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Directors Report of Bandhan Bank Ltd.

Mar 31, 2023

Your Board of Directors present the Ninth Annual Report on the business and operations of your Bank, together with the Audited Financial Statement for the Financial Year (''FY'') ended March 31, 2023.

Financial Performance of the Bank

The financial highlights for the FY under review, are presented below:

(Figures in ? crore)
Particulars	For the FY ended
Particulars	March 31, 2023	March 31, 2022
Deposits:	1,08,069.31	96,330.62
- Savings Bank Deposits	36,038.10	34,616.86
- Current Account Deposits	6,417.05	5,462.32
- Term Deposits	65,614.16	56,251.44
Advances (Net):	1,04,756.77	93,974.92
- Cash Credits, Overdrafts and Loans repayable on demand	22,048.64	17,154.78
- Term Loans	82,708.13	76,820.14
Total Assets/Liabilities	1,55,769.97	1,38,995.17
Net Interest Income	9,259.62	8,714.46
Non-Interest Income	2,468.55	2,822.50
Less: Operating Expenses (excluding Depreciation)	4,494.17	3,413.52
Profit before Depreciation, Provisions and Tax	7,234.00	8,123.44
Less: Depreciation	142.65	110.04
Less: Provisions	4,198.37	7,884.78
Profit Before Tax (PBT)	2,892.98	128.62
Less: Provision for Tax	698.35	2.83
Profit After Tax (PAT)	2,194.64	125.79
Balance in Profit & Loss Account brought forward from previous year	6,009.94	6,171.00
Appropriations:
Transfer to Statutory Reserves	548.66	31.45
Transfer to Statutory Reserve u/s 36(1)(viii) of the Income-tax Act, 1961	169.20	42.45
Transfer to Capital Reserve	1.74	16.00
Transfer to Investment Reserve	-	25.24
Transfer to Investment Fluctuation Reserve	31.19	10.65
Dividend pertaining to previous year paid during the year	-	161.07
Balance carried over to Balance Sheet	7,453.79	6,009.94
EPS (Basic) (in ^)	13.62	0.78
EPS (Diluted) (in ^)	13.62	0.78

State of Affairs of the Bank

While your Bank completed seven years of its operation during the FY under review, it has also achieved three significant milestones

i.e. (i) achieved the total deposits as well as total advances of ?1 lakh crore each; (ii) crossed ?2 lakh crore of total business; and (iii) acquired three crore customers. The Balance Sheet size of your Bank has also crossed ?1.5 lakh crore. The Total Liabilities (including capital and reserves) of your Bank stood at ?1,55,770 crore and the Total Advances (Net) at ?1,04,757 crore.

During the FY under review, your Bank stayed on course with its strategic priorities of portfolio diversification. As on March 31, 2023, Group loans were at 35 per cent. of the total asset book, down from 47 per cent. as on March 31, 2022. The share of housing finance portfolio increased by 100 bps during FY 2022-23 to 25 per cent. of the total asset book as on March 31, 2023, whereas other retail assets have also grown to 5 per cent. of the total asset book during FY 2022-23 as compared to 2 per cent. as on March 31, 2022. Commercial Banking portfolio achieved a share of

35 per cent. of the total asset book during FY 2022-23 as compared to 27 per cent. during the previous year.

With regard to the strategic priority of geographical diversification, among the new banking outlets opened in the year under review, majority were outside of the core markets of East and North East India. In terms of business volume for the legacy micro loans business, while Assam was the second largest market for your Bank for many years, in the year under review, Uttar Pradesh and Bihar overtook Assam, hinting further at the desired geographical diversification agenda. During the FY under review, your Bank has added 360 new banking outlets taking the total count of banking outlets to 5,999 as on March 31, 2023. Out of the total 5,999 banking outlets, 35 per cent. are in rural, 37 per cent. in semiurban, 18 per cent. in urban and 10 per cent. in metro locations. The number of customers has increased from 2.63 crore as on March 31, 2022 to 3 crore as on March 31, 2023. With the expanding network of banking outlets and customers, the total deposits grew further from ?96,330.62 crore as on March 31, 2022 to ?1,08,069.31 crore as on March 31, 2023 registering a growth of 12.19 per cent. The Current Account and Savings Account (''CASA'') deposits have recorded an increase of 5.93 per cent. from ?40,079.18 crore as on March 31, 2022 to ?42,455.15 crore as on March 31, 2023.

During the FY under review, the total income (net) of your Bank has increased by 1.66 per cent. to ?11,728.17 crore as against the total income of ?11,536.84 crore for FY 2021-22. The profit after tax (''PAT'') stood at ?2,194.64 crore, an increase of 1,645 per cent. as compared to ?125.79 crore for FY 2021-22. Consequently, Return on Average Equity (''ROAE'') was 11.8 per cent. as against 0.76 per cent. for FY 2021-22 and Return on Average Asset (''ROAA'') was 1.60 per cent. as against 0.11 per cent. for FY 2021-22. Correspondingly, basic as well as diluted earnings per share (''EPS'') increased from ?0.78 to ?13.62 as at the end of FY 2022-23 in comparison to FY 2021-22.

Your Bank continues to focus on financial inclusion by providing various financial services to the underserved. The Reserve Bank of India (''RBI'') has mandated Priority Sector Lending (''PSL'') of a minimum 40 per cent. of advances for all banks. Your Bank''s PSL was ?54,176 crore as on March 31, 2023 as compared to ? 56,397 crore as on March 31, 2022. At the end of FY 2022-23, PSL as a proportion of the gross advances of ?1,08,827.12 crore was 50 per cent.

Highlights of various business segments of your Bank during the FY under review are mentioned below:

Banking Unit (BU) Business

The Banking Units vertical of your Bank has been serving borrowers at the bottom of the pyramid with affordable and convenient loans to help them develop into entrepreneurs and transform their lives. Your Bank''s Banking Units business strategy is guided by its long-held philosophy of financial inclusion and economic empowerment of the disadvantaged sections of the society. The endeavour of your Bank is to nurture these entrepreneurs and help them move

up the socio-economic hierarchy. In their movement upwards, your Bank is by them to support with whichever financial service they may require in the journey.

Your Bank offers a wide array of loans through Banking Unit (''BU'') outlets under Banking Units vertical to benefit small business owners in need of financial assistance. It also helps in the growth of additional income generation avenues and offers enhanced opportunities to small entrepreneurs to achieve their business goals. The Bank operates its Group Loans and Small Business & Agri Loans (''SBAL'') business channels from its BU outlets.

Each BU is linked to a bank branch for operational convenience. BUs are self-sufficient and empowered to open deposit accounts using TABs and also open loan accounts after necessary credit checks. The highlight of the BUs'' operations is the TABs that are connected to the Core Banking System (''CBS'') through cellular data. Relationship Officers (''RO'') carry these TABs to their group meetings, and the entire instalment reconciliation for the customer happens through these TABs on real time basis. To ensure timely and effective support to the BUs in their day-to-day functioning, your Bank has a structure comprising Circles, Territories, Divisions, Areas and Banking Unit Catchments. A central operation team maintains oversight of the quality of the operations and adherence to prevalent guidelines at all times. Your Bank lays significant emphasis on processes and controls to help maintain uniform and consistent standards in transaction processing and service delivery, as well as compliance with regulatory and statutory guidelines.

During the FY under review, your Bank opened 138 new BUs pan-India with a focus on financial inclusion and to enhance portfolio quality by limiting the number of customers served by a BU. Your Bank''s commitment towards financial inclusion is also reflected in the fact that it offered loans to 23,77,606 new borrowers during the FY 2022-23. The portfolio for Group Loans stood at ? 38,059 crore whereas SBAL portfolio stood at ?18,765 crore at the end of FY 2022-23 as your Bank worked towards bringing additional measures in credit control in order to improve the quality of portfolio.

Your Bank now has nine loans products under its Group Loans, SBAL and other categories, which are provided from Banking Unit outlets to cater better to the varied demands and needs of its customers:

Group loans

1. Srishti Loan: Timely funds to start a new business or grow an existing one. Loan size is from ?15,000 to ?1,00,000.

2. Subriddhi Loan: Loan amount is up to 50 per cent. of the disbursement amount of running primary loan. Sanctioned to help customers fulfil their extra business requirement during their ongoing loan.

3. Suraksha Loan: Loan size is up to ?15,000 and is sanctioned to help existing customers meet their emergency expenses, e.g.- medical, drinking water and sanitation.

4. Sushiksha Loan: Loan size is up to ?10,000 and is sanctioned to help customers meet expenses towards the education of their children.

Small Business and Agri Loans

1. Sahayata Loan: Loan to fund growing business needs of individuals involved in an array of income generation activities. Loan amount is from ?50,001 to ?3,00,000.

2. Suyog Loan: Loan amount is up to 50 per cent. of the disbursement amount of running Sahayata loan. Sanctioned to help customers fulfil their additional short-term business requirement during their ongoing loan.

3. Baazar Loan: With a loan size from ?26,000 to ?1,50,000, this product is for small entrepreneurs, who have an existing super-saver account with your Bank. This loan provides financial support to deposit customers for their working capital needs.

Other loans

1. Micro Home Loan: Your Bank offers Micro Home Loan ranging from ?1,00,000 to ?10,00,000 to existing Banking

Unit Borrowers for construction as well as renovation of their houses so that their dream of their own house does not remain unfulfilled.

2. Two-wheeler Loan: Your Bank offers two-wheeler loans ranging from ?30,000 to ?1,20,000 to existing Banking Unit Borrowers. It brings them a step closer to their aspirations.

During the FY under review, your Bank has taken various initiatives:

â¢ During the pandemic and post pandemic restrictions, many of the customers of your Bank lost their livelihoods, which made them financially vulnerable. To strengthen the customers, your Bank came up with products specifically designed for these situations and ensured that the customers get the maximum financial assistance during the toughest time in their lives. In addition to lending to customers, your Bank is encouraging them to save in their savings bank accounts and to inculcate healthy financial habits, so that in any uncertain situation in the future, they remain financially stable.

â¢ Awareness about using digital solutions, like smartphone-based transactions and use of credit/debit cards for online transactions are still persistent issues to the customers under the Banking Unit vertical. To overcome these challenges, your Bank is giving training to make the customers aware about the benefits of digital payments and various other aspects, such as seeding bank accounts with mobile number and Aadhaar. Your Bank has also taken initiative by informing the customers to pay through online transactions.

â¢ Your Bank has been driving the transformation of customers at the ground level. Your Bank has already started migrating vintage and quality customers to Small Business and Agri loans from their existing group loans by laying out a strategy to increase the share of Small Business and Agri loans in overall portfolio of Banking Units vertical and extending new

product offerings, such as Sahayata Loan, Two-Wheeler Loan, and Micro Home Loan as per their changing requirements.

â¢ Your Bank has always placed strong emphasis on training and development to upskill and reskill staff to ensure that they stay relevant to the fast-changing world across levels and locations. This includes online and classroom training sessions.

â¢ Your Bank has taken several initiatives to strengthen the credit assessment process for Group loan and SBAL, and other loans in order to have a better portfolio. Your Bank has further started initiating deployment of separate Loan Sanctioning team to manage the end-to-end loan sanctioning process for SBAL loans.

With the advent of Microfinance master circular dated March 14, 2022 (updated on July 25, 2022) issued by the RBI, your Bank has revised its processes and guidelines in order to align its microfinance loans with the said guidelines to better cater its customers.

Commercial Banking Small Enterprise Loan (''SEL'')

In the current economic scenario, India is a country burgeoning with small businesses which are regularly in need of short to medium-term funding to maintain and grow their businesses. The Small Enterprise Loan vertical of your Bank empowers these businesses to expand their business by extending to them business loans tailored to suit their needs.

With the COVID pandemic now firmly behind us, the small-enterprise segment is now expected to grow at a much faster rate than in the recent past, thus making it all the more essential for your Bank to offer loans to these firms and aid them in their pursuit of growth and expansion, in turn contributing to the overall betterment of the country.

In an endeavor to understand its customers better, your Bank''s SEL vertical has constantly taken inputs from borrowers and with the help of these inputs, updated and added to the catalogue of offered products to remain at par with other leading banks of the country.

The following products are presently offered under SEL:

â¢ SEL Term Loans (^1.01 lakh to ^10 lakh)

These are term loans with a tenure of one to three years, and they are aimed towards financing working capital or asset creation needs of small businesses or other short-term business requirements. These loans range from ?1.01 lakh to ?10 lakh.

â¢ SEL Max Loans (^10.01 lakh to ^25 lakh)

This is similar to SEL Term Loans, but it is targeted towards slightly larger enterprises in terms of revenue, which might need loans of value higher than ?10 lakh. These loans range from ?10.01 lakh to ?25 lakh.

â¢ SEL Secured Overdraft Loans (^10.01 lakh to ^25 lakh)

This overdraft product has been added to your Bank''s SEL product bouquet during FY 2022-23 with a vision to cater to the MSME borrowers who need working capital in form of an overdraft and are willing to pledge a security for the loan. The range for this product is ?10.01 lakh to ?25 lakh and the overdraft limits are subject to renewal on a yearly basis.

Business Banking Group

Business Banking Group (''BBG'') offers loan products at competitive rates of interest to SME borrowers for meeting their working capital or capital expenditure requirements, including non-fund-based facilities. The interest rate offered is correlated with the applicant''s profile and credit rating. These are secured loans generally between ?25 lakh to ?5 crore extended to businesses involved in manufacturing, trading, and services, extended in the form of secured credit facilities including term loan, cash credit, overdraft or lease rental discounting or as non-fund-based facilities like letter of credit or bank guarantee. To promote ease of process, your Bank is in the advanced stage of deploying the Loan Originating System that automates and manages the end-to-end steps in the loan process. Also, the cash management for commercial clients has been launched and implementation of trade services is in the advanced stage. The BBG fund based Book was at ?535 crore as on March 31, 2023 as against ?297 crore as on March 31, 2022, registering a growth of about 80 per cent. during FY 2022-23.

In line with various government initiatives and regulatory instructions, Board-approved Credit and related Policies are in place to continue extending support in the aftermath of the COVID-19 pandemic, in the form of Emergency Credit Line Guarantee Scheme, Resolution Framework, etc., to the deserving and eligible borrowers, based on requests.

Commercial - LAP

Your Bank caters to proprietorships, partnerships, private limited companies, public limited companies (not listed on exchange) and individual business for loans against property (''LAP''). This is in line with your Bank''s overall objective of increasing the secured lending portfolio. It is quite a competitive segment in the financial services industry. Your Bank will leverage its 1,400 bank branches besides sourcing from the open market. Additionally, your Bank will have a higher level of engagement with customers by not only building the LAP book but also transitioning the entire customer relationship to your Bank. This product launched towards the end of FY under review, your Bank has laid an ambitious plan to scale up and build a quality book by end of FY 2023-24. As we move along, your Bank will use technology for better turnaround time which is essential for doing well in this space. Your Bank has a bouquet of programs to cater to most of the sectors in the market in the LAP space. With hiring of people underway, your Bank is set to make the most in the FY 2023-24. The focus would be on the top 30 cities for the LAP product which constitute 85 per cent. of the total LAP market. The book-size stood at ?53.14 crore, as on March 31, 2023.

Mid-Market Group

Mid-Market Group (''MMG'') offers loan products at competitive rates of interest to majorly medium enterprises and mid corporate

borrowers for meeting their working capital or capital expenditure requirements, including non-fund-based facilities. The interest rate offered is correlated with the applicant''s profile and credit rating. These are secured loans of generally more than ?5 crore extended to businesses involved in manufacturing, trading, and services, extended in the form of secured credit facilities including term loan, cash credit, overdraft or lease rental discounting or as non-fund-based facilities like letter of credit or bank guarantee. To promote ease of process, your Bank is in the advanced stage of deploying the Loan Originating System that automates and manages the end-to-end steps in the loan process. Also, the cash management for commercial clients have been launched and implementation of trade services is in the advanced stage. The MMG fund based Book was at ?3,605 crore as on March 31, 2023 as against ?1,871 crore as on March 31, 2022, registering a growth of about 93 per cent. during FY 2022-23.

Financial Institution Group

Your Bank considers Institutional Lending to Non-Banking Financial Companies (''NBFCs'')/Housing Finance Companies (''HFCs'') and NBFC-Microfinance Institution (''NBFC-MFI''), primarily, for on-lending activities. The NBFC-MFI business includes lending to Microfinance Institutions (''MFIs''), Societies and Trusts engaged in microfinance activities. While most of these loans are extended as Term Loans, your Bank also has credit exposure through Direct Assignments and investment exposures through Pass Through Certificates (''PTCs'') and Non-Convertible Debentures (''NCDs''). The NBFC (including HFCs) business primarily includes Term Loan product for on-lending purpose, and is also foraying into working capital loan, Direct Assignments and co-lending activities. The book-size of this business was at ?5,519.34 crore as on March 31, 2022, which has grown to ?10,386.72 crore as on March 31, 2023. The Institutional book, comprising lending to NBFCs and MFIs, has grown by 88 per cent. Your Bank has expanded its reach while building Books through diversified asset class as well as geographies during the Financial Year under review.

Agribusiness Loans

Providing credit for agricultural activities not only helps increase production but also empowers farmers, and supports the backbone of the Indian economy- the agricultural sector. Your Bank recognizes the importance of this sector and offers a wide range of credit facilities to provide financial support to all participants in the Agri value-chain system. Currently, your Bank provides KCC loans to borrowers engaged in farming activities, including animal husbandry, pisciculture etc. with competitive interest rates and minimal documentation. By doing so, your Bank is making it easier for farmers to access credit and invest in their farms to increase productivity.

Moreover, your Bank is expanding its reach by offering both fund-based and non-fund-based facilities to entities involved in agri-

ancillary services, such as food and agri processors, Agri input dealers, etc. Additionally, your Bank provides credit facilities to support development of agricultural infrastructure.

Housing Finance

Your Bank offers loans for purchase, construction, repair, renovation and extension of dwelling units to individuals. Loan against Property (''LAP'') on self-occupied residential property and loan against rent receivables on commercial property are also offered.

Loans are offered to Salaried as well as Self Employed individuals. In line with the objective to increase financial inclusion, your Bank also offers loans to New to Credit customers.

During the FY under review, the Housing loan services were extended from additional 33 Centers taking the presence to 389 Centers across 20 States and 2 Union Territories.

Your Bank continues to focus on housing finance and has disbursed ?6,129 crore during the FY clocking a growth in disbursement of 17 per cent. Consequently, the loan book has grown to ?26,577 crore indicating a growth of 12.8 per cent.

While your Bank continues to focus on Affordable Home Loans, a majority of loans are having a ticket size below ?20 lakh. A major portion of the housing book is meeting the criteria for Priority Sector lending as the focus area continues to be Affordable housing. During the FY, your Bank continued a special campaign for higher ticket loans that was launched last year offering attractive and competitive rates of interest. The campaign received a very good response.

Your Bank has also started a Direct Sales Agent (''DSA'') channel for sourcing of home loans. The DSA channel has picked up well and the contribution from the channel has been increasing. Your Bank is committed to the housing business and strives to increase the penetration in the Affordable as well as higher ticket size segments. With an objective to improve the servicing to the customers, your Bank is also strengthening the customer support and is in the process to launch digital journeys for customer onboarding and online support.

Your Bank offers loans at floating rates linked to an External Benchmark Rate (''EBR''). Your Bank has adopted the Repo rate announced by the RBI as the EBR rate. Your Bank also follows the principle of Risk based pricing and loans are offered based on the individual credit score arrived at based on multiple parameters. Existing customers who are serving floating rate loans linked to previous benchmark rates are also offered an option to convert their loans to EBR linked loans.

Retail Asset

With an objective to serve the financing needs of a larger population and to diversify the risk, your Bank has launched and strengthened several retail asset products during FY 2022-23. Customers can now avail various loans, like Gold Loans, Personal Loans, Two-Wheeler Loans, Car Loans and Commercial Vehicle &

Construction Equipment (''CVCE'') Loans from the Bank.

â¢ Gold Loan: Gold loan aims at fulfilling urgent monetary needs of the customers instantly, through its simplified documentation process quick turnaround time and wide branch network. Gold loans are given for a ticket size ranging from ?10,000 to ?40,00,000 for a tenure up to 3 years with a competitive rate of interest.

â¢ Personal Loan: Your Bank has revamped the personal loan product and revised the sourcing model. The sourcing is being done by a dedicated sales team, catering to existing customers and New to Bank customers as well. The Personal Loan product has started channel partner sourcing from the year 2021 to extend distribution network in major markets to diversify and expand the portfolio. Personal loans are given for ticket size from ?50,000 to ?25,00,000 for a tenure up to 5 years at a competitive rate of interest. Your Bank has been quickly ramping up this book during FY 2022-23. Total outstanding book stood at ?897 crore as on March 31, 2023.

â¢ Two Wheeler Loans: Your Bank has achieved and maintained a consistent growth rate and has reached to a sizable customer base with more than 90 per cent. New to Bank customers. The Two Wheeler loan program was redesigned to provide financing to existing as well as New to Bank customers for purchase of new Two Wheelers. Your Bank leveraged on its digital capabilities and using digital means, approved two wheeler loans in just 5 minutes for more than 90 per cent. of cases. The two wheeler loan caters to the customer''s needs by giving loans starting from ?5,000 to ?5,00,000. Your Bank redesigned the product as per market standard with introduction of dealer/ channel based distribution model expanding its geographical footprint.

â¢ Car Loan: Car Loan was launched by your Bank during the FY 2021-22, to meet the customers'' aspirations of owning a car. Your Bank designed various product schemes for loan amounts ranging from ?1,00,000 to ?1 crore, in order to cater to various customer profiles viz. salaried, self-employed as well as non-individual entities. With the help of its extensive manufacturer and dealer network, your Bank aims to provide the best deals to existing as well as new customers. Your Bank has built a sizable book of new car loans and has also launched new product used car Loan during the second half of FY 2022-23 to cater the larger strata of customers and to increase the profitability of overall auto loans business.

â¢ CVCE Loan: Road transport plays an important role in freight and people movement owing to its end-to-end connectivity and flexibility. In light of increased pace of economic activity, increased focus on manufacturing growth and e-commerce, CVCE product was launched in this year for self-employed customers & non-individual entities, looking for a loan from ?1 lakh to ?15 crore. The Bank aims to provide the best deals to existing as well as new customers, through its existing branch channel, manufacturers & dealer network.

Branch Banking

Your Bank takes pride in offering a wide range of retail liability products that cater to its customers'' diverse financial needs. Your Bank has a strong focus on customer service and constantly strives to provide innovative and convenient banking solutions.

During the FY under review, your Bank''s deposit portfolio witnessed robust growth, with a total deposit base of ?1,08,069 crore as of March 31, 2023. This represents a growth of 12 per cent. in the overall deposit franchise as compared to previous FY. While the growth in deposits was primarily driven by an increase in savings and current account deposits, the contribution from the Affluent Savings business segment which consists of the flagship products like the Elite and Premium Savings remained unmatched. This segment alone contributed to an overall SA growth of 15 per cent. as compared to previous FY. Your Bank also witnessed a steady growth in Term deposits, which grew by 17 per cent. over previous FY.

Your Bank has implemented various initiatives to ensure that the retail deposit portfolio remains competitive and meets the evolving needs of customers, with extra attention to the Affluent segment. Your Bank has leveraged technology to enhance the customer experience and offer digital payment solutions that are secure and convenient.

Your Bank has also launched targeted marketing campaigns to educate customers about the benefits of its products and services. In addition, the customer onboarding process has been streamlined to ensure a seamless experience.

Your Bank''s strong network of branches is a key element of the success and enables it to serve customers effectively. A total of 222 Branches were added during the FY under review taking your Bank''s footmark to 1,411 branches, covering a wide range of locations across the country. This extensive network ensures that your Bank is able to reach out to a large number of customers and offer them a range of products and services that are tailored to their specific needs. The continued investment in expanding the footprint is a reflection of the commitment to providing high-quality financial services to customers across the length and breadth of the country.

The launch of "SMART-Android POS" is a testament to the commitment to providing innovative and customer-centric solutions to merchants. Your Bank is confident that this product will further strengthen the current account customer base as a leading player in the POS space and will help to continue delivering value to customers. Your Bank is confident that the merchants will be excited about the range of offerings and features that SMART-Android POS brings to the table.

Your Bank will keep leveraging technology to offer new and enhanced digital solutions that are secure, convenient, and user-friendly.

Your Bank remains committed to providing customers with best-in-class banking solutions and looks forward to serving them with the same zeal and commitment in the future.

Third Party Products

Your Bank currently distributes mutual funds, life insurance and general insurance, including health insurance products. The Financial Year under review has been a year of collaboration and resurgence. Your Bank continues to demonstrate a persistent focus on offering a robust and comprehensive product proposition to its customers. In the General Insurance business, your Bank continued to serve its customers in their quest towards healthy living by offering them a wide variety of health insurance solution based product proposition. In the life insurance business, your Bank continues in its quest of offering a wide bouquet of products to cater to different life cycles and life stages of its customers. Your Bank has also been working tirelessly to build an analytics and technology driven business franchisee to offer the best in class insurance solutions to its customer base. In mutual funds distribution, your Bank continues to focus on a research driven distribution strategy with a vision of providing its customers the ease and flexibility while planning for investments. This year your Bank has launched the distribution of Mutual Funds through its Retail Internet Banking (RIB) platform in its continuous efforts towards offering customers further convenience and benefits.

Your Bank continues to invest towards building a segment driven, analytics and research based and technology embedded, product distribution proposition, across all Third Party Products and continues to seek out opportunities to add new product suites to serve customers financial needs holistically.

The total mutual fund AUM managed under your Bank''s code during FY under review was ?582.79 crore, earning an income of ?5.14 crore. A total of ?207.21 crore and ?497.07 crore of general and retail life insurance business, respectively, were garnered through the retail network during FY 2022-23, earning a fee income of ?26.65 crore and ?153.52 crore, respectively. During FY under review, the life insurance business through the existing arrangement in all asset verticals amounted to ?1,146.29 crore, earning an income of ?58.10 crore. Your Bank has also earned ?0.11 crore as commission for distribution of Atal Pension Yojana, NPS Lite Swavalamban schemes of PFRDA and others during the FY 2022-23.

Corporate Social Responsibility

Your Bank''s core commitment to creating inclusive growth is reflected in its Corporate Social Responsibility ("CSR") initiatives, which focus on the empowerment of the marginalised sections of the societies residing in the vicinity of its operational area. The marginalised communities are confronted with multi-dimensional vulnerabilities, at the core of which is the challenge to secure sustained livelihoods. Accordingly, the interventions of your Bank''s CSR initiatives are appropriately designed to build their capabilities for securing sustainable livelihoods.

To address its societal commitments, your Bank has adopted a comprehensive CSR policy that outlines the CSR programmes of your Bank, which are in line with Schedule VII to the Companies Act, 2013 (the ''Companies Act''). These programmes are being undertaken in the vicinity of your Bank''s operational areas.

For the seamless implementation and monitoring of the CSR programme, your Bank has constituted the Corporate Social Responsibility Committee of the Board of Directors (''CSRCB''), in accordance with the provisions of Section 135 of the Companies Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 (''CSR Rules''). During the FY under review, the scope of the CSR Committee has been broadened to oversee the implementation of the Business Responsibility and Sustainability Reporting (''BRSR'') related initiatives of the Bank and accordingly, the name of the Committee has been changed to the Corporate Social Responsibility and Sustainability Committee of the Board (''CSR&SCB''). The composition of the CSR&SCB is given in the Corporate Governance Report which forms part of this Report.

During the year under review, your Bank has contributed ?52.93 crore towards 19 CSR programmes implemented through a Project Implementing Agency (''PIA''). These CSR programmes were spread across 379 project locations in 63 districts of 8 states of India, reaching out to 4,08,789 individuals during the FY under review.

In terms of the provisions of Rule 8(3) of the CSR Rules, your Bank appointed KPMG Assurance and Consulting Services LLP (''KPMG'') to carry out an independent Impact Assessment of its CSR Programmes. Further, in terms of the General Circular No. 14 /2021 dated August 25, 2021, issued by the Ministry of Corporate Affairs, Government of India, the Impact Assessment Report is available at the Bank''s website https://www.bandhanbank.com/ beyond-banking, and the programme wise summary of the same is mentioned in the subsequent sections.

The details of CSR programmes undertaken pursuant to the provisions of the Companies Act and in accordance with the Annual Action Plan, during the FY under review are given as Annex - 1 and forms part of this Report. The CSR Policy as recommended by the CSR&SCB and approved by the Board is available on the Bank''s website: https://bandhanbank.com/sites/default/files/2023-01/ CSR-Policy-210123.pdf.

Some of the key programmes of your Bank''s CSR initiatives are:

Targeting the Hard-Core Poor Programme

During the year under review, your Bank has contributed ? 16.50 crore (?27.88 crore in FY 2021-22 and ?18.20 crore in FY 2020-21) towards the three projects of Targeting the Hard-Core Poor (''THP'') programme. The programme is designed for ultrapoor women-headed households, providing them with a range of gainful micro-enterprises in the form of farm, non-farm and mixed assets, along with handholding support and training on confidence building, enterprise skills, consumer interaction, marketing and financial skills. They are also provided with sustenance allowance to meet their daily needs until they generate substantial income from the provided assets. Within a period of 18-24 months, these

ultra-poor women start graduating, uplifting themselves from extreme poverty¹ and getting linked to mainstream society².

During the year under review, 18,000 ultra-poor women were provided farm, non-farm and mixed assets to sustain their livelihoods. These women belonged to 11 districts of Assam, Jharkhand, Odisha, Uttar Pradesh and West Bengal.

The Impact Assessment Study carried out by KPMG indicated that between the period of 2017 and 2022, more than 29,000 women were alleviated from below the poverty line to above the national poverty line (?1,059.42 for rural and ?1,286 for urban areas) with a significant increase in their business assets and household income having a monthly income of at least ?4,000 and an average monthly income of ?7,000. Additionally, 29,487 women had improved savings habits and access to safe and secure shelter.

In addition to the above impact assessment study, an independent, long-term study conducted by the Nobel Laureate Dr Abhijit Banerjee et.al.³, based on Randomised Control Trials (''RCT'') method, found that seven years after the asset was first distributed, the average income from the farm, non-farm and daily wages of the treatment group was higher by 286 per cent., 100 per cent. and 25 per cent., respectively, as compared to the average income of the control group. The study further emphasises that this higher income was not because of more working hours, but because the income per hour went up and they diversified their businesses and invested part of the gains from livestock into other activities.

The study further states that the monthly consumption of those assigned to the treatment group increased by 25 per cent. as compared to the increase of 12 per cent. monthly consumption of those assigned to the control group. Further, the amount deposited in the savings account by the treatment group was more than double as compared to the control group and there was also an increase in institutional borrowings.

The study highlighted the positive effects across all categories of outcomes. Compared to non-beneficiaries, the beneficiaries'' households of the programme have more assets, food security is higher, earn more, and are financially better off. The results for the adult-level indexed variables of the study indicated that the individuals are healthier, happier, and less stressed. Furthermore, the effects (except for productive assets) almost always grows over time, suggesting that the programme may have put beneficiaries'' household on a different trajectory.

Bandhan Health Programme

During the FY under review, your Bank has contributed ? 12.02 crore (?18.49 crore in FY 2021-22 and ?15.67 crore in FY 2020-21) towards six health programmes covering 34 districts in five states of India. The health programmes covered 2,22,042

beneficiaries during the year.

The Impact Assessment study conducted by KPMG indicated that the programme contributed in the improvement of institutional deliveries increased by 10 per cent. in phase III project and 2 per cent. in phase IV project. The complete ante-natal care (''ANC'') increased by 4 per cent. in both phase III and phase IV projects whereas the complete immunisation increased by 10 per cent. in phase III and 21 per cent. in phase IV projects. The study further estimated that over 3.23 lakh children were covered under the nutrition initiative between 2017 and 2021. The study also highlights that there has been a reduction in malnutrition among children below five years of age from 14 per cent. to 4 per cent.

A study conducted by Grameen Foundation and Freedom from Hunger India Trust from 2015 to 20 18⁴, concluded that there was an increase in the level of awareness on Mother and Child Health (''MCH'') from less than 10 per cent. to greater than 90 per cent. amongst the women who participated in the health awareness programme and the awareness amongst the adolescent girls on managing menstrual complications increased from 20 per cent. to 80 per cent.

Bandhan Education Programme

Your Bank''s education programme provides quality education to the children belonging to the marginalised section of society in your Bank''s catchment area. The education programme enables the children to improve their learning outcomes, especially in Science, Technology, Engineering and Mathematics (''STEM'') subjects and increase their retention and classroom engagement. The programme also provides training to the teachers belonging to the communities, government schools and schools run by the various charitable trust who are providing free education to transform their pedagogy and integrated various teaching and learning tools in their lesson plans and track the comprehensive continuous assessment of each child.

Your Bank contributed ?15.99 crore (?17.01 crore in FY 2021-22 and ?14.80 crore in FY 2020-21) towards the education programme benefiting 62,574 marginalised children across 43 districts of five states of India.

The Impact Assessment study conducted by KPMG indicated that over 85 per cent. of the parents across the states applauded the good quality of education provided at Bandhan Education Centre (''BEC''). The respondents highlighted that there had been an improvement in the academic performance in English and Mathematics of their wards in formal schools due to the support provided at the BECs. The parents and guardians shared that the staff at BEC provided them with hand-holding support during the enrolment of their children in formal schools.

Skill Development Programme

Your Bank''s skill development initiatives provide market-linked and job-ready employable skills to the youths from marginalised sections of the society in various domains. This initiative not only provides on-job training and job placement facilitation in the

organised sector but also a follow-up of the placements so that the youths are settled in their job post-training.

During the year, your Bank contributed ?3.69 crore (?4.79 crore in FY 2021-22 and ?4.89 crore in FY 2020-21) towards the skill development initiatives in 18 districts of five states of India. These PIAs operated 11 skill development centres in domains like Warehousing and Logistics, Retail and Customer Care, Sales and Marketing, ITeS and BPO, Refrigeration and Air Conditioning, Computer Accounting, Hardware and Networking, BFSI, etc.

Overall 22,220 youths have been trained under this programme till date, of which 75 per cent. were placed with net salaries ranging from ?8,000 to ?15,000 plus other performance-based allowances and social security benefits like Provident Fund (PF) and Employee State Insurance (ESI).

