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Directors Report of IDFC First Bank Ltd.

Mar 31, 2023

Your Board of Directors are pleased to present the 9th Annual Report of IDFC FIRST Bank Limited (‘IDFC FIRST Bank’ or the ‘Bank’) together with the Audited Financial Statements for the financial year (‘FY'') ended March 31, 2023.

STATE OF AFFAIRS OF THE BANK

The Bank has successfully diversified its business mix and added new revenue streams during FY 2022-23. It has launched new products in Retail as well as Wholesale Banking segments over the last 2 years and scaled them up during FY 2022-23. The achievements during the FY 2022-23 are mentioned below:

1. Growth in Funded Assets:

• Funded assets (including advances & credit substitutes) increased by 24% Y-o-Y from '' 1,29,051 as of March 31, 2022 to '' 1,60,599 crore as on March 31, 2023.

• Within the funded assets, urban retail segment including home loans, loan against property, wheels, consumer loans, digital and other loans, grew by 30% Y-o-Y from '' 67,321 crore as of March 31, 2022 to '' 87,516 crore as on March 31, 2023.

• Credit Card business, which is one of the newly launched segments for the Bank, grew by 74% Y-o-Y on a small and growing base, from '' 2,013 crore as of March 31, 2022 to '' 3,510 crore as on March 31, 2023.

• Commercial Finance segment, including the commercial vehicle, SME financing, business banking products, grew by 57% Y-o-Y from '' 10,144 crore as of March 31, 2022 to '' 15,928 crore as on March 31, 2023, primarily due to the low base where the growth was flat in FY 2021-22 due to COVID-19 impact.

• Within the wholesale banking, the non-infra corporate loans, grew by 9% Y-o-Y, from '' 23,676 crore as of March 31, 2022 to '' 25,894 crore as on March 31, 2023.

• Infrastructure financing reduced by 32% on a Y-o-Y basis and now constitutes only 2.9% of total funded assets as on March 31, 2023.

• The exposure to top 20 single borrowers reduced from 9% as of March 31, 2022 to 7% as of March 31, 2023.

2. Growth in Retail Liabilities:

• Customer Deposits of the Bank increased to '' 1,36,812 crore as on March 31, 2023 as compared to '' 93,214 crore as on March 31, 2022, Y-o-Y increase of 47%.

• The Total CASA Deposits increased to '' 71,983 crore as on March 31, 2023 from '' 51,170 crore as on March 31, 2022, Y-o-Y increase of 41%.

• Average CASA Ratio for FY 2022-23 stood at 48.48% as compared to 49.88% for FY 2021-22.

• Retail Deposits (Retail CASA and Retail Term Deposits) increased to '' 1,03,870 crore as on March 31, 2023 from '' 68,035 crore as on March 31, 2022, Y-o-Y increase of 53%.

3. Growth in Core Earnings:

• Strong NII Growth: For the full year, total Net Interest Income (‘NII’) increased by 30% to '' 12,635 crore in FY 2022-23 from '' 9,706 crore in FY 2021-22.

• Strong NIM improvement: The Net Interest Margin for the full year FY 2022-23 was at 6.05% as compared to 5.86% in FY 2021-22.

• Strong growth in Total Income (NII Fees and Other Income Trading Gain): The total income for the full year increased by 32% to '' 17,102 crore in FY 202223 from '' 12,928 crore in FY 2021-22.

• Strong Growth in Core Operating Profit (Operating Profit Net of Trading Income): For the full year, the Core Operating Profit grew by 67% to '' 4,607 crore in FY 2022-23 from '' 2,753 crore in FY 2021-22.

• Provision: For the full year, total Provisions stood at '' 1,665 crore in FY 2022-23 as compared to '' 3,109 crore in FY 2021-22.

• Profit After Tax: The Net Profit for the full year FY 2022-23 was '' 2,437 crore as compared to '' 145 crore in FY 2021-22.

4. Strong Asset Quality of the Bank:

• Bank''s Gross NPA ratio as of March 31, 2023 stood at 2.51% as compared to 3.70% as of March 31, 2022.

• Bank''s Net NPA ratio as of March 31, 2023 stood at 0.86% as compared to 1.53% as of March 31, 2022.

• Provision Coverage Ratio including technical writeoffs was 80.29% as of March 31, 2023 as compared to 70.29% as of March 31, 2022.

• Excluding the NPA in the infrastructure financing book which will run down in due course, the Gross and Net NPA of the Bank would be 1.84% and 0.46% and the PCR including technical write off would be 86.85%, as of March 31, 2023.

5. Improved Asset Quality on Retail & Commercial

Finance Book:

• Gross NPA ratio of Retail & Commercial Finance improved to 1.65% as of March 31,2023 as compared to 2.63% as of March 31, 2022.

• Retail & Commercial Finance Net NPA ratio improved to 0.55% as of March 31, 2023 as compared to 1.15% as of March 31, 2022.

• Provision Coverage Ratio (including technical write-offs) was 82.43% as of March 31, 2023 as compared to 69.59% as of March 31, 2022.

6. Strong Capital Adequacy:

• The Bank raised equity capital of ~ '' 2,196 crore through Preferential Issue to promoter in March, 2023.

• The Bank raised Tier II capital of '' 1,500 crore in Q3-FY23 through issuance of Additional Tier II bonds.

• Capital Adequacy Ratio stood at 16.82% with CET-1 Ratio at 14.20% as of March 31, 2023.

7. Strong Franchise:

• As on March 31, 2023, the Bank has built a national footprint through the operation of 809 branches (out of which 487 are Urban Branches and 322 are Rural Branches) across India and 925 ATMs.

POINTS OF PRESENCE COMPARISON CHART:

Particulars

FY 2022-23

FY 2021-22

Urban Bank Branches

487

375

Rural Bank Branches

322

266

ATMs (including Recyclers)

925

719

• The Bank offers a wide gamut of products to cater to the needs of customers from all segments which can be viewed on our website at www.idfcfirstbank.com.

FINANCIAL HIGHLIGHTS

('' in crore)

Particulars

FY 2023

FY 2022

Deposits

144,637

105,634

Borrowings

57,212

52,963

Investments

61,124

46,145

Advances

151,795

117,858

Total Assets/ Liabilities

239,942

190,182

Total Income

27,195

20,395

Profit Before Tax

3,267

175

Net Profit

2,437

145

Balance in Profit & Loss Account brought forward from previous year

(3,870)

(3,729)

Amount available for Appropriations

(1,433)

(3,583)

Appropriations

Transfer to Statutory Reserve

610

37

Transfer to Capital Reserve

96

45

Transfer to Special Reserve

65

6

Transfer to Investment Reserve

79

200

Transfer to Investment Fluctuation Reserve

274

-

Balance in profit and loss account carried forward

(2,556)

(3,870)

Capital adequacy ratio (Basel III)

16.82%

16.74%

Gross NPA %

2.51%

3.70%

Net NPA %

0.86%

1.53%

DIVIDEND

The Board of Directors of the Bank (‘Board’) did not recommend any dividend on equity shares for the FY 2022-23. Though the Bank has distributable profits in terms of the RBI Guidelines, there is a restriction under the Companies Act, 2013 which prohibits a company from declaring dividend in case of accumulated losses. The Bank has a debit balance in the Profit

and Loss account to the extent of '' 2,555.85 crore as of March 31, 2023 and hence, the Bank has not proposed dividend for FY 2022-23.

In accordance with Regulation 43A of the Securities and Exchange Board of India [‘SEBI’] (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (‘SEBI Listing Regulations’), our Bank has formulated a Dividend Distribution Policy, which ensures a fair balance between rewarding its members and retaining enough capital for the Bank''s future growth.

This Policy is available on the Bank''s website: www.idfcfirstbank. com under ‘Investors'' > ‘Other Investor Information'' > ‘Corporate Governance - Know More'' > ‘Policies'' section.

CAPITAL

Authorised Share Capital

As on March 31, 2023, the Authorised Share Capital of the Bank was '' 75,38,00,00,000 comprising of 7,50,00,00,000 equity shares of '' 10 each and 38,00,000 preference shares of '' 100 each.

Paid-up Equity Share Capital

Allotment of equity shares on preferential basis

Basis approval of the Board at their meeting held on February 04, 2023 and by virtue of special resolution passed by the members of the Bank through postal ballot on March 08, 2023, the duly authorised Committee of the Board had at its meeting held on March 23, 2023 approved the issue and allotment of 37,75,00,859 equity shares of face value of '' 10 each to IDFC Financial Holding Company Limited (wholly owned subsidiary of IDFC Limited), on a preferential basis, at an issue price of '' 58.18 per equity share (including a premium of '' 48.18 per equity share) aggregating to ~ '' 2,196.30 crore.

The Preferential issue was made pursuant to applicable provisions of the Companies Act, 2013, read with relevant rules made thereunder (‘the Act''), in accordance with the guidelines, rules, and regulation of SEBI, including SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018, SEBI Listing Regulations, the relevant provisions of the Banking Regulation Act, 1949 (‘Banking Regulation’), the rules, circulars, directions and guidelines issued by the Reserve Bank of India (‘RBI’). The Bank has ensured to comply with all legal and statutory formalities.

Allotment of equity shares pursuant to exercise of stock options

During FY 2022-23, 2,29,12,647 equity shares of '' 10 each were issued and allotted to the eligible employees of the Bank pursuant to exercise of stock options granted under ‘IDFC

FIRST Bank Limited Employee Stock Option Scheme 2015'' (‘IDFC FIRST Bank ESOS - 2015’).

As on March 31, 2023, the issued, subscribed and paid-up equity share capital of our Bank was '' 66,18,12,18,160 comprising 6,61,81,21,816 equity shares of '' 10 each.

Subsequent to the year under review and as on date of this report, the Bank has allotted 10,23,035 equity shares of '' 10 each to the allottees upon exercise of stock options granted under IDFC FIRST Bank ESOS - 2015. Post the said allotment, the paid-up Equity Share Capital of the Bank stands at '' 66,19,14,48,510 comprising 6,61,91,44,851 equity shares of '' 10 each.

Our Bank has not issued any equity shares with differential voting rights.

Issuance of “Basel III Tier-II Bonds” on Private Placement basis

In accordance with the powers granted by the Board, the duly authorized Committee of the Board had authorised Private Placement of Shelf Placement Memorandum for issuance of '' 3,000 crore of Basel III Compliant Tier-II Bonds in one or more tranches.

Under the said limit, the Bank launched the first Tranche of its Tier II Bond issuance for an issue size of '' 500 crore with a Green Shoe Option to retain oversubscription(s) up to '' 1,000 crore. The Bonds were issued with 10 year door-to-door tenor with an annual Call Option beginning from the 5th year from date of allotment. The issue was successfully completed on December 01, 2022.

Capital Adequacy

Our Bank is well capitalised and has a Capital Adequacy Ratio under Basel III as at March 31, 2023 of 16.82% (as against the RBI minimum requirement of 11.50%) and with Tier-I Capital Adequacy Ratio being 14.20%. The Bank raised '' 2,196 crore of fresh equity capital and '' 1,500 crore of Tier-2 capital during FY23.

With such capital buffer, our Bank continues to enjoy the highest levels of confidence from the Indian financial ecosystem including capital market participants, depositors and our customers.

Considering the strong growth opportunities in India, the strong asset track record with robust asset quality along with sustainable and granular liability franchise, our Bank is well placed to grow its business in the future.

As a Bank, it is our endeavour to be strong custodians of public depositors/ shareholders and to further strengthen the Balance Sheet immensely.

Ratings

The details of credit ratings obtained by the Bank along with revisions thereto, during the FY 2022-23, for various debt & financial instruments outstanding as on March 31, 2023, are disclosed in the Corporate Governance Report, forming part of this Annual Report.

The updated Credit Ratings are available on the Bank''s website at www.idfcfirstbank.com under ‘Investors'' > ‘Other Investor Information''.

PERFORMANCE AND CONTRIBUTION OF SUBSIDIARY AND ASSOCIATE COMPANIES

IDFC FIRST Bank has one Wholly-Owned Subsidiary Company, namely IDFC FIRST Bharat Limited (‘IDFC FIRST Bharat’/ ‘IFBL’).

IFBL is acting as a Business Correspondent (‘BC’) for distribution of the products of IDFC FIRST Bank and has given an added momentum to the financial inclusion plan of the Bank.

During FY 2022-23, IFBL has sourced loans worth '' 13,232 crore. IDFC FIRST Bharat reported a Profit After Tax of '' 47.83 crore for FY 2022-23 as against '' 37.27 crore for FY 2021-22.

IDFC FIRST Bank''s policy for determining material subsidiaries is available on the Bank''s website at www.idfcfirstbank.com under ‘Investors'' > ‘Other Investor Information'' > ‘Corporate Governance - Know More'' > ‘Policies'' section.

IDFC FIRST Bank has only one Associate Company as on March 31, 2023, viz. Millennium City Expressways Private Limited, in which it holds 29.98% equity stake.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129(3) of the Act, read with rule 8 of the Companies (Accounts) Rules, 2014, as amended, the Bank has prepared consolidated financial statements, which forms part of this annual report. The statement in Form AOC-1 containing the salient features of the financial statements of the Subsidiary and Associate Company of the Bank, also forms part of this Annual Report and is appended as ANNEXURE 1.

In accordance with the fourth proviso to Section 136(1) of the Act and Regulation 46(2)(s) of the SEBI Listing Regulations, the Annual Report of the Bank, containing standalone financial statements and the consolidated financial statements and all other documents required to be attached thereto are available on the Bank''s website at www.idfcfirstbank.com under ‘Investors'' > ‘View All Annual Reports''.

Further, in accordance with the fifth proviso to the said section, the Annual Report of IFBL containing therein its audited financial statements has been hosted on the Bank''s website at www.idfcfirstbank.com under ‘Investors'' > ‘View All Annual Reports''.

UPDATE ON THE MERGER OF IDFC LIMITED WITH BANK

The Board at its meeting held on December 30, 2021, had considered the proposal for merger of ‘IDFC Limited'' and ‘IDFC Financial Holding Company Limited'' with ‘IDFC FIRST Bank Limited'' and had expressed that they are in-principle in favour of the said merger, subject to the approval of the Board, members, creditors, requisite statutory and regulatory approvals of the respective entities. The Board has constituted and authorized ‘Capital Raise and Corporate Restructuring Committee'', to work on the terms of proposed merger including finalizing the Scheme, Valuation, hiring advisors etc. as required. The process for the merger is underway and we will keep the shareholders informed of significant developments in this behalf.

DIRECTORS AND KEY MANAGERIAL PERSONNEL Appointment/ Re-appointment of Directors

All appointments of Directors are made in accordance with the relevant provisions of the Act and the rules framed thereunder, the SEBI Listing Regulations, the Banking Regulation and the rules, guidelines and circulars issued by the RBI from time to time. The Bank has in place a framework for Board Diversity, Fit & Proper Criteria and Succession Planning for appointment of Directors on the Board of the Bank.

The Nomination and Remuneration Committee (‘NRC’) conducts due diligence before appointment of Directors and ensures adherence to ‘Fit and Proper'' criteria, as prescribed by RBI.

During the FY 2022-23, there was no change in the composition of Board of Directors of the Bank.

Further, based on the recommendation of the NRC, the Board approved making of an application to RBI for the appointment of Mr. Madhivanan Balakrishnan, Chief Operating Officer, as the Whole Time Director (‘WTD'') designated as Executive Director and Chief Operating Officer (‘ED & COO'') of the Bank, for a period of three (3) years and on such terms as may be approved by the RBI, subject to approval of shareholders of the Bank. The Bank has made an application to RBI for appointment of Mr. Madhivanan Balakrishnan, Chief Operating Officer, as the WTD designated as ED & COO of the Bank.

Mr. Vishal Mahadevia (DIN 01035771), Non-Executive Non-Independent Director whose office is liable to retire at the

ensuing AGM, being eligible seeks re-appointment, in terms of the provisions of Section 152(6) of the Act. Based on the recommendation of the NRC, the Board recommends his re-appointment to the members of the Bank. The resolution for the said re-appointment will form part of the Notice of ensuing AGM.

Brief profiles of all the Directors of the Bank are available on the Bank''s website at www.idfcfirstbank.com under About Us'' > ‘Board of Directors''.

None of the Directors of the Bank are disqualified in accordance with Section 164 of the Act.

Further, the Bank has received certificate from M/s. Makarand M. Joshi & Co., Practicing Company Secretaries, Bank''s Secretarial Auditor, certifying that during the financial year under review, the Board of the Bank is duly constituted with proper balance of Executive Director, Non-Executive Directors and Independent Directors.

Also, as per the SEBI Listing Regulations, the Bank has received certificate from M/s. Bhandari & Associates, Practicing Company Secretaries that none of the Directors on the Board of the Bank have been debarred or disqualified from being appointed or continuing as Directors of Companies by the Securities and Exchange Board of India/ Ministry of Corporate Affairs or any such other statutory authority.

As on the date of this report, in terms of Section 203(1) of the Act, Mr. V. Vaidyanathan, Managing Director & Chief Executive Officer (‘MD & CEO’), Mr. Sudhanshu Jain, Chief Financial Officer & Head - Corporate Centre and Mr. Satish Gaikwad, Head - Legal & Company Secretary are the Key Managerial Personnel (‘KMP’) of the Bank.

Statement on Declaration by Independent Directors

The Bank had received declaration from all the Independent Directors (‘IDs’), at the time of appointment and also at the first meeting of the Board held in FY 2022-23, that they meet the criteria of independence specified under sub-section (6) of Section 149 of the Act, read with rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended and Regulation 16(1)(b) of the SEBI Listing Regulations, for holding the position of ID and that they shall abide by the ‘Code for Independent Directors'' as per Schedule IV of the Act. There has been no change in the circumstances affecting their status as Independent Director. In the opinion of the Board, the IDs possess the requisite integrity, experience, expertise and proficiency required under all applicable laws and the policies of the Bank.

Further, all the IDs of the Bank have complied by rule 6 (Creation and Maintenance of Databank of Persons Offering to become Independent Directors) of the Companies (Appointment and

Qualification of Directors) Rules, 2014, as amended, and have also declared their enrolment in the databank of Independent Directors maintained by Indian Institute of Corporate Affairs (‘IICA’).

Familiarisation Programmes for Board Members

At the time of appointment, all Directors of our Bank are familiarized with their roles, responsibilities, rights and duties along with a brief overview of our Bank''s operations in a nutshell.

The Board is further provided with necessary documents, reports and internal policies to enable them to familiarize with the Bank''s procedures and practices. These includes in particular, Board Committees Chart, Code of Conduct for Board of Directors, Code of Conduct for Prohibition of Insider Trading, Policy of Related Party Transactions, Details of payment of Sitting Fees to Non-Executive Director, etc. Also, a web-link to access the historical data on Financial Results, Annual Reports, Investor Presentation, Memorandum & Articles of Association of the Bank and other relevant regulatory documents is provided to the Directors.

Directors are given opportunity to attend to select programmes organized by reputed institutions e.g. Centre for Advance Financial Research and Learning, the Institute for Development and Research in Banking Technology, Indian Institute of Corporate Affairs etc.

Detailed presentations are made at the Board and Committee meetings on business and performance of the Bank on a periodic basis, global business environment, business strategy and associated risks, responsibilities of the Directors, regulatory updates, etc.

Detailed presentations on the Bank''s business and updates thereon were made at the meetings of the Board and Committees held during the year.

BOARD MEETINGS

The Board met seven (7) times during FY 2022-23, on April 30, 2022, July 30, 2022, October 22, 2022, November 04,

2022, January 21, 2023, February 04, 2023 and March 29,

2023, details of which alongwith attendance are given in the Corporate Governance Report, forming part of this Annual Report. The maximum gap between any two consecutive meetings were within the statutory limit of 120 days.

BOARD COMMITTEES

In compliance with various regulatory requirements, several Board-level Committees have been constituted to delegate matters that require greater and more focused attention.

Details on the constitution, brief terms of reference, meetings held and attendance of all the Board-level Committees are given in the Corporate Governance Report forming part of this Annual Report.

A brief overview of some of the Board-level Committees are furnished below:

Audit Committee of the Board (‘ACB’)

The ACB met five (5) times during FY 2022-23, on April 29, 2022, July 29, 2022, October 21, 2022, January 20, 2023 and February 04, 2023.

All recommendations made by the ACB during the year were accepted by the Board.

Further, the ACB comprised of the following members as on the date of this report:

Mr. Aashish Kamat

- Chairperson | Independent Director

Mr. Pravir Vohra

- Member | Independent Director

Mr. S. Ganesh Kumar

- Member | Independent Director

Mr. Ajay Sondhi

- Member | Non-Executive Non-Independent Director

Nomination and Remuneration Committee (‘NRC’)

The NRC met four (4) times during FY 2022-23 on April 27, 2022, July 27, 2022, October 20, 2022, and January 18, 2023.

The meeting held on (i) April 27, 2022 was adjourned to April 30, 2022 and (ii) January 18, 2023 was adjourned to January 19, 2023; for discussion of certain agenda item.

Further, the NRC comprised of the following members as on the date of this report:

Mr. Hemang Raja -

Chairperson | Independent Director

Mr. Aashish Kamat -

Member | Independent Director

Dr. (Mrs.) Brinda Jagirdar -

Member | Independent Director

Mr. Vishal Mahadevia -

Member | Non-Executive Non-Independent Director

Remuneration Policy

The Bank has formulated and adopted the Remuneration Policies for the (i) Non-Executive Part-Time Chairman and Non-Executive Directors; (ii) Whole Time/ Executive Directors, Material Risk Takers, Key Managerial Personnel, Senior Management Personnel and Control Function and all other employees; (‘the Remuneration Policies''), in terms of the relevant provisions of the Act and rules made thereunder, SEBI Listing Regulations, Banking Regulation and the RBI guidelines issued in this regard, from time to time.

During the year, the Remuneration Policies were reviewed and approved by the NRC and the Board.

The Remuneration Policies have been hosted on the website of the Bank at www.idfcfirstbank.com under ‘Investors'' > ‘Other Investor Information'' > ‘Corporate Governance - Know More'' > ‘Policies'' section.

Weblink:

Remuneration Policy - (For Non-Executive Part-Time Chairman and Non-Executive Directors)

Remuneration Policy - (For the Whole Time/ Executive Directors, Material Risk Takers, Key Managerial Personnel, Senior Management Personnel and Control Function and all other employees)

All the Non-Executive Directors are paid sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory provisions. Further, expenses incurred by them for attending meetings of the Board and Committees in person are reimbursed at actuals.

Pursuant to the relevant RBI guidelines and approval of the members, for FY 2022-23, a fixed remuneration of '' 18 lakh p.a. was paid to each of the Non-Executive Directors of the Bank, other than the Chairperson of the Bank, who was paid '' 24 lakh p.a.

Mr. Vishal Mahadevia, Non-Executive Non-Independent Director, has opted not to receive any fixed remuneration and sitting fees from the Bank.

Stakeholders’ Relationship, ESG and Customer Service (‘SRECS’) Committee

The SRECS Committee met four (4) times during FY 202223 on April 28, 2022, July 28, 2022, October 20, 2022, and January 19, 2023.

Further, the SRECS Committee comprised of the following members as on the date of this report:

Dr. (Mrs.) Brinda Jagirdar -

Chairperson | Independent Director

Mr. Pravir Vohra -

Member | Independent Director

Mr. Sanjeeb Chaudhuri -

Member | Independent Director

Mr. S. Ganesh Kumar -

Member | Independent Director

Mr. Ajay Sondhi -

Member | Non-Executive Non-Independent Director

Mr. V. Vaidyanathan -

Member | MD & CEO

The Bank has formulated and adopted a CSR Policy which provides the focus areas (in accordance with Schedule VII of the Act) under which various developmental initiatives are undertaken and the same is available on the Bank''s website at www.idfctirstbank.com under ‘Investors'' > ‘Other Investor Information'' > ‘Corporate Governance - Know More'' > ‘Policies'' section.

The CSR initiatives of the Bank in FY 2022-23 were implemented directly or through various implementation agencies/partners. In order to achieve impact and scale, the CSR activities undertaken during the year mainly focused on areas: [a] Livelihoods, [b] Health and Sanitation, [c] Education and [d] Environment & Others (Employee Volunteering Programme & Adhoc).

In terms of the provisions of the Companies Act, 2013, the Bank is not mandated to incur CSR expenditure, however the Bank, for FY 2022-23, has spent '' 17.52 crore based on its commitment to CSR programs.

The Annual Report on CSR activities and details of amount spent or unspent by the Bank during FY 2022-23, in accordance with the CSR Rules, is attached as Annexure 2 to this Report.

Risk Management Committee (‘RMC’)

The RMC met four (4) times during FY 2022-23, on April 29, 2022, July 29, 2022, October 21, 2022 and January 20, 2023.

Further, the RMC comprised of the following members as on the date of this report:

Corporate Social Responsibility (‘CSR’) Committee

The CSR Committee met four (4) times during FY 2022-23 on April 27, 2022, July 25, 2022, October 17, 2022 and January 18, 2023.

Further, the CSR Committee comprised of the following members as on the date of this report:

Mr. V. Vaidyanathan -

Chairperson | MD & CEO

Dr. (Mrs.) Brinda Jagirdar -

Member | Independent Director

Mr. Hemang Raja -

Member | Independent Director

Mr. S. Ganesh Kumar -

Chairperson | Independent Director

Mr. Hemang Raja -

Member | Independent Director

Mr. Pravir Vohra -

Member | Independent Director

Mr. Sanjeeb Chaudhuri -

Member | Independent Director

Mr. Jaimini Bhagwati -

Member | Non-Executive Non-Independent Director

Mr. V. Vaidyanathan -

Member | MD & CEO

RISK MANAGEMENT FRAMEWORK

Our Bank promotes a strong risk culture throughout the organization. A strong risk culture is designed to help reinforce

the Bank''s resilience by encouraging a holistic approach to management of risk & return and an effective management of risk, capital, and reputational profile. Consequent to the amalgamation of erstwhile Capital First Group with IDFC Bank, effective December 18, 2018, Bank has re-aligned its key policies and Risk Framework forming an overall Risk Framework of the merged entity.

Our Bank has established a robust & effective risk governance framework to actively manage all the material risks faced by the Bank, in a manner consistent with the Bank''s risk appetite statement. Our Bank aims to establish itself as an industry leader in the management of risks and strive to reach the efficient frontier of risk and return for the Bank and its shareholders. The Board has ultimate responsibility for the Bank''s Risk Management Framework. It is responsible for approving the Bank''s risk appetite, risk tolerance and related strategies and policies. The Board is assisted by Risk Management Committee of the Board (‘RMC'') and its various management committees as part of the Risk Governance framework to ensure that our Bank has sound system of risk management and internal controls. The RMC assists the Board in relation to the oversight and review of the Bank''s risk management principles and policies, strategies, appetite, processes, and controls. The RMC of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity, operational risks etc. The Committee also reviews the Risk Appetite & Enterprise Risk Management framework, Internal Capital Adequacy Assessment Process (‘ICAAP'') and Stress Testing. ICAAP & Stress Testing requires the Bank to undertake rigorous, forward-looking assessment of risks by identifying severe events or changes in market conditions which could adversely impact the Bank.

Our Bank has in place a Board approved Risk Management Policy. The Policy aims at establishing a risk culture and governance framework to enable identification, measurement, mitigation and reporting of risks within the Bank in line with the Bank''s risk appetite, risk - return trade-off and the escalation & accountability framework. Having a comprehensive risk management framework in the Bank including well-articulated risk appetite statements, polices and robust stress testing programme facilitates our Bank to manage any potential susceptibility to extreme but plausible business risk. Taking best use of the proactive risk assessment frameworks & risk mitigation techniques, our Bank has built adequate Capital and Liquidity buffers and ensured business continuity during stressed conditions.

FY 2022-23 was a very eventful year. Due to inflationary pressures globally, most of the central banks across the globe had started increasing interest rates. This was coupled with the ongoing geopolitical crisis between Ukraine & Russia. Domestically, RBI hiked rates by around 250 bps during the

year. The year witnessed a robust growth in advances in the industry which overtook deposits growth. Taking best use of the proactive risk assessment frameworks & risk mitigation techniques, our Bank has built adequate Capital, sufficient Liquidity and ensured a sustainable business growth. The Bank has taken steps to diversify its product suite on both asset and liability side, balance the portfolio and avoid concentration risks.

Our Bank manages its capital position to maintain strong capital ratios well in excess of regulatory and Board approved minimum capital adequacy at all times. The strong Tier-I capital position of the Bank is a source of competitive advantage and provides assurance to regulators, credit rating agencies, depositors, and members. Capital management practices are designed to maintain a risk reward balance, while ensuring that businesses are adequately capitalized to absorb the impact of stress events including pandemic risks. Our Bank has rigorously adhered to the RBI mandated prudential norms on provisioning including based on evaluation of impact arising out of the fallout of COVID-19 on the underlying portfolio, which is aimed at preserving and protecting shareholders value. Our Bank has continued to proactively work on the resolution of the stressed asset portfolio and has further reduced the position. Our Bank has also de-risked the portfolio by diversifying the credit portfolio and focusing more on granular exposures.

INTERNAL FINANCIAL CONTROLS

The Bank has adequate internal controls and processes in place with respect to its financial statements that provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements. These controls and processes are driven through various policies, procedures and certifications which also ensure the orderly and efficient conduct of the Bank''s business, including adherence to Bank''s policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The controls and processes are being reviewed periodically. The Bank has a mechanism of testing the controls and processes at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.

RELATED PARTY TRANSACTIONS

All the Related Party Transactions (‘RPTs’) that were entered into during the financial year were on an arm''s length basis and were in ordinary course of business. Transactions entered into by the Bank with related parties in the normal course of its business were placed before the Audit Committee of the Board. Prior omnibus approval for normal banking transactions is also obtained from the ACB for the RPTs which are repetitive in nature as well as for the normal banking transactions which

cannot be foreseen. A statement giving details of all RPTs, entered pursuant to the omnibus approval so granted, is placed before the ACB for their review.

The Bank has not entered into any material financial or commercial transactions with its subsidiaries and other related parties as per Accounting Standard - 18 and the SEBI Listing Regulations that may have potential conflict with the interest of the Bank at large.

In terms of Regulation 23(9) of the SEBI Listing Regulations, the Bank submits the disclosure of RPTs, in a prescribed format, as specified under relevant Accounting Standards, on half yearly basis to the Stock Exchanges and update its website accordingly. The Bank have always been committed to good corporate governance practices, including matters relating to the RPTs.

There were no transactions entered into individually or taken together with the previous transactions during the financial year with related parties, which were not in the normal/ ordinary course of the business of the Bank, nor were there any transactions with related parties or others, which were not on an arm''s length basis. Hence, pursuant to Section 134(3) (h) of the Act, read with rule 8(2) of the Companies (Accounts) Rules, 2014, as amended, there are no RPTs to be reported under Section 188(1) of the Act. Hence, Form AOC-2 is not applicable to the Bank.

Pursuant to the provisions of the Act and the rules made thereunder, SEBI Listing Regulations and in the back-drop of the Bank''s philosophy on such matters, the Bank has in place a Board approved policy on related party transactions. The said policy is also uploaded on the Bank''s website at www.idfcffrstbank.com under ‘Investors'' > ‘Other Investor Information'' > ‘Corporate Governance - Know More'' > ‘Policies'' section.

INFORMATION/ CYBER SECURITY FRAMEWORK

IDFC FIRST Bank since its inception has put in place a robust Information/ Cyber Security Framework. Our Bank being a green field setup, has Information Security woven into our banking platform and seamlessly merges both culturally and technologically. A dedicated team of security professionals are part of the Information Security Group (‘ISG'') who govern the Information Security practices in the Bank. Our Bank has put in place state of the art security technologies including several industries ‘firsts'' technology solutions and adopted ‘defence in depth'' approach & industry best practices as part of our security framework and architecture.

Last year, the Bank worked closely with the Regulator to work towards an augmentation plan to improve its cyber security maturity.

This year, while continuing on its journey to mature its posture, Bank''s focus will continue to be on consolidation and improving its deployment posture of the technologies invested in the previous years. In addition, Bank has initiated some additional initiatives including:

a) Accelerating its risk based remediation program

b) Improving its Threat detection and response capabilities

c) Enhancing its cloud security program

d) Deploying zero trust model

e) Data discovery and life cycle management

Bank continued to maintain and upkeep its compliance posture to standards such as ISO 27001 ISMS (Information Security Management System), PCI DSS (Payment Card Industry Data Security Standard) and regulatory requirements. Given the changing threat landscape, the attempt is to progressively move towards maturity of proactive and adaptive platforms for automated detection, response and recovery.

BOARD EVALUATION

The Board members carries out an annual evaluation of the Board, Board Committees, and Individual Directors, including Chairperson, pursuant to the provisions of the Act and the SEBI Listing Regulations.

The evaluation brings out the cohesiveness of the Board, a Boardroom culture of trust and co-operation, and Boardroom discussions which are open, transparent and encourage diverse viewpoints. Other areas of strength includes effective discharge of Board''s roles and responsibilities.

The detailed process indicating the manner in which the annual evaluation has been carried out pursuant to the SEBI Listing Regulations and Act, is provided in the Corporate Governance Report, which forms part of this Annual Report.

UPDATE ON IMPACT OF COVID-19

India saw the abrupt start and subsequent end of the 3rd wave of COVID 19 pandemic by March 31, 2022. In FY 2022-23, COVID 19 was even more subdued compared to FY 202122. There was slight spurt in cases in between June and September 2022 but overall in FY 2022-23 there was no new pandemic wave in India while multiple waves continued across the globe.

FY 2022-23, was also a year where India learnt to live with COVID 19 potentially as a result of the herd immunity it acquired and also with majority of its population getting fully vaccinated (2 doses).

While cases dipped and restrictions were revoked by government, the Bank kept alive its COVID 19 Pandemic

framework - monitoring of cases, its policies and employee assistance program - ready to support its staff and business as required.

As on the date of this report no stringent restrictions have been put in place by the Government in the country that could affect our business operations.

Our Business Continuity Management team continues to proactively monitor the situation and will give timely advice as situation escalates.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review, as required by Regulation 34(2)(e) of the SEBI Listing Regulations, forms part of this Annual Report.

REPORT ON CORPORATE GOVERNANCE

Your Directors are is committed to achieve the highest standards of Corporate Governance. A separate section on Corporate Governance standards followed by our Bank and the relevant disclosures, as stipulated under the SEBI Listing Regulations, Act, and rules made thereunder forms part of this Annual Report.

A certificate from the Secretarial Auditors of the Bank, M/s. Makarand M. Joshi & Company, Practicing Company Secretaries, confirming compliance to the conditions of Corporate Governance as stipulated under the SEBI Listing Regulations is enclosed in the Corporate Governance Report and forms part of this Annual Report.

CEO & CFO Certification

A certificate issued by Mr. V. Vaidyanathan, MD & CEO and Mr. Sudhanshu Jain, Chief Financial Officer & Head - Corporate Centre of the Bank, in terms of Regulation 17(8) of the SEBI Listing Regulations, for the year under review was placed before the Board and forms part of this Annual Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

The Business Responsibility and Sustainability Report, in terms of Regulation 34(2)(f) of the SEBI Listing Regulations, describing the initiatives taken by IDFC FIRST Bank from an environmental, social and governance perspective is hosted on the Bank''s website at www.idfcfirstbank.com under ‘Investors'' > ‘View All Annual Reports'' and constitutes a part of this Annual Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(5) of the Act, it is hereby confirmed that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. the Directors had 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, 2023 and of the profit of the Bank for that period;

c. the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d. the Directors had prepared the annual accounts on a going concern basis;

e. the Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DEPOSITS

Being a Banking Company, the disclosures required as per rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, as amended, read with Sections 73 and 74 of the Act, are not applicable to our Bank.

