI) community. As of March 31, 2014 the combined balance sheet size of both the overseas branches was over USD 5.0 billion. To capture the one time opportunity offered by RBI in September - November 2013 to commercial banks for raising FCY monies at concessional rupee swap cost, the Bank issued USD 500 million bonds for 3 years through a public deal. In addition, USD 880 million were raised through bilateral loans in international loan market. With the above fund raising along with funds sourced through tie up with other foreign banks and FCNR deposits received directly, the bank raised USD 325 million as tier 1 borrowing and USD 3.4 billion of FCNR deposits, which was approximately 13% of the total inflows into the country under the special RBI window.

Treasury

The treasury group is responsible for compliance with reserve requirements, and management of liquidity and interest rate risk on the Bank''s balance sheet. On the foreign exchange and derivatives front, revenues are driven primarily by spreads on customer transactions based on trade flows and customers'' demonstrated hedging needs. The financial year ended March 31, 2014 recorded Rs. 1,401.1 crore revenues from foreign exchange and derivative transactions. These revenues were distributed across large corporate, emerging corporate, business banking and retail customer segments for plain vanilla foreign exchange products and across primarily large corporate and emerging corporate segments for derivatives. The Bank offers Indian rupee and foreign exchange derivative products to its customers, who use them to hedge their market risks. The Bank enters into foreign exchange and derivative deals with counterparties after it has set up appropriate counterparty credit limits based on its evaluation of the ability of the counterparty to meet its obligations in the event of crystallization of the exposure. Appropriate credit covenants may be stipulated where required as trigger events to call for collaterals or terminate a transaction and contain the risk. Where the Bank enters into foreign currency derivative contracts, not involving the Indian Rupee, with its customers it lays them off in the inter- bank market on a matched basis. For such foreign currency derivatives, the Bank does not have any open positions or does not assume any market risks but carries only the counterparty credit risk (where the customer has crystallized payables or mark-to-market losses). The Bank also deals in derivatives on its own account; including for the purpose of its own balance sheet risk management. The Bank recognizes changes in the market value of all derivative instruments (other than those designated as hedges) in the profit and loss account in the period of change. Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market.

Given the regulatory requirement of holding government securities to meet the statutory liquidity ratio (SLR) requirement, your Bank maintains a portfolio of government securities. While a significant portion of these SLR securities are held in the ''Held-to-Maturity'' (HTM) category, some of these are held in the ''Available for Sale'' (AFS) category. The Bank is also a Primary Dealer for government securities. As part of this business, as well as otherwise, the Bank holds fixed income securities in the "Held for Trading" (HFT) category.

Information Technology

Your Bank had successfully completed the program to refresh its Retail Core Banking System to the latest technology platform. Continuing with the program from the previous financial year, your Bank migrated the remaining 60% of the Retail Accounts to this new technology platform during the financial year ended March 31, 2014. This new Retail Core Banking System is deployed on a more robust architecture, enabling your Bank to provide more features to its customers and respond faster to business and market needs.

Your Bank continues to make substantial investments in its technology platforms and systems and spread its electronically linked branch network. Your Bank''s direct banking platforms continue to be stable and robust, supporting ever increasing transaction volumes, as customers adopt newer self-service technologies.

Over 2,15,000 of your Bank''s Point-Of-Sale terminals have been made safer and more secure, following implementation of RBI''s security and encryption mandates. Also, Repay cards are now accepted on these terminals and at Internet merchants enlisted with your Bank.

Your bank had implemented state-of-the-art engineered systems technology for some of the important systems. The capacity of the EFT switch has been upgraded to cater to growing ATM and other payment transaction volumes and enhance scalability. Your Bank has doubled the capacity of its operational Customer Relationship Management system in a very innovative manner, by implementing the latest version of its database engine and has doubled the supported user concurrency.

Live switch-over and switch-back drills of major IT applications have successfully been completed, as part of your Bank''s Business Continuity and Disaster Recovery management strategy, thereby enhancing your Bank''s readiness in responding to emergency situations. These switch-over and switch-back drills have been successfully completed for the new Retail Core banking System also.