The study conducted by KPMG indicated that between 2016 and 2021, 11,191 youths were trained with a placement rate of over 68 per cent. These youths earned salaried income in the organised sector with an average salary of ?13,265 with an average increase in the monthly household income by 24 per cent.

Water Conservation

The water conservation initiative aims at water security and drought-proofing in some of the high moisture-stressed regions of India, thereby providing a safety net to agriculture and livestock-based livelihoods. These initiatives facilitate participatory watershed management by empowering the communities to participate in the planning and implementation of local water resource development. Measures such as building, reviving and maintaining water-harvesting structures, prioritisation and judicious use of water for every community member, crop planning and water-efficient farming, use of drought-resistant varieties, cultivation of high-value crop requiring less water, etc., create a multiplier effect in drought-proofing and climate change adaptation measures and higher income generation. The programme has supported the construction of 23 water harvesting structures with a storage capacity of over 1,20,000 kilolitres of water in two states, which not only provided drinking water to over 1,500 families but also supported participatory irrigation of various crops and helped in generating an income of more than ?123 lakh.

Afforestation

Your Bank''s afforestation initiatives have contributed towards the project of establishing a "Bio-shield" to save the mangroves in the Bharuch district of Gujarat. Mangrove plantation of 67,540 saplings was carried out on 20 Hectares in a stretch of 1 km of coastline along with plantation of other medical plant species and fodder species, sequestering over 4,400 tonnes of CO₂ annually. The fodder bank was created to offset the biotic pressure from the mangrove area. The project created 4,629 person-days of employment and benefited 9,123 beneficiaries with additional income-generating avenues from fodder and medicinal plant harvesting.

Dividend

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''SEBI LODR''), the Board of Directors of your Bank has adopted a Dividend Distribution Policy that, inter-alia, balances the objectives of appropriately rewarding shareholders and retaining capital to maintain a healthy capital adequacy ratio. In addition to the Dividend Distribution Policy, the dividend payout ratio of the Bank is guided by the Circulars on dividend issued by RBI, from time to time. The Policy is available on the Bank''s website at https://bandhanbank.com/ sites/default/files/2022-09/Dividend-Distribution-Policy.pdf.

In line with this policy and in recognition of the financial performance during FY 2022-23, while retaining capital to maintain a healthy capital adequacy ratio to meet growth requirements, your Directors are pleased to recommend a dividend of ? 1.50 per equity share of ?10 each fully paid-up (15 %) for the financial year 2022-23, as against no dividend for the financial year 2021-22, for approval by the shareholders at the 9^th Annual General Meeting (''AGM'') of the Bank.

Pursuant to the provisions of Income-tax Act, 1961 (''IT Act''), dividends paid or distributed by the Bank shall be taxable in the hands of the shareholders and the Bank shall be required to deduct tax at source (''TDS'') at the prescribed rates from the dividend to be paid to Members, subject to the approval of dividend by the shareholders in the ensuing AGM. Further details are available in the notice of the 9^th AGM of the Bank.

Transfer to Reserves

In line with the RBI regulations, your Bank has transferred an amount of ?548.66 crore to the statutory reserve during the financial year ended March 31, 2023.

Issuance of Equity Shares & Capital Adequacy Ratio

During the FY under review, your Bank has allotted 70,613 equity shares of ?10 each fully paid-up pursuant to exercise of stock options by the eligible Employees of your Bank, aggregating to face value ?7,06,130.

Post allotment of aforesaid equity shares, the issued, subscribed and paid-up equity share capital of your Bank stood at ?16,10,83,64,800, comprising 1,61,08,36,480 equity shares of ?10 each fully paid-up as on March 31, 2023.

Your Bank has not issued any equity shares with differential voting rights during the FY under review.

The authorised share capital of the Bank was ?32,00,00,00,000, comprising 3,20,00,00,000 equity shares of ?10 each, as on March 31, 2023.

Your Bank''s capital adequacy ratio (''CAR''), calculated in line with the RBI Circular on Capital Adequacy Framework, stood at 19.76 per cent. as on March 31, 2023, well above the minimum regulatory requirements, out of which Tier 1 CAR was 18.70 per cent. and Tier 2 CAR was 1.06 per cent.

Performance and Financial Position of the Subsidiaries, Associates or Joint Venture

Your Bank did not have any subsidiary, associate or joint venture company during the FY 2022-23. Accordingly, no statement is required to be reported in Form AOC-1.

Awards and Recognitions

Your Bank has received several prestigious awards and recognitions from various revered institutions during the FY under review, which are as under: -

1. Your Bank was recognised as one of the world''s best banks by Forbes and Statista.

2. Your Bank received the 2023 Gallup Exceptional Workplace Award. The Bank was among the only 57 organizations worldwide that received this recognition.

3. Your Bank received the IBS Intelligence Global Fintech Award for its exceptional implementation of corporate internet banking.

4. Your Bank received The Pride of India Brands Award by Exchange for Media, in recognition of its innovative and excellent products, processes, and marketing practices.

Rating of Various Debt Instruments

Details of rating of various debt instruments of the Bank as on March 31, 2023 are as under:

Instruments	Rating	Rating Agency f	Amount K in Crore)
Term Loan from Banks	[ICRA]AA(Negative)	ICRA	80
Certificate of Deposit	[ICRA]A1 CRISIL A1	ICRA CRISIL	6,000⁽¹⁾
Non-Convertible	[ICRA]AA(Negative)	ICRA	1,560 ⁽²⁾
Debentures¹³¹	CRISIL AA/Negative	CRISIL	1,560 ⁽²⁾

⁽¹⁾ rating of ICRA is for ?3,000 crore only

² rating of ICRA is for ?110 crore only

³ transferred from erstwhile Gruh Finance Limited pursuant to the effectiveness of the Scheme of Amalgamation.

Board of Directors

The composition of the Board of Directors of your Bank (''Board'') is governed by the provisions of the Companies Act, the Banking Regulation Act, 1949 (the ''BR Act''), the SEBI LODR, other applicable laws and its Articles of Association. At the end of March 31, 2023, the Board of your Bank had thirteen Directors, out of which nine were Independent Directors, two were Non-Executive Non-Independent Directors i.e. one Nominee each of Bandhan Financial Holdings Limited and Caladium Investment Pte. Ltd., and the Managing Director & CEO, and one Executive Director.

Appointments

Mr. Ratan Kumar Kesh (DIN: 10082714)

The Board of Directors of the Bank, at its meeting held on March 21, 2023, on the basis of the recommendation of the Nomination and Remuneration Committee of the Bank (''NRC'') and as per the approval granted by the RBI vide its letter dated March 20, 2023, had approved the appointment of Mr. Ratan Kumar Kesh

(DIN: 10082714) as the Whole-time Director [Category: Additional Director], designated as Executive Director (''ED'') and Key Managerial Personnel of the Bank, for a period of three years, liable to retire by rotation, with effect from March 31, 2023, subject to Shareholders approval. Accordingly, approval of the Shareholders of the Bank has been sought vide Postal Ballot Notice dated May 19, 2023 for appointment of Mr. Kesh as the Whole-time Director, designated as ED and Key Managerial Personnel, for a period of three years, with effect from March 31, 2023 up to March 30, 2026, as per the said approval granted by the RBI.

Mr. Ratan Kumar Kesh, a BE Mechanical from NIT, Durgapur, has more than 28 years of experience in multiple industries including Banking & Finance, Manufacturing and Service Industry. He is an Advanced Quality Engineer from Quality Council of Indiana, USA. He possesses a Post Graduate Diploma in Business Management from NMIMS, Mumbai. He has also completed a Business Leadership Course from IIM, Ahmedabad & a Strategic Agility Leadership Course from Harvard Business School.

With nearly three decades of stellar experience, Mr. Kesh has a track record of leading complex operations including transformation, automation, customer experience, quality improvement and other related functions. He is a hands-on leader who has helped scale and address operational challenges with ease consistently at reputed banking organisations in India namely ICICI Bank, HDFC Bank, Yes Bank and Axis Bank.

Re-appointments

Ms. Divya Krishnan (DIN: 09276201)

In terms of the provisions of Section 152 of the Companies Act, Ms. Divya Krishnan, Non-Executive Non-Independent Director (Nominee of Bandhan Financial Holdings Limited), being longest in office, shall retire at the ensuing AGM and being eligible, offers herself for re-appointment.

Mr. Subrata Dutta Gupta (DIN: 08767943) and Mr. Suhail Chander (DIN: 06941577)

Mr. Subrata Dutta Gupta and Mr. Suhail Chander were appointed as Independent Directors of the Bank, effective March 19, 2021, for a period of three years each and their respective current terms are expiring on March 18, 2024. Accordingly, considering the outcome of their performance evaluation, notices received under Section 160 of the Companies Act from member(s) proposing their candidature for the office of Directors and the recommendations of the NRC, the Board, at its meeting held on May 26, 2023, has approved their re-appointments as Independent Directors of the Bank, not liable to retire by rotation, for the second term of five years each, effective March 19, 2024, subject to the approval of Shareholders of the Bank, by way of special resolution(s), at the ensuing AGM.

The resolution(s) in respect of re-appointment(s) of the Directors, as aforesaid, have been included in the Notice convening the 9th AGM of the Bank. Brief profiles of these Directors, together with other requisite disclosures/details, have been annexed to the said Notice. None of the Directors proposed for re-appointment, will attain the age of 75 years during the continuation of their tenure

on the Board of the Bank.

Shareholders approved appointments/ re-appointments

During the FY under review, the following appointments/re-appointments were approved by the Shareholders at the 8th AGM of the Bank held on August 10, 2022:

â¢ Appointment of Ms. Divya Krishnan (DIN: 09276201) as a Non-Executive Non-Independent Director of the Bank (Nominee of Bandhan Financial Holdings Limited), liable to retire by rotation, effective May 11, 2022.

â¢ Appointment of Mr. Philip Mathew (DIN: 09638394) as an Independent Director of the Bank, not liable to retire by rotation, for a period of three years, effective June 15, 2022.

â¢ Appointment of Dr. Aparajita Mitra (DIN: 09484337) as an Independent Director of the Bank, not liable to retire by rotation, for a period of three years, effective July 13, 2022.

â¢ Re-appointment of Dr. Holger Dirk Michaelis (DIN: 07205838), Nominee Director of Caladium Investment Pte. Ltd., being longest in office and liable to retire by rotation, retired at the 8th AGM of the Bank, and who, being eligible, had offered himself for re-appointment.

â¢ Re-appointment of Mr. Narayan Vasudeo Prabhutendulkar (DIN: 00869913) as an Independent Director of the Bank, not liable to retire by rotation, for the second term of five years, effective May 08, 2023.

â¢ Re-appointment of Mr. Vijay Nautamlal Bhatt (DIN: 00751001) as an Independent Director of the Bank, not liable to retire by rotation, for the second term of five years, effective May 08, 2023.

Cessations

During the financial year under review, the following Directors ceased to hold office of Director:

â¢ Mr. Ranodeb Roy (DIN: 00328764) ceased to be a Non-Executive Non-Independent Director with effect from May 11, 2022 pursuant to the withdrawal of his nomination by Bandhan Financial Holdings Limited from the Board of the Bank.

â¢ Mr. Snehomoy Bhattacharya (DIN: 02422012), Independent Director, completed his second term of four years on the Board of the Bank on July 08, 2022. Accordingly, he ceased to be the Director of the Bank effective July 09, 2022.

â¢ Ms. Raji Thekedathumadam Subramani Gain (DIN: 07256149), Independent Director, completed her second term of four years on the Board of the Bank on August 05, 2022. Accordingly, she ceased to be the Director of the Bank effective August 06, 2022.

Necessary disclosures in this regard have been made to the Stock Exchanges, the RBI and the Ministry of Corporate Affairs. The Board places on record its sincere appreciation for the contributions made by Mr. Roy, Mr. Bhattacharya and Ms. Gain during their tenure as Directors of the Bank.

Key Managerial Personnel

During the financial year under review, Mr. Ratan Kumar Kesh was appointed as Executive Director and Key Managerial Personnel for a period of three years effective March 31, 2023. Accordingly, Mr. Chandra Shekhar Ghosh, MD & CEO; Mr. Ratan Kumar Kesh, Executive Director; Mr. Sunil Samdani, Chief Financial Officer; and Mr. Indranil Banerjee, Company Secretary of the Bank are the Key Managerial Personnel of the Bank, as per the provisions of the Companies Act and rules made thereunder.

Meetings of the Board and Board Committees

The Board met fifteen times during the FY under review i.e., on May 11, 2022; May 13, 2022; June 15, 2022; July 13, 2022; July 22, 2022; September 14, 2022; October 26, 2022; October 28, 2022; December 29, 2022; January 18, 2023; January 20, 2023; February 23, 2023; February 24, 2023; March 21, 2023 and March 31, 2023. The details of the Board meetings held during the FY, attendance of Directors at the meetings, and other details have been provided separately in the Report on Corporate Governance forming part of this Report.

Your Bank currently has the following nine Board Committees:

1. Audit Committee;

2. Nomination & Remuneration Committee;

3. Stakeholders'' Relationship Committee;

4. Risk Management Committee;

5. IT Strategy Committee;

6. Customer Service Committee;

7. Corporate Social Responsibility and Sustainability Committee;

8. Committee of Directors;

9. Special Committee for Monitoring High Value Frauds.

Additionally, meeting(s) of Independent Directors, without the attendance of non-independent directors and members of management, were also held during the FY under review. The details of such meeting(s) have been provided separately in the Report on Corporate Governance forming part of this Report.

The details with respect to the composition, terms of reference, numbers of meetings held, attendance of members, etc., of these Board Committees are provided in the Report on Corporate Governance forming part of this Report, enclosed as Annex - 4.

Declaration from Independent Directors

The Bank has received necessary declarations from all the Independent Directors under Section 149(7) of the Companies Act and Regulation 25(8) of the SEBI LODR that they meet the criteria of independence laid down under Section 149(6) of the Companies Act read with allied Rules, and Regulation 16(1)(b) of the SEBI LODR, respectively. The Board has reviewed the disclosures of independence submitted by the Independent Directors and is of the opinion that the Independent Directors of the Bank fulfil the conditions specified in the Companies Act and the SEBI LODR, and are independent of the management. In the opinion of the

Board, all the Independent Directors possess requisite expertise, experience, integrity and proficiency as required under the applicable laws and policies of the Bank.

Familiarisation Programmes for Independent Directors

The details of the familiarisation programme(s) for the Independent Directors of the Bank have been provided separately in the Report on Corporate Governance forming part of this Report.

Board Evaluation

Pursuant to recommendation of the NRC, the Board has framed the ''Performance Evaluation Policy for the Board, Committees, NonIndependent / Whole Time Directors and Independent Directors'' (the ''Board PE Policy''), in accordance with the relevant provisions of the Companies Act, the SEBI LODR and SEBI Guidance Note on Board Evaluation. In terms of the Board PE Policy, performance evaluation of the Board and its Committees, Chairman and individual Directors are done on various parameters. Parameters for the Board include various aspects, such as, structure, meetings, appointments, agenda, discussions, roles and responsibilities, evaluation of risks, strategy, governance and compliance, conflict of interest, etc.

Parameters for Board Committees include various aspects, such as, mandate and composition, effectiveness, meetings, agenda, minutes, discussion and dissent, independence, etc.

Parameters for the Directors include various aspects, such as, knowledge and competency, integrity, functioning, commitment, contribution, attendance, initiative, teamwork, communication, corporate governance, updates, etc., and in case of Independent Directors, additional parameters include fulfilment of the independence criteria and their independence from the management.

The evaluation process has been carried out electronically. The Board of Directors has done the evaluation of Independent Directors, excluding the Independent Director being evaluated. Similarly, Independent Directors have done the evaluation of the Board as a whole, Non-Executive Chairman and Non-Independent Directors, including the MD & CEO. The Chairmen of Board Committees have done performance evaluation of their respective Committees. Thereafter, the report on performance evaluation of Directors, excluding NRC members, and the Chairman was submitted to the NRC, whereas the report on performance evaluation of the Board as a whole, Board Committees and Directors who were NRC members was submitted to the Board for necessary action. The NRC, after considering the performance evaluation report of Directors, excluding NRC members, made its recommendations to the Board for continuation / reappointment of Directors. Thereafter, the Board considered the recommendations of the NRC, and report on the performance evaluation of the NRC members, the Board as a whole and the Board Committees. The Board evaluation has provided some valuable inputs for optimising the roles and responsibilities, quality, quantity and timeliness of flow of information between the Bank''s management and the Board.

The Board of Directors of the Bank is satisfied with the outcome of the performance evaluation process. They were of the view that the Directors have been discharging their roles and responsibilities as expected by the Board and as required under the applicable regulatory provisions. The Board continues to be duly constituted representing various expertise, skill sets, knowledge and qualification required for the banking business. There was no observation during the performance evaluation of the previous years; and so is the case with the current year.

Appointment of Directors

Appointment of Directors on the Board is guided by the provisions of the BR Act and the guidelines/ circulars issued by the RBI, from time to time, the Companies Act and the SEBI LODR. In view of these provisions, your Bank has adopted a ''Policy on Appointment and Fit & Proper Criteria for Directors''. In terms of this Policy, while appointing directors, the NRC / Board considers fit and proper criteria, various skill sets, professional knowledge, practical experience, integrity, gender diversity and additionally, status of independence in case of Independent Directors. The details of the same have been included in the Report on Corporate Governance forming part of this Report. The Policy on Appointment and Fit & Proper Criteria for Directors is reviewed on annual basis and accordingly the Policy was reviewed by the Board on the recommendations of the NRC without any changes. The Policy is available on the Bank''s website at: https://bandhanbank.com/ sites/default/files/2022-09/Policy-on-Appointment-and%20Fit-and-Proper-Criteria-for-Directors.pdf.

Remuneration Policy

Your Bank has formulated and adopted a comprehensive ''Compensation Policy'' for its Directors, Key Managerial Personnel and Employees, in terms of Section 178 of the Companies Act, read with the relevant Rules made thereunder, Regulation 19 of the SEBI LODR and the guidelines /circulars issued by the RBI, in this regard, from time to time. The details of the same have been included in the Report on Corporate Governance forming part of this Report. The Compensation Policy is reviewed on annual basis and accordingly, the Policy was reviewed by the Board on the recommendation of the NRC to align with the regulatory requirements. The updated Compensation Policy of your Bank is available on the Bank''s website at: https://bandhanbank.com/ sites/default/files/2023-04/Compensation-Policy-050423.pdf.

Employees Remuneration

As on March 31, 2023, your Bank had 69,702 employees. The statement containing particulars of employees as required under Section 197(12) of the Companies Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is appended separately as Annex - 2(a) and forms part of this Report. The ratio of the remuneration of each Director to the median remuneration of the employees of your Bank and other details in terms of Section 197(12) of the Companies Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are also forming part of this Report as Annex - 2(b).

Employee Stock Options

Your Bank has instituted Employees Stock Option Scheme (''ESOP''), i.e., Bandhan Bank Employee Stock Option Plan Series 1 (''ESOP Scheme'') to enable its employees to participate in your Bank''s future growth and financial success. Your Bank provides its employees with a platform for participating in important decision making and instilling long-term commitment towards the future growth of the Bank by way of rewarding them through stock options. ESOP Scheme of your Bank is in compliance with the provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (''SEBI SBEBSE'') and no change has been made therein during the financial year under review. The ESOP Scheme is administrated by the NRC. In terms of the ESOP Scheme, the Options would vest not earlier than one year and not later than four years from the date of grant as decided by the NRC /Board. The Options granted shall be equally vested over four years. The exercise period shall be a maximum of five years from the date of the respective vesting of Options. Since your Bank has been allotting fresh equity shares upon exercise of Options, the source of the shares is of primary issuance.

In terms of the Compensation Policy of your Bank and the Shareholders'' approved ESOP Scheme, fresh grants have been made during the financial year under review to the eligible employees. Except the MD & CEO, none of the Directors was issued the stock options during the financial year under review. The information pertaining to the ESOP Scheme as prescribed under the SEBI SBEBSE are available on the website of the Bank at https://bandhanbank.com/annual-reports.

Further, as required under the SEBI SBEBSE, a certificate from the Secretarial Auditor of the Bank certifying that your Bank has implemented the ESOP Scheme in accordance with the applicable provisions of the SEBI SBEBSE and resolution(s) passed by Shareholders, will be made available electronically during the AGM.

Deposits

Being a banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, are not applicable to your Bank. The details of the deposits received and accepted by your Bank, as a banking company, are enumerated in the Financial Statement for the FY ended March 31, 2023, forming part of this Annual Report for FY 2022-23.

Internal Financial Controls, Audit and Compliance

Your Bank has an Internal Audit Department (''IAD'') and a Compliance Department (''CD''), which independently carry out evaluation of the adequacy of all internal controls. These departments ensure that operating and business units adhere to the laid down internal processes and procedures as well as to the regulatory/statutory and legal requirements.

The Compliance Function is one of the key elements in your Bank''s corporate governance structure. The compliance starts from the top, and the Board & the Senior Management play an important

role in driving the compliance culture. Your Bank remains committed to adhere to the highest standards of compliance vis-avis regulatory prescriptions and internal guidelines. Your Bank has a robust Compliance Policy, outlining the compliance philosophy, and roles and responsibilities of the CD.

The CD assists the Board and Top/Senior Management in managing the compliance risk of your Bank. The CD ensures that overall business of your Bank is conducted in strict adherence to the guidelines issued by the RBI and other regulators, various statutory provisions, standards and codes prescribed by FEDAI, FIMMDA, etc. by evaluating the products / processes, guiding business departments on the various regulatory guidelines with a special emphasis on better understanding of the perspective. It closely works with operational risk and internal audit functions and monitors various activities of your Bank with more emphasis on active risk management.

As the focal point of contact with the RBI and other regulatory entities, the CD evaluates the adequacy of internal controls and examines any systemic correction that is required, based on its analysis and interpretation of regulatory guidelines and deviations observed during monitoring and testing. Your Bank has a robust Anti Money Laundering (''AML'') framework and tools to manage the AML risk. It periodically apprises the Audit Committee of the Board (''ACB''), the Board and the Top/Senior Management on compliance levels, based on the changes in the external regulatory environment. The CD submits the compliance report to the ACB at regular intervals providing the compliance status with the laws/ rules and regulations applicable to the Bank.

The IAD independently carries out audit of various functions in the Bank, primarily to assess the effectiveness of internal control in critical systems and processes, and compliance with regulatory guidelines. The Bank has put in place appropriate preventive and detective controls including segregation of duty, dual controls, monitoring processes, checking of audit trails, supervisory reviews, etc., to mitigate the various risks emanating from banking business. IAD further ensures that independent checks and balances are in place, and that laid down policies and procedures are followed and also recommends improvements in operational processes and systems proactively.

To maintain the independence of these departments, the performance evaluation of the Chief Compliance Officer (''CCO'') and the Chief Audit Executive (''CAE'') is carried out by the ACB.

Considering the internal financial controls, audit and compliance systems of the Bank, and the work performed by the auditors, including the audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by management under the supervision of the ACB, the Board of Directors is of the opinion that the internal financial controls established and maintained by the Bank are adequate.

Related Party Transactions

During the year under review, there were no materially significant transactions with related parties, which could lead to a potential conflict of interest between the Bank and these parties. Prior-approval of the ACB is sought for all the related party transactions. Further, prior omnibus approval is also obtained from the ACB for the related party transactions, which are of repetitive nature as well as for the normal banking transactions which cannot be foreseen. The quarterly update on the details of transactions with the related parties, are placed before the ACB. The Related Party Transactions that were entered, during the FY under review, were on an arm''s length basis and were in the ordinary course of business, pursuant to the approval of the ACB. In terms of the amended definition of Related Party under the SEBI LODR, the promoter and member of promoter group are considered as Related Parties with effect from April 01, 2022. Accordingly, in terms of the provisions of Regulation 23 of the SEBI LODR, the approval of Shareholders were obtained at 8th AGM of the Bank for material related party transactions with the promoter entities i.e. Bandhan Financial Holdings Limited, Bandhan Financial Services Limited, Financial Inclusion Trust and North East Financial Inclusion Trust for the FY 2022-23 and upto 9th AGM of the Bank for banking transactions at arm''s length and in ordinary course of banking business of the Bank. The proposal for material related party transactions for FY 2023-24 and upto 10th AGM of the Bank is being submitted before the shareholders at 9th AGM for their approval.

There were no Related Party Transactions required to be reported in Form AOC-2. However, necessary disclosure as required under the Accounting Standards (AS 18) read with RBI''s Master Direction No.: RBI/DOR/2021-22/83 DOR.ACC.REC.No.45/21.04.018/2021-22 dated August 30, 2021, as may be updated from time to time, has been made in the note no. 18.11 to the Annual Financial Statement for the FY 2022-23. Your Bank has a Policy on dealing with Related Party Transactions, which is reviewed on annual basis and accordingly the Policy was reviewed by the Board on the recommendation of the ACB without any changes. The Policy is available on the Bank''s website: https://bandhanbank.com/ sites/default/files/2022-09/Policy-on-Dealing-with-Related-Party-Transactions.pdf.

Particulars of Loans, Guarantees or Investments

In terms of the provisions of Section 186(11) of the Companies Act, the provisions of Section 186 of the Companies Act, except sub-section (1) thereof, do not apply to any loan made, any guarantee given, security provided, or any investment made by a banking company in the ordinary course of its business. However, the particulars of investments made by the Bank are disclosed in the Financial Statement for the FY 2022-23, as per the applicable provisions of the BR Act.

Whistle Blower Policy/Vigil Mechanism

Your Bank has adopted the Board approved ''Policy on Vigilance and Whistle Blower Mechanism'', as required under Section 177 of the Companies Act, Regulation 22 of the SEBI LODR and applicable circulars issued by the RBI. During the financial year under review, as part of annual review process, the Board on the basis of recommendation of the ACB, segregated the Policy into two Policies i.e. Vigilance Policy and Whistle Blower Policy. The Whistle Blower Policy aims at putting in place a Detailed Protected Mechanism based on the directions of RBI (''Protected Disclosures Scheme for Private Sector and Foreign Banks'') and also provide

an avenue to raise concerns on Ethical, Legal or Regulatory violations and promptly addressing them while assuring the confidentiality and protection of the Whistle Blower against any form of retaliation. The complaints / disclosures under the Scheme covers the areas such as corruption / malpractices, misuse of office, criminal offences, suspected / actual fraud, failure to comply with existing rules and regulations, where such acts result in financial loss / operational risk, loss of reputation, etc. which may be detrimental to the interest of the Bank, its depositors and the public.

Your Bank promotes and makes available at all times, a Clean, Open and Transparent workplace, wherein business transaction, professionalism and productivity are seen as hallmarks of business practice. Your Bank is also committed to conduct all its business operations and transactions by maintaining highest ethical, moral and legal standards.

Your Bank encourages its employees, all stakeholders and members of general public, who have concerns about suspected misconduct, to come forward and express these concerns without fear of retaliation or unfair treatment. The Whistle Blower Policy provides adequate safeguards against the victimisation of the Directors and employees who avail this mechanism and ensures that the personnel get direct access to the Chairman of the ACB. None of the Bank''s personnel has been denied access to the ACB. The said Policies are available on the Bank''s website at https://bandhanbank.com/pdfViewerJS/index.html#../sites/ default/files/2022-11/Whistle_Blower_Policy_291122.pdf and https://bandhanbank.com/sites/default/files/2022-11/Vigilance_ Policy_291122.pdf.

Significant and Material Orders passed by Regulators or Courts or Tribunals

During FY 2022-23, no significant or material orders were passed by any Regulators or Courts or Tribunals against your Bank impacting its going concern status and operations in future. For other details, please refer to note no. 18.8(A) to the annual financial statement for the FY 2022-23.

Statutory Auditors and their Report

In terms of the ''Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)'' dated April 27, 2021 (''RBI Guidelines on Auditors'') issued by the RBI, banks shall appoint the Statutory Auditors for a continuous period of three years, subject to the firms satisfying the eligibility norms each year and the approval of the RBI on an annual basis. Further, in terms of the RBI Guidelines on Auditors and the Bank''s Policy for Appointment of Statutory Auditors, your Bank is required to appoint two Statutory Auditors. Accordingly, the Members of the Bank at the 7th AGM held on August 06, 2021 had approved the appointment of M M Nissim & Co LLP, Chartered Accountants (ICAI Firm Registration No. 107122W/W100672), as the Joint Statutory Auditors of the Bank for a period of three years, to hold office from the conclusion of the 7th AGM until the conclusion of the 10th AGM of the Bank to be held in 2024. Further, the Members of the Bank at the 8th AGM held on August 10, 2022 had approved the appointment of M/s. Singhi & Co., Chartered Accountants (ICAI

Firm Registration No. 302049E), as the Joint Statutory Auditors of the Bank for a period of three years, to hold office from the conclusion of the 8th AGM until the conclusion of the 11th AGM of the Bank to be held in 2025.

The Independent Auditor''s Report, given by the Joint Statutory Auditors on the financial statement of the Bank for the financial year ended March 31, 2023, forms part of this Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report. Also, no offence of fraud was reported by the Joint Statutory Auditors of the Bank under Section 143(12) of the Companies Act.

Secretarial Auditor and its Report

Pursuant to the provisions of Section 204 of the Companies Act and Regulation 24A(1) of the SEBI LODR, the Board had appointed CS Hansraj Jaria, Practising Company Secretary (FCS No.: 7703, C.P. No.: 19394), as the Secretarial Auditor to conduct Secretarial Audit of the Bank for FY 2022-23. Accordingly, the Secretarial Audit Report for FY 2022-23 is enclosed to this Report as Annex - 3. There is no qualification, reservation, adverse remark or disclaimer in the Secretarial Audit Report. Further, no offence of fraud was reported by the Secretarial Auditor of the Bank under Section 143(12) of the Companies Act.

Cost Records

In terms of the provisions of Section 148(1) of the Companies Act read with Rule 3 of the Companies (Cost Records and Audit) Rules, 2014, your Bank is not required to maintain cost records and accordingly, is not required to undergo cost audit.

Corporate Governance

Corporate Governance is based on the principles of conducting business with integrity, fairness and being transparent in all transactions, making necessary disclosures. Decisions are made in compliance with the laws of the land, with full accountability and responsibility towards the stakeholders, and a commitment to conducting all business in an ethical manner. Your Bank is committed to achieving the highest standards of Corporate Governance and adhering to the Corporate Governance requirements set by the regulators. A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures, as stipulated under the SEBI LODR, the Companies Act and rules made thereunder, is enclosed to this Report as Annex - 4.

A Certificate from CS Anjan Kumar Roy, Practising Company Secretary (C.P. No. 4557), regarding compliance with the conditions of Corporate Governance, as stipulated in the SEBI LODR, is annexed to the Report on Corporate Governance, which forms part of this Report.

Annual Return

Pursuant to the provisions of Section 92(3) read with Section 134(3)(a) of the Companies Act, the draft Annual Return of the Bank, in Form No. MGT-7, as on March 31, 2023, is available on your Bank''s website at https://bandhanbank.com/annual-reports. Further, the final Annual Return of the Bank, as on March 31, 2023, will be available on your Bank''s website at the said link, upon filing of the same with the Registrar of Companies under Section 92(4) of the Companies Act.

Management Discussion & Analysis

The Management Discussion & Analysis Report for the FY 2022-23, as prescribed under the SEBI LODR, forms part of this Report, and is enclosed as Annex - 5.

Business Responsibility and Sustainability Report

In terms of the provisions of Regulation 34(2)(f) of the SEBI LODR read with the SEBI''s circular dated May 10, 2021, the Business Responsibility and Sustainability Report (''BRSR'') of your Bank providing its performance against the nine principles of the ''National Guidelines on Responsible Business Conduct'' (NGBRCs) forms part of this Report, and is enclosed as Annex - 6.

Integrated Reporting

Your Bank has prepared an Integrated Report based on the principles enunciated by the International Integrated Reporting Council, which has been hosted on the website of your Bank and can be accessed at https://www.bandhanbank.com/annual-reports. The report provides information including financial and non-financial parameters, which would enable the members to make well informed decisions and have a better understanding of your Bank''s performance. It also deals with various aspects such as organisational strategy, governance framework, performance and prospects of value creation, based on the six forms of capital viz. financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital, and natural capital.

Compliance with Secretarial Standards

The Board of Directors affirms that your Bank has complied with the applicable provisions of the Secretarial Standards issued by the Institute of Company Secretaries of India, viz., SS-1 relating to Meetings of the Board and its Committees; and SS-2 relating to General Meetings.

Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

Your Bank has adopted zero tolerance towards any action on the part of any of its employees, which may fall under the ambit of ''sexual harassment'' at workplace and is fully committed to uphold and maintain the dignity of every woman constituent associated with your Bank. It takes all necessary measures to ensure a harassment free workplace and has instituted an Internal Committee for redressal of complaints and to prevent/ prohibit sexual harassment, in compliance with the guidelines enumerated in the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. At the beginning of the FY under review, two complaints were pending and during the FY, thirteen complaints were received, out of which twelve complaints had been closed during the FY. Three complaints were pending at the end of the FY, which have since been closed.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

In our endeavour to achieve aggressive goals to reduce carbon footprints, the conservation of energy has been integrated with the vision of the organisation and its operations. Your Bank has made it mandatory to use BEE Standard Energy Efficient equipment and promote Energy Efficient Building Design in line with Energy

Conservation Building Code (''ECBC'') in the upcoming projects. Some of the steps undertaken by your Bank towards conservation of energy are as under:

â¢ Smart building systems to achieve the highest level of efficiency;

â¢ At banking outlets, the focus is on insulation on walls and roof, optimum window wall ratio, premises shape and orientation, and re-engineering and retrofit of equipment;

â¢ Tracking of energy consumptions at all levels and comparing with the best international benchmarks;

â¢ Incorporation of smart meters for energy use monitoring and engagement with key stakeholders, at regular intervals, to drive energy conservation in the organisation culture;

â¢ Inclusion of the latest technologies in air-conditioning and inductive equipment in terms of variable drives and improved IKW (Consumption per Ton) in HVAC;

â¢ Lighting: Incorporation of 100 per cent. LED for lighting, daylight harvesting, timed illumination of signage through central monitoring system. Natural daylight utilization is encouraged in your Bank premises;

â¢ Daily operations and usage: Conservation through basic hygiene practices on energy usage through occupancy sensors, zoning of electrical circuits and master switches for premises. In the recent past, the Bank has put up three mega currency chests with five star energy ratings;

â¢ Water Conservation: Ground water recharge facilities through rain water harvesting in upcoming projects, volume flow controls at each sink point, water recycling through STPs.

