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

Notes to Accounts of IndusInd Bank Ltd.

Mar 31, 2015

SCHEDULE - 1 CONTINGENT LIABILITIES

I Claims against the Bank not acknowledged as debts 547,73,97 535,82,56

II Liability on account of outstanding Forward Exchange Contracts 96187,31,18 78491,21,24

III Liability on account of outstanding Derivative Contracts 79217,67,10 45391,62,66

IV Guarantees given on behalf of constituents

- In India 27987,92,20 18502,33,14

- Outside India - -

V Acceptances,Endorsements and Other Obligations 5019,93,18 4883,26,84

VI Other Items for which the Bank is contingently liable - -

The Depositor Education and Awareness Fund(DEAF) 12,52,58 -

TOTAL 208973,10,21 147804,26,44

* During the current year, Profit / (Loss) on derivative transactions has been classified alongwith profit on exchange transactions from Profit on sale of investments. Previous year numbers have been regrouped accordingly.

Schedule 2

Notes forming part of the financial statements

1. Capital Adequacy Ratio

The Bank computes Capital Adequacy Ratio as per RBI guidelines. Basel III Capital Regulations issued by RBI are applicable to the Bank with effect from April 1,2013. Under Basel III Capital Regulations, the Bank has to maintain a Minimum Total Capital (MTC) of 9% of the total risk weighted assets (RWAs) of which at least 5.50% (Previous year 5.00%) shall be from Common Equity Tier 1 (CET 1) capital and at least 7.00% (Previous year 6.50%) from Tier 1 capital. The capital adequacy ratio of the Bank calculated as per Basel III Capital Regulations is set out below:

Notes:

(1) Does not include amount of securities pledged with Central Counter Parties viz., Clearing Corporation of India Limited, National Securities Clearing Corporation of India Limited and Multi Commodity Exchange of India Limited.

(2) Excludes investment in RIDF scheme of NABARD and equity shares.

(3) Excludes investment in RIDF scheme of NABARD, commercial papers, Certificates of Deposit and preference shares acquired by way of conversion of debts.

(4) Includes investment in RIDF scheme of NABARD.

(5) Amounts reported under columns 4, 5, 6 and 7 are not mutually exclusive.

2.5 During the year, the value of sales and transfer of securities to / from HTM category, excluding one-time transfer of securities from HTM and sale on account of Open Market Operation (OMO), has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year. As such, in line with RBI guidelines, specific disclosures on book value, market value, and provisions if any, relating to such sale and transfers are not required to be made.

3.3 Disclosures on Risk Exposure in Derivatives

Derivatives Policy approved by Board of Directors defines the framework for carrying out derivatives business and lays down policies and processes to measure, monitor and report risk arising from derivative transactions. The policy provides for (a) appropriate risk limits for different derivative products and (b) authority levels for review of limit breaches and to take appropriate actions in such events. As part of the Derivatives Policy, the Bank has a Product Suitability and Customer Appropriateness Policy, which is used to classify customers on the basis of their need for various derivative products as well as their competence in understanding such products and the attendant risks involved.

Risk Management Department of the Bank is responsible for measuring, reporting and monitoring risk arising from derivatives transactions. It functions independent of Treasury business and undertakes the following activities:

- Monitors derivatives operations against prescribed policies and limits on a daily basis;

- Daily review of product-wise profitability and activity reports for derivatives operations;

- Daily submission of MIS and details of exceptions to the Top Management; and

- Monitoring effectiveness of derivative deals identified as hedges against the terms of the hedging instruments and underlying hedged risk.

- Collaterals are generally kept as cash or cash equivalent for securing derivative transactions.

The Risk Management function applies a host of quantitative tools and methods such as Value at Risk, PV01, stop-loss limits, counterparty limits, deal size limits and overnight position limits.

The Bank undertakes derivative transactions for hedging customers' exposure, hedging the Bank's own exposure, as well as for trading purposes, wherever permitted by RBI. The customers use these derivative products to hedge their forex and interest rate exposures.

The following table presents quantitative disclosures relating to Derivatives:

Note 1: There were no outstanding currency and interest rate futures as on March 31, 2015. Note 2: Marked to Market positions includes interest accrued on the swaps.

Note 3: Credit exposure is computed based on the current exposure method.

Note 4: Based on the PV01 ofthe outstanding derivatives.

Note 5: Based on the absolute value of PV01 of the derivatives outstanding as at the year end.

Notes:

1) RecoveriesincludesaletoSC/RC.

2) In terms of RBI circular number DBOD.BP.BC.No.98/21.04.132/2013-14 dated February 26, 2014, in respect of assets sold to SC / RCs, during the last quarter of the year ended March 31,2015, the loss on sale arrived at by deducting sale consideration and provisions held as on the date of sale from the outstanding amount, is being amortized over a period of two years. Accordingly, the Bank has charged to the Profit and Loss account an amount ofRs. 32.09 crores during the year ended March 31,2015.

3) Provisions include floating provisions, to the extent available.

4.2 Provision coverage ratio

Provision coverage ratio as at March 31,2015 is 62.61% (Previous year 70.35%).

4.7 During the year, there has been no purchase / sale of non-performing financial assets from / to other banks (Previous year Nil).

4.8 During the year, there was no sale of assets through securitization except sale of assets to SC / RC (Previous year Nil).

4.9 Provision on Standard Assets

In accordance with RBI guidelines, general provision on standard assets is made at the following rates:

(a) At 1% on standard advances to Commercial Real Estate Sector;

(b) At 0.25% on standard direct advances to SME and Agriculture; and

(c) At 0.40% of the balance outstanding in other standard assets.

Standard assets provision as at March 31,2015 also includes additional provision made on restructured standard assets in compliance with RBI guidelines.

The provision on standard assets is included in 'Other Liabilities and Provisions - Others' in Schedule 5, and is not netted off from Advances. The amount of provision held on standard assets is as below:

4.10 Unhedged Foreign Currency Exposure (UFCE) of Clients

Foreign exchange risk is the risk of loss arising out of adverse movements in foreign exchange rates affecting both on-balance sheet and off-balance sheet exposures. The forex positions that are not effectively hedged either by way of natural hedge or through derivatives/forward contracts expose a client to the risk of loss due to volatility in the forex rates. The Bank assesses the risk arising out of such UFCE of the clients at the time of credit appraisal and monitors the same at regular intervals. The provision for standard assets as of March 31, 2015 includeds an amount of Rs. 32.00 crores (Previous year NA) towards UFCE. Further, capital held under Basel III Capital Regulations, as of March 31,2015 includes an amount ofRs. 101.50 crores (Previous year NA) on account of UFCE, computed at the applicable risk weights.

In accordance with RBI guidelines, the Bank has utilized floating provision towards making specific provisions for NPAs and for absorbing loss on sale of NPAs to RC.

Notes:

(1) Working funds are reckoned as the average of total assets as per the monthly returns in Form X filed with RBI during the year.

(2) Returns on Assets are computed with reference to average working funds.

(3) Business per employee (deposits plus gross advances) is computed after excluding Inter-bank deposits.

6.2 Liquidity Coverage Ratio (LCR)

The Bank adheres to RBI guidelines relating to the Liquidity Coverage Ratio, Liquidity Risk Monitoring Tools and the LCR Disclosure Standards pursuant to the Basel III Framework on Liquidity Standards that are applicable to banks in India with effect from January 1,2015.

LCR, as laid down in the guidelines, measures the bank's ability to manage and survive for 30 days under a significant stress scenario that combines an idiosyncratic as well as a market-wide shock that would result in accelerated withdrawal of deposits from retail as well wholesale depositors, partial loss of secured funding, increase in collateral requirements, unscheduled draw down of unused credit lines, etc.

The Bank depends on balanced funding from retail as well as wholesale depositors. The Bank computes LCR in all significant currencies using the factors mentioned in RBI guidelines. High Quality Liquid Assets (HQLA) of the Bank consist of cash, unencumbered excess SLR, a portion of statutory SLR as allowed under the guidelines, cash balance with RBI in excess of statutory cash reserve requirements, and high rated corporate bonds issued by entities other than financial institutions. Major components of the Bank's Balance Sheet are in domestic currency, and it uses foreign currency sources to predominantly fund foreign currency advances.

Collaterals are generally kept as cash or cash equivalent for securing derivative transactions. The largest absolute net 30-day collateral flows realized during the preceding 24 months has been considered as potential outflow on account of change in valuation of derivative trades.

The Asset Liability Management Committee (ALCO) of the Bank is the governing body to decide on composition of funding sources and accordingly guide different business units. The Balance Sheet Management Group (BSMG), under the guidance of the ALCO, is responsible for operationalizing liquidity management within the Bank.

Quantitative disclosure:

Following is the quantitative disclosures relating to LCR:

7.4 Single borrower limit and Group Borrower Limit During the year, the Bank has not exceeded the prudential credit exposure limit in respect of Single Borrower and Group Borrowers (Previous year Nil).

7.5 Unsecured advances

The Bank has not extended any project advances where the collateral is an intangible asset such as a charge over rights, licenses, authorizations, etc. (Previous year Nil).The Unsecured Advances of Rs. 8,818.10 crores (Previous yearRs. 5,856.34 crores) as disclosed in Schedule 9B (iii) are without any collateral or security.

8. Concentration of Deposits, Advances, Exposures and NPAs

8.1 Concentration of Deposits

Advances are computed as per the definition of Credit Exposure including derivatives as prescribed in Master Circular on Exposure Norms DBOD.No.Dir.BC.12/13.03.00/2014-15dated July 1,2014.

Exposures are computed as per the definition in Master Circular on Exposure Norms DBOD.No.Dir.BC.12/13.03.00 / 2014-15 dated July 1, 2014 and includes credit and investment exposure.

