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Directors Report of IndusInd Bank Ltd.

Mar 31, 2015

Dear Members,

The Bank's Directors have pleasure in presenting the Twenty-first Annual Report covering business and operations of the Bank, together with the Audited Financial Statements for the year ended March 31,2015.

The financial performance for the year ended March 31,2015 is summarized as under:

(Rsin crores) As on As on March 31, 2015 March 31,2014

Deposits 74,134.36 60,502.29

Advances 68,788.20 55,101.84

Operating Profit (before Depreciation and Provisions & Contingencies) 3,225.07 2,694.11

Net Profit 1,793.72 1,408.02

During the year under review, despite a weak growth in the Indian economy and a persistently challenging operating environment, the Bank improved its business, with Deposits growing by 22.53% and Advances by 24.84% over the previous year.

The Bank continued to focus on increasing earnings from core banking business, and on strengthening the fee income streams.

Operating Profit (before Depreciation and Provisions & Contingencies) rose by 19.71% to Rs. 3,225.07 crores, as compared to Rs. 2,694.11 crores in the previous year.

The Net Profit of the Bank, after considering all expenses and necessary Provisions & Contingencies, was higher by 27.39% atRs. 1,793.72 crores as againstRs. 1,408.02 crores in the previous year.

Appropriations

The Directors recommend appropriation of Profit as under:

(Rs in crores)

Operating Profit before Depreciation and Provisions & Contingencies 3,225.07

Less: Depreciation on Fixed Assets 126.85

Less: Provisions & Contingencies inclusive of Income Tax 1,304.50

Net Profit 1,793.72

Profit Brought Forward 2,623.33

Amount available for Appropriation 4,417.05

Transfer to Statutory Reserve 448.43

Transfer to Capital Reserve 12.28

Transfer to Investment Reserve Account 37.16

Proposed Dividend 212.01

TaxonDividend 43.15

Balance carried over to Balance Sheet 3,664.02

Total Appropriations 4,417.05

Dividend

The Earning Per Share (EPS) of the Bank rose to Rs. 33.99 during the year 2014-15, from Rs. 26.85 in the previous year.

Looking at the overall improvement in performance coupled with the need to conserve capital for continued growth, the Directors recommend a Dividend ofRs. 4.00 per equity share ofRs. 10 each for the year ended March 31,2015. (Dividend for the year 2013-14 was Rs. 3.50 per equity share ofRs. 10 each).

In terms of the extant laws, the Bank shall pay tax on the amount of Dividend paid, so that the Dividend becomes tax- free in the hands of the shareholders.

During the year, unclaimed dividend pertaining to the financial year 2006-07 was transferred to the Investor Education and Protection Fund (IEPF) after giving due notice to the members whose names were appearing in the list of unpaid recipients.

Financial Performance

Despite benign WPI inflation, softening oil prices in the latter half of the year, and manageable levels of Current Account Deficit, the domestic interest rate scenario remained at elevated levels, especially for Deposits. During the last quarter of the financial year, RBI reduced Repo Rate to 7.50% from 8.00% while CRR was kept unchanged at 4.00% during the year.

The year under review was the first year of new triennial planning cycle for the Bank (Planning Cycle 3, for Financial Years 2015-17) with the theme of 'Intelligent Domination and Specialization' with a strategy to gain 'Market Share with Profitability' through Dominance, Diversification and Differentiation (3D). The Bank continued to leverage its business on the three performance planks of Productivity, Profitability and Efficiency.

Backed by improved volumes, the Total Income of the Bank grew by 19.24% to Rs.12,095.84 crores from Rs. 10,144.06 crores.

The healthy rise in profitability was the result of growth in Net Interest Income as well as Non-Interest Income. Net Interest Income improved by 18.32% to Rs. 3,420.28 crores from Rs. 2,890.71 crores, while Non-Interest Income rose to Rs. 2,403.87 crores from Rs. 1,890.53 crores, a rise of 27.15%.

Yield on Advances dropped to 13.12% during the year as against 13.56% in the previous year, even as the Cost of Deposits fell to 7.92% as against 8.17% in the previous year. Net Interest Margin (NIM) dropped to 3.65% during the year, as compared to 3.71% in 2013-14.

Fee and Miscellaneous Income at Rs. 2,403.87 crores, as compared to Rs. 1,890.53 crores in the previous year, showed strong annual growth of 27.15%. Core Fee Income such as commission, exchange, loan processing and account management fees, fees on Investment Banking and distribution of third-party products and earnings from foreign exchange business grew by 29.63% to Rs. 2,086.66 crores from Rs. 1,609.71 crores earned during the previous year.

The Bank expanded its branch network rapidly to reach 801 branches, as against 602 branches at the beginning of the year. Revenue per employee during the year remained steady atRs. 30 lakhs.

The quality of the Loan Book remained stable, with Net Non-Performing Assets (Net NPAs) at 0.31% as at March 31, 2015 as against 0.33% last year. The Provisioning Coverage Ratio (PCR) stood at 62.61% as compared to 70.35% previous year.

On the Liabilities side, the emphasis continued to be on broad-basing and deepening the deposit franchise. This was facilitated through leveraging the expanded branch network and the pan-India marketing setup, introduction of innovative products and service propositions, sustained promotional campaigns and enabling customers with alternate channels such as Video Branch, Mobile Banking, Internet Banking, ATMs, etc., as well as improving delivery of products online and client engagement through Digital channels. The Bank enhanced customer delight through more than 50 tie-ups in e-Commerce and Cards that also helped to drive spends.

The Bank introduced several new products and services for select client segments through its Consumer Banking, Transaction Banking and Global Markets Groups. The Consumer Banking Group expanded its product range with the launch of Loans Against Credit Card Receivables (LACR), Loans against Securities (LAS), Commercial Cards, Agri Loans, etc. Deeper understanding of client requirements and the ability to put technology to efficient use formed the edifice on which new products and service propositions were built.

The Bank kept up its focus on deepening as well as strengthening the fee-based income streams, resulting in smart growth in Non-Interest Income. Going forward, the Bank plans to upscale the growth momentum through further

enhancements in diverse revenue streams such as foreign exchange business, investment banking, structured trade and treasury products, distribution of third-party products like mutual funds and insurance, international remittances, Bullion operations and Transaction Banking activities, including the Depository business and financing the Commodity Market segment.

Performance of Subsidiary and Associate Company

ALF Insurance Services Pvt. Ltd., the Bank's subsidiary company which was set up to do the business of Insurance Corporate Broking, is currently under voluntary winding up.

Induslnd Marketing and Financial Services Private Limited (IMFS) is an Associate Company of the Bank and is engaged in the business of providing manpower services.

A statement containing the salient features of the financial position of the Subsidiary and Associate Company in Form AOC-1 is enclosed as Annexure I.