As per the applicable provisions of the Banking Regulation details of the Bank''s deposits have been included under Schedule 3 - Deposits, in the preparation and presentation of the financial statements of the Bank.

PARTICULARS OF LOANS, GUARANTEES, AND INVESTMENTS

Pursuant to Section 186 (11) of the Act, the provisions of Section 186 of the Act, except sub-section (1), do not apply to a loan made, guarantee given, or security provided, or any investment made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of the Banking Regulation.

REQUIREMENT FOR MAINTENANCE OF COST RECORDS

The Bank is not required to maintain cost records as specified by the Central Government under Section 148(1) of the Act.

INSTANCES OF FRAUD, IF ANY, REPORTED BY THE AUDITORS

During the year under review, no instances of fraud committed against the Bank by its officers or employees were reported by the Statutory Auditors and Secretarial Auditors under Section 143(12) of the Act to the Audit Committee or the Board.

The details of provisioning pertaining to Fraud Accounts during the year under review are provided in Note No. 18.13 to the Standalone Financial Statements as at March 31, 2023.

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

Detailed initiatives taken for conservation of energy has been mentioned in the Business Responsibility and Sustainability Report, which is hosted on the Bank''s website at www. idfcfirstbank.com under ‘Investors'' > ‘View All Annual Reports''.

Also, our Bank has been increasingly using information technology in its operations, for more details, please refer Management Discussion and Analysis Report, which forms part of this Annual Report.

Further, Foreign Exchange earnings and outgo are part of the normal banking business of the Bank.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/ COURTS/ TRIBUNALS

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status or the operations of the Bank.

CHANGE IN THE NATURE OF BUSINESS

During the year under review, there has been no change in the nature of business of the Bank.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE BANK

There are no material changes and commitments, affecting the financial position of the Bank between the end of the financial year of the Bank i.e. March 31, 2023 and the date of the Board Meeting in which the Directors'' Report was approved i.e. April 29, 2023.

INTERNAL OMBUDSMAN

In compliance with regulatory guidelines, the Bank has appointed Mr. Sharad Vinayak Rao Patil as Internal Ombudsman for a period of 3 years with effect from December 1, 2021, as per the Internal Ombudsman Scheme, 2018 to enhance our Bank''s customer grievance redressal mechanism and to improve service delivery.


EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, is appended as ANNEXURE 3.

In terms of Section 197(12) of the Act, read with rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of this Annual Report.

In accordance with the provisions of Section 136(1) of the Act, the Annual Report excluding the aforesaid information, is being sent to the members of the Bank and others entitled thereto. Any member interested may obtain the said statement by writing to the Company Secretary of the Bank.

Employee Stock Option Scheme

The Employee Stock Option Scheme (‘IDFC FIRST Bank ESOS - 2015’/ ‘ESOS’) was framed with an object of encouraging higher participation on the part of employees in the Bank''s growth and success. An effective stock option scheme enables retention of talent and aligning employee interest to that of the members.

There were 26,01,41,857 stock options outstanding at the beginning of FY 2022-23. During FY 2022-23, 5,63,19,723 stock options were granted to the eligible employees under IDFC FIRST Bank ESOS - 2015.

Further, 3,97,46,067 stock options had lapsed/forfeited and 2,29,12,647 stock options were exercised during the year ended March 31, 2023. Accordingly, 25,38,02,866 stock options remained outstanding as on March 31, 2023. All stock options vests in a graded manner and are required to be exercised within a specific period in accordance with IDFC FIRST Bank ESOS - 2015 and SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 [‘SEBI (SBEB & SE) Regulations’].

There has been no material change in IDFC FIRST Bank ESOS - 2015 during FY 2022-23 and the said IDFC FIRST Bank ESOS - 2015 is in compliance with the SEBI (SBEB & SE) Regulations.

The details and disclosures with respect to ESOS as required under SEBI (SBEB & SE) Regulations and circulars issued thereunder, have been uploaded on the Bank''s website www. idfcfirstbank.com under ‘Investors'' > ‘View All Annual Reports''.

Further, disclosure as per the ‘Guidance Note on Accounting for Employee Share-based Payments'' issued by the Institute of Chartered Accountants of India, are appearing under the

Note 18.44 to the Standalone Financial Statements of IDFC FIRST Bank, forming part of this Annual Report.

STATUTORY AUDIT

The Reserve Bank of India vide its Circular No. RBI/2021-22/25 Ref. No. DoS.CO.ARG/ SEC.01/08.91.001/2021-22 dated April 27, 2021, had issued the Guidelines for Appointment of Statutory Central Auditors (SCAs)/ Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) (‘RBI Guidelines’).

Pursuant to the RBI Guidelines, the Bank is required to appoint two (2) Joint Statutory Auditors, considering its asset size (i.e. more than '' 15,000 crore). Accordingly, the shareholders of the Bank in its 7th AGM held on September 15, 2021 had approved appointment of M S K A & Associates, Chartered Accountants (Firm Registration No. 105047W) as one of the Joint Statutory Auditors of the Bank for a period of 3 years commencing from the conclusion of 7th AGM till the conclusion of 10th AGM.

Also, pursuant to expiry of term of B S R & Co. LLP in the 8th AGM of the Bank held on August 05, 2022, the shareholders of the Bank in the said AGM (i.e. 8th AGM) had approved appointment of Kalyaniwalla & Mistry LLP, Chartered Accountants (Firm Registration Number 104607W/W100166) as another Joint Statutory Auditors of the Bank for a period of 3 years commencing from the conclusion of 8th AGM till the conclusion of 11th AGM.

Further, in terms of RBI Guidelines, the appointment of M S K A & Associates and Kalyaniwalla & Mistry LLP shall be subject to them satisfying the eligibility norms and approval of the RBI, each year.

Accordingly, based on the recommendation of the Audit Committee, the Board has considered and made an application to RBI for approving the re-appointment of M S K A & Associates, Chartered Accountants, for its third year, and re-appointment of Kalyaniwalla & Mistry LLP, Chartered Accountants, for its second year, to act as Joint Statutory Auditors of the Bank for the year 2023-24.

Auditors’ Report

There were no qualifications, reservations, adverse remarks or disclaimers made by the Statutory Auditors in their report for the financial year ended March 31, 2023.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Act, read with rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, the Bank had appointed M/s. Makarand M. Joshi & Co., Practicing Company Secretaries to undertake the Secretarial Audit of the Bank for the financial year ended March 31, 2023.

The Bank provided all assistance and facilities to the Secretarial Auditors for conducting their audit. The Secretarial Audit Report is appended as ANNEXURE 4 to this report.

There were no qualifications, reservations, adverse remarks or disclaimers made by the Secretarial Auditors in their report for the financial year ended March 31, 2023.

CONCURRENT AUDIT

Our Bank has a regular and well-defined process of concurrent audits for important functions such as treasury, trade finance operations, retail operations, wholesale operations, information technology, data center, etc. in line with the extant regulatory guidelines. Reputed Chartered Accountant/ CERT-IN certified firms carry out these Concurrent Audits. Key findings of these audits are placed before the Audit Committee of the Board on a quarterly basis.

ANNUAL RETURN

Pursuant to Section 92(3) read with Section 134(3)(a) of the Act, the Annual Return as on March 31, 2023 is available on the Bank''s website www.idfcfirstbank.com under ‘Investors'' > ‘View All Annual Reports''

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Bank has implemented a Whistle Blower Policy in compliance with the provisions of the Listing Regulations, Companies Act and RBI notification on Introduction of ‘Protected Disclosures Scheme for Private Sector and Foreign Banks''. Pursuant to this policy, the Whistle Blowers can raise concerns relating to reportable matters (as defined in the policy) such as breach of IDFC FIRST Bank''s Code of Conduct, employee misconduct, fraud, illegal, unethical, imprudent behavior, leakage of UPSI, corruption, safety and misappropriation or misuse of Bank funds/ assets, etc.

Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower to those who avail such mechanism and also provides for direct access to the Chairman of the Audit Committee, in exceptional cases. During the year, no person has been denied access to the Audit Committee of the Board.

The Audit Committee reviews the functioning of the Vigil Mechanism from time to time. The Bank has formulated a Vigilance Policy for effectively managing the risks faced by the Bank on account of corruption, malpractices and frauds.

The Whistle Blower Policy is available on the Bank''s website at: www.idfcfirstbank.com under ‘Investors'' > ‘Other Investor Information'' > ‘Corporate Governance - Know More'' > ‘Policies'' section.

The Whistle Blower Policy is communicated to the employees and is also posted on the Bank''s intranet.

Mr. Nilesh Doshi is the Chief Vigilance Officer of the Bank.

PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE

Our Bank has complied with the provisions relating to constitution of Internal Committee to investigate and inquire into sexual harassment complaints in line with ‘The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013.

Our Bank has in place a policy on Anti-Sexual Harassment, which reflects the Bank''s zero-tolerance towards any form of prejudice, gender bias and sexual harassment at the workplace. Our Bank undertakes ongoing trainings to create awareness on this policy.

The Bank conducts online training for its employees in order to understand the Policy on Prevention of Sexual Harassment and framework for reporting and resolving instances of sexual harassment, details of which have been mentioned in the Business Responsibility and Sustainability Report, which is hosted on the Bank''s website at www.idfcfirstbank.com under ‘Investors'' > ‘View All Annual Reports''.

The details pertaining to number of complaints during the year has been provided below:

a) Number of complaints filed during the year: 1

b) Number of complaints disposed of during the year: 0

c) Number of complaints pending at the end of the financial year: 11

The Bank has received 1 complaint in the month of March 2023. As on the date of this report, the said complaint is in the final stage of investigation and would be resolved within the statutory timelines.

AWARDS AND RECOGNITIONS

During the year under review, our Bank was recognized in various ways and the significant awards presented to our Bank are listed below:

• Outstanding Digital CX - Internet Banking (Wealth Management) by Digital CX.

• Best use of Al for Credit Decisioning by India Banking Summit and Awards

• Global Private Banking Innovation Awards 2022 by the Digital Banker and Global Private Banker

• Best Corporate Governance, India 2022 by World Finance Corporation

• ET Most Inspiring CEO by ET Edge

• Best Harmonizing Merger Award by the European

• Social Impact Bank of the Year 2022 by the European

• Most Innovative Digital Transformation Bank 2022 by the European

• Best Savings Product'' 2019-2020 by FE India''s Best Brand Award

• Asia Private Banking Award by the Associated Chambers of Commerce and Industry of India

• Non-lending Large Bank by the Associated Chambers of Commerce and Industry of India

• Overall Champion - Large Bank by the Associated Chambers of Commerce and Industry of India

• Best Sustainable Banking Strategy Award by Navabharat

• Excellence in Onboarding Program category - Silver by the Economic Times Human Capital Award

• Best Financial Institution with Digital Innovation by Bharat Fintech Summit''23

• Best CSR Sustainability Award by Economic Times BFSI Excellence Awards

• MD & CEO awarded Entrepreneur of the Year 2022 in Financial Services Category by Ernst & Young

• Innovative Payment Solution of the Year by TOI Gadgets Now Awards, 2022 1

GREEN INITIATIVE

To support the ‘Green Initiative'', members who have not updated their e-mail addresses are requested to update the same with their respective Depository Participants (DPs), in case shares held are in electronic form or communicate their e-mail address to the Registrar and Share Transfer Agent i.e. KFin Technologies Limited or to the Bank, in case shares are held in physical form, so that future communications can be sent to members in electronic mode. Note on Green Initiative forms part of the 9th AGM Notice.

ACKNOWLEDGMENT

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. The Board would also like to take this opportunity to express appreciation to its valued customers for their continued patronage and to the members of the Bank for their continued support.

Your Directors sincerely acknowledge the commitment and hard work put in by all employees of the Bank through its transformational journey. Their valuable contribution has enabled the Bank to make significant progress towards building a great institution.

For and on behalf of the Board of Directors of IDFC FIRST Bank Limited

Sanjeeb Chaudhuri

Date : April 29, 2023 Chairperson

Place : Mumbai DIN: 03594427

1

Zeplin Harmony Award by Zeplin


Mar 31, 2022

Your Board of Directors are pleased to present the 8thAnnual Report of IDFC FIRST Bank Limited (‘IDFC FIRST Bank'' or the ‘Bank'') together with the Audited Financial Statements for the financial year ended March 31, 2022.

STATE OF AFFAIRS OF THE BANK

The Bank has successfully diversified its business mix and added new revenue streams during FY 2021-22. Now it has expanded its reach to serve new customer segments both on the retail as well as wholesale side of the business and launched new Fund based and NonFund based products. The achievements during the FY 2021-22 are mentioned below-

1. Growth in Retail Assets:

• Retail Book increased 28% Y-o-Y to '' 83,740 crore as on March 31, 2022 from '' 65,300 crore as on March 31, 2021.

• Commercial Finance Book increased 15% Y-o-Y to '' 11,637 crore as on March 31, 2022 from '' 10,104 crore as on March 31, 2021.

• Retail Book and Commercial Finance Book together constitutes 72% of the Gross Funded Assets as on March 31, 2022 compared to 64% as on March 31, 2021.

• Wholesale Funded Assets decreased by 12% to '' 36,574 crore as on March 31, 2022 from '' 41,723 crore as on March 31, 2021.

• Within Wholesale Funded Assets, the Infrastructure loans decreased by 36% to '' 6,891 crore as on March 31, 2022 from '' 10,808 crore as on March 31, 2021.

2. Growth in Retail Liabilities:

• Customer Deposits of the Bank increased to '' 93,214 crore as on March 31, 2022 as compared to '' 82,725 crore as on March 31, 2021, Y-o-Y increase of 13%.

• The Total CASA Deposits increased to '' 51,170 crore as on March 31, 2022 from '' 45,896 crore as on March 31, 2021, Y-o-Y increase of 11%.

• Average CASA Ratio for FY22 stood at 49.88% as compared to 41.50% for FY21.

• Retail Deposits (Retail CASA and Retail Term Deposits) increased to '' 68,035 crore as on March 31, 2022 from '' 63,894 crore as on March 31, 2021, Y-o-Y increase of 6%.

3. Growth in Core Earnings:

• Strong NII Growth: For the full year, total Net Interest Income (‘NII'') increased by 32% to '' 9,706 crore in FY22 from '' 7,380 crore in FY21.

• Strong NIM improvement: The Net Interest Margin (‘NIM'') for the full year FY22 was at 5.96% as compared to 5.03% in FY21.

• Strong growth in Total Income (NII Fees and Other Income Trading Gain): The total income for the full year increased by 27% to '' 12,928 crore in FY22 from '' 10,164 crore in FY21.

• Strong Growth in Core Operating Profit (Operating Profit Net of Trading Income): For the full year, the Core Operating Profit grew by 44% to '' 2,753 crore in FY22 from '' 1,909 crore in FY21.

• Provision: For the full year, total Provisions stood at '' 3,109 crore in FY22 as compared to '' 2,595 crore in FY21.

• Profit After Tax: The Net Profit for the full year FY22 was '' 145 crore as compared to '' 452 crore in FY21.

4. Strong Asset Quality of the Bank:

• Bank''s Gross NPA ratio as of March 31, 2022 stood at 3.70% as compared to 4.15% as of March 31, 2021.

• Bank''s Net NPA ratio as of March 31, 2022 stood at 1.53% as compared to 1.86% as of March 31, 2021.

• Provision Coverage Ratio including technical write-offs was 70.29% as of March 31, 2022 as compared to 63.57% as of March 31, 2021.

5. Improved Asset Quality on Retail & Commercial

Finance Book:

• Retail & Commercial Finance Gross NPA ratio improved to 2.63% as of March 31, 2022 as compared to 4.01% as of March 31, 2021.

• Retail & Commercial Finance Net NPA ratio improved to 1.15% as of March 31, 2022 as compared to 1.90% as of March 31, 2021.

• Provision Coverage Ratio (including technical write-offs) was 69.59% as of March 31, 2022 as compared to 57.53% as of March 31, 2021.

6. Strong Capital Adequacy:

• The Bank had raised equity capital of '' 3,000 crore (approx.) through Qualified Institutions Placement (‘QIP'') on April 6, 2021.

• The Bank raised Tier II capital of '' 1,500 crore in Q4-FY22 through issuance of Tier II bonds which was the first Tier II capital raise since inception of the Bank

• Capital Adequacy Ratio stood at 16.74% with CET-1 Ratio at 14.88% as of March 31, 2022.

7. Strong Franchise:

• As on March 31, 2022, the Bank has built a national footprint through the operation of 641 branches (out of which 375 are Urban Branches and 266 are Rural Branches) across India, 601 Corporate Business Correspondent (‘BC'') branches, 719 ATMs.

Points of Presence comparison chart:

Particulars

FY 2021-22

FY 2020-21

Urban Bank Branches

375|

371

Rural Bank Branches

2661

225

ATMs (including Recyclers)

719l

677

Asset Service Branches

203l

151

Rural BC Branches (IDFC FIRST Bharat Limited)

384

384

Other BC Branches

217|

249

• The Bank offers a wide gamut of products to cater to the needs of customers from all segments which can be viewed on our website at www.idfcfirstbank.com.

FINANCIAL HIGHLIGHTS

('' in crore)

Particulars

FY 2022

FY 2021

Deposits

105,634

88,688

Borrowings

52,963

45,786

Investments

46,145

45,412

Advances

117,858

100,550

Total Assets / Liabilities

190,182

163,144

Total Income

20,395

18,179

Profit Before Tax

175

476

Net Profit

145

452

Balance in Profit & Loss Account brought forward from previous year

(3,729)

(3,560)

Amount available for Appropriations

(3,583)

(3,108)

Appropriations

Transfer to Statutory Reserve

37

114

Transfer to Capital Reserve

45

149

Transfer to Special Reserve

6

24

Transfer to Investment Reserve

200

335

Balance in profit and loss account carried forward

(3,870)

(3,729)

Capital adequacy ratio (Basel III)

16.74%

13.77%

Gross NPA %

3.70%

4.15%

Net NPA %

1.53%

1.86%

DIVIDEND

The Board of Directors did not recommend any dividend on equity shares for the FY 2021-22.

In accordance with Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (‘SEBI Listing Regulations''), our Bank has formulated a Dividend Distribution Policy, which ensures a fair balance between rewarding its Members and retaining enough capital for the Bank''s future growth.

This Policy is available on the Bank''s website at www.idfcfirstbank.com under the ‘Investors'' section.

PREPAREDNESS ON IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (‘IND-AS’)

The Reserve Bank of India (‘RBI’) vide Circular RBI/2018-2019/146 DBR. BP.BC.No.29/21.07.001/2018-19 dated March 22, 2019 has decided to defer the implementation of IND-AS for banks till further notice.

The Bank has made considerable progress on IND-AS implementation. The Bank is an associate company of the

IDFC Limited (‘IDFC''), which is a Non-Banking Financial Company (‘NBFC'') that falls under the ‘IND-AS Road map'' mandatorily applicable from April 1, 2018 and accordingly, has been preparing and submitting special purpose “Fit-for-Consolidation" consolidated financials under IND-AS to IDFC Limited with the transition date as April 1, 2017. Under the RBI guidelines, banks are not allowed for early adoption of IND-AS. Accordingly, the general-purpose financial statements of the Bank presented in the Annual Report are not under ‘IND-AS Road map''. The results of the Bank upon its first-time adoption of and transition to IND-AS, based on the updated regulations and accounting standards/guidance and business strategy at the date of actual transition, could differ from those reported in the Fit-for-Consolidation information.

Further, the Bank also submits Standalone Proforma financials in the format and frequency as prescribed by the RBI. These submissions are reviewed by the management and the Audit Committee of the Bank before submission to the RBI.

The implementation of IND-AS is expected to result in significant changes to the way the Bank prepares and presents its financial statements. The areas that are expected to have significant accounting impact on the application of IND-AS are summarized below:

1. Financial assets (which include advances and investments) shall be classified under amortized cost, fair value through other comprehensive income (a component of Reserves and Surplus) or fair value through profit/ loss categories based on the nature of the cash flows and the intention of holding the financial assets.

2. Interest will be recognized in the income statement using the effective interest method, whereby the coupon, fees net of transaction costs and all other premiums or discounts will be amortized over the life of the financial instrument.

3. Stock options will be required to be fair valued on the date of grant and be recognized as staff expenses in the income statement over the vesting period of the stock options.

4. The impairment requirements of IND-AS 109, Financial Instruments, are based on an Expected Credit Loss (ECL) model that replaces the incurred loss model under the extant framework. The Bank will be generally required to recognize either a 12-Month or Lifetime ECL, depending on whether there has been a significant increase in credit risk since initial recognition. IND-AS 109 will change the Bank''s current methodology for calculating the provision for standard assets and Non-Performing Assets (NPAs). The Bank will be required to apply a three-stage approach to measure ECL on financial instruments accounted for at amortized cost or fair value through other comprehensive income. Financial assets will migrate through the following three stages based on the changes in credit quality since initial recognition:

Stage 1: 12 Months ECL - For exposures which have not been assessed as credit-impaired or where there has not been a significant increase in credit risk since initial recognition, the portion of the ECL associated with the probability of default events occurring within the next twelve months will need to be recognized.

Stage 2: Lifetime ECL - For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL will need to be recognized.

Stage 3: Lifetime ECL - Financial assets will be assessed as credit impaired when one or more events having a detrimental impact on the estimated future cash flows of that asset have occurred. For financial assets that have become credit impaired, a lifetime ECL will need to be recognised.

5. Accounting impact on the application of IND-AS at the transition date shall be recognized in Equity (Reserves and Surplus) as and when it becomes statutorily applicable to the Bank.

CAPITAL

Authorised Share Capital

As on March 31, 2022, the Authorised Share Capital of the Bank was '' 75,38,00,00,000 comprising of 7,50,00,00,000 equity shares of '' 10 each and 38,00,000 preference shares of '' 100 each.

Paid-up Equity Share Capital Qualified Institutions Placement (‘QIP'')

Basis approval of the Board of Directors of the Bank (‘Board'') at their meeting held on February 18, 2021 and by virtue of special resolution passed by the members of the Bank through postal ballot on March 21, 2021, the duly authorised Committee of the Board had at its meeting held on April 6, 2021 approved the issue and allotment of 52,31,03,660 equity shares of face value of '' 10 each to Qualified Institutional Buyers (‘QIBs'') at an issue price of '' 57.35 per Equity Share (including a premium of '' 47.35 per share) aggregating to ~ '' 3,000 crore.

The QIP was made pursuant to applicable provisions of the Companies Act, 2013 (‘the Act''), read with relevant rules made thereunder, in accordance with the guidelines, rules and regulations of the Securities and Exchange Board of India (‘SEBI''), including SEBI (Issue of Capital and Disclosure Requirements) Regulations, SEBI Listing Regulations, the relevant provisions of the Banking Regulation Act, 1949, the rules, circulars, directions and guidelines issued by the RBI, and subject to the MCA Circulars issued in December 2020. The Bank has ensured to comply with all legal and statutory formalities.

Allotment of Equity Shares pursuant to exercise of Stock Options

During FY 2021-22, 1,87,54,795 equity shares of '' 10 each were issued and allotted to the eligible employees of the

Bank pursuant to exercise of Options granted under IDFC FIRST Bank Limited Employee Stock Option Scheme 2015 (‘IDFC FIRST Bank ESOS-2015'').

As on March 31, 2022, the issued, subscribed and paid-up equity share capital of our Bank was '' 62,17,70,83,100 comprising 6,21,77,08,310 equity shares of '' 10 each.

Subsequent to the year under review and as on date of this report, the Bank has allotted 3,45,560 equity shares of '' 10 each to the allottees upon exercise of stock options granted under IDFC FIRST Bank ESOS-2015. Post the said allotment, the paid-up Equity Share Capital of the Bank stands at 6,21,80,53,870 equity shares of '' 10 each, aggregating to '' 62,18,05,38,700.

Our Bank has not issued any equity shares with differential voting rights.

Issuance of “Basel III Tier-II Bonds” on Private Placement basis

In accordance with the powers granted by the Board, the duly authorized Committee of the Board had authorised Private Placement of Shelf Placement Memorandum for issuance of '' 2,000 crore of Basel III Compliant Tier-II Bonds in one or more tranches.

Under the said limit, IDFC FIRST Bank Limited launched the 1st Tranche of its maiden Tier II Bond issuance for an issue size of '' 1,000 crore with a Green Shoe Option to retain oversubscription(s) up to '' 500 crore. The Bond tranche was launched for a 10 year door-to-door tenor with an annual Call Option beginning from the 5th year from date of allotment. The Issue was successfully completed on February 8, 2022.

Capital Adequacy

Currently, the Bank is required to maintain a minimum total Capital Adequacy Ratio of 11.50%.

Our Bank is well capitalised and has a Capital Adequacy Ratio under Basel III as at March 31, 2022 of 16.74% (as against the RBI minimum requirement of 11.50%) & with Tier-I Capital Adequacy Ratio being 14.88%.

At high levels of Capital Adequacy, our Bank will continue to enjoy the highest levels of confidence from the Indian financial ecosystem including capital market participants, depositors and our customers.

With the strong opportunities in India (India is an emerging economy and an underserved and under-penetrated market), the strong asset track record (combined with Capital First and IDFC Bank) along with robust liability franchise, our Bank is well placed to grow its business in the future. Also, the capital raise undertaken by the Bank during the financial year, gave an additional buffer in light of unforeseen circumstances owing to COvID-19.

As a Bank, it is our endeavour to be strong custodians of public depositors/ shareholders and to further strengthen the Balance Sheet immensely.

Ratings

The details of all credit ratings obtained by the Bank along with any revisions thereto, during the financial year 2021-22, for various debt & financial instruments outstanding as on March 31, 2022, are disclosed in the Report on Corporate Governance, forming part of this Annual Report.

PERFORMANCE AND CONTRIBUTION OF SUBSIDIARY AND ASSOCIATE COMPANIES

IDFC FIRST Bank has one wholly owned Subsidiary Company, namely IDFC FIRST Bharat Limited (‘IDFC FIRST Bharat'' / ‘IFBL'').

IFBL is acting as a Business Correspondent (‘BC'') for distribution of the products of IDFC FIRST Bank and has given an added momentum to the financial inclusion plan of the Bank.

During FY 2021-22, IFBL has sourced loans worth '' 8,057 crore. IDFC FIRST Bharat reported a Profit After Tax of '' 37.27 crore for FY 2021-22 as against '' 30.90 crore for FY 2020-21.

IDFC FIRST Bank''s policy for determining material subsidiaries is available on the Bank''s website at www.idfcfirstbank.com under the ‘Investors'' section.

IDFC FIRST Bank has only one Associate Company as on March 31, 2022, viz Millennium City Expressways Private Limited, in which it holds 29.98% equity stake.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129(3) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014, as amended, the Bank has prepared consolidated financial statements, which forms part of this annual report. The statement in Form AOC-1 containing the salient features of the financial statements of the Subsidiary and Associate Company of the Bank, also forms part of this Annual Report and is appended as ANNEXURE 1.

In accordance with the third proviso to Section 136(1) of the Act and Regulation 46(2)(s) of the SEBI Listing Regulations, the Annual Report of the Bank, containing standalone financial statements and the consolidated financial statements and all other documents required to be attached thereto are available on the website of the Bank at www.idfcfirstbank.com under the ‘Investors'' section.

Further, in accordance with the fourth proviso to the said section, the Annual Report of IFBL containing therein its audited financial statements has been hosted on the Bank''s website at www.idfcfirstbank.com under the ‘Investors'' section.

UPDATE ON IMPACT OF COVID-19

COvID-19 was subdued through the major part of FY 2021-22 until the start of 2022, when the country saw the third wave of Pandemic propelled by Omicron - another variant of the SARS-Cov-2 that caused the earlier two waves in the country.

Omicron, a much faster transmissible variant, infected the country and the Bank alike but with lesser impact compared to the second wave caused by the Delta variant.

As the COvID-19 cases started increasing the Bank and the Business Continuity Management (‘BCM'') team proactively managed the impact by re-implementing stringent controls established in the second wave of the Pandemic in India.

Initiative undertaken to combat the third wave of COvID-19 Pandemic -

• Continued Communication: The Bank continued with its multi-channel (SMS, E-mail, Screensavers, Standees/posters etc.) communication on the COvID-19 awareness for the staff thus making them aware of the Pandemic related situation, precautions to take, the Bank''s existing Pandemic Assistance Program, government guidelines/ restrictions and the Bank''s strategy to address the ongoing situation. Further managers like before were encouraged to have frequent sessions with staff to understand and address any issues considering that the staff has been working remotely for most parts of the Pandemic.

• COVID-19 Policies & Assistance Programs:

The Bank''s Employee Assistance Program along with the Work from Home Policy & Quarantine Policy were made available for staff during the third wave. This provided financial, hospitalization related support as well as reduced exposure to the Pandemic.

• Safe & Secure Operating Environment: The

government guidelines on COvID-19 safeguards were implemented across the Bank premises throughout the country. Thus, ensuring both staff and customers remained safe.

• Business Continuity: Bank''s Business Continuity Program stood up well against the previous two Pandemic waves and delivered again during the third wave. Businesses activated their BCP strategies and were able to achieve all their business and customer needs.

• Reporting: The overall progress of the Pandemic continues to be reported periodically to the management, the Board and their advice is taken from time to time. As required, the management assesses, guides and provides resources to help address the challenges of the Pandemic, keeping in front the customer viz. CUSTOMER FIRST!

While the country has moved into a Post Pandemic Phase -albeit momentarily, the Bank with the help of its BCM team will continue to monitor cases and new variant evolution across the world and will take necessary steps in the interests of its customers and its employees, as required.

PROMOTER

In terms of the ‘Guidelines for Licensing of New Banks in the Private Sector'' issued by RBI on February 22, 2013 (‘Licensing Guidelines''), and as per the licensing conditions for the Bank, IDFC Financial Holding Company Limited (‘IDFC FHCL'') and IDFC Limited are the Promoters of IDFC FIRST Bank Limited (‘Bank'').

IDFC FHCL is the wholly-owned subsidiary of IDFC Limited and as on March 31, 2022, IDFC FHCL holds 2,26,89,37,489 equity shares constituting 36.49% of the total paid-up voting equity capital of the Bank.

Update on the Merger of ‘IDFC Limited'' and ‘IDFC Financial Holding Company Limited'' with ‘IDFC FIRST Bank Limited''

The Board at its meeting held on December 30, 2021, had considered the proposal for merger of ‘IDFC Limited'' and ‘IDFC Financial Holding Company Limited'' (‘Promoter Group'') with ‘IDFC FIRST Bank Limited'' and had expressed that they are in-principle in favour of the said merger, subject to the approval of the Board, members, creditors, requisite statutory and regulatory approvals of the respective entities. Further, the Board had constituted and authorized a special committee namely Capital Raise and Corporate Restructuring Committee (‘CR & CR Committee''), inter-alia to work on the terms of the proposed merger including finalizing the Scheme, valuation, hiring advisors etc., as required.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Appointment / Re-appointment of Directors

All appointments of Directors are made in accordance with the relevant provisions of the Act and the Rules framed thereunder, the SEBI Listing Regulations, the Banking Regulation Act, 1949 and the rules, guidelines and circulars issued by the RBI from time to time. The Bank has in place a framework for Board Diversity, Fit & Proper Criteria and Succession Planning for appointment of Directors on the Board of the Bank.

The Nomination and Remuneration Committee (‘NRC'') conducts due diligence before appointment of Directors and ensures adherence to ‘Fit and Proper'' criteria, as prescribed by RBI.

Changes in the Board of the Bank during the Financial Year 2021-22, are as follows:

Mr. S. Ganesh Kumar

Based on the recommendation of NRC, the Board at its meeting held on April 30, 2021, approved the appointment of Mr. S. Ganesh Kumar (DIN: 07635860) as an Additional Director in the category of Independent Director of the Bank for a period of 5 consecutive years commencing from April 30, 2021 to April 29, 2026 (both days inclusive). The said appointment was subsequently approved by the members at the 7th Annual General Meeting (‘AGM'') of the Bank held on September 15, 2021.

Mr. Pravir Vohra

Based on the recommendation of NRC, the Board at its meeting held on May 8, 2021, approved the re-appointment of Mr. Pravir Vohra (DIN: 00082545), as an Independent Director of the Bank for his second term of 5 consecutive years commencing from August 1, 2021 to July 31, 2026 (both days inclusive) in accordance with Section 10A(2A) of the Banking Regulation Act, 1949, Section 149 of the Act and SEBI Listing Regulations. The said re-appointment was subsequently approved by the members at the 7th AGM of the Bank held on September 15, 2021.

Mr. Ajay Sondhi

Based on the recommendation of NRC, the Board had approved the appointment of Mr. Ajay Sondhi (DIN: 01657614) as an Additional Director in the category of Non-Executive Non-Independent Director of the Bank, for a period of 4 consecutive years commencing from July 22, 2021 to July 21, 2025 (both days inclusive). The said appointment was subsequently approved by the members at the 7th AGM of the Bank held on September 15, 2021.

Mr. Ajay Sondhi, whose office is liable to retire at the ensuing AGM, being eligible seeks re-appointment, in terms of the provisions of Section 152(6) of the Companies Act, 2013. Based on the recommendation of the NRC, the Board recommends his re-appointment to the members of the Bank.

Mr. Sanjeeb Chaudhuri

During the year under review, Reserve Bank of India vide its letter dated August 25, 2021, approved the appointment of Mr. Sanjeeb Chaudhuri (DIN: 03594427) as the PartTime Chairperson of the Bank for a period of 3 years commencing from August 25, 2021 to August 24, 2024 (both days inclusive) at a consolidated remuneration of '' 24 lakh p.a. in addition to sitting fees for attending Board and its Committee meetings and reimbursement of expenses incidental thereto. The said appointment was also approved by the Members of the Bank through Postal Ballot on December 3, 2021.

In terms of applicable laws and pursuant to the approval of members at the 5th AGM of the Bank held on July 25, 2019, Mr. Sanjeeb Chaudhuri was appointed as an Independent Director of the Bank for a period of 4 consecutive years commencing from May 10, 2019 to May 9, 2023 (both days inclusive).

Subsequent to the year under review, based on the recommendation of the NRC, the Board at its meeting held on April 30, 2022, approved the re-appointment of Mr. Sanjeeb Chaudhuri as an Independent Director of the Bank for a second term of 4 consecutive years commencing from May 10, 2023 to May 09, 2027 (both days inclusive). The said re-appointment of Mr. Chaudhuri is subject to approval of the members of the Bank at ensuing AGM and other applicable statutory/ regulatory approvals, as may be required.

The details of the Director being re-appointed is set out in the Notice of the ensuing AGM of the Bank.

Mr. V. Vaidyanathan

Based on the recommendation of NRC, the Board at its meeting held on June 16, 2021, considered and approved the re-appointment of Mr. V. Vaidyanathan (DIN: 00082596) as the Managing Director & Chief Executive Officer (‘MD & CEO'') of the Bank, for a further period of 3 years, with effect from December 19, 2021 up to December 18, 2024 (both days inclusive), subject to the approval of the RBI and the Members of the Bank, in terms of the applicable provisions of the Act, the relevant Rules made thereunder, the SEBI Listing Regulations, the Banking Regulation Act, 1949, the Guidelines issued by the RBI in this regard and the Articles of Association of the Bank. The said re-appointment was approved by the RBI on September 7, 2021 and subsequently by the members at the 7th AGM of the Bank held on September 15, 2021.