9.2 Disclosure of penalties imposed by RBI

During the year, RBI imposed penalty of Rs. 0.10 crores on the Bank under section 47A(1) read with section 46(4) of the Banking Regulation Act, 1949 in respect of deficiencies in adherence to certain RBI guidelines on advances relating to one borrower account (Previous year Nil).

9.3 Fixed Assets

9.3.1 Cost of premises includes Rs. 4.09 crores (Previous yearRs. 4.09 crores) in respect of properties for which execution of documents and registration formalities are in progress. Of these properties, the Bank has not obtained full possession of one property having written down value ofRs. 1.63 crores (Previous yearRs. 1.67 crores) and has filed a suit for the same.

9.3.2 Computer software

The movement in fixed assets capitalized as computer software is given below:

9.4 Contingent Liabilities

The Bank's pending litigations comprise of claims against the Bank by the clients and proceedings pending with Income Tax authorities. The Bank has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. Claims against the Bank not acknowledged as debts comprise of tax demands of Rs. 127.12 crores (Previous year Rs. 118.38 crores) in respect of which the Bank is in appeal and the legal cases sub judice of Rs. 420.62 crores (Previous yearRs. 417.45 crores). The Bank carries a provision ofRs. 3.97 crores against cases sub judice. The amount of contingent liabilities is based on management's estimate, and no significant liability is expected to arise out of the same.

9.5 The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Bank has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of account.

9.6.1 Bancassurance business

Commission, Exchange and Brokerage in Schedule 14 include the following fees earned on Bancassurance business:

9.6.2 The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous year Nil).

9.6.3 The Bank does not have any Off-Balance Sheet SPVs (which are required to be consolidated as per accounting standards) (Previous year Nil).

9.8 There is no delay in transferring amounts to Investor Education and Protection Fund by the Bank (Previous year Nil).

9.9 Corporate Social Responsibility (CSR)

During the year under review, the Bank constituted a CSR Committee of Board of Directors to comply with provisions of sub section (2) to (5) of section 135 of the Companies Act, 2013. The Bank has spent an amount of Rs. 17.54 crores towards CSR initiatives through various projects in the areas of Rural Development and Inclusiveness, Environment Sustainability, Preventive Healthcare and certain areas of special interest such as Environmental, Education, etc. of the total CSR spends, an amount of Rs. 14.58 crores was incurred towards capital expenditure.

9.10 Drawdown from Reserves

The Bank has not undertaken any drawdown from reserves during the year (Previous year Nil).

9.11 Credit default swaps

The Bank has not undertaken any transactions in Credit Default Swaps (CDS) during the year (Previous year Nil).

9.12 Shares Forfeited

During the year, the Bank cancelled the shares forfeited till date. Consequently, the moneys collected on such forfeited shares amounting to Rs. 0.86 crores, consisting ofRs. 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.

9.13 Movement in depreciation of Fixed Assets

10. Employee Stock Option Scheme ("ESOS"):

The shareholders of the Bank approved Employee Stock Option Scheme (ESOS) on September 18, 2007. ESOS enables the Board and / or the HR and Remuneration Committee to grant such number of stock options of the Bank not exceeding 7% of the aggregate number of issued and paid up equity shares of the Bank, in line with the guidelines of the Securities & Exchange Board of India (SEBI). The options vest within a maximum period of five years from the date of grant of option. The exercise price for each grant is decided by the Compensation Committee, which is normally based on the latest available closing price. Upon vesting, the options have to be exercised within a maximum period of five years. The stock options are equity settled where the employees will receive one equity share per stock option.

Pursuant to the ESOS 2007 scheme, the HR and Remuneration Committee of the Bank has granted 3,45,67,700 options as set out below:

Recognition of expense

The Bank follows the intrinsic value method to recognize employee costs relating to ESOS, in accordance with the Guidance Note on "Accounting for Employee Share-based Payments" issued by the ICAI. Excess of fair market price over the exercise price of an option at the grant date, is recognized as a deferred compensation cost and amortized on a straight-line basis over the vesting period of such options. The fair market price is the latest available closing price on the stock exchange on which the shares of the Bank are listed, prior to the date of the meeting of the Compensation Committee in which stock options are granted. Since shares are listed on more than one stock exchange, the exchange where the Bank's shares have been traded highest on the said date is considered for this purpose.

Fair value methodology:

The fair value of options granted during the year has been estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during a period. The measure of volatility used in Black-Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on the National Stock Exchange of India Limited (NSE), over a prior period equivalent to the expected life of the options, till the date of the grant.

The stock-based compensation cost calculated as per the intrinsic value method for the year is Rs. 3.48 crores. Had the Bank adopted the Black-Scholes model based fair valuation, compensation cost for the year ended March 31,2015, would have increased by Rs. 59.54 crores and the proforma profit after tax would have been lower by Rs. 39.31 crores. On a proforma basis, the basic and diluted earnings per share would have been Rs. 33.25 and Rs. 32.68 respectively.

The weighted average fair value of options granted during the year is Rs. 228.99.

11. Disclosures - Accounting Standards

11.1 Employee Benefits (AS-15)

Gratuity:

Gratuity is a defined benefits plan. The Bank has obtained qualifying insurance policies from two insurance companies. The following table summarises the components of net expenses recognized in the Profit and Loss account and funded status and amounts recognized in the Balance Sheet, on the basis of actuarial valuation.

Provident Fund

The guidance note on implementing AS 15, Employee Benefits (revised 2005) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefits plans.

The details of the fund and plan assets position as at March 31,2015, are as follows:

11.2 Segment Reporting (AS 17)

The Bank operates in four business segments, viz. Treasury, Corporate/ Wholesale Banking, Retail Banking and Other Banking Operations. There are no significant residual operations carried by the Bank.

Geographic Segments:

The business operations of the Bank are largely concentrated in India. Activities outside India are restricted to resource mobilization in the international markets. Since the Bank does not have material earnings emanating from foreign operations, the Bank is considered to operate only in domestic segment.

11.3 Related party transactions (AS-18)

The following is the information on transactions with related parties:

Key Management Personnel

Mr. Romesh Sobti, Managing Director

Associates

Induslnd Marketing and Financial Services Private Limited Subsidiaries

ALF Insurance Services Private Limited (under liquidation)

In accordance with RBI guidelines, details pertaining to the related party transactions have not been provided as there is only one related party in each of the above categories.

11.4 Operating Leases (AS 19)

The Bank has taken a number of premises on operating lease for branches, offices, ATMs and residential premises for staff. The Bank has not given any assets on operating lease. The details of maturity profile of future operating lease payments are given below:

The Bank has not sub-leased any of the properties taken on lease. There are no provisions relating to contingent rent.

The terms of renewal and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements.

11.5 Earnings per share (AS 20)

Details pertaining to earnings per share as per AS-20 are as under:

11.6 Consolidated Financial Statements - Subsidiary (AS 21)

ALF Insurance Services Private Limited (ALFIS), a wholly owned subsidiary of the Bank, could not commence operations pending regulatory approvals. Consequent to a resolution passed by its Board of Directors in March 2011, ALFIS has appointed a Liquidator under the provisions of the Companies Act, 1956 and the process of winding up is currently under progress. Since the process of winding up is already under way, control is regarded as temporary and consolidated financial statements have not been drawn up under AS-21 Consolidated Financial Statements. Such non-consolidation or the winding up proceedings does not have any material impact on the financial results or the financial status of the Bank.

12.4 Letters of Comfort

The Bank has not issued any letters of comfort (Previous year Nil).

12.5 Disclosure on Remuneration

HR and Remuneration Committee

During the year, the Board of Directors of the Bank decided to merge the Human Resources Committee and the Remuneration Committee into HR and Remuneration Committee of the Bank. The HR and Remuneration Committee of the Bank comprise four members of the Board of Directors of the Bank including one member from Risk Management Committee of the Board. The mandate of the HR and Remuneration Committee is to establish, implement and maintain remuneration policies, procedures and practices that are consistent with, and promote, sound and effective risk management to achieve effective alignment between remuneration and risks. The Committee is also mandated to oversee framing, implementation and review of the Bank's Compensation policy as per RBI guidelines on Compensation of Whole Time Directors / Chief Executive Officers / Risk Takers and Control function staff. The Committee is also required to ensure that the cost / income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio. The HR and Remuneration committee reviews compensation structure and the policies of the Bank with a viewtoattract,retain and motivate employees.

Remuneration Policy

The Remuneration Policy is formulated by the Board in alignment with RBI guidelines and is structured to cover all

components of remuneration including fixed pay, variable pay, perquisites, retirement benefits such as Provident

Fund and Gratuity, Long term incentive plans and Employee Stock Options.

The key objectives of the policy are:

(i) Benchmark employee compensation with market for various job positions and skills and pay for 'Position, Performance & Person'

(ii) Maintain an optimal balance between fixed and variable pay

(iii) Pay for Performance

(iv) Build employee ownership and long term association through long term incentive plans (ESOPs)

Some of the important features of the Compensation Policy are as follows:

(i) The Bank has defined "Risk Takers and Risk Controllers" and prepared separate lists of Risk Takers and Risk Controllers. Risk Takers are defined as employees in Grades Senior Vice President 3 (SVP3) and above belonging to business line functions of Corporate & Commercial Banking Group, Global Markets Group, Transaction Banking Group, Consumer Banking and Consumer Finance Division, whose functioning and decisioning impacts the Bank materially on tangible financial performance aspects of revenues, costs, and profits. Risk Controllers are defined as employees in Grades SVP3 and above belonging to support functions of Chief Operating Officer (Operations, Finance & Accounts, Information Technology, Secretarial, etc.),Chief RiskOfficer (Credit, Risk, Financial Restructuring & Reconstruction Group, Credit Quality Loan Assurance Review), Human Resources, Inspection and Audit, Investor Relations, Marketing, etc, who support the business line functions through back office processes and activities and their functioning does not have a revenue impact through business generation.

(ii) The HR & Remuneration committee will oversee the framing, implementation and review of the Compensation Policy.