During the year under review, no company has become or ceased to be, a subsidiary, a joint venture or an associate company of the Bank.

Share Capital

The Paid-up Share Capital of the Bank as at March 31,2015 consisted of 52,94,50,209 equity shares ofRs. 10 each.

During the year under review, the Bank allotted 40,03,725 shares pursuant to exercise of Options under its Employees Stock Option Scheme, 2007.

Accordingly, the Paid-up Share Capital and Share Premium Account increased by Rs. 4.00 crores and Rs. 62.25 crores, respectively.

During the year under review, as an efficient housekeeping exercise, the Bank cancelled the shares forfeited till date. Consequently, the moneys collected on forfeited shares amounting to Rs. 0.86 crores, consisting of Rs. 0.19 crores lying in the Share Forfeiture Account and Rs. 0.67 crores lying in the Share Premium Account, were transferred to the Capital Reserve Account.

Debentures

During the year under review, the Bank had issued and allotted 5,000 Rated, Listed, Senior, Unsecured, Redeemable, Non-convertible Bonds in the nature of Debentures for Face Value ofRs. 10,00,000 (Rupees Ten Lakhs only) each, on March 31,2015to identified investors on Private Placement basis, for an aggregate amount ofRs. 500 crores.

Details of Debenture Trustees

Trustee I:

NameofDebentureTrustee : GDATrusteeshipLimited Address 'GDA House', S. No.94/95, Plot No.85, Bhusari Colony

: (Right), Kothrud, Pune -411 038, Maharashtra, India Email address : dt@gdatrustee.com

Trustee II:

NameofDebentureTrustee : IDBITrusteeshipServicesLimited Address : Asian Building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai - 400 001 Website : www.idbitrustee.com

Tier II Capital

The Bank did not raise any Tier II Capital during the year.

Deposits

Being a banking company, we are governed by the Banking Regulation Act, 1949 and as such, the provisions of the Companies Act, 2013 relating to acceptance of Public Deposits are not applicable.

Capital Adequacy

The Bank continues to be adequately capitalized. The Capital Adequacy Ratio of the Bank, calculated under the Basel III Capital Regulations mandated by RBI, is set out below:

March 31, 2015 March 31, 2014

i) Capital Adequacy Ratio (CRAR) 12-09% 13.83%

ii) CRAR - Core Equity Tier 1 Capital 11-22% 12.71%

iii) CRAR - Tier 2 Capital 0.87% 1.12%

Credit Ratings

Instruments Rating Rating Agency

Lower Tier II Subordinate Debt program AA ICRA

Upper Tier II Bond program AA ICRA

CertificatesofDeposit A1 CRISIL

Lower Tier II Subordinate Debt program AA CARE

ShortTermDebtlnstruments A1 IndiaRatings and Research

Lower Tier II Subordinate Debt program AA India Ratings and Research

Upper Tier II Bond program AA India Ratings and Research

Senior Bonds program AA India Ratings and Research

Directors

The Bank had seven Directors as on March 31, 2015, consisting of five Independent Directors, the Chairman (Non-executive Non-independent), and the Managing Director & CEO.

(a) Independent Non-Executive Directors

In terms of the definition contained in Section 149(6) of the Companies Act, 2013, Clause 49 of the Listing Agreement, and based on the Declarations received in this regard, the following Non-executive Directors are classified as Independent Directors as on March 31,2015:

(i) Mr. T. Anantha Narayanan

(ii) Mr. Ashok Kini

(iii) Mrs. Kanchan Chitale

(iv) Mr. Vijay Vaid

(v) Mr. Ranbir Singh Butola

(b) Woman Director

In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, specified companies are required to have at least one Woman Director in their Board.

Mrs. Kanchan Chitale, who joined the Board on October 18, 2011, is an Independent Director in the Board, and chairs some of the important Committees.

(c) Chairman of the Board

Mr. R. Seshasayee (DIN 00047985) has been Part-time Non-executive Chairman of the Bank since July 24, 2007.

Approval of the shareholders is requested for his re-appointment as Part-time Non-executive Chairman of the Bank for a period of 2 years with effect from July 24, 2015.

(d) Managing Director & CEO

Mr. Romesh Sobti (DIN 00031034) has been the Managing Director & CEO ofthe Bank since February 1,2008.

Shareholders of the Bank had, in the 19th AGM held on June 28, 2013, approved the re-appointment of Mr. Romesh Sobti as the Managing Director & CEO for a period of three years with effect from February 1,2014. Reserve Bank of India had approved the re-appointment of Mr. Romesh Sobti as Managing Director & CEO of the Bank for a period of one year, upto January 31,2015.

Reserve Bank of India have since conveyed their approval for the re-appointment of Mr. Romesh Sobti as Managing Director and CEO of the Bank for a further period of three years, with effect from February 1,2015 until January 31,2018.

(e) Appointment / Re-appointment / Resignation / Retirement of Directors

Mr. Ranbir Singh Butola (DIN 00145895) was appointed as an 'Additional Director' in the category of'Independent Non-Executive' by the Board in its meeting held on January 13, 2015, and shall hold office up to the date of the ensuing Annual General Meeting.

In terms of requirements ofthe Companies Act, 2013, approval ofthe shareholders is requested for the appointment of Mr. Ranbir S. Butola as an "Independent Non-Executive Director".

Mr. T. Anantha Narayanan (DIN 00007227) was appointed as an 'Independent Non-executive Director' at the AGM ofthe Bank held on June 27, 2014, for a period upto April 8,2015, in view of his attaining the age of 70 years, the maximum age limit prescribed by Reserve Bank of India (RBI).

In response to the Bank's request, RBI have conveyed their approval for continuance of Mr. Anantha Narayanan on the Board of the Bank as an 'Independent Non-Executive Director' for a period of four years w.e.f. June 24, 2014.

The Board had accordingly, at its meeting held on March 30, 2015, approved the appointment of Mr. Anantha Narayanan as an 'Additional Director' with effect from April 9, 2015 in the category of "Independent Non-executive Director". In terms of the Companies Act, 2013, Mr. Anantha Narayanan holds office up to the date of the ensuing AGM.

Since Mr. Anantha Narayanan has completed his initial term in the Board of the Bank as Independent Director, in compliance with Section 149 of the Companies Act, 2013, approval of the shareholders is requested, by passing of a Special Resolution for the appointment of Mr. Anantha Narayanan as "Independent Non-executive Director" for another term, as approved by the Reserve Bank of India, i.e., up to June 23, 2018.

Approval ofthe shareholders was obtained in the Annual General Meeting held on June 27,2014 for the appointment of Mrs. Kanchan Chitale (DIN 00007267) and Mr. Vijay Vaid (DIN 00219709) in the category of "Independent Non-executive Director" for a period of four years with effect from the original date of their appointment, viz., October 18, 2011.