The details on the Information Technology used by your Bank in its operations have been provided under the section on ''Information Technology at the Bank'' in this Report.

The foreign exchange loss of the Bank was ?248.76 lakh {including the net gains/ (losses) arising in all exchanges/derivatives transactions} whereas the foreign exchange outgo was ?567.29 lakh during the Financial Year 2022-23.

Human Resource Management

Your Bank has rapidly adapted to the new norms post-COVID and started to build the business and gain momentum in its growth journey. Your Bank has continued its endeavor towards improving employee productivity, wellness, creating new genre-spanning learning modules, and providing a forum for employee feedback. Your Bank continued emphasizing the growth of branches and verticals in order to achieve better penetration and reach out to every potential consumer market. A strong, collaborative, and empathetic leadership model is at the heart of your Bank''s strategy. Your Bank values its people and the contributions they make, which have ensured its success.

Your Bank knows that employees need a sense of purpose and an environment that supports productivity, creativity, and empowerment. This is why engaging with employees and measuring that engagement is so important. Your Bank engaged a global

agency - Gallup, to conduct an employee survey and has given the opportunity to more than 40.000 employees to voice their opinion. Your Bank is intending to create a workplace of choice that offers a highly engaging working environment.

Your Bank has achieved below key milestones towards building a great workplace with human centric approach:

â¢ Competency based grade promotion process to nurture talent and to elevate employee. 9,307 employees promoted during FY 2022-23;

â¢ 5,690 employees were identified for role elevation during FY 2022-23 in the Bank to extend opportunity to internal talent;

â¢ Continued adopting digitization for an enhanced employee experience by Introducing portals like Bandhan Express.

â¢ Revamped the Retail Asset Model and on-boarding more than 1,229 manpower during FY 2022-23. Your Bank has opened 31 Retail Asset centers across the Country.

â¢ Through the Campus Hiring program, your Bank created a young talent base. During FY 2022-23, your Bank covered 154 Campus across country hiring 1,102 Fresh talent from premier colleges.

Your Bank''s workforce has grown by 4.3X over the course of more than 7 years, creating a diverse mix of employee, building culture of values-driven growth, professionalism, and ethical governance. The essential cornerstone of the Bandhan Bank approach to resilience is a devoted and engaged team.

Our human resources management strategy is centred on creating a supportive, interesting, and collaborative workplace while continuing to be customer-centric, performance-driven, and future-ready. Your Bank has received the "Gallup Exceptional Workplace Award" in recognition of its efforts in the area of human resources. We rank among the most prestigious companies that are genuinely altering how people perceive work and life as an award winner.

Employees'' Learning and Development:

Both staff retention and performance improvement depend on employees'' growth and learning. Your Bank''s training programs have evolved to upskill and prepare all employees for the future. During FY 2022-23, more than 99 per cent. of the workforce received at least one training through 12 learning centers, Bandhan EDGE (the online platform), and external learning initiatives taken up by your Bank. More than 16 lakh hours of training were imparted last year to your Bank''s workforce at an average of 21.7 hours per employee.

Your Bank has a robust and comprehensive learning and development program consisting of various internal training modules and a comprehensive learning management system (LMS) platform used to deliver key e-learning programs to its employees. Some of the program initiatives are as below:

â¢ The development programs for leadership teams are conducted by the Bank in alliance with several premier and reputable institutions.

â¢ Promoting Culture of Ethics and Good Governance: By creating a culture that encourages employees to act ethically; A total of 83 senior management employees participated in the comprehensive Banking Ethics Program in FY2022-23.

â¢ Programs on Regulatory Compliance: A number of learning measures are implemented to improve employees'' understanding of KYC and AML/CFT, and compliance. All new hires are required to complete mandatory training modules covering the Code of Conduct, Information Security, KYC-AML-CFT, and other important and sensitive compliance-related topics.

â¢ Management Development Programs: Management development programs and leadership development programs are done internally and externally to build managerial and leadership skills.

Risk Management

Your Bank operates an Integrated Risk Management Framework to manage the risks inherent to the financial services industry as it aims to create maximum value for shareholders, clients, employees and communities. Your Bank''s view of risks is dynamic, reflecting the pace of change in the financial services industry.

The framework ensures that the tools and capability are in place to facilitate risk management and decision-making across the organisation. Risk appetite, supported by a robust set of principles, policies and practices, defines the levels of tolerance for a variety of risks and provides a structured approach to risk-taking within agreed boundaries.

All Bank colleagues share ownership of the way the risk is managed, working together to make sure business activities and policies are consistent with risk appetite.

Risk Appetite

Risk appetite defines the levels and types of risk that are acceptable, within risk capacity, in order to achieve strategic objectives and business plans. The Risk profile, as a part of Risk Appetite Framework, links the goals and priorities to risk management in a way that guides and empowers staff to serve customers well and achieve financial targets providing a holistic representation of all risks that it holds at a point in time, in the form of a dashboard.

Risk Culture

In your Bank, the target culture across is one in which risk is part of the way employees work and think. The desired risk culture behaviours are aligned to your Bank''s core values forming an effective basis for risk culture since these are used for performance management, recruitment and development.

The Board and Senior Management sets the "tone at the top" and has a trickle-down effect on all employees. Thus, it supports a strong culture, which is defined by your Bank''s expectations, thereby guiding how employees conduct themselves, work with colleagues, and make decisions. Your Bank has a well-defined Whistle Blower Policy in place.

Stress Testing

Your Bank''s Stress testing includes Scenario testing, which examines the impact of a hypothetical future state to define changes in risk factors as also Sensitivity testing, which examines the impact of an incremental change to one or more risk factors. Your Bank also carried out reverse stress testing, in order to identify circumstances that may lead to specific, defined outcomes.

Internal Capital Adequacy Assessment Process (''ICAAP'')

Your Bank carries out an internal assessment of material risks (ICAAP) annually to enable an evaluation of the amount, type and distribution of capital required to cover these risks. The ICAAP consists of a point-in-time assessment of exposures and risks at the end of the financial year, together with a forward-looking stress capital assessment. The examination of capital requirements under normal economic and adverse market conditions enables your Bank to determine whether its projected business performance meets internal and regulatory capital requirements.

Risk Management Framework

The Board of Directors has the overall responsibility for your Bank''s Risk Management, including culture and governance framework. The Risk Management Committee of the Board (''RMCB'') assists the Board in discharging these responsibilities effectively. The RMCB annually reviews and approves the risk management framework.

Your Bank continues to enhance its risk management programmes, including the non-financial risk management, in accordance with industry''s best practices and regulatory guidelines.

Major Risks

Your Bank''s risk management approach is to ensure that major risks and emerging risks, as they evolve, are identified, managed, and incorporated into its existing risk management assessment, measurement, monitoring and escalation processes. These practices ensure that a forward-looking risk assessment is maintained by the management in the course of business development and as part of the execution of ongoing risk oversight responsibilities. Senior management and the Board discuss top and emerging risks on a regular basis.

Asset/Liability Management (ALM)

Your Bank actively assesses ALM Risk, which involves evaluating, monitoring and managing interest rate risk, market risk, liquidity and funding, which potentially can have a significant earnings impact.

Your Bank has always maintained healthy Liquidity ratios; Liquidity Coverage Ratio (''LCR''), much above the regulatory minimum LCR requirement by having significant HQLA (''High Quality Liquid Assets'') as also the Net Stable Funding Ratio (''NSFR''), which is measured as the proportion of long-term assets that are funded by stable sources.

Climate-related Financial Risks

Your Bank is presently having provision in its Credit Policy to support green financing and considering proposals from such

segments to encourage green financing. Your Bank has further strengthened its Stress Testing Policy with the addition of various scenarios related to Climate risks.

Credit Risk

Your Bank balances the risk and return by setting certain objectives, e.g., ensuring credit quality is not compromised for growth; mitigating credit risk in transactions, relationships and portfolios; using its credit risk rating and scoring systems or other approved credit risk assessment or rating methodologies, policies and tools; pricing appropriately for the credit risk taken; detecting and preventing inappropriate credit risk through effective systems and controls; applying consistent credit risk exposure measurements; ongoing credit risk monitoring and administration; and avoiding activities that are inconsistent with its values, code of conduct or policies.

Information Security and Cyber Risks

Cybersecurity risk is a priority for your Bank, and it continues to develop and enhance its controls, processes and systems in order to protect its networks, computers, software and data from attack, damage or unauthorized access. Your Bank is also proactively involved in industry cybersecurity efforts and working with other parties, including its third-party service providers and governmental agencies, to continue to enhance defenses and improve resiliency to cybersecurity threats.

Your Bank has not experienced any material loss relating to these or other types of cyber-attacks. Your Bank has its own independent 24x7 C-SOC (Cyber Security Operations Centre) for a state-of-art centralized and consolidated cybersecurity incident prevention, security event monitoring, detection, and response, capabilities take into account proactive monitoring and management capabilities with sophisticated tools for detection, quick response, and backed by data and tools for sound analytics. Your Bank is also ISO 27001:2013 certified, for its information security management.

Operational Risk

Your Bank actively manages the Operational risk, which is the risk resulting from inadequate or failed internal processes, people and systems, or external events.

Your Bank has also put in place robust Fraud Risk, Outsourcing Risk and Legal Risk Frameworks within its Operational Risk Management.

Market Risk

Your Bank actively manages Market risk, which is the risk of possible economic loss from adverse changes in market risk factors, such as, interest rates, credit spreads, foreign exchange rates, equity and commodity prices, and the risk of possible loss due to counterparty exposure. This applies to implied volatility risk, basis risk, and market liquidity risk.

Regulatory Risk

Your Bank recognizes the utmost importance of regulatory risk and keeps a close watch on the developments in the regulatory environment and analyses its expected impact on your Bank''s businesses and strategy.

Reputational Risk

Your Bank''s reputation is rooted in the perception of its stakeholders, and the trust and loyalty they place in it is core to its purpose as a financial services organization. Your Bank is fully aware of the importance of reputational risk, and has put reputation as one of the anchors (along with earning, capital and liquidity) for finalising its risk appetite and has a Reputation Risk Dashboard as part of Enterprise Risk Dashboard, which is reviewed by the Board at quarterly intervals. Your Bank''s Reputational Risk Management Framework consists of integrated parameters, which may influence various stakeholders. Your Bank is also measuring and tracking the idiosyncratic risks related to stock price movement, as also social as well as traditional media sentiments, complaints, regulatory action, etc. on a periodic basis.

Strategic & Business Risk

Your Bank is monitoring the Strategic Risk by tracking your Bank''s competitive environment as well as any emerging risks, which may derail the overall Strategic pursuit so that suitable risk mitigation measures are timely taken.

Your Bank has a robust Business Risk Management Framework in place, which involves monitoring actionable metrics, including various financial indicators, as well as your Bank''s competitive position in the industry.

Information Technology at the Bank

Information Technology has been one of the key driving factors for the growth journey of your Bank. In view of the same, your Bank has undertaken a technology transformation journey with an overall objective to leverage cutting edge technology as a differentiator in this rapidly changing competitive financial services landscape. Few major initiatives taken during the FY 2022-23 are mentioned below:

â¢ Application transformation journey has been undertaken, led by implementation of Oracle FlexCube as CBS.

â¢ Other important critical applications which are under the purview of transformation includes:

i. Treasury

ii. Loan Origination System (LOS)

iii. Retail Internet Banking (RIB) and Mobile Banking (MB)

iv. Corporate Internet Banking (CIB)

v. Debit Card Management System (DCMS)

vi. Third Party Products (TPP)

vii. Document Management System (DMS)

viii. Cash Management Services (CMS)

ix. Enterprise Data Lake (EDL) to cater to MIS reports

â¢ The Housing Finance solution has been migrated to Oracle FlexCube.

Your Bank has taken the following initiatives on IT Infrastructure as a part of the transformation journey:

â¢ Your Bank has already built its Data Center (''DC''), Disaster Recovery (''DR'') Center and Near DR (''NDR'') sites. These have been reviewed by one of the Big 4 Firms, appointed by your Bank.

â¢ IT Infrastructure capacity has been adequately enhanced keeping in view of the business growth of your Bank for the next 2-3 years'' period.

â¢ Your Bank has deployed its own Network Access Control (NAC) centre for a better monitoring, network management and to enhance the end-point security.

â¢ Your Bank has entered into enterprise agreement with its principle vendors for use of its licenses at enterprise scale to ensure scalability and faster expansion of business.

â¢ All Bank branches have been enabled with adequate capacity (primary & secondary) links for seamless customer experience.

â¢ Your Bank has deployed high-end back-up and storage systems for ensuring high availability and security of data.

Material Changes and Commitment Affecting Financial Position of the Bank

There were no material changes and commitments, affecting the financial position of the Bank, which have occurred between the end of the Financial Year of the Bank, i.e., March 31, 2023, to which the financial statement relate, and the date of this Board''s Report.

Directors'' Responsibility Statement

Pursuant to the provisions of Section 134(3)(c) read with Section 134(5) of the Companies Act, the Directors hereby confirm that:

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

ii. We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the Bank''s state of affairs as on March 31, 2023, and of its profit for the FY ended on that date;

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

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

v. We have laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and are operating effectively; and

vi. We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Acknowledgements and Appreciations

The Board of Directors of your Bank extends its gratitude for the invaluable support and guidance received from the Reserve Bank of India, other government and regulatory authorities, and financial institutions. The Board also thanks the correspondent banks for their cooperation and help. The Board acknowledges the support of its shareholders, and also places on record its sincere thanks to its valued clients and customers for their patronage.

The Board also expresses its deep sense of appreciation to all the employees for displaying their strong work ethics, excellence at

work, professionalism, teamwork, commitment and initiative, which has led to the Bank making good progress. Your Board will continue to strive for improvements as your Bank continues on its journey towards achieving its objectives.

For and on behalf of the Board of Directors Bandhan Bank Limited

Anup Kumar Sinha

Place: Kolkata Non-Executive (Independent) Chairman

Date: May 26, 2023 (DIN: 08249893)

Mar 31, 2021

The Board of Directors present the Seventh Annual Report on the business and operations of your Bank together with the Audited Financial Statements for the financial year ('FY') ended March 31, 2021.

Financial Performance of the Bank

The financial highlights for the financial year under review, are presented below:

(Figures in Rs. Crore)
Â	For the financial year ended
Particulars	March 31, 2021	March 31, 2020
Deposits:	77,972.22	57,081.50
- Savings Bank Deposits	29,260.32	17,726.99
- Current Account Deposits	4,566.99	3,301.47
- Term Deposits	44,144.91	36,053.04
Advances (Net):	81,612.88	66,629.95
- Cash credits, overdrafts and loans repayable on demand	2,395.82	1,274.80
- Term loans	79,217.06	65,355.15
Total Assets/Liabilities	1,14,993.05	91,717.80
Net Interest Income	7,563.35	6,323.91
Non-Interest Income	2,109.06	1,549.20
Operating Expenses (excluding depreciation)	2,714.09	2,346.28
Profit before Depreciation, Provisions and Tax	6,958.32	5,526.83
Depreciation	103.06	80.26
Provisions	3,906.60	1,393.15
Profit before Tax	2,948.66	4,053.42
Provision for Tax	743.20	1,029.68
Profit After Tax	2,205.46	3,023.74
Balance in Profit & Loss Account brought forward from previous year	4,758.71	3,283.64
Opening Profit & Loss Account balance adjustment on account of amalgamation	-	(64.55)
Appropriations:	Â	Â
Transfer to Statutory Reserves	551.37	755.94
Transfer to Statutory Reserve u/s 36(1)(viii) of Income Tax Act 1961	74.37	103.12
Transfer to Capital Reserve	84.64	11.45
Transfer to Investment Reserve	-	5.16
Transfer to Investment Fluctuation Reserve	82.79	-
Dividend Paid (Including Dividend Distribution Tax) pertaining to previous year paid during the year	-	608.45
Balance carried over to Balance Sheet	6,171.00	4,758.71
EPS (Basic)	13.70	18.78
EPS (Diluted)	13.69	18.76

State of Affairs of the Bank

Your Bank had commenced its business on August 23, 2015, and within six years of its operation, the balance sheet size of theÂ Bank has crossed a landmark of ?1 lakh crore. The Total LiabilitiesÂ (including capital and reserves) of your Bank stood atÂ ?1,14,993.05 crore and the Total Advances (Net) at ?81,612.88Â crore whereas banking outlets increased to 5,310 as on MarchÂ 31, 2021. During the FY under review, the number of bankingÂ outlets that have been added to the network is 751. Out of the

total 5,310 banking outlets, 34 per cent. were established in rural, 39 per cent. in semi-urban, 18 per cent. in urban and 9 perÂ cent. in metro locations. The number of customers has increasedÂ from 2.01 crore as on March 31, 2020 to 2.30 crore as on MarchÂ 31, 2021. With the expanding network of banking outlets andÂ customers, the total deposits increased fromÂ ?57,081.50 crore as on March 31, 2020 to ?77,972.22 crore as onÂ March 31, 2021 registering a promising climb of 36.60 per cent.

The Current Account and Savings Account ('CASA') deposits have seen a significant increase of 60.86 per cent. fromÂ ?21,028.46 crore as on March 31, 2020 to ?33,827.31 crore as onÂ March 31, 2021.

During the FY under review, the total income (net) of your Bank has increased by 22.85 per cent. to ?9,672.41 crore as against theÂ total income of ?7,873.11 crore for FY 2019-20. However, duringÂ the FY the Bank has made additional provisions on NPA accountsÂ resulting from elevated risk observed in certain geographies andÂ the potential impact of the COVID-19 pandemic on certain loanÂ portfolios. These provisions held by the Bank are based on theÂ information available at the time of approval of accounts and areÂ in excess of the RBI prescribed norms. Due to this, the profit afterÂ tax ('PAT') for the financial year under review stood at ?2,205.46Â crore, a decline of 27.06 per cent. as compared to ?3,023.74Â crore for FY 2019-20. Consequently, Return on Average EquityÂ ('ROAE') was 13.24 per cent. for FY 2020-21 as against 21.07Â per cent. for FY 2019-20 and Return on Average Asset ('ROAA')Â was 2.13 per cent for FY 2020-21 as against 3.64 per cent forÂ FY 2019-20. Correspondingly, basic earnings per share ('EPS')Â decreased from ?18.78 to ?13.70 whereas diluted EPS decreasedÂ from ?18.76 to ?13.69 as at the end of FY 2020-21 in comparisonÂ to FY 2019-20.

Your Bank's strength lies in priority sector lending ('PSL') as it continues to focus on financial inclusion by providing variousÂ financial services to the underserved. The Reserve Bank of IndiaÂ ('RBI') has mandated PSL of a minimum 40 per cent. of advancesÂ for all banks. During FY 2020-21, your Bank's PSL went up fromÂ ?60,640.98 crore (net of IBPC of ?4,612.70 crore) as on MarchÂ 31, 2020 to ?74,369.51 crore (net of IBPC of ?2,124.13 crore)Â as on March 31, 2021 of which ?70,448 crore was sold to otherÂ banks falling short of PSL targets by way of Priority Sector LendingÂ Certificate ('PSLC') (as against the previous FY of ?56,805.75Â crore). At the end of FY 2020-21, PSL as a proportion of theÂ gross advances of ?84,509.60 crore (after IBPC) was 88 per cent.Â (including PSLC).

COVID - 19 pandemic

At the beginning of FY 2020-21, the COVID-19 pandemic was spreading across the world resulting in a global crisis. Almost allÂ the countries in the world were significantly affected, infectingÂ millions of people.

India also started to witness the impact of the pandemic with a rising number of people getting infected across the country. InÂ order to enforce social distancing norms to contain the spread ofÂ this disease, a nationwide lockdown was imposed which affectedÂ various business segments in various manufacturing and serviceÂ sectors. The Government of India ('GoI') and the Reserve BankÂ of India ('RBI') had announced several measures to minimise theÂ adverse economic impact on the business caused by this pandemic.

Your Bank has diligently been abiding by the advisories issued by the GoI, State Governments and various statutory andÂ regulatory authorities, from time to time. While enforcing theÂ social distancing protocols and keeping the safety of employees

in mind, banking outlets and offices of the Bank operated in accordance with the guidelines/directions issued by variousÂ statutory, regulatory and local authorities.

Your Bank has proactively leveraged its technology wherein a major portion of the workforce was benefitted through availingÂ work from home facilities. Moreover, to effectively manageÂ operations, and cater uninterrupted services to the customersÂ during these difficult times posed by the impact of the COVID-19Â pandemic, your Bank has triggered its business continuity planÂ ('BCP'). Your Bank managed to run its operations smoothly withÂ limited staff across all its banking outlets. Despite this constraint,Â operations were as per the prescribed business hours during theÂ day, and cash was made available in the ATMs so as to provideÂ uninterrupted financial services to the customers. At all timesÂ during the COVID-19 pandemic, your Bank had managed to keepÂ its services open to customers. Your Bank has engaged with itsÂ customers through digital channels and contact centres with theÂ objective of catering to their banking needs, as well as, enquiringÂ about their well-being during these extraordinarily difficult times.

Your Bank has taken multiple measures to ensure a safe environment for its employees and customers such as:

â¢ Â Â Â Regular sanitisation of the branches, ATMs, currency notes,Â temperature checks at premises.

â¢ Â Â Â Regular distribution of Hand Sanitizers at banking outlets.

â¢ Â Â Â Maintaining social distancing norms through effective floorÂ management.

â¢ Â Â Â Touch base with all existing customers and enquiring aboutÂ their well-being.

â¢ Â Â Â Adopting new digital initiatives from time to time.

â¢ Â Â Â Community outreach initiatives.

Your Bank has implemented necessary packages rolled out by RBI for its different segment of customers to provide the financialÂ assistance which are enumerated hereinbelow under differentÂ heads.

The extent to which the COVID-19 pandemic would impact the Bank's provision on assets and future results will depend onÂ future developments, which are highly uncertain considering theÂ impact of the second wave and the subsequent waves, if any. ThisÂ uncertainty relates to, among other things, any new informationÂ concerning the severity of the COVID-19 pandemic, and anyÂ action to contain its spread or mitigate its impact. Some of theseÂ actions will be determined by policies at the national level, whileÂ others will be determined by measures adopted by the Bank.Â Given the uncertainty over the macro-economic condition, theÂ impact of the global health pandemic may be different from thatÂ estimated as at the date of this report, and the Bank will continueÂ to closely monitor any material changes in economic conditions.

Emerging Entrepreneur Business

Your Bank has been serving borrowers at the bottom of the pyramid with affordable and convenient loans to help themÂ develop into entrepreneurs and transform their lives. As theÂ Bank's good microcredit customers expanded their businesses,

it supported them with enhanced banking facilities. Your Bank realised that these customers need more than just businessÂ loans to help them achieve their dreams and aspirations. Hence,Â providing them wholesome banking support is necessary.

With this backdrop, your Bank established a new vertical called Emerging Entrepreneur Business ('EEB') for servingÂ Micro Banking customers: Microcredit loans under JLG model,Â Individual Business Loans, Micro Bazaar Loans, Micro HomeÂ Loans and Two Wheeler Loans.

Your Bank has two types of banking outlets: Bank Branches catering to general banking customers and Banking Units ('BU')Â catering to EEB customers. Your Bank offers a wide array of loansÂ through EEB to benefit small business owners in need of financialÂ assistance. It also helps in the growth of additional incomeÂ generation avenues and offers enhanced opportunities to smallÂ entrepreneurs to achieve their business goals.

Each BU is linked to a bank branch for operational convenience. BUs are self-sufficient and empowered to open deposit accountsÂ using TABs and also open loan accounts after necessary creditÂ checks. The highlight of the BU's operations is the TABs that areÂ connected to the Core Banking System ('CBS') through cellularÂ data. Your Bank's Relationship Officers ('RO') carry these TABs toÂ their group meetings, and the entire instalment reconciliationÂ for the customer happens through these TABs on realtime. ToÂ ensure timely and effective support to the BUs in their day-today functioning, the Bank has a structure comprising Circles,Â Territories, Divisions, Areas and Banking Unit Catchments. AÂ central operations team maintain oversight of the quality of theÂ operations and adherence to prevalent guidelines at all times.Â Your Bank lays significant emphasis on processes and controls toÂ help maintain uniform and consistent standards in transactionÂ processing and service delivery, as well as compliance withÂ regulatory and statutory guidelines.

Your Bank's EEB strategy is guided by its philosophy of financial inclusion and economic empowerment of the disadvantagedÂ sections of society. During FY 2020-21, your Bank opened 618Â new BUs pan-India with a sole focus on financial inclusion. YourÂ Bank's commitment towards financial inclusion is also reflected inÂ the fact that it offered loans to 16,26,127 new borrowers duringÂ FY 2020-21. The growth of over 26 per cent. in the aggregateÂ micro banking asset portfolio from ?46,189 crore to ?58,346Â crore during FY 2020-21, is another indicator of your Bank's

Your Bank now has EEB loans in 10 categories to cater better to the varied demands of the customers:

1. Â Â Â Suchana Loan:Â Loan size is from ?1,000 to ?25,000 (noÂ processing fee) and is sanctioned for income-generatingÂ activities.

2. Â Â Â Srishti Loan:Â Loan size is from ?25,001 to ?1,50,000.

3. Â Â Â Suraksha Loan:Â Loan size is up to ?15,000 and is sanctionedÂ to help customers meet emergency medical/ sanitary/Â drinking water needs.

4. Â Â Â Susikhsha Loan:Â Loan size is up to ?10,000 and isÂ sanctioned to help customers meet expenses towards theÂ education of their children.

5. Â Â Â Su Briddhi:Â Sanctioned to help customers meet the extraÂ business requirements during their ongoing loan.

6. Â Â Â Samadhaan:Â The COVID-19 pandemic and nationwideÂ lockdowns affected the routine life of everyone in theÂ country. It had an impact on the EEB customers of yourÂ Bank as normal business activities remained affected in theÂ country. Your bank introduced Samadhaan Loan productÂ from ?5,000 to ?15,000 to support these existing EEBÂ borrowers.

7. Â Â Â Micro Bazaar Loan:Â Loan size from ?25,001 to ?1,50,000,Â for small entrepreneurs who have fixed place to deliverÂ their services to meet their working capital requirements.

8. Â Â Â Samriddhi Business Loan:Â Loan size from ?75,000 toÂ ?3,00,000, for matured EEB customers who have shownÂ considerable success in their endeavour.

9. Â Â Â Micro Home Loan:Â Loan size from ?1,00,000 to ?10,00,000Â to existing EEB borrowers for construction as well asÂ renovation of their houses.

10. Â Â Â Two Wheeler Loan:Â Loan size from ?30,000 to ?80,000Â sanctioned to existing EEB customers to meet theirÂ requirement of two-wheelers.

Your Bank has been taking many precautionary and corrective measures to improve its portfolio quality.

During FY 2020-21, with the advent of the COVID-19 pandemic, your Bank enhanced its workforce adding additional front endÂ officers in its large BUs. Further, your Bank has also put in placeÂ certain operating controls from its learnings, in order to sustain aÂ good portfolio quality in the future.

Your Bank is in the process of putting in place a comprehensive restructuring option for its stressed borrowers in the BU,Â including a moratorium option, under the Resolution frameworkÂ 2.0 of the RBI. This will provide necessary time relief to borrowersÂ whose livelihoods have been impacted, and will help them payÂ their instalments regularly at a later date.

Finally, your Bank has laid out a strategy to increase the share of its individual business loans in its overall portfolio. Your BankÂ has a large percentage of its borrowers who have successfullyÂ completed more than one loan cycle. The business of theseÂ borrowers are being evaluated by a dedicated individual loanÂ team, so that these families can be offered an individual monthlyÂ instalment loan. As the collection from individual borrowersÂ is through standing instruction given to the Banks, no physicalÂ collection is involved for regular paying borrowers.

Branch banking

The CASA Business of your Bank has grown by 60.86 per cent. during FY 2020-21 over FY 2019-20. The affluent business whichÂ consists of flagship savings products like Elite and PremiumÂ Saving products during the same periods has grown by 136 perÂ cent. vis-a-vis FY 2019-20.

During FY 2020-21, your Bank has launched its first foray into the digital account opening journey-Â Neo+ Savings account, with anÂ objective to digitise the liability on-boarding process. The launchÂ was in view of the recent unprecedented challenges that yourÂ Bank officials are facing in terms of meeting new customers andÂ new account acquisition. With its unique attributes such as lowÂ cost, ease of use, scalability and ubiquity, digital on-boardingÂ is expected to truly accelerate account acquisition across allÂ geographies.

Your Bank is immensely proud to launch its Corporate Salary offering "Shaurya", which will cater to the banking and financialÂ needs of our Military, Paramilitary and Police estabilishmentsÂ and help your Bank serve those valiant individuals who haveÂ dedicated their lives to serve our Nation.

Your Bank has recently launched "Biz Elite Current Account", a product proposition with enhanced features of a current accountÂ clubbed with additional benefits which help our PremiumÂ business segment customers enjoy the experience of EliteÂ banking along with the features of Current Account.

Commercial Banking

RBI had announced on March 27, 2020 and April 17, 2020, 'COVID-19 Regulatory Package' on asset classification andÂ provisioning. In terms of the RBI guidelines, the lendingÂ institutions have been permitted to grant a moratorium of threeÂ months on payment of all instalments/interest as applicable,Â falling due between March 01, 2020 and May 31, 2020Â ('moratorium period'). Further, RBI extended the COVID-19Â Regulatory Package vide notification dated May 23, 2020,Â wherein the lending institutions were permitted to extend the

moratorium from June 01, 2020 to August 31, 2020. In respect of the working capital facilities sanctioned in the form of cashÂ credit/overdraft ("CC/OD"), the Lending institutions were alsoÂ permitted, at their discretion, to convert the accumulatedÂ interest for the deferment period up to August 31, 2020, into aÂ funded interest term loan ('FITL') which shall be repayable notÂ later than March 31, 2021. Also, the working capital financingÂ was eased as a one-time measure by re-calculating the drawingÂ power through margin reduction till August 31, 2021, providedÂ the margins are restored to the original levels by March 31,

2021. In this regard, a Board approved policy duly incorporating the COVID-19 Regulatory Package has been implemented byÂ your Bank with a suitable enabling clause to accommodateÂ any further regulatory instructions in respect of the COVID-19Â Package. Customers of the Bank can place their requests throughÂ banking outlets and call centres. Your Bank extended supportÂ to its deserving borrowers by granting moratorium and FITLÂ facilities, in line with the Regulatory Package. As such, in respectÂ of all accounts classified as standard as on February 29, 2020,Â even if overdue, the moratorium period, wherever granted,Â shall be excluded by the lending institutions from the number ofÂ days past due for the purpose of asset classification under RBI'sÂ Income Recognition and Asset Classification norms.

As part of the COVID-19 Regulatory Package, operating guidelines on Emergency Credit Line Guarantee Scheme ('ECLGS 1.0')Â were introduced by National Credit Guarantee Trust CompanyÂ ('NCGTC') on June 02, 2020, and was initially valid till October 31,

2020. Â Â Â The scheme was subsequently an extended till NovemberÂ 30, 2020 vide operating guidelines dated October 31, 2020. TheÂ introduction of ECLGS 2.0 along with extension of ECLGS 1.0,Â both schemes valid till March 31, 2021, were communicatedÂ vide operating guidelines dated November 26, 2020. Further, theÂ introduction of ECLGS 3.0, modification in ECLGS 2.0 along withÂ extension of all three schemes (ECLGS 1.0, 2.0 & 3.0) till June 30,

2021, Â Â Â were communicated vide updated operating guidelinesÂ dated April 16, 2021. Introduction of ECLGS 4.0 and modificationsÂ in ECLGS 3.0 were communicated vide updated operatingÂ guidelines dated June 07, 2021, along with an extension of allÂ four schemes (ECLGS 1.0, 2.0, 3.0 & 4.0) till September 30, 2021.

The following are the brief details of ECLGS 1.0, ECLGS 2.0 & ECLGS 3.0, valid till September 30, 2021:

â¢ Â Â Â ECLGS-1.0 refers to the scheme for providing 100 perÂ cent. guarantee to member lending institutions in respectÂ of eligible credit facility extended by them in the form

of additional working capital term loan facility to its borrowers up to 20 per cent. of their total fund based creditÂ outstanding up to ?50 crore across all lending institutionsÂ and up to 60 days past due as on February 29, 2020. AÂ moratorium period of one year on the principal amountÂ shall be provided to borrowers under the scheme duringÂ which interest shall be payable. The principal shall be repaidÂ in 36 instalments (three years) under ECLGS 1.0 after theÂ moratorium period is over.

â¢ Â Â Â ECLGS-2.0 refers to the scheme for providing 100 perÂ cent. guarantee to member lending institutions in respect

of eligible credit facility extended by them in the form of working capital term loan facility and/or non-fund basedÂ facility or a mix of the two, to its borrowers in the 26Â sectors identified by the Kamath Committee on ResolutionÂ Framework vide its report dated September 04, 2020 andÂ the Healthcare sector, up to 20 per cent. of their totalÂ fund based credit outstanding of above ?50 crore and notÂ exceeding ?500 crore across all lending institutions and upÂ to 60 days past due as on February 29, 2020. A moratoriumÂ period of one year on the principal amount (fund basedÂ portion) shall be provided to borrowers under the schemeÂ during which interest shall be payable. The principal shall beÂ repaid in 48 instalments (four years) under ECLGS 2.0 afterÂ the moratorium period is over.

â¢ Â Â Â ECLGS 3.0 refers to the scheme for providing 100 perÂ cent. guarantee to member lending institutions in respectÂ of eligible credit facility extended by them in the form

of working capital term loan facility and/or non-fund based facility to its borrowers in the Hospitality (hotels,Â restaurants, marriage halls, canteens, etc.), Travel &

Tourism, Leisure & Sporting and Civil Aviation (scheduled and non-scheduled airlines, chartered flight operators, airÂ ambulances and airports) sectors, up to 40 per cent. of theirÂ total fund based credit outstanding up to ?500 crore acrossÂ all lending institutions, subject to a cap of ?200 crore perÂ borrower, and up to 60 days past due as on February 29,Â 2020. Eligible Borrowers under ECLGS 3.0 who have alreadyÂ availed benefit under ECLGS 1.0 or ECLGS 2.0, shall beÂ eligible for additional credit up to 20 per cent. of their totalÂ credit outstanding as on February 29, 2020. A moratoriumÂ period of two years on the principal amount (fund basedÂ portion) shall be provided to borrowers under the schemeÂ during which interest shall be payable. The principal shall beÂ repaid in 48 instalments (four years) under ECLGS 3.0 afterÂ the moratorium period is over.

