Home  »  Company  »  IDFC Bank  »  Quotes  »  Notes to Account
Enter the first few characters of Company and click 'Go'

Notes to Accounts of IDFC Bank Ltd.

Mar 31, 2017

A. BACKGROUND

IDFC Bank Limited (“the Bank”) was incorporated on October 21, 2014 as a Company under the Companies Act, 2013. Further to the grant of the universal banking license issued by the Reserve Bank of India (‘the RBI’) on July 23, 2015 and pursuant to the filing and approval of the Scheme of Arrangement under Section 391-394 of the Companies Act, 1956, between IDFC Limited and IDFC Bank Limited and their respective shareholders and creditors (‘Scheme of Arrangement’), by the Hon’ble Madras High Court vide its order dated June 25, 2015 and on fulfilment of all conditions specified under the Scheme and final banking license, the Bank has commenced its Banking operations on October 1, 2015, mainly in Commercial & Wholesale, Personal & Business Banking and Bharat (rural) Banking business. The Bank is regulated by the RBI and governed under the Banking Regulation Act, 1949. The Bank’s shares are listed on National Stock Exchange of India Limited and BSE Limited since November 6, 2015,

During the year ended March 31, 2017, the Bank has acquired 100% equity share capital of IDFC Bharat Limited (formerly known as Grama Vidiyal Microfinance Limited), a non banking finance company - microfinance institution (NBFC-MFI). On receipt of final approval from RBI and satisfaction of all the conditions (including surrender of the NBFC-MFI registration on October 18, 2016), IDFC Bharat Limited has become a wholly owned subsidiary of the Bank with effect from October 13, 2016. The Bank acquired 55,79,996 equity shares of IDFC Bharat Limited for a total consideration of Rs.310.52 crore,

B. BASIS OF PREPARATION

The financial statements have been prepared based on historical cost convention and accrual basis of accounting in accordance with the requirements prescribed under Section 29 and third schedule of the Banking Regulation Act, 1949 and in conformity with Generally Accepted Accounting Principles in India to comply with the statutory requirements prescribed under the circulars and guidelines issued by the RBI from time to time and the Accounting Standards notified under section 133 of the Companies Act, 2013, to the extent applicable and practices generally prevalent in the banking industry in India.

C. USE OF ESTIMATES

The preparation of financial statements in conformity with the Generally Accepted Accounting Principles requires the Management to make estimates and assumptions that affects the reported amount of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. The management believes that the estimates used in preparation of financial statements are prudent and reasonable. Actual results could differ from those estimates and the differences between the actual results and the estimates would be recognised in the periods in which the results are known / materialised,

Amounts in notes forming part of the financial statements for the year ended March 31, 2017 are denominated in Rs. crore to conform with the extant RBI guidelines.

1.1 IDFC Bank Limited (‘‘the Bank”) was incorporated as a Company under the Companies Act, 2013 on October 21, 2014. The Bank commenced its Banking operations on October 1, 2015, post receipt of final banking license by the RBI. Accordingly, figures for the previous period / year are not comparable since Banking operations were carried only for the period October 2015 to March 2016.

During the year ended March 31, 2017, the Bank has acquired 100% equity share capital of IDFC Bharat Limited (formerly known as Grama Vidiyal Microfinance Limited), a non banking finance company - microfinance institution (NBFC-MFI). On receipt of final approval from RBI and satisfaction of all the conditions (including surrender of the NBFC-MFI registration on October 18, 2016), IDFC Bharat Limited has become a wholly owned subsidiary of the Bank with effect from October 13, 2016. The Bank acquired 55,79,996 equity shares of IDFC Bharat Limited for a total consideration of Rs.310.52 crore.

1.2 CAPITAL ADEQUACY

The capital adequacy ratio of the Bank, calculated as per the RBI guidelines (under Basel III) is set out below :

** Includes Rs.1,594.02 crore of equity share capital issued to shareholders of IDFC Limited on account of demerger and Rs.1,797.46 crore held by IDFC Financial Holding Company Limited - Non Operative Financial Holding Company.

In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance Sheet date’, proposed dividend including dividend distribution tax of Rs.307.11 crore is not recognised as a liability as on March 31, 2017. Accordingly, the same has not been reckoned in determining capital funds in the computation of capital adequacy ratio as at March 31, 2017, Capital adequacy ratio after considering the effect of proposed dividend is 18.51%.

* The Bank commenced its banking operations from October 1, 2015 and was in operations only for a period of six months. Accordingly, figures considered for the computation of ratios are for the period October 1, 2015 to March 31, 2016 and ratios stated above are annualized (i.e. by multiplying 366 over actual number of days in operations).

$ Working funds represents average of total assets as reported to the RBI in Form X under Section 27 of the Banking Regulation Act, 1949.

@ Return on assets is computed based on net asset.

* Business is the total of average net advances and average deposits (net of inter-bank deposits). The average advances and the average deposits represents the simple average of the opening and closing figures.

* Productivity ratios are based on average employee numbers, which excludes contract staff, intern etc. & Operating profit is profit for the year before provisions and contingencies.

1.3 REPO TRANSACTIONS

Following are the details of securities sold and purchased under repo / reverse repo transactions (in face value terms) respectively including transactions under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) done during the years ended March 31, 2017 and March 31, 2016 :

1.4 During the year ended March 31, 2017, the value of sales / transfers of securities to / from HTM category (excluding one-time transfer of securities permitted to be undertaken by banks at the beginning of the accounting year and with approval of the Board of Directors and sales to the RBI under open market operation auctions) did not exceed 5% of the book value of investments held in HTM category at the beginning of the year

During the year ended March 31, 2016, the value of sales / transfers of securities to / from HTM category exceeded 5% of the book value of investments held in HTM category at the beginning of the year

1.5 DISCLOSURES ON RISK EXPOSURE IN DERIVATIVES QUALITATIVE DISCLOSURES :

a. Structure and organisation for management of risk in derivatives trading, the scope and nature of risk measurement, risk reporting and risk monitoring systems, policies for hedging and / or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants :

i The Bank undertakes transactions in FX and derivatives for the purpose of hedging the Balance Sheet, support customer FX and Derivatives hedging / business requirements and takes proprietary positions. Bank deals in various kinds of products viz. FX spot and forwards, INR and CCY Swaps and Foreign currency options. The Bank undertakes trading positions FX Spot, Forward, Swaps and Futures. Bank does not run Option book as of now. All the Option products are offered to the clients on a back to back basis.