The Board had, at its meeting held on April 16, 2015, approved the appointment of Mrs. Kanchan Chitale in the category of "Independent Non-executive Director" with effect from October 18, 2015 for another term of four years, and of Mr. Vijay Vaid in the category of "Independent Non-executive Director" up to February 3, 2018, i.e., the date of his attaining the age of 70 years.

Members are requested to approve the re-appointment of Mrs. Kanchan Chitale and of Mr. Vijay Vaid by passing of Special Resolution in the ensuing Annual General Meeting.

Mr. Ajay Hinduja (DIN 00642192), who had been a member of the Board as 'Non-executive Director' from October 31, 2006, ceased to hold office with effect from October 30, 2014, on completion of the maximum permissible tenure of eight years.

Mr. Yashodhan M. Kale (DIN 00013782), who had been appointed as 'Alternate Director' by Mr. Ajay Hinduja, ceased to hold that position with effect from October 30, 2014.

The Directors wish to place on record their appreciation for the valuable contributions made by Mr. Ajay Hinduja towards the deliberations in the Board Meetings during his tenure, and to Mr. Yashodhan M. Kale, Alternate Director, towards the deliberations in the Board Meetings attended by him in place of Mr. Ajay Hinduja.

Mr. Yashodhan M. Kale (DIN 00013782) was appointed as an 'Additional Director' in the category of 'Non-Independent Non-Executive' by the Board at its meeting held on April 16, 2015, and shall hold office up to the date ofthe ensuing Annual General Meeting.

In terms of requirements ofthe Companies Act, 2013, approval ofthe shareholders is requested for the appointment of Mr. Yashodhan M. Kale as "Non-Independent Non-Executive Director".

Mr. Sushil Chandra Tripathi (DIN 00941922), who was associated with the Bank as 'Independent Non-executive Director' since February 14, 2007, ceased to hold office from February 13, 2015, on completion of the maximum permissible tenure of eight years.

The Directors wish to place on record their appreciation for the valuable contributions made by Mr. S. C. Tripathi towards the deliberations in the Board Meetings during his tenure as Director of the Bank.

Brief profiles of the Directors seeking appointment / re-appointment at the ensuing Annual General Meeting has been furnished in the Report on Corporate Governance under the Section titled 'Board of Directors', which forms an integral part of this Report.

The Bank has received notices from Members pursuant to Section 160 ofthe Companies Act, 2013, signifying their intention to propose the candidature of the respective persons for the office of Director.

Board and Committee Meetings

During the year, six meetings each, of the Board and of the Audit Committee were held, the details of which are given in the Corporate Governance Report, which forms an integral part of this Report.

The Board has constituted the Audit Committee with Mr. T. Anantha Narayanan as Chairman and Mrs. Kanchan Chitale, Mr. Ashok Kini and Mr. Ranbir S. Butola as Members. There have not been any instances during the year when recommendations of the Audit Committee were not accepted by the Board.

Details of the composition of the Board, its Committees, the Meetings held and attendance of the Directors at such Meetings, are provided in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013and the Listing Agreement.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out annual evaluation of its own performance (Board as a whole), of the Directors individually, of the Chairman, and of the working of its Committees.

The statement indicating the manner in which the evaluation exercise was conducted is included in the Report on Corporate Governance, which forms an integral part of this Report.

System for Internal Financial Controls and its Adequacy

The Bank operates in a fully computerized environment with a Core Banking System supported by diverse application platforms for handling special businesses such as Treasury, Trade Finance, Credit Cards, Retail Loans, etc. The process of recording of transactions in each of the application platforms is subject to various forms of controls such as in-built system checks, Maker-Checker authorizations, independent post-transaction reviews, etc. The Financial Statements are prepared based on computer system outputs. Responsibility of preparation of Financial Statements is entrusted to a dedicated unit which is completely independent of business, risk, audit or other functions. This unit does not originate accounting entries except for limited matters such as share capital, taxes and transfers to reserves.

Conservation of energy and technology absorption and foreign exchange earnings and outgo

Considering the nature of activities as an entity in the financial services sector, the provisions of Section 134 (3) of the Companies Act, 2013 and the Rules framed thereunder relating to conservation of energy and technology absorption do not apply to the Bank. The Bank has, however, made optimum use of Information Technology in its operations.

The Bank has voluntarily taken steps towards conservation of energy and technology absorption, the details of which are highlighted in the Management Discussion and Analysis Report, which forms part of this Report. Details of foreign exchange earnings and outgo are also mentioned in the section on Management Discussion and Analysis.

Risk Management

The Bank has an integrated Risk Management Department, independent of business functions, covering Credit Risk, Market Risk, Assets-Liabilities Management (ALM), Operational Risk, and Information Security Riskfunctions.

Risk Management functions in the Bank have been aligned with best industry practices, and are being enhanced progressively, adapting to dynamic business environment and market conditions.

The Bank has implemented "Internal Capital Adequacy Assessment Process" (ICAAP) in line with Basel III requirements. The Bank has set up a Board-level Committee, viz., "Risk Management Committee" to examine risk policies and procedures developed by the Bank and to monitor adherence to various risk parameters and prudential limits by different operating departments.

More details on Risk Management framework/models adopted by the Bank are given in the section on 'Management Discussion and Analysis'.

Vigilance Mechanism

In compliance with RBI guidelines, the Bank has in place a "Whistle Blower Policy" since 2009. The Board of Directors of the Bank have constituted a Board-level Committee, viz., the Vigilance Committee, which conducts overview of cases of vigilance nature on the part of employees of the Bank. The Committee meets at least twice a year.

During the year under review, in compliance with provisions of the Companies Act, 2013, the Board of Directors have reviewed the Whistle Blower Policy of the Bank so as to make it compliant with the Regulations.

The current Whistle Blower Policy of the Bank is available on the website of the Bank at the undermentioned link:

http://www.indusind.com/content/dam/indusind/PDF/wbp final draft1.pdf

Auditors

M/s BSR & Co. LLP, Chartered Accountants, Statutory Auditors of the Bank, who have audited the accounts of the Bank for the year 2014-15, will retire at the conclusion of the ensuing Annual General Meeting. They have been associated with the Bank as Statutory Auditors for the past four financial years and are not eligible for re-appointment in accordance with RBI's policy of rotation and resting. The Board places on record its appreciation of the professional services rendered by M/s BSR& Co. LLP during their association with the Bank.

M/s Price Waterhouse Chartered Accountants LLP (PW), Mumbai (Firm's Regn. No. (012754N / N500016)) are proposed to be appointed as the Statutory Auditors for audit of the accounts of the Bank for FY 2015-16. Members are requested to consider the appointment of M/s Price Waterhouse Chartered Accountants LLP , as the Statutory Auditors of the Bank to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting at remuneration to be decided by the Board of Directors based on the recommendations of the Audit Committee. Their appointment is subject to the approval of the Reserve Bank of India. A certificate has been received from M/s Price Waterhouse, Chartered Accountants LLP to the effect that their appointment, if made, would be within the limits prescribed under Section 141 of the Companies Act, 2013.