â¢ Â Â Â ECLGS 4.0 refers to the scheme for providing 100 perÂ cent. guarantee to member lending institutions in respectÂ of eligible credit facility up to ?2 crore per borrowerÂ extended by them in the form of fund based (term loan)Â or non-fund based (LC for import of capital goods) facilityÂ to its hospitals/nursing homes/clinics/medical colleges/Â units engaged in manufacturing of liquid oxygen, oxygenÂ cylinders, etc., for setting up of on-site oxygen producingÂ plants. A moratorium period of six months on the principalÂ amount (fund based portion) shall be provided to borrowersÂ under the scheme during which interest shall be payable.Â The principal shall be repaid in maximum of 54 instalmentsÂ (four years and six months) under ECLGS 4.0 after theÂ moratorium period is over.

In line with the Board-approved Credit Policy, the Bank extended

support to the deserving and eligible borrowers based on

requests.

Commercial Banking, despite the pandemic situation, grew by

15 per cent. year-on-year. Small Enterprise Loan ('SEL') and Small

and Medium Enterprises Loan ('SME') Books have grown steadily during FY 2020-21. SEL has accounted for a total Book size ofÂ ?3,095 crore as on March 31, 2021, registering a growth of 50Â per cent. during the period. The SME book was at ?1,504 crore asÂ on March 31, 2021, registering a growth of about 102 per cent.Â during FY 2020-21. The Institutional book, comprising lending toÂ NBFCs and MFIs depleted by 24 per cent. since your Bank wasÂ cautious in building incremental advances in this segment.

Housing Finance

Your Bank offers Loans for the purchase, construction, repairs and renovation of dwelling units. Loan against property ('LAP'),Â as well as loans against rent receivables, are also offered againstÂ self-occupied residential / commercial property. In line with yourÂ Bank's objective of increasing financial inclusion, Home LoansÂ and LAP loans are offered to Salaried as well as Self-EmployedÂ customers, including New to Bank (NTB) customers as well.

Post amalgamation of erstwhile GRUH Finance Limited with the Bank, your Bank has expanded its scope of housing activities andÂ has additionally started offering home loan products from moreÂ than 125 bank branches across the nation. Your Bank continuesÂ to focus on the affordable housing space and has tied up withÂ various Government projects as well as projects in the privateÂ sector in the Affordable Housing space. Consequently, a majorityÂ of the housing loans are also eligible under the PSL category.

As on March 31, 2021, your Bank had a total Housing plus LAP exposure to ?20,213 crore constituting 23 per cent. of the totalÂ gross advances.

Retail Asset

Retail Assets portfolio currently comprises Gold Loan, Personal Loan, Two-Wheeler Loan and Loan/Overdraft against TermÂ Deposits.

FY 2020-21 witnessed retail portfolio registering a growth of 63 per cent. to ?1,193 crore, in which the primary product driversÂ were Gold Loan, Loan/Overdraft against term deposits andÂ Personal Loan. FY 2020-21 also witnessed reengineering of RetailÂ Assets Vertical both in terms of Organisational structure, productÂ depth and laying the technology foundation.

During FY 2020-21, Gold Loan was strengthened as a product. The book size grew from ?222 crore to ?394 crore, with aÂ disbursement of ?443.27 crore to 31,541 customers. Gold loanÂ is now being offered from 321 branches across the country upÂ from about 100 branches in the previous year. The financial yearÂ also saw the reintroduction of Personal Loan ('PL') with a newÂ credit framework and PL attained book size of ?91 crore at theÂ end of FY 2020-21.

Third Party Products

The Bank currently distributes mutual funds, life insurance, general insurance including health insurance products and cobranded credit cards. During the financial year under review, yourÂ Bank has designed a strong customer proposition, on the retailÂ health insurance segment in order to ensure the retail customers

who bank with us, have the opportunity to build a safety net around their health/medical related risks. In the life insuranceÂ business, your Bank has added, annuity products across bothÂ immediate and deferred annuity options, in the product basketÂ being offered for solicitation. In mutual funds distribution, yourÂ Bank has additionally empaneled a new asset managementÂ company with a vision of providing its customers more choicesÂ while planning for investments.

The total mutual fund AUM managed under your Bank's code during FY 2020-21 was ?324.23 crore earning an income ofÂ ?2.32 crore. A total of ?120.74 crore and ?327.60 crore of generalÂ and retail life insurance business, respectively, was garneredÂ through the branches during FY 2020-21 earning a fee income ofÂ ?14.19 crore and ?93.05 crore, respectively. During FY 2020-21,Â the life insurance business through the existing arrangement inÂ all asset verticals amounted to ?855.63 crore earning an incomeÂ of ?42.78 crore. Your Bank has distributed the co-branded creditÂ cards and earned ?1.03 crore as commission during FY 202021. Your Bank has also earned Re. 0.04 crore as commission forÂ distribution of Atal Pension Yojana and NPS Lite SwavalambanÂ schemes of PFRDA during FY 2020-21.

Corporate Social Responsibility

Your Bank's core commitment to creating inclusive growth is reflected in its Corporate Social Responsibility ("CSR") initiatives,Â which focus on the empowerment of the marginalised sections ofÂ the society.

To address its societal commitments, your Bank has adopted a comprehensive CSR Policy that outlines the CSR programmes,Â in line with Schedule VII of the Companies Act, 2013 (theÂ 'Companies Act'). These programmes are being undertaken inÂ the vicinity of your Bank's operational areas.

For the seamless implementation and monitoring of the CSR programme, your Bank has constituted the Corporate SocialÂ Responsibility Committee of the Board ('CSRCB'), in accordanceÂ with the provisions of Section 135 of the Companies Act readÂ with the Companies (Corporate Social Responsibility Policy)

Rules, 2014, as amended. The composition of the CSRCB is given in the Report on Corporate Governance forming part of theÂ Board's Report.

The marginalised communities residing in the vicinity of your Bank's operational areas are faced with multi-dimensional andÂ inter-aliaÂ vulnerabilities, at the core of which is the challenge toÂ secure sustained livelihoods. Accordingly, the interventions ofÂ your Bank's CSR initiatives are appropriately designed to buildÂ their capabilities for securing sustainable livelihoods.

Your Bank continues to engage itself with the marginalised sections of the society for inclusive growth. During the financialÂ year under review, your Bank has contributed ?54.17 croreÂ towards 25 CSR programmes implemented through 14 ProjectÂ Implementing Agencies ('PIAs'). The CSR programmes wereÂ spread across 671 project locations in 71 districts of 13 statesÂ across India, benefitting 2,94,550 individuals during the financialÂ year, thereby taking the total beneficiaries to 11,32,490Â individuals.

Outline of the CSR Policy of the Bank and the details of CSR activities/projects undertaken during the financial year are givenÂ asÂ Annexure - 1Â and forms part of this Board's Report. The CSRÂ Policy is in line with the recent amendments to the CompaniesÂ Act, as recommended by the CSRCB and approved by the Board,Â and is available on the Bank's website:Â https://bandhanbank.Â com/pdfViewerJS/index.html#../sites/default/files/2021-07/CSR-Policy-2021_1.pdf

Some of the key programmes of your Bank's CSR initiatives are:

Targeting the Hard-Core Poor Programme ('THP')

During the financial year under review, your Bank has contributed ?18.20 crore towards the THP programme - theÂ flagship programme of Bandhan Konnagar, an organisationÂ registered under the Societies of West Bengal Registration ActÂ XXVI of 1961, Implementing Agency. The programme is designedÂ for the ultra-poor women-headed households, providing themÂ with a range of lucrative micro-enterprises (in the form of farm,Â non-farm and mixed assets, non-cash) along with handholdingÂ support and training on confidence building, enterprise skills,Â consumer interaction, marketing and financial skills. They areÂ also provided with sustenance allowance to meet their dailyÂ needs till they start generating substantial income from theÂ assets provided. In 18 to 24 months, these ultra-poor womenÂ start graduating, uplifting themselves from extreme poverty¹Â andÂ get linked to mainstream society².

During the financial year under review, 27,444 ultra-poor women were provided farm-based, non-farm and mixed assets to sustainÂ their livelihoods. These women belonged to 133 locations underÂ your Bank's catchment area spread across 18 districts of Assam,Â Jharkhand, Madhya Pradesh, Odisha and West Bengal.

A long term study done by the Nobel Laureate, Dr. Abhijit Banerjee et.al.³, based on Randomised Control Trials ('RCT')Â method, suggests that in seven years after the assets were firstÂ distributed, livestock revenue, income from non-agriculturalÂ entrepreneurial activities and daily wage income was 286 perÂ cent., 100 per cent. and 25 per cent., respectively, higher in theÂ treatment group as compared to the control group mean, andÂ it was not because of more working hours, but because of theÂ fact that the income per hour went up and they diversified theirÂ businesses and invested part of the gains from livestock intoÂ other activities.

The monthly consumption of those assigned to treatment increased by 25 per cent. as compared to the consumption ofÂ those assigned to control, which increased by 12 per cent. andÂ the amount deposited in the savings account by the beneficiariesÂ was more than doubled as compared to the control group. ThereÂ was also an increase in formal borrowings.

The study also highlights the positive effects across all categories of outcomes. Compared to non-beneficiaries, the beneficiaries'Â households of the programme have more assets, food security isÂ higher, earn more, and are financially better off. The results forÂ the adult-level indexed variables of the study indicated that theÂ individuals are healthier, happier and less stressed. Furthermore,Â the effects (except for productive assets) almost always growsÂ over time, suggesting that the programme may have putÂ beneficiaries' household on a different trajectory.

Health, Nutrition, Drinking Water and Sanitation

During the financial year under review, your Bank has contributed ?15.67 crore towards seven health programmes of five PIAsÂ covering 35 districts in nine states of India.

Health

Your Bank contributed towards creating health and hygiene-related awareness and behaviour change through a network of 3,440 village-level female health volunteers known asÂ "Swasthiya Sahayikas"Â who reached out to 1,37,854 pregnantÂ women and lactating mothers. TheÂ Swasthiya SahayikasÂ heldÂ 48,234 health awareness forums. These sessions were attendedÂ by 2,36,063 female participants belonging to the reproductiveÂ age group. TheÂ Swasthiya SahayikasÂ made 1,92,830 home visitsÂ to follow up on the health status of pregnant women, lactatingÂ mothers and children below five years and have taken 373Â pregnant women for institutional deliveries during emergenciesÂ or in case of absence of any family members and referredÂ 3,203 women for ante-natal check-ups ('ANC') and institutionalÂ deliveries in 457 healthcare centres.

TheÂ Swasthiya SahayikasÂ of the health programme inducted menstrual hygiene behaviour change communication amongstÂ the women especially the adolescent girls and infant-careÂ behaviours to the pregnant women and lactating mothers. TheyÂ provided 3,08,179 sanitary pads during door-to-door visits andÂ have also started to supply infant diapers, soaps, hand sanitisers,Â moisturisers, etc.

These efforts resulted in improving the institutional deliveries to 90.25 per cent. compared to the national average of 78.90Â per cent.⁴Â and complete ANC to 91 per cent. compared to theÂ national average of 51.20 per cent.⁴

A study conducted by Grameen Foundation and Freedom from Hunger India Trust from 2016 to 20 18⁵, concluded that the

programme has a visible positive impact amongst the participants of the health awareness programme on the level of awarenessÂ and health-related behaviour between and end-line, from <10Â per cent to > 90 per cent of women know about Mother andÂ Child Health ('MCH') and from 20 per cent to 80 per cent ofÂ adolescent girls managing menstrual complications.

Healthcare

During the financial year under review, apart from the public health programme, 76,945 patients were provided treatment forÂ various diseases like cataracts, hypertension, diabetes, cough andÂ cold, etc., in three districts of four states of India through PIAs,Â taking the total to 2,47,602 patients.

Nutrition

During the financial year under review, 2,13,440 children, under the age of five years, were enrolled in the nutritionÂ initiatives, of which 2,910 children were identified with severeÂ acute malnutrition ('SAM') and were supported for nutritionÂ rehabilitation, whereas 13,060 children were found withÂ moderate acute malnutrition ('MAM') and were provided withÂ nutritional supplements including support for a nutritionalÂ garden. 94 per cent. of the children, over 24 months completedÂ their primary immunisation and 83.25 per cent. (NationalÂ Average of 54.90 per cent.)⁴Â of children from 0- 6 months wereÂ exclusively breastfed.

To provide round the year nutrition support, 27,444 households were provided planting materials of fruits and vegetables forÂ setting up their nutrition gardens. These nutrition gardens helpedÂ families, especially women and children to consume pesticide-free fresh fruits and vegetables round the year. This initiativeÂ has helped in reducing the protein-energy malnutrition ('PEM')Â amongst the children who are less than five years of age andÂ is evident from the fact that wasting by children under-five hasÂ gone down to 9 per cent. as against the national average of 35.7Â per cent.⁴Â The awareness regarding a balanced and adequateÂ diet during pregnancy coupled with the availability of fruits andÂ vegetables from the nutrition garden resulted in reducing the lowÂ birth weight incidences to a mere 2 per cent. of the live births asÂ compared to the national average of 18.2 per cent.⁴Â live birthsÂ being under 2.5 kilograms.

Drinking Water

During the financial year under review, 49 community-level reverse osmosis water treatment plants were set up, whichÂ provided 14,752 kilolitres of purified safe drinking water toÂ 33,749 households.

Sanitation

Your Bank has contributed towards developing the community-led sanitation and school sanitation programme by two PIAs coveringÂ three districts in three states of India. The initiatives helped in

improving the sanitation infrastructure of 502 households, 19 government schools, which included separate toilets for boysÂ and girls using child-friendly engineering, RO drinking waterÂ stations, mid-day meal platform with shades, dishwashing stations,Â roof rainwater harvesting system, etc. The programme inducedÂ behavioural change amongst the school teachers and childrenÂ through classroom sessions and demonstrations regardingÂ sanitation and personal hygiene including hand-washing usingÂ soaps after using toilets, before and after a meal, before holdingÂ infants, after arriving, after playing outdoors, after playing withÂ animals, after coughing, sneezing or blowing one's nose, cleaningÂ toilets, flushing toilets after use, using sanitary pads for menstrualÂ hygiene, etc. The programme also supported monitoring of theÂ operation and maintenance of the facilities created.

Education

Your Bank has contributed towards education programmes which provides quality education to the children belonging toÂ the marginalised section of the society in its catchment areas.

The education programme enables the children to improve their learning outcomes, especially in Science, Technology, English andÂ Mathematics ('STEM') subjects and increase their retention andÂ classroom engagement. The programme also provides training toÂ the teachers belonging to the communities, government schoolsÂ and schools run by the various charitable trust who are providingÂ free education to transform their pedagogy and integrate variousÂ teaching and learning tools in their lesson plans and track theÂ comprehensive continuous assessment of each child. For inclusiveÂ learning, your Bank has also contributed toÂ "Sammilit Pathshala"Â for providing education to children with special needs with otherÂ children. For creating a better learning environment, the programmeÂ also contributed to the creation of school education facilitiesÂ including, setting up of computer labs, smart classrooms, furnitureÂ and fixtures, building as a learning aid ('BALA') paintings, etc.

Your Bank contributed ?14.80 crore towards the education programme by three PIAs benefiting 69,812 marginalised childrenÂ in 33 districts of six states of India.

Support to Person with Disabilities

In line with the commitment to inclusive growth, your Bank has contributed ?38.85 lakh to the initiatives of four PIAs who areÂ dedicated to providing equal opportunities and a conduciveÂ environment to persons with disabilities ('PwD'). During theÂ financial year under review, the initiatives have supported 732Â PwDs in three districts of three states of India.

Skill Development

Skill development initiatives, supported by your Bank, provide market-linked and job-ready employable skills to the youths fromÂ the marginalised sections of the society in various domains. ThisÂ initiative not only provides on-the job training, and job placementÂ facilitation in the organised sector but also a follow-up of theÂ placements so that the youths are settled in their job post-training.

During the financial year under review, your Bank contributed ?4.89 crore toward the skill development initiatives of fourÂ PIAs in 17 districts of nine states of India. These PIAs operated

20 training centres in domains like Warehousing and Logistics, Retail and Customer Care, Sales and Marketing, ITeS and BPO,Â Refrigeration and Air Conditioning, Computer Accounting,Â Hardware and Networking, BFSI, Tailoring, Mason, Electrical, GDAÂ (Nursing), Manual Metal Arc Welding, Fitter Fabrication, SecurityÂ Guard and Driving.

During the financial year under review, 3,123 youths were trained, of which nearly 80 per cent. were placed with net salaryÂ ranging from ?6,500 to ?12,000 plus other performance-basedÂ allowances and social security benefits like Provident Fund (PF)Â and Employee State Insurance (ESI).

Water Conservation

The water conservation initiative, supported by your Bank, aims at water security and drought proofing to some of theÂ high moisture stressed regions of India, thereby providing aÂ safety net to agriculture and livestock-based livelihoods. TheÂ initiatives facilitate participatory watershed management byÂ empowering the communities to participate in the planning andÂ implementation of local water resource development. MeasuresÂ such as building, reviving and maintaining water-harvestingÂ structures, prioritisation and judicious use of water for everyÂ community member, crop planning and water-efficient farming,Â use of drought-resistant varieties, cultivation of high-valueÂ crop requiring less water, etc., creates a multiplier effect inÂ drought proofing and climate change adaptation measures andÂ higher income generation. The programme has supported theÂ construction of 23 water-harvesting structures with a storageÂ capacity of over 120,000 kilolitres of water in two states, whichÂ not only provided drinking water to over 1,500 families but alsoÂ supported participatory irrigation of various crops and helped inÂ generating an income of more than ?123 lakh.

Afforestation

The afforestation initiatives, supported by your Bank, have contributed towards the project on establishing "Bio-shield" toÂ save the mangroves in the Bharuch district of Gujarat. MangroveÂ plantation of 67,540 saplings was carried out in 20 Hectares inÂ a stretch of one kilometre of coastline along with plantation ofÂ other medicinal plant species and fodder species, sequesteringÂ over 4,400 tonnes of CO₂Â annually. The fodder bank was createdÂ to offset the biotic pressure from the mangrove area. The projectÂ created 4,629 person-days of employment and benefited 9,123Â beneficiaries with additional income generating avenues fromÂ fodder and medicinal plants harvesting.

Dividend

Your Bank has a dividend distribution policy that,Â inter-alia,Â balances the objectives of appropriately rewarding shareholdersÂ and retaining capital to maintain a healthy capital adequacyÂ ratio. Pursuant to Regulation 43A of the Securities and ExchangeÂ Board of India (Listing Obligations and Disclosure Requirements)Â Regulations, 2015 ('SEBI LODR'), the Board of Directors of theÂ Bank have adopted a dividend distribution policy. In additon toÂ the Dividend Distribution Policy, the dividend payout ratio of theÂ Bank is guided by the extant Circulars on dividend issued by RBI,Â from time to time. The Policy is available on the Bank's website

atÂ https://bandhanbank.com/pdfViewerJS/index.html#../sites/ default/files/2021-07/Dividend_Distribution_Policy.pdf

The RBI vide its Notification No. RBI/2021-22/23 DOR.ACC.

REC.7/21.02.067/2021-22 dated April 22, 2021, has directed that commercial banks may pay dividends on equity sharesÂ from the profits for the financial year ended March 31, 2021,Â subject to the quantum of dividend being not more than fiftyÂ per cent. of the amount determined as per the dividend payoutÂ ratio prescribed in paragraph 4 of RBI circular no. DBOD.NO.BP.Â BC.88/ 21.02.067/2004-05 dated May 04, 2005. Accordingly, inÂ compliance with the above Circulars issued by RBI and keepingÂ in mind the future capital requirements, the Board of DirectorsÂ of the Bank has recommended a dividend of ?1 on equity sharesÂ of ?10 each (i.e. 10%) for the financial year ended March 31,Â 2021, for approval of the shareholders at the 7th Annual GeneralÂ Meeting ('AGM') of the Bank. As per the amended Income TaxÂ Act, 1961, the dividend shall be subject to applicable deductionÂ of tax at source ('TDS').

Transfer to Reserves

In line with the RBI regulations, your Bank has transferred an amount of ?551.37 crore to the statutory reserve during theÂ financial year ended March 31, 2021.

Issuance of Equity Shares & Capital Adequacy Ratio

During the financial year under review, your Bank has issued 3,51,358 equity shares of ?10 each pursuant to exercise of stockÂ options by the eligible Employees of your Bank aggregating toÂ ?35,13,580.

Post allotment of aforesaid equity shares, the issued, subscribed and paid-up share capital of your Bank stood atÂ ?16,10,59,92,010/- comprising 161,05,99,201 equity shares ofÂ ?10 each fully paid-up as on March 31, 2021.

Your Bank has not issued any equity shares with differential voting rights during the financial year under review.

Your Bank's capital adequacy ratio ('CAR'), calculated in line with the RBI Circular on Capital Adequacy Framework, stood atÂ 23.47 per cent. as on March 31, 2021, well above the minimumÂ regulatory requirements of 10.875 per cent., out of which Tier 1Â CAR was 22.48 per cent. and Tier 2 CAR was 0.99 per cent.

Status on Dilution of Promoter's stake

In order to comply with the Guidelines for Licensing of New Banks in the Private Sector issued by RBI on February 22, 2013,Â ('Licensing Guidelines') and licensing conditions for the Bank,Â Bandhan Financial Holdings Limited ('BFHL' or the 'NOFHC'),Â the Promoter of the Bank had, on August 03, 2020 through aÂ secondary market sale, diluted its excess voting equity capital ofÂ 20.95 per cent. i.e. 33,73,67,189 equity shares of ?10 (RupeesÂ Ten only) each fully paid-up, in the Bank. Consequently, theÂ shareholding of NOFHC in the Bank has been reduced to 40 perÂ cent. of the total paid-up voting equity capital of the Bank. TheÂ Bank is now fully compliant with the aforesaid Guidelines and theÂ licensing conditions, and consequently, the regulatory restrictionsÂ imposed by RBI has been lifted.

Performance and Financial Position of the Subsidiaries, Associates or Joint Venture

Your Bank did not have any subsidiaries, associates or joint venture companies during FY 2020-21. Accordingly, no statementÂ is required to be reported in Form AOC-1.

Rating of Various Debt Instruments

Details of rating of various debt instruments of the Bank as on March 31, 2021 are as under:

Instruments	Rating	Rating	Amount
Â	Â	Agency	(^ in Cr.)
Subordinated Tier II	[ICRA]AA(Stable)	ICRA	Â
Non-Convertible Debentures	CARE AA- Stable	CARE	160
Term Loan from Banks	[ICRA]AA(Stable)	ICRA	80
Certificate of Deposit	[ICRA]A1+	ICRA	6,000⁽¹⁾
Â	CRISIL A1+	CRISIL	6,000⁽¹⁾
Non-Convertible Debentures¹³¹	[ICRA]AA(Stable) CRISIL AA/Stable	ICRA CRISIL	5,075⁽²⁾
Fixed Deposits Programme¹³*	FAAA / Stable	CRISIL	1,600
Subordinated Debt⁽³⁾	CRISIL AA/Stable	CRISIL	35

⁽¹⁾Â Â Â Â rating of ICRA is for ^3000 crore only

⁽²⁾Â Â Â Â rating of ICRA is for ^196.40 crore only

⁽³⁾Â Â Â Â transferred from erstwhile Gruh Finance Limited pursuant toÂ theÂ effectiveness of the Scheme of Amalgamation.

Board of Directors

The composition of the Board of Directors of the Bank ("Board")Â is governed by the provisions of the Companies Act, the BankingÂ Regulation Act, 1949 (the 'BR Act'), the SEBI LODR, otherÂ applicable laws and the Articles of Association of your Bank. AtÂ the end of March 31, 2021, the Board of your Bank had twelveÂ Directors, out of which nine were Independent Directors,Â two Non-Executive Non-Independent Directors including oneÂ Nominee Director of Caladium Investment Pte. Ltd, and oneÂ Managing Director and CEO.

Appointments

Mr. Suhail Chander (DIN: 06941577) and Mr. Subrata Dutta Gupta (DIN: 08767943)

Pursuant to the recommendations of the Nomination and Remuneration Committee of the Bank ('NRC'), the BoardÂ approved the appointment of Mr. Suhail ChanderÂ (DIN: 06941577) and Mr. Subrata Dutta Gupta (DIN: 08767943)Â as Additional Directors (Independent) of the Bank effectiveÂ March 19, 2021, after ascertaining their fit and proper status andÂ independence from the management of your Bank. Pursuant toÂ the provisions of Section 161 of the Companies Act, they wouldÂ continue to hold office as Additional Directors of the Bank, upÂ to the date of the ensuing AGM or the last date on which theÂ AGM should have been held, whichever is earlier. Your BankÂ has received notices in writing from members proposing theirÂ candidature as Director on the Board of the Bank. Further, theÂ NRC and the Board have also recommended their appointmentÂ as Independent Director(s), not liable to retire by rotation, to the

Shareholders at the ensuing AGM for a period of three years each effective March 19, 2021.

Mr. Suhail Chander, a Chartered Accountant, is having 37 years of rich experience in Banking Operations, Trade Finance, Retail andÂ Wholesale Banking covering the entire gamut from retail, SME,Â mid-size corporate to large corporates including public sectorÂ undertakings and risk management.

Mr. Subrata Dutta Gupta, Master of Arts in Economics, has rich experience of more than 35 years in Asset Based Financing ofÂ which 20 years in the Mortgage Industry in India and 11 yearsÂ in Development Finance with focus on Investment and AdvisoryÂ Services in the mortgage sector covering areas like StrategicÂ Planning, Business Plan, Underwriting and Policy Formulation, etc.

Re-appointments

Dr. Holger Dirk Michaelis (DIN : 07205838)

In terms of the provisions of Section 152 of the Companies Act, out of the two Non-Executive Non-Independent Directors,

Dr. Holger Dirk Michaelis (DIN: 07205838), Nominee Director of Caladium Investment Pte. Ltd., being longest in office, shall retireÂ at ensuing AGM and being eligible, offered himself forÂ re-appointment.

Mr. Chandra Shekhar Ghosh (DIN : 00342477)

Mr. Chandra Shekhar Ghosh, was appointed as the Managing Director and Chief Executive Officer ('MD & CEO') of the BankÂ effective July 10, 2015 for a period of three years. Thereafter, Mr.Â Ghosh, MD & CEO was re-appointed for a period of three yearsÂ effective July 10, 2018. In terms of the RBI Circular dated March 31,Â 2020 onÂ Appointment of Managing Director and Chief ExecutiveÂ Officer (MD & CEO) / CEO /part-time Chairperson (PTC) in BanksÂ - 'Declaration and Undertaking' and allied matters,Â the BankÂ submitted an application to RBI seeking re-appointment of the MDÂ & CEO, for a period of five years effective July 10, 2021, as approvedÂ by the Board at its meeting held on November 02, 2020, on theÂ basis of the recommendation of the NRC. RBI vide its letter datedÂ June 08, 2021, has approved the re-appointment of the MD & CEOÂ for a period of three years. Accordingly, as approved by RBI videÂ its letter dated June 08, 2021, and based on the recommendationÂ of the NRC, the Board has approved the re-appointment of Mr.Â Chandra Shekhar Ghosh, MD & CEO of the Bank for a period ofÂ three years effective July 10, 2021, not liable to retire by rotation,Â subject to the approval of Shareholders at the ensuing AGM, andÂ also designated him as the Key Managerial Personnel of the Bank.

Dr. A. S. Ramasastri (DIN : 06916673)

Dr. A. S. Ramasastri was appointed as an Independent Director of the Bank effective August 08, 2018 for a period of threeÂ years. Accordingly, considering the outcome of his performanceÂ evaluation, notice received under section 160 of the CompaniesÂ Act from a member proposing his candidature for the office ofÂ Director and the recommendation of the NRC, the Board at itsÂ meeting held on June 25, 2021, has approved his re-appointmentÂ as an Independent Director of the Bank, not liable to retire byÂ rotation, for a second term of five years effective August 08,

2021, subject to the approval of Shareholders of the Bank by way of a special resolution at the ensuing AGM.

Dr. Anup Kumar Sinha (DIN: 08249893)

Dr. Anup Kumar Sinha was appointed as an Independent Director of the Bank effective January 07, 2019 for a period of three yearsÂ and his current term is expiring on January 06, 2022. RBI videÂ Circular dated April 26, 2021 on 'Corporate Governance of theÂ Bank' has increased the upper age limit for NEDs, including theÂ Chair of the board of a bank, to 75 years and mandated thatÂ after attaining the age of 75 years no person can continue inÂ these positions. Dr. Sinha would complete his 75 years on July 04,Â 2026. Accordingly, considering the outcome of his performanceÂ evaluation, notice received under section 160 of the CompaniesÂ Act from a member proposing his candidature for the office ofÂ Director and the recommendation of the NRC, the Board at itsÂ meeting held on June 25, 2021, has approved his re-appointmentÂ as an Independent Director of the Bank, not liable to retire byÂ rotation, for a second term from January 07, 2022 up to JulyÂ 04, 2026 i.e. up to the date of his attaining the age of 75 years,Â subject to the approval of Shareholders of the Bank by way of aÂ special resolution at the ensuing AGM.

Further, the current term of Dr. Sinha as the Non-Executive Chairman of the Bank would expire on January 06, 2022, asÂ approved by RBI and Shareholders. Accordingly, pursuant to theÂ recommendation of the NRC, the Board at its meeting held onÂ June 25, 2021 has also approved his re-appointment as NonExecutive Chairman of the Bank from January 07, 2022 up toÂ July 04, 2026 i.e. up to the date of his attaining the age of 75Â years, subject to the approval of Shareholders of the Bank at theÂ ensuing AGM and the approval of RBI, from time to time.

Mr. Santanu Mukherjee (DIN : 07716452)

Mr. Santanu Mukherjee was appointed as an Independent Director of the Bank effective January 07, 2019 for a periodÂ of three years and his current term is expiring on January 06,Â 2022. Accordingly, considering the outcome of his performanceÂ evaluation, notice received under section 160 of the CompaniesÂ Act from a member proposing his candidature for the office ofÂ Director and the recommendation of the NRC, the Board at itsÂ meeting held on June 25, 2021, has approved his re-appointmentÂ as an Independent Director of the Bank, not liable to retire byÂ rotation, for a second term of five years effective January 07,Â 2022, subject to the approval of Shareholders of the Bank by wayÂ of a special resolution at the ensuing AGM.

The resolution(s) in respect of appointment and re-appointment of the Directors, as aforesaid, have been included in the NoticeÂ convening the 7th AGM of the Bank. Brief profiles of theseÂ Directors have been annexed to the said Notice. None of theÂ Directors as proposed for appointment / re-appointment willÂ cross the age of 75 years during the tenure of their continuationÂ on the Board of the Bank.

Shareholders approved appointments/ re-appointments

During the financial year under review, the following appointments/re-appointments were approved by theÂ Shareholders at the 6th AGM of the Bank held on August 21, 2020:

â¢ Appointment of Mr. NVP Tendulkar (DIN: 00869913) as an Independent Director of the Bank for a period of threeÂ years effective May 08, 2020.

â¢ Â Â Â Appointment of Mr. Vijay N Bhatt (DIN: 00751001) as anÂ Independent Director of the Bank for a period of threeÂ years effective May 08, 2020.

â¢ Â Â Â Mr. Ranodeb Roy (DIN: 00328764), Non Executive NonÂ Independent Director, being longest in office, liable to retireÂ by rotation and being eligible, was re-appointed.

Cessations

During the financial year under review, the following four Independent Directors ceased to hold office by virtue ofÂ completion of their respective terms on the Board of the Bank,Â as under:

â¢ Â Â Â Mr. Chintaman Mahadeo Dixit (DIN: 00524318) completedÂ his second term as an Independent Director of the Bank onÂ July 08, 2020. Accordingly, he ceased to be an IndependentÂ Director of the Bank effective July 09, 2020.

â¢ Â Â Â Mr. Harun Rasid Khan (DIN: 07456806) completed his firstÂ term as an Independent Director of the Bank on MarchÂ 26, 2021. He has requested the Board not to consider

his re-appointment due to his other pre-occupations and priorities. Accordingly, he ceased to be an IndependentÂ Director of the Bank effective March 27, 2021.

â¢ Â Â Â Mr. Bhaskar Sen (DIN: 03193003) completed his secondÂ term as an Independent Director of the Bank on March 31,Â 2021. Accordingly, he ceased to be an Independent DirectorÂ of the Bank effective April 01, 2021.

â¢ Â Â Â Mr. Sisir Kumar Chakrabarti (DIN: 02848624) completedÂ his second term as an Independent Director of the BankÂ on March 31, 2021. Accordingly, he ceased to be anÂ Independent Director of the Bank effective April 01, 2021.

Necessary disclosures in this regard have been made to the Stock Exchanges, RBI and the Ministry of Corporate Affairs.

The Board places on record its sincere appreciation for the contributions made by Mr. Dixit, Mr. Khan, Mr. Sen and Mr.Â Chakrabarti during their tenure as Independent Directors ofÂ the Bank.

Key Managerial Personnel

Mr. Chandra Shekhar Ghosh, MD & CEO, Mr. Sunil Samdani,

Chief Financial Officer and Mr. Indranil Banerjee, Company Secretary of the Bank are the Key Managerial Personnel of theÂ Bank as per the provisions of the Companies Act and rules madeÂ thereunder. Further, the Board at its meeting held on June 25,Â 2021 while approving the re-appointment of Mr. Ghosh as theÂ MD & CEO of the Bank, also approved his re-appointment as KeyÂ Managerial Personnel of the Bank for a period of three yearsÂ effective July 10, 2021, pursuant to provisions of Section 203 ofÂ the Companies Act.

Meetings of the Board and Board Committees

The Board met fourteen times during the Financial Year 202021 viz. on April 13, 2020, May 08, 2020, May 12, 2020, June 04, 2020, July 13, 2020, July 15, 2020, August 26, 2020, October

12, 2020, November 02, 2020, November 30, 2020, January 12, 2021, January 21, 2021, March 18, 2021 and March 19, 2021.