(iii) Remuneration will be market linked for critical roles so as to attract and retain talent.

(iv) In respect of WTDs / CEO / Risk Takers / Control function staff of the Bank, the compensation structure provides for a reasonable increase in fixed pay in line with the market benchmarks. Their individual increments are linked to annual performance rating and increment percentages at various performance rating levels, which will be decided on the basis of the financial performance of the Bank. Exceptions will be restricted to a select few high performers to reward performance, motivate and retain critical staff. The Bank also makes a distinction between Risk Takers and Risk Controllers and incorporates separate parameters on variable pay for these segments in its compensation policy.

(v) The quantum of overall variable pay to be disbursed in a year would vary on the basis of the financial performance of the Bank measured through various parameters such as Net Interest Margin, Net Interest Income, Return on Assets, Profit After Tax and Return on Equity.

(vi) Remuneration is linked to performance. Increments and variable pay are linked to the annual performance rating. Annual Performance Rating for an employee is arrived on the basis of tangible performance against pre-set Key Results Areas (KRAs) / measurable objectives set at the beginning of the financial year.

(vii) The individual variable pay is linked to the annual performance rating, and based on variable pay grids outlining variable pay as a percentage of Annual Guaranteed cash at various rating bands for a grade level. Exceptional increments and variable pay may be paid to select high performers, but in no case they would violate the stipulated RBI guidelines.

(viii) The individual variable pay would not exceed 70% of the fixed pay. Wherever variable pay exceeds a substantial portion of fixed pay as defined by the Bank, (currently defined at 65% of fixed pay), variable pay will be deferred over a period of 3 years in a ratio to be decided by management in accordance with RBI guidelines.

(ix) The Bank will implement malus / claw-back arrangements with the concerned employees in case of deferred pay as defined above. Malus arrangement would lay down policies to adjust deferred remuneration before vesting and claw-back arrangement would lay down policies to adjust deferred remuneration after vesting. The criteria would be negative contributions to the bank and / or relevant line of business in any year.

(x) The Compensation Policy does not provide for guaranteed bonus or sign on bonus in cash. Sign on bonus to be paid in form of pre-hiring ESOPs, will be very selective for critical hires.

(xi) The Compensation Policy does not provide for severance pay for any employee.

(xii) Retirement benefits in the form of Provident Fund and Gratuity are as per the Bank's HR policies which are in line with the statutory norms.

(xiii) Perquisites are laid down in HR Policies of the Bank.

(xiv) At present, the Bank uses cash based form of variable remuneration. The rationale is that cash based form of variable remuneration leads to an instant reward to the concerned employees and is also easy to administer.

(xv) ESOPs do not form a part of the variable pay and are very selectively granted to attract and retain employees. ESOPs are not granted with a defined periodicity. ESOP grant criteria include grade of the employee, criticality of the position in terms of business contribution and market value of the position, and performance and behavioural track of the employee.

Other Disclosures

Number of meetings held by RC during the financial year and remuneration paid to its members Year ended March 31, 2015

During the year, two meetings of Remuneration committee were held. The members were paid aggregate sitting fee of Rs. 1,00,000 for the two meetings.

During the year, two meetings of HR and Remuneration committee were held. The members were paid aggregate sitting fees ofRs. 1,40,000 for the two meetings. Year ended March 31,2014

During the year, two meetings of Remuneration committee were held. The members were paid aggregate sitting fee ofRs. 30,000 per meeting.

Number of employees having received a variable remuneration award during the financial year

64 employees belonging to the category of WTD / CEO / Risk Takers/Other Control function staff had received a variable remuneration award.

51 employees belonging to the category of WTD / CEO / Risk Takers had received a variable remuneration award.

Number and total amount of 'sign on' awards made during the financial year Details of guaranteed bonus if any paid as sign on bonus Details of severance pay in addition to the accrued benefits Total amount of outstanding deferred remuneration split into cash, shares and share linked instruments and other forms The outstanding deferred remuneration is Rs. 1.22 crores to be paid as cash in FY 2015-16 and FY 2016-17 The outstanding deferred remunerationis Nil.

Total amount of deferred remuneration paid out in the financial year Breakdown of amount of remuneration awards for the financial year Breakup of remuneration awards for the 66 employees defined as WTD I CEO / Risk Takers/ Other control function staff

(a) Fixed pay - Rs. 76.01 crores

(b) Variable pay - Rs. 28.66 crores for FY 2013-14

(c) Deferred remuneration - Rs. 1.22 crores

(d) Non-deferred remuneration - Rs. 27.44 crores

Breakup of remuneration awards for the 57 employees defined as WTD / CEO / Risk Takers:

(a) Fixed pay - Rs. 73.04 crores

(b) Variable pay - Rs. 21.95 crores for FY 2012-13

(c) Deferred remuneration - Nil

(d) Non-deferred remuneration - Rs. 21.95 crores

Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and implicit adjustments.

Total amount of reductions during the FY due to ex - post explicit adjustments

Total amount of reductions during the FY due to ex - post implicit adjustments

13. The Micro, Small and Medium Enterprises Development Act, 2006 that came into force from October 2, 2006, provides for certain disclosures in respect of Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or interest payments due to delays in such payments.

14. Previous year's figures have been regrouped / reclassified wherever necessary.

DF-1: Scope of Application

Name of the head of the banking group to which the framework applies: INDUSIND BANK LTD.

(i) Qualitative Disclosures:

Induslnd Bank Limited ('the Bank') is a commercial bank, incorporated on January 31, 1994. The Bank has only one wholly owned subsidiary viz., ALF Insurance Services Private Limited. The financials of the subsidiary are not consolidated with the Bank's financials as the said company could not commence business and has commenced proceedings for a voluntary winding up. The CRAR is computed on the financial position of the Bank alone.

(ii) Quantitative Disclosures:

c) List of group entities considered for consolidation:

As mentioned above in Para (i) above, the Bank does not have a "material non-listed Indian subsidiary" as defined in Clause 49 of the Listing Agreement. ALF Insurance Services Private Ltd. is a wholly owned subsidiary of the Bank that was set up to do the business of Insurance Corporate Broking but had not commenced operations. The Bank has since decided against entering into insurance broking business and proceedings for voluntary winding up of the company have been initiated.

d) There is no capital deficiency in any subsidiary, which is not included in the regulatory scope of consolidation.

e) As on 31st March, 2015, the Bank does not have controlling interest in any insurance entity.

f) There are no restrictions or impediments on transfer of funds or regulatory capital within the banking group. DF-2: Capital Adequacy

Applicable Regulations:

Reserve Bank of India issued Guidelines based on the Basel III reforms on capital regulation on May 2012, to the extent applicable to banks operating in India. The Basel III capital regulation has been implemented from April 01, 2013 in India in phases and it will be fully implemented as on March 31, 2019. RBI issued detailed Guidelines on Composition of Capital Disclosure Requirements on May 28, 2013. The Basel III Capital Regulations have been consolidated in Master Circular - Basel III Capital Regulations vide circular No.DBOD. No.BP.BC.6/21.06.201/2014-15 dated July 1 2014.

Basel III Capital Regulations:

Basel III Capital regulations continue to be based on three-mutually reinforcing pillars, viz., minimum capital requirements, supervisory review of capital adequacy, and market discipline. This circular also prescribes the risk weights for the balance sheet assets, non-funded items and other off-balance sheet exposures and the minimum capital funds to be maintained as ratio to the aggregate of the risk weighted assets and other exposures, as also, capital requirements in the trading book, on an ongoing basis and operational risk.

These guidelines also incorporate instructions regarding the components of capital and capital charge required to be provided for by the banks for credit, market and operational risks. It deals with providing explicit capital charge for credit and market risk and addresses the issues involved in computing capital charges for interest rate related instruments in the trading book, equities in the trading book and foreign exchange risk (including gold and other precious metals) in both trading and banking books. Trading book for the purpose of these guidelines includes securities under the Held for Trading category, Available For Sale category, open gold position limits, open foreign exchange position limits, trading positions in derivatives, and derivatives entered into for hedging trading book exposures.

Basel III capital regulations are being implemented in India with effect from April 1, 2013. In order to ensure smooth migration to Basel III without aggravating any near term stress, appropriate transitional arrangements have been made. The transitional arrangements for capital ratios began as on April 01, 2013. However, the phasing out of non-Basel III compliant regulatory capital instruments began as on January 01, 2013. Capital ratios and deductions from Common Equity will be fully phased-in and implemented as on March 31,2019.

Minimum capital requirements:

Underthe Basel III Capital Regulations, Banks are required to maintain a minimum Pillar I Capital to Risk-weighted Assets Ratio (CRAR) of 9% on an on-going basis (other than capital conservation buffer and countercyclical capital buffer etc.). Besides the minimum capital requirements, Basel III also provides for creation of capital

conservation buffer (CCB). The CCB requirement kicks in from March 31, 2016 and is to be fully implemented by March 31,2019. Over and above these requirements, Basel - III also mandates for maintenance of Counter- cyclical Capital Buffer (CCCB). The decision to maintain CCCB would be advised by RBI with a lead time.

Besides computing CRAR under the Pillar I requirement, the Bank also periodically undertakes stress testing in various risk areas to assess the impact of stressed scenario or plausible events on asset quality, liquidity, interest rate, derivatives and forex on its profitability and capital adequacy.

The assessment of future capital needs is effectively done based on the business projections, asset mix, operating environment, growth outlook, new business avenues, regulatory changes and risk and return profile of the business segments. The future capital requirement is assessed by taking cognizance of all the risk elements viz. Credit, Market and Operational risk and mapping these to the respective business segments.

Organisation Structure:

Integrated Risk Management: Objectives and Organisation Structure

The Bank has established an Enterprise-wide Risk Management Department, independent of the Business segments, responsible for Bank-wide risk management covering Credit risk, Market risk (including ALM) and Operational risk. The Risk Management Department focuses on identification, measurement, monitoring and controlling of risks across various segments. The Bank has been progressively adopting the best International practices so as to continually reinforce its Risk Management functions.