RBI had issued guidelines on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds and provided recommendations for implementation. Your Bank embarked on a program to implement these guidelines and has since implemented substantial portion of the requirements stated in the guidelines.

Service Quality Initiatives

Your Bank continued its drive towards improvements in service quality across all customer touch points namely branches, ATMs, Phone Banking, Net Banking and email channels. With a view to ensure comprehensive improvement, your Bank extended its service quality initiatives to the back office support functions. Your Bank regularly captures ''voice of customers'' and ''voice of employees'' and uses those towards simplification of processes to delight customers. Your Bank has also augmented the training and skill development mechanism to empower and equip employees to deliver improved quality of customer service.

Your Bank has taken various steps to improve the effectiveness of its grievance redressal mechanism across its delivery channels. The effectiveness of grievance handling in particular and overall customer service initiatives are periodically reviewed at different levels including by the Board of Directors of the Bank. All these initiatives have helped in consistent reduction in the total number of customer complaints. Your Bank has established a very strong and dispassionate review mechanism for complaint disposal in this year. Review is done by an independent cross functional team of senior staff ensuring unbiased resolution.

As a result of the continued focus on customer service, your Bank has not only received written appreciation from some of the Banking Ombudsmen appointed by the Reserve Bank of India, but has also received many accolades e.g. "Qualtech Award" in the Lean Sigma Project Competition for "Empowering Rural Livelihood: Re-engineering the Kisan Gold Card" (popularly known as 7 DAY KGC) and winner in Best Customer Management Initiative at the IBA Banking Technology Awards to name a few.

Risk Management and Portfolio Quality

Integral to its business, the Bank takes on various types of risk, the most important of which are credit risk, market risk and operational risk. The identification, measurement, monitoring and management of risks remain a key focus area for the Bank. Sound risk management and balancing risk-reward trade-offs are critical to the Bank''s success. Business and revenue growth are therefore to be weighed in the context of the risks implicit in the Bank''s business strategy. The Board of Directors of your Bank endorses the risk strategy and approves the risk policies. The Risk Policy & Monitoring Committee of the Board supervises implementation of the risk strategy. It guides the development of policies, procedures and systems for managing risk. The Committee periodically reviews risk level and direction, portfolio composition, status of impaired credits as well as limits for treasury operations.

The Bank has a comprehensive centralized risk management function, independent from the operations and business units of the Bank. For credit risk, distinct policies, processes and systems are in place for the retail and wholesale businesses. In the retail loan businesses, the credit cycle is managed through appropriate front-end credit, operational and collection processes. For each product, programs defining customer segments, underwriting standards, security structure etc., are specified to ensure consistency of credit buying patterns. Given the granularity of individual exposures, retail credit risk is monitored largely on a portfolio basis, across various products and customer segments. For wholesale credit exposures, management of credit risk is done through target market definition, appropriate credit approval processes, ongoing post-disbursement monitoring and remedial management procedures. Overall portfolio diversification and periodic as well as proactive reviews facilitate risk mitigation and management.

The banking industry in India continued to face a challenging environment, reflected in increased rating downgrades, debt restructuring and non-performing assets. Your Bank, however, has been able to maintain a high quality loan book and have relatively low delinquencies. The credit quality in the wholesale segment continued to be stable, supported by tighter credit standards, appropriate credit filters and robust monitoring systems as well as a balanced portfolio. The commercial vehicle and construction equipment segments continued to see some stress due to the ban on mining activity, low industrial growth and slowdown in investment activity. The credit quality of the other retail lending book of the Bank continued to be healthy in line with the expectations. As of March 31, 2014, your Bank''s ratio of gross non-performing assets (NPAs) to gross advances was 0.98%. Net non-performing assets (gross non- performing assets less specific loan loss provisions) were 0.3% of net advances as of March 31, 2014. Restructured assets including pipeline cases were 0.2% of gross advances as of March 31, 2014. The specific loan loss provisions that the Bank has made for its non-performing assets continue to be more conservative than the regulatory requirement. In addition, the Bank has made general provisions for standard assets which are as per regulatory prescription. The coverage ratio taking into account specific, general and floating provisions was 176% as of March 31, 2014.