The details of the Board meetings held during the financial year, attendance of Directors at the meetings, and other details haveÂ been provided separately in the Report on Corporate GovernanceÂ forming part of this Board's Report.

The Bank currently has the following nine Board Committees:

1. Â Â Â Audit Committee

2. Â Â Â Nomination & Remuneration Committee

3. Â Â Â Stakeholders Relationship Committee

4. Â Â Â Risk Management Committee

5. Â Â Â IT Strategy Committee

6. Â Â Â Customer Service Committee

7. Â Â Â Corporate Social Responsibility Committee

8. Â Â Â Committee of Directors

9. Â Â Â Special Committee for Monitoring High Value Frauds

Additionally, meetings of Independent Directors were also held during the financial year under review.

The details with respect to the composition, terms of reference, numbers of meetings held, attendance of members, etc., ofÂ these Board Committees are provided in the Report on CorporateÂ Governance forming part of this Board's Report.

Declaration from Independent Directors

The Bank has received necessary declarations from all the Independent Directors under section 149(7) of the CompaniesÂ Act and Regulation 25(8) of the SEBI LODR that they meet theÂ criteria of independence laid down thereunder. The Board hasÂ reviewed the disclosures of independence submitted by theÂ Independent Directors and is of the opinion that the IndependentÂ Directors of the Bank fulfil the conditions specified in theÂ Companies Act and SEBI LODR and are independent of theÂ management. In the opinion of the Board, Independent DirectorsÂ possess requisite expertise, experience, integrity and proficiencyÂ as required under the applicable laws and policies of the Bank.

Familiarisation Programmes for Independent Directors

The familiarisation programme for the Independent Directors are disclosed in the Report on Corporate Governance forming part ofÂ this Board's Report.

Board Evaluation

Pursuant to the recommendation of the NRC, the Board has framed the 'Performance Evaluation Policy for the Board,Â Committees, Non- Independent / Whole Time Directors andÂ Independent Directors' (the 'Board PE Policy') in accordanceÂ with the relevant provisions of the Companies Act, the SEBIÂ LODR and SEBI Guidance Note on Board Evaluation. In terms ofÂ the Board PE Policy, performance evaluation of the Board andÂ its Committees, Chairman and individual Directors are done on

various parameters. Parameters for the Board include various aspects such as structure, meetings, appointments, agenda,Â discussions, roles and responsibilities, evaluation of risks,Â strategy, governance and compliance, conflict of interest, etc.

Parameters for Board Committees include various aspects such as mandate and composition, effectiveness, meetings, agenda,Â minutes, discussion and dissent, independence, etc.

Parameters for the Directors include various aspects such as knowledge and competency, integrity, functioning, commitment,Â contribution, attendance, initiative, teamwork, communication,Â corporate governance, updates, etc., and in case of IndependentÂ Directors, additional parameters include fulfilment of theÂ independence criteria and their independence from theÂ management.

The evaluation process has been carried out electronically. The Board of Directors has done the evaluation of IndependentÂ Directors where the Independent Director who was subject toÂ evaluation did not participate. Similarly, Independent DirectorsÂ have done the evaluation of the Board as a whole, NonExecutive Chairman and Non-Independent Directors includingÂ the MD & CEO. The Chairman of Board Committees have doneÂ performance evaluation of respective Committees. Thereafter,Â the report on performance evaluation of Directors and ChairmanÂ was submitted to the NRC where the report on performanceÂ evaluation of the Board as a whole and Board Committees wereÂ submitted to the Board for necessary action. The NRC, afterÂ considering the performance evaluation report of Directors,Â made its recommendations to the Board for continuation /Â re-appointment of Directors. Thereafter, the Board consideredÂ the recommendations of the NRC, report on the performanceÂ evaluation of the Board as a whole and the Board Committees.Â The Board evaluation has provided some valuable inputs forÂ optimising the roles and responsibilities, quality, quantityÂ and timeliness of flow of information between the Bank'sÂ management and the Board.

The Board of Directors of the Bank is satisfied with the outcome of the performance evaluation process. They were of theÂ view that the Directors have been discharging their roles andÂ responsibilities as expected by the Board and the regulatoryÂ provisions. Although the Board has undergone some changeÂ during the financial year, it continues to be duly constitutedÂ representing various expertise, skill sets, knowledge andÂ qualification required for the banking business. There was noÂ observation during the performance evaluation of the previousÂ years; so is the case with the current year.

Appointment of Directors

Appointment of Directors on the Board is guided by the provisions of the BR Act and the guidelines/ circulars issuedÂ by the RBI, from time to time, the Companies Act and the SEBIÂ LODR. In view of these provisions, your Bank has adopted aÂ 'Policy on Appointment and fit and proper criteria for Directors'.

In terms of this Policy, while appointing directors, the NRC / Board considers fit and proper criteria, various skill sets,Â professional knowledge, practical experience, integrity, genderÂ diversity and additionally, status of independence in case of

Independent Directors. The details of the same have been included in the Report on Corporate Governance forming partÂ of this Board's Report. The Policy on Appointment and Fit &Â Proper Criteria for Directors of the Bank is available on the Bank'sÂ website:Â https://bandhanbank.com/pdfViewerJS/index.html#../Â sites/default/files/2020-12/Policy-Fit-Proper-Criteria-Director.pdf

Remuneration Policy

Your Bank has formulated and adopted a comprehensive Compensation Policy for its Directors, Key ManagerialÂ Personnel and Employees of the Bank, in terms of SectionÂ 178 of the Companies Act read with the relevant Rules madeÂ thereunder, Regulation 19 of the SEBI LODR and the GuidelinesÂ /Circulars issued by the RBI, in this regard, from time to time.

The details of the same have been included in the Report on Corporate Governance forming part of this Board's Report. TheÂ Compensation Policy of your Bank is available on the Bank'sÂ website: https://bandhanbank.com/pdfViewerJS/index.html#../Â sites/default/files/2020-12/CompensationPolicy.pdf

Employees Remuneration

As on March 31, 2021, your Bank had 49,445 employees. The statement containing particulars of employees as required underÂ Section 197(12) of the Companies Act read with Rule 5(2) ofÂ the Companies (Appointment and Remuneration of ManagerialÂ Personnel) Rules, 2014, are appended separately asÂ Annexure -2(a)Â and forms part of this report. The ratio of the remunerationÂ of each Director to the median remuneration of the employeesÂ of your Bank and other details in terms of Section 197(12)Â of the Companies Act read with Rule 5(1) of the CompaniesÂ (Appointment and Remuneration of Managerial Personnel) Rules,Â 2014, are forming part of this report asÂ Annexure - 2(b).

Employee Stock Options

Your Bank has instituted Employees Stock Option Scheme ('ESOP'), i.e., Bandhan Bank Employee Stock Option Plan SeriesÂ 1 ('ESOP Scheme') to enable its employees to participate in yourÂ Bank's future growth and financial success. Your Bank providesÂ its employees with a platform for participating in importantÂ decision making and instilling long-term commitment towardsÂ the future growth of the Bank by way of rewarding them throughÂ stock options. ESOP Scheme of your Bank is in complianceÂ with the provisions of SEBI (Share Based Employee Benefits)Â Regulations, 2014 ('SEBI SBEB') and no change has been madeÂ therein during the financial year under review. The ESOP SchemeÂ is administrated by the NRC. In terms of the ESOP Scheme, theÂ Options would vest not earlier than one year and not later thanÂ four years from the date of grant as decided by the NRC /Board.Â The Options granted shall be equally vested over four years. TheÂ exercise period shall be a maximum of five years from the dateÂ of the respective vesting of Options. Since your Bank has beenÂ allotting fresh equity shares upon exercise of Options, the sourceÂ of the shares is of primary issuance.

In terms of the Shareholders' approved ESOP Scheme and the Compensation Policy of the Bank, fresh grants have been madeÂ during the financial year under review to the eligible employees.Â None of the Directors was issued the stock options during theÂ financial year under review.

The information pertaining to the ESOP Scheme as prescribed under SEBI SBEB read with SEBI Circular dated June 16, 2015 onÂ requirements specified under the SEBI SBEB, is available on theÂ website of the Bank atÂ https://bandhanbank.com/annual-reports.

Further, as required under SEBI SBEB, the auditor's certificate on the implementation of the ESOP Scheme, in accordance with SEBIÂ SBEB, will be made available electronically at the AGM.

Deposits

Being a banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014 read withÂ Sections 73 and 74 of the Companies Act are not applicable toÂ your Bank. The details of the deposits received and accepted byÂ your Bank as a banking company are enumerated in the financialÂ statements for the financial year ended March 31, 2021 formingÂ part of this annual report.

Internal Financial Controls, Audit and Compliance

Your Bank has an Internal Audit Department ('IAD') and a Compliance Department ('CD'), which independently carryÂ out evaluation of the adequacy of all internal controls. TheseÂ departments ensure that operation and business units adhere toÂ the laid down internal processes and procedures as well as to theÂ regulatory/statutory and legal requirements.

The Compliance Function is one of the key elements in your Bank's corporate governance structure. The compliance startsÂ from the top and, the Board and Senior Management, play anÂ importat role in driving the compliance culture. The Bank remainsÂ committed to adhere to the highest standards of complianceÂ vis-a-vis regulatory prescriptions and internal guidelines. TheÂ Bank has a robust Compliance Policy, outlining the complianceÂ philosophy, and roles and responsibilities of the CD.

The CD assists the Board and Senior Management in managing the compliance risk of the Bank. The department ensures thatÂ overall business of your Bank is conducted in strict adherenceÂ to the guidelines issued by RBI and other regulators, variousÂ statutory provisions, standards and codes prescribed by FEDAI,Â FIMMDA, etc. by evaluating the products / processes, guidingÂ business departments on the various regulatory guidelines withÂ a special emphasis on better understanding of the perspective.

It closely works with operational risk and internal audit functions and monitors various activities of your Bank with more emphasisÂ on active risk management.

As the focal point of contact with RBI and other regulatory entities, the CD evaluates the adequacy of internal controlsÂ and examines any systemic correction that is required, basedÂ on its analysis and interpretation of regulatory guidelines andÂ deviations observed during monitoring and testing. Your BankÂ has a robust Anti Money Laundering ('AML') framework andÂ tools to manage the AML risk. It periodically apprises the AuditÂ Committee of the Board, ('ACB'), the Board and the SeniorÂ Management on compliance levels, based on the changes in theÂ external regulatory environment. The CD submits the complianceÂ report to the ACB at regular intervals providing the complianceÂ status with the laws/rules and regulations applicable to the Bank.

The IAD proactively recommends improvements in operational processes and systems. The Bank has put in place extensiveÂ internal controls including audit trails, appropriate segregationÂ of front- and back-office operations, post-transactionÂ monitoring processes at the backend to mitigate operationalÂ risks. To safeguard the independence, the performanceÂ evaluation of the Chief Compliance Officer ('CCO') and theÂ Chief Audit Executive ('CAE') is carried out by the ACB. ItÂ further reviews the effectiveness of controls and complianceÂ with regulatory guidelines. IAD further ensures independentÂ checks and balances, and adherence to the laid down policiesÂ and procedures of the Bank that are in accordance with theÂ regulatory guidelines.

Considering the internal financial controls, audit and compliance systems of the Bank and the work performed by the auditors,Â including the audit of internal financial controls over financialÂ reporting by the statutory auditors and the reviews performedÂ by management under the supervision of the ACB, the BoardÂ of Directors is of the opinion that the internal financial controlsÂ established and maintained by the Bank are adequate.

Related Party Transactions

There were no materially significant transactions with related parties during the financial year 2020-21, which could lead to aÂ potential conflict of interest between the Bank and these parties.Â Prior omnibus approval is also obtained from the ACB for theÂ related party transactions which are of repetitive nature as wellÂ as for the normal banking transactions which cannot be foreseen.Â The quarterly update on the details of transactions with theÂ related parties, pursuant to the omnibus approval, were placedÂ before the Audit Committee. The Related Party Transactions thatÂ were entered during the financial year under review were on anÂ arm's length basis and were in the ordinary course of business,Â pursuant to the approval of the ACB. Accordingly, there areÂ no Related Party Transactions required to be reported in FormÂ AOC-2. However, necessary disclosure as required under theÂ Accounting Standards (AS 18) read with RBI's Master Circular-Disclosure in Financial Statements- Notes to Accounts dated JulyÂ 01, 2015, has been made in the notes no. 18.13 to the annualÂ financial statements for the financial year 2020-21. Your Bank'sÂ Policy on dealing with Related Party Transactions is available onÂ the Bank's website:Â https://bandhanbank.com/pdfViewerJS/Â index.html#../sites/default/files/2021-06/Details_of_Related_Â Party_Transactions.pdf

Particulars of Loans, Guarantees or Investments

In terms of the provisions of Section 186 (11) of the Companies Act, the provisions of Section 186 of the Companies Act exceptÂ sub-section (1), do not apply to any loan made, any guaranteeÂ given, security provided, or any investment made by a bankingÂ company in the ordinary course of its business. However, theÂ particulars of investments made by the Bank are disclosed in theÂ Financial Statements for the financial year 2020-21, as per theÂ applicable provisions of the BR Act.

Whistle Blower Policy/Vigil Mechanism

The Bank has adopted the Board approved 'Vigilance Policy and Whistle Blower Mechanism', as required under Section 177 of

the Companies Act, Regulation 22 of SEBI LODR and applicable circulars issued by RBI, in this regard. This Policy empowers theÂ employees to raise their concerns relating to fraud, malpracticeÂ or any other activity or event, which is against the interests ofÂ the Bank or society as a whole. According to this Policy, theÂ ACB has been entrusted with the responsibility of reviewingÂ the complaints received and the action taken thereof. DetailedÂ information on the Vigil Mechanism of the Bank is provided inÂ the Report on the Corporate Governance which forms part of thisÂ Board's Report.

Significant and Material Orders passed by Regulators or Courts or Tribunals

During FY 2020-21, no significant or material orders were passed by any Regulators or Courts or Tribunals against the BankÂ impacting its going concern status and operations in future.

Statutory Auditors and their Report

The Members of the Bank at the 5th AGM held on June 28,

2019 had approved the appointment of Deloitte Haskins & Sells, Chartered Accountants (ICAI Firm Registration Number 117365W)Â as the Statutory Auditors of the Bank for a period of four years fromÂ the conclusion of the 5th AGM till the conclusion of the 9th AGM,Â subject to the approval of the RBI on an annual basis. In termsÂ of the 'Guidelines for Appointment of Statutory Central AuditorsÂ (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excludingÂ RRBs), UCBs and NBFCs (including HFCs)' dated April 27, 2021Â ('RBI Guidelines') issued by RBI, banks shall appoint the StatutoryÂ Auditors for a continuous period of three years, subject to the firmsÂ satisfying the eligibility norms each year and the approval of RBIÂ on an annual basis. Since Deloitte Haskins & Sells will completeÂ two years as Statutory Auditors at the conclusion of the 7th AGM,Â they may continue as Statutory Auditors for one more year i.e. tillÂ the conclusion of the 8th AGM to be held in 2022, subject to theÂ approval of RBI on an annual basis. Accordingly, on the basis of theÂ recommendation of the ACB, the Board has recommended the reappointment of Deloitte Haskins & Sells as Statutory Auditors for aÂ period of one more year to the RBI for approval.

The Report, given by the Auditors on the financial statements of the Bank for the financial year ended on March 31,

2021, forms part of this Annual Report. There has been no qualification, reservation, adverse remark or disclaimer givenÂ by the Auditors in their Report. Also, no offence of fraud wasÂ reported by the Auditors of the Bank under section 143(12) ofÂ the Companies Act.

Further, in terms of the RBI Guidelines and the Bank's Policy for Appointment of Statutory Auditors, your Bank is requiredÂ to appoint two statutory Auditors. Accordingly, the Board ofÂ Directors, on the recommendation of the ACB, has recommendedÂ the name of M. M. Nissim & Co. LLP, Chartered Accountants (ICAIÂ Firm Registration No. 107122W/W100672) as the first preferredÂ firm, to act as the joint Statutory Auditors of the Bank, to RBIÂ for approval for a period of one year. The Board of Directors hasÂ also recommended the appointment of M. M. Nissim & Co. LLP,Â Chartered Accountants (ICAI Firm Registration No. 107122W/Â W100672), as Joint Statutory Auditors of the Bank, for a periodÂ of three years to hold office from the conclusion of the 7th

AGM until the conclusion of the 10th AGM of the Bank, for the approval of the shareholders at the ensuing AGM, subject toÂ the approval of RBI on an annual basis. M. M. Nissim & Co. LLPÂ shall act as the joint Statutory Auditors of the Bank along withÂ Deloitte Haskins & Sells till the conclusion of the 8th AGM andÂ thereafter act as joint Statutory Auditors of the Bank with suchÂ other new joint Statutory Auditor(s) who will be appointed byÂ the Bank subject to prior approval from RBI and approval of theÂ shareholders of the Bank.

Secretarial Auditors and their report

Pursuant to the provisions of Section 204 of the Companies Act, the Board has appointed CS Anjan Kumar Roy, PractisingÂ Company Secretary (C.P. 4557) as Secretarial Auditor to conductÂ Secretarial Audit of the Bank for FY 2020-21. Accordingly, theÂ Secretarial Audit Report for FY 2020-21 is enclosed to this Board'sÂ Report asÂ Annexure - 3. There are no qualifications, reservations,Â adverse remarks or disclaimers in the Secretarial Audit Report.

No offence or fraud was reported by the Secretarial Auditor of the Bank under section 143(14) of the Companies Act.

Cost Records

In terms of the provisions of Section 148(1) of the Companies Act read with Rule 3 of the Companies (Cost Records and Audit)Â Rules, 2014, your Bank is not required to maintain cost recordsÂ and accordingly is not required to undergo cost audit.

Corporate Governance

Corporate governance is based on the principles of conducting business with integrity, fairness and being transparent in allÂ transactions, making necessary disclosures. Decisions are madeÂ in compliance with the laws of the land, with full accountabilityÂ and responsibility towards the stakeholders, and a commitmentÂ to conducting all business in an ethical manner. Your Bank isÂ committed to achieving the highest standards of CorporateÂ Governance and adhering to the Corporate GovernanceÂ requirements set by the regulators. A separate section onÂ Corporate Governance standards followed by your Bank andÂ the relevant disclosures, as stipulated under the SEBI LODR, theÂ Companies Act and rules made thereunder, is enclosed to thisÂ Board's Report asÂ Annexure -4.

A Certificate from CS Deepak Kumar Khaitan, Practising Company Secretary (C.P. No. 5207), confirming compliance by your Bank toÂ the conditions of Corporate Governance as stipulated under SEBIÂ LODR, is annexed to the Report on Corporate Governance, whichÂ forms part of this Board's Report.

Annual Return

Pursuant to the provisions of Section 92(3) read with Section 134(3)(a) of the Companies Act, the Annual Return as ofÂ March 31, 2021, is available on your Bank's website atÂ https://Â bandhanbank.com/annual-reports.

Management Discussion and Analysis

The Management Discussion and Analysis report for the financial year 2020-21, as prescribed under SEBI LODR, forming part ofÂ this report asÂ Annexure - 5.

Business Responsibility Report

In terms of the provisions of SEBI LODR, a Business Responsibility Report describing the initiatives taken by your Bank from anÂ environmental, social and governance perspective is formingÂ part of this report asÂ Annexure - 6.

Integrated Reporting

The Bank has prepared an Integrated Report based on the principles enunciated by the International Integrated ReportingÂ Council which has been hosted on the website of the Bank andÂ can be accessed at https://www.bandhanbank.com/annual-reports. The report provides information including financial andÂ non-financial parameters which would enable the members toÂ make well informed decisions and have a better understanding ofÂ the Bank's performance. It also deals with various aspects such asÂ organisational strategy, governance framework, performance andÂ prospects of value creation, based on the six forms of capital viz.Â financial capital, manufactured capital, intellectual capital, humanÂ capital, social and relationship capital, and natural capital.

Compliance with Secretarial Standards

The Board of Directors affirms that your Bank has complied with the applicable Secretarial Standards issued by the Institute ofÂ Company Secretaries of India (SS-1Â andÂ SS-2) relating to MeetingsÂ of the Board, its Committees and the General Meetings.

Information Under the Sexual Harassment of Women at Workplace (Prevention, Prohibition andÂ Redressal) Act, 2013

Your Bank has adopted zero tolerance towards any action on the part of any of its employees, which may fall under the ambitÂ of 'sexual harassment' at workplace and is fully committed toÂ uphold and maintain the dignity of every woman constituentÂ associated with your Bank. It takes all necessary measuresÂ to ensure a harassment free workplace and has instituted anÂ Internal Committee for redressal of complaints and to prevent/Â prohibit sexual harassment, in compliance with the guidelinesÂ enumerated in the Sexual Harassment of Women at WorkplaceÂ (Prevention, Prohibition and Redressal) Act, 2013. At theÂ beginning of the financial year under review, two complaintsÂ were pending and during the financial year, seven complaintsÂ were received, out of which six complaints have been closedÂ during the financial year. Three complaints were pending at theÂ end of the financial year, out of which two complaints have sinceÂ been closed.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Energy and natural resource conservation have been one of the focus areas for your Bank and conscious efforts are beingÂ made towards improving energy performance, year on year. InÂ our endeavour to achieve aggressive goals to reduce carbonÂ footprints, the conservation of energy has been integrated withÂ the vision of the organisation and its operations. Some of theÂ steps undertaken by your Bank towards conservation of energyÂ are as under:

â¢ Â Â Â Creating flexibility in the smart building systems to achieveÂ the highest level of efficiency.

â¢ Â Â Â At banking outlets, the focus is on insulation on walls andÂ roof, optimum window wall ratio, premises shape andÂ orientation, and re-engineering and retrofit of equipment.

â¢ Â Â Â Tracking of energy consumptions at all levels and comparingÂ with the best international benchmarks.

â¢ Â Â Â Incorporation of smart meters for energy use monitoringÂ and engagement with key stakeholders at regular intervalsÂ to drive energy conservation in the organisation culture.

â¢ Â Â Â Inclusion of the latest technologies in air-conditioningÂ and inductive equipment in terms of variable drives andÂ improved IKW (Consumption per Ton) in HVAC.

â¢Â Â Â Â Lighting:Â Incorporation of 100 per cent. LED for lighting,Â day light harvesting, timed illumination of signage throughÂ central monitoring system.

â¢Â Â Â Â Daily operations and usage -Â Conservation through basicÂ hygiene practices on energy usage through occupancyÂ sensors, zoning of electrical circuits and master switches forÂ premises.

â¢Â Â Â Â Water Conservation:Â Ground water recharge facilitiesÂ through rain water harvesting in upcoming projects,Â volume flow controls at each sink point, water recyclingÂ through STPs.

During the pandemic, the travel needs were met through video conferencing across the organisation using multiple platformsÂ adding to your Bank's contribution towards the carbon foot printÂ reduction.

The details on the Information Technology used by your Bank in its operations have been provided under section on 'InformationÂ Technology at the Bank' in this Report.

The foreign exchange earnings of the Bank was ?47 lakh (including the net gains arising in all exchanges/derivativesÂ transactions) whereas the foreign exchange outgo was of ?76Â lakh during the financial year 2020-21.

Human Resource Management

Your Bank understands the power of human motivation and dedicated efforts to achieve the desired goal. As a Bank, we areÂ proud of our employees who have served throughout the yearÂ during this COVID-19 pandemic as an exemplar of customerÂ service. Our focus includes rewarding and recognizing theÂ performance, ensuring a safe and competitive work environmentÂ for the employees and providing a platform for sustainableÂ growth. The Human Resource Department also drives theÂ initiatives for the employees' wellbeing, by way of subsidisedÂ loans and also, more importantly for their physical wellbeing.

During FY 2020-21, your Bank increased its employee strength to 49,445 from 39,750. Your Bank has also added 129 Retail Banking

Branches, 618 Banking Units and 4 Home Loan Centres. Series of programmes were conducted to meet the on-going learning andÂ development needs in the Bank and promote an environment ofÂ learning, self-growth and excellence. The learning architecture inÂ your Bank focuses on:

â¢ Â Â Â Developing tailor-made, competency based programmesÂ for different sets of employees, based on their roles andÂ functional area in the Bank.

â¢ Â Â Â Induction and onboarding programmes for the new hiresÂ through online and offline mode.

â¢ Â Â Â Training the front line bankers on several aspects ofÂ Compliance, AML, Risk and Regulatory norms.

â¢ Â Â Â Specifically designed tailor made programme deliveredÂ by specialists for Leadership roles covering areas such asÂ conflict management, people management, etc.

â¢ Â Â Â Competency based succession plan for majority of theÂ roles; overall 7,000 employees were identified for theÂ higher role.

â¢ Â Â Â Competency based promotion process to nurture identifiedÂ talent.

â¢ Â Â Â Identification of critical resources and differentiated careerÂ path for retaining the critical resources.

â¢ Â Â Â Creating a fresh talent pool by adding resources fromÂ college campuses and the NextGen Banker's Programme.

â¢ Â Â Â Introduction of the COVID-19 homecare programme forÂ staffs, with approximately 600 impacted staffs utilized theÂ professional service.

â¢ Â Â Â Digitisation of the various HR processes to enhanceÂ employee experience.

Your Bank has completed the annual appraisal process during the financial year under review for all the eligible employes and amidÂ all the crisis employees were paid their annual increments andÂ performance-based variable pay/bonuses. Overall approximatelyÂ 31,000 employees participated in the process. Your Bank has alsoÂ taken various precautionary measures during the pandemic crisisÂ and successfully executed the banking operations by optimizingÂ workforce deployment.

The Bank provides training through a wide range of training programmes, to employees across departments and functions, toÂ build their professional competence and improve their skill sets,Â and thus, enable them to contribute to your Bank's mission.

Risk Management

Your Bank manages a variety of risks that can significantly affect its financial performance and ability to meet the expectations ofÂ its customers, shareholders, regulators and other stakeholders.

Risk is part of our Business Model. Your Bank measures and manages risk as part of its business, including in connection

with the products and services it offers to its customers. The risks we take include financial such as credit, interest rate,Â market, liquidity and non-financial such as operational includingÂ compliance, strategic and reputation risks.

The Board of Directors has the overall responsibility for the Bank's Risk Management, including culture and governance framework.Â The Risk Management Committee of the Board ('RMCB') assistsÂ the Board in discharging these responsibilities effectively.

Risk Appetite & Risk Profile

The management defines and the Board approves your Bank's risk appetite, which is the amount of risk your Bank isÂ comfortable sustaining given its existing level of resources. RiskÂ appetite defines which risks are acceptable and at what levelÂ and guides businesses and risk leaders. Risk appetite boundariesÂ are set within the Bank's risk-bearing capacity. Your Bank's riskÂ appetite is articulated in a statement of risk appetite, which isÂ approved at least annually by the Board.

Your Bank's risk profile is a holistic representation of all risks, that it holds at a point in time, in the form of a dashboard. Your BankÂ monitors its risk profile, and the Board quarterly reviews reportsÂ and analysis concerning its risk profile.

Your Bank continuously monitors its risk appetite, and the Board reviews periodic risk appetite reports and analyses.

Risk and Strategy

Your Bank's risk profile, risk capacity, risk appetite, and risk management effectiveness (i.e., the holistic measure of theÂ quality and effectiveness of your Bank's risk managementÂ activities, including the functional or programmatic use ofÂ controls and capabilities to manage risks) are considered in theÂ strategic planning process, which is closely linked with the Bank'sÂ capital planning process ('ICAAP').

Your Bank's Integrated Risk Management Department ('RMD')Â participates in strategic planning at several points and in theÂ process, providing a challenge to an independent assessment ofÂ the Bank's self-assessment of the risks associated with strategicÂ planning initiatives. RMD also independently assesses theÂ impact of the strategic plan on risk capacity, risk appetite, andÂ risk management effectiveness at the principal line of business,Â enterprise function, and at an aggregate Bank level. Post effectiveÂ review by the management, the strategic plan is presented to theÂ Board every year for its review and approval thereon.

Everyone Manages Risk

Every employee creates risk in the course of performing business activities and is required to manage that risk. Risk is thereforeÂ everyone's responsibility. Every employee is required to complyÂ with applicable laws, regulations, and Bank policies.

Risk and Culture

Senior management sets the "tone at the top" by supporting a strong culture, defined by the Bank's expectations, that guidesÂ how employees conduct themselves, work with colleagues,

and make decisions. The Board holds senior management accountable for establishing and maintaining the right cultureÂ and effectively managing risk. Employees are strongly encouragedÂ and expected to speak up as and when they see somethingÂ that could cause harm to any stakeholder of the Bank riskingÂ its reputation. This is because risk management is everyone'sÂ responsibility, all employees are expected to challenge riskÂ decisions when appropriate and to escalate their concerns whenÂ they have not been addressed appropriately. Your Bank has aÂ well-defined Whistle Blower Policy in place.

Employee performance evaluations are tied to and take into account, effective risk management. Your Bank's performanceÂ management and incentive compensation programmes areÂ designed to establish a balanced framework between risk andÂ reward under core principles that employees are expectedÂ to know and practice. The Board, through its respectiveÂ Committees, plays an important role in overseeing and providingÂ credible challenge to your Bank's performance management andÂ incentive compensation programmes.

Risk Management Framework

Your Bank's risk management framework sets forth the core principles on how the Bank seeks to manage and govern itsÂ risk. Many Bank policies and documents anchor to the riskÂ management framework's core principles.

The RMCB annually reviews and approves the risk management framework. Your Bank's utmost priority is to strengthen byÂ building the right risk and control infrastructure. Your BankÂ continues to enhance its risk management programmes,Â including the non-financial risk management in accordanceÂ with Industry's best practices and regulatory guidelines. TheÂ Board assesses management's performance, provides credibleÂ challenges, and holds management accountable for maintainingÂ an effective risk management programme and for adhering to riskÂ management expectations.

Board Committee Structure

The Board carries out its risk oversight responsibilities directly and through its Committees. RMCB reviews and recommendsÂ the Bank's risk management framework and oversees itsÂ implementation, including the processes established by theÂ management to identify, assess, measure, monitor, and manageÂ risks. It also monitors the Bank's adherence to its risk appetite.

In addition, the RMCB oversees the Risk Management Department ('RMD') and the performance of the Chief RiskÂ Officer ('CRO') who reports functionally to the RMCB andÂ administratively to the MD & CEO.

Management Committee Structure

The Bank has established management committees, that support management in carrying out its governance and risk management

responsibilities. Each management governance committee is expected to discuss, document, and make decisions regardingÂ significant risk issues, emerging risks, and risk acceptances;Â review and monitor progress related to critical and high-riskÂ issues and remediation efforts within its scope, including lessonsÂ learned; and report key challenges, decisions, escalations, otherÂ actions, and open issues to a Board committee, as appropriate.

In addition, the CRO has the authority to escalate risks and issues directly to the RMCB.

Risk Operating Model - Roles and Responsibilities

The Bank has three lines of defence: the Front Line, Independent Risk Management and Internal Audit. Your Bank's risk operatingÂ model creates necessary interaction, interdependencies, andÂ ongoing engagement among the lines of defence:

â¢Â Â Â Â Front Line:Â The front line, which is composed of our fiveÂ principal lines of business and certain activities of enterpriseÂ functions, is the first line of defence. In the course of itsÂ business activities, the front line identifies, measures andÂ assesses, manages, controls, monitors, and reports on theÂ risk associated with its business activities and balances riskÂ and reward in decision making while remaining within theÂ Bank's risk appetite.

â¢Â Â Â Â Risk Management Department ('RMD')Â is the second lineÂ of defence. It establishes and maintains your Bank's riskÂ management programme and provides oversight, includingÂ the challenge to and independent assessment of the frontÂ line's execution of its risk management responsibilities

â¢Â Â Â Â Internal Audit Department ('IAD')Â is the third line ofÂ defence. It is responsible for acting as an independentÂ assurance function and validates that the risk managementÂ programme is adequately designed and functioningÂ effectively.

Risk Type Classifications

Your Bank uses common classifications, hierarchies, and ratings to enable consistency across all risk management programmesÂ and aggregation of information. Risk type classifications permitÂ the Bank to identify and prioritise its risk exposures, includingÂ emerging risk exposures.

Operational Risk Management:Â Operational risk, is the risk resulting from inadequate or failed internal processes, peopleÂ and systems, or external events. The RMCB has primary oversightÂ responsibility for all aspects of operational risk, includingÂ significant supporting programmes and/or policies regardingÂ your Bank's business resiliency and disaster recovery, and third-party risk management. As part of its oversight responsibilities,Â the RMCB reviews and recommend significant operational riskÂ policies and oversees the Bank's operational risk managementÂ programme.

At the management level, Operational Risk Management, which is part of RMD, has oversight responsibility for operational risk.Â Operational Risk Management reports to the CRO and providesÂ periodic reports related to operational risk to the OperationalÂ Risk Management Committee ('ORMC') as also to the RMCB.

Your Bank is committed to providing uninterrupted service to its customers. Therefore, it is essential to protect the criticalÂ infrastructure in the Bank from natural and manmade disasters /Â events and ensure business continuity of the various operationalÂ units. Business Continuity Management (BCM) Policy has beenÂ put in place with the objective to recover critical activities andÂ systems within defined timelines; the safety of people and itsÂ assets; communicate with stakeholders during an emergency;Â manage reputation risk, etc. BCM Committee ('BCMC') isÂ responsible to ensure Business Continuity Plan ('BCP') capabilitiesÂ in the organization and their regular testing.

The Bank has the following framework in place to monitor Business Disruption Risk:

â¢ Â Â Â Having trackers for identifying major risk due to BusinessÂ Disruption.

â¢ Â Â Â Assessment of BCP test results and DR Drill report toÂ identify a gap.

â¢ Â Â Â Identifying risk areas related to BCP while carrying outÂ assessment of any product or process or during field visitÂ or by any other means and raising the same with theÂ concerned stakeholder for resolution.

â¢ Â Â Â Identifying Business Disruption Risk (if any) during Risk andÂ Control Assessments as per the defined calendar.

During the COVID-19 pandemic, the BCMC formed a QRT (Quick Response Team) to ensure business continuity and resilience.