Separate Committees, as specified below, are set up to manage and control various risks:

- Risk Management Committee (RMC)

- Credit Risk Management Committee (CRMC)

- Market Risk Management Committee (MRMC)

- Asset Liability Management Committee (ALCO)

- Operational Risk Management Committee (ORMC)

Bank has articulated various risk policies which specify the risks, controls and measurement techniques. The policies are framed keeping risk appetite as the central objective. Against this background, the Bank identifies a number of key risk components. For each of these components, the Bank determines a target that represents the Bank's perception ofthe component in question.

The risk policies are vetted by the sub-committees, viz. CRMC, MRMC, etc. and are put forth to RMC, which is a sub- committee of the Board. Upon vetting of the policies by RMC, the same is placed for the approval of the Board and implemented.

Bank has put in place a comprehensive policy on ICAAP, which presents a holistic view of the material risks faced, control environment, risk management processes, risk measurement techniques, capital adequacy and capital planning.

Policies are periodically reviewed and revised to address the changes in the economy / banking sector and Bank's risk profile. Monitoring of various risks is undertaken at periodic intervals and a report is submitted to Top Management / Board.

Credit Risk

The Bank manages credit risk comprehensively; both at Transaction level and at Portfolio level. Some of the major initiatives taken are listed below :

- Bank uses a robust Risk rating framework for evaluating credit risk of the borrowers. The Bank uses segment- specific rating models that are aligned to target segment of the borrowers.

- Risks on various counter-parties such as corporates, banks, are monitored through counter-party exposure limits, also governed by country risk exposure limits in case of international trades.

- The Bank manages risk at the portfolio level too, with portfolio level prudential exposure limits to mitigate concentration risk.

- The Bank has a well-diversified portfolio across various industries and segments, as illustrated by the following data.

? Retail and schematic exposures (which provide wider diversification benefits) account for as much as 45 % of the total fund-based advances.

? The Bank's corporate exposure is fully diversified over 85 industries, thus insulated/minimised from individual industry cycles.

The above initiatives support qualitative business growth while managing inherent risks within the risk appetite. Market Risk

Key sources of Market risk are Liquidity Risk, Interest Rate Risk, Price Risk and Foreign Exchange Risk. The Bank has implemented a state-of-the-art Treasury system which supports robust risk management capabilities and facilitates Straight-through Processing.

Market Risk is effectively managed through comprehensive policy framework which provides various tools such as Mark-to-Market, Sensitivity analysis, Value-at-Risk, besides through operational limits such as stop-loss limits, exposure limits, deal-size limits, maturity ladder, etc.

Asset Liability Management (ALM)

The Bank's ALM system supports effective management of liquidity risk and interest rate risk, covering 100% of its assets and liabilities.

- Liquidity Risk is monitored through Structural Liquidity Gaps, Dynamic Liquidity position, Liquidity Ratios analysis and Behavioural analysis, with prudential limits for negative gaps in various time buckets.

- Interest Rate Sensitivity is monitored through prudential limits for Rate Sensitive Gaps and other risk parameters.

- Interest Rate Risk on the Investment portfolio is monitored through Modified Duration on a daily basis. Optimum risk is assumed through duration, to balance between risk containment and profit generation from market movements.

ALCO meetings were convened frequently during the financial year, wherein analytical presentations were made providing detailed analysis of liquidity position, interest rate risks, product mix, business growth v/s budgets, interest rate outlook, which helped to reviewthe business strategies regularly and undertake new initiatives.

Operational risk

Operational risk is managed by addressing People risk, Process risk, Systems risk as well as risks arising out of external environment.

The Bank has efficient audit mechanism, involving periodical on-site audit, concurrent audits, on the spot and off-site surveillance enabled by the Bank's advanced technology and Core Banking System.

The Bank has constituted Fraud Risk Management Committee which is involved in root cause analysis and actions taken to mitigate frauds. A separate and independent KYC/AML cell has been in place to ensure compliance with respect to customer on-boarding and transaction monitoring as per the internal framework and regulatory guidelines of KYC/AML.

The Bank has implemented various Operational Risk management tools such as Risk Events reporting framework, Risk and Control Self-Assessment (RCSA) and Loss Data (Basel 8*7 matrix) collection including Near Miss Events. The Bank weighs each new Product and Process enhancements under Operational Risk Assessment Process (ORAP) framework.

The Bank has initiated the process of putting in place Operational Risk Management Framework, using sophisticated tools, such as:

- Key Risks Indicators

- Operational Risk Incident Reporting

- Score Cards (Branch and Corporate Functions)

The framework would help in mitigation of operational risks and optimization of capital requirement towards operational risks under Basel II norms.

Systems Risk

As part of Systems-related Operational Risk Management initiatives, the Bank has achieved the following :

- The Bank has formulated and implemented a comprehensive Business Continuity Plan (BCP) to ensure continuity of its critical business functions and extension of banking services to its customers.

- The Bank has Information Security Policy in place to ensure confidentiality, integrity and accessibility of all its information security assets.

- The Bank has established an effective Disaster Recovery site at a distant location, with on-line, real-time replication of data, both in Mumbai and Chennai.

- Comprehensive IT security framework has been put in place to ensure complete data security and integrity.

- The Bank has housed its data center in a professionally managed environment, with sophisticated and fool-proof security features and assured supply of utilities.

The robust Risk Management framework created in the Bank supports rapid and qualitative growth with optimization of risks and maximization of shareholder value.

DF-3: Credit Risk: General Disclosures

"Credit Risk" is defined as the probability / potential that the borrower or counter-party may fail to meet its obligations in accordance with agreed terms. It involves inability or unwillingness of a borrower or counter-party to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions.

Credit Risk is made up of two components:

1. Transaction Risk (or Default Risk), which represents the risk arising from individual credit exposures and

2. Portfolio Risk, which represents the risk inherent in the portfolio of credit assets (concentration of assets, correlation among portfolios, etc.).

Credit risk is found in a variety of transactions across the Bank's portfolio including not only loans, off balance sheet exposures, investments and financial guarantees, but also the risk of a counterparty in a derivative transaction becoming unable to meet its obligations. Credit risk constitutes the largest risk to which the Bank is exposed. The Bank has adequate system support which facilitates credit risk management and measurement across its portfolio. The system support is strengthened and expanded as and when new exposures are added to the Bank's portfolio.

The Bank has articulated comprehensive guidelines for managing credit risk as outlined in Credit Risk Policy and related Policies framework, Bank Risk Policy, Country Risk Policy, Loan Review Policy and Recovery Policy. The

credit risk management systems used at the Bank have been implemented in accordance with these guidelines and best market practices. The credit risk management process focuses on both specific transactions and on groups of specific exposures as portfolios.

The Bank's credit risk policy and related policies and systems focus are framed to achieve the following key objectives:

- Monitoring concentration risk in particular products, segments, geographies etc thereby avoiding concentration risk from excessive exposures to any particular products, segments, geographies etc.

- Assisting in building quality credit portfolio and balancing risks and returns in line with Bank's risk appetite

- TrackingCreditqualitymigration

- Determining how much capital to hold against each class of the assets

- Undertaking Stress testing to evaluate the credit portfolio strength

- To develop a greater ability to recognize and avoid potential problems

- Alignment of Risk Strategy with Business Strategy

- Adherence to regulatory guidelines

Credit Risk Management at specific transaction level

The central objective for managing credit risk at each transaction level is development of evaluation and monitoring system that covers the entire life cycle of the exposure, i.e. opportunity for transaction, assessing the credit risk, granting of credit, disbursement and subsequent monitoring, identifying the obligors with emerging credit problems, remedial action in event of credit quality deterioration and repayment or termination of the obligation.

The Credit Policies of the Bank stipulates for applicability of various norms for managing credit risk at a specific transaction level and more relevant to the target segment of the obligors. It covers all the types of obligors, viz. Corporate, SME, Traderand Schematic Loans such as Home Loan, Personal Loan, etc.

The major components of Credit Risk and related Policies are mentioned below:

- The transaction with the customer/ prospective customer is undertaken with an aim to build long term relationship.

- All the related internal and regulatory guidelines such as KYC norms, RBI prudential norms, etc. are adhered to while assessing the credit request of the borrower.

- The credit is granted with due diligence and detailed insight into the customer's circumstances and of specific assessments that provide a context for such credits.

- The facility is granted based on the customer's creditworthiness, capital base or assets to assure that the customer is able to substantiate the repayment. Due regard is also placed to the industry in which the customer is operating, the business specific risks and management capability and their risk appetite.

- Regular follow-up in the overall health of the borrower is undertaken to assess whether the basis of granting credit has changed.

- When loans and credits are granted to borrowers falling outside preferred credit rating, the Bank normally obtains sufficient collateral. However, collaterals are not the sole criterion for lending, which is generally done based on assessing the business viability of the borrower and the adequacy of the expected cash flows.

- The Bank has defined exposures limit on the basis of internal risk rating of the borrower.

- The Bank is particularly cautious when granting credits to businesses in affected or seasonal industries.

- In terms of Bank's country risk management, due caution is exercised when assuming risk in countries with an unstable economic or political scenario.

Beside the acceptability norms defined in the policies/manual for an individual transaction, Bank has also implemented various credit related product programmes which enables efficient appraisal, assessment, delivery, supervision and control of tailor made loan products targeted at specific customer segments. The customers covered under the Business Banking product programme are evaluated using a scoring/rating model developed based on the segment specific risk profile.

Consumer Finance Division apprises the loan application based on robust set criteria defined in the respective product programmes. Further as a mechanism to assess the credit quality, customers are also evaluated through application scoring models which are segment specific. Further, post disbursement, the quality of the account is tracked by means of a Behavioral score.