Dr. Jaimini Bhagwati

Based on the recommendation of NRC, the Board of Directors of the Bank approved the appointment of Dr. Jaimini Bhagwati (DIN: 07274047), as an Additional Director in the category of Non-Executive Non-Independent Director of the Bank for a period of 3 years commencing from February 18, 2022 to February 17, 2025 (both days inclusive). The said appointment of Dr. Bhagwati is subject to approval of shareholders of the Bank through Postal Ballot dated March 30, 2022.

Cessation of Director

Sunil Kakar

Mr. Sunil Kakar tendered his resignation and ceased to be a Non-Executive Non-Independent Director of the Bank with effect from July 22, 2021.

Brief profiles of all the Directors of the Bank are available on the Bank''s website at www.idfcfirstbank.com under the ‘Board of Directors'' section.

None of the Directors of the Bank are disqualified in accordance with Section 164 of the Act.

Further, it is reported by M/s. Makarand M. Joshi & Co., Practicing Company Secretaries, Bank''s Secretarial Auditor that during the financial year under review, the Board of Directors of the Bank is duly constituted with proper balance of Executive Director, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act, SEBI Listing Regulations and Banking Regulations Act.

Also, as per the SEBI Listing Regulations, the Bank has received Certificate from M/s. Bhandari & Associates, Practicing Company Secretaries that none of the Directors on the Board of the Bank have been debarred or disqualified from being appointed or continuing as Directors of Companies by the Securities and Exchange Board of India/ Ministry of Corporate Affairs or any such other statutory authority.

Remuneration Policy

The Bank has formulated and adopted the Remuneration Policies for the (i) Non-Executive Part-Time Chairperson

Statement on Declaration by Independent Directors

The Bank had received declaration from all the Independent Directors (‘IDs''), at the time of appointment and also at the first meeting of the Board of Directors held in FY 2021-22, that they meet the criteria of independence specified under subsection (6) of Section 149 of the Act, read with Rule

5 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and Regulation 16(1)(b) of the SEBI Listing Regulations, for holding the position of ID and that they shall abide by the ‘Code for Independent Directors'' as per Schedule IV of the Act. There has been no change in the circumstances affecting their status as Independent Director. In the opinion of the Board, the IDs possess the requisite integrity, experience, expertise and proficiency required under all applicable laws and the policies of the Bank.

Further, all the IDs of the Bank have complied by Rule

6 (Creation and Maintenance of Databank of Persons Offering to become Independent Directors) of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, and have also declared their enrolment in the databank of Independent Directors maintained by Indian Institute of Corporate Affairs (‘IICA'').

Familiarisation Programmes for Board Members

At the time of appointment, all Directors of our Bank are familiarized with their roles, responsibilities, rights and duties along with a brief overview of our Bank''s operations in a nutshell.

The Board is further provided with necessary documents, reports and internal policies to enable them to familiarize with the Bank''s procedures and practices. These includes in particular, Board Committees Chart, Code of Conduct for Board of Directors, Code of Conduct for Prohibition of Insider Trading, Policy of Related Party Transactions, Details of payment of Sitting Fees to Non-Executive Director, etc. Also, a web-link to access the historical data on Financial Results, Annual Reports, Investor Presentation, Memorandum & Articles of Association of the Bank and other relevant regulatory documents is provided to the Directors.

Directors are given opportunity to attend to select programmes organized by reputed institutions e.g. Centre for Advance Financial Research and Learning, the Institute For Development and Research in Banking Technology etc.

Periodic presentations are made at the Board and Committee meetings on business and performance of the Bank, global business environment, business strategy and associated risks, responsibilities of the Directors etc.

Detailed presentations on the Bank''s business and updates thereon were made at the meetings of the Board and Committees held during the year.

BOARD MEETINGS

The Board met nine (9) times during FY 2021-22 viz., April 30, 2021, May 8, 2021, June 16, 2021, June 30, 2021, July 31, 2021, October 30, 2021, December 30, 2021, January 29, 2022 and March 30, 2022; details of which are given in the Corporate Governance Report, which forms part of this Annual Report. The maximum interval between any two consecutive meetings did not exceeded 120 days.

BOARD COMMITTEES

In compliance with various regulatory requirements, several Board-level Committees have been constituted to delegate matters that require greater and more focused attention.

Details on the constitution, brief terms of reference, meetings held and attendance of all the Board-level Committees are given in the Corporate Governance Report which forms part of this Annual Report.

A brief overview of some of the Board-level Committees is furnished below:

Audit Committee of the Board (‘ACB'')

The ACB met eight (8) times during FY 2021-22 i.e. on April 29, 2021, May 7, 2021, May 21, 2021, June 16, 2021, July 30, 2021, September 30, 2021, October 29, 2021 and January 28, 2022.

All recommendations made by the ACB during the year were accepted by the Board.

Further, the ACB comprises of the following members as on the date of this report:

Mr. Aashish Kamat

- Chairman | Independent Director

Mr. Pravir Vohra

- Member | Independent Director

Mr. S. Ganesh Kumar

- Member | Independent Director

Mr. Ajay Sondhi

Member | Non-Executive Non-Independent Director

Nomination and Remuneration Committee (‘NRC'')

The NRC met eight (8) times during FY 2021-22 on April 28, 2021, May 7, 2021, June 16, 2021, June 29, 2021, July 30 ,2021, October 28, 2021, December 29, 2021 and January 25, 2022.

Further, the NRC comprised of the following members as on the date of this report:

Mr. Hemang Raja

- Chairman | Independent Director

Mr. Aashish Kamat

- Member | Independent Director

Dr. (Mrs.) Brinda Jagirdar

- Member | Independent Director

Mr. Vishal Mahadevia

Member | Non-Executive Non-Independent Director

(Independent) and Non-Executive Directors; (ii) Whole Time/Executive Directors, Material Risk Takers, Key Managerial Personnel, Senior Management Personnel and Control Function and all other employees; (‘the Policies''), in terms of the relevant provisions of Section 178 of the Act, the relevant Rules made thereunder, the SEBI Listing Regulations relating to Corporate Governance and the Guidelines issued by the RBI, in this regard.

During the year, the said Policies were reviewed and approved by the NRC and the Board.

Our Bank also has a process in place for identification of independence, qualifications and positive attributes of its Directors. The NRC ensures a transparent nomination process to the Board of Directors with diversity of gender, thought experience, knowledge and perspective in the Board.

The said Policies have been hosted on the website of the Bank at www.idfcfirstbank.com under the ‘Investors'' section.

All the Non-Executive Directors are paid sitting fees for attending meetings of the Board and its Committees, which are determined by the Board based on applicable regulatory provisions. Further, expenses incurred by them for attending meetings of the Board and Committees in person are reimbursed at actuals.

Pursuant to the relevant RBI guidelines and approval of the members, a fixed remuneration of '' 16 lakh p.a. was paid to each of the Non-Executive Directors of the Bank, other than the Chairperson, on a proportionate basis for FY 2021-22.

Mr. vishal Mahadevia, Non-Executive Non-Independent Director, has opted not to receive any fixed remuneration and sitting fees from the Bank.

Stakeholders'' Relationship and Customer Service Committee (‘SRCSC'')

The SRCSC met four (4) times during FY 2021-22 i.e. on April 28, 2021, July 29, 2021, October 28, 2021, and January 27, 2022.

Further, the SRCSC comprised of the following members as on the date of this report:

Dr. (Mrs.) Brinda Jagirdar

Chairperson | Independent Director

Mr. Pravir Vohra

- Member | Independent Director

Mr. Sanjeeb Chaudhuri

- Member | Independent Director

Mr. S. Ganesh Kumar

- Member | Independent Director

Mr. Ajay Sondhi

Member | Non-Executive Non-Independent Director

Mr. V. Vaidyanathan

- Member | MD & CEO

Corporate Social Responsibility (‘CSR'') Committee

The CSR Committee met four (4) times during FY 202122 on April 28, 2021, July 28, 2021, October 21, 2021 and January 25, 2022.

Further, the CSR Committee comprises of the following members as on the date of this report:

Mr. V. Vaidyanathan

- Chairman | MD & CEO

Dr. (Mrs.) Brinda Jagirdar

- Member | Independent Director

Mr. Hemang Raja

- Member | Independent Director

The Bank formulated and adopted a CSR Policy which provides the focus areas (in accordance with Schedule vII of the Act) under which various developmental initiatives are undertaken and the same is available on the Bank''s website at www.idfcfirstbank.com under the ‘Investors'' section.

The CSR initiatives of the Bank in FY 2021-22 were implemented through various implementation agencies/ partners. In order to achieve impact and scale, the CSR activities undertaken during the year mainly focused on areas: [a] Livelihoods, [b] Health and Sanitation, [c] Education, [d] Women Empowerment, and [e] Others (COVID-19 Relief / Employee Volunteering Programme).

The amount spent for CSR contribution by the Bank for FY 2021-22 was '' 14.41 crore.

The Annual Report on CSR activities and details of amount spent or unspent by the Bank during FY 2021-22, in accordance with the CSR Rules, is attached as ANNEXURE 2 to this Report.

Risk Management Committee (‘RMC'')

The RMC met four (4) times during FY 2021-22 i.e. on May 7, 2021, July 30, 2021, October 29, 2021, and January 28, 2022.

Further, the RMC comprised of the following members as on the date of this report:

Mr. S. Ganesh Kumar

- Chairperson | Independent Director

Mr. Hemang Raja

- Member | Independent Director

Mr. Pravir Vohra

- Member | Independent Director

Mr. Sanjeeb Chaudhuri

- Member | Independent Director

Mr. V. Vaidyanathan

- Member | MD & CEO

RISK MANAGEMENT FRAMEWORK

Our Bank promotes a strong risk culture throughout the organization. A strong risk culture is designed to help reinforce the Bank''s resilience by encouraging a holistic approach to management of risk & return and an effective management of risk, capital and reputational profile.

Consequent to the amalgamation of erstwhile Capital First Group with IDFC Bank, effective December 18, 2018, Bank has re-aligned its key policies and Risk Framework forming an overall Risk Framework of the merged entity. Our Bank operates within an effective Risk Management Framework to actively manage all the material risks faced by the Bank, in a manner consistent with the Bank''s risk appetite statement. Our Bank aims to establish itself as an industry leader in the management of risks and strive to reach

the efficient frontier of risk and return for the Bank and its shareholders. The Board has ultimate responsibility for the Bank''s Risk Management Framework. It is responsible for approving the Bank''s risk appetite, risk tolerance and related strategies and policies. The Board is assisted by Risk Management Committee of the Board (‘RMC'') and is supported by various management committees as part of the Risk Governance framework to ensure that our Bank has sound system of risk management and internal controls. The RMC assists the Board in relation to the oversight and review of the Bank''s risk management principles and policies, strategies, appetite, processes and controls.

The RMC of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity, operational risks etc. The Committee also reviews the Risk Appetite & Enterprise Risk Management framework, Internal Capital Adequacy Assessment Process (‘ICAAP'') and Stress Testing. ICAAP & Stress Testing requires the Bank to undertake rigorous, forward-looking assessment of risks by identifying severe events or changes in market conditions which could adversely impact the Bank.

Our Bank has in place a Board approved Risk Management Policy. The Policy aims at establishing a risk culture and governance framework to enable identification, measurement, mitigation and reporting of risks within the Bank in line with the Bank''s risk appetite, risk - return tradeoff and the escalation & accountability framework.

Having a comprehensive risk management framework in the bank including well-articulated risk appetite statements, polices and robust stress testing programme facilitates our Bank to manage any potential susceptibility to extreme but plausible business risk. Taking best use of the proactive risk assessment frameworks & risk mitigation techniques, our Bank has built adequate Capital and Liquidity buffers and ensured business continuity during stressed conditions.

Our Bank manages its capital position to maintain strong capital ratios well in excess of regulatory and Board approved minimum capital adequacy at all times. The strong Tier-I capital position of the Bank is a source of competitive advantage and provides assurance to regulators, credit rating agencies, depositors and members. Capital management practices are designed to maintain a risk reward balance, while ensuring that businesses are adequately capitalized to absorb the impact of stress events including pandemic risks.

Our Bank has rigorously adhered to the RBI mandated prudential norms on provisioning including on the basis of evaluation of impact arising out of the fallout of COvID-19 on the underlying portfolio, which is aimed at preserving and protecting shareholders value. Our Bank has continued to proactively work on the resolution of the stressed asset portfolio and has further reduced the position. Our Bank has also de-risked the portfolio by diversifying the credit portfolio and focussing on granular exposures.

INTERNAL FINANCIAL CONTROLS

The Bank has adequate internal controls and processes in place with respect to its financial statements that provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements. These controls and processes are driven through various policies, procedures and certifications which also ensure the orderly and efficient conduct of the Bank''s business, including adherence to Bank''s policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The controls and processes are being reviewed periodically. The Bank has a mechanism of testing the controls and processes at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.

RELATED PARTY TRANSACTIONS

All the Related Party Transactions (‘RPTs'') that were entered into during the financial year were on an arm''s length basis and were in ordinary course of business. Transactions entered into by the Bank with related parties in the normal course of its business were placed before the Audit Committee of the Board (‘ACB''). Prior omnibus approval for normal banking transactions is also obtained from the ACB for the RPTs which are repetitive in nature as well as for the normal banking transactions which cannot be foreseen. A statement giving details of all RPTs, entered pursuant to the omnibus approval so granted, is placed before the ACB for their review.

The Bank has not entered into any material financial or commercial transactions with its subsidiaries and other related parties as per AS-18 and the SEBI Listing Regulations that may have potential conflict with the interest of the Bank at large.

In terms of Regulation 23(9) of the SEBI Listing Regulations, the Bank submits the disclosure of Related Party Transactions, in a prescribed format, as specified under relevant Accounting Standards, on half yearly basis to the Stock Exchanges and update its website accordingly.

IDFC FIRST Bank have always been committed to good corporate governance practices, including matters relating to the related party transactions.

There were no transactions entered into individually or taken together with the previous transactions during the financial year with related parties, which were not in the normal / ordinary course of the business of the Bank, nor were there any transactions with related parties or others, which were not on an arm''s length basis. Hence, pursuant to Section 134(3)(h) of the Act, read with Rule 8(2) of the Companies (Accounts) Rules, 2014, there are no RPTs to be reported under Section 188(1) of the Act. Hence, Form AOC-2 is not applicable to the Bank.

Pursuant to the provisions of the Act and the Rules made thereunder, SEBI Listing Regulations and in the backdrop of the Bank''s philosophy on such matters, the Bank has in place a Board approved policy on related party transactions. The said policy is also uploaded on the Bank''s website at www.idfcfirstbank.com under the ‘Investors'' section.

INFORMATION / CYBER SECURITY FRAMEWORK

IDFC FIRST Bank since its inception has put in place a robust Information/ Cyber Security Framework. Our Bank being a green field setup, has Information Security woven into our banking platform and seamlessly merges both culturally and technologically. A dedicated team of security professionals are part of the Information Security Group (‘ISG'') who govern the Information Security practices in the Bank. Our Bank has put in place state of the art security technologies including several industries ‘firsts'' technology solutions and adopted ‘defense in depth'' approach & industry best practices as part of our security framework and architecture.

Last year, the Bank onboarded several new core cyber defense technologies to improve upon our defense and response capabilities in line with our overall Cyber Defense Strategy.

This year, the Bank''s focus was on consolidation and improving its deployment posture of the new technologies invested in the previous year. In addition Bank has initiated some additional initiatives including:

a) Improving the end point detection and response capabilities

b) Cloud Security posture assessment and enhancement

c) Data Privacy gap assessment

d) Data Classification

Bank continued to maintain and upkeep its compliance posture to standards such as ISO 27001 ISMS (Information Security Management System), PCI DSS and regulatory requirements. Given the changing threat landscape, the attempt is to progressively move towards maturity of proactive and adaptive platforms for automated detection, response and recovery.

BOARD EVALUATION

The Board of Directors carries out an annual evaluation of the Board, Board Committees, and Individual Directors, including Chairperson, pursuant to the provisions of the Act and the SEBI Listing Regulations.

The evaluation brings out the cohesiveness of the Board, a Boardroom culture of trust and co-operation, and Boardroom discussions which are open, transparent and encourage diverse viewpoints. Other areas of strength includes effective discharge of Board''s roles and responsibilities.

The detailed process indicating the manner in which the annual evaluation has been carried out pursuant to the SEBI Listing Regulations and Act, is provided in the Corporate Governance Report, which forms part of this Annual Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review, as required by Regulation 34(2)(e) of the SEBI Listing Regulations, forms part of this Annual Report.

REPORT ON CORPORATE GOVERNANCE

Your Directors ensure the Bank''s prosperity by collectively directing its affairs, whilst meeting the appropriate interests of its Members and other Stakeholders.

Our Bank is committed to achieve the highest standards of Corporate Governance. A separate section on Corporate Governance standards followed by our Bank and the relevant disclosures, as stipulated under the SEBI Listing Regulations, Act, and Rules made thereunder forms part of this Annual Report.

A Certificate from the Secretarial Auditors of the Bank, M/s. Makarand M. Joshi & Company, Practicing Company Secretaries, confirming compliance to the conditions of Corporate Governance as stipulated under the SEBI Listing Regulations is enclosed in the Corporate Governance Report and forms part of this Annual Report.

CEO & CFO Certification

Certificate issued by Mr. v. vaidyanathan, Managing Director & CEO and Mr. Sudhanshu Jain, Chief Financial Officer & Head - Corporate Centre of the Bank, in terms of Regulation 17(8) of the SEBI Listing Regulations, for the year under review was placed before the Board of Directors and forms part of this Annual Report.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report, in terms of Regulation 34(2)(f) of the sEbI Listing Regulations, describing the initiatives taken by IDFC FIRST Bank from an environmental, social and governance perspective is hosted on the Bank''s website at www.idfcfirstbank.com under the ‘Investors'' section and constitutes a part of this Annual Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(5) of the Act, it is hereby confirmed that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. the Directors had 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, 2022 and of the profit of the Bank for that period;

c. the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d. the Directors had prepared the annual accounts on a going concern basis;

e. the Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DEPOSITS

Being a Banking Company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Act, are not applicable to our Bank.

As per the applicable provisions of the Banking Regulation Act, 1949, details of the Bank''s deposits have been included under Schedule 3 - Deposits, in the preparation and presentation of the financial statements of the Bank.

PARTICULARS OF LOANS, GUARANTEES, AND INVESTMENTS

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

REQUIREMENT FOR MAINTENANCE OF COST RECORDS

The Bank is not required to maintain cost records as specified by the Central Government under Section 148(1) of the Act.

INSTANCES OF FRAUD, IF ANY, REPORTED BY THE AUDITORS

During the year under review, no instances of fraud committed against the Bank by its officers or employees were reported by the Statutory Auditors and Secretarial Auditors under Section 143(12) of the Act to the Audit Committee or the Board of Directors of the Bank.

The details of provisioning pertaining to Fraud Accounts during the year under review are provided in Note No. 18.13 to the Standalone Financial Statements as at March 31, 2022.

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

The provisions of Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 relating

to conservation of energy and technology absorption are given as under:

Detailed initiatives taken for conservation of energy has been mentioned in the Business Responsibility Report, which is hosted on the Bank''s website at www.idfcfirstbank.com under the ‘Investors'' section.

Also, our Bank has been increasingly using information technology in its operations, for more details, please refer Management Discussion and Analysis Report, which forms part of this Annual Report.

Further, Foreign Exchange earnings and outgo are part of the normal banking business of the Bank.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/ COURTS/ TRIBUNALS

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status or the operations of the Bank.

CHANGE IN THE NATURE OF BUSINESS

During the year under review, there has been no change in the nature of business of the Bank.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE BANK

There are no material changes and commitments, affecting the financial position of the Bank between the end of the financial year of the Bank i.e. March 31, 2022 and the date of the Board Meeting in which the Directors'' Report was approved i.e. April 30, 2022.

INTERNAL OMBUDSMAN

In compliance with regulatory guidelines, the Bank has appointed Mr. Sharad Vinayak Rao Patil as Internal Ombudsman for a period of 3 years with effect from December 1, 2021, as per the Internal Ombudsman Scheme, 2018 to enhance our Bank''s customer grievance redressal mechanism and to improve service delivery.

Mr. Dayanand P. Kasabe held the position of Internal Ombudsman for a period of 3 years effective from December 3, 2018.

EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as ANNEXURE 3.

In terms of Section 197(12) of the Act, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said Rules forms part of this Annual Report.

In accordance with the provisions of Section 136(1) of the Act, the Annual Report excluding the aforesaid information, is being sent to the members of the Bank and others entitled thereto. Any member interested may obtain the said statement by writing to the Company Secretary of the Bank.

Employee Stock Option Scheme

The Employee Stock Option Scheme (‘IDFC FIRST Bank ESOS - 2015'' / ‘ESOS'') was framed with an object of encouraging higher participation on the part of employees in the Bank''s financial growth and success. An effective stock option scheme enables retention of talent and aligning employee interest to that of the Members.

There were 25,98,00,114 stock options outstanding at the beginning of FY 2021-22. During FY 2021-22, 4,05,55,216 stock options were granted to the eligible employees under IDFC FIRST Bank ESOS - 2015.

Further, 2,14,58,678 stock options had lapsed/forfeited, and 1,87,54,795 stock options were exercised during the year ended March 31, 2022. Accordingly, 26,01,41,857 stock options remained outstanding as on March 31, 2022. All stock options vests in a graded manner and are required to be exercised within a specific period in accordance with IDFC FIRST Bank ESOS - 2015 and SEBI (Share Based Employee Benefits) Regulations, 2014, which has been replaced by the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 [‘SEBI (SBEB & SE) Regulations''].

The Bank has used the intrinsic value method to account for the compensation cost of Stock Options to employees of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the Option. IDFC FIRST Bank ESOS - 2015 is administered by the NRC of the Board of the Bank.

There has been no material change in IDFC FIRST Bank ESOS - 2015 during FY 2021-22 and the said IDFC FIRST Bank ESOS - 2015 is in compliance with the SEBI (SBEB & SE) Regulations.

The details and disclosures with respect to ESOS as required under SEBI (SBEB & SE) Regulations and circulars issued thereunder, have been uploaded on the Bank''s website at www.idfcfirstbank.com under the ‘Investors'' section.

Further, disclosure as per the ‘Guidance Note on Accounting for Employee Share-based Payments'' issued by the Institute of Chartered Accountants of India, are appearing in the Notes to the Standalone Financial Statements of IDFC FIRST Bank, forming part of this Annual Report.

KEY MANAGERIAL PERSONNEL

As on the date of this report, the following officials of the Bank are the ‘Key Managerial Personnel'' pursuant to the provisions of Section 203 of the Act :

Mr. V. Vaidyanathan

Managing Director & Chief Executive Officer

Mr. Sudhanshu Jain

Chief Financial Officer & Head - Corporate Centre

Mr. Satish Gaikwad

Head - Legal & Company Secretary

STATUTORY AUDIT

The Reserve Bank of India vide its Circular No. RBI/2021-22/25 Ref. No. DoS.CO.ARG/ SEC.01/08.91.001/2021-22 dated April 27, 2021, had issued the Guidelines for Appointment of Statutory Central Auditors (SCAs)/ Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) (‘RBI Guidelines'').

Pursuant to the RBI Guidelines, the Bank is required to appoint two (2) Joint Statutory Auditors, considering its asset size (i.e. more than '' 15,000 crore). Accordingly, the Members of the Bank at the 7th Annual General Meeting held on September 15, 2021, had approved the re-appointment of M/s. B S R & Co. LLP, Chartered Accountants (Firm Registration No. 101248W/ W-100022) and appointment of M/s. M S K A & Associates, Chartered Accountants (Firm Registration No. 105047W) as the Joint Statutory Auditors of the Bank, for a period of 1 year and 3 years, respectively i.e. from the conclusion of 7th AGM until the conclusion of the 8th AGM and from the conclusion of 8th AGM until the conclusion of the 10th AGM of the Bank.

The appointment of M/s. M S K A & Associates is subject to it satisfying the eligibility norms and approval of the RBI, each year. As M/s. B S R & Co. LLP would be completing 3 years of continuous association with the Bank at the conclusion of the 8th AGM, the Bank is required to appoint a new Joint Statutory Auditor in place of M/s. B S R & Co. LLP.

Pursuant to RBI Guidelines, the Bank''s ‘Policy for Appointment of Statutory Auditors of the Bank'' and based on the recommendation of the Audit Committee of the Board, the Board of Directors of the Bank recommends to RBI for approval, the re-appointment of M/s. M S K A & Associates, Chartered Accountants (Firm Registration No.: 105047W), for its second year, and appointment of M/s. Kalyaniwalla & Mistry LLP, Chartered Accountants (Firm Registration No.: 104607W/ W100166), for its first year, to act as Joint Statutory Auditors of the Bank for the year 2022-23. The Board also recommends the appointment of M/s. Kalyaniwalla & Mistry LLP, as Joint Statutory Auditors of the Bank for a period of 3 years to hold office from the conclusion of the 8th AGM until the conclusion of 11th AGM of the Bank, subject to satisfying the eligibility norms and approval of the RBI, each year.

In terms of the provisions of Section 139 of the Act, the appointment of Statutory Auditors is subject to approval of Members. Accordingly, the appointment of M/s. Kalyaniwalla & Mistry LLP will be placed before the Members of the Bank, at the ensuing AgM, for approval. M/s. B S R & Co. LLP, Chartered Accountants (Firm Registration No.: 101248W/ W-100022) will continue to hold office as the Joint Statutory Auditors of the Bank (alongside M/s. M S K A & Associates) until the conclusion of the ensuing AGM of the Bank.

Auditors'' Report

There were no qualifications, reservations, adverse remarks or disclaimers made by the Statutory Auditors in their report for the financial year ended March 31, 2022.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Act, read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank had appointed M/s. Makarand M. Joshi & Co., Practicing Company Secretaries to undertake the Secretarial Audit of the Bank for the financial year ended March 31, 2022.

The Bank provided all assistance and facilities to the Secretarial Auditors for conducting their audit.

The Secretarial Audit Report is appended as ANNEXURE 4 to this report.

There were no qualifications, reservations, adverse remarks or disclaimers made by the Secretarial Auditors in their report for the financial year ended March 31, 2022.

CONCURRENT AUDIT

Our Bank has a regular and well-defined process of concurrent audits for important functions such as treasury, trade finance operations, retail operations, wholesale operations, information technology, data center, etc. in line with the extant regulatory guidelines. Reputed Chartered Accountant / CERT-IN certified firms carry out these Concurrent Audits. Key findings of these audits are placed before the Audit Committee of the Board on a quarterly basis.

ANNUAL RETURN

Pursuant to Section 92(3) read with Section 134(3)

(a) of the Act, the Annual Return as on March 31, 2022 is available on the Bank''s website at following link: https://www.idfcfirstbank.com/investors/annual-report.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

The Bank encourages an open and transparent system of working and dealing amongst its stakeholders. The Bank has also adopted a “Whistle Blower Policy" to encourage and empower the Employees/Stakeholders to make or report any Protected Disclosures under the Policy, without any fear of reprisal, retaliation, discrimination or harassment of any kind.

This Policy has also been put in place to provide a mechanism through which adequate safeguards can be provided against victimization of employees who avail of this mechanism. The policy would cover and will be applicable to the Protected Disclosures related to violation/suspected violation of the Code of Conduct including (a) breach of applicable law;

(b) fraud or corruption; (c) leakage/suspected leakage of unpublished price sensitive information which are in violation to SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended, etc. Details of Whistle blower complaints received and subsequent action taken and the functioning of the Whistle Blower mechanism are reviewed periodically by the Audit Committee of the Board.

The Bank has formulated and adopted a Whistle Blower Policy and Vigil Mechanism, details of which have been provided in the Report on Corporate Governance, which forms part of this Annual Report.

PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE

Our Bank has an Internal Committee to investigate and inquire into sexual harassment complaints in line with ‘The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013''.

Our Bank has in place a policy on Anti-Sexual Harassment, which reflects the Bank''s zero-tolerance towards any form of prejudice, gender bias and sexual harassment at the workplace. Our Bank has set up an Internal Committee (‘IC'') to receive and redress complaints of sexual harassment. Our Bank undertakes ongoing trainings to create awareness on this policy.

No sexual harassment complaints were filed during the year under review i.e. FY 2021-22.

During FY 2021-22, employees were given online training in order to understand the Policy on Prevention of Sexual Harassment and framework for reporting and resolving instances of sexual harassment, details of which have been mentioned in the Business Responsibility Report, which is hosted on the Bank''s website at www.idfcfirstbank.com under ‘Investors'' section.

AWARDS AND RECOGNITIONS

During the year under review, our Bank was recognized in various ways and the significant awards presented to our Bank are listed below:

• Breaking Ground in WASH Financing

• Utkarsh Puraskar'' DigiDhan award

• Best Payments and Collections Solution Award 2021

• Best Innovative Payment Solution

• Best Consumer Digital Bank in India - 2021

• Best Wealth Management Provider for Digital CX

• Excellence in User Experience - Website

• Asia Private Banking Award

• Best BFSI Brands in Private Bank Category

• Best Corporate Governance, India 2022

• Most Trusted Brands of India 2021

• Best Sustainable Banking Strategy Award

• Most Harmonious Merger Award

• Social Impact Bank of the Year 2022

• Most Innovative Digital Transformation Bank 2022

• Most Innovative Banks

• Most Trusted Companies Awards 2021

• Water.org & Sa-Dhan Awards 2021

• Most Promising Brand Awards 2022

• Outstanding Digital CX - Internet Banking (Wealth Management)

GREEN INITIATIVE

To support the ‘Green Initiative'', members who have not updated their e-mail addresses are requested to update the same with their respective Depository Participants (DPs), in case shares held are in electronic form or communicate their e-mail address to the Registrar and Share Transfer Agent i.e. KFin Technologies Limited or to the Bank, in case shares are held in physical form, so that future communications can be sent to members in electronic mode. Note on Green Initiative forms part of the 8th AGM Notice.

ACKNOWLEDGMENT

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. The Board would also like to take this opportunity to express appreciation to its valued customers for their continued patronage and to the members of the Bank for their continued support.

Your Directors sincerely acknowledge the commitment and hard work put in by all employees of the Bank through its transformational journey. Their valuable contribution has enabled the Bank to make significant progress towards building a great institution.

For and on behalf of the Board of Directors of IDFC FIRST Bank Limited

Sanjeeb Chaudhuri

Chairperson niM- msQ/i/nv


Mar 31, 2021

Your Board of Directors are pleased to present the Seventh Annual Report of IDFC FIRST Bank Limited (‘IDFC FIRST Bank’ or the ‘Bank’) together with the Audited Financial Statements for the financial year ended March 31, 2021.

FINANCIAL HIGHLIGHTS

('' in crore)

Particulars

FY 2021

FY 2020

Deposits

88,688

65,108

Borrowings

45,786

57,397

Investments

45,412

45,405

Advances

100,550

85,595

Total Assets / Liabilities

163,144

149,200

Total Income

18,222

18,030

Profit before Depreciation and Tax

805

(2,073)

Net Profit

452

(2,864)

Appropriations

Transfer to Statutory Reserve

114

-

Transfer to Capital Reserve

149

166

Transfer to Special Reserve

24

-

Transfer from Investment Reserve

335

-

Dividend paid (includes tax on dividend)

-

-

Balance in profit and loss account carried forward

(3,729)

(3,560)

Capital adequacy ratio (Basel III)

13.77%

13.38%

Gross NPA %

4.15%

2.60%

Net NPA %

1.86%

0.94%

Return on Assets

0.28%

(1.79%)

STATE OF AFFAIRS OF THE BANK

The Bank has successfully diversified its business mix and added new revenue streams after the Merger. Now it has expanded its reach to serve new customer segments both on the retail as well as wholesale side of the business. The achievements during the FY 2020-21 are mentioned below -

1. Strong Growth in Retail Assets:

• Retail Book increased 29% Y-o-Y to '' 73,673 crore as on March 31, 2021 from '' 57,310 crore as on March 31, 2020.

• Retail Book constitutes 63% of Funded Loan Assets as on March 31, 2021 compared to 54% as on March 31, 2020. Including the Priority Sector Lending (‘PSL’) buyout portfolio, where the underlying assets are retail loans, the retail assets contribution to overall funded assets stood at 67% as of March 31, 2021.

• Wholesale Book decreased by 14% to '' 33,920 crore as on March 31, 2021 from '' 39,388 crore as on March 31, 2020.

• Within Wholesale Book, the Infrastructure loans

decreased by 27% to '' 10,808 crore as on March 31, 2021 from '' 14,840 crore as on March 31, 2020.

2. Strong Growth in Retail Liabilities:

• The Total CASA Deposits increased to '' 45,896 crore as on March 31, 2021 from '' 20,661 crore as on March 31, 2020, Y-o-Y increase of 122%.

• CASA Ratio improved to 51.75% as on March 31, 2021 from 31.87% as on March 31, 2020.

• Strong CASA growth of '' 25,235 crore during FY21 and '' 5,333 crore during Q4 FY21.

• Retail Deposits (Retail CASA and Retail Term Deposits) increased to '' 63,894 crore as on March 31, 2021 from '' 33,924 crore as on March 31, 2020, Y-o-Y increase of 88%.

• IDFC FIRST Bank Fixed Deposit program was assigned highest safety rating of ‘FAAA’ by CRISIL.

• Bank consciously reduced Certificate of Deposits (‘CD’) to '' 5,964 crore as on March 31, 2021 from '' 7,111 crore as on March 31, 2020, a Y-o-Y reduction of 16%, as CD are short term institutional borrowing in nature, and replaced them with Retail

7. Franchisee:

• As on March 31, 2021, the Bank has built a national footprint through the operation of 596 branches (out of which 371 are Urban Branches and 225 are Rural Branches) across many cities in India, 655 Corporate Business Correspondent (‘BC’) branches, 592 ATMs, 85 Recyclers, 3 Central Processing Centers and 1 Clearing Hub.

Points of Presence comparison chart:

Particulars

FY 2020-21

FY 2019-20

Urban Bank Branches

371

295

Rural Bank Branches

225

169

ATMs1

592

356

Recyclers

85

-

Asset Service Branches

151

128

Rural BC Branches (IDFC FIRST Bharat Limited)

384

380

Other BC Branches

271

272

’Excluding white label ATMs

FD and CASA money, thus strengthening and diversifying the liabilities significantly.

3. Strong growth in Core Earnings:

• Strong NII Growth: For the full year, total Net Interest Income (‘NII’) increased by 21% to '' 7,380 crore in FY21 from '' 6,076 crore in FY20.

• Strong NIM improvement: The Net Interest Margin (‘NIM’) for the full year FY21 was at 4.98% as compared to 3.91% in FY20.

• Strong growth in Total Income (NII Fees and Other Income Trading Gain): The total income for the full year increased by 24% to '' 10,207 crore in FY21 from '' 8,237 crore in FY20.

• Core Pre-provision Operating Profit (PPOP Net of treasury income and impact of interest on interest reversal): For the full year, the Core PPOP grew by 11% to '' 1,964 crore in FY21 from '' 1,764 crore in FY20.

• Provision: For the full year, Total Provisions stood at '' 2,638 crore in FY21 as compared to '' 4,754 crore in FY20.

• Profit After Tax: The Net Profit for the full year FY21 was '' 452 crore as compared to Net Loss of '' 2,864 crore in FY20.

4. Asset Quality of the Bank:

• Bank’s Gross NPA ratio as of March 31, 2021 stood at 4.15% as compared to 2.60% as of March 31, 2020.

• Bank’s Net NPA ratio as of March 31, 2021 stood at 1.86% as compared to 0.94% as of March 31, 2020.