Independent Auditor's Report

M/s BSR & Co.LLP, Chartered Accountants, have audited the accounts of the Bank for the year 2014-15 and their Report is annexed. There is no qualification in the Auditor's Report.

Secretarial Audit

In terms of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank has appointed Mr. S. N. Bhandari of M/s Bhandari & Associates, Company Secretaries in Practice (CP. No. 366), to undertake Secretarial Audit. The Secretarial Audit Report submitted by M/s Bhandari & Associates is furnished at Annexure II, and forms an integral part of this Report.

The Secretarial Audit Report submitted by M/s Bhandari & Associates for FY 2014-15 does not contain any qualification, reservation or adverse remark.

Material events that have happened after the Balance Sheet date:

On April 10, 2015, the Bank entered into an agreement with Royal Bank of Scotland N.V. to acquire on a 'slump sale' basis its Diamond and Jewellery financing business in India, of approximately Rs. 4,500 crores in size, along with related deposit portfolio, subject to certain regulatory approvals. The process of taking over of the business is under way and until ownership of the loans-transfer takes place, the day-to-day management of the loan portfolio will remain with Royal Bank of Scotland N.V. Once the formalities related to the transaction are completed, the business will be integrated with that of the Bank, and the advances and related deposit portfolio of the Bank will increase to the extent of acquisition.

Other than the above, there are no material changes and commitments affecting the financial position of the Bank, which have occurred between the end of the Financial Year 2014-15 to which the Balance Sheet relates and the date of this Report.

Statutory Disclosures

Information, wherever required under the Banking Regulation Act, 1949 or the Companies Act, 2013 as applicable to the Bank, has been laid out in the Schedules attached and forms part of the Balance Sheet and the Profit and Loss Account.

The details pursuant to remuneration of Directors and employees in terms of Section 197 (12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given at Annexure III and form an integral part of this Report.

Employees Stock Option Scheme

The Bank had instituted an Employee Stock Option Scheme (ESOS - 2007) to enable its employees, including Whole- time Directors, to participate in the future growth of the Bank. Under the Scheme, Options can be granted, which upon exercise could give rise to the issuance of a number of shares upto 7% of the issued equity capital of the Bank from time to time. The eligibility and number of Options to be granted to an employee is determined on the basis of criteria laid down in the Scheme and is approved by the Compensation Committee of the Board of Directors.

An aggregate of 3,45,67,700 Options, comprising 6.53% of the Bank's equity capital, have been granted under the Scheme. Statutory disclosures as required by SEBI Guidelines on Employee Stock Options are given at Annexure IV to this Report.

The Employees Stock Option Plan is administered by the Compensation Committee of the Board.

Directors' Responsibility Statement

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134 (3) (c) and 134 (5) of the Companies Act, 2013:

(i) that in the preparation of the Annual Accounts for the year ended March 31, 2015, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(ii) that such accounting policies as mentioned in the notes to the Financial Statements have been selected and applied consistently and that judgements and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31,2015 and of the profit of the Bank for the year ended on that date;

(iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities;

(iv) that the Annual Financial Statements have been prepared on a 'going concern' basis;

(v) that proper internal financial controls were in place and that the financial controls were adequate and operating effectively;

(vi) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form MGT-9, as required under Section 92 of the Companies Act, 2013, are included in this Report as Annexure V and form an integral part of this Report.

Particulars of Employees

The Bank had 19,121 employees on its rolls as on March 31,2015.

The information containing particulars of employees pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the Members at the Registered Office / Secretarial and Investor Services Office of the Bank during business hours on working days of the Bank up to the date of the ensuing Annual General Meeting. Any Member interested in obtaining a copy thereof, may write to the Company Secretary at the Secretarial and Investor Services Office for the same.

Remuneration Policy

The Board of Directors has, on the recommendations of the HR & Remuneration Committee framed a policy in relation to remuneration of Directors, Key Management Personnel and Senior Management of the Bank.

The detailed remuneration Policy of the Bank is given under "Disclosure on Remuneration" at Note no. 12.5 of the notes forming of the Financial Statements and forms an integral part of this Report.

Particulars of Loans, Guarantees or Investments outstanding

Details of Loans, Guarantees and Investments made by the Bank are given in the Notes to Financial Statements.

Corporate Social Responsibility

The Bank has voluntarily undertaken various initiatives in the area of Corporate Social Responsibility (CSR) by focusing on sustainability-driven growth.

In terms of the requirements of Section 135 of the Companies Act, 2013 and CSR Rules 2014, the Bank has set up a Board-level CSR Committee to look after the CSR initiatives of the Bank. The Committee is headed by Mrs. Kanchan

Chitale as Chairperson, with Mr. Ashok Kini, Mr. Vijay Vaid and Mr. Romesh Sobti as Members.

The Bank has also framed the CSR Policy and strategy that will guide and govern the Bank's activities in focus areas namely, rural development and inclusiveness, environmental sustainability, preventive healthcare and other areas of special interest.

During the year under review, the Bank has committed to Prime Minister's Swachh Bharat Abhiyan and worked towards financial inclusion and legal literacy. The CSR initiatives / projects undertaken by the Bank are largely in accordance with Schedule VII ofthe Companies Act, 2013.

The Report on CSR activities undertaken by the Bank is set out at Annexure VI and forms an integral part of this Report.

Related Party Transactions

All transactions entered with 'Related Parties' during the year under review were on 'arm's length basis' and in the 'ordinary course of business' and therefore do not attract the provisions of Section 188 of the Companies Act 2013. Further, there are no materially significant Related Party Transactions during the year with any of the Related Parties viz., Promoters, Directors and Key Management Personnel or other related entities which may have a potential conflict with the interest of the Bank at large.

The Policy on Related Party Transactions as approved by the Board of Directors is available on the website ofthe Bank at the link given below:

http://www.indusind.com/content/home/important-links/other-useful-information.html.

Business Responsibility Report (BRR)

The Securities and Exchange Board of India, vide their circular dated August 13, 2012 have mandated top 100 listed entities, based on their market capitalization on BSE Limited and National Stock Exchange of India Ltd., to include the 'Business Responsibility Report' (BRR) as part of the Annual Report.

In view of the above and in compliance with Clause 55 of the Listing Agreement with Stock Exchanges, the Business Responsibility Report of the Bank has been enclosed as Annexure VII to this Report, and forms an integral part of this Report.

Corporate Governance

As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on Corporate Governance practices followed by the Bank, together with a Certificate from Practising Company Secretary confirming compliance, forms an integral part of this Report.

A copy of Certificate issued by M/s Bhandari & Associates is attached as Annexure VIII to this Report.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report as required under Clause 49 of the Listing Agreement, forms part of the Annual Report.