The customers under Credit Cards segment are evaluated by means of robust customer selection criteria that include variety of factors.

Bank has also put in place a detailed policy for portfolio acquisition which stipulates various criteria for asset selection including due diligence, transfer of risks and rewards of the underlying portfolio, credit enhancements, portfolio risk management and monitoring in accordance with RBI guidelines.

Credit Approval Committee

The Bank has put in place the principle of 'Committee' or 'Approval Grids' approach while according sanctions to the credit proposals. This provides for an unbiased, objective assessment/evaluation of credit proposals. Such Committees include atleast one official from an independent department, which has no volume or profits targets to achieve. The official of the independent department is a compulsory member of the Credit Committee and a dissent by such member cannot be overridden by others. The spirit of the credit approving system is that no credit proposals are approved or recommended to higher authorities unless all the members of the 'Committee' or 'Approval Grids' agree on the acceptability of the proposal in all respects. In case of disagreement the proposal is referred to next higher Committee whose decision to approve or decline with conditions is then final.

The following 'Approval Grids' are constituted:

? Corporate & Commercial Banking Segment :

^ Zonal Credit Committee (ZCC)

^ Corporate Office Credit Committee (COCC) - I

^ Corporate Office Credit Committee (COCC) - II

^ Executive Credit Committee (ECC)

? Consumer Banking (CB) Segment :

The scheme of delegation under Consumer Banking Segment includes Vehicle financing, personal loans, housing loans and other schematic loans under multi-tier Committee based approach as under:

^ Branch Credit Committee - Consumer Banking (BCC - CB)

^ Regional Credit Committee - Consumer Banking (RCC - CB)

^ Corporate Office Credit Committee - Consumer Banking (COCC- CB I & II)

^ Executive Credit Committee

The credit proposals which are beyond the delegated powers of ECC are placed to Committee of Directors (COD) or Board of Directors (BOD) for approval.

Risk Classification

The Bank monitors the overall health of its customers on an on-going basis to ensure that any weakening of a customer's earnings or liquidity is detected as early as possible. As part of the credit process, customers are classified according to the credit quality in terms of internal rating, and the classification is regularly updated on receipt of new information/ changes in the factors affecting the position of the customer.

The Bank has operationalised the following risk rating/ scoring models depending on the target segment of the borrower:

- Large Corporate, Small & Medium Enterprises, NBFC

- Trading entities, Capital Market Broker and Commodity Exchange Broker

- Financial Institutions/Primary Dealers and Banks

- Retail customers (Schematic Loans) - who are assigned credit scoring

The customers under Business Banking segment are assessed for credit quality using a scoring/rating model. The score serves a measure to categorise the customers into various risk classes which are further calibrated to different risk grade. Bank has also implemented rating models for assessing the risk under Lease Rental Discounting and Warehouse Receipts Financing products.

Rating grades in each rating model, other than the segments driven by product programmes, is on a scale of 1 to 8, which are further categorised by assigning /- modifiers to reflect the relative standing of the borrower within the specific risk grade. The model-specific rating grades are named distinctly. Each model-specific rating grade reflects the relative ratings of the borrowers under that particular segment. For instance, L4 indicates a superior risk profile of a Large Corporate, when compared to another Large Corporate rated L5.

In order to have a common risk yardstick across the Bank, these model specific ratings are mapped to common scale ratings which facilitate measurement of risk profile of different segments of borrower by means of common risk ladder.

The various purposes for which the rating/scoring models are used are mentioned hereunder:

^ Portfolio Management

^ Efficiency in lending decision

^ To assess the quality of the borrower - single point reference of credit risk of the borrower ^ Preferred rating norms for assuming exposures ^ Prudential ceiling for single borrower exposures - linked to rating ^ Frequency of review of exposures ^ Frequency of internal auditing of exposures ^ To measure the portfolio quality

^ Target for quality of advances portfolio is monitored by way of Weighted Average Credit Rating (WACR).

^ Pricing credit

^ Capital allocation (under Basel II - IRB approaches)

Credit Quality Assurance:

Bank has also adopted Loan Review Mechanism (LRM), which involves independent assessment of the quality of an advance, effectiveness of loan administration, compliance with internal policies of bank and regulatory framework and portfolio quality. It also helps in tracking weaknesses developing in the account for initiating corrective measures in time. LRM is carried out by Credit Quality Assurance team, which is independent of Credit and Business functions.

Credit Risk Management at Portfolio level:

The accumulation of individual exposures leads to portfolio, which creates the possibility of concentration risk. The concentration risk, ideally on account of borrowers/ products with similar risk profile, may arise in various forms such as Single Borrower, Group of Borrowers, Sensitive Sector, Industry-wise Exposure, Unsecured Exposure, Rating wise Exposure, Off Balance sheet Exposure, Product wise Exposure, etc. The credit risk concentration is addressed by means of structural and prudential limits stipulated in the Credit Risk Policy and other related policies.

Concentration risk on account of exposures to counter-parties (both single borrower and group of borrowers), Industry- wise, Rating-wise, Product-wise, etc., is being monitored by Risk Management Dept (RMD). Forthis purpose, exposures in all business units, viz. branches, treasury, investment banking, etc., by way of all instruments (loans, equity/debt investments, derivative exposures, etc.) are being considered. Such monitoring is carried out at monthly intervals. Besides, respective business units are monitoring the exposure on continuous real-time basis.

The concentration risk is further evaluated in terms of statistical measures and benchmarks. Detail analysis of portfolio risk and control measures in place is carried out on a monthly basis on various parameters. Direction of risks and controls (decreasing, stable, and increasing) and resultant net risk is also done. Further, a comprehensive Stress Testing framework based on several factors and risk drivers assessing the impact of stressed scenario on Credit quality, its impact on Bank's profitability and capital adequacy is placed to Top Management /Board every quarter. The framework highlights the Bank's credit portfolio under 3 different levels of intensity across default, i.e. mild, medium and severe, and analyses its impact on the portfolio quality and solvency level.

Impaired credit - Non Performing Assets (NPAs):

The Bank has an independent Credit Administration Department that constantly monitors accounts for irregularities, identifies accounts for early warning signals for potential problems and identifies individual NPAaccounts systematically.

Bank has also set up Financial Restructuring and Reconstruction (FRR) Dept for managing and monitoring defaulted accounts, carrying out restructuring, wherever feasible and following up for recoveries of dues.

The guidelines as laid down by RBI Master Circular No. DBOD.No.BP.BC.9/21.04.048/2014-15 dated July 1,2014, on Asset classification, Income Recognition and Provisioning to Advances portfolio are followed while classifying Non- performing Assets (NPAs). The guidelines are as under:

a) An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank

b) A non performing asset (NPA) is a loan or an advance where;

i. interest and / or installment of principal remains overdue for a period of more than 90 days in respect of a term loan,

ii. the account remains 'out of order', in respect of an Overdraft / Cash Credit (OD/ CC),

iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

iv. the installment of principal or interest thereon remains overdue for two crop seasons for short duration

crops,

v. the installment of principal or interest thereon remains overdue for one crop season for long duration crops,

vi. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation

transaction undertaken in terms of RBI guidelines on Securitisation dated February 1,2006.

vii. in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

Out of Order status: An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit / drawing power. In cases where the outstanding balance in the principal operating account is less than the sanctioned limit / drawing power, but there are no credits continuously for 90 days as on the

date of Balance Sheet or credits are not enough to cover the interest debited during the same period, these accounts should be treated as 'out of order'.

Overdue: Any amount due to the bank under any credit facility is 'overdue' if it is not paid on the due date fixed by the bank.

Credit Risk Exposures

* Includes all exposures such as Cash Credit, Overdrafts, Term Loan, Cash, SLR securities etc., which are held in banking book.

** Off-Balance items such as Letter of Credit, Bank Guarantee and credit exposure equivalent of Inter-bank forwards, merchant forward contracts and derivatives, etc.

(b) Geographic Distribution of Exposures as on 31st March, 2015

As per the Basel II guidelines on Standardised approach, the risk weight on certain categories of domestic counter parties is determined based on the external rating assigned by any one of the accredited rating agencies, i.e. CRISIL, ICRA, CARE, India Rating Pvt. Ltd, Brickworks Ratings India Pvt. Ltd and SMERA. For Foreign counterparties and banks, rating assigned by S&P, Moody's and Fitch are used.

The Bank computes risk weight on the basis of external rating assigned, both Long Term and Short Term, for the facilities availed by the borrower. The external ratings assigned are generally facility specific. The Bank follow below mentioned procedures as laid down in the Basel II guidelines for usage of external ratings:

- Ratings assigned by one rating agency are used for all the types of claims on the borrowing entity.

- Long term ratings are used for facilities with contractual maturity of one year & above. Short term ratings are generally applied for facilities with contractual maturity of less than one year.

- If either the short term or long term ratings attracts 150% risk weight on any of the claims on the borrower, the Bank assigns uniform risk weight of 150% on all the unrated claims, both short term and long term unless the exposure is subjected to credit risk mitigation.

- In case of multiple ratings, if there are two ratings assigned to the facility that maps to different risk weights, the rating that maps to higher risk weight is used. In case of three or more ratings, the ratings corresponding to the two lowest risk weights is referred to and the higher of those two risk weights is be applied, i.e., the second lowest risk weight.

- For securitized and guaranteed transactions, SO ratings assigned by the rating agency are applied for arriving at the risk weights.