• Provision Coverage Ratio (PCR) was 56.23% as of March 31, 2021 as compared to 64.53% as of March 31, 2020.

5. Asset Quality on Retail Loan Book:

• Retail Asset Gross NPA ratio stood at 4.01% as of March 31, 2021 as compared to 1.77% as of March 31, 2020.

• Retail Asset Net NPA ratio stood at 1.90% as of March 31, 2021 as compared to 0.67% as of March 31, 2020.

6. Capital Adequacy:

• With Preferential Issue of '' 2,000 crore (approx.) during June 2020, our Bank availed an insurance for an emerging COVID-19 situation, that positioned itself for strong growth going forward.

• Capital Adequacy Ratio stood at 13.77% with CET-1 Ratio at 13.27% as of March 31, 2021.

• The Bank has raised equity capital of '' 3,000 crore (approx.) through Qualified Institutions Placement (‘QIP’) on April 06, 2021, including this, the Capital Adequacy Ratio stands at 16.32% with CET-1 ratio at 15.62%, as on March 31, 2021.

• The Bank offers a wide gamut of products to cater to the needs of customers from all segments which can be viewed on our website: www.idfcfirstbank.com.

UPDATE ON IMPACT OF COVID-19

Towards the end of 2020 and early 2021, India saw considerable decrease in new COVID-19 cases. But major Pandemics have multiple waves of infection and being aware of the same, the Business Continuity Management (‘BCM’) team continued to monitor and create awareness among staff and management on the related threat to the Bank’s services and its customers. In the later weeks of February 2021, India saw the 2nd wave of the COVID-19 Pandemic hit the country.

The continued and proactive review by the BCM team on the evolving nature of the pandemic helped the Bank take timely actions and minimize the impact of the 2nd wave.

Initiative undertaken to combat 2nd wave of COVID-19 Pandemic -

• Proactive & Inclusive Communication: The

Bank continues its communication with its staff on the Pandemic, creating awareness on the threat, precautions to take, the Bank’s Pandemic Assistance Program, government guidelines/restrictions and the Bank’s strategy to address the ongoing situation. For this multiple modes of communications are employed - electronic (SMS, E-mail, Screensavers) and physical (Standees/posters etc.) to reach the staff. Further, managers are encouraged to have frequent sessions with staff to understand and address any issues considering that the staff has been working remotely for most parts of the Pandemic.

• COVID-19 Policies & Assistance Programs: The

Bank last year implemented various policies targeted towards employee health & safety like the Work from

Home Policy & Quarantine Policy. Both these policies were activated & implemented before the lockdown in India, thus ensuring Bank was well prepared to address the effects of the Pandemic and the Lockdowns. The 21 days paid Quarantine Leaves ensured infected employee recovers well and do not infect other staff or customers.

Further, as Pandemic started having impact on our staff, the Bank came out with a “COVID-19 Assistance Program” to help its staff and their families. The program addressed multiple issues affecting staff -Reimbursement of the cost of testing & vaccination, a 24x7 Doctor Helpline to allay their doubts/concerns, discounted Pricing for Home Isolation Packages and hospitalization assistance for employees and their family on best effort basis. The Bank also launched countrywide vaccination drive for its staff and their dependents thus ensuring staff and families are safe.

• Safe & Secure Operating Environment: The

government came out with specific guidelines on keeping bank premises safe and secure last year. The Bank implemented these guidelines and ensured that our premises are sanitized and deep cleaned frequently so that they are safe and secure both for our staff and our customers. Specialized in-house and external partners are involved in ensuring the same daily. Further, branches are closed for pre-defined periods whenever there is a positive COVID-19 case in the branch and fully sanitized. Our Bank is fully compliant to government laid down guidelines on use of mask, social distancing and relevant controls across our offices/branches in the country.

• Business Continuity & Course Correction: The

Business Continuity Program stood up well against the Pandemic last year. The Pandemic plan has been further enhanced with the learnings e.g. like the Bank’s continuity strategy has embraced the remote working and split site operations as a primary strategy, Bank’s branches & team operate per changing nature of the operating environments and government directives seamlessly with staff on rotation. The same continues now as we see the impact of the 2nd wave of COVID-19 Pandemic.

• Sprucing Up Technology Infrastructure: Our

technology infrastructure has been the backbone of the Bank’s fight against the Pandemic. It provided the remote access platform that helped critical teams to perform business activities from the secure confines of their homes and ensure continuity of critical business functions. The remote access technology supporting the Bank has been further enhanced over the course of the last year to ensure the Bank can support more staff in the remote operating model. 1

guides and provides resources to help address the challenges of the Pandemic, keeping in front the customer viz. CUSTOMER FIRST!

• CSR Initiatives: We have undertaken 5 key initiatives in response to the severe second wave of COVID-19 that has impacted the marginalized across urban and rural India. In order to emphasise urgency for COVID-19 vaccination, and to clear misconceptions relating to it, the bank reached out to over five million of its customers in semi-urban and rural locations digitally using animated films. In our other programs, we provided Oxygen Concentrators to rural hospitals, Cash Relief support to those who lost their bread-winner to the deadly disease, mask distribution and also initiated a livelihood program to help families earn a living despite lockdown restrictions by means of mask-making.

The Bank continues to monitor the evolving environment of the Pandemic (potential 3rd wave) with the help of its BCM team and will take necessary steps and do course correction as required in the interests of its customers and its staff!

DIVIDEND

The Board of Directors did not recommend any dividend on equity shares for the FY 2020-21, in absence of distributable profits, in terms of the RBI Guidelines.

In accordance with Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (‘SEBI Listing Regulations’), our Bank has formulated a Dividend Distribution Policy, which ensures a fair balance between rewarding its Shareholders and retaining enough capital for the Bank’s future growth.

This Policy is available on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section.

PREPAREDNESS ON IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (‘IND-AS’)

The Reserve Bank of India (‘RBI’) vide Circular RBI/2018-2019/146 DBR. BP.BC.No.29/21.07.001/2018-19 dated March 22, 2019 has decided to defer the implementation of IND-AS for banks till further notice.

The Bank has made considerable progress on IND-AS implementation and in fact, since the Bank is an associate company of IDFC Limited (holding company of IDFC Financial Holding Company Limited, Promoter) which is a Non-Banking Finance Company (‘NBFC’) that falls under the ‘IND-AS Road map’ mandatorily applicable from April 01, 2018. Accordingly, the Bank has been preparing and submitting special purpose ‘Fit for Consolidation’ consolidated financials under IND-AS to IDFC Limited with the transition date as April 01, 2017. Under the RBI guidelines, banks are not allowed to early adopt IND-AS and should be guided by the RBI guidelines. Accordingly, the general purpose financial statements of the Bank presented in the Annual Report are not under IND-AS.

Further, the Bank also submits quarterly Standalone

Proforma financials in the format as prescribed by the RBI. These submissions are reviewed by the management and the Audit Committee of the Bank before submission to the RBI. The working group of the Bank prepares quarterly proforma IND-AS financials as required by the RBI.

The implementation of IND-AS is expected to result in significant changes to the way the Bank prepares and presents its financial statements. The areas that are expected to have significant accounting impact on the application of IND-AS are summarized below:

1. Financial assets (which include advances and investments) shall be classified under amortized cost, fair value through other comprehensive income (a component of Reserves and Surplus) or fair value through profit/ loss categories on the basis of the nature of the cash flows and the intention of holding the financial assets.

2. Interest will be recognized in the income statement using the effective interest method, whereby the coupon, fees net of transaction costs and all other premiums or discounts will be amortized over the life of the financial instrument.

3. The impairment requirements of IND-AS 109, Financial Instruments, are based on an Expected Credit Loss (ECL) model that replaces the incurred loss model under the extant framework. The Bank will be generally required to recognize either a 12-Month or Lifetime ECL, depending on whether there has been a significant increase in credit risk since initial recognition. IND-AS 109 will change the Bank’s current methodology for calculating the provision for standard assets and nonperforming assets (NPAs). The Bank will be required to apply a three-stage approach to measure ECL on financial instruments accounted for at amortized cost or fair value through other comprehensive income. Financial assets will migrate through the following three stages based on the changes in credit quality since initial recognition:

Stage 1: 12 Months ECL - For exposures which have not been assessed as credit-impaired or where there has not been a significant increase in credit risk since initial recognition, the portion of the ECL associated with the probability of default events occurring within the next twelve months will need to be recognized.

Stage 2: Lifetime ECL - For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL will need to be recognized.

Stage 3: Lifetime ECL - Credit Impaired Financial assets will be assessed as credit impaired when one or more events having a detrimental impact on the estimated future cash flows of that asset have occurred. For financial assets that have become credit impaired, a lifetime ECL will need to be recognized.

4. Accounting impact on the application of IND-AS at the transition date shall be recognized in Equity (Reserves and Surplus) as and when it becomes statutorily applicable to the Bank.

SHARE CAPITAL

Authorised Share Capital

In order to meet Bank’s growth objectives, business expansion plans and to further strengthen its financial position, the Bank felt the need to have adequate Authorised Capital in order to infuse additional funds in the form of further capitalization and to generate long term resources by issuing securities.

Pursuant to approval of the Board of Directors of the Bank at their meeting held on May 01, 2020, and in accordance with the consent of the shareholders and other requisite approvals, the Authorised Share Capital of the Bank was increased to '' 75,38,00,00,000 (Rupees Seven Thousand Five Hundred Thirty Eight Crore only) divided into 7,50,00,00,000 (Seven Hundred Fifty Crore) equity shares of '' 10 each and 38,00,000 (Thirty Eight Lakh) preference shares of '' 100 (Rupees One Hundred only) each, by creation of additional 2,17,50,00,000 (Two Hundred Seventeen and Fifty Lakh) equity shares of '' 10 each and the consequent alteration of its Memorandum of Association. Further, Reserve Bank of India had vide its letter dated May 10, 2020, acknowledged the proposed increase in Authorised Share Capital and consequent amendment to be carried out in the Memorandum of Association of the Bank, subject to compliance with relevant statutes and circulars/ instructions/ guidelines issued by RBI from time to time.

As on March 31, 2021, the Authorised Share Capital of the Bank was '' 75,38,00,00,000 comprising of 7,50,00,00,000 equity shares of '' 10 each and 38,00,000 preference shares of '' 100 each.

Paid-up Equity Share Capital

Issue of Equity Shares on Preferential basis (‘Preferential Issue’)

Our Bank has grown steadily on its business and financial parameters during the recent years. Our Bank is one of India’s fastest growing private sector banks with an expanding presence across the country.

Basis the approval of the Board of Directors of the Bank at their meeting held on May 01, 2020 and by virtue of special resolution passed by the shareholders of the Bank through postal ballot on June 03, 2020, the Allotment, Transfer and Routine Matters Committee had at its meeting held on June 12, 2020, approved the issue and allotment of 86,24,40,704 (Eighty-Six Crore Twenty-Four Lakh Forty Thousand Seven Hundred and Four) equity shares of face value of '' 10 each fully paid-up, at a price of '' 23.19 per Equity Share (including premium of '' 13.19 per share), aggregating to ~ '' 2,000 crore on a preferential basis, the offer/issue price being determined in accordance with the applicable provisions of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (‘SEBI ICDR Regulations’).

Qualified Institutions Placement (‘QIP’)

Basis approval of the Board of Directors of the Bank at their meeting held on February 18, 2021 and by virtue of special resolution passed by the shareholders of the Bank through postal ballot on March 21, 2021, the Capital Raising Committee of the Board (the ‘Capital Raising Committee’) had at its meeting held on April 06, 2021 approved the issue and allotment of 52,31,03,660 (Fifty-Two Crore Thirty-One Lakh Three Thousand Six Hundred Sixty) equity shares of face value of '' 10 each to Qualified Institutional Buyers (‘QIBs’) at an issue price of '' 57.35 per Equity Share (including a premium of '' 47.35 per share) aggregating to ~ '' 3,000 crore. Further, the list of allottees who had been allotted more than five percent (5%) of the equity shares in the QIP Issue were as below:

Name of the Investors/ Allottees

No. of Equity Shares allotted

% of total Equity Shares offered in the QIP Issue

Bajaj Allianz Life Insurance Company Ltd.

6,26,85,260

11.98

Baillie Gifford Emerging Markets Equities Fund

5,95,74,979

11.39

Baillie Gifford Pacific Fund a Sub Fund of Baillie Gifford Overseas Growth Funds

46,792,068

8.95

BNP Paribas Arbitrage - ODI

45,074,080

8.62

City of New York Group Trust

44,606,692

8.53

Baillie Gifford Emerging Markets Growth Fund a Sub Fund of Baillie Gifford Overs

35,524,397

6.79

HDFC Life Insurance Company Limited

34,873,580

6.67

TATA AIA Life Insurance CO LTD-Whole Life MID Cap Equity Fund-ULIF 009 04/01/07

30,514,380

5.83

Both, the Preferential Issue and the QIP was made pursuant to applicable provisions of the Companies Act, 2013, read with relevant rules made thereunder, in accordance with the guidelines, rules and regulations of the Securities and Exchange Board of India (‘SEBI’), including SEBI ICDR Regulations, SEBI Listing Regulations, the relevant provisions of the Banking Regulation Act, 1949, the rules, circulars, directions and guidelines issued by the RBI, and subject to the MCA Circulars issued in December 2020. The Bank has ensured to comply with all legal and statutory formalities.

Post the above QIP Issue, the issued, subscribed and paid-up equity share capital of our Bank as on April 06, 2021 was '' 61,98,95,35,150 consisting of 6,19,89,53,515 equity shares of '' 10 each.

Allotment of Equity Shares pursuant to exercise of Stock Options

During FY 2020-21, 35,06,135 equity shares of '' 10 each were issued and allotted to the eligible employees of the Bank on exercise of Options granted under IDFC FIRST Bank Limited Employee Stock Option Scheme 2015 (‘IDFC FIRST Bank ESOS-2015’).

As on March 31, 2021, the issued, subscribed and paid-

up equity share capital of our Bank was '' 56,75,84,98,550 comprising 5,67,58,49,855 equity shares of '' 10 each.

Subsequent to the year under review and as on date of this report, the Bank has allotted 29,13,740 equity shares of '' 10 each to the allottees upon exercise of stock options pursuant to IDFC FIRST Bank ESOS-2015. Post the said allotment, the paid-up Equity Share Capital of the Bank stands at 620,18,67,255 equity shares of '' 10 each, aggregating to '' 6201,86,72,550.

Our Bank has not issued any equity shares with differential voting rights.

CAPITAL ADEQUACY

Currently, the Bank is required to maintain a minimum total Capital Adequacy Ratio of 10.875%, of which minimum Tier 1 is 8.875% including Capital conservation buffer.

Our Bank is well capitalised and has a Capital Adequacy Ratio under Basel III as at March 31, 2021 of 13.77% (as against the RBI minimum requirement of 10.88%) & with Tier-I Capital Adequacy Ratio being 13.27%.

Capital Adequacy Ratio of the Bank, including additional equity capital of '' 3,000 crore raised through QIP on April 6, 2021 and calculated on figures as on March 31, 2021, was strong at 16.32% with CET-1 Ratio at 15.62%.

At such Capital Adequacy, our Bank shall be one of the highest CET-1 capitalized banks in the country, which is far higher than the regulatory requirements.

At high levels of Capital Adequacy, our Bank will continue to enjoy the highest levels of confidence from the Indian financial ecosystem including capital market participants, depositors and our customers.

With the strong opportunities in India (India is an emerging economy and an underserved and under-penetrated market), the strong asset track record (combined with Capital First and IDFC Bank) combined with robust liability franchise, our Bank is well placed to grow its business in the future. Also, the capital raise does give the buffer on account of unforeseen circumstances on account of COVID-19.

As a Bank, it is our endeavor to be strong custodians of public depositors/ shareholders and to further strengthen the balance sheet immensely.

RATINGS

Credit rating details for 80CCF Long Term Infrastructure Bonds, Private Placement Bonds and other instruments of IDFC FIRST Bank is available on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section.

Our Bank is rated ‘FAAA’ by CRISIL for '' 50,000 crore Fixed Deposit Program, which is the highest level of safety rating by CRISIL.

During the FY 2020-21, our Bank has not issued any Senior Unsecured Redeemable Long-Term Bonds in the nature of Non-Convertible Debentures and/ or non-equity regulatory capital instrument.

DEPOSITS

Being a Banking Company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, 2013 are not applicable to our Bank.

As per the applicable provisions of the Banking Regulation Act, 1949, details of the Bank’s deposits have been included under Schedule 3 - Deposits, in the preparation and presentation of the financial statements of the Bank.

LOANS, GUARANTEES OR ACQUISITION OF SECURITIES

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

PERFORMANCE AND CONTRIBUTION OF SUBSIDIARY AND ASSOCIATE COMPANIES

IDFC FIRST Bank has one wholly owned Subsidiary Company, namely IDFC FIRST Bharat Limited (‘IDFC FIRST Bharat‘).

IDFC FIRST Bharat is acting as a Business Correspondent (‘BC’) for distribution of the products of IDFC FIRST Bank and has given an added momentum to the financial inclusion plan of the Bank.

During FY 2020-21, IDFC FIRST Bharat has sourced loans worth '' 6,220 crore, of which '' 4,162 crore is in Joint Liability Group Loans (‘JLG’), '' 555 crore is in Micro Enterprises Loans (‘MEL’), '' 1,110 crore is in Micro Housing Loan (‘MHL’), '' 206 crore is in Two Wheeler Loans, '' 17 crore is in Housing Loan and '' 95 crore is in Loan Against Property products as a BC to IDFC FIRST Bank. During the year consumer durable and personal loan products, were launched and '' 71 crore and '' 4 crore respectively were disbursed. The year-end Assets Under Management (‘AUM’) of IDFC FIRST Bharat as of March 31, 2021 has increased to '' 7,811 crore from '' 5,908 crore as on March 31, 2020.

IDFC FIRST Bank’s policy for determining material subsidiaries is available on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section.

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statements, which forms part of this Annual Report.

Further, pursuant to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and consolidated financial statements has been hosted on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section.

In addition thereto, the Annual Report of IDFC FIRST Bharat containing therein its audited financial statements has also been hosted on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section.

IDFC FIRST Bank has only one Associate Company as on March 31, 2021, viz Millennium City Expressways Private Limited, in which it holds 29.98% equity stake.

The highlights on performance of the Subsidiary and Associate Company and their contribution to the overall performance of the Bank can be referred to in Form AOC-1, appended as ANNEXURE 1.

PROMOTER

Pursuant to the RBI Guidelines for ‘Licensing of New Banks in the Private Sector’ dated February 22, 2013, the Promoter - IDFC Financial Holding Company Limited (‘IDFC FHCL’) is required to hold a minimum of 40% of the total paid-up voting equity capital of the Bank which shall be locked in for a period of five years from the date of commencement of business of the Bank i.e. from October 01, 2015. Further, the shareholding by IDFC FHCL in the Bank in excess of 40% of the total paid-up voting equity capital was required to be brought down to 40% within three years from the date of commencement of business of the Bank. Also, in the event of the Bank raising further voting equity capital during the first five years from the date of commencement of business, IDFC FHCL should continue to hold 40% of the enhanced total voting equity capital of the Bank for a period of five years from the date of commencement of business of the Bank. Accordingly, as and when equity shares were allotted by IDFC FIRST Bank pursuant to the ESOP Scheme or by way of any other allotment, IDFC FHCL used to purchase new shares for maintaining 40% shareholding in the Bank.

The lock-in restrictions on IDFC FHCL for holding minimum 40% of the total paid-up voting equity capital of the Bank ceased to be applicable with effect from October 01, 2020. However, pursuant to applicable provisions of law, 34,49,76,282 equity shares of the Bank allotted to IDFC FHCL during their subscription of preferential issue is locked-in for 3 years i.e. with effect from June 26, 2020 upto June 25, 2023.

As on March 31, 2021, IDFC FHCL held 2,26,89,37,489 equity shares in Bank constituting 39.98% of the total paid-up voting equity capital of the Bank. As on April 06, 2021 (post QIP), the shareholding of IDFC FHCL was 36.60% of the total paid-up voting equity capital of the Bank. As on date of this report, the equity shareholding of IDFC FHCL remains same.

EMPLOYEES

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 may be obtained by the shareholders by writing to the Head - Legal and Company Secretary of our Bank.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as ANNEXURE 2.

EMPLOYEE STOCK OPTION SCHEME

The Employee Stock Option Scheme (‘IDFC FIRST Bank ESOS - 2015’/ ‘ESOS’) was framed with an object of encouraging higher participation on the part of employees in the Bank’s financial growth and success. An effective stock option scheme enables retention of talent and aligning employee interest to that of the Shareholders.

There were 23,41,93,359 stock options outstanding at the beginning of FY 2020-21. During FY 2020-21, 4,21,32,000 stock options were granted to the eligible employees under IDFC FIRST Bank ESOS-2015.

Further, 1,30,19,110 stock options had lapsed/ forfeited, and 35,06,135 stock options were exercised during the year ended March 31, 2021. Accordingly, 25,98,00,114 stock options remained outstanding as on March 31, 2021. All stock options vests in a graded manner and are required to be exercised within a specific period in accordance with IDFC FIRST Bank ESOS-2015 and Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, as amended (‘SEBI SBEB Regulations’).

The Bank has used the intrinsic value method to account for the compensation cost of Stock Options to employees of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the Option. IDFC FIRST Bank ESOS - 2015 is administered by the Nomination and Remuneration Committee (‘NRC’) of the Board of the Bank.

There has been no material change in IDFC FIRST Bank ESOS - 2015 during FY 2020-21 and the said IDFC FIRST Bank ESOS - 2015 is in compliance with the SEBI SBEB Regulations.

The details and disclosures with respect to ESOS as required under SEBI SBEB Regulations and circulars issued thereunder, have been uploaded on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section.

Further, disclosure as per the ‘Guidance Note on Accounting for Employee Share-based Payments’ issued by the Institute of Chartered Accountants of India, are appearing in the Notes to the Standalone Financial Statements of IDFC FIRST Bank, forming part of this Annual Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Appointment & Cessation

All appointments of Directors are made in accordance with the relevant provisions of the Companies Act, 2013 and the Rules framed thereunder, the SEBI Listing Regulations, the Banking Regulation Act, 1949 and the rules, guidelines and circulars issued by the RBI from time to time.

The NRC conducts due diligence before appointment of Directors and ensures adherence to ‘Fit and Proper’ criteria, as prescribed by RBI.

The Bank received instructions from Department of Financial Services, Ministry of Finance, Government of India nominating Dr. Sanjay Kumar (DIN 08764419) as a Government Nominee Director on the Board of the Bank in place of Ms. Anindita Sinharay (DIN 07724555). Based on the recommendation of the NRC, the Board of Directors of the Bank had appointed Dr. Sanjay Kumar as a Government Nominee Director (Additional Director) of the Bank with effect from June 22, 2020 and accordingly Ms. Anindita Sinharay ceased to be a Government Nominee Director with effect from June 22, 2020.

The shareholders at 6th AGM of the Bank held on July 30,

2020 approved the appointment of Dr. Sanjay Kumar as a Government Nominee Director (Non-Executive NonIndependent Director), with effect from June 22, 2020.

During the year under review, Dr. Rajiv Lall (DIN 00131782) tendered his resignation as Part-Time Non-Executive Chairman from the Board of IDFC FIRST Bank effective from September 04, 2020 citing his prolonged personal health issues.

Pursuant to Reserve Bank of India Circular Ref:DBOD. No.BC.24/08.139.001/2002-03 dated September 9, 2002 on ‘Implementation of Recommendations of the Consultative Group of Directors of Banks/ Financial Institutions’ (‘RBI Circular’), and in view of attaining an age of 70 years, Mr. Anand Sinha (DIN 00682433) ceased to be an Independent Director of the Bank with effect from February 02, 2021.

The Bank had received a communication dated March 25, 2021 from Department of Financial Services, Ministry of Finance of Government of India (‘GoI’), mentioning that GoI holds one (1) seat on the Board of the Bank and since, the GoI has been minority shareholder in Bank and is not involved in day to day operation of the Bank, it has been decided to withdraw its Board representation from the Board of the Bank. Accordingly, the Board vide circular resolution dated March 25, 2021 noted and approved the cessation of Dr. Sanjay Kumar as a Government Nominee Director on the Board of the Bank with effect from March 25, 2021.

Subsequent to the year under review, based on the recommendation of the NRC, the Board at its meeting held on April 30, 2021, approved the appointment of Mr. S. Ganesh Kumar (DIN 07635860) as an Additional Director in the category of Independent Director of the Bank for a period of five (5) consecutive years, effective from April 30,

2021 to hold office up to April 29, 2026 (both days inclusive), subject to approval of the shareholders of the Bank and other applicable statutory/ regulatory approvals. Further, on May 08, 2021, the Board of Directors on the recommendation of the NRC, approved the re-appointment of Mr. Pravir Vohra (DIN 00082545) as an Independent Director of the Bank for a second term of five (5) consecutive years, commencing from August 01, 2021 up to July 31, 2026 (both days inclusive), subject to approval of the shareholders of the Bank and other applicable statutory/ regulatory approvals.

Further, the Board of Directors of the Bank at its meeting held on June 16, 2021, based on the recommendation of the NRC and performance evaluation, as applicable, have approved the re-appointment of Mr. V. Vaidyanathan (DIN 00082596) as the Managing Director & Chief Executive Officer (‘MD & CEO’) for a period of three years with effect from December 19, 2021, subject to the approval of the shareholders and the Reserve Bank of India. The approval of the shareholders in this regard is being sought at the ensuing AGM of the Bank.

The details of the Director being re-appointed is set out in the Notice of the ensuing AGM of the Bank.

Brief profiles of all the Directors of the Bank are available on the Bank’s website at www.idfcfirstbank.com under the ‘Board of Directors’ section.

None of the Directors of the Bank are disqualified in accordance with Section 164 of the Companies Act, 2013.

Further, the Bank had received declaration from all the Independent Directors (‘IDs’), at the time of appointment and also at the first meeting of the Board of Directors held in FY 2020-21, that they meet the criteria of independence specified under sub-section (6) of Section 149 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and Regulation 16(1) (b) of the SEBI Listing Regulations, for holding the position of ID and that they shall abide by the ‘Code for Independent Directors’ as per Schedule IV of the Companies Act, 2013. In the opinion of the Board, the IDs possess the requisite integrity, experience, expertise and proficiency required under all applicable laws and the policies of the Bank.

Further, all the IDs of the Bank have complied and affirmed to abide by Rule 6 (Creation and Maintenance of Databank of Persons Offering to become Independent Directors) of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, and have also declared their enrollment in the databank of Independent Directors maintained by Indian Institute of Corporate Affairs (‘IICA’).

Further, it is reported by M/s. Makarand M. Joshi & Co., Practicing Company Secretaries, Bank’s Secretarial Auditor that during the financial year under review, the Board of Directors of the Bank is duly constituted with proper balance of Executive Director, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Companies Act, 2013, and other applicable RBI Regulations laws.

Further, as per the SEBI Listing Regulations, the Bank has received Certificate from M/s. Bhandari & Associates, Practicing Company Secretaries that none of the Directors on the Board of the Bank have been debarred or disqualified from being appointed or continuing as directors of Companies by the Securities and Exchange Board of India/ Ministry of Corporate Affairs or any such other statutory authority.

FRAMEWORK FOR APPOINTMENT OF DIRECTORS

The Bank has in place a framework for Board Diversity, Fit & Proper Criteria and Succession Planning for appointment of Directors on the Board of the Bank.

FAMILIARISATION PROGRAMMES FOR BOARD MEMBERS

At the time of appointment, all Directors of our Bank are familiarized with their roles, responsibilities, rights and duties along with a brief overview of our Bank’s operations in a nutshell.

The Board members are further provided with necessary documents, reports and internal policies to enable them to familiarize with the Bank’s procedures and practices.

Periodic presentations are made at the Board and Committee meetings on business and performance of the Bank, global business environment, business strategy and associated risks, responsibilities of the Directors etc.

Detailed presentations on the Bank’s business and updates thereon were made at the meetings of the Board and Committees held during the year.

The details of the said programmes are available on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section.

BOARD EVALUATION

The Board of Directors (‘Board’) has carried out an annual evaluation of the Board, Board Committees, and Individual Directors pursuant to the provisions of the Companies Act, 2013 and the SEBI Listing Regulations for the financial year 2020-21.

The detailed process indicating the manner in which the annual evaluation has been carried out pursuant to the SEBI Listing Regulations and Companies Act, 2013 is provided in the Corporate Governance Report, which forms part of this Annual Report.

NUMBER OF MEETINGS OF THE BOARD

The Board met thirteen (13) times during FY 2020-21 viz., May 01, 2020, May 22, 2020, July 24, 2020, July 28, 2020, August 28, 2020, September 11, 2020, October 08, 2020, October 31, 2020, January 09, 2021, January 30, 2021, February 18, 2021, March 22, 2021 and March 31, 2021; details of which are given in the Corporate Governance Report, which forms part of this Annual Report. The maximum interval between any two consecutive meetings did not exceeded 120 days.

BOARD COMMITTEES

In compliance with various regulatory requirements, several Board-level Committees have been constituted to delegate matters that require greater and more focused attention.

Details on the constitution, brief terms of reference, meetings held and attendance of all the Board-level Committees are given in the Corporate Governance Report which forms part of this Annual Report.

Dr. (Mrs.) Brinda Jagirdar

Chairperson | Independent Director

Mr. Sanjeeb Chaudhuri

- Member | Independent Director

Mr. Pravir Vohra

- Member | Independent Director

Mr. S. Ganesh Kumar

- Member | Independent Director

Mr. Sunil Kakar

Member | Non-Executive Non-Independent Director

Mr. V. Vaidyanathan

- Member | MD & CEO

Corporate Social Responsibility (CSR) Committee

The CSR Committee met three (3) times during FY 2020-21 on May 07, 2020, October 30, 2020 and January 28, 2021.

Further, the CSR Committee comprises of the following members as on the date of this report:

A brief overview of some of the Board-level Committees is furnished below:

Audit Committee

The Audit Committee met six (6) times during FY 2020-21 i.e. on May 21, 2020, May 29, 2020, July 28, 2020, September 11, 2020, October 30, 2020, and January 30, 2021.

All recommendations made by the Audit Committee during the year were accepted by the Board.

Further, the Audit Committee comprises of the following members as on the date of this report:

Mr. Aashish Kamat

- Chairman | Independent Director

Mr. Pravir Vohra

- Member | Independent Director

Mr. Sanjeeb Chaudhuri

- Member | Independent Director

Mr. Sunil Kakar

Member | Non-Executive Non-Independent Director

Nomination and Remuneration Committee (NRC)

The NRC is constituted in compliance with the RBI Guidelines, Section 178 of the Companies Act, 2013 and the SEBI Listing Regulations.

The NRC met five (5) times during FY 2020-21 on May 21, 2020, July 27, 2020, August 28, 2020, October 31, 2020 and January 28, 2021.

Further, the NRC comprised of the following members as on the date of this report:

Mr. Hemang Raja

- Chairman | Independent Director

Mr. Aashish Kamat

- Member | Independent Director

Dr. (Mrs.) Brinda Jagirdar

- Member | Independent Director

Mr. Vishal Mahadevia

Member | Non-Executive Non-Independent Director

Remuneration Policy

The Bank has formulated and adopted the Remuneration Policies for the (i) Non-Executive Part-time Chairman and Non-Executive Directors; (ii) Whole-time / Executive Directors, Material Risk Takers, Key Managerial Personnel, Senior Management Personnel & Control Function Staff; and (iii) employees of the Bank (‘the Policies’), in terms of the relevant provisions of Section 178 of the Companies Act, 2013, the relevant Rules made thereunder, the SEBI Listing Regulations relating to Corporate Governance and the Guidelines issued by the RBI, in this regard.

During the year, the said Policies were reviewed and approved by the NRC and the Board.

Our Bank also has a process in place for identification of independence, qualifications and positive attributes of its Directors. The NRC ensures a transparent nomination process to the Board of Directors with diversity of gender, thought experience, knowledge and perspective in the Board.

The said Policies have been hosted on the website of the Bank at www.idfcfirstbank.com. under the ‘Investors’ section in terms of the SEBI Listing Regulations.

Stakeholders’ Relationship and Customer Service Committee (SRCSC)

The SRCSC met four (4) times during FY 2020-21 i.e. on May 07, 2020, July 24, 2020, October 30, 2020, and January 28, 2021.

Further, the SRCSC comprised of the following members as on the date of this report:

Mr. V. Vaidyanathan

- Chairman | MD & CEO

Dr. (Mrs.) Brinda Jagirdar

- Member | Independent Director

Mr. Hemang Raja

- Member | Independent Director

The CSR Policy of the Bank is available on the Bank’s website

at www.idfcfirstbank.com under the Investors section.

The CSR initiatives of the Bank in FY 2020-21 were implemented through various implementation agencies/ partners. In order to achieve impact and scale, the CSR activities undertaken during the year mainly focused on areas: [a] Livelihoods, [b] Health and Sanitation, [c] Education, [d] Women Empowerment, and [e] Others (COVID-19 Relief).

The amount spent for CSR contribution by the Bank for FY 2020-21 was '' 19.62 crore.

Annual Report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended from time to time, has been appended as ANNEXURE 3 and forms part of this Report.

KEY MANAGERIAL PERSONNEL

As on the date of this report, the following officials of the Bank are the ‘Key Managerial Personnel’ pursuant to the provisions of Section 203 of the Companies Act, 2013:

Mr. V. Vaidyanathan

Managing Director & Chief Executive Officer Mr. Sudhanshu Jain

Chief Financial Officer & Head - Corporate Centre

Mr. Satish Gaikwad

Head - Legal & Company Secretary

INTERNAL FINANCIAL CONTROLS

The Bank has adequate internal controls and processes in place with respect to its financial statements that provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements. These controls and processes are driven through various policies, procedures and certifications which also ensure the orderly and efficient conduct of the Bank’s business, including adherence to Bank’s policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The controls and processes are being reviewed periodically. The Bank has a mechanism of testing the controls and processes at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.

INFORMATION / CYBER SECURITY FRAMEWORK

IDFC FIRST Bank since its inception has put in place a robust Information/ Cyber Security Framework. Our Bank being a green field setup, has Information Security woven into our banking platform and seamlessly merges both culturally and technologically. A dedicated team of security professionals are part of the Information Security Group (‘ISG’) who govern the Information Security practices in the Bank. Our Bank has put in place state of the art security technologies including several industries ‘firsts’ technology solutions and adopted ‘defense in depth’ approach & industry best practices as part of our security framework and architecture.

This year Bank onboarded several new core cyber defense technologies to improve upon our defense and response capabilities in line with our overall Cyber Defense Strategy. While such technologies are in various stages of maturity, the use of Artificial Intelligence (‘AI’) / Machine Learning (‘ML’) is at its core to identify early signs of exploits and automated response and remediation will ensure identified issues are addressed promptly.

Overall banking industry including our bank experienced challenges associated with the pandemic conditions and work from home strategy. At our bank, secure practices were deployed very quickly with almost real time transition of teams to work from home, without any significant downtime or security lapses. Bank continued to maintain and upkeep its compliance posture to standards such as ISO 27001 ISMS (Information Security Management System), PCI DSS and regulatory requirements. Given the changing threat landscape and the continuation of the pandemic conditions, the attempt is to progressively move towards maturity of proactive and adaptive platforms for automated detection, response and recovery.

INTERNAL OMBUDSMAN

In compliance with regulatory guidelines, the Bank has appointed Mr. Dayanand P. Kasabe, a senior retired Central Banker as Internal Ombudsman for a period of 3 years with effect from December 03, 2018, as per the Internal

Ombudsman Scheme, 2018 to enhance our Bank’s customer grievance redressal mechanism and to improve service delivery.