Significant and Material Orders passed by the Regulators or Courts

There are no significant and material orders passed by the Regulators / Courts that would impact the going concern status of the Bank and its future operations.

Awards and Accolades

During the year under review, your Bank has received many awards and accolades for excellence in managing the Risk, Information Technology and for innovations, etc. Mr. Romesh Sobti, Managing Director and CEO received 'Banker of the Year' award from "Business Standard", a leading financial newspaper.

Brief details of various awards are covered under Management Discussion and Analysis Report.

Cautionary Statement

Certain statements in the "Directors' Report" and in the section on "Management Discussion and Analysis" describing the Bank's objectives, estimates and expectations may be 'forward-looking statements' within the meaning of applicable Securities Laws and Regulations. Actual results could differ substantially from those expressed or implied. Important factors that could make a difference include economic conditions in the domestic and overseas markets, changes in Laws / Regulations, and other incidental factors.

Policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace

The Bank has zero tolerance for sexual harassment at workplace and has adopted a 'Policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at the Workplace', in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013and the Rules made thereunder.

The Policy aims to provide protection to women employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment.

The Bank has also constituted an 'Internal Complaints Committee', to enquire into the complaints of sexual harassment and recommend appropriate action.

The Bank received 6 complaints of sexual harassment during the financial year 2014-15, status of the same is as under.

No. of cases received No. of cases closed No. of cases pending for during the year during the year investigation attheend of the year

6 5 1

Acknowledgements

The Directors are grateful to the shareholders of the Bank for the trust and confidence reposed by them in the Bank.

The Directors are also grateful to the Reserve Bank of India, the Ministry of Corporate Affairs, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Stock Exchanges and the Depositories for the guidance and support extended by them to the Bank.

The Board expresses its appreciation to all employees for their excellent performance, strong work ethic, and unswerving commitment, which qualities have contributed to the Bank's continued progress in a challenging environment.

The Board thanks its valued customers for their patronage, and looks forward to the growing of this mutually supportive relationship in future.

For and on behalf of the Board of Directors

Sd/- Place : Mumbai R. Seshasayee Date :May22,2015 Chairman


Mar 31, 2013

The Bank''s Directors have pleasure in presenting the Nineteenth Annual Report covering business and operations of the Bank, together with the audited financial accounts for the year ended March 31, 2013.

The financial performance for the year ended March 31, 2013 is summarized as under:

(Rs. in crores)

March 31, 2013 March 31, 2012

Deposits 54,116.72 42,361.55

Advances 44,320.61 35,063.95

Operating Profit (before Depreciation and Provisions and Contingencies) 1,912.89 1,447.99

Net Profit 1,061.18 802.61

During the year, despite the deceleration in growth rate in the Indian economy and a challenging macroeconomic environment, the Bank''s deposits grew by 27.75% and advances increased by 26.40%.

The focus during the year continued to be on increasing the earnings from core banking business and on strengthening the fee income streams.

The Operating Profit (before Depreciation and Provisions and Contingencies) during the year under review rose by 32.11% to Rs. 1,912.89 crores, from the level of Rs. 1,447.99 crores in the previous year.

The Bank''s Net Profit, after considering necessary provisions and contingencies and all expenses, was higher by 32.22% at Rs. 1,061.18 crores as against Rs. 802.61 crores in the previous year.

Appropriations

The Directors recommend appropriation of profit as under:

(Rs. in crores)

Operating Profit before Depreciation and Provisions & Contingencies 1,912.89

Less: Depreciation on Fixed Assets 73.43

Less: Provisions & Contingencies inclusive of Income Tax 778.28

Net Profit 1,061.18

Profit Brought forward 1,187.59

Amount available for Appropriation 2,248.77

Transfer to Statutory Reserve 265.30

Transfer to Capital Reserve 8.36

Transfer to Investment Reserve Account 0.40

Proposed Dividend 157.09

Tax on Dividend 26.69

Balance carried over to Balance Sheet 1,790.93

Total Appropriations 2,248.77

Dividend

The Earning per Share (EPS) of the Bank has risen to Rs. 21.83 during the year 2012-13, from Rs. 17.20 in the previous year.

Looking to the overall improvement in performance, the Directors recommend dividend of Rs. 3/- per equity share of Rs. 10/- each for the year ended March 31, 2013. (Dividend for the year 2011-12 was Rs. 2.20 per equity share of Rs. 10/- each).

The Bank shall pay tax on the amount of dividend paid, which will be tax-free in the hands of the shareholders.

Financial Performance

The operating environment in the Indian economy witnessed significant turbulence throughout the year, incorporating worsening liquidity conditions and inflationary pressures coupled with volatility in currency exchange rates. During the year, RBI reduced Repo Rate to 7.50% from 8.50% and CRR rates were reduced to 4.00% from 4.75%.

During the year 2012-13, the Bank continued to leverage its business on the three performance planks of Productivity, Profitability and Efficiency, which helped the Bank to significantly improve its profitability.

The Bank''s Total Income grew by 31.00% to Rs. 8,346.19 crores from Rs. 6,370.98 crores, backed by improved business.

The sharp rise in profitability was the result of a healthy increase in core earnings of the Bank through Net Interest Income (Nil) and robust growth in Non-Interest Income streams. Net Interest Income improved by 31.02% to Rs. 2,232.87 crores from 1 1,704.25 crores while Non-Interest Income rose to Rs. 1,362.96 crores from Rs. 1,011.78 crores, a rise of 34.71%.

The year 2012-13 has been one of sustained hardening of interest rates and shrinking of lending margins. The Yield on Advances remained steady at 13.77% during the year, even as the Cost of Deposits showed an increase to 8.49% as against 8.06% in the previous year (an increase of 43 basis points). However, the Net Interest Margin (NIM) increased to 3.43% during the year, as compared with 3.33% in 2011-12, owing to reduction in the total cost of funds.

Fee and Miscellaneous Income at Rs. 1,362.96 crores as compared to Rs. 1,011.78 crores in the previous year showed strong annual growth of 34.71%. Core Fee Income such as commission, exchange, fees on distribution of third-party products and earnings from foreign exchange business, etc. grew by 36% to Rs. 1,239.34 crores from the level of t 913.24 crores last year.

The Bank expanded its branch network rapidly to reach 500 branches, as against 400 branches at the beginning of the year. Revenue per employee during the year remained steady at Rs. 31.26 lakhs.

Quality of the Bank''s assets remained stable, with Net Non-Performing Assets (Net NPAs) at 0.31 % as at March 31,2013 from 0.27% last year. The Provisioning Coverage Ratio (PCR) stood at 70.13% as compared to 72.72% previous year.