Risk Weight-wise distribution of Gross Credit Exposures

DF-5: Credit risk mitigation: Disclosures for standardised approach

The Bank mitigates credit exposure with eligible collaterals and guarantees to reduce the credit risk of obligors as stipulated under Basel II. In principle with mitigating credit risk, Bank has put in place a comprehensive policy on Credit Risk Mitigants and Collaterals for recognizing the eligible collaterals and guarantors for netting

the exposures and reducing the credit risk of obligors. Basic procedures and descriptions of controls as well as types of standard/acceptable collaterals, guarantees necessary in granting credit, evaluation methods for different types of credit and collateral, applicable "haircuts" to collateral, frequency of revaluation and release of collateral are stipulated in the Bank's credit policy, policy on collateral management and credit risk mitigant policy. The Bank uses net exposure for capital calculations after taking cognizance of eligible financial collaterals. All collaterals and guarantees are recorded and the details are linked to individual accounts. Perfection of security interest, date, currency and correlation between collateral and counterparty are also considered.

As lending is subject to default risk, Bank accepts collateral securities to minimize the impact of loss and consequently reducing the credit risk. The type of collaterals is determined based on the nature of facility, product type, counter party risk and its credit quality. However, as explained earlier, collateral is not the sole criteria for granting credit. For Corporate and SME clients, working capital facility is generally secured by charge on current assets and Term loan is secured by charge on fixed assets. In case of project financing, Bank generally stipulates escrow of receivables/project cash flows along with the charge on underlying project assets. The credit risk policy clearly defines the types of secondary securities and minimum percentage in relation to the total exposures that is required to be obtained in case of credit granted to obligors falling outside the preferred rating grade. Credit facilities are also granted against the security of assets such as cash deposits, NSC, guarantee, mortgages, pledge of shares and commodities, bank guarantees, accepted bills of exchange, assignment of receivables etc. The credit facilities, in terms of risk policies, are secured by secondary collaterals such as cash deposits, NSC, guarantee, mortgages, fixed assets etc. Bank also grants unsecured credit to the borrowers with high standing and low credit risk profile. Customers under Credit card programme are assessed by means of comprehensive customer selection parameters.

For Business Banking clients, who are driven by product programmes and templated scoring models, the facilities are ordinarily secured by adequate collaterals. The programmes have a robust mechanism for collateral acceptance, valuation and monitoring.

In case of schematic products such as Home Loan, LAP, Auto Loan, etc., Loan to value ratio, margin and valuation/revaluation of collaterals is defined in the resp


Mar 31, 2013

1. Capital Adequacy Ratio

The Bank computes Capital Adequacy Ratio as per RBI guidelines. The Bank has migrated to the New Capital Adequacy Framework (Basel II) with effect from March 31, 2009. Under the Basel II guidelines, the Bank is required to maintain Capital to Risk weighted Assets Ratio, at a minimum of 9% on an on-going basis, covering credit risk, market risk and operational risk. Further, the minimum capital to be maintained by the Bank is subjected to a prudential floor which is the higher of:

(i) Minimum capital to be maintained under the New Capital Adequacy Framework (Basel li); and

(ii) 80% of the minimum capital to be maintained under Basel I guidelines

Notes:

(1) Does not include amount of securities pledged with Central Counter Parties such as Clearing Corporation of India Ltd., National Securities Clearing Corporation of India Ltd. and Multi Commodity Exchange of India Ltd.

(2) Excludes investment in RIDF scheme of NABARD and equity shares.

(3) Excludes investment in RIDF scheme of NABARD, commercial papers, CD''s and preference shares acquired by way of conversion of debts.

(4) Includes investment in RIDF scheme of NABARD.

(5) Amounts reported under 4, 5, 6 and 7 are not mutually exclusive.

Notes:

(1) Does not include amount of securities pledged with Central Counter Parties such as Clearing Corporation of India Ltd., National Securities Clearing Corporation of India Ltd. and Multi Commodity Exchange of India Ltd.

(2) Excludes investment in RIDF scheme of NABARD and equity shares

(3) Excludes investment in RIDF scheme of NABARD

(4) Includes investment in RIDF scheme of NABARD

(5) Amounts reported under 4, 5, 6 and 7 are not mutually exclusive.

Note: In addition to the above provision for Non Performing Non SLR Investments, an amount of Rs. 1.80 crores (Previous Year Nil) is held towards diminution in fair value of restructured accounts in respect of parties having exposure reported under Schedule 8 Investments as well as Schedule 9 Advances.

2.1 During the year, the value of sales and transfer of securities to / from HTM category, excluding one-time transfer of securities from HTM and sale on account of Open Market Operation (OMO), has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year. As such, in line with RBI guidelines, specific disclosures on book value, market value, and provisions if any, relating to such sale and transfers are not required to be made.

3.1 Exchange Traded Interest Rate Derivatives

The Bank has not undertaken any exchange traded interest rate derivative transactions during the year (Previous Year Nil).

3.2 Disclosures on Risk Exposure in Derivatives

The Risk Management Department of the Bank is responsible for measuring, reporting and monitoring risk arising from derivatives transactions. It functions independent of Treasury business and undertakes the following activities:

- Monitors daily derivatives operations against prescribed policies and limits;

- Reviews daily product-wise profitability and activity reports for derivatives operations;

- Submits MIS and details of exceptions to the Top Management on a daily basis; and

- Ensures monitoring effectiveness of derivative deals identified as hedges against the terms of the hedging instruments and underlying hedged risk.

The Risk Management function applies a host of quantitative tools and methods such as Value at Risk, PV01, stop-loss limits, counterparty limits, deal size limits and overnight position limits.

The Bank undertakes derivative transactions for hedging customers'' exposure, hedging the Bank''s own exposure, as well as for trading purposes, wherever permitted by RBI. The customers use these derivative products to hedge their forex and interest rate exposures; all trades with customers are covered back-to-back with other market makers.

The Derivatives Policy approved by Board of Directors defines the framework for carrying out derivatives business and lays down policies and processes to measure, monitor and report risk arising from derivative transactions. The policy provides for (a) appropriate risk limits for different derivative products and (b) authority levels for review of limit breaches and to take appropriate actions in such events. As part of the Derivatives Policy, the Bank has a Product Suitability and Customer Appropriateness Policy, which is used to classify its customers on the basis . of their need for various derivative products as well as their competence in understanding such products and the attendant risks involved.

Note 1: Based on the PV01 of the outstanding derivatives as at March 31, 2013.

Note 2: Based on the absolute value of PV01 of the derivatives outstanding during the year. Derivative contracts that are "back-to-back" have not been included herein.

Note 3: Mark to Market positions above includes interest accrued on the swaps.

Note 4: There were no outstanding currency futures as on March 31, 2013.

Note 5: Credit exposure is computed based on the current exposure method.

4.1 During the year, there has been no purchase / sale of non-performing financial assets from / to other banks (Previous Year Nil).

4.2 During the year, there was no sale of assets through securitization in respect of Standard Advances (Previous Year Nil).

4.3. Floating provision:

The Bank does not carry any floating provision in the books.

Notes:

(1) Working funds are reckoned as the average of total assets as per the monthly returns in Form X filed with RBI during the year.

(2) Business per employee (deposits plus gross advances) is computed after excluding Inter-bank deposits.

(3) Return on Assets are computed with reference to average working funds.

(1) As per RBI circular RPCD.CO.PIan.BC.69/04.09.01/2010-11 dated 09/05/2011, limit for housing loan under priority sector has been changed from Rs. 20 lakhs to Rs. 25 lakhs

(2) Does not include corporate lending backed by mortgage of land and building.

5.1 Single borrower limit and Group Borrower Limit:

During the year, the Bank has not exceeded the prudential credit exposure limit in respect of Single Borrower and Group Borrowers (Previous Year Nil).

5.2 Unsecured advances:

The Bank has not extended any project advances where the collateral is an intangible asset such as a charge over rights, licences, authorizations etc. (Previous Year Nil). The Unsecured Advances of Rs. 4,211.05 crores (Previous Year Rs. 2,853.82 crores) as disclosed in Schedule 9B (iii) are without any collateral or security.

6.1 Disclosure of penalties imposed by RBI:

RBI has not imposed any penalty on the Bank u/s 46(4) of the Banking Regulation Act, 1949 (Previous Year Nil).

6.2 Fixed Assets:

Cost of premises includes Rs. 4.09 crores (Previous Year Rs. 4.09 crores) in respect of properties for which execution of documents and registration formalities are in progress. Of these properties, the Bank has not obtained full possession of one property having WDV of Rs. 1.70 crores (Previous Year Rs. 1.74 crores) and has filed a suit for the same.

6.3 Contingent Liabilities:

Claims against the Bank not acknowledged as debts comprise of tax demands in respect of which the Bank is in appeal of Rs. 111.40 crores (Previous Year Rs. 108.84 crores) and the cases sub judice Rs. 319.49 crores (Previous '' Year Rs. 306.06 crores). The above are based on management''s estimate, and no significant liability is expected to arise out of the same.

6.4.1 During the current year, fee income from investment banking, account processing, card operations, and client account maintenance related activities aggregating to Rs. 589.68 crores which in earlier years was classified under the head Miscellaneous Income in Schedule 14 has been classified under "Commission, Exchange and Brokerage" in Schedule 14. Corresponding previous year figures aggregating to Rs. 419.18 crores have also been reclassified to conform to the current year presentation.

6.4.2 The Bank does not have any Overseas branches and hence the disclosure regarding total assets, NPAs and revenue is not applicable.

6.4.3 The Bank does not have any Off-Balance Sheet SPVs (which are required to be consolidated as per accounting standards).

7. Employee Stock Option Scheme ("ESOS")

The shareholders of the Bank had approved Employee Stock Option Scheme (ESOS) on September 18, 2007, enabling the Board and / or the Compensation Committee to grant such number of Options of the Bank not exceeding 7% of the aggregate number of issued and paid up equity shares of the Bank, in line with the guidelines of the Securities & Exchange Board of India (SEBI). The Options vest within a maximum period of five years from the date of grant of Option. The exercise price for each grant is decided by the Compensation Committee, which is normally based on the latest available closing price. Upon vesting, the Options have to be exercised within a maximum period of five years. The ESOS is equity settled where the employees will receive one equity share per Option.