STATUTORY AUDITORS

In terms of the ‘Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)’ dated April 27, 2021 (‘RBI Guidelines’) issued by RBI, banks shall appoint the Statutory Auditors for a continuous period of three (3) years, subject to the firms satisfying the eligibility norms each year and the approval of RBI on an annual basis.

B S R & Co. LLP, Chartered Accountants (Firm Registration No. 101248W/W-100022) have been the Statutory Auditors of the Bank for two (2) years i.e. FY 2019-20 and FY 2020-21. Hence, they may continue as Statutory Auditors for one (1) more year i.e. from the conclusion of the 7th Annual General Meeting (‘AGM’) till the conclusion of the 8th AGM to be held in 2022, subject to the approval of RBI. Accordingly, on the basis of the recommendation of the Audit Committee of the Board (‘ACB’), the Board of Directors (‘the Board'') has recommended the re-appointment of B S R & Co. LLP as one of the Joint Statutory Auditors for a period of one (1) more year to the RBI for approval.

Further, in terms of the RBI Guidelines and the Bank’s Policy for Appointment of Statutory Auditors, our Bank is required to appoint two (2) Statutory Auditors. Accordingly, the Board, on the recommendation of the ACB, has recommended to the RBI for approval, the name of MSKA & Associates, Chartered Accountants (Firm Registration No. 105047W) as the first preferred firm, to act as the Joint Statutory Auditors of the Bank, for a period of one (1) year. The Board has also recommended the appointment of MSKA & Associates, Chartered Accountants as Joint Statutory Auditors of the Bank for a period of three (3) years to hold office from the conclusion of the 7th AGM until the conclusion of the 10th AGM of the Bank, for the approval of the shareholders at the ensuing AGM, subject to the approval of RBI on an annual basis. MSKA & Associates shall act as the Joint Statutory Auditors of the Bank along with B S R & Co. LLP till the conclusion of the 8th AGM and thereafter act as Joint Statutory Auditors of the Bank with such other new joint Statutory Auditor(s) who will be appointed by the Bank subject to prior approval from RBI and approval of the shareholders of the Bank.

AUDITORS’ REPORT

There were no qualifications, reservations, adverse remarks or disclaimers made by the Statutory Auditors in their report for the financial year ended March 31, 2021.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank had appointed M/s. Makarand M. Joshi & Co., Practicing Company Secretaries to undertake the Secretarial Audit of the Bank for the financial year ended March 31, 2021.

The Bank provided all assistance and facilities to the Secretarial Auditors for conducting their audit.

The Secretarial Audit Report is appended as ANNEXURE 4 to this report.

There were no qualifications, reservations, adverse remarks or disclaimers made by the Secretarial Auditors in their report for the financial year ended March 31, 2021.

CONCURRENT AUDIT

Our Bank has a regular and well-defined process of concurrent audits for important functions such as treasury, trade finance operations, retail operations, wholesale operations, information technology, data center, etc. in line with the extant regulatory guidelines. Reputed Chartered Accountant / CERT-IN certified firms carry out these Concurrent Audits. Key findings of these audits are placed before the Audit Committee of the Board on a quarterly basis.

REQUIREMENT FOR MAINTENANCE OF COST RECORDS

The Bank is not required to maintain cost records as specified by the Central Government under Section 148(1) of the Companies Act, 2013.

AWARDS AND RECOGNITIONS

Best Private Bank - Digital Innovation & Services 2019 by Asian Private Banker

This award recognised our Bank as one which has embraced the digital wave, its impact on the wealth management business, and the opportunities afforded by emergent technologies. This win also recognised our digital capabilities and convenience our technology brought to banking.

Three Asset Triple A Awards 2020 for Treasury, Trade, SSC and Risk

Our Bank secured 2 awards in Payments and Collection solutions category for India and 1 award for Treasury and Working Capital Domain in the NBFC segment. These awards corroborate with our ideology of client focus, cocreating innovative and client centric solutions.

‘Most Transformed New Bank in India 2020’ by Capital Finance International (CFI)

With an uptick during the “COVID-19 Quarter” (Q4-2020) coupled with strong corporate governance policies aligned with international best practices, and focus on transparent client engagement, IDFC FIRST Bank won the Most Transformed New Bank (India) in 2020 at the CFI Awards. The CFI.co judging panel bestowed this honour on IDFC FIRST Bank on recognizing its high-growth performance and prospects.

ET Best BFSI Brand in Private Banking Category

At the 4th edition of ET Best BFSI Brands, IDFC FIRST Bank was chosen as one of the Best BFSI Brands of 2021 in the Private Bank Category. The award was based on the parameters of innovation, trust, legacy, customer centricity and performance - all key tenets of the Bank’s core values and philosophy.

INSTANCES OF FRAUD, IF ANY, REPORTED BY THE AUDITORS OR THE MANAGEMENT

No offence of fraud was reported by the Auditors of the Bank under Section 143(12) of the Companies Act, 2013. The details of provisioning pertaining to Fraud Accounts during the year under review are provided in Note No. 18.16 to the Standalone Financial Statements as at March 31, 2021.

RISK MANAGEMENT FRAMEWORK

Our Bank promotes a strong risk culture throughout the organization. A strong risk culture is designed to help reinforce the Bank’s resilience by encouraging a holistic approach to management of risk & return and an effective management of risk, capital and reputational profile.

Consequent to the amalgamation of erstwhile Capital First Group with IDFC Bank, effective December 18, 2018, Bank has re-aligned its key policies and Risk Framework forming an overall Risk Framework of the merged entity. Our Bank operates within an effective Risk Management Framework to actively manage all the material risks faced by the Bank, in a manner consistent with the Bank’s risk appetite. Our Bank aims to establish itself as an industry leader in the management of risks and strive to reach the efficient frontier of risk and return for the Bank and its shareholders. The Board has ultimate responsibility for the Bank’s Risk Management Framework. It is responsible for approving the Bank’s risk appetite, risk tolerance and related strategies and policies. The Board is assisted by Risk Management Committee of the Board (‘RMC’) and is supported by various management committees as part of the Risk Governance framework to ensure that Bank has sound system of risk management and internal controls. The RMC assists the Board in relation to the oversight and review of the Bank’s risk management principles and policies, strategies, appetite, processes and controls.

The RMC of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity and operational risks. The Committee also reviews the Risk Appetite & Enterprise Risk Management framework, Internal Capital Adequacy Assessment Process (‘ICAAP’) and Stress Testing. ICAAP & Stress Testing requires the Bank to undertake rigorous, forward-looking assessment of risks by identifying severe events or changes in market conditions which could adversely impact the Bank.

Our Bank has in place a Board approved Risk Management Policy. The Policy aims at establishing a risk culture and governance framework to enable identification, measurement, mitigation and reporting of risks within the Bank in line with the Bank’s risk appetite, risk - return tradeoff and the escalation & accountability framework.

Our Bank manages its capital position to maintain strong capital ratios well in excess of regulatory and Board approved minimum capital adequacy at all times. The strong Tier I capital position of the Bank is a source of competitive advantage and provides assurance to regulators, credit rating agencies, depositors and shareholders. Capital management practices are designed to maintain a risk

reward balance, while ensuring that businesses are adequately capitalized to absorb the impact of stress events including pandemic risks.

Our Bank has rigorously adhered to the RBI mandated prudential norms on provisioning including on the basis of evaluation of impact arising out of the fallout of COVID-19 on the underlying portfolio, which is aimed at preserving and protecting shareholders value. Our Bank continued to proactively work on the resolution of the stressed asset portfolio and has further reduced the position. Our Bank has also de-risked the portfolio by diversifying the credit portfolio across non-infrastructure sectors and focused on increasing shorter-tenure and granular exposures. With these measures, we have sought to reduce the concentration risk in the portfolio.

RELATED PARTY TRANSACTIONS

All the related party transactions that were entered into during the financial year were on arm’s length basis and in the ordinary course of business of the Bank. IDFC FIRST Bank have always been committed to good corporate governance practices, including matters relating to related party transactions.

All the related party transactions are placed before the Audit Committee for approval. Prior omnibus approval is obtained from the Audit Committee for foreseen related party transactions. Prior omnibus approval is also obtained for unforeseen related party transactions subject to their value not exceeding '' 1 crore per transaction. The required disclosures are made to the Audit Committee on a quarterly basis for all the related party transactions.

Further, in terms of Regulation 23(9) of the SEBI Listing Regulations, the Bank submits the disclosure of Related Party Transactions, on consolidated basis, in a prescribed format, as specified under relevant Accounting Standards, on half yearly basis to the Stock Exchanges and update its website accordingly.

Pursuant to the provisions of Companies Act, 2013 and the Rules made thereunder, SEBI Listing Regulations and in the back-drop of the Bank’s philosophy on such matters, the Bank has in place a Board approved policy on related party transactions. The said policy is also uploaded on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section. Since all related party transactions entered into by the Bank were in the ordinary course of business and on arm’s length basis, Form AOC-2 as prescribed under Section 134(3)(h) of the Companies Act, 2013 is not applicable to the Bank.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review, as required by Regulation 34(2)(e) of the SEBI Listing Regulations, forms part of this Annual Report.

CORPORATE GOVERNANCE

Your Directors ensure the Bank’s prosperity by collectively

directing its affairs, whilst meeting the appropriate interests of its Shareholders and other Stakeholders.

Our Bank is committed to achieve the highest standards of Corporate Governance. A separate section on Corporate Governance standards followed by our Bank and the relevant disclosures, as stipulated under the SEBI Listing Regulations, Companies Act, 2013 and Rules made thereunder forms part of this Annual Report.

A Certificate from the Secretarial Auditors of the Bank, M/s. Makarand M. Joshi & Company, Practicing Company Secretaries, confirming compliance to the conditions of Corporate Governance as stipulated under the SEBI Listing Regulations is enclosed at the beginning of the Corporate Governance Report and forms part of this Annual Report.

CEO & CFO CERTIFICATION

Certificate issued by Mr. V. Vaidyanathan, Managing Director & CEO and Mr. Sudhanshu Jain, Chief Financial Officer & Head - Corporate Centre of the Bank, in terms of Regulation 17(8) of the SEBI Listing Regulations, for the year under review was placed before the Board of Directors and forms part of this Annual Report.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report, in terms of Regulation 34(2)(f) of the SEBI Listing Regulations, describing the initiatives taken by IDFC FIRST Bank from an environmental, social and governance perspective is hosted on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section and constitutes a part of this Annual Report.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Bank has implemented a Whistle Blower Policy in compliance with the provisions of the SEBI Listing Regulations, Companies Act, 2013 and RBI notification on Introduction of ‘Protected Disclosures Scheme for Private Sector and Foreign Banks’. Pursuant to this policy, the Whistle Blowers can raise concerns relating to reportable matters (as defined in the policy) such as breach of IDFC FIRST Bank’s Code of Conduct, employee misconduct, fraud, illegal unethical imprudent behavior, leakage of Unpublished Price Sensitive Information, corruption, safety and misappropriation or misuse of Bank funds/ assets etc.

Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower to those who avail such mechanism and also provides for direct access to the Chairman of the Audit Committee, in exceptional cases.

The Audit Committee reviews the functioning of the Vigil Mechanism from time to time. None of the Whistle Blowers has been denied access to the Audit Committee of the Board. The Whistle Blower Policy is available on the Bank’s website at www.idfcfirstbank.com under ‘Investors’ section. The Whistle Blower Policy is communicated to the employees and is also posted on the Bank’s intranet.

In addition to the above, the Bank has formulated a Vigilance Policy for effectively managing the risks faced by the Bank on account of corruption, malpractices and frauds.

PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE

Our Bank has an Internal Committee to investigate and inquire into sexual harassment complaints in line with The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013.

Our Bank has in place a policy on Anti-Sexual Harassment, which reflects the Bank’s zero-tolerance towards any form of prejudice, gender bias and sexual harassment at the workplace. Our Bank has set up an Internal Committee (‘IC’) to receive and redress complaints of sexual harassment. Our Bank undertakes ongoing trainings to create awareness on this policy.

During the year under review i.e. FY 2020-21, four (4) sexual harassment complaints were filed, out of which three (3) complaints were closed during the year. One (1) complaint was received in the month of February 2021 and was subsequently resolved within the timelines.

During FY 2020-21, employees were given online training in order to understand the Policy on Prevention of Sexual Harassment and framework for reporting and resolving instances of sexual harassment, details of which have been mentioned in the Business Responsibility Report, which is hosted on the Bank’s website at www.idfcfirstbank.com under ‘Investors’ section.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/ COURTS/ TRIBUNALS

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status or the operations of the Bank.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE BANK

There are no material changes and commitments, affecting the financial position of the Bank between the end of the financial year of the Bank i.e. March 31, 2021 and the date of the Board Meeting in which the Directors’ Report was approved i.e. June 16, 2021.

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

The provisions of Section 134(3)(m) of the Companies Act,

2013 read with Rule 8(3) of the Companies (Accounts) Rules,

2014 relating to conservation of energy and technology absorption are given as under:

Detailed initiatives taken for conservation of energy has been mentioned in the Business Responsibility Report, which is hosted on the Bank’s website at www.idfcfirstbank.com under the ‘Investors’ section.

Also, our Bank has been increasingly using information technology in its operations, for more details, please refer Management Discussion and Analysis Report, which forms part of this Annual Report.

Further, Foreign Exchange earnings and outgo are part of the normal banking business of the Bank.

ANNUAL RETURN

Pursuant to Section 92(3) read with Section 134(3)(a) of the Companies Act, 2013, the Annual Return as on March 31, 2021 is available on the Bank’s website on https://www.idfcfirstbank.com/investors/annual-report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, it is hereby confirmed that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. the Directors had 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, 2021 and of the profit of the Bank for that period;

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

d. the Directors had prepared the annual accounts on a going concern basis;

e. the Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

GREEN INITIATIVE

To support the ‘Green Initiative’, shareholders who have not updated their e-mail addresses are requested to update the same with their respective Depository Participants (DPs), in case shares held are in electronic form or communicate their e-mail address to the Registrar and Share Transfer Agent i.e. KFin Technologies Private Limited or to the Bank, in case shares are held in physical form, so that future communications can be sent to shareholders in electronic mode. Note on Green Initiative forms part of the 7th AGM Notice.

Stock Exchanges (‘National Stock Exchange of India Limited’ & ‘BSE Limited’), Depositories, Rating Agencies, Unique Identification Authority of India (‘UIDAI’), National Payments Corporation of India (‘NPCI’), The Clearing Corporation of India Limited (‘CCIL’), Indian Banks’ Association (‘IBA’), Fixed Income Money Market and Derivatives Association of India (‘FIMMDA’) and all other regulatory agencies and associations with which the Bank interacts.

Your Directors sincerely acknowledge the commitment and hard work put in by all employees of the Bank through its transformational journey. Their valuable contribution has enabled the Bank to make significant progress towards achieving its objective of becoming a diversified universal Bank, with a focus on retail banking.

ACKNOWLEDGMENT

Your Directors take this opportunity to express their deep and sincere gratitude to our Customers, Business Partners, Business Correspondents and Vendors for the trust and confidence reposed by them in the Bank. We would like to thank our Shareholders, Bondholders, Investors and Financial Institutions for their co-operation and assistance during the year under review.

Your Directors would like to place on record their appreciation for the support received from IDFC Group, Government of India, State Governments, various Ministries, Reserve Bank of India (‘RBI’), Securities and Exchange Board of India (‘SEBI’), Insurance Regulatory and Development Authority of India (‘IRDA’), Financial Intelligence Unit-India (FIU-IND),

For and on behalf of the Board of Directors of IDFC FIRST Bank Limited

Hemang Raja V. Vaidyanathan

Date: June 16, 2021 Director Managing Director & CEO

Place: Mumbai DIN: 00040769 DIN: 00082596

1

Reporting: The overall progress of the Pandemic continues to be reported periodically to the management, the Board and their advice is taken from time to time. As required, the management assesses,


Mar 31, 2019

Directors’ Report

Dear Members,

The Directors are pleased to present the Fifth Annual Report of IDFC FIRST Bank Limited (formerly IDFC Bank Limited) together with the audited financial statements for the financial year ended March 31, 2019.

Financial Highlights

(Rs, in crore)

Particulars

FY 2019

FY 2018

Deposits

70,479

48,198

Borrowings

69,983

57,287

Investments

58,475

61,202

Advances

86,302

52,165

Total Assets / Liabilities

167,185

126,520

Total Income

12,887

10,048

Profit before Depreciation and Tax

(483)

1,191

Net Profit

(1,944)

859

Appropriations

Transfer to Statutory Reserve

-

215

Transfer to Capital Reserve

2

202

Transfer to Special Reserve

-

75

Transfer from Investment Reserve

-

(1)

Dividend paid (includes tax on dividend)*

294

305

Balance in profit and loss account carried forward

(530)

1,710

Capital adequacy ratio (Basel III)

15.47%

18.00%

Gross NPA %

2.43%

3.31%

Net NPA %

1.27%

1.69%

Return on Assets

(1.20%)

0.72%

* The Board of Directors at their meeting held on May 10, 2019 had not proposed any dividend for FY 2018-19.

In terms of revised Accounting Standard (AS) 4 ''Contingencies and Events occurring after the Balance sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, dated March 30, 2016, dividend for FY 2017-18 of Rs, 294.02 crore (net of DDT on dividend from Subsidiary) was paid in FY 2018-19 after necessary approvals from shareholders on July 31, 2018.

Amalgamation of erstwhile Capital First Group with IDFC Bank Limited

The Board of Directors of IDFC Bank Limited (‘Amalgamated Company'' or ''the Bank'') and erstwhile Capital First Limited, Capital First Home Finance Limited and Capital First Securities Limited (‘Amalgamating Companies’ / ‘Capital First Group’) at their respective meetings held on January 13, 2018 had approved a Composite Scheme of Amalgamation (‘Scheme’) of Amalgamating Companies with Amalgamated Company and their respective shareholders and creditors under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 (''Amalgamation'').

Pursuant to the Scheme being approved vide respective Orders passed by the National Company Law Tribunal (''NCLT''), Chennai Bench and Mumbai Bench, the Meetings of the Board of Directors (''the Board'') of the Amalgamated Company and Amalgamating Companies were duly convened on December 18, 2018 and the said Board inter-alia considered and noted the ''Effective Date'' as December 18, 2018 pursuant to Orders passed by both the NCLTs respectively filed with Registrar of Companies (''ROC'') as on that date. The ''Appointed Date'' was October 01, 2018 as approved by both the NCLTs.

The Share Exchange Ratio for the Amalgamation was 139:10 i.e. 139 (One Hundred and Thirty Nine) fully paid-up equity shares of the Bank for every 10 (Ten) fully paid-up equity shares held in erstwhile Capital First Limited.

Further, pursuant to the effectiveness of the Scheme on December 18, 2018, the Allotment, Transfer and Routine Matters Committee of the Board of Directors of the Bank, at its meeting held on January 05, 2019 had inter-alia considered and approved the allotment of 1,377,109,057 equity shares of face value of '' 10 each, fully paid-up, as per the said Share Exchange Ratio in terms of the Scheme, to the eligible equity shareholders of erstwhile Capital First Limited as on December 31, 2018, being the ''Record Date''.

State of Affairs of the Bank

Your Bank has successfully diversified its business mix and added new revenue streams after the Merger. Now it has expanded its reach to serve new customer segments both on the retail as well as wholesale side of the business.

As on March 31, 2019, your Bank has built a national footprint through the operation of 242 branches (out of which 133 are Urban Bank Branches and 109 are Rural Bank Branches) across many cities in India, 454 Corporate Business Correspondent (''BC'') branches, 141 ATMs, 3 Central Processing Centers and 1 Clearing Hub.

Points of Presence comparison chart:

Particulars

FY 2018-19

FY 2017-18

Urban Bank Branches

133

47

Rural Bank Branches

109

103

ATMs

141

115

Asset Service Branches (Erstwhile Capital First Branches)

102

NA

Rural BC Branches (IDFC FIRST Bharat Limited)

354

312

Other BC Branches

100

75

Your Bank had a customer base of 7.3 million live customers as on March 31, 2019.

Your Bank offers a wide gamut of products to cater to the needs of customers from all segments which can be viewed on our website: www.idfcfirstbank.com.

Change of Name of the Bank

The Board of Directors and Shareholders of the Bank had approved the change of name of the Bank from ‘IDFC Bank Limited’ to ‘IDFC FIRST Bank Limited’ and the consequential amendment to the Memorandum and Articles of Association of the Bank.

The name of the Bank has changed from IDFC Bank Limited to ‘IDFC FIRST Bank Limited’ with effect from January 12, 2019 by virtue of ''Certificate of Incorporation pursuant to change of name'' issued by the ROC, Chennai.

Further, License No. 144 dated February 07, 2019 (in lieu of license no. 111 dated July 23, 2015 in the name of IDFC Bank Limited) had been issued by the Reserve Bank of India (''RBI'') consequent upon the said change of name.

The RBI vide its gazette letter no. DBR.PSBD. No. 7234/16.01.146/2018-19 dated March 01, 2019, had informed that pursuant to Section 42(6)(c) of the Reserve Bank of India Act, 1934 (2 of 1934), the said alterations in the name of the Bank has been effective from January 12, 2019 in the Second Schedule to the said Act.

Also, the symbol of the Bank on the National Stock Exchange of India Limited has been changed to ''IDFCFIRSTB'' and security code on BSE Limited remains ''539437''.

Dividend

In accordance with Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''Listing Regulations''), your Bank has formulated a Dividend Distribution Policy, which ensures a fair balance between rewarding its Shareholders and retaining enough capital for the Bank''s future growth.

This Policy is available on the Bank''s web-link: https://www.idfcfirstbank.com/corporate-goverance.html.

During FY 2018-19, the Bank had incurred losses. Accordingly, the Directors did not recommend dividend on equity shares for the FY 2018-19.

Implementation of Indian Accounting Standards (‘Ind-AS’)

The RBI vide Circular RBI/2018-2019/146 DBR. BP.BC.No.29/21.07.001/2018-19 dated March 22, 2019 has decided to defer the implementation of Ind-AS till further notice.

The Bank has made significant progress on Ind-AS implementation. The main impacted area under Ind-AS are Effective Interest Rate (''EIR''), Expected Credit Loss (''ECL'') and Investment classification. Your Bank had appointed a consultant for development of ECL methodology and review and assessment of the accounting policy gaps. Under the RBI guidelines, Banks are not allowed to early adopt Ind-AS and should be guided by the RBI guidelines. Accordingly, the general purpose financial statement of the Bank presented in the Annual Report are not under Ind-AS.

Further, the Bank has also submitted quarterly Standalone Proforma financial in the format as prescribed by the RBI. These submissions were reviewed by the Management and the Audit Committee of the Bank before submission to the RBI. The working group of the Bank has prepared pro-forma Ind-AS financials as requested by the RBI vide its circular DBR.BP.BC.No.106/21.07.001/2015-16 dated June 23, 2016, letter DO. DBR.BP.No.2535/21.07.001/2017-18 dated September 13, 2017 and subsequent communication from time to time.

Capital Adequacy

During FY 2018-19, 492,450 equity shares of '' 10 each were issued and allotted to the eligible employees of the Bank on exercise of Options granted under IDFC FIRST Bank Limited Employee Stock Option Scheme 2015 (''IDFC FIRST Bank ESOS-2015'').

Further, pursuant to the effectiveness of the Composite Scheme of Amalgamation, the Allotment, Transfer and Routine Matters Committee of the Board of Directors of the Bank, at its meeting held on January 05, 2019, inter-alia considered and approved the allotment of 1,377,109,057 equity shares of face value of '' 10 each, fully paid-up, as per the Share Exchange Ratio to the eligible equity shareholders of erstwhile Capital First Limited as on the Record Date.

As on March 31, 2019, the issued, subscribed and paid-up Equity Share Capital of your Bank was Rs, 47,816,764,120 comprising 4,781,676,412 equity shares of Rs, 10 each.

Subsequent to the year under review, the Allotment, Transfer and Routine Matters Committee of the Bank through a resolution passed at its meeting held on April 05, 2019 had allotted 371,970 fully paid-up equity shares of Rs, 10 each to the allottees upon exercise of stock options pursuant to IDFC FIRST Bank Employee Stock Option Scheme 2015 (IDFC FIRST Bank ESOS-2015).

Post the aforesaid allotment, the paid-up Equity Share Capital of the Bank stands at 4,782,048,382 equity shares of Rs, 10 each, aggregating to Rs, 47,820,483,820.

Pursuant to the sanction of Scheme by both the NCLTs, and consequent upon the Amalgamation of the Amalgamating Companies with the Amalgamated Company, the Authorized Share Capital of IDFC FIRST Bank Limited (''IDFC FIRST Bank'') stood after Amalgamation as follows:

Authorized Share Capital -

(Amount in Rs,)

IDFC FIRST Bank Limited (After Amalgamation)

5,325,000,000 Equity shares of Rs, 10 each

53,250,000,000

3,800,000 Preference Shares of Rs, 100 each

380,000,000

Total

53,630,000,000

Your Bank has not issued any equity shares with differential voting rights.

Your Bank is well capitalized and has a Capital Adequacy Ratio (''CAR'') under Basel III as at March 31, 2019 of 15.47% (as against a RBI minimum requirement of 10.88%) & with Tier-I Capital Adequacy Ratio being 15.28%.

Ratings of various Debt Instruments

During the year ended March 31, 2019, your Bank has not issued any Senior Unsecured Redeemable Long Term Bonds in the nature of Non-Convertible Debentures.

Credit rating details for 80CCF Long Term Infrastructure Bonds, Private Placement Bonds and other instruments of IDFC FIRST Bank along with rating rationale are available on the Bank''s web-link: https://www.idfcfirstbank.com/ifb-credit-ratings.html.

During the year under review, your Bank has not issued any non-equity regulatory capital instrument.

Deposits

Being a Banking Company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.

As per the applicable provisions of the Banking Regulation Act, 1949, details of the Bank''s deposits have been

included under Schedule 3 - Deposits, in the preparation and presentation of the financial statements of the Bank.

RBI Guidelines

As a Banking Company, your Bank always aims to operate in compliance with applicable RBI guidelines and regulations and employs its best efforts towards achieving the same.

Loans, Guarantees or Acquisition of Securities

Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given or securities provided or acquisition of securities by a Banking Company in its ordinary course of business are exempted from disclosure requirements under Section 134(3)(g) of the Companies Act, 2013.

Performance and Contribution of Subsidiary and Associate Companies

IDFC FIRST Bank has one wholly owned Subsidiary Company, namely IDFC FIRST Bharat Limited (''IDFC FIRST Bharat''), which was formerly known as IDFC Bharat Limited.

IDFC FIRST Bharat is acting as a Business Correspondent (‘BC’) for distribution of the products of IDFC FIRST Bank and has given an added momentum to the financial inclusion plan of the Bank.

The Board of Directors and Shareholders of IDFC Bharat had approved the change of name of the Company from ‘IDFC Bharat Limited’ to ‘IDFC FIRST Bharat Limited’ and the consequential amendment to the Memorandum and Articles of Association of the Company.

The name of the Subsidiary has changed from IDFC Bharat Limited to ‘IDFC FIRST Bharat Limited’ with effect from April 29, 2019 by virtue of ''Certificate of Incorporation pursuant to change of name'' issued by the ROC, Chennai.

During FY 2018-19, IDFC FIRST Bharat has disbursed Rs, 4,989 crore, of which Rs, 4,808 crore is in Joint Liability Group (Rs,JLGRs,), Rs, 31 crore is in Micro Enterprises Loan (Rs,MEL'') and Rs, 149 crore is in Micro Housing Loan (''MHL'') products, as a BC to IDFC FIRST Bank. The yearend portfolio outstanding managed by IDFC FIRST Bharat for the financial year ended March 31, 2019 has increased to Rs, 3,732 crore as compared to Rs,2,455 crore for the financial year ended on March 31, 2018. IDFC FIRST Bharat, as a BC to IDFC FIRST Bank, has initiated mobilization of savings from the clients and reached an outstanding balance of Rs, 108 crore at the end of FY 2018-19. The number of clients for JLG loans has increased to 19 lakh during FY 2018-19 as against 13 lakh, at the end of FY 2017-18. The number of saving accounts opened by IDFC FIRST Bharat during the

FY 2017-18 was 8 lakh, which has increased to 12 lakh at the end of FY 2018-19.

IDFC FIRST Bank’s policy for determining material subsidiaries is available on the Bank''s web-link: https://www.idfcfirstbank.com/corporate-goverance.html. The Bank does not have any material subsidiary company as per the Companies Act, 2013 and the Listing Regulations.

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statements, which forms part of this Annual Report.

Further, pursuant to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and consolidated financial statements has been hosted on the Bank''s website: www.idfcfirstbank.com under the ''Investor Relations'' section.

In addition thereto, the Annual Report of IDFC FIRST Bharat containing therein its audited financial statements has also been hosted on the Bank''s website: www.idfcfirstbank.com under the ''Investor Relations'' section.

The Annual Reports of IDFC FIRST Bank and IDFC FIRST Bharat are also available at the Registered Office of the Bank during business hours i.e. from 9:30 a.m. to 6:00 p.m. on all days (except Saturday, Sunday and Public Holidays).

Any Shareholder who is interested in obtaining a physical copy of the aforesaid Annual Reports may write to the Company Secretary of the Bank by sending an e-mail on [email protected].

Pursuant to the RBI Guidelines for ''Licensing of New Banks in the Private Sector'' dated February 22, 2013, the Promoter - IDFC Financial Holding Company Limited (‘IDFC FHCL'') is required to hold a minimum of 40% of the paid-up voting equity capital of the Bank which shall be locked in for a period of five years from the date of commencement of business of the Bank i.e. from October 1, 2015. Further, the shareholding by IDFC FHCL in the Bank in excess of 40% of the total paid-up voting equity capital was required to be brought down to 40% within three years from the date of commencement of business of the Bank. Also, in the event of the Bank raising further voting equity capital during the first five years from the date of commencement of business, IDFC FHCL should continue to hold 40% of the enhanced voting equity capital of the Bank for a period of five years from the date of commencement of business of the Bank. Accordingly, as and when equity shares are allotted by IDFC FIRST Bank pursuant to the ESOP Scheme or by way of any other allotment, IDFC FHCL purchases new shares for maintaining 40% shareholding in the Bank.

The Amalgamation of erstwhile Capital First Group with IDFC Bank led to reduction in shareholding of IDFC FHCL from 56.18% (as on Record Date i.e. December 31, 2018) to 40% (as on the Date of Allotment i.e. January 05, 2019). Accordingly, IDFC FHCL ceased to be Holding Company of IDFC FIRST Bank and thereby your Bank became an Associate Company of IDFC FHCL.

IDFC FIRST Bank has only one Associate Company as on March 31, 2019, namely Millennium City Expressways Private Limited in which it holds 29.98% equity stake.

The highlights on performance of the Subsidiary and Associate Company and their contribution to the overall performance of the Bank can be referred to in Form AOC-1, appended as Annexure 1.

Employees

Your Bank has grown with a talent base of 12,257 employees as of March 31, 2019, after the Merger with the erstwhile Capital First Group. The Bank has a well defined process of recruiting employees after rigorous screening of their capabilities as assessed by the organization for the requirements of the new dynamic ecosystem of the country. Your Bank has a merit oriented culture where performance appraisal is conducted on an annual basis for all employees through a rigorous process. Employees are allocated ratings based on the performance and such performance ratings are linked with employees'' rewards and compensation. In general, the work environment in the organization continued to be vibrant during the year.

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 may be obtained by the Members by writing to the Head - Legal and Company Secretary of your Bank.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure 2.

Employee Stock Option Scheme

The Employee Stock Option Scheme (IDFC FIRST Bank ESOS-2015 / ''ESOS'') was framed with an object of encouraging higher participation on the part of employees in the Bank''s financial growth and success. An effective stock option scheme enables retention of talent and aligning employee interest to that of the Shareholders.

IDFC FIRST Bank ESOS-2015 was approved by the Members at their meeting held on December 09, 2014. The Members at the Annual General Meeting (''AGM'') held on July 27, 2016 approved an Employee Stock Options (''ESOP'') pool of 6% of the paid-up share capital of the Bank.

There were 90,711,660 Options outstanding at the beginning of FY 2018-19. During FY 2018-19, 22,006,400 Options were granted to the eligible employees under IDFC FIRST Bank ESOS-2015. Further, in accordance with and pursuant to effectiveness of Scheme of Amalgamation, 167,818,175 stock options were granted to eligible employees of erstwhile Capital First Group on the basis of the Share Exchange Ratio, i.e. for every 10 (Ten) options held by an Eligible Employee which entitle such Eligible Employee to acquire 10 (Ten) equity shares in the erstwhile Capital First Limited, such Eligible Employee was conferred 139 (One Hundred and Thirty Nine) options in the IDFC FIRST Bank which entitles him / her to hold 139 (One Hundred and Thirty Nine) equity shares in IDFC FIRST Bank under IDFC FIRST Bank ESOS-2015.

Further, 23,787,480 Options had lapsed / forfeited and 492,450 Options were exercised during the year ended March 31, 2019. Accordingly, 256,256,305 Options remained outstanding as on March 31, 2019. All Options vests in a graded manner and are required to be exercised within a specific period.

The Bank has used the intrinsic value method to account for the compensation cost of Stock Options to employees of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the Option. IDFC FIRST Bank ESOS-2015 is administered by the Nomination & Remuneration Committee (''NRC'') of the Board of the Bank.

There has been no material change in IDFC FIRST Bank ESOS-2015 during FY 2018-19 and the said scheme is in compliance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, as amended from time to time.

However, on recommendation of NRC at its meeting held on May 09, 2019, the Board of Directors of the Bank at its meeting held on May 10, 2019, approved the proposal to increase the existing pool from current 6% to 8% of the issued and paid-up share capital of the Bank, from time to time and also modification of exercise period of the Scheme, subject to approval of the Shareholders of the Bank.

The proposal for consequential modification of Scheme subsequent to increase in ESOP pool and modification of exercise period is placed for Shareholders approval in the ensuing Annual General Meeting.

The details and disclosures with respect to ESOS as required under Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and circulars issued there under, have been uploaded on the Bank''s website: www.idfcfirstbank.com under the ‘Investor Relations'' section.

Further, disclosure as per the ''Guidance Note on Accounting for Employee Share-based Payments'' issued by the Institute of Chartered Accountants of India, are appearing in the Notes to the Standalone Financial Statements of IDFC FIRST Bank, forming part of this Annual Report.

Directors and Key Managerial Personnel Appointment & Cessation

All appointments of Directors are made in accordance with the relevant provisions of the Companies Act, 2013 and the Rules framed there under, the Listing Regulations, the Banking Regulation Act, 1949 and the rules, guidelines and circulars issued by the RBI from time to time.

The NRC conducts due diligence before appointment of Directors and ensures adherence to ''Fit and Proper'' criteria, as prescribed by RBI.

During the year under review, the Board of Directors on the recommendation of the NRC, had re-appointed Mr. Abhijit Sen (DIN: 00002593), Ms. Veena Mankar (DIN: 00004168) and Mr. Ajay Sondhi (DIN: 01657614), as Non-Executive Independent Directors of the Bank for a second term of five (5) consecutive years effective from July 27, 2018 to hold office up to July 26, 2023 or for such other period as the RBI may approve and they shall not be liable to retire by rotation. The aforesaid re-appointment of Independent Directors was approved by the Members in the 4th Annual General Meeting of the Bank held on July 31, 2018. The Members also approved the re-appointment of Mr. Rajan Anandan (DIN: 02395272), as Non-Executive Independent Director of the Bank for a second term of five (5) consecutive years effective from December 01, 2018 to hold office up to November 30, 2023 or for such other period as the RBI may approve and he shall not be liable to retire by rotation.