On the liabilities side, the emphasis continued to be on broadbasing the deposit franchise. This task was accomplished by leveraging the expanded branch network and the pan-India marketing setup, offering innovative products and service propositions, sustained promotional campaigns, and enabling customers with alternate channels like ATMs, Internet Banking, etc.

The Bank introduced several new products and services for its chosen client segments, through its Transaction Banking Group and Global Markets Group. Deeper understanding of client requirements and the ability to put technology to efficient use formed the bedrock on which new products and service propositions were created.

The Bank kept up its focus on deepening as well as strengthening the fee-based income streams, resulting in a smart growth in non-interest income. Moving forward, the Bank plans to upscale the growth momentum through further enhancements in diverse revenue streams such as foreign exchange business, investment banking, structured trade and treasury products, distribution of third party products like mutual funds and insurance, international remittances, bullion operations and transaction banking activities, including the depository business and the commodity market business.

Share Capital

On December 5, 2012, the Bank issued 5,21,00,000 equity shares of Rs. 10/- each at a price of 1384.00 per share, aggregating to t 2,000.64 crores through a Qualified Institutions Placement (QIP).

During the year under review, the Bank allotted 30,67,705 shares pursuant to the exercise of Options under its Employees Stock Option Scheme, 2007.

Pursuant to the above, the Paid-up Share Capital and Share Premium Account increased by Rs. 55.17 crores and Rs. 1,962.85 (net) crores respectively.

As at March 31, 2013, the Paid-up Equity Capital of the Bank consisted of 52,26,77,706 shares of Rs. 10/- each, excluding forfeited shares.

Tier II Capital

The Bank did not raise any Tier II Capital during the year.

Capital Adequacy

The Bank is adequately capitalized. The Capital Adequacy Ratio of the Bank, calculated as per the New Capital Adequacy Framework (Basel II norms) of RBI, is set out below:

March 31, 2013 March 31, 2012

i) Capital Adequacy Ratio (CRAR) 15.36% 13.85%

ii) CRAR- Tier I Capital 13.78% 11.37%

iii) CRAR- Tier II Capital 1.58% 2.48%

Ratings

Instruments Rating Rating Agency

Lower Tier II Subordinate Debt program AA ICRA

Upper Tier II Bonds AA- ICRA

Certificates of Deposit A1 CRISIL

Lower Tier II Subordinate Debt program AA CARE

Long Term Debt Instruments AA- India Ratings and Research

Short Term Debt Instruments AA India Ratings and Research

Subsidiary Company

ALF Insurance Services Pvt. Ltd., the Bank''s subsidiary company which was set up to do the business of Insurance Corporate Broking, is currently under voluntarily winding up, and the process is expected to be completed soon.

Directors

Mr. S. C. Tripathi and Dr. T. T. Ram Mohan, Directors, retire by rotation, and being eligible, have offered themselves for re- appointment.

Mr. R. Seshasayee was appointed Part-time Non-executive Chairman of the Bank on July 24, 2007 for a period of two years. The Reserve Bank of India had approved the re-appointment of Mr. R. Seshasayee as Part-time Chairman of the Bank for a further period of two years in July 2009 and July 2011. Re-appointment of Mr. R. Seshasayee as Part-time Chairman of the Bank for a period of two years w.e.f. July 24, 2013 is proposed, subject to approval of the Reserve Bank of India.

Mr. Romesh Sobti was appointed Managing Director & CEO of the Bank for a period of three years with effect from February 1, 2008 and requisite approval as required u/s 35B of the Banking Regulation Act, 1949 was obtained. The said appointment was approved by the shareholders in the General Body meeting held on September 22, 2008. Mr. Sobti was thereafter re-appointed as Managing Director & CEO of the Bank in the Annual General Meeting held on June 28, 2010 for a further period of three years, w.e.f. February 1, 2011. Re-appointment of Mr. Romesh Sobti as Managing Director & CEO of the Bank for a period of three years w.e.f. February 1, 2014 is proposed, subject to approval of the Reserve Bank of India.

Brief resume of Directors proposed to be re-appointed have been furnished in the section on ''Corporate Governance''. Auditors

M/s B S R & Co., Chartered Accountants, the Statutory Auditors of the Bank, who have audited the accounts of the Bank for the year 2012-13, will retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. Members are requested to consider their re-appointment and authorise the Board to fix their remuneration. The appointment of the Statutory Auditors will be subject to the approval of Reserve Bank of India.

Auditors'' Report

M/s B S R & Co., Chartered Accountants, have audited the accounts of the Bank for the year 2012-13 and their Report is annexed. There are no qualifications in the Auditors'' Report.

Statutory Disclosures

Information, wherever required under the Banking Regulation Act, 1949 or the Companies Act, 1956 as applicable to a banking company, has been laid out in the schedules attached and forms part of the Balance Sheet and the Profit and Loss Account.

There are no material changes and commitments affecting the financial position of the Bank, which have occurred between the end of the financial year 2012-13 to which the Balance Sheet relates and the date of this Report.

Considering the nature of activities as an entity in the financial services sector, the provisions of Section 217(1)(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank has, however, made optimum use of information technology in its operations.

The Bank had 11,502 employees on its rolls as on March 31, 2013. The information required under Section 217(2A) of the Companies Act, 1956 and the rules made thereunder is given in the annexure appended hereto and forms part of this Report. In terms of Section 219(1 )(b)(iv) of the Companies Act, this Report and the Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Bank.

Employee Stock Option Scheme

The Bank had instituted Employee Stock Option Scheme (ESOS - 2007) to enable its employees, including Whole-time Directors, to participate in the future growth of the Bank. Under the Scheme, Options can be granted, which upon exercise could give rise to the issue of a number of shares upto 7% of the issued equity capital of the Bank from time to time. The Employee Stock Option Scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of Options to be granted to an employee is determined on the basis of criteria laid down in the Scheme and is approved by the Compensation Committee of the Board of Directors.

An aggregate of 2,79,55,200 Options, comprising 5.35% of the Bank''s equity capital, have been granted under the Scheme. Statutory disclosures as required by the SEBI Guidelines on ESOS are given at Annexure "I" to this Report.

Corporate Governance

The Bank continues its endeavour to adopt the best prevalent Corporate Governance practices.

A separate Report on the status of implementation of Corporate Governance, as required under Clause 49 of the Listing Agreement with the relevant Stock Exchanges, is included in the section on ''Corporate Governance'' which forms part of this Report. M/s Bhandari & Associates, Company Secretaries have certified that the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreements with the Stock Exchanges have been complied with by the Bank. A copy of their Certificate is also attached at Annexure ''II'' to this Report''.

Directors'' Responsibility Statement

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors hereby certify and confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgements 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 at March 31, 2013 and of the profit of the Bank for the year ended on that date;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and Banking Regulation Act, 1949 for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities; and

(iv) the Annual Accounts have been prepared on a ''going concern'' basis.

Acknowledgements

The Directors are grateful to the shareholders of the Bank for the trust and confidence reposed by them in the Bank.