The RMD continues to plan and monitor your Bank's COVID-19 business Continuity and resilience in terms of (i) EffectivenessÂ of Business Continuity Plan; (ii) Emerging Risks especiallyÂ Information Security and Cyber-attacks with the onset of WorkÂ From Home (WFH) process; (iii) Present and Emerging LiquidityÂ position; (iv) Communications/Awareness for staff and customers;Â (v) Emerging Credit Risk on segmental portfolio; (vi) Impact onÂ other pillar 2 risks : Reputation, Strategic & Business Risk andÂ (vii) People Risk in terms of employee workplace safety; amongstÂ others. Regular reports on the same get reviewed by RMCBÂ during the period.

Information securityÂ is a significant operational risk for financial institutions such as Bandhan Bank and includes the riskÂ arising from unauthorised access, use, disclosure, disruption,Â modification, or destruction of information or informationÂ systems. The Information Security function, part of the RMD,Â is headed by the Chief Information Security Officer ('CISO')Â reporting into the CRO.

The Board is actively engaged in the oversight of your Bank's information security risk management and cyber defenceÂ programmes. The RMCB and the Information Technology StrategyÂ Committee of the Board ('ITSCB') have oversight responsibility forÂ the same. A Technology Advisory Committee ('TAC'), comprising

Senior Executives from IT and Information Security Department ('InfoSec') functions of the Bank and external experts analysesÂ the technical requirements whereas the Information SecurityÂ Committee ('ISC') looks into the entire gamut of the InformationÂ Security and comprises the CRO, CISO, CIO and other seniorÂ functionaries. ISC reports into the ITSCB which provides oversightÂ of technology, information security, and cybersecurity risks asÂ well as data management risk.

Your Bank, like other financial institutions, continues to be the target of various evolving and adaptive cyber-attacks, includingÂ malware, ransomware, phishing, and denial-of-service, as partÂ of an effort to disrupt the operations of financial institutions,Â potentially test their cybersecurity capabilities, commit fraud,Â or obtain confidential, proprietary or other information. Cyberattacks have also focused on targeting online applications andÂ services, such as online banking, as well as cloud-based andÂ other products and services provided by third parties, andÂ have targeted the infrastructure of the internet causing theÂ widespread unavailability of websites and degrading websiteÂ performance.

Your Bank has not experienced any material losses relating to these or other types of cyber-attacks. Cybersecurity risk is aÂ priority for Bandhan Bank, and we continue to develop andÂ enhance our controls, processes and systems in order to protectÂ our networks, computers, software and data from attack, damageÂ or unauthorised access. Your Bank is also proactively involvedÂ in industry cybersecurity efforts and working with other parties,Â including our third-party service providers and governmentalÂ agencies, to continue to enhance defences and improve resiliencyÂ to cybersecurity threats.

Your Bank has started its in-house Cyber Security Centre ('C-SOC'), which is further enhancing better analyses and control.

Outsourcing Risk

Your Bank has outsourced a good part of the IT activities to a third party. Additionally, some of the non-IT activities haveÂ been also outsourced to external vendors. Considering the riskÂ involved in these outsourcing arrangements, the Bank has put inÂ place a well-defined outsourcing policy. The Central OutsourcingÂ Committee of the Bank is responsible to manage outsourcingÂ risk during the onboarding of new vendors and perform regularÂ reviews of existing vendors and outsourced activities. Your BankÂ has also defined indicators for Outsourcing Risk including risk in ITÂ Outsourcing. The indicators are regularly tracked and reviewed byÂ the Risk Department. Adverse findings are reported to concernedÂ authorities.

Compliance riskÂ (a type of operational risk) is the risk resulting from the failure to comply with laws (legislation, regulations andÂ rules) and regulatory guidelines, and the failure to appropriatelyÂ address associated impacts, including to customers. ComplianceÂ risk encompasses violations of applicable internal policies,Â programme requirements, procedures, and standards related toÂ ethical principles applicable to the banking industry. Your BankÂ has an independent Compliance Department, headed by the

Chief Compliance Officer ('CCO') who oversees such compliances. A Compliance Committee, comprising the senior business andÂ control executives and chaired by the MD & CEO has been put inÂ place from the year under review.

Fraud Risk:Â A comprehensive approach to combat fraud has become a prerequisite and any organization that fails to protectÂ itself appropriately, faces increased vulnerability to fraud.

Your Bank has framed an effective fraud risk management framework to establish a strong internal control framework toÂ detect, investigate, report and identify frauds at the earliest. TheÂ framework follows P-D-R (Prevention, Detection and Response)Â model.

Your Bank has also put in place a Fraud Prevention and Monitoring Committee ('FPMC') which deliberates on the allegedÂ incidents referred to it by respective departments, as fraud orÂ not and direct concerned departments for necessary actions.Â Fraud risk indicators at the Enterprise Level and Business level (asÂ applicable) get defined and tracked and reviewed by RMCB on aÂ regular basis.

Conduct risk, a sub-category of Operational risk, is the risk of inappropriate, unethical, or unlawful behaviour on the part ofÂ employees or individuals acting on behalf of the Bank, causedÂ by deliberate or unintentional actions or business practices.

The RMCB reviews the conduct risk components as part of your Bank's risk culture. Apart from the annual review of the status ofÂ the Risk culture as part of CRO's Annual Risk Report; the RMCBÂ during this financial year has started reviewing the status on aÂ quarterly basis and has approved the Bank's overall approach toÂ the Risk Culture.

Considering the legal risk involved in various activities of the Bank the following risk framework is in place to address legal riskÂ in the Bank;

â¢ Â Â Â Legal risk parameters with the threshold at Enterprise andÂ Business level (as applicable) has been defined and getÂ tracked.

â¢ Â Â Â Legal department is a permanent member of the changeÂ management framework.

â¢ Â Â Â Trend analysis of legal cases (against the Bank and by theÂ Bank), identifying emerging legal risk in the Bank, analysis ofÂ legal cases to identify the concern areas that get reportedÂ to the ORMC and RMCB on a regular basis.

Credit Risk

Your Bank defines credit risk as the risk of loss associated with a borrower or counterparty default (failure to meet obligations inÂ accordance with agreed upon terms). Credit risk exists with manyÂ of our assets and exposures such as debt security holdings andÂ loans. At the management level, the Credit Risk function, whichÂ is part of RMD, has oversight responsibility for credit risk. CreditÂ Risk reports to the CRO and supports periodic reports related toÂ Credit Risk to the Credit Risk Management Committee ('CRMC')Â consisting of senior executives from Business and Risk andÂ chaired by the MD & CEO and also to the RMCB.

Your Bank manages credit risk by establishing what it believes are sound credit policies for underwriting new business, whileÂ monitoring and reviewing the performance of our existing loanÂ portfolios. Your Bank employs various credit risk managementÂ and monitoring activities to mitigate risks associated withÂ multiple risk factors affecting loans including:

â¢ Â Â Â Loan concentrations and related credit quality;

â¢ Â Â Â Counterparty credit risk;

â¢ Â Â Â Economic and market conditions;

â¢ Â Â Â Legislative or regulatory mandates;

â¢ Â Â Â Changes in interest rates.

Your Bank's credit risk management oversight process is governed centrally, but provides for direct management and accountabilityÂ by the lines of business. The overall credit process includesÂ comprehensive credit policies, disciplined credit underwriting,Â frequent and detailed risk measurement and modelling, regularÂ credit training programmes, and a continual loan review andÂ audit process. A key to the credit risk management is adherenceÂ to a well-controlled underwriting process, suited to the businessÂ segment and size of the loan.

Asset/Liability ManagementÂ involves evaluating, monitoring and managing interest rate risk, market risk, liquidity andÂ funding. Primary oversight of all these risks resides with theÂ RMCB, which oversees the administration and effectivenessÂ of risk management policies and processes used to assessÂ and manage these risks. At the management level, the AssetÂ Liability Management Committee ('ALCO'), which consists ofÂ senior management from finance, risk and business groups,Â oversees these risks and reviews periodic reports providedÂ to the RMCB. For market risk activities of the Trading Book, aÂ separate management level oversight committee Market RiskÂ Management Committee ('MRMC') has been constituted thisÂ financial year with senior executives from Finance, Treasury andÂ Risk departments.

Interest rate riskÂ is created in the role of a financial intermediary for customers based on investments such as loans and otherÂ extensions of credit and debt securities. Interest rate risk canÂ have a significant impact to our earnings. Your Bank is subject toÂ interest rate risk because:

â¢ Â Â Â Assets and liabilities may mature or reprice at differentÂ times. If assets reprice faster than liabilities and interestÂ rates are generally rising, earnings will initially increase;

â¢ Â Â Â Assets and liabilities may reprice at the same time but byÂ different amounts;

â¢ Â Â Â Short-term and long-term market interest rates may changeÂ by different amounts. For example, the shape of the yieldÂ curve may affect yield for new loans and funding costsÂ differently;

â¢ Â Â Â The remaining maturity for various assets or liabilities mayÂ shorten or lengthen as interest rates change; or

â¢ Interest rates may have a direct or indirect effect on loan demand, collateral values, credit losses, mortgageÂ origination volume, and other financial instruments.

The objective of effective liquidity management is to ensure that the Bank can meet customer loan requests, customer depositÂ maturities/withdrawals and other cash commitments efficientlyÂ under both normal operating conditions and under periods ofÂ Bank-specific and/or market stress. To achieve this objective, theÂ Board establishes liquidity guidelines that require sufficient asset-based liquidity to cover potential funding requirements and toÂ avoid over-dependence on volatile, less reliable funding markets.Â These guidelines are monitored on a monthly basis by the ALCOÂ and on a quarterly basis by the RMCB. Your Bank has alwaysÂ maintained a Liquidity Coverage Ratio ('LCR'), much above theÂ minimum LCR requirement of 100 per cent., which is calculatedÂ as HQLA (High Quality Liquid Assets) divided by projected netÂ cash outflows, as each is defined under the LCR rule.

Your Bank engages in trading activities to accommodate the investment and risk management activities of the customersÂ and to execute economic hedging to manage certain balanceÂ sheet risks. Income earned on the financial instruments used inÂ the trading activities include net interest income, changes in fairÂ value and realized gains and losses.

Reputational Risk

Trust is the bedrock of any business relationship. As such, reputational risk has long been recognized as a key risk byÂ business leaders and often tops the list of risks of most concernÂ to the senior executives. In the wake of tremendous rise of socialÂ media, reputational risk has gained a new importance in theÂ corporate world.

In your Bank, reputational risk is handled as mentioned in the External Communications Policy of the Bank. Your Bank uses aÂ listening tool to monitor the brand mentions in the digital space.Â Through the PR agency, the Bank monitors media reports aboutÂ the Bank. The branches reach out to the central office in case ofÂ any media queries in the branch.

Your Bank is fully aware of the importance of reputational risk, and has put reputation as one of the anchors (along with earning,Â capital and liquidity) for finalising its Risk appetite and from thisÂ financial year has included a Reputation Risk Dashboard as partÂ of Enterprise Risk Dashboard which gets reviewed by the RMCBÂ and the Board at quarterly intervals.

Strategic riskÂ is the risk to Earnings, Capital, or Liquidity arising from adverse business decisions, improper implementation ofÂ strategic initiatives, or inadequate responses to changes in theÂ external operating environment.

Your Bank's strategic plan till 2020 focused mainly on defending core markets in microfinance, building a good liability franchiseÂ along with strong CASA ratios and building a customer base in

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traversing the path, the Bank has come up with a new 5-year Strategy Document (2020-25); which can help it to break into theÂ next orbit.

Accordingly, the Board through the Risk Appetite Framework has put low tolerance towards any threats to the effective andÂ efficient delivery of the Strategy plans.

Your Bank is monitoring the Strategic Risk by tracking the following parameters:

â¢ Â Â Â Assumptions made by the Bank in forming its strategic planÂ and their alignment with the macro-economic environment

â¢ Â Â Â Bank's Strategy plans vis-a-vis achievements

Information Technology at the Bank

Information Technology has been a pivotal role player in the promising journey of the Bank. Few major initiatives areÂ mentioned below:

â¢ Â Â Â Integration of various applications through robustÂ Middleware and API Gateway platform.

â¢ Â Â Â Development of an Enterprise Data Lake as a SingleÂ Source of Truth for all Data elements. This application isÂ being designed to house Internal, External, Structured,Â Unstructured and Semi-Structured Data.

â¢ Â Â Â Modernisation of the Loan Origination Platform. Further,Â the Bank has implemented a new Tab Banking solution forÂ its Micro Credit Business, as part of Financial Inclusion.

â¢ Â Â Â Bank has set up its own Data Center ('DC') and DisasterÂ Recovery ('DR') Center with state-of-the-art technology andÂ has started migrating the Applications to the new DC & DR.

Material Changes and Commitment Affecting Financial Position of the Bank

There were no material changes and commitments, affecting the financial position of the Bank, which has occurred between theÂ end of the financial year of the Bank i.e. March 31, 2021 and theÂ date of this Board's Report.

Directors' Responsibility Statement

Pursuant to the provisions of Section 134(3)(c) read with Section 134(5) of the Companies Act, the Directors hereby confirm that:

i. Â Â Â In the preparation of the annual accounts, the applicableÂ accounting standards have been followed along with properÂ explanation relating to material departures;

ii. Â Â Â They have selected such accounting policies and appliedÂ them consistently and made judgments and estimates thatÂ are reasonable and prudent so as to give a true and fairÂ view of the Bank's state of affairs as on March 31, 2021, andÂ of its profit for the financial year ended on that date;

iii. Â Â Â They have taken proper and sufficient care for theÂ maintenance of adequate accounting records in accordanceÂ with the provisions of the Companies Act for safeguardingÂ the assets of the Bank and for preventing and detectingÂ fraud and other irregularities;

iv. Â Â Â They have prepared the annual accounts on a goingÂ concern basis;

v. Â Â Â They have laid down internal financial controls to beÂ followed by the Bank and that such internal financialÂ controls were adequate and were operating effectively; and

vi. Â Â Â They have devised proper systems to ensure complianceÂ with the provisions of all applicable laws and that suchÂ systems were adequate and operating effectively.

Acknowledgements and Appreciations

The Board of Directors of your Bank extends its gratitude for

the invaluable support and guidance received from the Reserve

Bank of India, other government and regulatory authorities, and

financial institutions. The Board also thanks the correspondent banks for their cooperation and help. The Board acknowledgesÂ the support of its shareholders, and also places on record itsÂ sincere thanks to its valued clients and customers for theirÂ patronage.

The Board also expresses its deep sense of appreciation to all the employees for displaying their strong work ethics, excellenceÂ at work, professionalism, teamwork, commitment and initiative,Â which has led to the Bank making commendable progress inÂ today's challenging environment. Further, the Board extends itsÂ special thanks for the unmatched efforts put in by the employeesÂ of the Bank, during these testing times caused due to theÂ COVID-19 pandemic, to provide uninterrupted services to theÂ customers and is deeply grateful and have immense respect forÂ everyone who risked their life and safety to fight this pandemic,Â and deeply regret the loss of life. Your Board will continue toÂ strive for improvements as your Bank continues on its uniqueÂ journey towards financial inclusion.

Mar 31, 2019

To The Members,

The Directors take great pleasure in presenting the Fifth Annual Report of your Bank''s business and operations together with the audited accounts for the financial year (''FY'') ended March 31, 2019.

Financial Performance of the Bank

The financial highlights for the financial year under review, are presented below:

Summary of Financial Performance (Rs. In Crore)

Particulars	For year ended
Particulars	As on March 31, 2019	As on March 31, 2018
Deposits:	43,231.62	33,869.00
- Savings Bank Deposits	14,008.04	9,209.39
- Current Account Deposits	3,609.69	2,414.53
- Term Deposits	25,613.89	22,245.08
Advances (Net):	39,643.39	29,713.04
- Cash credits, overdrafts and loans repayable on demand	975.84	1,149.39
- Term loans	38,667.55	28,563.65
Total Assets/Liabilities	56,441.71	44,310.06
Net Interest Income	4,496.10	3,032.24
Non-Interest Income:	1,063.05	706.18
Operating Expenses (excluding depreciation) Profit before Depreciation, Provisions and Tax Depreciation	1,732.79 3,826.36 78.17	1,222.39 2,516.03 85.92
Provisions	735.14	374.21
Profit before Tax	3,013.05 1,061.55 1,951.50	2,055.90
Provision for Tax		710.34
Profit After Tax		1,345.56
Balance in Profit & Loss Account brought forward from previous year	2,057.60	1,048.43
Appropriations:	487.87 87.85
Transfer to Statutory Reserve		336.39
Transfer to Investment Fluctuation Reserve		-
Transfer to Capital Reserve	5.94	-
Dividend Paid (Including Dividend Distribution Tax)	143.80 3,283.64 16.36	-
Balance carried over to Balance Sheet		2,057.60
EPS (Basic)		12.26
EPS (Diluted)	16.34	12.26

The Bank commenced its banking business with effect from August 23, 2015 with 501 branches across India. In a span of about three years, the Bank has expanded its presence significantly in metro, urban, semi-urban and rural areas. As on March 31, 2019, its network consisted of 4,000 banking outlets, of which 71 per cent are in rural & semi urban areas, demonstrating your Bank''s commitment to financial inclusion. To further the cause of financial inclusion, the Bank has augmented its Doorstep Service Centres (''DSCs'') from 2,764 on March 31, 2018 to 3,014 as on March 31, 2019. With the expanding network of branches and DSCs, the number of customers grew during the FY 2018-19 from 1.30 crore to 1.65 crore with a corresponding growth in total deposits by 27.64 per cent to Rs.43,231.62 crore, of which Rs.17,617.73 crore (40.75 per cent) was Current Account and Savings Account (''CASA'') deposits.

During FY 2018-19, your Bank enhanced shareholders'' value by increasing its total income by 39.91 per cent to Rs.7,707.10 crore as against the total income for FY 2017-18 of Rs.5,508.48 crore.

The profit after tax (''PAT'') as at the end of the financial year was Rs.1,951.50 crore an increase of 45.02 per cent over the previous year of Rs.1,345.56 crore. Further Return on Average Equity (''ROAE'') was 19.00 per cent in FY 2018-19 against 25.98 per cent in FY 2017-18. Return on Average Asset (''ROAA'') was 4.23 per cent in FY 2018-19 against 4.06 per cent in FY 2017-18. The Bank''s basic earnings per share (''EPS'') increased from Rs.12.26 to Rs.16.36, and diluted earnings per share from Rs.12.26 to Rs.16.34 for FY 2017-18 and FY 2018-19, respectively. The net interest margin (''NIM'') was 10.43 per cent in FY 2018-19 against 9.69 per cent in FY 2017-18.

The Reserve Bank of India (''RBI'') has mandated Priority Sector Lending (''PSL'') of 40 per cent of advances for all the Banks. For your Bank, this was an opportunity to leverage on its primary strength as it continues to focus on financial inclusion by providing various financial services to the underserved. During FY 2018-19, your Bank''s PSL went up from Rs.28,211 crore (net of IBPC of Rs.2,425.81 crore) on March 31, 2018 to Rs.37,888.15 crore (net of IBPC of Rs.4,541.45 crore) on March 31, 2019 of which Rs.28,895 crore was sold to other banks falling short of PSL targets by way of Priority Sector Lending Certificate (''PSLC'') (as against the previous year of Rs.16,454 crore). At the end of FY 2018-19, PSL as a proportion of the gross advances of Rs.40,234.63 crore was 94.17 per cent (after IBPC & including PSLC).

Under the Small Enterprises Loan (''SEL'') scheme loans between Rs.1 lakh and Rs.10 lakh, are offered for income generating activities of small enterprises, which are described as enterprises with equipment investments below Rs.25 lakh. SEL has helped your Bank to enhance its objective of financial inclusion with significant increase in lending to small enterprises. As on March 31, 2019 total SEL loan outstanding was Rs.1,497.36 crore from 84,787 customers as against Rs.1,639 crore from 86,089 customers as on March 31, 2018. The Bank ventured into Gold Loan business during FY 2017-18 with operations at 57 branches in Eastern India. As on March 31, 2019, its outstanding gold loan book stood, at Rs.128.28 crore from 22,619 customers as against Rs.43.1 crore from 8,205 customers as on March 31, 2018. Your Bank has also forayed into the distribution of third- party products/services, which are made available through designated bank branches. The business segment began as a pilot during FY 2017-18 and at present, the Bank distributes mutual funds, standalone health insurance, general insurance and life insurance products. As on March 31, 2019, the Bank distributes mutual funds through 400 branches across various metro and urban locations and 60 semi-urban branches. Currently, your Bank is distributing standalone health insurance products across all branches. The response for the products has been encouraging. The Bank recognises microbanking activities as its core area and strives to perform better in this particular area. However, at the same time your Bank also explores business opportunities in other areas too, with a view to diversify its business risks. Your Bank is also aware of the need for providing best possible services to its ever increasing number of customers particularly those at the bottom of the pyramid. While your Bank uses technology at its optimum level for quality customer services, your Bank also maintains relationship with the customers and addresses the grievances, if any, in a structured and satisfactory manner.

Dividend

The policy is available on the Bank''s website: https://www. bandhanbank.com/pdf/Dividend-Policy.pdf. In line with this policy and in recognition of the financial performance during FY 2018-19 and the promising future prospects, while retaining capital to maintain a healthy capital adequacy ratio to meet prudential and growth requirements, your Directors are pleased to recommend a dividend of Rs.3 per equity share of Rs.10 each fully paid-up (30%) for financial year 2018-19, as against a dividend of Rs.1 per equity share of Rs.10 each fully paid-up (10%) for the financial year 2017-18, for approval by the shareholders at the 5th Annual General Meeting (''AGM'') of the Bank. The dividend shall be subject to tax on distribution of dividend to be paid by the Bank. This reflects overall confidence in your Bank''s ability to consistently grow earnings over a period of time.

In terms of the provisions of Section 124(5) of the Companies Act, 2013 (the ''Act''), the Bank is not required to transfer the unclaimed dividend amount to the Investors Education and Protection Fund as of yet, since the Bank has declared the dividend only for the financial year 2017-18.

Transfer to Reserves

In line with the RBI regulations, the Bank has transferred an amount of Rs.487.87 crore to the statutory reserve during the financial year ended March 31, 2019.

Issuance of Equity Shares & Capital Adequacy Ratio

During the financial year 2018-19, your Bank has issued 2,77,911 equity shares of Rs.10 each pursuant to exercise of stock options by the eligible Employees of the Bank aggregating to Rs.27,79,110.

Post allotment of aforesaid equity shares, the issued, subscribed and paid-up share capital of your Bank stood at Rs.11,93,08,28,550 comprising 1,19,30,82,855 equity shares of Rs.10 each fully paid-up.

Your Bank has not issued any equity shares with differential voting rights during the financial year.

Your Bank''s capital adequacy ratio (CAR), calculated in line with the RBI Circular on Capital Adequacy Framework, stood at 29.20 per cent on March 31, 2019, well above the minimum regulatory requirements of 10.875 per cent, out of which Tier 1 Capital Ratio was 27.88 per cent and Tier 2 Capital Ratio was 1.32 per cent.

Proceeds from Public Issues:

During the previous year ended March 31, 2018 the Bank has raised capital of Rs.3,662.40 crore through Initial Public Offer (''IPO'') by issuing 9,76,63,910 Equity shares of Rs.10 each. Pursuant to Regulation 32 of the SEBI LODR, your Bank hereby confirms that there has been no deviation in the use of IPO proceeds from the objects stated in the prospectus.

The funds raised through IPO has been fully utilised and statement of the utilisation of the IPO proceeds as on March 31, 2019 is as under:

Particulars	Amount (Rs. in Crore)
Gross proceeds of IPO issue- A	3,662.40
Less: Public issue expenses- B	65.37
Net proceeds from Public issue- C = (A-B)	3,597.03
Less: Amounts utilised for the purpose received- D	3,597.03
Balance E = (C-D)	NIL

Rating of Various Debt Instruments

Instrument	Rating (As on March 31, 2019)	Rating Agency	Amount (Rs. In crore)
Unsecured Subordinated Non-Convertible Debenture	CARE AA- Stable*	CARE Ratings	160
Unsecured Subordinated Non-Convertible Debenture	[ICRA]AA &	ICRA	160
Term Loans From Banks	[ICRA]AA &	ICRA	80
Certificate of Deposit	[ICRA]A1	ICRA	3,000

*/& Under Rating Watch with Developing Implications

During the year, ICRA has re-affirmed the short-term rating of [ICRA]A1 (pronounced ICRA A one plus) for the certificates of deposit programme of your Bank, which has been enhanced to Rs.3,000 crore from Rs.1,500 crore.

Performance and Financial Position of the Subsidiaries

Your Bank did not have any subsidiaries, associates or Joint Venture Companies during the financial year 2018-19.

Scheme of Amalgamation

In terms of the Guidelines for Licensing of New Banks in the Private Sector issued by the RBI on February 22, 2013 ("Licensing Guidelines") and Licensing conditions, Bandhan Financial Holdings Limited ("BFHL" or the "NOFHC"), the holding company of the Bank was required to bring its excess shareholding to 40% of the paid-up voting equity capital of the Bank within three years from the commencement of operation of the Bank, i.e., by August 22, 2018. The Bank and NOFHC have been exploring various options/opportunities to bring the shareholding to the prescribed level. In view of this, the Board of Directors of the Bank at its meeting held on January 07, 2019, after considering the report of the Audit Committee, have considered and approved scheme of amalgamation of GRUH Finance Limited (''Transferor Company") into and with Bandhan Bank Limited ("Transferee Company" or the "Bank") and their respective Shareholders and Creditors under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013, the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and other relevant provisions under applicable law ("Scheme"), subject to receipt of applicable regulatory and statutory approvals.

The Scheme contemplates the amalgamation of Transferor Company into and with the Transferee Company and the dissolution without winding up of the Transferor Company pursuant thereto. The share exchange ratio for the amalgamation of the Transferor Company into and with the Transferee Company shall be 568 (five hundred and sixty-eight) fully paid-up equity shares of face value of Rs.10 each of the Transferee Company for every 1,000 (one thousand) fully paid-up equity shares of Rs.2 each of the Transferor Company (share exchange ratio).

The appointed date for the Scheme shall be January 01, 2019, or such other date as may be mutually agreed between the Transferor Company and Transferee Company and is the date with effect from which the Scheme shall be operative. A copy of the Scheme setting out the rationale and other information along with various documents as prescribed under SEBI Circular ref. no. CFD/DIL3/CIR/2017/21 dated March 10, 2017 are available on the website of the Bank and can be accessed at https://www.bandhanbank.com/Scheme-Amalgamation-Gruh-Finance-Limited.aspx.

On the effectiveness of the Scheme, the shareholding of NOFHC in the Bank would be reduced from current 82.26% to 61% (approx.) of the paid-up voting equity share capital of your Bank post issue of voting equity shares to the shareholders of the Transferor Company in terms of the share exchange ratio.

Your Bank has made necessary applications to various authorities seeking approval on the Scheme of Amalgamation, the status of the same is given herein below:

- Reserve Bank of India vide its letter dated March 14, 2019 conveyed it''s ''No-objection'' for the voluntary amalgamation of GRUH Finance Limited into and with the Bank.

- BSE Limited vide letter dated April 03, 2019, has issued its observation letter as required under Regulation 37 of the SEBI LODR with "no adverse observation" to the proposed Scheme.

- National Stock Exchange of India Limited vide letter dated April 03, 2019, has issued its observation letter as required under Regulation 37 of the SEBI LODR with "no-objection" to the proposed Scheme.

- The Competition Commission of India (''CCI'') by way of its letter dated April 15, 2019 intimated that, at its meeting held on April 15, 2019, it had considered the proposed combination Comb Reg no. (C-2019/03/651) pursuant to the Scheme and approved the same under sub-section (1) of Section 31 of the Competition Act, 2002.

- The Bank has also filed the Company Application in relation to the Scheme with the Hon''ble National Company Law Tribunal, Kolkata bench on April 04, 2019. The Company Application has been heard on April 23, 2019 and stood adjourned for further hearing on May 06, 2019.

In terms of Regulation 38 of the SEBI LODR read with Rule 19(2) and Rule 19A of the Securities Contracts (Regulation) Rules, 1957, your Bank is required to bring the public shareholding to the level of at least 25% within three years of listing of equity shares on the stock exchanges ,i.e., by March 2021. With a view to further facilitate listed entities to comply with the minimum public shareholding ("MPS") requirements, the Securities and Exchange Board of India ("SEBI") has by way of its circular dated February 22, 2018 bearing reference number SEBI/HO/CFD/CMD/CIR/P/43/2018 ("SEBI Circular"), prescribed the various methods to comply with the MPS requirements. However, the methods prescribed under the SEBI Circular does not include amalgamation as an express method to comply with MPS requirements. On the effectiveness of the Scheme of Amalgamation, the public shareholding in the Bank would increase from current 17.74% to 39% (approx.). Accordingly, your Bank had made an application to SEBI, seeking approval for adoption of the proposed Scheme of Amalgamation as a method to comply with the norms of MPS as required under Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957. Pursuant to the Bank''s application to SEBI, SEBI has by way of its letter dated April 03, 2019, conveyed its approval for adoption of the Scheme of Amalgamation as a method under clause (ix) of the Annexure to the SEBI Circular to comply with the MPS norms, subject to compliance with the terms and conditions specified therein.

Board of Directors

As on March 31, 2019, the Board of your Bank consisted of twelve Directors out of which nine are Independent Directors, one Nominee Director (Non-executive) of Caladium Investment Pte. Ltd, one Non-Executive Non-Independent Director and one Managing Director and CEO.

Appointments

Dr. Allamraju Subramanya Ramasastri

Pursuant to the recommendation of the Nomination and Remuneration Committee (''NRC''), the Board of Directors of the Bank approved the appointment of Dr. Allamraju Subramanya Ramasastri (DIN: 06916673) as an Additional Director (Independent) of the Bank, with effect from August 08, 2018. Pursuant to the provisions of Section 161 of the Act, he continues to hold office as an Additional Director of the Bank, up to the date of the ensuing Annual General Meeting (''AGM'') or the last date on which the AGM should have been held, whichever is earlier. Your Bank has received a notice in writing from a member proposing the candidature of Dr. Ramasastri as a Director on the Board of the Bank. Further, the NRC and the Board of Directors of the Bank have also recommended his appointment as an Independent Director, not liable to retire by rotation, to the Shareholders at the ensuing AGM for a period of three years with effect from August 08, 2018.

Dr. Anup Kumar Sinha

Pursuant to the recommendation of the NRC, the Board of Directors of the Bank approved the appointment of Dr. Anup Kumar Sinha (DIN: 08249893) as an Additional Director (Independent) of the Bank, with effect from January 07, 2019. Pursuant to the provisions of Section 161 of the Act, he continues to hold office as an Additional Director of the Bank, up to the date of the ensuing AGM or the last date on which the AGM should have been held, whichever is earlier. Your Bank has received a notice in writing from a member proposing the candidature of Dr. Sinha as a Director on the Board of the Bank. Further, the NRC and the Board of Directors of the Bank have also recommended his appointment as an Independent Director, not liable to retire by rotation, to the Shareholders at the ensuing AGM for a period of three years with effect from January 07, 2019.

Additionally, pursuant to the recommendation of NRC, the Board of Directors of the Bank at its meeting held on January 07, 2019 have also approved the appointment of Dr. Anup Kumar Sinha as Non-Executive Part-Time Chairman of the Bank for a period of three years with effect from January 07, 2019. The Board also approved the remuneration of Rs.24 lakh per annum (consolidated) in addition to sitting fees and reimbursement of other expenses for attending meetings of the Board and Committees and traveling and official expenses for performing his duty as Non-Executive Part-time Chairman of the Bank, subject to approval of the Shareholders. The appointment and remuneration of Dr. Sinha as the Non-Executive Part-time Chairman of the Bank has been pursuant to approval of the RBI.

Mr. Santanu Mukherjee

Pursuant to the recommendation of the NRC, the Board of Directors of the Bank approved the appointment of Mr. Santanu Mukherjee (DIN: 07716452) as an Additional Director (Independent) of the Bank, with effect from January 07, 2019. Pursuant to the provisions of Section 161 of the Act, he continues to hold office as an Additional Director of the Bank, up to the date of the ensuing AGM or the last date on which the AGM should have been held, whichever is earlier. Your Bank has received a notice in writing from a member proposing the candidature of Mr. Mukherjee as a Director on the Board of the Bank. Further, the NRC and the Board of Directors of the Bank have also recommended his appointment as an Independent Director, not liable to retire by rotation, to the Shareholders at the ensuing AGM for a period of three years with effect from January 07, 2019.

Re-appointment

Dr. Holger Dirk Michaelis

In terms of the provisions of Section 152 of the Act, out of the two Non-Executive Non-Independent Directors, Dr. Holger Dirk Michaelis (DIN: 07205838), Nominee Director, being longest in office, shall retire at the ensuing AGM and being eligible, offers himself for re-appointment.

Ms. Thekedathumadam Subramani Raji Gain

Ms. Thekedathumadam Subramani Raji Gain (DIN: 07256149) was appointed as an Independent Director of the Bank with effect from August 06, 2015 for a period of three years. Accordingly, pursuant to the recommendation of NRC, the Board of Directors at their meeting held on July 18, 2018 had approved the re-appointment of Ms. Gain as an Independent Director of the Bank for a period of four years with effect from August 06, 2018, which is subject to approval of Shareholders of the Bank by way a special resolution. Your Bank had received a notice in writing from a member proposing the re-appointment of Ms. Gain as a Director on the Board of the Bank. Further, the NRC and the Board of Directors of the Bank have also recommended her re-appointment as an Independent Director, not liable to retire by rotation, for the approval of Shareholders at the ensuing AGM, for second term of four years with effect from August 06, 2018, by way of special resolution.

Relevant details including the profiles of the above named persons setting out their accomplishments are appended to the Explanatory Statement accompanying the Notice for the AGM and report on Corporate Governance forming part of this Annual Report.

Shareholders Approved Appointments

During the financial year 2018-19, pursuant to recommendations of the NRC and the Board of Directors of the Bank, the Shareholders of the Bank at its fourth AGM held on July 19, 2018 had approved the following appointments:

- Mr. Ranodeb Roy (DIN: 00328764), Non-Executive Non-Independent Director, who retired by rotation and being eligible, offered himself for re-appointment, was re-appointed by the Shareholders.