Further, Members at the 4th Annual General Meeting of the Bank held on July 31, 2018 also approved the re-appointment of Dr. Rajiv B. Lall (DIN: 00131782) as the Founder Managing Director and Chief Executive Officer for a period of two (2) years with effect from October 1, 2018 or for such other period as the RBI may approve.

Mr. Pravir Vohra (DIN: 00082545) was appointed as an Additional Director in the category of Independent Director of the Bank for a period of three (3) years with effect from August 01, 2018 subject to approval of Members.

As per the terms of the Scheme of Amalgamation, the Board of the Bank was re-constituted to represent directors of both the merging entities.

Immediately upon the effectiveness of the Scheme of Amalgamation, the Board of IDFC FIRST Bank was re-constituted and the Board of Directors of both, IDFC FIRST Bank and erstwhile Capital First Limited, was equally represented on the re-constituted Board.

The Board, based on the recommendations of NRC, appointed following Directors on the Board of IDFC FIRST Bank for a period of five (5) years with effect from December 18, 2018, as per the provisions of applicable laws and rules made thereunder and subject to approvals of Shareholders of the Bank:

a. Dr. (Mrs.) Brinda Jagirdar (DIN: 06979864) as an Independent Director;

b. Mr. Hemang Raja (DIN: 00040769) as an Independent Director;

c. Mr. Vishal Mahadevia (DIN: 01035771) as a Non-Executive Non-Independent Director;

d. Mr. Aashish Kamat (DIN: 06371682) as an Independent Director; and

e. Mr. Desh Raj Dogra (DIN: 00226775) as an Independent Director

Mr. Ajay Sondhi and Mr. Rajan Anandan had tendered their resignation from the Board of the Bank with effect from December 18, 2018.

Dr. Rajiv B. Lall stepped down as the Founder Managing Director and Chief Executive Officer of the Bank and became Part-Time Non-Executive Chairman of the Bank in place of Ms. Veena Mankar with effect from December 19,

2018. Ms. Veena Mankar continued to be on the Board of the Bank as an Independent Director.

The Board of Directors at its Meeting held on December 18, 2018, based on the recommendations of the NRC, appointed Mr. V. Vaidyanathan (DIN: 00082596) as the

Managing Director & Chief Executive Officer (''MD & CEO'') of IDFC FIRST Bank with effect from December 19, 2018 of the new entity, subject to necessary approvals. Further, the RBI vide its letters dated December 14, 2018 and January 17, 2019 approved the appointment of Mr. V. Vaidyanathan as the MD & CEO of the Bank for a period of three (3) years with effect from December 19, 2018.

The RBI vide its letter dated January 31, 2019 has accorded its approval for payment of remuneration of '' 46,000,000 p.a. plus Perquisites payable to Mr. V. Vaidyanathan as the MD & CEO of IDFC FIRST Bank Limited effective from December 19, 2018.

Upon recommendation of NRC and receipt of requisite approvals from the RBI relating to term of appointment and payment of remuneration, the Board of Directors of the Bank at its Meeting held on February 05, 2019 considered and approved the said term of appointment and remuneration of '' 46,000,000 p.a. plus Perquisites payable to Mr. V. Vaidyanathan as the MD & CEO for a period of three (3) years effective from December 19, 2018 in compliance with the provisions of the Companies Act, 2013 and other applicable regulations. The proposal for appointment and payment of remuneration to Mr. V. Vaidyanathan is subject to approval of the Members at the ensuing Annual General Meeting.

Thereafter, Ms. Veena Mankar and Mr. Abhijit Sen tendered their resignation from the Board of IDFC FIRST Bank effective from March 25, 2019 in order to balance their expanding work commitments.

Subsequent to the year under review, Mr. Desh Raj Dogra tendered his resignation from the Board of IDFC FIRST Bank effective from April 04, 2019 in order to avoid potential conflict of interest with his other Board memberships.

Further, based on the recommendation of the NRC, the Board at its meeting held on May 10, 2019 approved the reappointment of Mr. Anand Sinha (DIN: 00682433) as an Independent Director for second term of four (4) consecutive years with effect from August 01, 2019, subject to approval of the shareholders of the Bank and other applicable statutory / regulatory approvals. Also, the appointment of Mr. Sanjeeb Chaudhuri (DIN: 03594427) as an Independent Director for a period of four (4) consecutive years with effect from May 10, 2019 was approved at the Board Meeting held on May 10, 2019, based on the recommendation of the NRC and subject to approval of the shareholders of the Bank and other applicable statutory / regulatory approvals.

In terms of Section 160 of the Companies Act, 2013, your Bank has received notice in writing from Members proposing candidature of Mr. Pravir Vohra,

Mr. Hemang Raja, Dr. (Mrs.) Brinda Jagirdar, Mr. Aashish Kamat, Mr. Vishal Mahadevia, Mr. V. Vaidyanathan, Mr. Anand Sinha and Mr. Sanjeeb Chaudhuri.

The relevant details including brief profiles of Dr. Rajiv B. Lall, Mr. Pravir Vohra, Mr. Hemang Raja, Dr. (Mrs.) Brinda Jagirdar, Mr. Aashish Kamat, Mr. Vishal Mahadevia, Mr. V. Vaidyanathan, Mr. Anand Sinha and Mr. Sanjeeb Chaudhuri are given in the Exhibit to the Notice of the 5th AGM. Further, brief profiles of all the Directors of the Bank are also available on the Bank''s web-link: https://www.idfcfirstbank.com/about-us/board-of-directors.html under the ''Board of Directors'' section.

None of the Directors of the Bank are disqualified in accordance with Section 164 of the Companies Act, 2013.

The Board recommends to the Shareholders, the appointment of the aforesaid Directors at the ensuing AGM.

Further, the Bank had received a declaration from all the Independent Directors (''IDs''), at the time of appointment and also at the first meeting of the Board of Directors held in FY 2018-19, that they meet the criteria of independence specified under sub-section (6) of Section 149 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and Regulation 16(1)(b) of the Listing Regulations, for holding the position of ID and that they shall abide by the ''Code for Independent Directors'' as per Schedule IV of the Companies Act, 2013.

Further, it is reported by the Bank''s Secretarial Auditor that during the financial year under review, the Board of Directors of the Bank is duly constituted with proper balance of Executive Director, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Companies Act, 2013 and Listing Regulations.

Further, as per the Listing Regulations, the certificate from the Bank''s Secretarial Auditor, being a Company Secretary in Practice, has also been received that none of the Directors on the Board of the Bank have been debarred or disqualified from being appointed or continuing as directors of Companies by the Securities and Exchange Board of India/ Ministry of Corporate Affairs or any such statutory authority.

Framework for Appointment of Directors

The Bank has in place a framework for Board Diversity, Fit & Proper Criteria and Succession Planning for appointment of Directors on the Board of the Bank.

Retirement by Rotation

In accordance with the Articles of Association of the Bank and pursuant to the provisions of Section 152 of the Companies Act, 2013, Mr. Sunil Kakar (DIN: 03055561), Non-Executive Non-Independent Director, would retire by rotation at the ensuing AGM and being eligible, offers himself for re-appointment.

Key Managerial Personnel

As on the date of this report, the following officials of the Bank are the ''Key Managerial Personnel'' pursuant to the provisions of Section 203 of the Companies Act, 2013:

Mr. V. Vaidyanathan

Managing Director and Chief Executive Officer (appointed with effect from December 19, 2018)

Mr. Pankaj Sanklecha

Chief Financial Officer and Head - Corporate Centre (appointed with effect from December 19, 2018)

Mr. Satish Gaikwad

Head - Legal and Company Secretary (appointed with effect from December 19, 2018)

During the year under review, Dr. Rajiv B. Lall stepped down as the Founder MD & CEO of the Bank and became Part-Time Non-Executive Chairman of the Bank with effect from December 19, 2018. Further, Mr. Bipin Gemani resigned as the Chief Financial Officer of the Bank with effect from December 18, 2018 and Mr. Mahendra N. Shah resigned as the Group Company Secretary and Group Compliance Officer of the Bank with effect from December 18, 2018.

Familiarization Programmes for Board Members

At the time of appointment, all Directors of your Bank are familiarized with their roles, responsibilities, rights and duties along with a brief overview of your Bank’s operations in a nutshell.

The Board members are further provided with necessary documents, reports and internal policies to enable them to familiarise with the Bank''s procedures and practices.

Periodic presentations are made at the Board and Committee meetings on business and performance of the Bank, global business environment, business strategy and associated risks, responsibilities of the Directors etc.

Detailed presentations on the Bank’s business and updates thereon were made at the meetings of the Board and Committees, held during the year.

The details of the said programmes are available on the Bank’s web - link: https://www.idfcfirstbank.com/corporate-goverance.html.

Board Evaluation

The Board of Directors has carried out an annual evaluation of its own performance, Board Committees, and Individual Directors pursuant to the provisions of the Companies Act, 2013 and Listing Regulations. Additionally, the necessary evaluation was carried out by the NRC and IDs at their respective meetings held for the purpose.

The detailed process indicating the manner in which the annual evaluation has been carried out pursuant to Listing Regulations and Companies Act, 2013 is given in the Corporate Governance Report, which forms part of this Annual Report.

Number of Meetings of the Board

The Board met seven (7) times during FY 2018-19 viz., April 24, 2018, July 30, 2018, October 24, 2018, December 18, 2018 (two Board meetings held on December 18, 2018), January 08, 2019 and February 05, 2019; details of which are given in the Corporate Governance Report, which forms part of this Annual Report. The maximum interval between any two consecutive meetings did not exceed 120 days.

Board Committees

In compliance with various regulatory requirements, several Board-level Committees have been constituted to delegate matters that require greater and more focused attention.

Details on the constitution, brief terms of reference, meetings held and attendance of all the Board-level Committees are given in the Corporate Governance Report which forms part of this Annual Report.

A brief overview of some of the Board-level Committees is furnished below:

Audit Committee

The Audit Committee met nine (9) times during FY 2018-19 i.e. on April 23, 2018, July 30, 2018, August 14, 2018, October 23, 2018, November 06, 2018, December 18, 2018, January 07, 2019, February 04, 2019 and February 26, 2019.

All recommendations made by the Audit Committee during the year were accepted by the Board.

Further, the Audit Committee comprises of the following members as on the date of this report :

Mr. Aashish Kamat

Chairman | Independent Director

Dr. (Mrs.) Brinda Jagirdar Member | Independent Director

Mr. Pravir Vohra

Member | Independent Director Mr. Sunil Kakar

Member | Non-Executive Non-Independent Director

Corporate Social Responsibility (CSR) Committee

The CSR Committee met two (2) times during FY 2018-19 on April 23, 2018 and February 04, 2019. The CSR Policy of the Bank is available on the Bank''s web-link: https://www.idfcfirstbank.com/corporate-goverance.html.

The CSR initiatives of the Bank in FY 2018-19 were implemented through various implementation agencies / partners. In order to achieve impact and scale, the CSR activities undertaken during the year mainly focused on five areas: Education, Livelihoods, Women Empowerment, Health and Financial Inclusion.

The amount spent for CSR contribution by the Bank for FY 2018-19 was '' 20.82 crore. Further, during the year under review '' 0.34 crore was spent by IDFC FIRST Bank in order to meet, discharge and satisfy all the obligations of the erstwhile Capital First Limited, to the extent they were outstanding on the Effective Date (December 18, 2018) of Scheme of Amalgamation.

Additionally, Rs, 4.48 crore incurred by erstwhile Capital First Group towards CSR spend was also recognized as expense in the Statement of Profit and Loss of the Bank on CSR related activities.

The amount spent for CSR contribution by erstwhile Capital First Limited for the period between April 01, 2018 to December 18, 2018 (i.e. prior Amalgamation) was Rs, 6.51 crore.

Details of the CSR initiatives undertaken by IDFC FIRST Bank through various implementation partners / agencies are given in Annexure 3.

Further, the CSR Committee comprises of the following members as on the date of this report:

Mr. V. Vaidyanathan Chairman | Executive Director

Dr. (Mrs.) Brinda Jagirdar Member | Independent Director

Mr. Hemang Raja

Member | Independent Director

Nomination and Remuneration Committee (NRC) / Remuneration Policy

The NRC is constituted in compliance with the RBI Guidelines, Section 178 of the Companies Act, 2013 and Listing Regulations.

The NRC met seven (7) times during FY 2018-19 on April 24, 2018, July 30, 2018, October 23, 2018, December 18, 2018, January 08, 2019, January 28, 2019 and February 04, 2019.

Further, the NRC comprised of the following members as on the date of this report:

Mr. Hemang Raja

Chairman | Independent Director

Mr. Aashish Kamat

Member | Independent Director

Dr. (Mrs.) Brinda Jagirdar Member | Independent Director

Mr. Vishal Mahadevia

Member | Non-Executive Non-Independent Director

In line with the provisions of the Companies Act, 2013 and RBI guidelines issued in this regard, from time to time, your Bank has a stable framework for remuneration of the various categories of persons at IDFC FIRST Bank and accordingly has two separate remuneration policies as given below:

I. Remuneration Policy for the Whole Time / Executive Directors, Non-Executive / Independent Directors, Key Managerial Personnel and Senior Management Personnel.

The various components of remuneration itemized in this policy inter-alia are as follows:

For Whole Time / Executive Directors:

a. Fixed Pay benchmarked primarily to the Indian Private Sector Banks;

b. Variable Pay in the form of annual performance bonus will be determined based on the Bank, business units and individual performance and other evaluation criteria and is not an entitlement;

c. Retiral benefits, allowances, perquisites and other benefits;

d. Stock Options;

e. Directors and Officers Liability Insurance Policy;

f. Severance Pay, if mandated by any applicable laws.

g. Malus/Clawback

For Non-Executive / Independent Directors:

a. Commission to Non-Executive / Independent Directors (other than the Part - time Chairperson);

b. Remuneration to Non-Executive Part-time Chairperson;

c. Sitting Fees and Other Expenses; and

d. Directors and Officers Liability Insurance Policy.

For Key Managerial Personnel (‘KMP’) and Senior Management Personnel (‘SMP’):

a. Fixed Pay benchmarked primarily to the Indian Private Sector Banks;

b. Variable Pay in the form of annual performance bonus will be determined based on Bank, business unit and individual performance and other evaluation criteria and is not an entitlement;

c. Retiral benefits, allowances, perquisites and other benefits;

d. Stock Options;

e. Directors and Officers Liability Insurance Policy;

f. Severance Pay, if mandated by any applicable laws.

g. Malus/Clawback

II. Remuneration Policy for Employees (Including Risk-Takers) except for the Whole Time / Executive Directors, Non-Executive / Independent Directors, KMP and SMP.

The various components of remuneration itemized in this policy inter-alia are as follows:

a. Fixed Pay benchmarked primarily to the Indian Private Sector Banks;

b. Variable Pay in the form of annual performance bonus will be determined based on Bank, Business unit and individual performance and other evaluation criteria and is not an entitlement.

The organization has a robust policy around performance management which has a direct bearing on Variable Pay. The organization applies the malus model through the performance management framework.

I n the event of significant negative contributions of the bank and/ or the relevant line of business in any year, the deferred compensation (if any) would be subjected to clawback arrangement;

c. Statutory Bonus, as may be mandated by any applicable laws;

d. Stock Options;

e. Severance Pay, if mandated by any applicable laws.

The principles for remuneration at IDFC FIRST Bank are guided by the Bank’s philosophy for driving employee performance to achieve its medium term and long term objectives, balanced with prudent risk taking and are in compliance with the RBI’s Guidelines on Compensation of Whole-Time Directors / Chief Executive Officers / Risk takers and Control function staff, etc. dated January 13, 2012.

Both the remuneration policies are available on the Bank''s web - link:

https://www.idfcfirstbank.com/corporate-goverance.html.

Your Bank also has a process in place for identification of independence, qualifications and positive attributes of its Directors. The NRC ensures a transparent nomination process to the Board of Directors with the diversity of gender, thought, experience, knowledge, perspective and in the Board.

The NRC, after taking into consideration the Remuneration Policy for the Whole Time / Executive Directors, Non-Executive / Independent Directors, KMP and SMP, recommends their remuneration to the Board for its approval.

Internal Financial Controls

The Bank has adequate internal controls and processes in place with respect to its financial statements that provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements. These controls and processes are driven through various policies, procedures and certifications which also ensure the orderly and efficient conduct of the Bank''s business, including adherence to Bank''s policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The controls and processes are being reviewed periodically. The Bank has a mechanism of testing the controls and processes at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.

Information / Cyber Security Framework

IDFC FIRST Bank since its inception has put in place a robust Information / Cyber Security Framework. Our Bank being a green field setup, has Information Security woven into our banking platform and seamlessly merges both culturally and technologically. A dedicated team of security professionals are part of the Information Security Group (‘ISG’) who govern the Information Security practices in the Bank. Our Bank has put in place state of the art security technologies including several industry ‘firsts’ technology solutions and adopted ''defense in depth'' approach & industry best practices as part of our security framework and architecture. Our Bank is mindful of the need to always be on the guard and monitors its environment 24x7x365. Given the changing threat landscape and evolving technology platforms, the attempt is to progressively move towards adoption of proactive and adaptive platforms for quick detection and recovery.

Internal Ombudsman

In compliance with regulatory guidelines, the Bank has appointed Mr. Dayanand P. Kasabe, a senior retired Central Banker as Internal Ombudsman for a period of 3 years with effect from December 03, 2018, as per the Internal Ombudsman Scheme, 2018 to enhance your Bank''s customer grievance redressal mechanism and to improve service delivery.

Statutory Auditors

IDFC FIRST Bank Limited was incorporated on October 21, 2014. The Bank received the final banking license on July 23, 2015 and commenced its banking operations from October 01, 2015.

Deloitte Haskins & Sells LLP, Chartered Accountants, Ahmadabad (Firm Registration No. 117365W) have been the Statutory Auditors of the Bank since incorporation.

In terms of RBI circular DBS.ARS.BC.04/08.91.001/ 2017-18 dated July 27, 2017 and titled ''Appointment of Statutory Central Auditors (SCAs) - modification of rest period'', an audit firm, after completing its four (4) years tenure in a particular private / foreign bank, will not be eligible for appointment as SCA of the same bank for a period of six (6) years. This practice is based on the guidelines on periodical rotation and resting of statutory auditors.

Further, in terms of Section 30(1) of the Banking Regulation Act, 1949, the Statutory Auditors of banks are required to be appointed in the AGM, with the prior approval of RBI. The Audit Committee and the Board of Directors of the Bank, vide circular resolutions dated April 20, 2019 and April 23, 2019 respectively, approved the appointment of Statutory Auditors of the Bank for FY 2019-20 in the order of preference with a panel of 3 auditors for onward submission to the RBI.

In accordance with the aforesaid circular, the appointment of the SCA will be subject to shareholders approval in the ensuing AGM, post receipt of RBI approval.

Auditors’ Report

There were no qualifications, reservations, adverse remarks or disclaimers made by the Statutory Auditors in their report for the financial year ended March 31, 2019.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank had appointed M/s. Bhandari & Associates, Company Secretaries to undertake the Secretarial Audit of the Bank for the financial year ended March 31, 2019.

The Bank provided all assistance and facilities to the Secretarial Auditors for conducting their audit.

The Secretarial Audit Report is appended as Annexure 5 to this report.

There were no qualifications, reservations, adverse remarks or disclaimers made by the Secretarial Auditors in their report for the financial year ended March 31, 2019.

Compliance with applicable Secretarial Standards

The Bank has generally complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Concurrent Audit

Your Bank has a regular process of getting concurrent audit done for important functions such as treasury, trade finance operations, retail operations, wholesale operations etc. as required by extant regulatory guidelines. Reputed Chartered Accountant firms carry out the Concurrent Audit. Results of these audits are placed before the Audit Committee of the Board on a quarterly basis.

Requirement for Maintenance of Cost Records

The Bank is not required to maintain cost records as specified by the Central Government under Section 148(1) of the Companies Act, 2013.

Awards and Recognitions

During the year under review, your Bank was recognized in various ways and the significant awards presented to your Bank are listed below:

- Banking Frontiers Finnoviti Awards 2019

- NASSCOM DSCI Excellence Award 2018 for Best Security Practices in Banking

- Two Awards won at 6th Payments and Cards Summit 2018

- Intelligent Enterprise Award 2018

- Product Innovator of the Year

- Two Awards won at National Payments Excellence Awards 2017 for two consecutive years

- Won 2 Triple-A awards

- IDEX Legal award 2018

- Award for excellence in video IP Based Surveillance

During the year under review, erstwhile Capital First received several award/ accolades. Select few awards/ rankings are as mentioned below:

- ''CEO of the year 2018'' by Business world : “Leaving a well-paying top job as an MD in the ICICI group and acquiring stake in NBFC with the hope of converting to a bank is a novel thought or weird, depending on the prism you use, but certainly unique. But in the end, by merging with a bank, looks like a nice landing for Vaidyanathan and Capital First. Certainly a big match player.”

- ''Outstanding Corporate Transformation India 2018'' by Capital Finance International : “The CFI.co judges agree that Capital First is a case of extra-ordinary transformation in Corporate in seven years, from small to big, from loss making to highly profitable, concentrated to diversified, and the 2018 award is applauded by the jury”.

- ''V. Vaidyanathan: Most Inspirational Management Buyout India 2018'' by Capital Finance International : “MBOs are rare but successful leveraged ones with dramatic rise in market caps and squaring leverage through stake sale, make for management textbooks. The CFI.co judging panel applauds Vaidyanathan''s successful soft touchdown of the MBO in 2018, by merger with a commercial bank, leading to his 2018 award win for Most Inspirational Management Buyout India.”

- ''Game Changers of India'' - Economic Times Global Business Summit 2018 : “From creating market linkages for micro enterprises to bridging rural-urban divide these leaders are innovating the way new business is done. These change-makers have recognized the possibilities to build sustainable businesses targeting the bottom of the pyramid and investors that are willing to back them in their efforts."

Instances of Fraud, if any reported by the Auditors or the Management

No offence of fraud was reported by the Auditors of the Bank under Section 143(12) of the Companies Act, 2013. The details of provisioning pertaining to Fraud Accounts during the year under review are provided in Note No. 18.17 to the Standalone Financial Statements as at March 31, 2019. The Members are requested to refer to the said Note for details in this regard.

Risk Management Framework

Your Bank promotes a strong risk culture throughout the organization. A strong risk culture is designed to help reinforce the Bank’s resilience by encouraging a holistic approach to management of risk & return and an effective management of risk, capital and reputational profile.

Consequent to the amalgamation of IDFC Bank and erstwhile Capital First Group, effective December 18, 2018, Bank has re-aligned its key policies and Risk Framework forming an overall Risk framework of the merged entity. Your Bank operates within an effective risk management framework to actively manage all the material risks faced by the Bank, in a manner consistent with the Bank''s risk appetite. Your Bank aims to establish itself as an industry leader in the management of risks and strive to reach the efficient frontier of risk and return for the Bank and its shareholders. The Board has ultimate responsibility for the Bank’s risk management framework. It is responsible for approving the Bank''s risk appetite, risk tolerance and related strategies and policies. The Board is supported by various management committees as part of the Risk Governance framework to ensure that Bank has sound system of risk management and internal controls including Risk Management Committee of the Board (''RMC''). The RMC assists the Board in relation to the oversight and review of the Bank’s risk management principles and policies, strategies, appetite, processes and controls.

To ensure the Bank has a sound system of risk management and internal controls in place, the Board has established the Risk Management Committee of the Board. The Risk Management Committee of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity and operational risks. The Committee also reviews the Risk Appetite & Enterprise Risk Management framework, Internal Capital Adequacy Assessment Process (''ICAAP'') and Stress Testing.

Your Bank has in place a Board approved Risk Management Policy. The Policy aims at establishing a risk culture and governance framework to enable identification, measurement, mitigation and reporting of risks within the Bank in line with the Bank''s risk appetite, risk - return trade-off and the escalation & accountability framework.

Vigil Mechanism / Whistle Blower Policy

The Bank has implemented a Whistle Blower Policy in compliance with the provisions of the Listing Regulations, Companies Act, 2013 and RBI notification on Introduction of ‘Protected Disclosures Scheme for Private Sector and Foreign banks''. Pursuant to this policy, the Whistle Blowers can raise concerns relating to reportable matters (as defined in the policy) such as breach of IDFC FIRST Bank’s Code of Conduct, employee misconduct, fraud, illegal unethical imprudent behavior, corruption, safety and misappropriation or misuse of Bank funds / assets etc.

Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower to those who avail such mechanism and also provides for direct access to the Chairman of the Audit Committee, in exceptional cases.

The Audit Committee reviews the functioning of the Vigil Mechanism from time to time. None of the Whistle Blowers has been denied access to the Audit Committee of the Board. The Whistle Blower Policy is available on the Bank''s web-link: https://www.idfcfirstbank.com/corporate-goverance.html. The Whistle Blower Policy is communicated to the employees and is also posted on the Bank''s intranet.

In addition to the above, the Bank has formulated a Vigilance Policy for effectively managing the risks faced by the Bank on account of corruption, malpractices and frauds.

Mr. Avinash Saraiya is the Chief Vigilance Officer of the Bank.

Prevention of Sexual Harassment of Women at the Workplace

Your Bank has an Internal Committee to investigate and inquire into sexual harassment complaints in line with The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013.

Your Bank has in place a policy on Anti-Sexual Harassment, which reflects the Bank’s zero-tolerance towards any form of prejudice, gender bias and sexual harassment at the workplace. Your Bank has set up an Internal Committee (''IC'') to receive and redress complaints of sexual harassment. Your Bank undertakes ongoing trainings to create awareness on this policy. During FY 2018-19, employees were given training on the subject so that they understand the anti-sexual harassment policy, the complete framework adopted by the Bank to report and resolve instances of sexual harassment etc., details of which have been mentioned in the Business Responsibility Report, which is hosted on the Bank''s web-link: https://www.idfcfirstbank.com/corporate-goverance.html.

During the year under review, 6 sexual harassment cases were filed, all of which were resolved as on March 31, 2019. During FY 2018-19, employees were given online training and classroom training was imparted to all IC members in order to understand the Policy on Prevention of Sexual Harassment and framework for reporting and resolving instances of sexual harassment.

Significant and Material Orders passed by the Regulators / Courts / Tribunals

Pursuant to the Scheme of Amalgamation being approved vide respective Orders passed by the NCLT, Chennai Bench and Mumbai Bench, the Meetings of the Board of Directors (''the Board'') of the Amalgamated Company and Amalgamating Companies were duly convened on December 18, 2018 and the said Board inter-alia considered and noted the ''Effective Date'' as December 18, 2018 pursuant to Orders passed by both the NCLTs respectively filed with Registrar of Companies (''ROC'') as on that date. The ''Appointed Date'' was October 01, 2018 as approved by both the NCLTs.

Accordingly, the Scheme of Amalgamation became effective on December 18, 2018 pursuant to the filing of the Orders of both the benches of the Hon''ble NCLT with the ROC.

Therefore, pursuant to the effectiveness of the Amalgamation and by virtue of operation of law, the Amalgamating Companies stood dissolved without being wound up with effect from December 18, 2018.

Apart from the above, there were no other significant and material orders passed by the regulators or courts or tribunals impacting the going concern status or the operations of the Bank.

Material Changes and Commitments affecting the Financial Position of the Bank

There are no material changes and commitments, affecting the financial position of the Bank between the end of the financial year of the Bank i.e. March 31, 2019 and the date of the Board Meeting in which the Directors'' Report was approved i.e. May 10, 2019.

Related Party Transactions

All the related party transactions that were entered into during the financial year were on arm''s length basis and in the ordinary course of business of the Bank. IDFC Group including IDFC FIRST Bank have always been committed to good corporate governance practices, including matters relating to related party transactions.

All the related party transactions are placed before the Audit Committee for approval. Prior omnibus approval is obtained from the Audit Committee for foreseen related party transactions. Prior omnibus approval is also obtained for unforeseen related party transactions subject to their value not exceeding '' 1 crore per transaction. The required disclosures are made to the Audit Committee on a quarterly basis in terms of the omnibus approval of the Committee.

Pursuant to the provisions of Companies Act, 2013 and Rules made thereunder, Listing Regulations and in the back-drop of the Bank''s philosophy on such matters, the Bank has in place a Board approved policy on related party transactions. The said policy is also uploaded on the Bank''s web-link: https://www.idfcfirstbank.com/corporate-goverance.html. Since all related party transactions entered into by the Bank were in the ordinary course of business and on arm’s length basis, Form AOC-2 as prescribed under Section 134(3)(h) of the Companies Act, 2013 is not applicable to the Bank.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 relating to conservation of energy and technology absorption are given as under:

Detailed initiatives taken for conservation of energy has been mentioned in the Business Responsibility Report, which is hosted on the Bank''s website: www.idfcfirstbank.com under the ''Investor Relations'' section.

Also, your Bank has been increasingly using information technology in its operations, for more details, please refer Management Discussion and Analysis Report, which forms part of this Annual Report.

Further, Foreign Exchange earnings and outgo are part of the normal banking business of the Bank.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year under review, as required by Regulation 34(2)(e) of the Listing Regulations, forms part of this Annual Report.

Corporate Governance

Your Directors ensure the Bank’s prosperity by collectively directing its affairs, whilst meeting the appropriate interests of its Shareholders and other Stakeholders.

Your Bank is committed to achieve the highest standards of Corporate Governance. A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures, as stipulated under Listing Regulations, Companies Act, 2013 and Rules made there under forms part of this Annual Report.

A Certificate from the Statutory Auditors of the Bank, Deloitte Haskins & Sells LLP, Chartered Accountants, Ahmadabad (Firm Registration No. 117365W), conforming compliance to the conditions of Corporate Governance as stipulated under Listing Regulations is enclosed at the beginning of the Corporate Governance Report and forms part of this Annual Report.

CEO & CFO Certification

Certificate issued by Mr. V. Vaidyanathan, MD & CEO and Mr. Pankaj Sanklecha, Chief Financial Officer and Head

- Corporate Centre of the Bank, in terms of Regulation 17(8) of Listing Regulations, for the year under review was placed before the Board of Directors and forms part of this Annual Report.

Business Responsibility Report

The Business Responsibility Report, in terms of Regulation 34(2)(f) of Listing Regulations, describing the initiatives taken by IDFC FIRST Bank from an environmental, social and governance perspective is hosted on the Bank’s website: www.idfcfirstbank.com under the ‘Investor Relations’ section and constitutes a part of this Annual Report. Any Member interested in obtaining a physical copy of the same may write to the Head - Legal and Company Secretary of the Bank by sending an e-mail on [email protected].

Annual Return

An extract of the Annual Return as of March 31, 2019 pursuant to the sub-section (3) of Section 92 of the Companies Act, 2013 read with Rule 12 (1) of the Companies (Management and Administration) Rules, 2014 and forming part of this report is placed on the Bank''s website: www.idfcfirstbank.com under the ‘Investor Relations’ section as per provisions of Section 134(3)(a) and is also set out in Annexure 4 to this Annual Report.

The Annual Return of the Bank has been placed on the website of the Bank and can be accessed under the ''Investor Relations'' section.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, it is hereby confirmed that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. the Directors had 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, 2019 and of the loss of the Bank for that period;

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

d. the Directors had prepared the annual accounts on a going concern basis;

e. the Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgment

Your Directors take this opportunity to express their deep and sincere gratitude to our Customers, Business Partners, Business Correspondents and Vendors for the trust and confidence reposed by them in the Bank. We would like to thank our Shareholders, Bondholders, Investors and Financial Institutions for their co-operation and assistance during the year under review.

Your Directors would like to place on record their appreciation for the support received from IDFC Group, Government of India, State Governments, various Ministries, Reserve Bank of India (''RBI''), Securities and Exchange Board of India (''SEBI''), Stock Exchanges (''National Stock Exchange of India Limited'' & ''BSE Limited''), Competition Commission of India (''CCI''), National Housing Bank (''NHB''), National Company

Law Tribunal (''NCLT''), Chennai Bench and Mumbai Bench, Depositories, Rating Agencies, Unique Identification Authority of India (''UIDAI''), National Payments Corporation of India (''NPCI''), The Clearing Corporation of India Limited (''CCIL''), Indian Banks'' Association (''IBA''), Insurance Regulatory and Development Authority of India (''IRDA''), Fixed Income Money Market and Derivatives Association of India (''FIMMDA'') and all other regulatory agencies and associations with which the Bank interacts.

Your Directors sincerely acknowledge the commitment and hard work put in by all employees of the Bank through its transformational journey. Their valuable contribution has enabled the Bank to make significant progress towards achieving its objective of becoming a diversified universal Bank, with a focus on retail banking.

For and on behalf of the Board of Directors of IDFC FIRST Bank Limited

(formerly IDFC Bank Limited)

Dr. Rajiv B. Lall

Date : May 10, 2019 Chairman

Place: Mumbai DIN: 00131782


Mar 31, 2018

BOARD''S REPORT

Dear Members,

The Directors are pleased to present the Fourth Annual Report of IDFC Bank together with the audited financial statements for the financial year ended March 31, 2018.

State of Affairs of the Bank

Your Bank has successfully and steadily diversified its business mix and added new revenue streams. It has expanded its reach to serve new customer segments both on the retail as well as wholesale side of the business.

In a short span of just two-and-half years, your Bank has built a national

footprint through the operation of 50 branches across the top 35 cities in India, 100 semi-urban and rural branches across 8 key states of India viz. Madhya Pradesh, Karnataka, Andhra Pradesh, Gujarat, Rajasthan, Tamil Nadu, Tripura and Meghalaya, 387 Corporate Business Correspondents (''BC'') branches, 85 ATMs and 17,474 Customer Access Points.

Points of Presence comparison chart:

POINTS OF PRESENCE

MARCH 31, 2018

MARCH 31, 2017

Branches

150

74

IDFC Bharat & other Business Correspondents

387

350

Customer Access Points (including MicroATMs, cashless PDS outlets and Aadhaar Pay merchant points)

17,474

8,142

ATM''s

85

47

Your Bank''s customer base has almost doubled with a total of 27 lakh customers as on March 31, 2018, with 4 lakh urban and 23 lakh semi-urban and rural customers, as against 13.8 lakh customers as on March 31, 2017

Your Bank offers a wide gamut of products to cater to the needs of customers from all segments which can be viewed on our website: www.idfcbank.com.

MERGER - SHRIRAM GROUP

IDFC Group and Shriram Group had signed an exclusivity agreement on July 8, 2017 to allow due diligence and discussions to arrive at an agreement on a transaction structure and swap ratio for a strategic combination between certain businesses of the Shriram Group with IDFC Bank and IDFC Limited.

However, despite best efforts, the two groups were not able to reach an agreement on a mutually acceptable swap ratio.

Accordingly, the exclusivity period was terminated with effect from October 30, 2017.

IDFC Bank, while focusing on enhancing its strategic momentum, continued to explore opportunities for inorganic growth as well.

MERGER - CAPITAL FIRST GROUP

The Board of Directors of IDFC Bank and Capital First Limited (''Capital First'') at their respective meetings held on January 13,

2018 had approved a composite scheme of amalgamation (''Scheme'') of Capital First, Capital First Home Finance Limited and Capital First Securities Limited with IDFC Bank Limited and their respective shareholders and creditors under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 (''Amalgamation'').

This decision was made pursuant to IDFC Bank''s stated strategy of "retail sing” its business to complete their transformation from a dedicated infrastructure financier to a well-diversified universal bank, and in line with Capital First''s stated intention and strategy to convert to a universal bank.