The Directors are also grateful to the Reserve Bank of India, the Ministry of Corporate Affairs, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, and the Stock Exchanges for the guidance and support extended by them to the Bank.

The Board expresses its deep sense of appreciation to all employees for their excellent performance, strong work ethic and unswerving commitment, which qualities have contributed to the Bank''s continued progress in a challenging environment.

The Board thanks its valued customers for their patronage, and looks forward to the growing of this mutually supportive relationship in future.

For and on behalf of the Board of Directors

Place : Mumbai R. Seshasayee

Date : May 8, 2013 Chairman


Mar 31, 2012

The Bank's Directors have pleasure in presenting the Eighteenth Annual Report covering business and operations of the Bank, together with the audited accounts for the year ended March 31, 2012.

The financial performance for the year ended March 31, 2012 is summarized as under:

(Rs in crores) As on As on March 31, 2012 March 31, 2011

Deposits 42,361.55 34,365.37

Advances 35,063.95 26,165.65

Operating Profit (before Depreciation and Provisions and Contingencies) 1,447.99 1,142.22

Net Profit 802.61 577.32

During the year, the Bank's deposits grew by 23.27% and advances increased by 34.01%, despite the deceleration in growth rate in the Indian economy and a challenging macroeconomic environment.

The focus during the year continued to be on increasing the earnings from core banking business and on strengthening the fee income streams.

The Operating Profit (before Depreciation and Provisions and Contingencies) during the year under review rose by 26.77% to Rs1,447.99 crores, from the level ofRs1,142.22 crores in the previous year.

The Bank's Net Profit, after considering necessary provisions and contingencies and all expenses, was higher by 39.02% at Rs802.61 crores as against Rs577.32 crores in the previous year.

Appropriations

The Directors recommend appropriation of profit as under:

(Rs in crores)

Operating Profit before Depreciation and Provisions & Contingencies 1,447.99

Less: Depreciation on Fixed Assets 74.96

Less: Provisions & Contingencies 570.42

Net Profit 802.61

Profit Brought forward 714.36

Amount available for Appropriation 1,516.97

Transfer to Statutory Reserve 200.65

Transfer to Capital Reserve 8.63

Transfer to Investment Reserve Account 0.52

Proposed Dividend 102.89

Tax on Dividend 16.69

Balance carried over to Balance Sheet 1,187.59

Total Appropriations 1,516.97

Dividend

The Earning per Share (EPS) of the Bank has risen to Rs 17.20 during the year 2011-12, from Rs 13.16 in the previous year.

Looking to the overall improvement in performance, the Directors recommend a dividend ofRs 2.20 per equity share ofRs 10/- each for the year ended March 31, 2012. (Dividend for the year 2010-11 was Rs 2.00 per equity share ofRs 10/- each).

The Bank shall pay tax on the amount of dividend paid, which will be tax-free in the hands of the shareholders.

Financial Performance

During the year 2011-12, the Bank continued to leverage its business on the three performance planks of Productivity, Profitability and Efficiency, which helped the Bank to improve its profitability significantly.

The Bank's Total Income grew by 48.06% to Rs 6,370.98 crores from Rs 4,303.02 crores, backed by improved business.

The sharp rise in profitability was the result of a healthy increase in the core earnings of the Bank through Net Interest Income (Nil) and robust growth in Non-Interest Income streams. Net Interest Income improved by 23.81% to Rs 1,704.25 crores from Rs 1,376.50 crores while Non-Interest Income rose to Rs 1,011.78 crores from Rs 713.66 crores, a rise of41.77%.

The operating environment in the Indian economy witnessed significant turbulence throughout the year, incorporating worsening liquidity conditions and inflationary pressures coupled with volatility in currency exchange rates. RBI continued with a staunch anti-inflationary stance until December 2011, and raised policy rates in every review. However, to mitigate the liquidity crunch, RBI had reduced CRR by 125 basis points in Q4FY12 and has deferred policy rate reductions to fiscal 2012-13.

The year 2011-12 has been one of sustained hardening of interest rates and shrinking of lending margins. Although the Yield on Advances improved to 13.77% during the year as against the yield of 12.36% in 2010-11 (an increase of 141 basis points), the Cost of Deposits showed a sharper increase to 8.06% as against 6.32% in the previous year (an increase of 174 basis points). Accordingly, the Net Interest Margin (NIM) declined to 3.33% during the year, as compared with 3.47% in 2010-11.

Fees and Miscellaneous Income at Rs 1,011.78 crores as compared with Rs 713.66 crores in the previous year showed strong annual growth of 42%. Increase in Core Fee Income such as commission, exchange, fees on distribution of third-party products and earnings from foreign exchange business, etc. grew about 45% to Rs 913.24 crores from the level ofRs 629.44 crores last year.

The Bank expanded its branch network rapidly to reach 400 branches, as against 300 branches at the beginning of the year. Revenue per employee during the year remained steady atRs 30 lakhs.

Quality of the Bank's assets improved further, with Net Non-Performing Assets (Net NPAs) falling to 0.27% as at March 31, 2012 from 0.28% last year. The Provisioning Coverage Ratio (PCR) improved marginally to 72.72% as compared with 72.61% in the previous year.

On the liabilities side, the emphasis continued to be on broad basing the deposit franchise and on reduction in the overall cost of deposits. This task was accomplished by leveraging the expanded branch network and the pan-India marketing setup, offering innovative products and service propositions, sustained promotional campaigns, and enabling customers with alternate channels like ATMs, Internet Banking, etc.

The Bank introduced several new products and services for its chosen client segments, through its Transaction Banking Group and Global Markets Group. Deeper understanding of client requirements and the ability to put technology to efficient use formed the bedrock on which new products and service propositions were created.

Towards consolidating itself as a full service 'Universal Bank', the Bank acquired the Indian operations of the Credit Cards business of Deutsche Bank AG, as a going concern on a slump sale basis. The acquisition was fully funded from internal accruals of the Bank. A seamless take-over of the business was completed on June 1, 2011.

The Bank kept up its focus on deepening as well as strengthening the fee-based income streams, resulting in a smart growth in non-interest income. Moving forward, the Bank plans to upscale the growth momentum through further enhancements in diverse revenue streams such as foreign exchange business, investment banking, structured trade and treasury products, distribution of third party products like mutual funds and insurance, international remittances, bullion operations and transaction banking activities, including the depository business and the commodity market business.

Share Capital

During the year under review, the Bank allotted 17,36,166 shares pursuant to the exercise of Options under its Employees Stock Option Scheme, 2007.

Pursuant to the above, the Paid-up Share Capital and Share Premium Account increased by Rs 1.73 crores and Rs 9.78 crores respectively.

As at March 31, 2012, the Paid-up Equity Capital of the Bank consisted of 46,75,10,001 shares ofRs 10/- each, excluding forfeited shares.