A dedicated team within the risk management function is responsible for assessment, monitoring and reporting of operational risk exposures across the bank. Board approved Operational Risk Management Framework is put in place. A bottom up self-assessment process identifies high risk areas so that bank can initiate timely remedial measures. Key Operational Risk Indicators are employed to alert the bank on impending problems in a timely manner to ensure risk mitigation actions. Material operational risk losses are examined thoroughly to identify areas of risk exposures and gaps in controls basis which appropriate risk mitigating actions are initiated.

Market Risk in the trading portfolio of your Bank has been adequately managed through a well-defined Board approved market risk policy and stringent trading risk limits such as positions limits, gap limits, tenor restrictions; sensitivity limits viz. PV01, Modified Duration and Option Greeks, Value-at-Risk (VaR) limit and Stop Loss Trigger Level (SLTL). The Bank also has an approved investment policy which is adhered while investing or trading. Additionally, Bank has a Board approved stress test policy and framework which encompasses the market risk stress test scenarios and simulations so that stress losses can be measured and adequate control measures can be initiated.

Liquidity risk is the risk that the Bank may not be able to fund increases in assets or meet obligations as they fall due without incurring unacceptable losses. Interest rate risk is the risk where changes in market interest rates affect the Bank''s earnings through changes in its net interest income (NII) and the market value of equity through changes in the economic value of its interest rate sensitive assets, liabilities and off-balance sheet positions. The policy framework for liquidity and interest rate risk management is established in the Bank''s ALM policy which is guided by regulatory instructions. Your Bank has established various Board approved limits viz., maturity gap limits and limits on stock ratios for liquidity risk and limits on income impact and market value impact for interest rate risk. Your Bank''s Asset Liability Committee (ALCO) ensures that liquidity risk and interest rate risk are within the tolerance limits. Additionally, your Bank has a comprehensive Board approved stress testing programme covering liquidity and interest rate risk which is aligned with the regulatory guidelines.

In accordance with RBI''s guidelines, the Bank is currently on the Standardized Approach for Credit Risk, the Basic Indicator Approach for Operational Risk and the Standardized Approach for Market Risk. Parallely, the Bank is progressing with its initiatives for migrating to the advanced approaches for these risks. The framework of the advanced approaches is in harmony with the Bank''s objective of adopting best practices in risk management.

INTERNAL CONTROLS, AUDIT AND COMPLIANCE

Your Bank has Internal Audit and Compliance functions which are responsible for independently evaluating the adequacy of all internal controls and ensuring operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements. The audit function also proactively recommends improvements in operational processes and service quality. To mitigate operational risks, the Bank has put in place extensive internal controls including restricted access to the Bank''s computer systems with strong audit trails, appropriate segregation of front and back office operations, post transaction monitoring processes at the back end to ensure independent checks and balances, adherence to the laid down policies and procedures of the Bank and to all applicable regulatory guidelines. Your Bank has always adhered to the highest standards of compliance and governance and has put in place controls and an appropriate structure to ensure this. To ensure independence, the internal audit function has a reporting line to the Chairman of the Audit and Compliance Committee of the Board and only a dotted line reporting to the Managing Director. The Audit and Compliance Committee of the Board also reviews the performance of the audit and compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines.

CORPORATE SOCIAL RESPONSIBILITY

Your Bank continues its endeavors to build a sustainable business philosophy through three platforms namely governance, social responsibility and environmental responsibility.

Your Bank has undertaken several community interventions/ projects through the year to create a positive impact on society. These projects take shape in many ways from corporate philanthropy to employee driven projects. The Bank has partnered with over 18 NGOs and over 70,000 lives impacted through our initiatives.

In keeping with its mission for community interventions its projects/programs have largely focused in the areas as outlined below.

Education

Education is one of the building blocks of any nation, one of the core focuses of the CSR strategy is the promotion of education. Your Bank''s programs aim at mainstreaming out of school children and strengthening the quality of education. In order to meet these objectives we have initiated a multitude of programs reaching out to about 5,500 students.