Recognition of expense

Excess of fair market price over the exercise price of an Option as at the grant date, is recognized as a deferred compensation cost and amortized on a straight-line basis over the vesting period of such Options. The fair market price is the latest available closing price prior to the date of the meeting of the Board of Directors, in which Options are granted, on the stock exchange on which the shares of the Bank are listed. Since shares are listed in more than one stock exchange, the stock exchange where the Bank''s shares have been traded highest on the said date is considered.

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during a period. The measure of volatility used in Black-Scholes Options pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on NSE, over a prior period equivalent to the expected life of the Options, till the date of the grant.

Had the Bank adopted the Black - Scholes model based fair valuation, compensation cost for the year ended March 31, 2013, would have increased by Rs. 38.29 crores and the proforma profit after tax would have been lower by Rs. 25.86 crores correspondingly. On a proforma basis, the basic and diluted earnings per share would have been Rs. 21.30 and Rs. 20.88 respectively.

The weighted average fair value of Options granted during the year ended March 31, 2013 is Rs. 159.69.

8. Disclosures - Accounting Standards

8.1 Net Profit or Loss for the period, prior period items and changes in accounting policies (AS-5):

There has been no material change in Accounting Policies adopted during the year ended March 31, 2013, from those followed for the year ended March 31, 2012.

8.2 Depreciation Accounting (AS-6):

During the year, the Bank has revised estimated useful life of automated teller machines (ATMs), software and certain other items of fixed assets. Whenever there is a revision in the estimated useful life of an asset, the unamortised depreciable amount is charged over the revised remaining useful life of the said asset. The revision in the estimated useful life has resulted in the profit after tax for year ended March 31, 2013 being higher by Rs. 12.82 crores.

8.3 Employee Benefits (AS-15):

Gratuity:

The benefit of Gratuity is a funded defined benefit plan. For this purpose the Bank has obtained qualifying insurance policies from two insurance companies. The following table summarises the components of net - expenses recognized in the Profit and Loss account and funded status and amounts recognized in the Balance Sheet, on the basis of actuarial valuation.

Provident Fund:

The guidance on implementing AS 15, Employee Benefits (revised 2005) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans.

8.4 Segment Reporting (AS 17):

The Bank operates in four business segments, viz. Treasury, Corporate / Wholesale Banking, Retail Banking and Other Banking Operations. There are no significant residual operations carried by the Bank.

Geographic Segments:

The business operations of the Bank are largely concentrated in India. Activities outside India are restricted to resource mobilization in the international markets. Since the Bank does not have material earnings emanating from foreign operations, the Bank is considered to operate only in domestic segment.

8.5 Related party transactions (AS-18):

The following is the information on transactions with related parties:

Key Management Personnel:

Mr. Romesh Sobti, Managing Director Associates:

Induslnd Marketing and Financial Services Private Limited

Induslnd Information Technology Limited (fully divested on September 13, 2011)

Subsidiaries:

ALF Insurance Services Private Limited (under liquidation)

As on March 31, 2013, there was only one related party in the all above category; hence, in accordance with RBI guidelines, no disclosure relating to the transactions with these related parties.

The Bank has not sub-leased any of the properties taken on lease. There are no provisions relating to contingent rent.

The terms of renewal and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements.

8.6 Consolidated Financial Statements - Subsidiary (AS 21):

ALF Insurance Services Pvt. Ltd., subsidiary of the Bank, could not commence operations. Consequent to the resolution of Board of Directors, the process of winding up of the said company is under progress. Since the control is regarded as temporary, no consolidated financial statements have been drawn up as per AS-21 "Consolidated Financial Statements".

9.1 Letters of Comfort:

The Bank has not issued any letter of comfort.

9.2 Disclosure on Remuneration:

Remuneration Committee (RC)

The RC of the Bank comprises of four members of the Board of Directors of the Bank including one member from Risk Management Committee of the Board. The mandate of the RC is to establish, implement and maintain remuneration policies, procedures and practices that are consistent with, and promote, sound and effective risk management to achieve effective alignment between remuneration and risks. The Committee is also mandated '' to oversee framing, implementation and review of the Bank''s Compensation policy as per RBI guidelines on Compensation of Whole Time Directors / Chief Executive Officers / Risk Takers and Control function staff whose professional activities have a material impact on the Bank''s risk profile. The RC is also required to ensure that the cost / income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio. The RC reviews compensation structure and the policies of the Bank with a view to attract, retain and motivate employees.

Remuneration Policy

The Remuneration Policy is formulated by the Board in alignment with RBI guidelines, and is structured to cover all components of remuneration including fixed pay, variable pay, perquisites, retirement benefits such as Provident Fund and Gratuity, long term incentive plans, and Employee Stock Options.

The key objectives of the policy are:

(i) Benchmark employee compensation with market salaries for various job positions and skills and pay for ''Position, Performance & Person''

(ii) Maintain an optimal balance between fixed and variable pay

(iii) Pay for Performance

(iv) Build employee ownership and long term association through long term incentive plans (ESOPs and Deferred Bonus)

Some of the important features of the Compensation Policy are as below:

(i) The RC will oversee the framing, implementation and review of the Compensation Policy.

(ii) Remuneration will be market linked for critical job roles so as to attract and retain talent.

(iii) In respect of WTDs / CEO / Risk Takers, the compensation structure provides for a reasonable increase in fixed pay in line with market benchmarks. Their individual increments are linked to annual performance rating and increment percentages at various performance rating levels will be decided, on the basis of the financial performance of the Bank. Exceptions will be restricted to a select few high performers to reward performance, motivate and retain critical staff.

(iv) The quantum of overall variable pay to be disbursed in a year would vary on the basis of the financial performance of the Bank measured through various parameters such as NIM, Nil, ROA, PAT and ROE.

(v) Remuneration is linked to performance. Increments and variable pay are linked to the annual performance rating. Annual Performance Rating for an employee is arrived on the basis of tangible performance against pre-set KRAs / Goals set at the beginning of the Financial Year. The individual variable pay would be linked to annual performance rating, and would be based on variable pay grids outlining variable pay as a percentage of Annual Guaranteed cash at various rating bands for a grade level. Exceptional increments and variable pay may be paid to high performers, but in no case they would violate the stipulated RBI guidelines.

(vi) The individual variable pay would not exceed 70% of the fixed pay. Wherever variable pay exceeds 50% of the fixed pay, 50% of the variable pay will be deferred over a period of 3 years in a ratio to be decided by management, which at present is set at 33% : 33% : 34%.

(vii) Post disbursement of variable pay from Financial Year 2013-14, the Bank will enter into a Malus / Claw-back arrangement with the concerned employees. Malus arrangement would lay down policies to adjust deferred remuneration before vesting and Claw-back arrangement would lay down policies to adjust deferred remuneration after vesting. The criteria would be negative contribution by relevant business lines through supervisory oversight, excessive risk taking, integrity / staff accountability issues.

(viii) The Compensation Policy does not provide for guaranteed bonus or sign on bonus in cash. Sign on bonus to be paid in form of pre-hiring ESOPs will be very selective for critical hires.

(ix) The Compensation Policy does not provide for severance pay for any employee.

(x) Retirement benefits in the form of Provident Fund and Gratuity are as per the Bank''s HR policies which are broadly in line with the statutory norms.

(xi) Perquisites are laid down in HR Policies of the Bank.

(xii) At present, the Bank uses cash based form of variable remuneration. The rationale is that cash based form of variable remuneration leads to an instant reward to the concerned employees and is also easy to . administer.

(xiii) ESOPs do not form a part of the variable pay and are very selectively granted to attract and retain employees. ESOPs are not granted with a defined periodicity. The ESOP grant criteria include grade of the employee, criticality of the position in terms of business contribution and market value of the position, and performance and behavioural track of the employee.

9.3 On December 5, 2012, the Bank had issued 5,21,00,000 equity shares of Rs. 10/- each at a premium of Rs. 374 per share through a Qualified Institution Placement(QIP) and mobilised Rs. 2,000.64 crores. Bank incurred issue expenses of Rs. 17.57 crores which has been adjusted against the Share premium account.

10. The Micro, Small and Medium Enterprises Development Act, 2006 that came into force from October 2, 2006, provides for certain disclosures in respect of Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or interest payments due to delays in such payments.

11. Previous year''s figures have been regrouped / reclassified wherever necessary.


Mar 31, 2012

1) Capital Adequacy Ratio:

The Bank computes Capital Adequacy Ratio as per RBI guidelines. The Bank has migrated to the New Capital Adequacy Framework (Basel II) with effect from March 31, 2009. Under the Basel II guidelines, the Bank is required to maintain Capital to Risk weighted Assets Ratio, at a minimum of 9% on an on-going basis, covering credit risk, market risk and operational risk. Further, the minimum capital to be maintained by the Bank is subjected to a prudential floor which is the higher of :

i) Minimum capital to be maintained under the New Capital Adequacy Framework (Basel II); and

ii) 80% of the minimum capital to be maintained under Basel I guidelines

Note:

(1) Does not include amount of securities pledged with Central Counter Parties such as Clearing Corporation of India Ltd., National Securities Clearing Corporation of India Ltd, and Multi Commodity Exchange of India Ltd.

(2) Excludes investment in RIDF scheme of NABARD and equity shares.

(3) Excludes investment in RIDF scheme of NABARD, commercial papers, CD's and preference shares acquired by way of conversion of debts.

(4) Includes investment in RIDF scheme of NABARD.

(5) Amounts reported under 4, 5, 6 and 7 are not mutually exclusive.

Note:

(1) Does not include amount of securities pledged with Central Counter Parties such as Clearing Corporation of India Ltd., National Securities Clearing Corporation of India Ltd. and Multi Commodity Exchange of India Ltd.

(2) Excludes investment in RIDF scheme of NABARD and equity shares

(3) Excludes investment in RIDF scheme of NABARD

(4) Includes investment in RIDF scheme of NABARD

(5) Amounts reported under 4, 5, 6 and 7 are not mutually exclusive.