Tier II Capital

The Bank did not raise any Tier II Capital during the year.

Capital Adequacy

The Bank is adequately capitalized. The Capital Adequacy Ratio of the Bank, calculated as per the New Capital Adequacy Framework (Basel II norms) of RBI, is set out below:

March 31, 2012 March, 31, 2011

i) Capital Adequacy Ratio (CRAR) 13.85% 15.89%

ii) CRAR - Tier I Capital 11.37% 12.29%

iii) CRAR - Tier II Capital 2.48% 3.60%

Ratings

Instruments Rating Rating Agency

Lower Tierll Subordinate Debt program AA ICRA

Upper Tierll Bonds AA- ICRA

Certificate of Deposit A1 CRISIL

Lower Tierll Subordinate Debt program AA CARE

Lower Tierll Debt Instruments AA-(ind) FITCH

Upper Tierll Debt Instruments A(ind) FITCH

Short Term Debt Instruments A1 FITCH

Subsidiary Company

ALF Insurance Services Pvt. Ltd., the Bank's subsidiary company was set up to do the business of Insurance Corporate Broking. The Bank has since decided against entering the Insurance Broking business, and the subsidiary is being voluntarily wound up.

Directors

Mr. Ajay Hinduja and Dr. T. T. Ram Mohan, Directors, retire by rotation, and being eligible, have offered themselves for re- appointment.

Mrs. Kanchan Chitale was appointed Additional Director by the Board at its meeting held on October 18, 2011, and will hold office as Additional Director upto the ensuing Annual General Meeting.

Mr. Vijay Vaid was appointed Additional Director by the Board at its meeting held on October 18, 2011, and will hold office as Additional Director upto the ensuing Annual General Meeting.

Mr. R. S. Sharma was appointed Additional Director by the Board at its meeting held on April 19, 2012, and will hold office as Additional Director upto the ensuing Annual General Meeting.

The Bank has received notices from members pursuant to Section 257 Of the Companies Act, 1956 signifying their intention to propose the candidature of Mrs. Kanchan Chitale, Mr. Vijay Vaid and Mr. R. S. Sharma for the office of Director.

Brief profiles of Mrs. Kanchan Chitale, Mr. Vijay Vaid and Mr. R. S. Sharma are furnished in the Report on Corporate Governance.

Mr. Premchand Godha, who had joined the Bank's Board on October 31, 2006, expressed a desire to step down from the Board of our Bank owing to his professional preoccupations. Mr. Godha's resignation was accepted by the Board on August 18, 2011.

The Directors wish to place on record their sincere appreciation for the valuable contributions made by Mr. Godha towards the deliberations in the Board during his tenure as Director of the Bank.

Mr. T. Anantha Narayanan, who had joined the Bank's Board on March 18, 2004, ceased to hold office from March 18, 2012 on completion of the maximum permissible tenure of 8 years laid down in Section 10A(2A)(i) of the Banking Regulation Act, 1949.

The Directors wish to place on record their sincere appreciation for the valuable contributions made by Mr. Anantha Narayanan towards the deliberations in the Board during his tenure as Director of the Bank.

Auditors

M/s BSR & Co., Chartered Accountants, the Statutory Auditors of the Bank, who have audited the accounts of the Bank for the year 2011-12, will retire at the conclusion ofthe ensuing Annual General Meeting and are eligible for re-appointment. Members are requested to consider their re-appointment and authorise the Board to fix their remuneration. The appointment of the Statutory Auditors will be subject to the approval of Reserve Bank of India. The members are further requested to authorise the Board to appoint Branch Auditors of the Bank in consultation with the Statutory Auditors and to fix their remuneration.

Auditors' Report

M/s BSR & Co., Chartered Accountants, have audited the accounts of the Bank for the year 2011-12 and their Report is annexed. There are no qualifications in the Auditors' Report.

Statutory Disclosures

Information, wherever required under the Banking Regulation Act, 1949 or the Companies Act, 1956 as applicable to a banking company, has been laid out in the schedules attached and forms part of the Balance Sheet and Profit and Loss Account.

There are no material changes and commitments affecting the financial position of the Bank, which have occurred between the end of the financial year 2011-12 to which the Balance Sheet relates and the date of this Report.

Considering the nature of activities as an entity in the financial services sector, the provisions of Section 217(1)(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank has, however, made optimum use of information technology in its operations.

The Bank had 9,370 employees on its rolls as on March 31, 2012. The information required under Section 217(2A) of the Companies Act, 1956 and the rules made there under is given in the annexure appended hereto and forms part of this Report. In terms of Section 219(1)(b)(iv) of the Companies Act, this Report and the Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Bank.

Employees Stock Option Scheme

The Bank had instituted an Employees Stock Option Scheme to enable its employees, including Whole-time Directors, to participate in the future growth of the Bank. Under the Scheme, Options which upon exercise or conversion could give rise to the issue of a number of shares not exceeding in the aggregate 7% of the issued equity capital of the Bank from time to time can be granted. The Employees Stock Option Scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of criteria laid down in the Scheme and is approved by the Compensation Committee of the Board of Directors.

An aggregate of 2,72,45,700 Options, comprising 5.82% of the Bank's equity capital, have been granted under the Scheme. Statutory disclosures as required by the revised SEBI Guidelines on ESOS are given in the Annexure to this Report.

Corporate Governance

The Bank continues its endeavour to adopt the best prevalent Corporate Governance practices.

A separate Report on the status of implementation of Corporate Governance, as required under Clause 49 of the Listing Agreements with the relevant Stock Exchanges, is included in the section on 'Corporate Governance' which forms part of this Report. M/s Bhandari & Associates, Company Secretaries have certified that the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreements with the Stock Exchanges have been complied with by the Bank. A copy of their Certificate is also attached to the section on 'Corporate Governance'.

Directors' Responsibility Statement

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors hereby certify and confirm that:

(i) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgements 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 at March 31, 2012 and of the profit of the Bank for the year ended on that date;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and Banking Regulation Act, 1949 for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities; and

(iv) the Annual Accounts have been prepared on a 'going concern' basis.

Acknowledgements

The Directors are grateful to the shareholders of the Bank for the trust and confidence reposed by them in the Bank.

The Directors are also grateful to the Reserve Bank of India, the Stock Exchanges, the Ministry of Corporate Affairs, and the Securities and Exchange Board of India for the guidance and support extended by them to the Bank.

The Board expresses its deep sense of appreciation to all employees for their excellent performance, strong work ethic and unswerving commitment, which qualities have contributed to the Bank's continued progress in a challenging environment.

The Board thanks its valued customers for their patronage, and looks forward to the growing of this mutually supportive relationship in future.

For and on behalf of the Board of Directors

Place : Mumbai R. Seshasayee

Date : May 25,2012 Chairman

 
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