1. Integration of out of school children: Integration of first time learners into mainstream education through pre-primaries within the community. In FY 13 -14 we were able to enroll over 1,000 children.

2. Improving the reading and learning ability of children: Through programs such as ''Grow with Books'' initiated in 7 Municipal Schools in Pune and the ''Library Projects'' in 10 schools in the Kharu block of Leh, your Bank aims to improve the reading and learning ability of the child. Another project aimed to stimulate the cognitive abilities of children exposes them to practical scientific experiences through a ''Mobile Science Lab'' The Mobile Lab travels to schools reaching out to over 22,000 children annually.

3. Rehabilitation of children with special needs: In continuation of our inclusive approach we support efforts of mainstreaming/rehabilitation differently abled children with special needs such as physiotherapy treatment, speech therapy etc. In addition to providing ongoing assistance we have also established an Audiology room for children with hearing impairments.

4. Educational assistance: In addition to initiatives that directly impact the learning ability of the child, your Bank also sponsors the educational expenses of disadvantaged or destitute children in institutional care, schools, colleges and professional courses. Currently close to 1,000 students receive educational assistance through direct or institutional support. In addition to these your Bank also differentiates positively in favor of the Girl Child through a special sponsorship for education of the girl child.

5. Special educational sponsorships: Your Bank launched the Educational Crisis Scholarship Support (ECSS) in 2011. ECSS aims to provide assistance to students to tide over difficult situation / personal/family crisis / without any adverse impact on their education. In the year 2013-14, 338 students in schools and colleges were supported for completing their education.

Financial Literacy

Your Bank supports Financial literacy projects in 600 schools across Andhra Pradesh and Odisha, inculcating social and financial habits among students aged 8 to 14. So far we have reached out to over 63,000 students studying in Government schools. In addition through our Sustainable Livelihood Initiative (SLI), Bank also offers non-financial services such as credit counseling and financial literacy training. The Bank also conducts rural financial literacy initiatives across the country to complement its efforts to support inclusive growth. Under its ''Power of Banking Program'' the Bank continues to train school children on basic concepts of Finance such as the origin of money, role of banks, importance of savings, etc. Driven by employee volunteers, the program covered over 3,300 children in 2013-14.

Training

Your Bank consistently strives to empower and provide occupational training to people at the bottom of the pyramid, which in turn will create employment opportunities for them. Bank''s livelihood initiatives are aimed at training and capacity development of youth and women from economically weaker sections of society and to empower them to gain access to opportunities and growth. Bank''s livelihood support programs are aimed at empowering competency-based, skill-oriented technical and vocational training.

In continuation of our initiative in Kolar district of Karnataka, the bank extended its support to another batch of 150 students, in the computer, life skill and retail management. 70% of the trainees were successfully placed through industry tie-ups.

In Jharkhand, Bank''s project trained 399 youth in Mobile Repairing, BSPA (Bedside Patient Attendant) and ITES (Information Technology). The project aims to train a second batch of 480 youth and introduce additional courses for Beauticians, Electrical repairing, Driving and Automobile Repairing. Trainees have been successfully placed through the project with salary ranging from Rs. 3,500 to Rs. 5,000 p.m.

In addition over 630 youth have been trained in various skills as part of our Capacity Building programs. We have since inception conducted over 6,088 programs covering 157,646 people.

Community Initiatives

Your Bank has supported a number of need-based projects within the community to make a difference to more than 4,900 lives. These have ranged from infrastructural support to community based campaigns. In response to the water crisis in Maharashtra, the Bank sponsored the constructing of rain water harvesting structures in three villages in Maharashtra. Another project implemented in Mangaon aimed at creating sanitation and water storage facilities for tribal children.

Traffic safety is another concern area we support. We have installed branded boards with messages on traffic safety such as ''Wear a helmet'', ''Wear a seatbelt'', ''Don''t use your mobile while driving'', etc. In addition to this, Your Bank has also identified villages across the country where it provides branded message boards for road identification, and social message boards.