ii Treasury Sale Desk is a customer centric desk that caters to customers’ requirements in FX and Derivatives products subject to regulatory and internal requirements. Product offering to the clients is based on Suitability and Appropriateness policy of the Bank as well as by the extant RBI guidelines. The policy ensures that the product being offered by the Bank are in sync with the nature of the underlying, risk sought to be hedged giving due regard to the risk appetite of the customer and understanding of the risk by the customer. Market Risk exposures of clients arising out of FX and Derivative transactions are monitored by the Bank on a daily basis through current exposure method. Exposures are independently monitored and reported.

iii The Bank recognises all derivative contracts (other than those designated as hedges) at fair value. The mark to market movement on the positions is monitored on a daily basis. Changes in the fair value of derivatives other than those designated as hedges are recognised in the Profit and Loss Account. Hedge transactions are accounted for on an accrual basis. Hedging transactions are undertaken by the Bank to protect the variability in the fair value or the cash flow of the underlying Balance Sheet item.

iv All the derivative transactions are governed by the FX & Derivative policy, Market Risk Management policy and Limit Management Framework of the Bank. Limit Management Framework details various types of market risk limits which are monitored on a daily basis and breaches, if any, are reported promptly. Risk assessment of the portfolio is undertaken periodically and presented to the Market Risk Committee / Asset Liability Committee. These limits are set up taking into account market volatility, risk appetite, business strategy and management experience. Bank has a clear functional segregation of Treasury operations between Front Office, Market Risk and Back Office.

b. Accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation :

Interest rate swaps are booked with the objective of managing the interest rate risk on liabilities. Interest rate swaps in the nature of hedge are recorded on accrual basis and these transactions are not marked-to-market. Any resultant profit or loss on termination of the hedge swaps is amortised over the life of the swap or underlying liability, whichever is shorter

Currency interest rate swaps in the nature of hedge, booked with the objective of managing the currency and interest rate risk on foreign currency liabilities are recorded on accrual basis and these transactions are not marked-to-market. Any resultant profit or loss on termination of hedge swaps is amortised over the life of swap or underlying liability, whichever is shorter. The foreign currency balances on account of principal of currency interest rate swaps outstanding as at the balance sheet date are revalued using the closing rate.

i The notional principal amount of derivatives reflect the volume of transactions outstanding as at the balance sheet date and do not represent the amounts at risk.

ii The Bank has computed the maximum and minimum of PV01 for the year based on daily average,

iii In respect of derivative contracts, the Bank evaluates the credit exposure arising therefrom, in line with RBI guidelines,

Credit exposure has been computed using the Current Exposure Method (CEM) which is the sum of :

a. the current replacement cost (marked-to-market value including accrued interest) of the contract or zero whichever is higher; and

b. the Potential Future Exposure (PFE) is a product of the notional principal amount of the contract and a factor that is based on the grid of credit conversion factors prescribed in RBI guidelines, which is applied on the basis of the residual maturity and the type of contract.

1.6 SPECIFIC PROVISION

The Bank holds on a prudent basis, provisions on identified advances in infrastructure sector that were extended by IDFC Limited and acquired by the Bank on demerger of Financing Undertaking, that are not non-performing (as on Balance Sheet date), on the basis of extant environment or specific information on risk of possible slippages or current pattern of servicing.

1.7 MOVEMENT IN TECHNICAL / PRUDENTIAL WRITTEN-OFF ACCOUNTS :

Technical or prudential write-offs refers to the amount of non-performing assets which are outstanding in the books of the branches, but have been written-off (fully or partially) at the head office level. Movement in the stock of technically or prudentially written-off accounts given below :

1.8 DETAILS OF NON-PERFORMING FINANCIAL ASSETS PURCHASED / SOLD

During the year ended March 31, 2017 and March 31, 2016 there were no non-performing financial assets purchased / sold by the Bank from / to other banks / FIs / NBFCs (excluding securitisation / reconstruction companies)

1.9 DETAILS OF SINGLE BORROWER LIMIT (SGL) / GROUP BORROWER LIMIT (GBL) EXCEEDED BY THE BANK

During the years ended March 31, 2017 and March 31, 2016, the Bank’s credit exposure to single borrower and group borrowers was within the prudential exposure limits prescribed by the RBI.

1.10 UNSECURED ADVANCES

During the year ended March 31, 2017, there are unsecured advances of Rs.1,588.27 crore (Previous Year Rs.3,651.52 crore) for which intangible securities such as charge over the rights, licenses, authority etc. has been taken as collateral by the Bank and the estimated value of the intangible collaterals was Rs.1,401.09 crore (Previous Year Rs.5,969.71 crore).

1.11 DISCLOSURE OF PENALTIES IMPOSED BY RBI

During the years ended March 31, 2017 and March 31, 2016, the RBI has not imposed any penalty on the bank.

1.12 EMPLOYEE BENEFITS

I The Bank has charged the following amounts in the Profit and Loss Account towards contribution to defined contribution plans which are included under schedule 16 (I) :

II GRATUITY

The following tables summarise the components of net benefit expenses recognised in the Profit and Loss Account and funded status and amounts recognised in the balance sheet for the gratuity benefit plan :

Profit and Loss Account

Net employee benefit expenses (recognised in payments to and provisions for employees) :

1.13 SEGMENT REPORTING

Business Segments :

The business of the Bank is divided into three segments : Treasury, Corporate / Wholesale Banking, Retail Banking Business and Other Banking Business. These segments have been identified and reported taking into account, the target customer profile, the nature of products and services, the differing risks and returns, the organisation structure, the internal business reporting system and the guidelines prescribed by the RBI.