- Mr. Chandra Shekhar Ghosh (DIN: 00342477) was re-appointed as Managing Director & CEO of the Bank, for a period of three years with effect from July 10, 2018. The RBI vide its letter dated July 04, 2018 had approved the re-appointment of Mr. Ghosh as Managing Director & CEO of the Bank for a period of three years with effect from July 10, 2018 till July 09, 2021.

- Mr. Harun Rasid Khan (DIN: 07456806) was appointed as an Independent Director of the Bank for a period of three years with effect from March 27, 2018, not liable to retire by rotation.

- Mr. Snehomoy Bhattacharya (DIN: 02422012) was re-appointed as an Independent Director of the Bank, with effect from July 09, 2018 for a period of four years, not liable to retire by rotation.

- Prof. Krishnamurthy Venkata Subramanian (DIN: 00487747) was re-appointed as an Independent Director of the Bank, with effect from July 09, 2018 for a period of five years, not liable to retire by rotation. However, Prof. Subramanian resigned from the Board which was effective from January 04, 2019.

- Mr. Chintaman Mahadeo Dixit (DIN: 00524318) was re-appointed as an Independent Directors of the Bank, with effect from July 09, 2018 for a period of two years, not liable to retire by rotation.

- Mr. Sisir Kumar Chakrabarti (DIN: 02848624) was re-appointed as an Independent Director of the Bank, with effect from April 01, 2018 for a period of three years, not liable to retire by rotation.

- Mr. Bhaskar Sen (DIN: 03193003) was re-appointed as an Independent Director of the Bank, with effect from April 01, 2018 for a period of three years, not liable to retire by rotation.

- Ms. Georgina Elizabeth Baker (DIN: 06601316) was appointed as a Nominee Director (Non-executive Director -category Professional) of International Finance Corporation and IFC FIG Investment Company I (jointly) on the Board of the Bank with effect from July 26, 2016. Ms. Baker ceased to be a Director of the Bank with effect from August 31, 2018, pursuant to withdrawal of her nomination by IFC.

- Dr. Holger Dirk Michaelis (DIN: 07205838) was appointed as a Nominee Director (Non-executive Director - category Professional) of Caladium Investment Pte. Ltd. on the Board of the Bank with effect from February 12, 2016.

Cessations

Dr. Ashok Kumar Lahiri

Dr. Ashok Kumar Lahiri (DIN: 07234290), Non-Executive Part-time (Independent) Chairman of the Bank, had demitted from the office with effect from the close of business hours on April 09, 2018, due to his difficulties in discharging the duties satisfactorily as he was simultaneously a Member of the Fifteenth Finance Commission.

Thereafter, Pursuant to the recommendation of the NRC, the Board of Directors of the Bank approved the appointment of Mr. Harun Rasid Khan (DIN: 07456806) as the Non-Executive Part-time Chairman of the Bank with effect from June 05, 2018 subject to approval of the RBI. Due to non-receipt of the RBI approval and increasing commitment of Mr. Khan in his other work areas, the Bank submitted an application under Section 10B of the Banking Regulation Act, 1949 with the RBI for appointment of Dr. Anup Kumar Sinha as Non-Executive Part-time Chairman of the Bank on the basis of recommendation of the NRC and the Board. In terms of the approval received from the RBI and the recommendation of the NRC, the Board at their meeting held on January 07, 2019 approved the appointment of Dr. Anup Kumar Sinha as Non-Executive Part-time Chairman of the Bank for a period of three years with effect from January 07, 2019.

Mr. Pravir Kumar Vohra

Mr. Pravir Kumar Vohra (DIN: 00082545) who was appointed as an Additional Director (Independent) of the Bank, not liable to retire by rotation, with effect from June 05, 2018 for a period of three years, had resigned from the office with effect from June 25, 2018 due to conflict of his responsibilities with another opportunity he was considering in the financial services sector.

Mr. Boggarapu Sambamurthy

Mr. B. Sambamurthy (DIN: 00246211), Independent Director, ceased to be a Director of the Bank with effect from July 09, 2018, due to completion of his tenure of three years as an Independent Director as approved by the Shareholders.

Ms. Georgina Elizabeth Baker

Ms. Georgina Elizabeth Baker (DIN: 06601316), Nominee Director, International Finance Corporation (IFC) and IFC FIG Investment Company I (jointly) ceased to be a Director of the Bank with effect from August 31, 2018, pursuant to withdrawal of her nomination by IFC.

Prof. Krishnamurthy Venkata Subramanian

Prof. Krishnamurthy (DIN: 00487747), Independent Director of the Bank, tendered his resignation from the office of Director of the Bank with effect from December 23, 2018 vide his communication dated January 04, 2019 due to his appointment as the Chief Economic Advisor (CEA) to the Government of India. Accordingly, in terms of the provisions of Section 168(2) of the Act, Prof. Krishnamurthy ceased to be a Director of the Bank with effect from January 04, 2019.

The Board places on record its sincere appreciation for the valuable services rendered by Dr. Ashok Kumar Lahiri, Mr. B. Sambamurthy, Prof. Krishnamurthy Venkata Subramanian, Ms. Georgina Elizabeth Baker and Mr. Pravir Kumar Vohra during their association with the Bank in the capacity of Chairman / Directors.

Apart from the above, no other Director was appointed or has resigned during the year under review.

Key Managerial Personnel

Mr. Chandra Shekhar Ghosh, Managing Director & CEO, Mr. Sunil Samdani, Chief Financial Officer and Mr. Indranil Banerjee, Company Secretary of the Bank are the Key Managerial Personnel as per the provisions of the Act and rules made thereunder.

Meetings of the Board and Board Committees

The Board met thirteen times during the Financial Year 2018-19, viz., on April 09, 2018, April 27, 2018, June 04, 2018, June 05, 2018, July 18, 2018, August 08, 2018, October 10, 2018, October 31, 2018, November 14, 2018, January 07, 2019, January 10, 2019, February 26, 2019 and February 27, 2019. The details of Board meetings held during the financial year, attendance of Directors at the meetings, etc., have been provided separately in the Report on Corporate Governance forming part of this Annual Report.

The Bank currently has following nine Board Committees, additionally the meeting of Independent Directors was also held during the financial year:

1. Audit Committee

2. Nomination & Remuneration Committee

3. Risk Management Committee

4. Customer Service Committee

5. Corporate Social Responsibility Committee

6. Stakeholders Relationship Committee

7. IT Strategy Committee

8. Special Committee for monitoring High Value Frauds

9. Committee of Directors

The details with respect to the composition, terms of reference, numbers of meetings held, etc., of these Board Committees are provided in the Report on Corporate Governance forming part of this Annual Report.

Corporate Social Responsibility

Your Bank has constituted the Corporate Social Responsibility (''CSR'') Committee of the Board of Directors, in accordance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility) Rules, 2014, as amended.

The CSR initiatives of your Bank are undertaken through Bandhan-Konnagar which is a Society Registered under the West Bengal Societies Registration Act, 1960. Various programmes run by Bandhan-Konnagar include targeting the hard core poor (THP), education, health, employment generation. Through the THP programme, assistance is extended to the women who are destitute or below the pyramid section of the society of a designated area where they are brought to the mainstream with support and guidance. The education programme are run through various pre-primary and primary schools across various areas and assisting them to enter the proper education system. The heath programme is attributed to development of awareness and provide basic necessary health support, awareness development for improvement of hygiene and guidance. Through the employing the unemployment programme the basic training is given to the youth who find some way to engage themselves either in running entrepreneurship or engaging in the service after completion of their training. Your Bank''s objective is to help people from economically backward communities join the mainstream society by enabling them to generate sustained income on their own in due course.

The details of CSR activities/projects undertaken during the year is given as Annexure - 1 and forms part of this Board''s Report. The CSR Policy as recommended by the CSR Committee and approved by the Board is available on the Bank''s website: https://www. bandhanbank.com/pdf/CSR-Policy-New-Format.pdf.

Declaration from Independent Directors

The Bank has received necessary declarations from all the Independent Directors under Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI LODR that they meet the criteria of independence laid down thereunder. The Board of Directors of the Bank has reviewed the disclosures of independence submitted by the Independent Directors and is of the opinion that the Independent Directors of the Bank fulfil the conditions specified in the Act and SEBI LODR and are independent of the management.

Familiarisation Programmes for Independent Directors

The familiarising programme for the Independent Directors are disclosed in the Report on Corporate Governance that forms part of this Annual Report.

Board Evaluation

Pursuant to the recommendation of NRC, the Board of Directors of the Bank has approved the Performance Evaluation Policy which laid down evaluation process and criteria for the performance evaluation of all the Directors including Chairman, MD & CEO, Board Level Committees and the Board as a whole. Details of Board Evaluation process and performance evaluation carried out for financial year 2018-19 is included separately in the Report on Corporate Governance forming part of this Annual Report.

Appointment of Directors

Appointment of Directors on the Board of the Bank is guided by the provisions of the Banking Regulation Act, 1949 and the rules framed thereunder, the Companies Act, 2013 and the SEBI LODR. Further, the Board considers various skill sets, practical experience, gender diversity while appointing directors on the Board of the Bank. The details of the same have been included in the Report on Corporate Governance forming part of this Annual Report.

Remuneration Policy

The Board of Directors of the Bank had formulated and adopted compensation policy and HR Policy for Remuneration of Employees of the Bank including the Executive Directors and the remuneration of Non-Executive Directors including the Chairman of the Bank are governed by the respective regulatory provisions. The details of the same have been included in the Report on Corporate Governance forming part of this Annual Report.

Employees Remuneration

As on March 31, 2019, your Bank had 32,342 employees. The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are appended separately as Annexure - 2(a) and form part of this report. The ratio of the remuneration of each Director to the median remuneration of the employees of the Bank and other details in terms of Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure - 2(b).

Employee Stock Options

Your Bank has instituted Employees Stock Option Plans to enable its employees to participate in your Bank''s future growth and financial success. Your Bank provides its employees a platform for participating in important decision making and instilling long-term commitment towards future growth of the Bank by way of rewarding them through stock options. Accordingly, with the approval of the Shareholders of the Bank, the Bank had instituted an Employees Stock Option Scheme (ESOP), i.e., Bandhan Bank Employee Stock Option Plan Series I (''Scheme''). In terms of the Shareholders'' approved Scheme and the remuneration Policy of the Bank, NRC has approved the grant of 22,20,725 Stock Options to the eligible Employees of the Bank at a grant price of Rs.180 per Option in the month of December 2017 under Tranche 1.

The Scheme was approved by the shareholders of the Bank in the general meeting before the Initial Public Offering (''IPO'') of the Bank on March 27, 2018. However, in terms of compliance of Regulation 12 of the SEBI (Share Based Employee Benefits) Regulations, 2014 (''SEBI SBEB'') the Scheme is required to be approved by the shareholders after the IPO of the Bank. Accordingly, your Bank proposes to seek the shareholders approval of the Scheme which was approved by the shareholders before the IPO of the Bank. In view of the above Regulations, your Bank has made no grants under the Scheme after the listing of its equity shares on the stock exchanges pursuant to the IPO. Approval of the Shareholders'' of the Bank is being sought on the Scheme along with granting of additional 5,25,36,327 ESOPs under the Scheme in multiple tranches in terms of the provisions of the SEBI SBEB which is forming part of the AGM Notice.

The Scheme is administrated by the NRC. In terms of the Scheme, the Options would vest not earlier than one year and not later than four years from the date of grant as decided by the Board / NRC. The Options granted shall be equally vested over four years. The exercise period shall be maximum of five years from the date of respective vesting of Options. Further, the source of shares is primary in nature, since your Bank has been issuing new equity shares upon exercise of Options. None of the Directors were

The information pertaining to Employee Stock Options as prescribed under SEBI SBEB read with SEBI Circular dated June 16, 2015 on Requirements specified under the SEBI (Share Based Employee Benefits) Regulations, 2014 is attached as Annexure - 3.

Deposits

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

The details of the deposits received and accepted by your Bank as a banking company are enumerated in the financial statements for the financial year ended March 31, 2019.

Internal Financial Controls, Audit and Compliance

Your Bank has an Internal Audit department and a Compliance department, which independently carry out evaluation of the adequacy of all internal controls. These departments ensure that operating and business units adhere to laid down internal processes and procedures as well as to regulatory and legal requirements. The audit department also proactively recommends improvements in operational processes and service quality. The Bank has put in place extensive internal controls including audit trails, appropriate segregation of front- and back-office operations, post-transaction monitoring processes at the backend to mitigate operational risks. It further ensures independent checks and balances, and adherence to the laid down policies and procedures of the Bank are according to regulatory guidelines. Your Bank has adhered to the highest standards of compliance and governance and has placed controls and appropriate structure to ensure this.

To safeguard independence, the internal audit department reports directly to the Chairman of the Audit Committee of the Board. The Audit Committee of the Board also reviews the performance of the Audit department and Compliance department. It further appraises the effectiveness of controls and compliance with regulatory guidelines. The Board of Directors confirms that there are internal controls in place with reference to the Financial Statements and that such controls are operating effectively.

Related Party Transactions

There were no materially significant transactions with related parties including promoters, Directors, key managerial personnel or relatives of the Directors during the financial year 2018-19, which could lead to a potential conflict of interest between the Bank and these parties. The details of the transactions with related parties, if any, were placed before the Audit Committee from time to time. There were no material individual transactions with related parties, which were not in the ordinary course of business of the Bank, nor were there any transactions with related parties, which were not on arm''s length basis. Accordingly, AOC-2 is not applicable to the Bank. Necessary disclosure as required under the Accounting Standards (AS 18) has been made in the notes to the financial statements to the extent applicable to the Bank.

Your Bank''s Policy on dealing with Related Party Transactions is available on the Bank''s website: https://www.bandhanbank.com/ pdf/RelatedParty-Transactions-Policy.pdf

Particulars of Loans, Guarantees or Investments

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

Whistle-Blower Policy/Vigil Mechanism

Your Bank has adopted a Whistle-Blower Policy pursuant to which the Bank''s employees can raise their concerns relating to fraud, malpractice or any other activity or event, which is against the interests of the Bank or society as a whole. According to this policy, the Audit Committee has been entrusted with the responsibility of reviewing the complaints received and the action taken thereof. Detailed information on the Vigil Mechanism of the Bank is provided in the Report on the Corporate Governance which forms part of this Annual Report.

Business Responsibility Report

In terms of the provisions of SEBI LODR, a Business Responsibility Report describing the initiatives taken by your Bank from environmental, social and governance perspective is available on the Bank''s website at the link: www.bandhanbank.com

Significant and Material Orders Passed by Regulators or Courts or Tribunals

During FY 2018-19, no significant or material orders were passed by any Regulators or Courts or Tribunals against the Bank impacting its going concern status and operations in future. However, the Reserve Bank of India vide its letter dated September 19, 2018 has imposed two restrictions on the Bank, one is withdrawal of general permission to open new branches whereby the Bank is not permitted to open new branches without the prior approval of the RBI and the other is freezing of remuneration of the MD & CEO at the existing level due to non-compliance of one licensing condition of dilution of excess shareholding of Non-operative Financial Holding Company (''NOFHC'') in the Bank to 40% of the paid-up capital of the Bank, within three years from the commencement of the operations of the Bank. Your Bank has taken initiatives to comply with the only remaining licensing condition and in that regard amalgamation of GRUH Finance Limited into and with the Bank has been approved by the Board by which the existing shareholding of NOFHC in the Bank will be brought down to 61% (approx.). Your Bank along with NOFHC has also initiated several other steps to comply with the only remaining licensing condition at the earliest. Your Bank is constantly in touch with the RBI on the matter.

Statutory Auditors and their Report

The Members of the Bank at the 1st Annual General Meeting held on June 29, 2015 have approved the appointment of S. R. Batliboi & Associates, LLP, Chartered Accountants, (ICAI Firm Registration Number 101049W) as Statutory Auditors of the Bank and was thereafter re-appointed every year with the prior-approval of the RBI and the approval of the Shareholders. However, as per the RBI circular DBS.No.ARS.BC.8/08.91.001/2000-2001 dated January 30, 2001 and DBS.ARS.BC.04/08.91.001/2017-2018 dated July 27, 2017, Statutory Auditors for Private Banks cannot be appointed for more than four years. Hence the term for current Auditors of the Bank will end at the ensuing AGM. Accordingly, on the basis of recommendations of the Audit Committee, the Board of Directors of the Bank have approved the appointment of Deloitte Haskins & Sells, Chartered Accountants (ICAI Firm Registration Number 117365W) as the Statutory Auditors of the Bank for a period of four years from the conclusion of 5th AGM till the conclusion of 9th AGM, subject to approval of Shareholders of the Bank and by the RBI every year as required under the RBI circular dated January 30, 2001 and July 27, 2017 as mentioned above. The approval of the RBI has been received for appointment of Deloitte Haskins & Sells, Chartered Accountants, as the Statutory Auditors of the Bank for the financial year 2019-20, i.e., from the conclusion of 5th AGM till the conclusion of 6th AGM. Accordingly, your Board recommends to the shareholders, the appointment of Deloitte Haskins & Sells, Chartered Accountants (ICAI Firm Registration Number 117365W), as the statutory auditors of your Bank for a period of four years from the conclusion of ensuing AGM till the conclusion of 9th AGM, subject to approval of the RBI on an annual basis.

The Report given by the Auditors on the financial statements of the Bank for the financial year ended on March 31, 2019 forms part of this Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report. Also, no offence of fraud was reported by the Auditors of the Bank.

Secretarial Auditors and their Report

Pursuant to the provisions of Section 204 of the Act, your Bank has appointed Mr. Deepak Kumar Khaitan, Practicing Company Secretary (C.P. 5207) as Secretarial Auditor to conduct Secretarial Audit of the Bank for the FY 2018-19. Accordingly, the Secretarial Audit Report for FY 2018-19 is annexed to this report as Annexure - 4. There are no reservations, adverse remark or disclaimer in the Secretarial Audit Report except three observations, i.e., first w.r.t. the letter dated September 19, 2018 by Reserve Bank of India, which has been explained above under the head ''Significant and Material Orders Passed by Regulators or Courts or Tribunals'', second w.r.t. the Securities and Exchange Board of India (''SEBI'') approving the Scheme of Amalgamation as a method to comply with Minimum Public Shareholding (''MPS'') requirements, which has also been explained above under the ''Scheme of Amalgamation'' and third w.r.t. SGL bouncing. In this regard, it may be noted that no penalty has been levied on the Bank by the RBI during the year ended March 31,2019 and March 31,2018. However a single instance of SGL bouncing occurred on October 04, 2018 due to security being available in Repo account instead of Primary account with the RBI. A lenient view was taken by the RBI and the monetary penalty was waived off with necessary directions vide letter dated October 25, 2018. Appropriate control measures have been taken by your Bank internally to prevent such recurrence.

No offence of fraud was reported by the Secretarial Auditor of the Bank.

Cost Records

In terms of the provisions of Section 148(1) of the Act read with Rule 3 of the Companies (Cost Records and Audit) Rules, 2014, your Bank is not required to maintain cost records and accordingly is not required to undergo cost audit.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Energy and natural resource conservation have been one of the focus area for the Bank and conscious efforts are being made towards improving energy performance, year on year. Some of the steps undertaken by the Bank towards conservation of energy are as under:

- Replacement of CFL and conventional lighting to LED in select premises

- Saving of water through use of Bio-blocks in urinals at Select Large Facilities

- Installations of green locks and AC controllers in air conditioning machines in order to save energy

- Put controls on usage of lifts, ACs, common passage lights and other electrical equipment

Your Bank has used information technology in its operations, details of the same has been provided under section on Information Technology at Bandhan Bank in this Report. The Bank is however, constantly pursuing its goal of technological upgradation in a cost-effective manner for delivering quality customer services.

The Foreign exchange earnings of the Bank for the financial year 2018-19 was Rs.36.49 lakh whereas foreign exchange outgo was of Rs.1.93 crore during FY 2018-2019.

Corporate Governance

Corporate governance is based on the principles of conducting the business with all integrity, fairness, and being transparent with all transactions, making necessary disclosures and decisions, complying with the laws of the land, accountability and responsibility towards the stakeholders and commitment of conducting the business in an ethical manner. Your Bank is committed to achieve the highest standards of Corporate Governance and also adheres to the Corporate Governance requirements set by regulators/applicable laws. A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures, as stipulated under the SEBI LODR, the Act and rules made thereunder is annexed to this Report as Annexure - 5.

A Certificate from CS Deepak Kumar Khaitan, Practicing Company Secretary (C.P. 5207), confirming compliance by the Bank to the conditions of Corporate Governance as stipulated under SEBI LODR, is annexed to the Report on Corporate Governance, which forms part of this Annual Report.

Annual Return

Pursuant to the provisions of Section 134(3)(a) and Section 92(3) of the Act and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return as at March 31, 2019 forms part of this Report as Annexure - 6 and the Annual Return of the Bank as at March 31, 2019 is placed on its website and can be accesses at www.bandhanbank.com.

Management''s Discussions and Analysis

The Management Discussion and Analysis report for the financial year 2018-19 as prescribed under SEBI LODR is enclosed as Annexure - 7 which forms part of this report.

Information Under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

Your Bank has zero tolerance towards any action on the part of any of its employees, which may fall under the ambit of ''sexual harassment'' at workplace and is fully committed to uphold and maintain the dignity of every woman constituent associated with the Bank. It takes all necessary measures to ensure a harassment free workplace and has instituted an Internal Committee for redressal of complaints and to prevent/prohibit sexual harassment, in compliance with the guidelines enumerated in the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints. All the complaints received, decisions taken and dissemination of action initiated by the Bank placed to the Audit Committee of the Board periodically. Details of the cases filed and resolved during the financial year 2018-19 is given hereunder:

Number of	Number of	Number of	Number of
complaints	complaints	complaints	complaints
pending as at	filed during	disposed of	pending as at
the beginning	the financial	during the	the end of the
of the	year	financial year	financial year
financial year
0	14	14	0

Human Resource Management

Your Bank recognises that the human resource is key to organisational success. Thus, the goal of the Human Resources (''HR'') department is to ensure that the employees are recruited, engaged, retained and motivated to contribute to the Bank''s growth and strategic mission. The HR Department proactively engages with employees at all levels for this purpose. Its vision is to create an environment of learning and superior performance in line with the Bank''s corporate values and aligning the personal aspirations of employees to business imperatives.

The employee engagement initiatives place greater emphasis on learning and development, providing opportunities for staff to seek aspirational roles, streamlining the Performance Management System and introducing performance-linked rewards. A host of programmes are being run to meet the ongoing learning and development needs in the Bank and promote a climate of learning, self-growth and excellence. The learning architecture in your Bank focusses on:

1. Developing tailor-made, competency-mapped programmes for different sets of employees, based on their roles in the Bank

2. Induction/orientation of new hires for acquaintance with the culture of the Bank

3. Training on operational risk, audit, compliance and regulatory aspects for frontline staff

4. People management, customer-centric and compliance-based programmes for employees in leadership roles

Through its 11 residential training centres across the country, and through a wide range of training programmes, your Bank has provided 1,00,060 days of training to its people. The trainings were provided to people across departments and functions, to build their professional competence and improve their skill sets, and thus, enable them to contribute to your Bank''s mission.

Additionally, the Bank continues to engage with leading management institutes for leadership and management development programmes and specialised programmes for employees across senior and mid-management levels of staff.

Your Bank believes that the Performance Management (''PM'') process is a powerful driver of individual and corporate performance. An online PM System (''PMS''), with focus on building transparency in performance assessments, employee ownership of the goals and encouraging dialogue on performance and developmental feedback between the appraisee and appraiser, was introduced in your Bank. Softer behavioural attributes, like the employee''s adherence to values of the organisation, customer focus, accountability, ability to work in a team, and others build a culture conducive to sustainable business performance and promote desired behaviour. Recognising their importance, attention was also paid to such softer behavioural attributes.

Your Bank shall continue to leverage and/or align HR practices to build critical organisational capabilities, build a conducive work environment to enhance and shape employee satisfaction, and enable achievement of the strategic goals.

Risk Management Framework

Managing risk is an integral part of the banking business and your Bank aims at delivering a superior stakeholder value by achieving an appropriate equilibrium between risk and return. Your Bank has put in place an Integrated Risk Management framework that articulates its risk appetite and drills down the same into a limit framework for various risk categories. The risk governance framework ensures oversight, monitoring for vulnerability mapping and an integrated evaluation for effective risk management.

The Board of Directors provides oversight on all the risks assumed by the Bank. The Board has established Committees with specific terms of reference to facilitate focused oversight. At organisational level, overall risk management is assigned to an independent Risk Management Committee of Board (''RMCB''). The Bank''s Risk Committee reviews risk management policies, key risk indicators and the limit frameworks including stress test limits for various risks. Policies approved by the Board of Directors or Committees of the Board from time to time constitute the governing framework for each type of risk. Business activities are undertaken within this policy framework.

The Bank has set up various executive-level committees, having participation from various business and control functions, that are designed to review and oversee matters pertaining to various material risks.

Commitment towards the independence of Risk Management Department of the Bank, headed by a Chief Risk Officer (''CRO''), an employee of rich experience and seniority, to facilitate independent evaluation, monitoring and reporting of various risks is supervised by RMCB on a regular basis and reviewed by the Board on an annual basis. The Bank is in constant endeavour to upgrade its system and processes for establishment of an effective risk management system.

Credit Risk

The CRMC reports to the RMCB, the apex body for risk management in the Bank.

Your Bank has a uniqueness in terms of the composition of its credit portfolio with the preponderance of the small ticket microbanking portfolio and is also expanding into the General Banking loans, the Bank has various assessment approaches in tandem with the segmental risk profile of borrowers. Credit Underwriting is not part of Business and reports into a separate Underwriting Unit under the Risk Department. For large size loans, credit proposals are approved at the Head Office Credit Committees depending on the delegation of power vested in them. To limit the magnitude of credit risk, prudential limits are laid down on various aspects of credit, benchmark on various ratios, borrower type limits, industry and sectoral limits, among others.

An independent Credit Risk Management Department (''CRMD''), reporting into the CRO, implements the Credit Risk framework.

Market and Liquidity Risk

The Asset-Liability Management Committee (''ALCO''), reporting into the RMCB, functions as the top operational unit for managing the balance sheet within the performance/risk parameters laid down by the Board. It determines the asset liability management strategy in light of the current and expected business environment and reviews positions of the trading groups and the interest rate and liquidity gap positions on the banking book. The ALCO also sets deposit and benchmark lending rates.

Market risk arises largely from the Bank''s statutory reserve management and trading activity and is managed through a well-defined Board-approved Investment Policy and Market Risk Policy that caps risk in different trading desks or/and various securities through trading risk limits/triggers and is supplemented by a Board approved stress testing framework that simulates various market risk scenarios to measure losses and initiate remedial measures.

Liquidity Risk is the risk that a bank may not be able to meet its short term financial obligations due to an asset-liability mismatch or interest rate fluctuations. Your Bank''s framework for liquidity and interest rate risk management is spelt out in its Asset Liquidity-Management policy that is implemented, monitored and periodically reviewed by the ALCO. The Liquidity Coverage Ratio (''LCR'') seeks to ensure that the Bank has an adequate stock of unencumbered High-Quality Liquid Assets (''HQLA'') that can be converted into cash easily and immediately to meet its liquidity needs under a 30-day calendar liquidity stress scenario. Your Bank is maintaining the LCR limit as prescribed by the RBI.

An independent Market Risk Management Department (''MRMD''), reporting into the CRO, implements the Market & Liquidity Risk framework

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. To manage operational risks, the Bank has in place a comprehensive operational risk management framework, whose implementation is supervised by the Operational Risk Management Committee (''ORMC''), chaired by MD & CEO and reviewed by the RMCB.

The risk framework employs a judicial mixture of quantitative and qualitative assessment tools to assess the operational risk in products and processes. An independent Operational Risk Management Department (''ORMD''), reporting into the CRO, implements the framework.

The Bank has well laid down processes for management of its day-to-day activities which is approved by Product & Process Change Management Committee (''PCMC'') comprising of senior functionaries of Business and Control groups. The Bank follows established, well-designed controls, which include traditional four eye principles, effective separation of functions, segregation of duties, call back processes, reconciliation, exception reporting and periodic MIS.

Your Bank as a part of its strategy, has outsourced significant portion of its Information Technology Operations, an independent Outsourcing Committee comprising of members of Senior Management oversees the outsourcing risk framework under the guidance of the RMCB.

The Bank undertakes fraud risk assessment to identify and understand risks to its business. The Fraud Prevention and Monitoring Committee (''FPMC''), comprising senior functionaries of the Bank, is responsible for identification of frauds, deliberation, analysis of fraud events, gaps in controls and processes and initiate remedial actions and reports into the Audit Committee of the Board(''ACB'').

Information Security Management

The Bank operates in a highly automated environment and makes use of the latest technologies to support various operations. This throws up operational risks such as business disruption, risks related to information assets, data security, integrity, reliability and availability amongst others. In view of the same, your Bank has established an information security architecture to assess its IT-related vulnerabilities and manage the existing and emerging cybersecurity risks.

The IT Strategy Committee of the Board (''ITSCB'') is the apex body through which the Board keeps an oversight on the entire IT strategy of the Bank, including the cybersecurity strategy. The RMCB and the ACB also monitors the InfoSec aspects from their corresponding angles.

The teams monitor systems from the standpoint of operations, availability and security. In the endeavour towards providing high availability and continuity of services to its customers, including high availability of customer-facing IT systems, the Bank has a Board-approved Business Continuity Plan which includes plans for recovery of its IT systems in the event of any disaster or contingency. The Bank has a Board-approved Information Security and Cyber Security Policy which also incorporates a cyber-crisis management plan. The Bank has used the service of renowned auditing firms to conduct Statutory Audit of IT systems and controls. The Bank has laid down processes for change management, identity management, access management and security operations and these processes are periodically reviewed and refined to keep abreast of emerging risks and to ensure that commensurate controls to mitigate such risks are put in place.

With technology becoming an integral part of the banking industry, the Bank has established an information security architecture to assess its IT-related vulnerabilities and manage the existing and emerging cybersecurity risks. A well-documented Board approved information security policy is put in place. In addition, employees mandatorily periodically undergo information security training and sensitisation exercises.

Information Security (InfoSec) Team, under Chief Information Security Officer (''CISO''), reports into the overall Risk Management Department under CRO. The team follows strategies and procedures for managing the processes, tools and policies necessary to prevent, detect, document and counter threats to digital and non-digital information, and automated processes. InfoSec responsibilities include establishing a set of processes that will safeguard information assets regardless of how the information is structured or whether it is in transit/being processed or is at rest in storage. Your Bank is also building up its own independent 24*7 C-SOC (Cyber Security Operations Centre) for state of the art centralised and consolidated cybersecurity incident prevention, security event monitoring, detection and response capabilities.

Your Bank reaches out to customers through various channels, both brick and mortar like Branches & door step centres and click like Internet Banking, Mobile Banking, UPI as also ATMs. The security of digital channels is very critical given high number of cybersecurity incidents getting reported across the globe. Your Bank has taken up various steps, like two-factor authentications, implementation of transaction limit for digital channels, implementation of data leakage prevention solution, monitoring of transactions for card based transactions to protect its digital channels from misuse by external and internal incidents.

Information Technology at Bandhan Bank

Your Bank has taken giant strides in its IT & Digital Initiatives for the Bank. Information technology has played a key driver in this journey with solutions around the key levers of the Bank. Few key initiatives across Payments, Customer Experience, Operational Efficiency and Channel Upgrades are mentioned below:

Payments

BHIM *99#: This initiative has been introduced to drive digital usage of banking services especially in Rural Areas. This form of mobile banking uses Unstructured Supplementary Service Data (''USSD'') channel and can be used by customers without a smartphone. This application provides basic banking services like Fund Transfer and Balance Enquiry through simple steps.

BHIM App: Your Bank has been listed as an issuer in NPCI and other Bank''s Payment System Player (''PSP'') apps so that customers can send and receive funds to/from Bandhan Accounts using Unified Payments Interface as mode of the transaction.

BHIM Bandhan UPI (Google Play store): Your Bank has launched its own Android UPI Application hosted in Google Play store thereby announcing its arrival as a Payment System Player in the UPI Payment Ecosystem.

Bharat QR Customer App (RuPay Version 2) : Enhancement of the Bharat QR App thereby providing additional features to buyers and sellers while performing QR based payments.

Customer Experience

Chatbot: A software driven automated "Question and Answer" bot deployed within the Bandhan Bank website as virtual agents. These agents can serve multiple customers at the same time. Customers now receive response to their basic queries through questions asked to the bot using natural English language.

Home Loan Appraisal System: An intelligent scorecard built on credit score algorithms and set of business rules. This utility equips your Bank''s Credit Underwriters to assess the customer quality during the loan review cycle.

Micro Home Loan: Through this solution, your Bank has been able to help customers by providing loans to build houses as part of affordable housing initiative.

Paperless Insurance Claim: Your Bank has established system integration with its insurance partner, HDFC for digitising the insurance claims.

Agri and Term Loans with Kisan Credit Card: Through this solution, your Bank has been able to support farmers through disbursal of Agri and term loans using their Kisan credit card.

Operational Efficiency

Gold Loan Lead Generation: Through this module, all prospective leads are captured and tracked periodically and effectively by the Bank.

De-Dupe: This utility helps Central Processing Unit Team to validate KYC input errors and rectify them as and where required.

Meet2Govern: End-to-End digitisation of the meeting management software through document generation, meeting schedules and effective workflows.

Data Driven Decision: Branch Health Index: An in-house developed Visual Dashboard to analyse branch performance against defined criterias.

Channels Upgrades

Corporate Internet Banking Upgrade:

1. Delivery of Corporate Internet Banking phase II

In Phase II of Corporate Internet Banking, the Bank has introduced the following functionalities:

i) Bulk file upload for inter-bank & intra-bank Fund Transfers

ii) Account-wise transaction limit set-up

iii) Transaction in Cash Credit (CC) & Overdraft (OD) accounts

2. New functionalities in mBandhan application in Android version:

i) VISA, Rupay Offers

ii) Facility to update E-mail ID

iii) Change of language from "Hotlist Debit Card" to "Block Debit Card"

iv) Option to create and save Nominee details for TD purposes

v) Apply for a new SB/CA/Loan

vi) Favourite Transactions

vii) Update Limits per transaction/daily limit at customer''s end

viii) Sequence change

ix) ATM PIN regeneration

Material Changes and Commitment Affecting Financial Position of the Bank

There was no material changes and commitments, affecting the financial position of the Bank, which has occurred between the end of the financial year of the Bank, i.e., March 31, 2019 and the date of this Directors'' Report.