One of Bank''s largest community based initiatives is organizing blood donation drives. In 2007, the Bank introduced the idea of a one-day nationwide blood donation drive and encouraged people to support a single social cause across the Bank''s vast network. Engaging the community as a team proved to be an important success factor in the years that followed. The seventh edition of the event was held from December 5, 2013 to December 8, 2013. 86,774 units of blood were collected during the campaign. The HDFC Bank Blood Donation Drive of 2013 set a GUINNESS WORLD RECORD™ as the organizer of the "Largest Blood Donation (across multiple venues) in a single day" in the world. The campaign involved 61,902 participants donating blood at 1,115 camps across 709 locations in India on December 6, 2013.

Response To Disasters:

Your Bank has always responded to the need of those affected by natural disasters such as flood, landslides, drought, etc. During times of crisis the bank has extended its support to provide relief to victims of such disasters and support the rehabilitation efforts of the state.

As a responsible Corporate Citizen Your Bank joined hands to support the victims.

During the landslide and flash floods in Uttarakhand and Orissa, Bank''s employees donated towards relief efforts and the amounts were matched by the Bank.

Bank''s employees joined relief teams in Uttarakhand to distribute Solar Lamps to 22 villages. Having identified lack of health facilities as a major need your Bank has tied-up with an NGO to set up and support the cost of running a primary Healthcare center at KedarGhati which will cater to the primary and the secondary healthcare needs of 50 villages.

Employee Volunteering:

Your Bank continues to encourage employees to participate and contribute to society through both time and funds. Through the employee payroll giving program employees continues to donate on a monthly basis. Currently 5,464 employees are active payroll donors. The Bank supports this gesture by donating a matching amount

Structures volunteering activities were created to encourage employees to engage in various acts of charity. The Banks annual volunteering day branded as the ''Make a Difference day'' saw an enthusiastic participation of more than 79 teams.

The ''BE-A-SANTA'' campaign initiated this year encouraged employees to bring in the New Year by sharing their fortunes. Employees contributed in fulfilling small wishes made by children and senior citizens. Wish Trees bearing wish cards were placed at different locations and employees could choose a wish card and fulfill the wishes.

Sustainable Livelihood Initiative:

Your Bank is committed to reaching out to the unbanked and under banked people at the bottom of the pyramid, particularly in rural India and bringing them into the banking fold. Your Bank''s Sustainable Livelihood Initiative has helped empower thousands of people, particularly women, in rural parts of India. Through this initiative, the Bank reaches out to the un-banked and under-banked segment of the population and in doing so, helps as many people as possible at the bottom of the pyramid by providing them with livelihood training and finance.

It involves a holistic approach - from offering training and enhancing occupation skills to providing credit counseling, financial literacy and market linkages - which financially empowers people and brings them into the banking fold. About 9 lac families were covered this year and about 27 lac families have so far benefitted from this initiative.

Environmental Responsibility

Your Bank regards climate change mitigation and environmental improvements as essential elements of a sustainable business. This belief embodies the Bank''s approach on reduction of carbon emissions. The Bank has taken various steps to manage GHG emissions, through Multi-channel delivery such as ATMs, Phone Banking, Net Banking and Mobile Banking which have cut down customers'' need to commute to our branches.

Your bank has ensured that many of its major locations have energy efficient lighting systems in place.

We have also adopted a ''Phase-out'' policy to replace inefficient lighting options and have also started incorporating the use of unconventional energy sources to power our ATMs in areas with fluctuating power supply. Promotion of video conference and video chatting on IP phone has also resulted in reducing travelling and fuel consumption; Bank has also introduced server and desktop Virtualization thereby reducing power consumption.

FINANCIAL INCLUSION

Over the last few years, your Bank has been working on a number of initiatives to promote Financial Inclusion across identified sections of rural and semi urban, under-banked and un-banked consumers. These initiatives target segments of the population that have limited or no access to the formal banking system by building a robust and sustainable model that provides relevant services and viable timely credit that ultimately results in economically uplifting its customers and substitutes borrowings at usurious rates.

Your Bank''s initiatives in the rural or deeper geography are dovetailed into its financial inclusion plans and also complements its Corporate Social Responsibility initiative where the endeavor has been to provide banking services which are viable both for the customer and the Bank. As of March 31, 2014 your bank had 318 unbanked branches. The Bank also had 4 one man and 201 two men branches to carry on business in deeper geographies.