1.14 DEFERRED TAX

The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under :

1.15 DRAW DOWN FROM RESERVES

The Bank has not undertaken any draw down from reserves during the year,

APPROPRIATION TO RESERVES

i Statutory Reserve

As mandated by the Banking Regulation Act, 1949, all banking companies incorporated in India shall create a reserve fund, out of the balance of profit of each year as disclosed in the Profit and Loss Account before any dividend is declared and transfer a sum equivalent to not less than twenty five per cent of such profit. The Bank has transferred Rs.255.00 crore (Previous Year Rs.118.00 crore) to Statutory Reserve for the year

ii Investment Reserve Account (IRA)

As per RBI guidelines, if provisions created on account of depreciation in the ‘AFS’ or ‘HFT’ categories are found to be in excess of the required amount in any year, the excess shall be credited to the Profit and Loss Account and an equivalent amount (net of taxes, if any and net of transfer to Statutory Reserves as applicable to such excess provision) shall be appropriated to Investment Reserve Account. During the year, the Bank has transferred Rs.0.55 crore (Previous Year Nil) to Investment Reserve Account.

iii Capital Reserve

As per RBI Guidelines, profit / loss on sale of investments in the ‘Held to Maturity’ category is recognised in the Profit and Loss Account and profit is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to Capital Reserve. Profit / loss on sale of investments in ‘Available for Sale’ and ‘Held for Trading’ categories is recognised in the Profit and Loss Account. Accordingly, the Bank has appropriated Rs.5.50 crore (Previous Year Rs.82.50 crore) being profit on sale of investments in the HTM category net of applicable taxes and transfer to statutory reserve.

iv Special Reserve

As per the provisions under Section 36(1) (viii) of Income Tax Act, 1961, the specified entity is allowed the deduction in respect of any special reserve created and maintained by it, i.e. an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head “Profits and gains of business or profession” (before making any deduction under this clause). This would be applicable till the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital (excluding the amounts capitalized from reserves) and general reserves of the entity. During the year, the Bank has transferred an amount of Rs.325.00 crore (Previous Year Rs.145.00 crore) to Special Reserve,

1.16 DISCLOSURE OF LETTERS OF COMFORT (LOCs) ISSUED BY BANKS

The Bank has not issued any Letter of Comfort to its subsidiary / group companies during the years ended March 31, 2017 and March 31, 2016.

1.17 UNHEDGED FOREIGN CURRENCY EXPOSURE

The Bank’s Credit Policy lays down that the Bank will evaluate risks arising out of unhedged foreign currency exposures of the borrowers and will also monitor the same. Both at the time of initial approval as well as subsequent reviews, the assessment of credit risk arising out of foreign currency exposure of the borrowers include details of imports, exports, repayments of foreign currency borrowings, as well as hedges done by the borrowers or naturally enjoyed by them vis-a-vis their intrinsic financial strength, history of hedging and losses arising out of foreign currency volatility. The details of unhedged foreign currency exposure of customers are monitored periodically. The Bank also maintains additional provision and capital, in line with RBI guidelines,

During the year ended March 31, 2017, the Bank has made incremental provision of Rs.1.21 crore (Previous Year Rs.8.17 crore) and held incremental capital of Rs.52.74 crore (Previous Year Rs.22.55 crore) towards borrowers having unhedged foreign currency exposures,

1.18 DISCLOSURES ON REMUNERATION

Qualitative disclosures

a Information relating to the composition and mandate of the Remuneration Committee :

The Board nomination and remuneration committee comprised of the following members :

Mr. Ajay Sondhi Chairman

Ms. Veena Mankar Member

Mr. Anand Sinha Member

During FY 2017, Mr. Vinod Rai and Mr. Anil Baijal were members of nomination and remuneration committee and they resigned from the Board w.e.f. July 31, 2016 and December 08, 2016 respectively

i Evaluate performance of the Whole Time Directors (WTDs) (including the Managing Director & CEO) against predetermined parameters

ii Make recommendations on remuneration (including performance bonus and perquisites) of Whole Time Directors

iii Approve policy and quantum of variable pay, bonus, stock options and increments for the employees of the Bank

iv Frame guidelines for the Employees Stock Option Scheme (ESOS) and recommend grants of the Bank’s stock options to Whole Time Directors of the Bank

b Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy :

The Bank has under the guidance of the Board and the Nomination and Remuneration Committee, follows compensation practices intended to drive pay for performance within the framework of prudent risk management.

Specific principles and objectives of IDFC Bank remuneration policy and design include :

i Help attract and retain employees :

- Pay elements and structure to be market competitive

- Flexibility and agility in approach to design / review structure

- Differentiate market through benefit programs that build and reinforce organization values and loyalty

- Reward meritocracy, with differentiation based on performance

ii Foster a culture of authentic service and prudent risk taking :

- Reward programs to be designed to incentivize

- superior and consistent customer service and

- specifically discourage miss-selling, thereby help build trust and faith of customers

- Rewards not just based on quantitative (financial) parameters alone; but also on how performance is achieved, including process adopted, prudent judgement and controls exercised

- Reward good behaviour and organizational stewardship, that conserves franchise reputation

- Revenue producers will not determine compensation for risk managers and other control functions

- Compensation programs to be overlaid with requisite conformity to the RBI guidelines.

iii Emphasize alignment with our stated Bank Values of Balance, Collaboration, Drive and Honesty :

- Compensation program design to promote, measure and reward excellence on these key organization values

- Short term and long term incentives, and staff recognition framework to specifically incorporate metrics on these

iv Evaluate and Reward Performance over Time :

- Program design to ensure balance between short term versus long term financial performance and health of the organization

- Drive long term commitment and ownership for decisions through LTI and/or equity awards with deferred vesting schedule

v Balance between market competitiveness and internal alignment :

- Pay levels to be referenced to the 66th percentile of Indian Private Sector banks

- Aspire to stay best-in-class within competitive cost parameters; balance between basic and lifestyle benefits

- Internal pay parity for roles staffed with employees with similar skills and seasoning

c Description of the ways in which current and future risks are taken into account in the remuneration process including the nature and type of the key measures used to take account of these risks :

The Board approves the risk framework for the Bank and the business activities of the Bank are undertaken within this framework to achieve the financial plan. The risk framework includes the Bank’s risk appetite, limits framework and policies and procedures governing various types of risk. The performance evaluation framework of Whole Time Directors, equivalent positions and senior management personnel in material risk taker roles incorporates these risk and control aspects as detailed by the Board. These factors include (but are not limited to) elements such as consistency in asset quality, rating slippage of existing loans, RORWA, operational risk parameters and quality of systems. The performance management framework of the Bank will evolve over time and get more sophisticated and mature. As regards linkage to remuneration, the compensation for Whole Time Director’s, etc is paid in fixed pay, performance linked variable pay and stock options which is approved by the NRC. Furthermore, material risk takers will not be put on any guaranteed bonus framework, Performance evaluation of individuals in Credit and Risk, and Control functions will have requisite line of independence to revenue making senior management personnel,

d Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration :

While the bank had its first performance review cycle having started its operations only on October 1, 2015, performance and its linkage to levels of remuneration will be guided by the objectives / principles as spelt out in Item b above. Annual Remuneration package comprises of a combination of fixed salary, cash bonus and ESOPs, in a mix that ensures appropriate alignment with RBI guidelines and long term value creation and stability of the Bank. Further, total pay levels will be referenced against 66th percentile of Indian private sector banks,

e Bank’s policy on deferral and vesting of variable remuneration and a discussion of the bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting :

As outlined in Item (d) above, deferral structures have been incorporated and published to the staff. For senior levels and material risk taker roles, remuneration package represents a mix of fixed pay, cash bonus and ESOP in a manner that ensures deferred vesting schedule of ESOPs. Further, the deferred / unvested portions will be subject to “malus” provision in conformity with RBI guidelines,

f Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms :

The bank at this juncture primarily has an annual cash bonus process and ESOPs. The ESOP scheme has been designed with a view to ensure an appropriate risk balanced remuneration architecture. Further, for junior roles in front-line sales where quarterly formulae based incentive programs get rolled-out, there will be requisite emphasis on risk and control parameters. We have piloted the monthly incentive plan for all branch roles in Bharat Banking with an adequate emphasis on risk / collections and compliance to set-out processes.

1.19 CREDIT DEFAULT SWAPS

The Bank has not undertaken any transactions in Credit Default Swaps (CDS) during the year ended March 31, 2017 and March 31, 2016.

1.20 LIQUIDITY COVERAGE RATIO

Qualitative disclosure

Liquidity risk management of the Bank is undertaken by the Balance Sheet Management Group (BSMG) under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans. The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI for reporting of the Liquidity Coverage Ratio (LCR). The mandated regulatory threshold as per the transition plan is embedded into the Limit Management Framework of the Bank with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO), Risk Management Committee of the Board and Board for oversight and periodical review. The Bank has been submitting LCR reports to RBI from January 2016.

Currently the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As a strategy, the Bank is highly invested into GOI Bonds and corporate bonds which has resulted in a high level of HQLA. The Bank follows the criteria laid down by the RBI for month-end calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30 day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement viz. Treasury Bills, Central and State Government securities and corporate bonds in form of CP, CD and Bonds rated AA- and above with mandated haircuts applied thereto.

Bank is predominantly funded through long term borrowings viz Bonds and ECBs. Further the reliance on retail deposits and CASA is minimal as of now. All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed LCR computation. Bank expects the LCR to reduce in the coming quarters primarily on account of growth in advances and increased focus on raising retail deposits.

The Risk department measures and monitors the liquidity profile of the Bank with reference to the Board approved limits on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios and periodical liquidity stress testing. The Bank assesses the impact on short term liquidity gaps dynamically under various scenarios covering business projections under normal as well as varying market conditions. Periodical reports are placed before the Bank’s ALCO for perusal and review.

1.21 RELATED PARTY DISCLOSURE :

As per AS-18, Related Party Disclosure, the Bank’s related parties are disclosed below :

A. ULTIMATE HOLDING COMPANY

IDFC Limited

B. HOLDING COMPANY

IDFC Financial Holding Company Limited

C. FELLOW SUBSIDIARIES

IDFC Alternatives Limited

IDFC Asset Management Company Limited IDFC AMC Trustee Company Limited

IDFC Finance Limited (Merged with IDFC Projects w.e.f. April 1, 2016)

IDFC Foundation

IDFC Infrastructure Finance Company Limited (formerly known as IDFC Infra Debt Fund Limited)

IDFC Projects Limited IDFC Securities Limited IDFC Trustee Company Limited IDFC Capital (USA) Inc.

IDFC Capital (Singapore) Pte. Limited IDFC Investment Advisors Limited IDFC Investment Managers (Mauritius) Limited IDFC Securities Singapore Pte. Limited

D. SUBSIDIARY

IDFC Bharat Limited (formerly known as Grama Vidiyal Micro Finance Limited) (wholly owned subsidiary w.e.f. October 13, 2016)

E. ASSOCIATES

i Direct

Feedback Infra Private Limited Millennium City Expressways Private Limited

ii Indirect (through fellow subsidiaries)

Jetpur Somnath Tollways Private Limited

Delhi Integrated Multi-Modal Transit System Limited

Infrastructure Development Corporation (Karnataka) Limited

Uttarakhand Infrastructure Development Company Limited (under liquidation)

India PPP Capacity Building Trust

F. KEY MANAGEMENT PERSONNEL

Dr. Rajiv B. Lall (Founder Managing Director & Chief Executive Officer)

G. RELATIVES OF KEY MANAGEMENT PERSONNEL

Tara Lall, Ambika Lall, Indrani Gangadhar, Kishen Behari Lall, Bunty Chand, Reena Khanna

In accordance with paragraph 5 and 6 of AS - 18, the Bank has not disclosed certain transactions with relatives of key management personnel as they are in the nature of banker-customer relationship.

The significant transactions between the Bank and related parties for year ended March 31, 2017 are given below. A specific related party transaction is disclosed as a significant related party transaction wherever it exceeds 10% of all related party transactions in that category:

- Interest Expense :

IDFC Limited Rs.4.37 crore (Previous Year Rs.2.11 crore); IDFC Financial Holding Company Limited Rs.5.02 crore (Previous Year Rs.1.58 crore); IDFC Foundation Rs.2.62 crore (Previous Year Rs.0.03 crore),

- Interest income earned :

Feedback Infra Private Limited Rs.11.94 crore (Previous Year Rs.3.96 crore); Millennium City Expressways Private Limited Rs.38.94 crore (Previous Year Rs.20.03 crore); IDFC Bharat Limited Rs.21.49 crore (Previous Year Nil).