The Share Exchange ratio for the Amalgamation is 139 (One Hundred and Thirty Nine) fully paid-up equity shares of the Bank for every 10 (Ten) fully paid-up equity shares held in Capital First.

The Amalgamation is founded on leveraging of the significant complementarities that exist between the entities involved and the Amalgamation would create meaningful value to various stakeholders including respective shareholders, customers, employees, as the combined business would benefit from increased scale, wider product diversification, diversified balance sheet and the ability to drive synergies across revenue opportunities, operating efficiencies and underwriting efficiencies, amongst others.

Capital First brings with it a retail lending franchise with a loan book of R 25,243 crore (March 31, 2018), a live customer base of more than 3 million customers; and a distribution network in 225 locations across the country growing at a five-year CAGR of 29% on AUM and 39% in profits.

Mr. Vaidyanathan, currently Chairman and Managing Director of Capital First, will succeed Dr. Rajiv B. Lall as the Managing Director and CEO of the combined entity upon completion of the Amalgamation and upon receipt of necessary regulatory approvals. Post Amalgamation, Dr. Lall will step into the role of Non-Executive Chairman of IDFC Bank, subject to regulatory approvals, and guide the transition process. He will replace Ms. Veena Mankar, the present Non-Executive Chairperson of IDFC Bank, who will remain on the Board.

As on the date of this report, the Scheme has received approvals from the National Housing Bank, Competition Commission of India, BSE Limited and the National Stock Exchange of India Limited (in the capacity of a SEBI registered Stock Broker), No Objection Letters from BSE Limited and the National Stock Exchange of India Limited under Regulation 37 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''Listing Regulations'') and No Objection Letter from the Reserve Bank of India (''RBI'').

Further, the Bank has filed an application with the National Company Law Tribunal, Chennai Bench seeking its direction for convening meetings of the Shareholders and Creditors of IDFC Bank. On receipt of directions from the National Company Law Tribunal, the Bank will convene meetings of the Shareholders and Creditors. Subsequent to the receipt of approval of the Shareholders and Creditors, the Bank shall file a Petition with the National Company Law Tribunal for its final approval to the Scheme.

Dividend

In accordance with Regulation 43A of the Listing Regulations, your Bank has formulated a Dividend Distribution Policy which ensures a fair balance between rewarding its Shareholders and retaining enough capital for the Bank''s future growth.

This Policy is available on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section.

Your Directors are pleased to recommend a dividend at the rate of R 0.75 per equity share of R 10 each (i.e. 7.5%) for the year ended March 31, 2018.

The above dividend would be paid subject to approval by the Members at the ensuing Annual General Meeting (''AGM'').

The Register of Members and Share Transfer Books will remain closed from Wednesday, July 25, 2018 to Tuesday July 31, 2018 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2018.

Dividend will be paid to those Members whose names appear in the Register of Members as on Tuesday, July 24, 2018; in respect of shares held in dematerialised form, it will be paid to those Members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date. Dividend shall be subject to tax on dividend to be paid by the Bank.

Implementation of Indian Accounting Standards (‘Ind-AS’)

The Ministry of Corporate Affairs (''MCA'') in its press release dated January 18, 2016 outlined the roadmap for implementation of International Financial Reporting Standards (''IFRS'') converged Ind-AS for banks and Non-Banking Financial Companies (''NBFCs''). The roadmap requires the Bank to prepare Ind-AS based financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the period beginning April 1, 2017 or thereafter

The RBI in its first Bi-monthly Monetary Policy statement on Development and Regulatory Policies for 2018-19 dated April 5, 2018, announced the deferment of Ind-AS Implementation for all Scheduled Commercial Banks (''SCBs'') by one year for necessary legislative amendments. As per the statement, the new implementation date will be April 1, 2019 with comparatives for the period beginning April 1, 2018 or thereafter.

The RBI vide its circular DBR.BP.BC. No.76/21.07.001/2015-16 dated February 11, 2016 has also requested all banks to take note of press release for implementation of Ind-AS and disclose in the annual report, the strategy for Ind-AS Implementation and progress in this regard.

As guided by the RBI in its circular dated February 11, 2016, your Bank has formed a Steering Committee to review the entire process of Ind-AS implementation. The Steering Committee closely monitors the progress of the project and assesses the changes in significant accounting policies, impact on capital adequacy and business model of the Bank. Under supervision of Steering Committee, your Bank has also formed a Technical committee and working group comprising of members from cross functional areas. The Technical committee and working group have carried out a detailed diagnostic analysis of GAAP differences between the current accounting framework and Ind-AS. In addition, the Audit Committee of the Bank also oversees the progress of the Ind-AS implementation process. Working group of the Bank has prepared pro-forma Ind-AS financials as requested by the RBI vide its circular DBR.BP.BC.No.106/21.07.001/2015-16 dated June 23, 2016 and vide its letter DO.DBR.BP.No.2535/21.07.001/2017-18 dated September 13, 2017 respectively.

The pro-forma Ind-AS financials were also presented to Steering committee and Audit committee before final submission to the RBI.

Your Bank has evaluated the system and process change requirements for implementation of Ind-AS and the main impacted areas are Effective Interest Rate (''EIR''), Expected Credit Loss (''ECL'') and Investment classification. Your Bank has also evaluated systems requiring significant changes and identified additional system and process requirements for implementation of Ind-AS. The Bank is engaging with vendors for technology solutions for implementation of Ind-AS.

Your Bank had also appointed consultants for their expert advice on various topics such as identification of key GAAP differences, evaluation of accounting policy choices, changes in accounting policy and development of ECL methodology etc. Your Bank has also conducted training sessions for the officials from various departments of the Bank to develop the understanding of Ind-AS for smooth transition and implementation. Key members of the Bank from Finance and Risk has also attended the training sessions arranged by Indian Banking Association (''IBA'') and National Institute of Bank Management (''NIBM'') on Ind-AS.

The implementation of Ind-AS is expected to result in significant changes to the way the Bank prepares and presents its financial statements. The areas that are expected to have significant accounting impact on the application of Ind-AS are summarized below:

1) Financial assets (which include advances and investments) shall be classified under amortized cost, fair value through other comprehensive income (a component of Reserves and Surplus) or fair value through profit / loss categories on the basis of the nature of the cash flows and the intention of holding the financial assets.

2)Interest will be recognized in the income statement using the effective interest method, whereby the coupon, fees net of transaction costs and all other premiums or discounts will be amortized over the life of the financial instrument.

3) The impairment requirements of Ind-AS 109, Financial Instruments, are based on an ECL model that replaces the incurred loss model under the extant framework.

The Bank will be generally required to recognize either a 12-Month or Lifetime ECL, depending on whether there has been a significant increase in credit risk since initial recognition. Ind-AS 109 will change the Bank''s current methodology for calculating the provision for standard assets and non-performing assets (''NPAs''). The Bank will be required to apply a three-stage approach to measure ECL on financial instruments accounted for at amortized cost or fair value through other comprehensive income. Financial assets will migrate through the following three stages based on the changes in credit quality since initial recognition:

Stage 1: 12 Months ECL For exposures which have not been assessed as credit-impaired or where there has not been a significant increase in credit risk since initial recognition, the portion of the ECL associated with the probability of default events occurring within the next twelve months will need to be recognized.

Stage 2: Lifetime ECL - Not Credit Impaired For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired, a lifetime ECL will need to be recognized.

Stage 3: Lifetime ECL - Credit Impaired Financial assets will be assessed as credit impaired when one or more events having a detrimental impact on the estimated future cash flows of that asset have occurred. For financial assets that have become credit impaired, a lifetime ECL will need to be recognized.

Interest revenue will be recognized at the original effective interest rate applied on the gross carrying amount for assets falling under stages 1 and 2 and on written down amount for the assets falling under stage 3.

4) Accounting impact on the application of Ind-AS at the transition date shall be recognized in Equity (Reserves and Surplus).

The implementation of Ind-AS by banks requires certain legislative changes in the format of financial statements to comply with disclosures required by Ind-AS. The change in format requires an amendment to the third schedule of the Banking Regulation Act, 1949 to make it compatible with the presentation of financial statements under Ind-AS. The RBI would issue necessary instructions / guidelines and clarifications to facilitate the implementation of the new accounting standards.

Awards and Recognitions

During the year under review, your Bank was recognized in various ways and the significant awards presented to your Bank are listed below:

- IDEX Legal Awards 2017

- TISS CLO Awards 2017

- Digital Transformation Awards 2017

- IFSEC India Awards 2017

- -Banking Nibhao wins Effies 2017

- Listed in LinkedIn Top Companies 2017

- Finnoviti Award 2018

Capital Raising & Capital Adequacy Ratio

During FY18, 5,068,721 equity shares of R 10 each were issued and allotted to the eligible employees of the Bank on exercise of Options granted under IDFC Bank Limited Employee Stock Option Scheme 2015 (''IDFC Bank ESOS-2015'').

As on March 31, 2018, the issued, subscribed and paid-up share capital of your Bank was Rs 34,040,749,050 comprising of 3,404,074,905 equity shares of Rs 10 each.

Subsequently on April 16, 2018, the Bank issued and allotted 32,167 equity shares of Rs 10 each under IDFC Bank ESOS-2015, which resulted in an increase in share capital and the share capital as on the date of this report stands at Rs 34,041,070,720 i.e. 3,404,107,072 equity shares of Rs 10 each.

Also, your Bank has not issued any equity shares with differential voting rights.

During the year ended March 31, 2018, your Bank has not issued any Senior Unsecured Redeemable Long Term Bonds in the nature of Non-Convertible Debentures.

Credit rating details for 80CCF Long Term Infrastructure Bonds and Private Placement Bonds of IDFC Bank along with rating rationale are available on the Bank''s website: www.idfcbank.com.

Your Bank is well capitalized and has a Capital Adequacy Ratio (''CAR'') under Basel III as at March 31, 2018 of 18.00% as against a minimum RBI requirement of 13.00%, with Tier I being 17.68%.

During the year, your Bank has not issued any non-equity regulatory capital instrument.

Deposits

Being a banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.

Loans, Guarantees or Acquisition of Securities

Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given or securities provided or acquisition of securities by a banking company in its ordinary course of business are exempted from disclosure requirements under Section 134(3)(g) of the Companies Act, 2013.

PERFORMANCE AND CONTRIBUTION OF SUBSIDIARY AND ASSOCIATE COMPANIES

IDFC Bank has one wholly owned subsidiary company namely IDFC Bharat Limited (''IDFC Bharat''), which was formerly known as Grama Vidiyal Micro Finance Limited.

IDFC Bharat is acting as a BC for distribution of the products of IDFC Bank and has given an added momentum to the financial inclusion plan of the Bank.

During FY18, IDFC Bharat has disbursed Rs 3,744 crore of Joint Liability Group (''JLG'') loans as a BC to IDFC Bank. The yearend portfolio outstanding managed by IDFC Bharat for the financial year ended March 31, 2018 has increased to Rs 2,455 crore as compared to Rs 1,148 crore for the financial year ended on March 31, 2017,

IDFC Bharat, as a BC to IDFC Bank, has initiated mobilization of savings from the clients and reached an outstanding balance of Rs 34 crore at the end of FY18.

The number of clients for JLG loans has increased to 12.91 lakh during FY18 as against 9.6 lakh, at the end of FY17 The number of saving accounts opened by IDFC Bharat during the FY18 was 3.88 lakh.

IDFC Bank''s policy for determining material subsidiaries is available on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section. The Bank does not have any material subsidiary company as per the Companies Act, 2013 and the Listing Regulations.

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statements, which forms part of this Annual Report.

Further, pursuant to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and consolidated financial statements has been hosted on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section.

In addition thereto, the Annual Report of IDFC Bharat containing therein its audited financial statements has also been hosted on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section.

The Annual Reports of IDFC Bank and IDFC Bharat are also available at the Registered Office of the Bank during business hours i.e. from 9.30 a.m. to 6.30 p.m. on all days (except Saturday, Sunday and Public Holidays).

Any Shareholder who is interested in obtaining a physical copy of the aforesaid Annual Reports may write to the Group Company Secretary & Group Compliance Officer of the Bank on: [email protected] or send an email on [email protected].

Feedback Infra Private Limited was an associate company of IDFC Bank during FY18. However, the Bank sold partial stake in Feedback Infra Private Limited, which resulted in change in its holding from 24.61% to 17.77%. Accordingly, Feedback Infra Private Limited ceased to be an associate of the Bank w.e.f. March 19, 2018. As a result, IDFC Bank had only one associate company as on March 31, 2018, namely Millennium City Expressways Private Limited in which it holds 29.98% equity stake.

The highlights on performance of the subsidiary and associate company and their contribution to the overall performance of the Bank can be referred to in Form AOC-1, appended as Annexure 1.

Employees

Your Bank considers gender diversity during its recruitment process. Your Bank has grown significantly with a talent base of 5,814 permanent employees as on March 31, 2018 out of which 929 were women employees, as against 3,905 permanent employees as on March 31, 2017, including 686 women employees. Also, IDFC Bharat had a strong employee base of 3,856 employees as on March 31, 2018.

Your Bank stood out for the intent to shake up the industry''s "age-old conventions” the benefits that begin even before the first day and the appetite for innovative ways of working like the Twitter resume initiative.

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in this Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the Members of the Bank.

The said information is available for inspection at the Registered Office and Corporate Office of the Bank during working hours and any Member interested in obtaining such information may write to the Group Company Secretary & Group Compliance Officer and the same will be furnished on request.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure 2.

Employee Stock Option Scheme

The Employee Stock Option Scheme (IDFC Bank ESOS-2015) was framed with an object of encouraging higher participation on the part of employees in the Bank''s financial growth and success.

An effective stock option scheme enables retention of talent and aligning employee interest to that of the Shareholders.

IDFC Bank ESOS-2015 was approved by the Members at their meeting held on December 09, 2014. The Members at the AGM held on July 27, 2016 approved an ESOP pool of 6% of the paid up share capital of the Bank.

There were 90,712,744 Options outstanding at the beginning of FY18. During FY18, 20,419,100 Options were granted to the eligible employees under IDFC Bank ESOS-2015. Further, 15,351,463 Options were lapsed / forfeited and 5,068,721 Options were exercised during the year ended March 31, 2018. Accordingly, 90,711,660 Options remained outstanding as on March 31, 2018. All Options vests in a graded manner and are required to be exercised within a specific period.

The Bank has used the intrinsic value method to account for the compensation cost of Stock Options to employees of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the Option. IDFC Bank ESOS-2015 is administered by the Nomination & Remuneration Committee (''NRC'') of the Board of the Bank.

There has been no material change in IDFC Bank ESOS-2015 during FY18 and the said scheme is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, as amended from time to time.

Disclosures as required under Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and circulars issued there under, have been uploaded on the Bank''s website: www.idfcbank.com.

Further, disclosure as per the "Guidance Note on Accounting for Employee Share-based Payments” issued by the Institute of Chartered Accountants of India, are appearing in the Notes to the Standalone Financial Statements of IDFC Bank, forming part of this Annual Report.

Directors and Key Managerial Personnel

APPOINTMENT & CESSATION

All appointments of Directors are made in accordance with the relevant provisions of the Companies Act, 2013 and the Rules framed there under, the Listing Regulations, the Banking Regulation Act, 1949 and the rules, guidelines and circulars issued by the RBI from time to time.

The NRC conducts due diligence before appointment of Directors and ensures adherence to ''Fit and Proper'' criteria, as prescribed by RBI.

Mr. Vikram Limaye (DIN: 00488534) tendered his resignation from the Board of IDFC Limited effective from July 15, 2017 consequent to his appointment as the Managing Director & CEO of National Stock Exchange of India Limited. Thereafter, the Board of IDFC Limited appointed Mr. Sunil Kakar (DIN: 03055561) as the Managing Director & CEO of IDFC Limited in place of Mr. Limaye w.e.f. July 16, 2017. As a result,

Mr. Limaye resigned from the Board of IDFC Bank w.e.f. July 15, 2017 and IDFC Limited nominated Mr. Sunil Kakar on the Board of IDFC Bank w.e.f. July 16, 2017 in place of Mr. Limaye.

Further, Mr. Sunil Kakar, on taking charge as the Managing Director & CEO of IDFC Limited, resigned as the Chief Financial Officer of IDFC Bank w.e.f. July 15, 2017

The aforesaid appointment of Mr. Kakar was approved by the Shareholders of the Bank, at its 3rd AGM, held on July 28, 2017 at Chennai.

Based on the recommendations of the NRC, the Board of IDFC Bank had at its meeting held on April 25, 2017, recommended the appointment of Mr. Avtar Monga (DIN: 00418477) as the Executive Director, subject to approvals of the RBI and of the Shareholders of the Bank. In terms of Section 35B of the Banking Regulation Act, 1949, an application was made to the RBI seeking its approval for the appointment of Mr. Monga as the Executive Director. Since, the proposed merger of Capital First Limited with IDFC Bank, will require the Board of the Bank to be reconstituted, the application under Section 35B of the Banking Regulation Act, 1949 was withdrawn from RBI.

The Board appointed Mr. Bipin Gemani as the interim Chief Financial Officer of the Bank at its meeting held on January 13, 2018, w.e.f. the said date.

Since, the terms of office of Ms. Veena Mankar, Mr. Ajay Sondhi, Mr. Abhijit Sen, Mr. Rajan Anandan and Dr. Rajiv B. Lall will expire in FY19, the Board, based on the recommendation of the NRC, has recommended re-appointment of the following directors:

1. Re-appointment of Ms. Veena Mankar as an ID for a period of 5 years w.e.f July 27, 2018 or for such other period as the RBI may approve;

2. Re-appointment of Mr. Abhijit Sen as an ID for a period of 5 years w.e.f July 27, 2018 or for such other period as the RBI may approve;

3. Re-appointment of Mr. Ajay Sondhi as an ID for a period of 5 years w.e.f July 27, 2018 or for such other period as the RBI may approve;

4. Re-appointment of Mr. Rajan Anandan as an ID for a period of 5 years w.e.f December 1, 2018 or for such other period as the RBI may approve; and

5. Re-appointment of Dr. Rajiv B. Lall as the Founder Managing Director & Chief Executive Officer for a period of 2 years w.e.f October 1, 2018 or for such other period as the RBI may approve.

In terms of Section 160 of the Companies Act, 2013, your Bank has received notice in writing from Members proposing candidature of the aforementioned Directors.

The relevant details including brief profiles of Ms. Veena Mankar, Mr. Abhijit Sen, Mr. Ajay Sondhi, Mr. Rajan Anandan and Dr. Rajiv B. Lall are given in the Exhibit to the Notice of the 4th AGM and are also available on the Bank''s website: www.idfcbank.com.

None of the Directors of the Bank are disqualified to be appointed as Directors in accordance with Section 164 of the Companies Act, 2013.

Further, the Bank had received a declaration from all the ID, at the time of appointment and also at the first meeting of the Board of Directors held in FY18, that they meet the criteria of independence specified under sub-section (6) of Section 149 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Qualification of Directors) Rules 2014 and Regulation 16 of the Listing Regulations, for holding the position of ID and that they shall abide by the ''Code for Independent Directors’ as per Schedule IV of the Companies Act, 2013.

Each ID of the Bank, is independent of all other Directors and the Management.

The Board recommends the re-appointment of the aforesaid Directors to the Shareholders at the ensuing AGM.

Brief Profiles of all the Directors are available on the Bank''s website: www.idfcbank.com.

FRAMEWORK FOR APPOINTMENT OF DIRECTORS

The Bank has in place a framework for Board Diversity, Fit & Proper Criteria and Succession Planning for appointment of Directors on the Board of the Bank.

RETIREMENT BY ROTATION

In accordance with the Articles of Association of the Bank and pursuant to the provisions of Section 152 of the Companies Act, 2013, Ms. Anindita Sinharay, Nominee Director representing the Government of India, would retire by rotation at the ensuing AGM and being eligible, offers herself for re-appointment.

KEY MANAGERIAL PERSONNEL

As on the date of this report, the following officials of the Bank are the ''Key Managerial Personnel'' pursuant to the provisions of Section 203 of the Companies Act, 2013:

Dr. Rajiv B. Lall

Founder Managing Director & CEO

Mr. Bipin Gemani

Chief Financial Officer (appointed w.e.f. January 13, 2018)

Mr. Mahendra N. Shah

Group Company Secretary &

Group Compliance Officer

All the Key Managerial Personnel are part of the Executive Committee of IDFC Bank.

Familiarization Programmes for Board Members

At the time of appointment, all Directors of your Bank are made familiar with their roles, responsibilities, rights and duties along with a brief overview of your Bank''s operations in a nutshell.

The Board members are further provided with necessary documents, reports and internal policies to enable them to familiarize with the Bank''s procedures and practices.

Periodic presentations are made at the Board and Committee meetings on business and performance of the Bank, global business environment, business strategy and associated risks, responsibilities of the Directors etc.

Detailed presentations on the Bank''s business and updates thereon were made at the meetings of the Directors and Committees, held during the year

The details of the said programmes are available on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section.

Board Evaluation

The detailed process indicating the manner in which annual evaluation, pursuant to Listing Regulations and Companies Act, 2013, has been done by the Board, of its own performance and that of its Committees and Individual Directors is given in the Corporate Governance Report, which forms part of this Annual Report.

Board Meetings

During FY18, nine (9) board meetings were held; details of which are given in the Corporate Governance Report, which forms part of this Annual Report.

Board Committees

In compliance with various regulatory requirements, several Board-level Committees have been constituted to delegate matters that require greater and more focused attention.

Details on the constitution, terms of reference, meetings held and attendance of all the Board-level Committees are given in the Corporate Governance Report which forms part of this Annual Report.

A brief overview of some of the Board-level Committees is furnished below:

Audit Committee

As on March 31, 2018, the Audit Committee had the following members:

Mr. Abhijit Sen

Chairman | Independent Director

Mr. Anand Sinha

Member | Independent Director

Mr. Ajay Sondhi

Member | Independent Director

Ms. Veena Mankar

Member | Independent Director

Mr. Sunil Kakar

Member | Nominee Director

The Audit Committee met six (6) times during FY18 i.e. on April 25, 2017; July 26, 2017; October 24, 2017; January 13, 2018; January 18, 2018 and March 08, 2018.

All recommendations made by the Audit Committee during the year were accepted by the Board.

The Audit Committee was reconstituted w.e.f. April 24, 2018 and accordingly, the Committee now comprises the following members:

Mr. Abhijit Sen

Chairman | Independent Director

Mr. Anand Sinha

Member | Independent Director

Mr. Sunil Kakar

Member | Nominee Director

Corporate Social Responsibility Committee

The Corporate Social Responsibility (''CSR'') Committee has the following members:

Dr. Rajiv B. Lall

Chairman | Founder Managing Director & CEO Mr. Abhijit Sen

Member | Independent Director

Ms. Veena Mankar

Member | Independent Director

The CSR Committee of the Bank met one (1) time during FY18 on April 25, 2017, The CSR Policy of the Bank is available on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section.

The CSR initiatives of the Bank are implemented through IDFC Foundation, a Section 8 company under the Companies Act, 2013. In order to achieve impact and scale, the CSR activities undertaken during the year mainly focused on two national initiatives a) Livelihood enhancement through financial inclusion and b) Shwetdhara-Cattle Care program.

Details of the CSR initiatives undertaken by IDFC Bank through IDFC Foundation are given in Annexure 3.

Nomination and Remuneration Committee / Remuneration Policy

The Nomination and Remuneration Committee was constituted in compliance with the RBI Guidelines, Section 178 of the Companies Act, 2013 and Listing Regulations.

The NRC has the following members:

Mr. Ajay Sondhi

Chairman | Independent Director

Mr. Anand Sinha

Member | Independent Director

Ms. Veena Mankar

Member | Independent Director

In line with the provisions of the Companies Act, 2013 and RBI guidelines issued in this regard, from time to time, your Bank has a stable framework for remuneration of the various categories of persons at IDFC Bank and accordingly has two separate remuneration policies as given below:

I. Remuneration Policy for the Whole Time / Executive Directors, Non Executive/ Independent Directors, Key Managerial Personnel and Senior Management Personnel.

The various components of remuneration itemized in this policy inter alia are as follows:

For Whole Time / Executive Directors:

a. Fixed Pay benchmarked primarily to the Indian Private Sector Banks;

b. Variable Pay in the form of annual performance bonus will be determined based on the Bank, business units and individual performance and other evaluation criteria and is not an entitlement;

c. Retiral benefits, allowances, perquisites and other benefits;

d. Stock Options;

e. Directors and Officers Liability Insurance Policy;

f. Severance Pay, if mandated by any applicable laws.

For Non-Executive / Independent Directors:

a. Commission to Non-executive / Independent Directors (other than the Part -time Chairperson);

b. Remuneration to Non-Executive Part -time Chairperson;

c. Sitting Fees and Other Expenses; and

d. Directors and Officers Liability Insurance Policy

For Key Managerial Personnel (‘KMP’) and Senior Management Personnel (‘SMP’):

a. Fixed Pay benchmarked primarily to the Indian Private Sector Banks;

b. Variable Pay in the form of annual performance bonus;

c. Retiral benefits, allowances, perquisites and other benefits;

d. Stock Options;

e. Directors and Officers Liability Insurance Policy;

f. Severance Pay, if mandated by any applicable laws.

II. Remuneration Policy for Employees (Including Risk-Takers) except for the Whole Time / Executive Directors, Non Executive / Independent Directors, KMP and SMP

The various components of remuneration itemized in this policy inter alia are as follows:

a. Fixed Pay benchmarked primarily to the Indian Private Sector Banks;

b. Variable Pay in the form of annual performance bonus;

c. Statutory Bonus, as may be mandated by any applicable laws;

d. Stock Options;

e. Severance Pay, if mandated by any applicable laws.

The principles for remuneration at IDFC Bank are guided by the Bank''s philosophy for driving employee performance to achieve its short term and long term objectives, balanced with prudent risk taking and are in compliance with the RBI''s Guidelines on Compensation of WholeTime Directors / Chief Executive Officers / Risk takers and Control function staff, etc. dated January 13, 2012.

Both the policies are available on the Bank''s website: www.idfcbank.com.

Your Bank also has a process in place for identification of independence, qualifications and positive attributes of its Directors. The NRC ensures a transparent nomination process to the board of directors with the diversity of gender, thought, experience, knowledge, perspective and in the Board.

The NRC, after taking into consideration the Remuneration Policy for the Whole Time / Executive Directors, Non-Executive/ Independent Directors, Key Managerial Personnel and Senior Management Personnel, recommends their remuneration to the Board for its approval.

Internal Financial Controls

The Bank has adequate internal controls and processes in place with respect to its financial statements that provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements.

These controls and processes are driven through various policies, procedures and certifications which also ensure the orderly and efficient conduct of the Bank''s business, including adherence to Bank''s policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The controls and processes are being reviewed periodically. The Bank has a mechanism of testing the controls and processes at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.

Information / Cyber Security Framework

IDFC Bank since its inception has put in place a robust Information / Cyber Security Framework. Our Bank being a green field setup, has Information Security woven into our banking platform and seamlessly merges both culturally and technologically A dedicated team of security professionals are part of the Information Security Group (''ISG'') who govern the Information Security practices in the Bank. Our Bank has put in place state of the art security technologies including several industry ''firsts'' technology solutions and adopted "defense in depth” approach & industry best practices as part of our security framework and architecture. Our Bank is mindful of the need to always be on the guard and monitors its environment 24/7/365. Given the changing threat landscape and evolving technology platforms, the attempt is to progressively move towards adoption of proactive and adaptive platforms for quick detection and recovery.

Statutory Auditors

Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (''DHS'') (Registration No.: 117365W), will retire as the Statutory Auditors of the Bank at the ensuing AGM. In terms of Section 139 of the Companies Act, 2013 read with Companies (Audit & Auditors) Rules, 2014, the Board of Directors has recommended the appointment of DHS as Statutory Auditors of the Bank for a period of One (1) year, subject to approval of the RBI, to hold office from the conclusion of the ensuing 4th AGM till the conclusion of 5th AGM, on a remuneration to be decided by the Board or Committee thereof, DHS, the retiring auditors, have confirmed that their appointment, if made, would be in conformity with the provisions of Section 139(1) read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and Section 141 of the Companies Act, 2013 and have given their consent to be appointed.

The Bank has received approval from the RBI for the aforesaid appointment.

The Board recommends the appointment of DHS as the Statutory Auditors of the Bank at the ensuing AGM.

Auditors’ Report

There were no qualifications, reservations, adverse remarks or disclaimers made by the Statutory Auditors in their report for the financial year ended March 31, 2018.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank had appointed Bhandari & Associates, Company Secretaries to undertake the Secretarial Audit of the Bank for the financial year ended March 31, 2018.

The Bank provided all assistance and facilities to the Secretarial Auditors for conducting their audit.

The Secretarial Audit Report is appended as Annexure 4 to this report.

There were no qualifications, reservations, adverse remarks or disclaimers made by the Secretarial Auditors in their report for the financial year ended March 31, 2018.

Compliance with applicable Secretarial Standards

The Bank has generally complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Concurrent Audit

Your Bank has a regular process of getting concurrent audit done for the treasury and trade finance operations. The concurrent audit is done by BSR & Co. LLP, Chartered Accountants for treasury operations and Ernst & Young LLP, Chartered Accountants for trade finance operations. The concurrent audit reports for both the functions are placed before the Audit Committee for review.

Instances of Fraud, if any reported by the Auditors or the Management

There have been no instances of fraud reported by the Auditors under Section 143(12) of the Companies Act, 2013 or by the Management.

Risk Management Framework

Your Bank operates within an effective Risk Management Framework to actively manage all the material risks faced by the Bank, in a manner consistent with the Bank''s risk appetite. Your Bank aims to establish itself as an industry leader in the management of risks and strives to reach the efficient frontier of risk and return for the Bank and its Shareholders. The Board has the ultimate responsibility for the Bank''s risk management framework.

The Board is responsible for approving the Bank''s risk appetite, risk tolerance and related strategies and policies.

To ensure the Bank has a sound system of risk management and internal controls in place, the Board has established the Risk Management Committee of the Board. The Risk Management Committee of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity and operational risks. The Committee also reviews the Risk Appetite & Enterprise Risk Management framework, Internal Capital Adequacy Assessment Process (''ICAAP'') and Stress Testing.

Your Bank has in place a Board approved Risk Management Policy. The Policy aims at establishing a risk culture and governance framework to enable identification, measurement, mitigation and reporting of risks within the Bank in line with the Bank''s risk appetite, risk - return trade-off and the escalation & accountability framework.

Vigil Mechanism / Whistle Blower Policy

The Bank has implemented a Whistle Blower Policy in compliance with the provisions of the Listing Regulations, Companies Act, 2013 and RBI notification on Introduction of ''Protected Disclosures Scheme for Private Sector and Foreign banks''. Pursuant to this policy, the Whistle Blowers can raise concerns relating to reportable matters (as defined in the policy) such as breach of IDFC Bank Code of Conduct, employee misconduct, fraud, illegal unethical imprudent behaviour corruption, safety and misappropriation or misuse of Bank funds / assets etc. Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower to those who avail such mechanism and also provides for direct access to the Chairman of the Audit Committee, in exceptional cases. The Audit Committee reviews the functioning of the Vigil Mechanism from time to time. None of the Whistle Blowers has been denied access to the Audit Committee of the Board. The Whistle Blower Policy is available on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section. The Whistle Blower Policy is communicated to the employees and is also posted on the Bank''s intranet.

In addition to the above, IDFC Bank has formulated a Vigilance Policy for effectively managing the risks faced by the Bank on account of corruption, malpractices and frauds.

Ms. Susmita Ghosh is the Chief Vigilance Officer of IDFC Bank.

Anti-Sexual Harassment Policy

Your Bank has in place a policy on Anti-Sexual Harassment, which reflects the Bank''s zero-tolerance towards any form of prejudice, gender bias and sexual harassment at the workplace. Your Bank has set up an Internal Committee to receive and redress complaints of sexual harassment. Your Bank undertakes ongoing trainings to create awareness on this policy. During FY18, employees were given training on the subject so that they understand the anti-sexual harassment policy, the complete framework adopted

by the Bank to report and resolve instances of sexual harassment etc., details of which have been mentioned in the Business Responsibility Report, which is hosted on the Bank''s website: www.idfcbank.com.

There were no cases of sexual harassment during the year under review.

Significant and Material Orders passed by the Regulators / Courts / Tribunals

During the year under review, no significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status or the operations of the Bank.

Material Changes and Commitments affecting the Financial Position of the Bank

There are no material changes and commitments, affecting the financial position of the Bank which have occurred between the end of the financial year of the Bank i.e. March 31, 2018 and the date of this Board''s Report.

Related Party Transactions

All the related party transactions that were entered into during the financial year were on arm''s length basis and in the ordinary course of business of the Bank. IDFC Group including IDFC Bank have always been committed to good corporate governance practices, including in matters relating to related party transactions.

All the related party transactions are placed before the Audit Committee for approval. Prior omnibus approval is obtained from the Audit Committee for foreseen related party transactions. Prior omnibus approval is also obtained for unforeseen related party transactions subject to their value not exceeding R 1 crore per transaction. The required disclosures are made to the Committee on a quarterly basis in terms of the omnibus approval of the Committee.

Pursuant to the provisions of Companies Act, 2013 and Rules made there under Listing Regulations and in back-drop of the Bank''s philosophy on such matters, the Bank has in place a Board approved policy on related party transactions. The said policy is also uploaded on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section. Since all related party transactions entered into by the Bank were in the ordinary course of business and on arm''s length basis, Form AOC-2 as prescribed under Section 134(3)(h) of the Companies Act, 2013 is not applicable to the Bank.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not applicable to your Bank.

However, your Bank has been taking steps at all times for conservation of energy. The initiatives taken for conservation of energy has been mentioned in the Business Responsibility Report, which is hosted on the Bank''s website: www.idfcbank.com.

Also, your Bank has been increasingly using information technology in its operations, for more details please refer Management Discussion and Analysis, which forms part of this Annual Report.

Special Business

The Board of Directors recommends the following items under Special Business for approval of the Shareholders at the ensuing AGM:

1. Offer and Issue of Debt Securities on Private Placement basis

2. Re-appointment of Mr. Abhijit Sen as an Independent Director of the Bank

3. Re-appointment of Ms. Veena Mankar as an Independent Director of the Bank

4. Re-appointment of Mr. Ajay Sondhi as an Independent Director of the Bank

5. Re-appointment of Mr. Rajan Anandan as an Independent Director of the Bank

6. Re-appointment of Dr. Rajiv B. Lall as the Founder Managing Director &

Chief Executive Officer of the Bank.

7. Alteration of Articles of Association of the Bank

Green Initiative

In accordance with ''Green Initiative'', your Bank is sending the Annual Report and Notice of AGM in electronic mode to those Shareholders whose e-mail addresses are registered with the Bank and / or the Depository Participants.

Your Directors are thankful to the Shareholders for their participation in this Green Initiative.

We look forward to your continued support towards this Initiative.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year under review, as required by Regulation 34(2)(e) of the Listing Regulations forms part of this Annual Report.

Corporate Governance

Your Directors ensure the Bank''s prosperity by collectively directing its affairs, whilst meeting the appropriate interests of its Shareholders and other Stakeholders.

Your Bank is committed to achieve the highest standards of Corporate Governance. A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures, as stipulated under Listing Regulations, Companies Act, 2013 and Rules made thereunder forms part of this Annual Report.