Your Bank''s financial inclusion initiatives have been integrated across its various businesses, and product groups. As of March 31, 2014 your Bank had brought over 9.5 million households who were hitherto excluded from basic banking services, into the banking fold.

Rural Initiatives

Your Bank offers products and services such as savings, current, fixed and recurring deposits, loans, ATM facilities, investment products such as mutual funds and insurance, electronic funds transfers, drafts and remittances etc. in its branches located in rural and under banked locations. The Bank also leverages some of these branches as hubs for other inclusion initiatives such as direct linkages to self-help groups and to promote Joint Liability Group Loans, POS terminals and information technology enabled kiosks. The Bank covers over 14,000 villages in the country through various distribution set ups, which include branches, bank staff reaching out to the villages and business correspondents. Around 44% of the above mentioned villages have a population of less than 2,000 that have largely been financially excluded from the formal banking sector.

A number of retail credit products such as two-wheeler loans, car loans, mortgages etc. that are consumption products in urban centers happen to be means of income generation for rural consumers. Apart from loans directly linked to agriculture such as pre and post harvest credit, there are many other credit products that the Bank uses to aid financial betterment in rural locations. Your Bank has extended provision of its retail loans to large segments of the rural population where the end use of the products acquired (by availing Bank''s loans) is used for income generating activities. For example, loans for tractors, commercial vehicles, two wheelers etc. supplement the farmer''s income by improving productivity and reducing expenses.

Basic Banking Saving Deposit and Micro Deposits (BSBDA)

A savings account is the primary requirement for the provision of other banking services; the account promotes the habit of savings, provides security, and inculcates confidence among the target segment in the banking sector.

This product was launched by your Bank with a specific objective to provide customers a platform that enables them to inculcate the habit of savings.

Given the specific segment that is being targeted, namely customers who do not have any other Bank account, this product truly addresses the cause of Financial Inclusion. Additionally the Bank also periodically tracks the behavior in these accounts to ensure that the accounts opened maintain a balance and are active. From current financial year SLI has initiated Overdraft facility on these accounts.

The total number of Basic Banking Saving Deposit accounts was 27.5 lac as of March 31,2014 as against 15.8 lac as of March 31, 2013. Your bank has provided OD facility of Rs. 8.3 lac to 1,384 BSBDA accounts

Agriculture and Allied Activities

A large portion of India''s un-banked population relies on agriculture as the main source of livelihood. We believe provision of credit to farmers through various methods that your Bank has employed replaces the traditional money lending channel, while simultaneously providing income generating activities. Your Bank provides various loans to farmers through its suite of specifically designed products such as the Kisan Gold Card, tractor and cattle loans etc. In addition, the Bank offers post-harvest cash credit, warehouse receipt financing and bill discounting facilities to mandi (markets for grain and other agricultural produce) participants and farmers. These facilities enable the mandi participants to make timely payments to farmers. The Bank carries out this business through branches that are located in close proximity to mandis.

The Bank targets specific sectors to capture supply chain of certain crops from the production stage to the sales stage. On the basis of these cash flows, your Bank is able to finance specific needs of the farmers. This model has currently been implemented with dairy and sugarcane farmers. The initiative currently underway includes the appointment of dairy societies and sugarcane co-operatives as business correspondents, through whom the Bank opens accounts of individual farmers attached to these societies. The societies route all payments to the farmers through this account.

The use of appropriate technology is necessary to bring about efficiency in the agri value chain. One such technology initiative is the Milk to Money Terminal (MFT) used in Dairy supply chain. The technology captures milk quality and quantity data at a farmer level each time milk is poured by connecting to the fat tester and weighing machine. It converts this data into an accounting entry instantaneously and credits the farmer''s account. The MFT contains a cash dispenser that functions as standard ATM, thus the farmer can withdraw the amount from his account immediately if needed. The transparency in the milk collection process benefits both farmers and corporate as they get data at farmer level accurately and quickly, which enables the corporate to improve farmer productivity through their direct intervention.