- Dividend Income earned:

Feedback Infra Private Limited Rs.0.60 crore (Previous Year Nil)

- Receiving of services :

IDFC Securities Limited Rs.12.66 crore (Previous Year Rs.5.92 crore); IDFC Bharat Limited Rs.45.15 crore (Previous Year Nil),

- Rendering of services :

IDFC Securities Limited Rs.3.73 crore (Previous Year Rs.6.55 crore); IDFC Asset Management Company Limited Rs.2.13 crore (Previous Year Rs.0.91 crore); IDFC Infrastructure Finance Company Limited Rs.1.50 crore (Previous Year Rs.0.01 crore); IDFC Alternatives Limited Rs.1.01 crore (Previous Year Rs.0.19 crore)

- Managerial Remuneration :

Rajiv B. Lall Rs.4.65 crore (Previous Year Rs.1.92 crore)*

* Refer Note 18.46 - Quantitative Disclosure

- Sale of investments :

IDFC Limited Rs.14.34 crore (Previous Year Nil),

- Advance granted :

Feedback Infra Private Limited Rs.65.96 crore (Previous Year Nil),

- Advance repaid :

Millennium City Expressways Private Limited Rs.19.46 crore (Previous Year Rs.8.26 crore),

- Sell down of loans :

IDFC Infrastructure Finance Company Limited Rs.73.62 crore (Previous Year Rs.125.21 crore),

- Non Fund based Exposure :

Feedback Infra Private Limited Rs.9.52 crore (Previous Year Nil),

- Deposits with the Bank :

IDFC Limited Rs.398.81 crore (Previous Year Rs.218.97 crore); IDFC Financial Holding Company Limited Rs.75.44 crore (Previous Year Rs.44.23 crore); IDFC Bharat Limited Rs.110.40 crore (Previous Year Nil),

- Investment of related party in the Bank :

IDFC Financial Holding Company Limited Rs.7,030.07 crore (Previous Year Rs.7,030.07 crore),

- Security Deposits Outstanding :

IDFC Alternatives Limited Rs.1.77 crore (Previous Year Rs.1.77 crore)

- Other receivables (net) :

IDFC Bharat Limited Rs.41.27 crore (Previous Year Nil),

- Other payables (net) :

IDFC Bharat Limited Rs.9.57 crore (Previous Year Nil),

1.22 EARNING PER SHARE (‘EPS’)

Basic and diluted earnings per equity share are computed in accordance with AS 20 - Earnings per share. Basic earnings per equity share are computed by dividing net profit after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share is computed by dividing net profit after tax attributable to equity shareholders by the weighted average number of equity shares and weighted average number of dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive. Dilution of equity is on account of stock options granted to employees by the Bank.

1.23 LEASES

In accordance with Accounting Standard 19 on ‘Leases’ as notified under the Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, the following disclosures in respect of operating leases are made:

1.24 CORPORATE SOCIAL RESPONSIBILITY (CSR)

i Amount required to be spent by the Bank on CSR during the year Rs.4.85 crore.

ii Amount spent towards CSR during the year and recognised as expense in the statement of profit and loss on CSR related activities is Rs.4.85 crore, which comprise of following -

1.25 PROPOSED DIVIDEND

The Board of Directors, in their meeting held on April 25, 2017 have proposed dividend of Rs.0.75 per equity share amounting to Rs.307.11 crore, inclusive of dividend distribution tax. The proposal is subject to the approval of shareholders at the Annual General Meeting. 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, proposed dividend is not recognised as a liability as on March 31, 2017. Accordingly, the balance of Reserves and Surplus is higher by Rs.307.11 crore and the balance of Other Liabilities is lower by an equivalent amount as on March 31, 2017.

Appropriation to proposed dividend during the year ended March 31, 2017 represents dividend of Rs.0.03 crore (Previous Year Nil) paid pursuant to exercise of employee stock options after the previous year end but before the record date for declaration of dividend for the year ended March 31, 2016,

1.26 SMALL AND MICRO INDUSTRIES

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments,

1.27 DISCLOSURE ON FACTORING

As per the RBI circular Ref No. DBR.No.FSD.BC.32/24.01.007/2015-16 dated July 30, 2015, banks are required to disclose factoring exposures. Receivables acquired under factoring are treated as part of loans and advances and reported under the head ‘Bills Purchased and Discounted’ in Schedule 9 of the Balance Sheet. The Bank has factoring exposure of Rs.480.16 crore (Previous Year Rs.200.25 crore) and outstanding of Rs.302.41 crore (Previous Year Rs.200.21 crore) as on March 31, 2017.

1.28 INVESTOR EDUCATION AND PROTECTION FUND

There were no amounts which were required to be transferred to the Investor Education and Protection Fund,

1.29 DESCRIPTION OF CONTINGENT LIABILITIES

i Claims against the Bank not acknowledged as debts

The Bank is a party to taxation matters which are in dispute and are under appeal. The demands have been partly paid / adjusted and will be received as refund if the matters are decided in favour of the Bank,

ii Liability for partly paid investments

This represents amounts remaining unpaid towards liability for partly paid investments. These payment obligations of the Bank do not have any profit / loss impact,

iii Liability on account of forward exchange and derivative contracts

The Bank enters into foreign exchange contracts, currency options, forward rate agreements, currency swaps and interest rate swaps with inter-bank participants on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest / principal in one currency against another, based on predetermined rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Interest rate futures are standardised, exchange-traded contracts that represent a pledge to undertake a certain interest rate transaction at a specified price, on a specified future date. Forward rate agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified future time. An exchange traded currency option contract is a standardised foreign exchange derivative contract, which gives the owner the right, but not the obligation, to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date on the date of expiry. Currency Futures contract is a standardised, exchange-traded contract, to buy or sell a certain underlying currency at a certain date in the future, at a specified price,

iv Guarantees given on behalf of constituents

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.

v Acceptances, endorsements and other obligations

These includes documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank’s customers that are accepted or endorsed by the Bank.

vi Other items

Other items represent estimated amount of contracts remaining to be executed on capital account.

1.29 COMPARATIVE FIGURES

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year’s presentation.


Mar 31, 2016

1 NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016

Amounts in notes forming part of the financial statements for the year ended March 31, 2016 are denominated in Rs,crore to conform with the extant RBI guidelines.

2 IDFC Bank Limited (''''the Bank”) was incorporated as a Company under the Companies Act, 2013 on October 21, 2014. The Bank commenced its Banking operations on October 1, 2015, post receipt of final banking license by the RBI. Accordingly, figures for the previous period / year is not comparable since Banking operations were not carried out during the previous period / year. In addition, RBI guidelines on Disclosure in Financial Statements - ''Notes to Accounts'' is not applicable for the period / year ended March 31, 2015.