2.1 During the year, the value of sales and transfer of securities to / from HTM category, excluding one-time transfer of securities from HTM and sale on account of Open Market Operation (OMO), has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year. As such, in line with RBI guidelines, specific disclosures on book value, market value, and provisions if any, relating to such sale and transfers are not made.

3.1 Exchange Traded Interest Rate Derivatives:

The Bank has not undertaken any exchange traded interest rate derivative transactions during the year (previous year Nil).

3.2 Disclosures on Risk Exposure in Derivatives

The Risk Management Department of the Bank is responsible for measuring, reporting and monitoring risk arising from derivatives transactions. It functions independent of Treasury business and undertakes the following activities:

- Monitors daily derivatives operations against prescribed policies and limits;

- Reviews daily product-wise profitability and activity reports for derivatives operations;

- Submits MIS and details of exceptions to the Top Management on a daily basis; and

- Ensures monitoring effectiveness of derivative deals identified as hedges against the terms of the hedging instruments and underlying hedged risk.

The Risk Management function applies a host of quantitative tools and methods such as Value at Risk, PV01, stop-loss limits, counterparty limits, deal size limits and overnight position limits.

The Bank undertakes derivative transactions for hedging customers' exposure, hedging the Bank's own exposure, as well as for trading purposes, wherever permitted by RBI. The customers use these derivative products to hedge their forex and interest rate exposures; all trades with customers are covered back to back with other market makers.

The Derivatives Policy approved by Board of Directors defines the framework for carrying out derivatives business and lays down policies and processes to measure, monitor and report risk arising from derivative transactions. The policy provides for (a) appropriate risk limits for different derivative products and (b) authority levels for review of limit breaches and to take appropriate actions in such events. As part of the Derivatives Policy, the Bank has a Product Suitability and Customer Appropriateness Policy, which is used to classify its customers on the basis of their need for various derivative products as well as their competence in understanding such products and the attendant risks involved.

Note 1: Based on the PV01 of the outstanding derivatives as at March 31, 2012.

Note 2: Based on the absolute value of PV01 of the derivatives outstanding during the year. Derivative contracts that are "back-to-back" have not been included herein.

Note 3: Mark to Market positions above includes interest accrued on the swaps.

Note 4: There were no outstanding currency futures as on March 31, 2012.

Note 5: As on March 31, 2012, Marked to Market receivable is Rs 481.45 crores and Marked to Market payable is Rs 307.22 crores in respect of Currency derivatives. In respect of Interest rate derivatives, Marked to Market receivable is Rs 163.47 crores and Marked to Market payable is Rs 147.96 crores.

Foreign Currency exposure not hedged by derivative instruments (Net Open Position) as on March 31, 2012 is Rs (44.73) crores (previous year Rs (5.69) crores).

4.1 During the year, there has been no purchase / sale of non-performing financial assets from / to other banks (previous year Nil).

4.2 During the year, there was no securitization transaction pertaining to Standard Advances (previous year Nil).

Note:

(1) Working funds are reckoned as the average of total assets as per the monthly returns in Form X filed with RBI during the year.

(2) Business per employee (deposits plus gross advances) is computed after excluding Inter-bank deposits.

(3) Returns on Assets are computed with reference to average working funds.

(1) As per RBI circular RPCD.CO.Plan.BC.69/04.09.01/2010-11 dated 09/05/2011, limit for housing loan under priority sector has been changed from Rs 20 lacs to Rs 25 lacs

(2) Does not include corporate lending backed by mortgage of land and building.

5.1 Single borrower limit and Group Borrower Limit:

During the year, the Bank has not exceeded the prudential credit exposure limit in respect of Single Borrower and Group Borrowers (previous year Nil).

5.2 Unsecured advances:

The Bank has not extended any project advances where the collateral is an intangible asset such as a charge over rights, licences, authorizations etc. As such, the Unsecured Advances of Rs 2853.82 crores (previous year Rs 3714.29 crores) as given in Schedule 9B (iii) are without any collateral or security.

6.1 Disclosure of penalties imposed by RBI:

RBI has not imposed any penalty on the Bank u/s 46(4) of the Banking Regulation Act, 1949 (previous year Nil).

6.2 Fixed Assets:

Cost of premises includes Rs 4.09 crores (previous year Rs 4.09 crores) in respect of properties for which execution of documents and registration formalities are in progress. Of these properties, the Bank has not obtained full possession of one property having WDV of Rs 1.74 crores (previous year Rs 1.78 crores) and has filed a suit for the same.

6.3 Contingent Liabilities:

Claims against the Bank not acknowledged as debts comprise of tax demands in respect of which the Bank is in appeal of Rs 108.84 crores (previous year Rs 149.64 crores) and the cases sub-judice Rs 306.06 crores (previous year Rs 159.96 crores). The above are based on the management's estimate, and no significant liability is expected to arise out of the same.

6.4 During the year, the Bank had 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 the internal accruals of the Bank. The business take-over was completed on June 01, 2011 and all the assets and mutually agreed liabilities of the said Credit Cards business became part of the Bank's Balance Sheet on that date. The price paid towards acquisition of the business was allocated to the assets and liabilities on the basis of their fair value on the acquisition date and accounted for accordingly. The incomes generated by the business on and from that date, and the assets and liabilities pertaining to the business have been duly considered in the Profit and Loss Account for the year ended and the Balance Sheet as at March 31, 2012 respectively. While the acquisition of Credit Cards business has a strategic importance in augmenting the product offerings of the Bank, it has not materially impacted the financial results forthe year ended March 31, 2012 and the state of affairs ofthe Bank as on that date.

6.5.1 Miscellaneous income includes processing fees Rs 124.73 crores (previous year Rs 83.61 crores), card operations fees Rs 64.27 crores (previous year Rs 23.62 crores), investment banking income Rs79.02 crores (previous year Rs60.53 crores) and others Rs 160.99 crores (previous year Rs 94.37 crores).

6.5.2 The Bank does not have any Overseas branches and hence the disclosure regarding total assets, NPAs and revenue is not applicable.

6.5.3 The Bank does not have any Off-Balance Sheet SPVs (which are required to be consolidated as per accounting standards).

7) Employee Stock Option Scheme ("ESOS"):

The shareholders of the Bank had approved Employee Stock Option Scheme (ESOS) on September 18, 2007, enabling the Board and / or the Compensation Committee to grant such number of Options of the Bank not exceeding 7% of the aggregate number of issued and paid up equity shares of the Bank, in line with the guidelines of the Securities & Exchange Board of India (SEBI). The options vest at the discretion of the Compensation Committee, but within a maximum period of five years from the date of grant of option. The exercise price for each grant is decided by the Compensation Committee, which is normally based on the latest available closing price. Upon vesting, the options have to be exercised within a maximum period of five years. The ESOS is equity settled where the employees will receive one equity share per option.

Recognition of expense

Excess of fair market price over the exercise price of an option as at the grant date, is recognized as a deferred compensation cost and amortized on a straight-line basis over the vesting period of such options. The fair market price is the latest available closing price prior to the date of the meeting of the Board of Directors, in which options are granted, on the stock exchange on which the shares of the Bank are listed. Since shares are listed in more than one stock exchange, the stock exchange where the Bank's shares have been traded highest on the said date is considered.

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during a period. The measure of volatility used in Black -Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on NSE, over a prior period equivalent to the expected life of the options, till the date of the grant.

The Bank has charged Rs 3.04 crores to the Profit and Loss account being the intrinsic value of stock options granted for the year ended March 31, 2012. Had the Bank adopted the Black - Scholes model based fair valuation, compensation cost for the year ended March 31, 2012, would have increased by Rs 55.40 crores and the proforma profit after tax would have been lower correspondingly. On a proforma basis, the basic and diluted earnings per share would have been Rs 16.02 and Rs 15.70 respectively.

The weighted average fair value of options granted during the year ended March 31, 2012 is Rs 136.76.

8) Disclosures - Accounting Standards :

8.1 Net Profit or Loss for the period, prior period items and changes in accounting policies (AS-5):

There has been no material change in Accounting Policies adopted during the year ended March 31, 2012, from those followed for the year ended March 31, 2011.

8.2 Employee Benefits(AS-15):

Gratuity:

The benefit of Gratuity is a funded defined benefit plan. For this purpose the Bank has obtained qualifying insurance policies from two insurance companies. The following table summarises the components of net expenses recognized in the Profit and Loss account and funded status and amounts recognized in the Balance Sheet, on the basis of actuarial valuation.

Provident Fund:

The guidance on implementing AS 15, Employee Benefits (revised 2005) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans.

Geographic Segments:

The business operations of the Bank are largely concentrated in India. Activities outside India are restricted to resource mobilization in the international markets. Since the Bank does not have material earnings emanating from foreign operations, the Bank is considered to operate only in domestic segment.

* As on March 31, 2011, there was only one related party in the said category; hence, in accordance with RBI guidelines, no disclosure relating to the transactions with these related parties.

Note: Figures in bracket represent maximum outstanding during the year.

8.3 Consolidated Financial Statements - Subsidiary (AS 21):

ALF Insurance Services Pvt. Ltd., subsidiary of the Bank, could not commence operations. Consequent to the resolution of Board of Directors, the process of winding up of the said company is under progress. Since the control is regarded as temporary, no consolidated financial statements have been drawn up as per AS-21 "Consolidated Financial Statements".

9.1 Letters of Comfort

The Bank has not issued any letter of comfort.

10. Floating provision

The Bank does not carry any floating provision in the books.

11. The Micro, Small and Medium Enterprises Development Act, 2006 that came into force from October 2, 2006, provides for certain disclosures in respect of Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or interest payments due to delays in such payments.

12. Previous year's figures have been regrouped / reclassified wherever necessary.

 
Subscribe now to get personal finance updates in your inbox!