A Certificate from the Statutory Auditors of the Bank, Deloitte Haskins & Sells, Chartered Accountants, Ahmadabad (Registration No. 117365W), conforming compliance to the conditions of Corporate Governance as stipulated under Listing Regulations is affixed at the beginning of the Corporate Governance Report and forms part of this Annual Report.

CEO & CFO Certification

Certificate issued by Dr. Rajiv B. Lall, Founder Managing Director & CEO and Mr. Bipin Gemani, Chief Financial Officer of the Bank, in terms of Regulation 17(8) of Listing Regulations, for the year under review was placed before the Board of Directors and forms part of this Annual Report.

Business Responsibility Report

The Business Responsibility Report, in terms of Regulation 34(2)(f) of Listing Regulations, describing the initiatives taken by IDFC Bank from an environmental, social and governance perspective is hosted on the Bank''s website: www.idfcbank.com under the ''Investor Relations'' section and constitutes a part of this Annual Report. Any Member interested in obtaining a physical copy of the same may write to the Group Company Secretary & Group Compliance Officer of the Bank by sending an e-mail on [email protected].

Extract of Annual Return

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return (Form No. MGT-9) as at March 31, 2018 forms part of this report and is appended as Annexure 5.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, it is hereby confirmed that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. the Directors had 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 at the end of the financial year and of the profit of the Bank for that period;

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

d. the Directors had prepared the annual accounts on a going concern basis;

e. the Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively

Acknowledgement

Your Directors take this opportunity to express their deep and sincere gratitude to our Customers, Business Partners, Business Correspondents and Vendors for the trust and confidence reposed by them in the Bank.

We would like to thank our Shareholders, Bondholders, Investors and Financial Institutions for their co-operation and assistance during the year under review.

Your Directors would like to place on record their appreciation for the support received from IDFC Group, Capital First Group, Government of India, State Governments, various Ministries, RBI, SEBI, Stock Exchanges, Depositories, Rating Agencies, CCI, Unique Identification Authority of India (''UIDAI''), National Payments Corporation of India (''NPCI''),

The Clearing Corporation of India Limited (''CCIL''), Indian Banks'' Association (''IBA''), Insurance Regulatory and Development Authority of India (''IRDA''), Fixed Income Money Market and Derivatives Association of India (''FIMMDA'') and all other regulatory agencies and associations with which the Bank interacts.

Your Directors sincerely acknowledge the commitment and hard work put in by all employees of the Bank through its transformational journey. Their valuable contribution has enabled the Bank to make significant progress towards achieving its objective of becoming a diversified universal bank, with a focus on retail banking.

For and on behalf of the Board of Directors

VEENA MANKAR

Independent Non-Executive

Chairperson

JUNE 29, 2018


Mar 31, 2017

Dear Members,

The Directors are pleased to present the Third Annual Report of IDFC Bank together with the audited financial statements for the financial year ended March 31, 2017

State of Affairs of the Bank

Your Bank has successfully and steadily diversified its business mix and added new revenue streams. It has expanded its reach to serve new customer segments both on the retail as well as wholesale side of the business.

Your Bank is building a national footprint with presence across 20 States, 150 districts, 19 major cities and 33,000 villages.

As on March 31, 2017, your Bank’s network comprised of 74 branches, 57 of which were Bharat branches, 13 were Bharat Plus branches and 4 were Wholesale Bank branches. Your Bank had a total of 47 ATMs, out of which 26 were White Label ATMs. Further, your Bank had a total of 8,142 outlets, which include MicroATMs, cashless PDS outlets and Aadhaar Pay merchant points.

As on March 31, 2017, your Bank had a total of 13.8 lacs customers out of which 9.6 lacs were customers of subsidiary company of the Bank i.e. IDFC Bharat Limited (formerly known as Grama Vidiyal Micro Finance Limited).

Your Bank is now offering a wide gamut of products to cater to the needs of customers from all segments which can be viewed on our website: www.idfcbank.com.

During the year under review, your Bank was recognised in various ways and the significant awards presented to your Bank are highlighted at the beginning of this Annual Report.

ACQUISITION

During FY17, your Bank acquired 100% equity stake of Grama Vidiyal Micro Finance Limited (‘GVMFL’) thereby making it a wholly owned subsidiary of the Bank.

GVMFL had I 1,502 crore of Asset Under Management, over 300 branches in 7 states and over a million customers. It was a profitable entity with net profits of I 42 crore in FY16, with Return on Assets of 3.4% and Return on Equity of 31%. Its net worth was I 155 crore and its portfolio at risk as on March 31, 2016 was 0.001%.

Post-acquisition, GVMFL surrendered its NBFC-MFI Licence issued by the Reserve Bank of India (‘RBI’).

GVMFL has now been renamed and is known as IDFC Bharat Limited.

IDFC Bharat Limited (‘IDFC Bharat’) is presently acting as a Business

Correspondent for distribution of the products of IDFC Bank and has given an added momentum to the financial inclusion plan of the Bank.

As on March 31, 2017, IDFC Bharat had a widespread network comprising of 326 branches, with operations in seven states namely Tamil Nadu, Maharashtra, Madhya Pradesh, Puducherry, Kerala, Karnataka and Gujarat.

DEMONETISATION

On November 08, 2016, the Government of India announced the demonetisation of all I 500 and I 1,000 bank notes (‘Specified Bank Notes’). The exchange of the Specified Bank Notes for bank notes of other valid denominations or depositing the Specified Bank Notes for crediting to the customers’ accounts, was permitted up to December 30, 2016. Your Bank ensured timely compliance with RBI notifications issued in this regard from time to time.

In the days following the demonetisation, the country faced severe cash shortages.

Your Bank took various steps to support this initiative of the Government of India and helped the general public in various ways. Some of them were separate counters at all branches for senior citizens and differently abled sections of the society, door step facility for exchanging notes, extra working hours put in by employees to meet the requirement of cash, faster account opening procedures, etc.

Financial Highlights 2016-17

Summary

IN Rs. CRORE

STANDALONE

CONSOLIDATED

PARTICULARS

FY17

FY16*

FY17

Deposits

40,208

8,219

40,098

Borrowings

50,262

57,160

50,262

Advances

49,402

45,699

49,402

Total Assets / Liabilities

112,160

83,216

112,064

Total Income

9,546

4,052

9,597

Profit before Depreciation & Tax

1,605

757

1,650

Net Profit

1,020

467

1,019

Amount available for appropriation

2,233

1,661

Appropriations

IN Rs. CRORE

PARTICULARS

STANDALONE

FY17

FY16

Transfer to Statutory Reserve

255

118

Transfer to Capital Reserve

6

83

Transfer to Investment Reserve

1

-

Transfer to Special Reserve

325

145

Proposed dividend (incl. tax on dividend)**

-

102

Balance in P&L account carried forward

1,646

1,213

Key Performance Indicators

PARTICULARS

STANDALONE

FY17

FY16

Capital Adequacy Ratio (Basel III)

18.90%

22.04%

Gross NPA

2.99%

6.16%

Net NPA

1.14%

2.39%

Return on Assets

1.04%

1.04%

* The Bank commenced its banking operations w.e.f. October 01, 2015.

**The Board of Directors, at their meeting held on April 25, 2017, have proposed a dividend of C 0.75 per equity share of C 10 each amounting to C 307.11 crore, inclusive of dividend distribution tax. The proposal is subject to the approval of Shareholders at the ensuing Annual General Meeting. In terms of the revised Accounting Standard AS-4 ‘Contingencies and Events occurring after the Balance sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016 dated March 30, 2016, proposed dividend is not recognised as a liability as on March 31, 2017. Proposed dividend was however accounted for as a liability as at March 31, 2016 in line with the existing accounting standard applicable at that time.

In the weeks following government’s decision to demonetise currencies, the Government initiated digitisation of payments on a war footing. As people switched to mobile wallets and cards for payments, a large section of the population had no access to digital payment methods.

Subsequently, your Bank officially launched IDFC Aadhaar Pay, India’s first Aadhaar-linked cashless merchant solution. IDFC Aadhaar Pay proves that technology can revolutionise last mile payments. By using the fingerprint as digital identity it empowers even individuals without a phone to pay electronically for small value transactions. The convenience of Aadhaar Pay is expected to encourage a behavioural shift towards digital payments.

Further, details on Financial Summary and Business Review are appearing in the Chapter ‘Management Discussion and Analysis’, which forms part of this Annual Report.

Dividend

In accordance with Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’), your Bank has formulated a Dividend Distribution Policy which ensures a fair balance between rewarding its Shareholders and retaining enough capital for the Bank’s future growth. This Policy is available on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section.

IDFC Bank started its banking operations on October 01, 2015. After completion of just 18 months of operations, your Directors are pleased to recommend a dividend for the 2nd consecutive year at the rate of Rs. 0.75 per equity share of Rs. 10 each (i.e. 7.5%) for the year ended March 31, 2017 as against Rs. 0.25 per equity share for FY16.

The Register of Members and Share Transfer Books will remain closed from Saturday, July 22, 2017 to Friday July 28, 2017 (both days inclusive) for the purpose of payment of dividend for the financial year ended March 31, 2017,

Dividend will be paid to those Members whose names appear in the Register of Members as on Friday, July 21, 2017; in respect of shares held in dematerialised form, it will be paid to those Members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date. Dividend shall be subject to tax on dividend to be paid by the Bank.

Above dividend would be paid subject to approval by the Members at the ensuing Annual General Meeting (‘AGM’).

Capital Raising & Capital Adequacy Ratio

During FY17, 6,382,848 equity shares of Rs. 10 each were issued and allotted to the eligible employees of the Bank on exercise of Options granted under IDFC Bank Limited Employee Stock Option Scheme 2015 (‘IDFC Bank ESOS-2015’).

As on March 31, 2017, the issued, subscribed and paid-up share capital of your Bank was Rs. 33,990,061,840 comprising of 3,399,006,184 equity shares of Rs. 10 each.

Subsequently on April 17, 2017, May 16, 2017 and June 15, 2017, the Bank issued and allotted 351,921; 1,121,338 and 519,411 equity shares of Rs. 10 each respectively, which resulted in an increase in share capital and the share capital as on the date of this report stands at Rs. 34,009,988,540 i.e. 3,400,998,854 equity shares of Rs. 10 each.

Also, your Bank has not issued any equity shares with differential voting rights during the year

During the year ended March 31, 2017, your Bank had issued 4,800 Senior Unsecured Redeemable Long Term Bonds in the nature of Non-Convertible Debentures aggregating to Rs. 480 crore. These Bonds were rated ‘IND AAA’ (Stable Outlook) by India Ratings & Research Private Limited and ‘[ICRA] AAA’ (Stable Outlook) by ICRA Limited.

Your Bank is well capitalised and has a Capital Adequacy Ratio (‘CAR’) under Basel III as at March 31, 2017 of 18.90% as against RBI norms of 13.00%, with Tier I being 18.54%.

During the year, your Bank has not issued any instrument eligible under Tier II.

Deposits

Being a banking company, the disclosures required as per Rule 8(5)(v)&(vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.

Loans, Guarantees or Acquisition of Securities

Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given or securities provided or acquisition of securities by a banking company in its ordinary course of business are exempted from disclosure requirements under Section 134(3)(g) of the Companies Act, 2013.

Subsidiary / Associate Companies

IDFC Bank acquired 100% equity stake of Grama Vidiyal Micro Finance Limited (now renamed as IDFC Bharat Limited) on October 13, 2016, thereby making it a wholly owned subsidiary of the Bank.

Post acquisition, IDFC Bharat surrendered its NBFC-MFI Licence issued by the RBI and has discontinued its micro finance business. IDFC Bharat is presently acting as a Business Correspondent for distribution of the products of IDFC Bank and has given an added momentum to the financial inclusion plan of the Bank.

The Bank’s policy for determining material subsidiaries is available on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section. The Bank does not have any material subsidiary company as per the Companies Act, 2013 and the Listing Regulations.

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statements, which forms part of this Annual Report.

Further, pursuant to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and consolidated financial statements has been hosted on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section.

In addition thereto, the Annual Report of IDFC Bharat containing therein its audited financial statements has also been hosted on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section.

The Annual Report of IDFC Bank and IDFC Bharat is also available for inspection at the Registered Office of the Bank during business hours i.e. from 9.30 a.m. to 6.30 p.m. on all days (except Saturday, Sunday and Public Holidays).

Any Shareholder who is interested in obtaining a physical copy of any of the aforesaid Annual Report may write to the Company Secretary & Chief Compliance Officer of the Bank on: mahendra.shah@ idfcbank.com or send an email on [email protected].

IDFC Bank has two associate companies namely Feedback Infra Private Limited and Millennium City Expressways Private Limited in which it holds 24.61% and 29.98% equity stake respectively.

A statement containing salient features of the financial statement of subsidiary and associate companies in Form AOC-1 is appended as Annexure 1.

The highlights of performance of subsidiary and associate companies and their contribution to the overall performance of the Bank can be referred in Form AOC-1 as well as Consolidated Financial Statements, which forms part of this Annual Report.

Employees

Your Bank considers gender diversity during its recruitment process. Your Bank has grown significantly with a talent base of 3,905 permanent employees as on March 31, 2017 out of which 686 were women employees. Also, IDFC Bharat, subsidiary company of the Bank, had a strong employee base of 3,432 employees as on March 31, 2017

Your Directors are proud to inform that your Bank has been officially listed in LinkedIn’s Top Companies list where India wants to work now. This is an incredible recognition and indeed a proud moment for all of us at IDFC Bank as we contribute to build the ‘Bank of Now’.

Your Bank stood out for the intent to shake up the industry’s “age-old conventions” the benefits that begin even before the first day and the appetite for innovative ways of working like the Twitter resume initiative.

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in this Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the Members of the Bank. The said information is available for inspection at the Registered Office and Corporate Office of the Bank during working hours and any Member interested in obtaining such information may write to the Company Secretary & Chief Compliance Officer and the same will be furnished on request.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as Annexure 2.

Employee Stock Option Scheme

The Employee Stock Option Scheme (IDFC Bank ESOS-2015) was framed with an object of encouraging higher participation on the part of employees in the Bank’s financial growth and success.

An effective stock option scheme enables retention of talent and aligning employee interest to that of the Shareholders.

IDFC Bank ESOS-2015 was approved by the Members at their meeting held on December 09, 2014. The Members at the AGM held on July 27, 2016 approved reduction in the ESOP pool from 7% to 6% of the paid up share capital of the Bank.

There were 74,651,161 Options outstanding at the beginning of FY17 During FY17, 31,387,500 Options were granted to the eligible employees under IDFC Bank ESOS-2015. Further, 8,943,069 Options were lapsed / forfeited and 6,382,848 Options were exercised during the year ended March 31, 2017. Accordingly, 90,712,744 Options remain outstanding as on March 31, 2017. All Options vests in a graded manner and are required to be exercised within a specific period. The Bank has used the intrinsic value method to account for the compensation cost of stock options to employees of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying share on the date, prior to the date of the grant, exceeds the exercise price on the Option. IDFC Bank ESOS-2015 is administered by the Nomination & Remuneration Committee (‘NRC’) of the Board of the Bank.

During FY17, there has been no material change in IDFC Bank ESOS-2015 and the said scheme is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, as amended from time to time. Disclosures as required under Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and circulars issued thereunder, have been uploaded on the Bank’s website: www.idfcbank.com.

Directors and Key Managerial Personnel

APPOINTMENTS

All appointments of Directors are made in accordance with the relevant provisions of the Companies Act, 2013 and the Rules framed thereunder, the Listing Regulations, the Banking Regulation Act, 1949 and the rules, guidelines and circulars issued by the RBI from time to time.

The NRC conducts due diligence before appointment of Directors and ensures adherence to ‘Fit and Proper’ criteria, as prescribed by RBI to Private Sector Banks.

Based on the recommendations of the NRC and subject to the approval of the Shareholders, the Board accorded its consent to appoint Mr. Anand Sinha (DIN: 00682433) as an Independent Director for a period of three (3) years w.e.f. August 01, 2016.

The Board further appointed Ms. Anindita Sinharay (DIN: 07724555) as a Nominee Director representing the Ministry of Finance, Government of India w.e.f, February 01, 2017,

Mr. Avtar Monga (DIN: 00418477) was appointed as the Executive Director of the Bank for a period of three (3) years w.e.f, April 25, 2017, subject to approval of the RBI and Shareholders.

Mr. Vikram Limaye (DIN: 00488534) tendered his resignation from the Board of IDFC Limited effective from July 15, 2017 consequent to his appointment as the Managing Director & CEO by the Board and Shareholders of National Stock Exchange of India Limited. Thereafter, the Board of IDFC Limited appointed Mr. Sunil Kakar (DIN: 03055561) as the Managing Director & CEO of IDFC Limited in place of Mr. Limaye w.e.f. July 16, 2017. Mr. Kakar is presently serving as the Chief Financial Officer of IDFC Bank and would resign from this position on his taking charge as the Managing Director & CEO of IDFC Limited. As a result, Mr. Limaye resigned from the Board of IDFC Bank w.e.f. July 15, 2017. IDFC Limited has now nominated Mr. Sunil Kakar on the Board of IDFC Bank w.e.f. July 16, 2017 in place of Mr. Limaye.

Your Directors appointed Mr. Sunil Kakar as a Nominee Director representing IDFC Limited (Ultimate Holding Company) w.e.f, July 16, 2017, subject to approval of the Shareholders,

None of the Directors of the Bank are disqualified to be appointed as Directors in accordance with Section 164 of the Companies Act, 2013.

Further, the Bank had received a declaration from all the Independent Directors, at the time of appointment and also before the first meeting of the Board of Directors held in FY17, that they meet the criteria of independence specified under sub-section (6) of Section 149 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Qualification of Directors) Rules 2014 and Regulation 16 of the Listing Regulations, for holding the position of Independent Director and that they shall abide by the ‘Code for Independent Directors’ as per Schedule IV of the Companies Act, 2013,

In terms of Section 160 of the Companies Act, 2013, your Bank has received notice in writing from Members along with requisite deposit of H 100,000 each proposing candidature of Mr. Anand Sinha, Ms. Anindita Sinharay, Mr. Avtar Monga and Mr. Sunil Kakar. The Board recommends the appointment of the aforesaid directors to the Shareholders at the ensuing AGM,

Brief Profiles and other details of all the aforesaid Directors are available on the Bank’s website: www.idfcbank.com,

CESSATION

During the year, Mr. Vinod Rai (DIN: 01119922), Nominee Director on the Board of the Bank representing IDFC Limited, resigned w.e.f. July 31, 2016 on being appointed as the Chairman of the Banks Board Bureau.

Mr. Anil Baijal (DIN: 01608892) resigned from the Board as a Director and Non-Executive Chairman w.e.f. December 08, 2016, pursuant to completion of his RBI approved tenure,

Mr. Baijal is now serving as the 21st Lieutenant Governor of Delhi, Subsequently, Ms. Veena Mankar (DIN: 00004168) was appointed as the Independent Non-Executive Chairperson of the Bank in his place w.e.f. December 09, 2016. The RBI accorded its approval to Ms. Veena Mankar for holding the position of Independent Non-Executive Chairperson of the Bank w.e.f. January 30, 2017,

Ms. Veena Mankar has been with the Bank as an Independent Director since July 27, 2015.

Dr. Ashok Gulati (DIN: 07062601) resigned from the Board w.e.f. February 10, 2017 pursuant to being nominated by the Government as part-time, non-official Director on the Central Board of RBI.

Mr. Vikram Limaye has resigned from the Board of IDFC Bank w.e.f. July 15, 2017 consequent to his appointment as the Managing Director & CEO by the Board and Shareholders of National Stock Exchange of India Limited.

The Board placed on record its appreciation for the valuable services rendered by Mr. Vinod Rai, Mr. Anil Baijal, Dr. Ashok Gulati and Mr. Vikram Limaye during their tenure as Directors of the Bank.

RETIREMENT BY ROTATION

As on date of this report, your Bank has nine (9) Directors as follows:

Five (5) IDs - Ms. Veena Mankar, Mr. Anand Sinha, Mr. Abhijit Sen, Mr. Ajay Sondhi and Mr. Rajan Anandan Two (2) Nominee Directors - Mr. Vikram Limaye and Ms. Anindita Sinharay Two (2) Executive Directors -Dr. Rajiv B. Lall and Mr. Avtar Monga In accordance with the Articles of Association of the Bank and pursuant to the provisions of Section 152 of the Companies Act, 2013, IDs are not liable to retire by rotation.

Out of the Two (2) Executive Directors, Dr. Rajiv B. Lall, Founder Managing Director & CEO is not liable to retire by rotation as per his terms of appointment. Mr. Avtar Monga, Executive Director is an Additional Director who was appointed w.e.f. April 25, 2017 and his appointment is placed for approval at the ensuing AGM in accordance with Section 160 and Section 161 of the Companies Act, 2013. Hence, he is not liable to retire by rotation at the ensuing AGM.

Out of the Two (2) Nominee Directors, Ms. Sinharay is an Additional Director who was appointed during FY17 and her appointment is placed for approval at the ensuing AGM in accordance with Section 160 and Section 161 of the Companies Act, 2013. Accordingly, she is not liable to retire by rotation at the ensuing AGM. Mr. Vikram Limaye, Nominee Director was eligible to retire by rotation at the ensuing AGM to be held on July 28, 2017. However, Mr. Limaye has resigned from the Board of IDFC Bank w.e.f. July 15, 2017.

In view of these circumstances, there would be no director who would be liable to retire by rotation at the ensuing AGM.

KEY MANAGERIAL PERSONNEL

As on the date of this report, the following officials of the Bank are the ‘Key Managerial Personnel’ pursuant to the provisions of Section 203 of the Companies Act, 2013:

Dr. Rajiv B. Lall

Founder Managing Director & CEO

Mr. Sunil Kakar

Chief Financial Officer (resigned w.e.f. July 15, 2017)

Mr. Mahendra N. Shah

Company Secretary & Chief Compliance Officer

Familiarisation Programmes for Board Members

At the time of appointment, all Directors of your Bank are made familiar with their roles, responsibilities, rights and duties along with a brief overview of your Bank’s operations in a nutshell.

The Board members are further provided with necessary documents, reports and internal policies to enable them to familiarise with the Bank’s procedures and practices.

Periodic presentations are made at the Board and Committee meetings on business and performance of the Bank, global business environment, business strategy and associated risks, responsibilities of the Directors etc. Detailed presentations on the Bank’s business and updates thereon were made at the meetings of the Directors and Committees held during the year,

The details of the said programmes are available on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section.

Board Evaluation

Pursuant to Listing Regulations and Companies Act, 2013, the process indicating the manner in which annual evaluation has been done by the Board of its own performance and that of its Committees and individual Directors is given in the Corporate Governance Report, which forms part of this Annual Report.

Board Meetings

During the period under review, seven (7) board meetings were held; details of which are given in the Corporate Governance Report, which forms part of this Annual Report.

Board Committees

In compliance with various regulatory requirements, several Board Committees have been constituted to delegate matters that require greater and more focused attention.

The details of the constitution, terms of reference and meetings of all the Board-level Committees are given in the Corporate Governance Report which forms part of this Annual Report.

A brief overview of some of the Board-level Committees is furnished below:

Audit Committee

The Audit Committee as constituted under Section 177 of the Companies Act, 2013 has the following members:

Mr. Abhijit Sen

Chairman | Independent Director Mr. Ajay Sondhi

Member | Independent Director

Mr. Anand Sinha

Member | Independent Director

Ms. Veena Mankar

Member | Independent Director

Mr. Vikram Limaye

Member | Nominee Director

The Audit Committee met five (5) times during FY17 i.e. on April 26, 2016; July 26, 2016; October 25, 2016; November 28, 2016 and January 25, 2017

All the recommendations made by the Audit Committee during the year were accepted by the Board.

Corporate Social Responsibility Committee

The Corporate Social Responsibility (‘CSR’) Committee as constituted under Section 135 of the Companies Act, 2013 has the following members:

Dr. Rajiv B. Lall

Chairman | Founder Managing Director & CEO

Mr. Abhijit Sen

Member | Independent Director

Ms. Veena Mankar

Member | Independent Director

The CSR Committee of the Bank met two (2) times during FY17 i.e. on April 26, 2016 and November 25, 2016.

The CSR Policy of the Bank is available on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section.

The CSR initiatives undertaken by IDFC Bank through IDFC Foundation, a Section 8 company under the Companies Act, 2013, are given in Annexure 3.

Nomination and Remuneration Committee / Remuneration Policy

The Nomination and Remuneration Committee was constituted in compliance with the RBI Guidelines, Section 178 of the Companies Act, 2013 and Listing Regulations. The NRC has the following members:

Mr. Ajay Sondhi

Chairman | Independent Director

Mr. Anand Sinha

Member | Independent Director

Ms. Veena Mankar

Member | Independent Director

The Bank has a process in place for identification of independence, qualifications and positive attributes of Directors.

Your Bank’s remuneration policy seeks to provide a framework for the remuneration of the following categories of people at IDFC Bank:

1. Whole Time / Executive Directors

2. Non-Executive / Independent Directors

3. Key Managerial Personnel and Senior Management Personnel.

The aforesaid remuneration policy is in line with the provisions of the Companies Act, 2013 and RBI guidelines issued in this regard, from time to time.

Taking into consideration the aforesaid remuneration policy, the NRC recommends remuneration of Executive Directors,

Key Managerial Personnel and Senior Management Personnel to the Board for its approval.

Internal Financial Controls

The Bank has adequate internal controls and processes in place with respect to its financial statements which provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements.

These controls and processes are driven through various policies, procedures and certification. The controls and processes are being reviewed periodically. The Bank has a mechanism of testing the controls and processes at regular intervals for their design and operating effectiveness to ascertain the reliability and authenticity of financial information.

Statutory Auditors

Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (‘DHS’) (Registration No: 117365W), will retire as the Statutory Auditors of the Bank at the ensuing AGM. In terms of Section 139 of the Companies Act, 2013 read with Companies (Audit & Auditors) Rules, 2014, the Board of Directors has recommended the appointment of DHS as Statutory Auditors of the Bank for a period of One (1) year, subject to approval of the RBI, to hold office from the conclusion of the ensuing 3rd AGM till the conclusion of 4th AGM, on a remuneration to be decided by the Board or Committee thereof,

DHS, the retiring auditors, have confirmed that their appointment, if made, would be in conformity with the provisions of Section 139(1) read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and Section 141 of the Companies Act, 2013 and have given their consent to be appointed.

The Board recommends the appointment of DHS as the Statutory Auditors of the Bank at the ensuing AGM.

Auditors’ Report

There were no qualifications, reservations, adverse remarks or disclaimers made by the Statutory Auditors in their report for the financial year ended March 31, 2017,

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank had appointed Bhandari & Associates, Company Secretaries to undertake the Secretarial Audit of the Bank for the financial year ended March 31, 2017,

The Bank provided all assistance and facilities to the Secretarial Auditors for conducting their audit.

The Secretarial Audit Report is appended as Annexure 4 to this report.

There were no qualifications, reservations, adverse remarks or disclaimers made by the Secretarial Auditors in their report for the financial year ended March 31, 2017,

Concurrent Audit

Your Bank has a regular process of getting concurrent audit done for the treasury and trade finance operations. The concurrent audit is done by BSR & Co. LLP, Chartered Accountants for treasury operations and Ernst & Young LLP, Chartered Accountants for trade finance operations. The concurrent audit reports for both the functions are placed before the Audit Committee for review.

Instances of Fraud, if any reported by the Auditors or the Management

There have been no instances of fraud reported by the Auditors under Section 143(12) of the Companies Act, 2013 or by the Management.

Risk Management Policy

Your Bank operates within an effective risk management framework to actively manage all the material risks faced by the Bank, in a manner consistent with the Bank’s risk appetite. Your Bank aims to establish itself as an industry leader in the management of risks and strives to reach the efficient frontier of risk and return for the Bank and its Shareholders. The Board has the ultimate responsibility for the Bank’s risk management framework, The Board is responsible for approving the Bank’s risk appetite, risk tolerance and related strategies and policies. To ensure the Bank has a sound system of risk management and internal controls in place, the Board has established the Risk Management Committee of the Board. The Risk Management Committee of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity and operational risks. The Committee also reviews the Risk Appetite & Enterprise Risk Management framework, Internal Capital Adequacy Assessment Process (‘ICAAP’) and Stress Testing. Your Bank has in place a Risk Management Policy approved by the Board.

Vigil Mechanism / Whistle Blower Policy

The Bank has implemented a Whistle Blower Policy in compliance with the provisions of the Listing Regulations, Companies Act, 2013 and RBI notification on Introduction of ‘Protected Disclosures Scheme for Private Sector and Foreign banks’. Pursuant to this policy, the Whistle Blowers can raise concerns relating to reportable matters (as defined in the policy) such as breach of IDFC Bank Code of Conduct, employee misconduct, fraud, illegal unethical imprudent behaviour corruption, safety and misappropriation or misuse of Bank funds / assets etc, Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimisation of Whistle Blower to those who avail such mechanism and also provides for direct access to the Chairman of the Audit Committee, in exceptional cases. The Audit Committee reviews the functioning of the Vigil Mechanism from time to time. None of the Whistle Blowers has been denied access to the Audit Committee of the Board. The Whistle Blower Policy is available on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section. The Whistle Blower Policy is periodically communicated to the employees and is also posted on the Bank’s intranet,

In addition to the above, IDFC Bank has formulated Vigilance Policy for effectively managing the risks faced by the Bank on account of corruption, malpractices and frauds. Dr. Rajeev Uberoi, General Counsel and Head - Legal and Audit, is the Chief Vigilance Officer of the Bank,

Anti Sexual Harassment Policy

Your Bank has in place a policy on Anti Sexual Harassment, which reflects the Bank’s zero-tolerance towards any form of prejudice, gender bias and sexual harassment at the workplace. Your Bank undertakes ongoing trainings to create awareness on this policy. During FY17 employees were given training on the subject through intranet quiz and lectures so that they understand the anti sexual harassment policy, the complete framework adopted by the Bank to report and resolve instances of sexual harassment etc.

For details on initiatives taken by your Bank in this regard, sexual harassment cases etc., please refer the Business Responsibility Report, which is hosted on the Bank’s website: www.idfcbank.com,

Significant and Material Orders passed by the Regulators / Courts / Tribunals

During the year under review, no significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status or operations of the Bank.

Material Changes and Commitments affecting the Financial Position of the Bank

There are no material changes and commitments, affecting the financial position of the Bank which have occurred between the end of the financial year of the Bank i.e. March 31, 2017 and the date of this Board’s Report.

Related Party Transactions

All the related party transactions that were entered into during the financial year were on arm’s length basis and in the ordinary course of business of the Bank. IDFC Group including IDFC Bank have always been committed to good corporate governance practices, including in matters relating to related party transactions.

All the related party transactions are placed before the Audit Committee for approval. Prior omnibus approval is obtained from the Audit Committee for foreseen related party transactions. Prior omnibus approval is also obtained for unforeseen related party transactions subject to their value not exceeding 11 crore per transaction. The required disclosures are made to the Committee on a quarterly basis in terms of the omnibus approval of the Committee.

Pursuant to the provisions of Companies Act, 2013 and Rules made thereunder Listing Regulations and in the back-drop of Bank’s philosophy on such matters, the Bank has in place board approved policy on related party transactions. The said policy is also uploaded on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section. Since all related party transactions entered into by the Bank were in the ordinary course of business and on arm’s length basis, Form AOC-2 as prescribed under Section 134(3)(h) of the Companies Act, 2013 is not applicable to the Bank.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not applicable to your Bank.

However, your Bank has been taking steps at all times for conservation of energy. The initiatives taken for conservation of energy has been mentioned in the Business Responsibility Report, which is hosted on the Bank’s website: www.idfcbank.com.

Also, your Bank has been increasingly using information technology in its operations, for more details please refer Management Discussion and Analysis, which forms part of this Annual Report.

Special Business

The Board of Directors recommends the following items under special business for approval of the Shareholders at the ensuing AGM:

1. Offer and Issue of Debt Securities on Private Placement basis.

2. Appointment of Mr. Anand Sinha as an Independent Director.

3. Appointment of Ms. Anindita Sinharay as a Nominee Director representing Government of India.

4. Appointment of Mr. Sunil Kakar as a Nominee Director representing IDFC Limited (Ultimate Holding Company).

5. Appointment of Mr. Avtar Monga as a Director

6. Appointment of Mr. Avtar Monga as the Executive Director,

Green Initiative

In accordance with ‘Green Initiative’, your Bank is sending the Annual Report and Notice of AGM in electronic mode to those Shareholders whose e-mail addresses are registered with the Bank and / or the Depository Participants.

Your Directors are thankful to the Shareholders for their participation in this Green Initiative.

We look forward to your continued support towards this Initiative.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year under review, as required by Regulation 34(2)(e) of the Listing Regulations forms part of this Annual Report.

Corporate Governance

Your Directors ensure the Bank’s prosperity by collectively directing its affairs, whilst meeting the appropriate interests of its Shareholders and other Stakeholders.

Your Bank is committed to achieve the highest standards of Corporate Governance. A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures, as stipulated under Listing Regulations, Companies Act, 2013 and Rules made thereunder forms part of this Annual Report.

A Certificate from the Statutory Auditors of the Bank, Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Registration No. 117365W), conforming compliance to the conditions of Corporate Governance as stipulated under Listing Regulations is affixed at the beginning of the Corporate Governance Report and forms part of this Annual Report.

CEO & CFO Certification

Certificate issued by Dr. Rajiv B. Lall, Founder Managing Director & CEO and Mr. Sunil Kakar, Chief Financial Officer of the Bank, in terms of Regulation 17(8) of Listing Regulations, for the year under review was placed before the Board of Directors and forms part of this Annual Report.

Business Responsibility Report

The Business Responsibility Report, in terms of Regulation 34(2)(f) of Listing Regulations, describing the initiatives taken by IDFC Bank from an environmental, social and governance perspective is hosted on the Bank’s website: www.idfcbank.com under the ‘Investor Relations’ section. Any Member interested in obtaining a physical copy of the same may write to the Company Secretary & Chief Compliance Officer of the Bank by sending an e-mail on mahendra.shah@ idfcbank.com.

Extract of Annual Return

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return (Form No. MGT-9) as at March 31, 2017 forms part of this report and is appended as Annexure 5.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, it is hereby confirmed that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. the Directors had 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 at the end of the financial year and of the profit of the Bank for that period;

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

d. the Directors had prepared the annual accounts on a going concern basis;

e. the Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgement

Your Directors take this opportunity to express their deep and sincere gratitude to our Customers, Business Partners, Business Correspondents and Vendors for the trust and confidence reposed by them on the Bank, which has helped your Bank gain momentum in just 18 months of its operations.

We would like to thank our Shareholders, Bondholders, Investors and Financial Institutions for their co-operation and assistance during the year under review.

Your Directors would like to place on record their appreciation for the support received from IDFC Group, Government of India, State Governments, various Ministries, RBI, SEBI, Stock Exchanges, Depositories, Rating Agencies, Unique Identification Authority of India (‘UIDAI’), National Payments Corporation of India (‘NPCI’), The Clearing Corporation of India Limited (‘CCIL’), Indian Banks’ Association (‘IBA’), Insurance Regulatory and Development Authority of India (‘IRDA’) and all other regulatory agencies and associations with which the Bank interacts.

Your Directors recognise the commitment, drive and hard work put in by each employee of the Bank as well as its subsidiary company to help your Bank towards achieving its “dharma” to materially deepen and broaden our reach, delivering differentiated service to the full range of customers - corporate and retail, urban and rural - through innovation in products, processes and technology, empowering the communities we serve to grow and prosper

For and on behalf of the Board of Directors

VEENA MANKAR

Independent Non-Executive Chairperson

JUNE 30, 2017

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