Pursuant to the Scheme of Arrangement, the Financing Undertaking of IDFC Limited was demerged in the Bank with effect from October 1, 2015. Accordingly assets amounting to Rs,66,237.46 crore and liabilities amounting to Rs,60,002.90 crore resulting in net assets amounting toRs,6,234.56 crore along with contingent liabilities of Rs,285.63 crore, capital commitment of Rs,840.05 crore and notional principal of derivative contract of Rs,13,903.57 crore pertaining to the Financing Undertaking were transferred from IDFC Limited to the Bank and in consideration, equity shares of the Bank, in the ratio of 1:1 have been issued to the shareholders of IDFC Limited equivalent to 47% of the equity shareholding of IDFC Bank Limited. In addition, shares were issued to the Non-operative Financial Holding Company, IDFC Financial Holding Company Limited in compliance with RBI Guidelines for Licensing of New Banks in the Private Sector

3 DISCLOSURES ON RISK EXPOSURE IN DERIVATIVES QUALITATIVE DISCLOSURES :

a. Structure and organization for management of risk in derivatives trading, the scope and nature of risk measurement, risk reporting and risk monitoring systems, policies for hedging and / or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigates :

i The Bank undertakes transactions in FX and derivatives for the purpose of hedging the Balance Sheet, support customer FX and Derivatives hedging / business requirements and takes proprietary positions. Bank deals in various kinds of products viz. FX spot and forwards, INR and CCY Swaps and Foreign currency options. The Bank undertakes trading positions FX Spot, Forward, Swaps and Futures. Bank does not run Option book as of now. All the Option products are offered to the clients on a back to back basis.

ii Treasury Sale Desk is a customer centric desk that caters to customers'' requirements in FX and Derivatives products subject to regulatory and internal requirements. Product offering to the clients is based on Suitability and Appropriateness policy of the Bank as well as by the extant RBI guidelines. The policy ensures that the product being offered by the Bank are in sync with the nature of the underlying, risk sought to be hedged giving due regard to the risk appetite of the customer and understanding of the risk by the customer. Market Risk exposures of clients arising out of FX and Derivative transactions are monitored by the Bank on a daily basis through current exposure method. Exposures are independently monitored and reported.

iii The Bank recognizes all derivative contracts (other than those designated as hedges) at fair value. The mark to market movement on the positions is monitored on a daily basis. Changes in the fair value of derivatives other than those designated as hedges are recognized in the Profit and Loss Account. Hedge transactions are accounted for on an accrual basis. Hedging transactions are undertaken by the Bank to protect the variability in the fair value or the cash flow of the underlying Balance Sheet item.

iv All the derivative transactions are governed by the FX & Derivative policy, Market Risk Management policy and Limit Management Framework of the Bank. Limit Management Framework details various types of market risk limits which are monitored on a daily basis and breaches, if any, are reported promptly. Risk assessment of the portfolio is undertaken periodically and presented to the Market Risk Committee / Asset Liability Committee. These limits are set up taking into account market volatility, risk appetite, business strategy and management experience. The Bank has a clear functional segregation of Treasury operations between Front Office, Market Risk and Back Office.

b. Accounting policy for recording hedge and non-hedge transactions; recognition of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit risk mitigation :

Interest rate swaps are booked with the objective of managing the interest rate risk on liabilities. Interest rate swaps in the nature of hedge are recorded on accrual basis and these transactions are not marked-to-market. Any resultant profit or loss on termination of the hedge swaps is amortized over the life of the swap or underlying liability, whichever is shorter

Currency interest rate swaps in the nature of hedge, booked with the objective of managing the currency and interest rate risk on foreign currency liabilities are recorded on accrual basis and these transactions are not marked-to-market. Any resultant profit or loss on termination of hedge swaps is amortized over the life of swap or underlying liability, whichever is shorter. The foreign currency balances on account of principal of currency interest rate swaps outstanding as at the balance sheet date are revalued using the closing rate.

4 DISCLOSURES ON REMUNERATION

Qualitative disclosures

a Information relating to the composition and mandate of the Remuneration Committee :

The Board nomination and remuneration committee comprised of the following members :

Mr. Ajay Sondhi Chairman

Mr. Anil Baijal Member

Ms. Veena Mankar Member

Mr. Vinod Rai Member

The functions of the Committee include :

i Evaluate performance of the Whole Time Directors (WTDs) (including the Managing Director & CEO) against predetermined parameters

ii Make recommendations on remuneration (including performance bonus and perquisites) of Whole Time Directors

iii Approve policy and quantum of variable pay, bonus, stock options and increments for the employees of the Bank

iv Frame guidelines for the Employees Stock Option Scheme (ESOS) and recommend grants of the Bank''s stock options to Whole Time Directors of the Bank

b Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

The Bank has under the guidance of the Board and the Nomination and Remuneration Committee, follows compensation practices intended to drive pay for performance within the framework of prudent risk management.

Specific principles and objectives of IDFC Bank remuneration policy and design include :

i Help attract and retain employees :

- Pay elements and structure to be market competitive

- Flexibility and agility in approach to design / review structure

- Differentiate market through benefit programs that build and reinforce organization values and loyalty

- Reward meritocracy, with differentiation based on performance

ii Foster a culture of authentic service and prudent risk taking :

- Reward programs to be designed to incentivize

- Superior and consistent customer service and

Specifically discourage miss-selling, thereby help build trust and faith of customers

- Rewards not just based on quantitative (financial) parameters alone; but also on how performance is achieved, including process adopted, prudent judgment and controls exercised

- Reward good behavior and organizational stewardship, that conserves franchise reputation

- Revenue producers will not determine compensation for risk managers and other control functions

- Compensation programs to be overlaid with requisite conformity to the RBI guidelines.

iii Emphasize alignment with our stated Bank Values of Balance, Collaboration, Drive and Honesty :

- Compensation program design to promote, measure and reward excellence on these key organization values

- Short term and long term incentives, and staff recognition framework to specifically incorporate metrics on these

iv Evaluate and Reward Performance over Time

- Program design to ensure balance between short term versus long term financial performance and health of the organization