Loans against Gold Jewellery

This offering allows customers a reliable source of credit in times of need. In the absence of this product, customers might be unable to access credit or alternatively might avail of credit at much higher rates in the form of unsecured loans from money lenders. Gold loans provide an alternate source of funds by monetising the household gold. It provides financial independence to small traders, small entrepreneurs and housewives. It also substitutes borrowing at usurious rates, particularly by small borrowers and weaker sections.

Small and Micro Enterprises

Your Bank offers complete banking solutions to micro, small and medium scale enterprises across industry segments including manufacturers, retailers, wholesalers / traders and services. The entire suite of financial products including cash credit, overdrafts, term loans, bills discounting, export packing credit, letter of credit, bank guarantees, cash management services and other structured products are made available to these customers. One of the means to financial inclusion is by supporting small and micro enterprises which in turn provide employment opportunities to the financially excluded. Though indirect, we believe this model may in many instances be more effective than providing subsidies that are often unsustainable, or never reach the intended beneficiary.

Promoting Financial Awareness

In addition to providing various products and services to the financially excluded, your Bank believes that imparting education and training to these target segments is equally essential to ensure transparency and create awareness. To this effect the Bank has put in place various training programs. These are conducted by Bank staff in local languages and cover not only the customers but also various intermediaries such as the Bank''s business correspondents. Through these programs your Bank provides credit counseling and information on parameters like savings habit, better utilization of savings, features of savings products, credit utilization, asset creation, insurance, income generation program etc. The Bank also facilitates need based capacity building and market place for the customers with the objective of sustaining their livelihood in holistic manner. During the financial year ended March 31, 2014, over 44,000 financial awareness programs covering over 6.5 lac households were conducted by Sustainable Livelihood Initiative, RIG and Branches. These camps are conducted using the RBI prescribed Financial Literacy Material (Posters, Financial Guide and Financial Diary).

HUMAN RESOURCES

Human Resources Development has been a key and constant focus area for your bank. The human resources agenda, that includes within its gamut the attraction and retention of talent, skills development, reward and recognition, performance management and employee engagement are realized through a number of key initiatives, systems and processes.

Employee Development

Performance Management is one of the most critical dimensions pertaining to the management of human resources and the organisation has a comprehensive Performance Management System (PMS) to assess performance. The PMS facilitates the differentiation between the various categories of performance. Higher rewards for higher levels of performance have been a fundamental philosophy of your bank. Apart from rewards, the PMS also allows for identification of training and development needs for employees. Employee development and growth is realized through an array of functional and behavioral programs that your bank conducts throughout the year as well as on the job training. Further your bank lays emphasis in rotating key talent for professional development and growth and building a leadership pipeline for the future.

Rewards and Recognition

Rewards and Recognition play a key role to attract, retain and engage employees. Your Bank is committed to ensure that employees are competitively positioned vis-a-vis market with respect to both fixed as well as variable pay. Your Bank also grants employee stock options to a certain segment of the employee population in order to align employee efforts to the creation of shareholder value. Apart from the standard compensation your Bank also has a well institutionalized recognition program called "Star Awards" to recognize the contribution of employees on an ongoing basis.

Employee Engagement

Fun at work is something your Bank feels should be an integral part of every HDFC Bank employee''s life. Your Bank believes in conducting activities that help individuals showcase their talent or pursue their interests other than work. Your Bank conducted comprehensive sports activities like ''Josh Unlimited'', a multi-city, multi-discipline sports event held across 15 cities. Stepathlon - a race around a Virtual World is a unique initiative which creates an ecosystem that promotes corporate health, fitness & productivity by increasing daily activities. Your Bank has been the largest participant and has bagged the ''Most Active Company'' and the ''Most Active Bank'' award for two consecutive years. The Voice Hunt contest in association with Shankar Mahadevan Academy, Sensations - the Bank''s ''ln-house musical band contest'' and the corporate photography contest were some of the other prominent engagement initiatives.