- Drive long term commitment and ownership for decisions through LTI and/or equity awards with deferred vesting schedule

v Balance between market competitiveness and internal alignment

- Pay levels to be referenced to the 66th percentile of Indian Private Sector banks

Aspire to stay best-in-class within competitive cost parameters; balance between basic and lifestyle benefits

- Internal pay parity for roles staffed with employees with similar skills and seasoning

c Description of the ways in which current and future risks are taken into account in the remuneration process including the nature and type of the key measures used to take account of these risks :

The Board approves the risk framework for the Bank and the business activities of the Bank are undertaken within this framework to achieve the financial plan. The risk framework includes the Bank''s risk appetite, limits framework and policies and procedures governing various types of risk. The performance evaluation framework of Whole Time Directors, equivalent positions and senior management personnel in material risk taker roles incorporates these risk and control aspects as detailed by the Board. These factors include (but are not limited to) elements such as consistency in asset quality, rating slippage of existing loans, RORWA, operational risk parameters and quality of systems. The performance management framework of the Bank will evolve over time and get more sophisticated and mature. As regards linkage to remuneration, the compensation for Whole Time Director''s, etc is paid in fixed pay, performance linked variable pay and stock options which is approved by the NRC. Furthermore, material risk takers will not be put on any guaranteed bonus framework. Performance evaluation of individuals in Credit and Risk, and Control functions will have requisite line of independence to revenue making senior management personnel.

d Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration :

While the bank is yet to have a first performance review cycle having started its operations only on October 1, 2015, performance and its linkage to levels of remuneration will be guided by the objectives / principles as spelt out in Item babove. Annual Remuneration package will comprise of a combination of fixed salary, cash bonus and ESOPs, in a mix that ensures appropriate alignment with RBI guidelines and long term value creation and stability of the Bank. Further, total pay levels will be referenced against 66th percentile of Indian private sector banks.

e Bank’s policy on deferral and vesting of variable remuneration and a discussion of the bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting :

As outlined in Item (d) above, deferral structures will be incorporated and published to the staff over the next 12 months.

For senior levels and material risk taker roles, remuneration package will represent a mix of fixed pay, cash bonus and ESOP in a manner that ensures deferred vesting schedule of ESOPs. Further, the deferred / unvested portions will be subject to “malus” provision in conformity with RBI guidelines.

f Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms.

The bank at this juncture primarily has an annual cash bonus process and ESOPs. The ESOP scheme has been designed with a view to ensure an appropriate risk balanced remuneration architecture. Further, for junior roles in front-line sales where quarterly formulae based incentive programs get rolled-out, there will be requisite emphasis on risk and control parameters. We are piloting the first such quarterly plan for junior roles in a specific business area (Bharat Banking), where there is adequate emphasis on risk / collections and compliance to set-out processes.

5 LIQUIDITY COVERAGE RATIO

Qualitative disclosure

Liquidity risk management of the Bank is undertaken by the Balance Sheet Management Group (BSMG) under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans. The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI for reporting of the Liquidity Coverage Ratio (LCR).

The mandated regulatory threshold as per the transition plan is embedded into the Limit Management Framework of the Bank with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO), Risk Management Committee of the Board and Board for oversight and periodical review. The Bank has been submitting LCR reports to RBI from January 2016.

Currently the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As a strategy, the Bank is highly invested into GOI Bonds and corporate bonds which has resulted in a high level of HQLA. The Bank follows the criteria laid down by the RBI for month-end calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30 day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement viz. Treasury Bills, Central and State Government securities and corporate bonds in form of CP, CD and Bonds rated AA- and above with mandated haircuts applied thereto.

Bank is predominantly funded through long term borrowings viz Bonds and ECBs. Further the reliance on retail deposits and CASA is minimal as of now. All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed LCR computation. Bank expects the LCR to reduce in the coming quarters primarily on account of growth in advances and increased focus on raising retail deposits.

The Risk department measures and monitors the liquidity profile of the Bank with reference to the Board approved limits on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios and periodical liquidity stress testing. The Bank assesses the impact on short term liquidity gaps dynamically under various scenarios covering business projections under normal as well as varying market conditions. Periodical reports are placed before the Bank''s ALCO for perusal and review.

6 RELATED PARTY DISCLOSURE :

As per AS-18, Related Party Disclosure, the Bank''s related parties are disclosed below :

A. ULTIMATE HOLDING COMPANY

IDFC Limited

B. HOLDING COMPANY

IDFC Financial Holding Company Limited

C. FELLOW SUBSIDIARIES

IDFC Alternatives Limited

IDFC Asset Management Company Limited

IDFC AMC Trustee Company Limited

IDFC Finance Limited

IDFC Foundation

IDFC Infra Debt Fund Limited

IDFC Projects Limited

IDFC Securities Limited

IDFC Trustee Company Limited

IDFC Capital (USA) Inc.

IDFC Capital (Singapore) Pte. Ltd.

IDFC Investment Advisors Limited

IDFC Investment Managers (Mauritius) Limited

IDFC Securities Singapore Pte. Limited

D. ASSOCIATES

i Direct

Feedback Infra Private Limited Millennium City Expressway Private Limited

ii Indirect (through fellow subsidiaries)

Jetpur Somnath Tollways Private Limited

Delhi Integrated Multi-Modal Transit System Limited Infrastructure Development Corporation (Karnataka) Limited Uttarakhand Infrastructure Development Company Limited India PPP Capacity Building Trust

E. KEY MANAGEMENT PERSONNEL

Dr. Rajiv B. Lall (Founder Managing Director & Chief Executive Officer)

F. RELATIVES OF KEY MANAGEMENT PERSONNEL:

Tara Lall, Ambika Lall, Indrani Gangadhar, Kishen Behari Lall, Bunty Chand, Reena Khanna

In accordance with paragraph 5 and 6 of AS - 18, the Bank has not disclosed certain transactions with relatives of key management personnel as they are in the nature of banker-customer relationship.

The significant transactions between the Bank and related parties for year ended March 31, 2016 are given below. A specific related party transaction is disclosed as a significant related party transaction wherever it exceeds 10% of all related party transactions in that category:

- Interest Expense :

IDFC LimitedRs,2.11 crore (Previous Year Nil); IDFC Financial Holding Company LimitedRs,1.58 crore (Previous Year Nil); IDFC Finance LimitedRs,0.46 crore (Previous Year Nil).

- Interest income earned :

Feedback Infra Private LimitedRs,3.96 crore (Previous Year Nil); Millennium City Expressways Private LimitedRs,20.03 crore (Previous Year Nil).

- Receiving of services :

IDFC Securities LimitedRs,5.92 crore (Previous Year Nil); IDFC Alternatives LimitedRs,1.77 crore (Previous Year Nil).

- Rendering of services :

IDFC Securities LimitedRs,6.55 crore (Previous Year Nil); IDFC Asset Management Company LimitedRs,0.91 crore (Previous Year Nil).

- Managerial Remuneration :

Rajiv B. LallRs,1.92 crore (Previous Year Nil).

- Sale of investments :

IDFC Infra Debt Fund LimitedRs,108.83 crore (Previous Year Nil).

- Profit on sale of Investments :

IDFC Infra Debt Fund LimitedRs,1.03 crore (Previous Year Nil).

- Purchase of fixed assets :

IDFC Securities LimitedRs,0.34 crore (Previous Year Nil).

- Placement of security deposits :

IDFC Alternatives LimitedRs,1.77 crore (Previous Year Nil).

- Advance repaid :

Millennium City Expressways Private LimitedRs,8.26 crore (Previous Year Nil).

- Sell down of loans :

IDFC Infra Debt Fund LimitedRs,125.21 crore (Previous Year Nil).

- Deposits with the Bank :

IDFC LimitedRs,218.97 crore (Previous Year Nil); IDFC Financial Holding Company LimitedRs,44.23 crore (Previous Year Nil); IDFC Infra Debt Fund LimitedRs,102.39 crore (Previous Year Nil).

- Investment of related party in the Bank :

IDFC Financial Holding Company LimitedRs,7,030.07 crore (Previous Year Nil).

- Other receivables (net) :

IDFC Securities LimitedRs,0.75 crore (Previous Year Nil).

- Other payables (net) :

IDFC Securities LimitedRs,1.18 crore (Previous Year Nil).

7 EARNING PER SHARE (‘EPS’)

Basic and diluted earnings per equity share are computed in accordance with AS 20 - Earnings per share. Basic earnings per equity share are computed by dividing net profit after tax attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per equity share is computed by dividing net profit after tax attributable to equity shareholders by the weighted average number of equity shares and weighted average number of dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive. Dilution of equity is on account of stock options granted to employees by the Bank.

8 SMALL AND MICRO INDUSTRIES

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments.

9 DISCLOSURE ON FACTORING

As per the RBI circular Ref No. DBR.No.FSD.BC.32/24.01.007/2015-16 dated July 30, 2015, banks are required to disclose factoring exposures. Receivables acquired under factoring are treated as part of loans and advances and reported under the head ''Bills Purchased and Discounted'' in Schedule 9 of the Balance Sheet. The Bank has factoring exposure ofRs,200.25 crore and outstanding ofRs,200.21 crore as on March 31, 2016 (Previous Year Nil).

10 DESCRIPTION OF CONTINGENT LIABILITIES

i Claims against the Bank not acknowledged as debts

The Bank is a party to taxation matters which are in dispute and are under appeal. The demands have been partly paid/ adjusted and will be received as refund if the matters are decided in favour of the Bank.

ii Liability for partly paid investments

This represents amounts remaining unpaid towards liability for partly paid investments. These payment obligations of the Bank do not have any profit / loss impact.

iii Liability on account of forward exchange and derivative contracts

The Bank enters into foreign exchange contracts, currency options, forward rate agreements, currency swaps and interest rate swaps with inter-bank participants on its own account and for customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by way of interest / principal in one currency against another, based on predetermined rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. Interest rate futures are standardized, exchange-traded contracts that represent a pledge to undertake a certain interest rate transaction at a specified price, on a specified future date. Forward rate agreements are agreements to pay or receive a certain sum based on a differential interest rate on a notional amount for an agreed period. A foreign currency option is an agreement between two parties in which one grants to the other the right to buy or sell a specified amount of currency at a specific price within a specified time period or at a specified future time. An exchange traded currency option contract is a standardized foreign exchange derivative contract, which gives the owner the right, but not the obligation, to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date on the date of expiry. Currency Futures contract is a standardized, exchange-traded contract, to buy or sell a certain underlying currency at a certain date in the future, at a specified price.

iv Guarantees given on behalf of constituents

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.

v Acceptances, endorsements and other obligations

These includes documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank''s customers that are accepted or endorsed by the Bank.

vi Other items

Other items represent estimated amount of contracts remaining to be executed on capital account.


Mar 31, 2015

1.IDFC Bank Limited ('the Company') is a public company, incorporated in India on October 21, 2014. The Company is a wholly owned subsidary of IDFC Financial Holding Company Limited.

(b) Terms / rights attached to equity shares

* The Company has only one class of equity shares having a par value of ' 10 per share. Each holder of equity shares is entitled to one vote per share.

* In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exists currently. The distribution will be in proportion to the number of equity shares held by the Shareholders.

2. Provisions & Contingencies

a. There are no litigations claims made by the Company or pending on the Company.

b. Provisions for onerous contracts are recognised when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises any impairment loss on the assets associated with that contract.

3. The Company is yet to commence its commercial operations. Accordingly, there are no separate reportable segments as per Accounting Standard 17 on 'Segment Reporting' as specified u/s 133 of Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014.

4. As per Accounting Standard 18 on 'Related Party Disclosures' as specified u/s 133 of Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014.

Holding Company:

IDFC Limited (Upto December 25, 2014)

IDFC Financial Holding Company Limited (w.e.f. December 26, 2014)

5. In accordance with Accounting Standard 20 on 'Earnings Per Share' as specified u/s 133 of Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014.

6. The Company has a negative net worth as at March 31,2015 however, the accounts of the Company have been prepared on going concern basis, since the ultimate parent company IDFC Limited has committed to infusion of funds and other support as necessary in accordance with the corporate restructuring plan for the IDFC group approved by the Board of Directors of IDFC Limited in the meeting dated October 30, 2014. This demonstrates the ability and intention of the Company to continue as a going concern.

7. Since the Company was incorporated on October 21, 2014 this is the first accounting period of the Company. Accordingly there are no comparative figures.

Find IFSC