STATUTORY DISCLOSURES

The information required under Section 217(2A) of the Companies Act, 1956 and the rules made there under as amended, are given in the 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 said annexure may write to the Company Secretary at the Registered Office of the Bank. The Bank had 68,165 employees as on March 31, 2014. 213 employees employed throughout the year were in receipt of remuneration of more than Rs. 60 lacs per annum and 8 employees employed for part of the year were in receipt of remuneration of more than Rs. 5 lacs per month.

The provisions of Section 217(1)(e) of the Act relating to conservation of energy and technology absorption do not apply to your Bank. The Bank has, however, used information technology extensively in its operations.

The report on Corporate Governance is annexed herewith and forms part of this report.

The Ministry of Corporate Affairs has issued "Corporate Governance Voluntary Guidelines" in December 2009. While these guidelines are recommendatory in nature, the Bank has adopted most of these guidelines as detailed in the Corporate Governance Report. The Bank will examine the possibilities of adopting the remaining guidelines in an appropriate manner.

BUSINESS RESPONSIBILITY REPORT

The Bank''s Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives in the format adopted by companies in India as per the guidelines of the Securities and Exchange Board of India in this regard is available on its web site www.hdfcbank.com

RESPONSIBILITY STATEMENT

The Board of Directors hereby state that

i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2014 and of the profit of the Bank for the year ended on that date;

iii) We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

iv) We have prepared the annual accounts on a going concern basis.

DIRECTORS

Mr. Keki Mistry and Mrs. Renu Karnad will retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

Mr. Harish Engineer ceased to be a director from the closing hours of business on September 30, 2013 on his retirement from the services as an Executive Director in the whole-time employment of the Bank. Mr. Engineer served the Bank since its inception and played the lead role in setting up and developing the Wholesale Banking Business of the Bank over the years. As the Head of the Wholesale Banking Group, Mr. Engineer has contributed significantly in achieving the growth objectives of the Bank. Your directors wish to place on record their sincere appreciation of the contributions made by Mr. Engineer during his tenure with the Bank.

Mr. Paresh Sukthankar was elevated to the position of Deputy Managing Director by the Board with effect from 24th December 2013 subject to the approval of the shareholders and the Reserve Bank of India. The approval of the shareholders has since been obtained by means of a resolution passed by postal ballot, the results for which were announced on 12th March 2014. The approval of the Reserve Bank of India is awaited.

Mr. Kaizad Bharucha was appointed as an additional director by the Board and designated as an Executive Director in the whole-time employment of the Bank with effect from 24th December 2013 subject to the approval of the shareholders and the Reserve Bank of India. The approval of the shareholders has since been obtained by means of a resolution passed by postal ballot, the results for which were announced on 12th March 2014. The approval of the Reserve Bank of India is awaited.

In terms of the provisions of Section 149 of the Companies Act, 2013 it is proposed to appoint Mr.C.M.Vasudev, Dr. Pandit Palande, Mr.Partho Datta, Mr. Bobby Parikh, Mr. A.N.Roy and Mr.Vijay Merchant as Independent Directors for tenures determined in accordance with the applicable provisions of the Banking Regulation Act, 1949 and the guidelines of the Reserve Bank of India in this regard.

The brief resume/details relating to Directors who are to be appointed/re-appointed as above are furnished in the report on Corporate Governance.

AUDITORS

The Auditors, M/s. BSR & Co., Chartered Accountants have been the Statutory Auditors of the Bank since 2010. As per the regulations of the Reserve Bank of India the same auditors cannot be re-appointed for a period beyond four years. It is proposed to appoint Deloitte Haskins and Sells, LLP as the new Statutory Auditors of the Bank, on an annual remuneration (statutory audit fees) of Rs. 1,10,00,000, plus applicable taxes, subject to the approval of the members and the Reserve Bank of India. Your Directors place on record their sincere appreciation of the professional services rendered by BSR & Co., as Statutory Auditors of the Bank.

ACKNOWLEDGEMENT

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other government and regulatory agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank''s employees and look forward to their continued contribution in building a World Class Indian Bank.



On behalf of the Board of Directors

Mr. C. M. Vasudev

Chairman

Mumbai, April 22, 2014

 
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