Compliance with Secretarial Standards

The Board of Directors affirm that the Bank has complied with the applicable Secretarial Standards issued by the Institute of Companies Secretaries of India (SS1 and SS2) respectively relating to Meetings of the Board, its Committees and the General Meetings.

Directors'' Responsibility Statement

Pursuant to the provisions of Section 134(3)(c) read with Section 134(5) of the Act, the Directors hereby confirm that:

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

ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the Bank''s state of affairs as on March 31, 2019, and of its profit for the year ended on that date;

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

iv) they have prepared the annual accounts on a going concern basis;

v) they have laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively.

Acknowledgments

The Board of Directors places on record its gratitude to the RBI, other government and regulatory authorities, financial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the shareholders, and also places on record its sincere thanks to its valued clients and customers for their patronage. The Board also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, teamwork, commitment and initiative, which has led to the Bank making commendable progress in today''s challenging environment. Your Board will continue to ask for more and more improvements as your Bank continues its unique journey by combining microbanking with traditional commercial banking.

For and on behalf of the Board of Directors

Bandhan Bank Limited

Anup Kumar Sinha

Place: Mumbai Non-executive Part-time Chairman

Date: May 02, 2019 (DIN: 08249893)

Mar 31, 2018

Board''s Report

The Members,

The Directors take great pleasure in presenting the Fourth Annual Report of your Bank''s business and operations together with the audited accounts for the year ended March 31, 2018.

Financial Performance of the Bank

The financial highlights for the year under review, are presented below:

Summary of Financial Performance (Rs, In Crore)

Particulars	For the year ended
Particulars	March 31, 2018	March 31, 2017
Deposits:	33,869.00	23,228.66
- Savings Bank Deposits	9,209.39	5,384.72
- Current Account Deposits	2,414.53	1,452.62
- Term Deposits	22,245.08	16,391.32
Advances (Net):	29,713.04	16,839. 08
- Cash credits, overdrafts and loans repayable on demand	1,149.39	344.48
- Term loans	28,563.65	16,494.60
Total Assets/Liabilities	44,310.06	30,236.09
Net Interest Income	3,032.24	2,403.50
Non-Interest Income:	706.18	411.41
Operating Expenses (excluding depreciation)	1,222.39	955.15
Profit before Depreciation, Provisions and Tax	2,516.03	1,859.76
Depreciation	85.92	66.85
Provisions	374.21	88.44
Profit before Tax	2,055.90	17,04.47
Provision for Tax	710.34	592.52
Profit After Tax	1,345.56	1,111.95
Net Profit	1,345.56	1,111.95
Balance in Profit & Loss Account brought Forward From previous year	1,048.43	215.38
Appropriations:
Transfer to Statutory Reserve	336.39	277.99
Transfer to Investment Reserve	-	-
Transfer to Capital Reserve	-	0.91
Transfer to/(from) Reserve Fund	-	-
Surplus carried over to Balance Sheet	2,057.60	1,048.43
EPS (Basic & Diluted)	12.26	10.15

The Bank commenced its banking business with effect from

August 23, 2015 with 501 branches across India. In a span of about three years, the Bank has expanded its presence significantly in metro, urban, semi-urban and rural areas. As on March 31, 2018, its network consisted of 936 branches, of which 30 per cent are in rural areas, demonstrating your Bank''s commitment to financial inclusion. To further the cause of financial inclusion the Bank has augmented its Doorstep Service Centres (DSCs) from 2,443 on March 31, 2017 to 2,764 on March 31, 2018. With the expanding network of branches and DSCs, the number of customers grew during the FY 2017-18 from 1.05 crore to 1.30 crore with a corresponding growth in total deposits by 45.80 per cent to '' 33,869.00 crore, of which Rs, 1 1,623.92 crore (34.32 per cent) was Current Account and Savings Account (CASA) deposits.

During FY 2017-18, your Bank enhanced shareholdersRs, value by increasing its total income by 27.51 percent to Rs, 5,508.48 crore. The profit after tax (PAT) as at the end of the year was Rs, 1,345.56 crore an increase of 21 per cent over the previous year. Further Return on Average Equity (ROAE) was 25.98 percent in FY 2017-18 against 28.51 percent in FY 2016-17. Return on Average Asset (ROAA) was 4.06 percent in FY 2017-18 against 4.47 percent in FY 2016-17. The Bank''s basic earnings per share (EPS) increased from Rs, 10.15 to Rs, 12.26, and diluted earnings per share from Rs, 10.15 to Rs, 12.26 as after end of the FY 2016-17 and the FY 2017-18 respectively. The net interest margin (NIM) was 9.69 percent in FY 2017-18 against 10.15 percent in FY 2016-17.

The Reserve Bank of India (RBI) has mandated Priority Sector Lending (PSL) of 40 percent of advances for all the Banks. For your Bank, this was an opportunity to leverage on its primary strength as it continues to focus on financial inclusion by providing various financial services to the underserved. During FY 2017-18, the Bank''s PSL went up from Rs, 16,456.64 crore (net of IBPC of Rs, 6,679.12 crore) on March 31, 2017 to Rs, 28,21 1.00 crore (net of IBPC of Rs, 2,425.81 crore) on March 31, 2018 of which Rs, 16,454 crore was sold to other banks falling short of PSL targets by way of Priority Sector Lending Certificate (PSLC) during FY 2017-18 (PY Nil). At the end of FY 2017-18, PSL as a proportion of the gross advances of Rs, 29,913.28 crore (after IBPC) was 94.31 per cent (including PSLC).

Under the Small Enterprises Loan (SEL) scheme loans between Rs, 1 lakh and Rs, 10 lakh, are offered for income generating activities of small enterprises, which are described as enterprises with equipment investments below Rs, 25 lakh. SEL has helped your Bank to enhance its objective of financial inclusion with significant increase in lending to small enterprises. As on March 31, 2018 total SEL loan outstanding was ? 1,639 crore from 86,089 customers.

The Bank ventured into Gold Loan business in FY 2017-18

with operations at 57 branches in Eastern India. As on March 31, 2018, its outstanding gold loan book stood, at Rs, 43.1 crore from 8,205 customers.

Your Bank has also forayed into the distribution of third-party products/services, which are made available through designated bank branches. The business segment began as a pilot in FY 2017-18 and at present, the Bank distributes mutual funds and standalone health insurance products.

As on March 31, 2018, the Bank distributes mutual funds through 285 branches across various metro and urban locations. Currently, your Bank is distributing standalone health insurance products across all branches. The response for the products has been encouraging.

Dividend

Your Bank has a dividend policy that, inter alia, balances the objectives of appropriately rewarding shareholders and retaining capital to maintain a healthy capital adequacy ratio. Pursuant to Regulation 43A of the Securities and Exchange Board of India SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (SEBI LODR) the Board of Directors of the Bank have adopted a dividend distribution policy, which is in line with the parameters prescribed by SEBI for distribution of dividend. The policy is available on the Bank''s website: www.bandhanbank.com/pdf/Dividend-Policy.pdf. Consistent with this policy and in recognition of the excellent financial performance during FY 2017-18 and the promising future prospects while retaining capital to maintain a healthy capital adequacy ratio to meet prudential and growth requirements, your Directors are pleased to recommend a dividend of '' 1 per equity share of '' 10 each fully paid as against NIL dividend in the previous year for approval by the shareholders at the 4th Annual General Meeting (AGM). This dividend shall be subject to tax on dividend to be paid by the Bank. This reflects overall confidence in your Bank''s ability to consistently grow earnings over a period of time.

Since the Bank has not declared any dividend since its incorporation in 2014, in terms of section 125 of the Companies Act, 2013 (''the Act''), there is no unclaimed dividend, which is required to be transferred to the Investors

Education and Protection Fund as per the statutory requirement.

Transfer to Reserves

As required under section 134(3)(j) of the Act, and in line with the RBI regulations, the Bank has transferred the following amount to the statutory reserve during the FY ended March 31, 2018:

Amount Transferred	Amount
Statutory Reserve	Rs, 336.39 crore

Board and Board Committees

As on March 31, 2018, the Board of your Bank consists of thirteen (13) Directors of whom nine (9) are Independent Directors, two (2) Nominee Directors (Non-executive) of

International Financial Corporation and Caladium Investment Pte. Ltd., one (1) Non-executive and Non-Independent Director and one (1) Managing Director and CEO.

Mr. Harun Rasid Khan [DIN: 07456806] was appointed as an Additional Director (category being Non-Executive, Independent Director) of the Bank, with effect from March 27, 2018 to hold office upto the date of ensuing AGM. Further, the Nomination and Remuneration Committee (NRC) and Board of Directors of the Bank have also recommended the appointment of Mr. Harun Rasid Khan as Non-Executive, Independent Director, not liable to retire by rotation, to the Shareholders at the ensuing AGM. Further, on the recommendation of the NRC, the Board of Directors at their meeting held on June 05, 2018 has also appointed Mr Harun Rasid Khan as non-executive part-time Chairman of the Bank for a period of three years with effect from June

05, 2018 or till the expiry of his term as an Independent Director, whichever is earlier, with a remuneration of Rs, 24 lac per annum (consolidated) in addition to sitting fees and reimbursement of other expenses for attending meetings of the Board and Committees and performing his duty as non-executive part-time Chairman of the Bank. The said appointment and remuneration is subject to approval of the Reserve Bank of India.

On the recommendation of the NRC at its meeting held on April 09, 2018, the Board of Directors of the Bank at their

Meeting held on that date had re-appointed Mr. Chandra Shekhar Ghosh (DIN: 00342477) as ''Managing Director'' of the Bank designated as ''Managing Director & Chief Executive Officer (CEO)'' for a period of three years with effect from July 10, 2018. The said re-appointment is subject to the approval of the Reserve Bank of India and Members of the Bank at the ensuing AGM. Your Directors recommend his re-appointment as ''Managing Director'', designated as ''Managing Director & CEO'' of the Bank.

On the recommendation of the NRC at its meeting held on

February 24, 2018, the Board of Directors of the Bank at their Meeting held on February 28, 2018 had re-appointed Mr. Bhaskar Sen (DIN: 03193003) and Mr. Sisir Kumar Chakrabarti (DIN: 02848624) as Independent Directors of the Bank, with effect from April 01, 2018 for a period of three years. The said re-appointments are subject to the approval of Members of the Bank at the ensuing AGM.

On the recommendation of the NRC at its meeting held on June 04, 2018, the Board of Directors of the Bank at their Meeting held on June 05, 2018 had re-appointed Prof.

Krishnamurthy Venkata Subramanian (DIN: 00487747),

Mr. Snehomoy Bhattacharya (DIN: 02422012) and Mr. Chintaman Mahadeo Dixit (DIN: 00524318) as Independent Directors of the Bank, with effect from July 09, 2018 for a period of five, four and two years respectively. The said re-appointments are subject to the approval of Members of the Bank at the ensuing AGM.

The Board on the recommendation of the NRC at its meeting held on July 26, 2016 and February 12, 2016 had appointed Ms. Georgina Elizabeth Baker and Dr. Holger Dirk Michaelis as the Nominee Directors of the International Finance Corporation (IFC) and IFC FIG Investment Company I (IFC FIG) (jointly) and Caladium Investment Pte. Ltd., respectively. As per amended Articles of Association of the Bank, after completion of the Initial Public Offering, approval of the shareholders through Special Resolutions are required for appointment of the Nominee Directors as mentioned herein above. Your Board accordingly proposes for the approval of their appointments by the Members at the ensuing AGM.

In terms of Section 152 of the Act, Mr. Ranodeb Roy (DIN: 00328764) Non-Executive Director, being liable to retire by rotation, shall retire at the ensuing AGM and being eligible, offers himself for re-appointment.

Pursuant to the recommendation of the Nomination and Remuneration Committee (NRC), the Board of Directors of the Bank approved the appointment of Mr. Pravir Kumar Vohra [DIN: 00082545] as an Additional Director of the Bank (category being Independent) not liable to retire by rotation, with effect from June 05, 2018. Under Section 161 of the Act, he continues to hold office as an Additional Director of the Bank, until the conclusion of the ensuing Annual General Meeting of the Bank. The Board of Directors recommend appointment of Mr. Vohra as a Non-Executive, Independent Director of the Bank, not liable to retire by rotation. The ordinary resolution in respect of his appointment has been included in the Notice convening the 4th AGM of the Bank.

Dr. Ashok Kumar Lahiri was the non-executive part-time Chairman and Independent Director of the Bank during the FY 2017-18. He had demitted from directorship of the Bank on April 09, 2018. Thereafter, Mr. Harun Rasid Khan was appointed as the non-executive part-time Chairman of the Bank with effect from June 05, 2018 subject to approval of the RBI.

The relevant details including profiles of Mr. Chandra Shekhar Ghosh, Mr. Bhaskar Sen, Mr. Sisir Kumar Chakrabarti, Prof. Krishnamurthy Venkata Subramanian, Mr. Snehomoy Bhattacharya, Mr. Chintaman Mahadeo Dixit, Ms. Georgina Elizabeth Baker, Dr. Holger Dirk Michaelis, Mr. Ranodeb

Roy, Mr. Harun Rasid Khan and Mr. Pravir Kumar Vohra are included separately in the AGM Notice and report on Corporate Governance forming part of this Annual Report.

Mr. Pradip Kumar Saha [DIN: 02947368] has resigned from the Directorship of the Bank with effect from February 22, 2018. Dr. Ashok Kumar Lahiri [DIN: 07234290] has demitted from the Directorship of the Bank with effect from close of business hours on April 09, 2018. The Board places on record its sincere appreciation for the valuable services rendered by Dr. Ashok Kumar Lahiri and Mr. Pradip Kumar Saha during their tenure as Directors of the Bank.

Apart from the above, no other Director was appointed or resigned during the year under review.

The Board met eleven (11) times during the Financial Year 2017-18 viz. on April 26, May 13, July 26, August 24, October 26, November 22 and December 19, 2017 and on January 31, February 28, March 07 and March 27, 2018. The details of Board meetings held during the year, attendance of Directors at the meetings and constitution of various

Committees of the Board have been provided separately in the Corporate Governance Report.

Declaration from Independent Directors

The Bank has received necessary declarations from all the Independent Directors under section 149(6) of the Act and Regulation 16(1)(b) of the SEBI LODR that they meet the criteria of independence laid down there under.

Key Managerial Personnel

Mr. Chandra Shekhar Ghosh, MD & CEO, Mr. Sunil Samdani, Chief Financial Officer and Mr. Indranil Banerjee, Company Secretary of the Bank are the Key Managerial Personnel as per the provisions of the Act and rules made there under.

Familiarization Programmes for Independent Directors

The familiarizing programme for the Independent Directors are disclosed in the Corporate Governance Report that forms part of this Annual Report.

Board Evaluation

Your Bank has laid down evaluation process and criteria for the performance evaluation of all the Directors including Chairman, MD & CEO, Board Level Committees and Board as a whole in line with the provisions of the Act,

Listing Regulations and SEBI Guidance Note on the Board Evaluation. Details of Board Evaluation process is included separately in the Corporate Governance Report.

Directors'' Responsibility Statement

Pursuant to Section 134(3)(c) of the Act, the Directors confirm:

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

ii) that they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to

give a true and fair view the Bank''s state of affairs as on March 31, 2018, and its profit for the year ended on that date;

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

iv) that they have prepared the annual accounts on a going concern basis; and

v) that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively.

Deposits

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

The details of the deposits received and accepted by your Bank as a banking company are enumerated in the financial statement for the year ended March 31, 2018.

Issuance of Equity Shares

The Bank has made an Initial Public Issue (IPO) of 1 19,280,494 Equity Shares of Face Value of Rs, 10 each consisting of a fresh issue of 97,663,910 equity shares and an offer for sale of 14,050,780 equity shares by IFC and 7,565,804 equity shares IFC FIG Investment Company I at an Issue Price of Rs, 375 each. As on March 31, 2018, the issued, subscribed and paid up capital of your Bank stood at Rs, 11,928,049,440 comprising 1,192,804,944 equity shares of ? 10 each fully paid.

During the financial year, your Bank has received consent from BSE Limited and National Stock Exchange of India Limited for listing and trading of 1,192,804,944 equity

shares with effect from March 27, 2018.

Your Bank has not issued any equity shares with differential voting rights during the financial year.

Information About Financial Performance/ Financial Position of the Subsidiaries, Associates and Joint Venture Companies

Your Bank did not have any subsidiaries, associates and Joint Venture Companies during the financial year 2017-18.

Capital Adequacy Ratio

Your Bank''s capital adequacy ratio (CAR), calculated in line with the relevant capital regulations, stood at 31.48 per cent on March 31, 2018, well above the minimum regulatory requirements of 13 per cent.

Internal Financial Controls, Audit and Compliance

Remuneration Policy

The Board of Directors of the Bank had formulated and adopted policies for Remuneration of Employees of the Bank, Remuneration of Directors including the Chairman of the Bank. The details of the same have been included in the Report on Corporate Governance forming part of this Annual Report.

Employees Remuneration

The Bank had 28159 employees as on March 31, 2018.

The statement containing particulars of employees as required under Section 197(12) of the Act read with the details of employees in terms of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are appended separately as Annexure - 1(a) and form part of this report. The ratio of the remuneration of each Director to the median remuneration of the employees of the Bank and other details in terms of Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure - 1(b).

Employee Stock Options

Your Bank has instituted Stock Option Plans to enable its employees to participate in your Bank''s future growth and financial success. Your Bank provides its employees a platform for participating in important decision making and instilling long-term commitment towards future growth of the Bank by way of rewarding them through stock options.

The information pertaining to Employee Stock Options is attached as Annexure -2.

Related Party Transactions

There were no materially significant transactions with related parties including promoters, Directors, key managerial personnel, subsidiaries or relatives of the Directors during the financial year, which could lead to a potential conflict of interest between the Bank and these parties. The details of the transactions with related parties, if any, were placed before the Audit Committee from time to time. There were no material individual transactions with related parties, which were not in the ordinary course of business of the Bank, nor were there any transactions with related parties, which were not on arm''s length basis.

Pursuant to the proviso of Section 188(1) of the Act details of transactions with related parties are appended in Annexure - 3.

Your Bank''s Policy on dealing with Related Party Transactions is available on the Bank''s website: www. bandhanbank.com/pdf/RelatedParty-Transactions-Policy.pdf

Particulars of Loans, Guarantees or Investments

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

Whistle Blower Policy/Vigil Mechanism

Your Bank has adopted a Whistle Blower Policy pursuant to which the Bank''s employees can raise their concerns relating to fraud, malpractice or any other activity or event, which is against the interests of the Bank or society as a whole. According to this policy, the Audit Committee has been entrusted with the responsibility of reviewing the complaints received and the action taken thereof. Detailed information on the Vigil Mechanism of the Bank is provided in the Report on the Corporate Governance which forms part of this Annual Report.

Corporate Social Responsibility

Your Bank has constituted the Corporate Social Responsibility (CSR) Committee of the Board of Directors, in accordance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility)

Rules, 2014, as amended.

Your Bank''s CSR initiatives reach the bottom-of-the-pyramid population, who are difficult to include under the micro banking activity of your Bank. It offers the underserved people financial assistance, and handholds and mentors them regarding optimal use of funds. Your Bank''s objective is to help people from economically backward communities join the mainstream society by enabling them to generate sustained income on their own in due course.

The details of CSR activities/projects undertaken during the year is given as Annexure - 4 and forms part of this Board''s Report. The CSR Policy as recommended by the CSR

Committee and approved by the Board is available on the Bank''s website:www.bandhanbank.com/Other-Policies.aspx.

Business Responsibility Report

The Business Responsibility Report containing a report on its Corporate Social Responsibility Activities and Initiatives according to the Securities and Exchange Board of India''s (SEBI) guidelines is available on the Bank''s website at the link: www.bandhanbank.com/Business-Responsibility-Report.aspx

Significant and Material Orders Passed by Regulators or Courts or Tribunals

During FY 2017-18, no significant or material orders were passed by any Regulators or Courts or Tribunals against the Bank.

Statutory Auditors and their Report

The Members of the Bank at the 1st Annual General Meeting held on June 29, 2015 have approved the appointment of M/s S. R. Batliboi & Associates, LLP, Chartered Accountants, 22, Camac Street, Block C, 3rd Floor, Kolkata - 700016 (ICAI Firm Registration Number 101049W) as Statutory Auditors of the Bank, subject to the approval of the Reserve Bank of India. In terms of the approval received from the RBI pursuant to Section 30 (1A) of the Banking Regulation Act, 1949, your Board recommends the re-appointment of M/s S. R. Batliboi & Associates, LLP, Chartered Accountants, as the statutory auditors of your Bank for the year 2018-19 for their fourth year.

The Report given by the Auditors on the financial statements of the Bank forms part of this Annual Report. There has been no qualification, reservation, adverse remark given by the Auditors in their Report. Also, no offence of fraud was reported by the Auditors of the Bank.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Act and the

Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank has appointed Mr. Deepak Kumar Khaitan, Practicing Company Secretary (C.P 5615) to conduct Secretarial Audit of the Bank for the FY 2018-19.

The Secretarial Audit Report is given in Annexure - 5 to this report. There are no observations, reservations or adverse remarks in the Secretarial Audit Report.

Policy on Appointment of Directors

Rating of Various Debt Instruments

Instrument	Rating (As on March 31, 2018)	Rating Agency	Amount
Unsecured Subordinated Non-Convertible	CARE AA - Stable (Double A Minus; Outlook: Stable)	CARE Ratings	Rs, 160 crore
Debenture	[ICRA]AA - (Double A Minus; Outlook: Positive)	ICRA
Term Loans From Bank	[ICRA]AA - (Double A Minus; Outlook: Positive)	ICRA	Rs, 80 crore
Certificate of Deposit	[ICRA]A1	ICRA	Rs, 1,500 crore

NOTE: In the month of April 2018, ICRA has upgraded its long-term rating to [ICRA]AA (pronounced ICRA double A) to the Rs, 160 crore subordinated Tier-II nonconvertible debenture programme and its Rs, 80 crore term loans of Bandhan Bank Limited (BBL). The outlook on the rating has been changed to stable from positive earlier.

The Board of Directors of the Bank had formulated and adopted policy on ''Board Diversity'' and ''Fit & Proper Criteria'' and ''Succession Planning''. The details of the same have been included in the Report on Corporate Governance forming part of this Annual Report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Considering the nature of the Bank''s activities, the provisions of Section 134(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 relating to conservation of energy and technological absorption do not apply to the Bank. The Bank is however, constantly pursuing its goal of technological up-gradation in a cost-effective manner for delivering quality customer service. There were no foreign exchange earnings and whereas foreign exchange outgo was Rs, 1.32 crore during FY 2017-2018.

Corporate Governance

the land, accountability and responsibility towards the stakeholders and commitment of conducting the business

in an ethical manner. Your Bank is committed to achieve the highest standards of Corporate Governance and also adheres to the Corporate Governance requirements set by regulators/applicable laws.

A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures, as stipulated under the Listing Regulations, the Act and rules made thereunder forms part of this Annual Report.

A Certificate from CS Deepak Kumar Khaitan, Practicing Company Secretary, conforming compliance by the Bank to the conditions of Corporate Governance as stipulated under Listing Regulations, is annexed as Annexure -10 to the Report on Corporate Governance, which forms part of this Annual Report.

Extract of Annual Return

Pursuant to the provisions of Section 134(3)(a) and Section 92 (3) of the Act and Rule 12 (1) of the Companies

(Management and Administration) Rules, 2014, the extract of the Annual Return as at March 31, 2018 forms part of this report as Annexure - 7.

Management''s Discussions and Analysis

The Management Discussion and Analysis report enclosed as

Annexure - 8 forms part of this report.

Information Under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

Your Bank has zero tolerance towards any action on the part of any of its employees , which may fall under the ambit of ''sexual harassment'' at workplace and is fully committed to uphold and maintain the dignity of every woman employee working in the Bank. It takes all necessary measures to ensure a harassment free workplace and has instituted an Internal Complaints Committee for redressal of complaints and to prevent sexual harassment. The Policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints. The Audit Committee of the Board, on a regular basis, review the complaints and actions taken by the Bank.

Number of complaints pending as at the beginning of the financial year	Number of complaints filed during the financial year	Number of complaints disposed of during the financial year	Number of complaints pending as on the end of the financial year
0	13	13	0

Human Resource Management

Your Bank recognizes that human resource is key to organizational success. Thus, the goal of the Human Resources (HR) department is to ensure that the employees are recruited, engaged, retained and motivated to contribute to the Bank''s growth and strategic mission. The HR Department proactively engages with employees at all levels for this purpose. Its vision is to create an environment of learning and superior performance in line with the Bank''s corporate values and aligning the personal aspirations of employees to business imperatives.

The employee engagement initiatives place greater emphasis on learning and development, providing opportunities for staff to seek inspirational roles, streamlining the Performance Management System and introducing performance-linked rewards. A host of programmes are being run to meet the on-going learning and development needs in the Bank and promote a climate of learning, self-growth and excellence. The learning architecture in your Bank focuses on:

1. Developing tailor-made, competency-mapped

programmes for different sets of employees, based on their roles in the Bank

2. Induction/orientation of new hires for acquaintance with the culture of the Bank

3. Training on operational risk, audit, compliance and regulatory aspects for frontline staff

4. People management, customer-centric, and compliance-based programmes for employees in leadership roles

Through its eight residential training centres across the country, and through a wide range of training programmes, your Bank has provided 100,112 days of training to its people. The trainings were provided to people across departments and functions, to build their professional competence and improve their skill sets, and thus, enable them to contribute to your Bank''s mission.

Additionally, the Bank continues to engage with leading management institutes for leadership and management development programmes and specialized programmes for employees across senior and mid-management levels of staff.

Your Bank believes that the Performance Management (PM) process is a powerful driver of individual and corporate

performance. An online PM System (PMS), with focus on building transparency in performance assessments, employee ownership of the goals and encouraging dialogue on performance and developmental feedback between the appraise and appraiser, was introduced in your Bank. Softer behavioral attributes, like the employee''s adherence to values of the organization, customer focus, accountability, ability to work in a team, and others build a culture conducive to sustainable business performance and promote desired behavior. Recognizing their importance, attention was also paid to such softer behavioral attributes.

Your Bank shall continue to leverage and/or align HR practices to build critical organizational capabilities, build a conducive work environment to enhance and shape employee satisfaction, and enable achievement of the strategic goals.

Risk Management Framework

Risk is an integral part of the banking business and your Bank aims at delivering a superior stakeholder value by achieving an appropriate equilibrium between risk and return.

Your Bank''s risk management strategy focusses on clear understanding of various risks, disciplined risk assessment and measurement procedures and continuous monitoring.

The policies and procedures established for this purpose are continuously benchmarked with national and global best practices.

The Bank has adopted following ethics for an effective and robust Risk Management framework:

- An independent and dedicated Risk management structure with clear goals compatible with the Bank''s vision and strategy.

- High governance standards, applying industry best practices to identify, measure, monitor and manage risks.

- Well-established policies and procedures to guide the risk taking activities of the Bank.

The key components of the Bank''s risk management philosophy is as follows:

- The Board of Directors has oversight on all risks assumed by the Bank. At organizational level, overall risk management is assigned to an independent Risk Management Committee of Board (RMCB). The Bank''s Risk Committee reviews risk management policies, key risk indicators such as credit risk, interest rate risk, market risk, liquidity risk, foreign exchange risk, process risk, people risk, concentration risk and so on. It further inspects the limit frameworks including stress test limits for various risks.

- Senior Management Level Committees like Credit Risk Management Committee (CRMC) for Credit Risk, Operational Risk Management Committee (ORMC) for Operational Risk, Asset Liability Committee (ALCO) for

Market Risk and Asset Liability Management have been constituted to facilitate focused oversight of various risks and report to the RMCB. Your bank has constituted an internal committee namely, Fraud Prevention and Management Committee (FPMC) with the objective of fraud risk management. The FPMC works under the guidance of and report to Audit Committee of the Board (ACB).

- Policies approved from time to time by the Board of Directors/Committees of the Board form the governing framework for each type of risks. Business activities are undertaken within this policy framework.

- Commitment towards the independence of Risk Management Department of the Bank to facilitate independent evaluation, monitoring and reporting of various risks. This aspect is supervised by RMCB on a regular basis and reviewed by the Board on an annual basis.

- Risk appetite framework, approved by the Board of Directors, covers various risk appetites, which are further broken down to individual risk metrics. A quarterly review of risk dashboard showing the static and directional movement of the risk metrics is conducted by the Board of Directors and the RMCB.

- The Bank prepares the ICAAP on a forward-looking approach, which includes the risks that are not fully captured by the minimum capital ratio prescribed under Pillar 1 of Basel III norms and other factors external to the Bank. The RMCB reviews the capital adequacy position of the Bank under normal and stressed conditions on a regular basis.

- The Bank is in constant Endeavour to upgrade its system and processes for establishment of an effective risk management system.

Credit Risk

Credit risk is the risk that arises when a borrower is unable to meet its financial obligation to the lender. All credit risk aspects are governed by Credit Policy and Credit Risk Policy of the Bank. The Credit Risk Management Committee (CRMC) overseas and reviews the credit risk of your Bank. The Committee is responsible for formulation of policies on standards for presentation of credit proposals, financial covenants, rating standards and benchmarks, delegation of credit approving powers, prudential limits on large credit exposures, asset concentrations, standards for loan collateral, portfolio management, loan review mechanism, risk concentrations, risk monitoring and evaluation, provisioning, regulatory/legal compliance and so on. The CRMC reports to the Risk Management Committee of Board (RMCB), the apex body for risk management in the Bank.

Since Bandhan Bank has a uniqueness in terms of the composition of its credit portfolio vis-a-vis the borrower segments wherein the preponderance of the small ticket micro banking portfolio, the Bank has various assessment approaches in tandem with the segmental risk profile of borrowers. Under micro banking, the Bank follows a group based sourcing but individual based credit assessment approach. For other segments, credit proposals are approved at the Credit Approval Committees depending on the delegation of power vested in them. Sub Committees are formed at Head Office and Zonal Office levels. To limit the magnitude of credit risk, prudential limits are laid down on various aspects of credit, benchmark on various ratios, borrower type limits, industry and sectoral limits, among others.

A dedicated and qualified Credit Risk Management Department (CRMD); independent of the Credit Administration Department owns the credit risk policy, analyse, manage and control credit risk on a bank wide basis. The CRMD also lays down risk assessment systems, monitor quality of loan portfolio, identify problems and correct deficiencies, develop MIS and undertake loan reviews. The CRMD, takes the responsibility of periodic monitoring of the portfolio stipulating quantitative ceiling on aggregate exposure in specified rating categories, evaluate the rating-wise distribution of borrowers in various industry, business segments and so on, undertake rapid portfolio reviews, stress tests and scenario analysis when external environment undergoes rapid changes.

Market and Liquidity Risk

The Asset-Liability Management Committee (ALCO) functions as the top operational unit for managing the balance sheet within the performance/risk parameters laid down by the Board. The ALCO is responsible for managing risks related to Market and Liquidity and reporting to the RMCB. The ALCO has the power to determine pricing of assets, liabilities, maturity and also to play a role in approving the final benchmark marginal cost of lending rate (MCLR).

Your Bank has set up an independent Market Risk

Management Department (MRMD) to identify, analyse and manage risks i.e., liquidity risk, interest rate risk, foreign exchange rate risk, commodity price risk, equity price risk and others. The Bank manages the market risk in trading portfolio through a robust framework prescribed in the

Board approved Market Risk Management Policy.

The MRMD analyses the Bank''s liquidity profile on a static basis, wherein the assets and liabilities and off-balance sheet items are pegged on a particular day and the behavioral pattern and the sensitivity of these items to changes in market interest rates and environment are duly accounted for.

Your Bank has prepared with Contingency Funding Plans by assessing the ability to withstand bank-specific or market crisis scenario. Availability of back-up liquidity support in the form of committed lines of credit, reciprocal arrangements, liquidity support from other external sources, liquidity of assets, and others are also being explored and considered.

The Market Risk System supports VaR and Stress Testing helping the MRMD to assess the depth and attributes of potential risks prevailing in the market. The framework includes the monitoring of VaR limits, Modified Duration, PV01 for forex investments, Equity portfolios, exposure limits and others.

Operational Risk

Managing operational risk has become an important feature of a sound risk management structure in modern financial markets in the wake of incredible increase in the volume of transactions, high degree of structural changes and complex support systems.

The Bank''s Operational Risk management is governed by the robust and efficient Operational Risk Management Policy approved by the Board of Directors. The Policy is formulated to incorporate the policies and procedures based on common elements across business lines or risks. The policy also addresses product review processes, involving business, risk management and internal control functions, change management and so on.

Your Bank''s operational risk monitoring system focusses, inter alia, on operational performance measures such as volume, turnover, settlement facts, delays and errors. The risk framework employs a judicial mixture of quantitative and qualitative assessment tools to assess the operational risk in products and processes.

The Bank''s Operational Risk management is monitored and mitigations are supervised by the Operational Risk Management Committee (ORMC). This Committee reports to the apex Risk Management Committee of the Bank (RMCB). The core responsibility of the Committee is to implement the best industry practices for managing the Operational Risk. The Operational Risk is managed by the Operational Risk Management Department (ORMD). The ORMD is dedicated to assess, identify, mitigate and manage the Risk emanating from people, process, products, systems and environment.

The Bank has also established efficient and vigorous business continuity framework to ensure the continuity of services in the event of any catastrophic event. To have a comprehensive view on the risk landscape, the Bank follows an integrated risk approach.

Information Security Management

Information Security Team, under Chief Information Security Officer (CISO), reports into the overall Risk Management Department under Chief Risk Officer.

The information security (infosec) team follows strategies and procedures for managing the processes, tools and policies necessary to prevent, detect, document and counter threats to digital and non-digital information, and automated processes. Infosec responsibilities include establishing a set of processes that will safeguard information assets regardless of how the information is structured or whether it is in transit/being processed or is at rest in storage.

Fraud Risk Management

The Bank undertakes fraud risk assessment to identify and understand risks to its business. It also identifies weaknesses that present a fraud risk to the organization. The fraud risk assessment is supplemented with policies and procedures, development of preventive and detective fraud control activities, fraud reporting process, whistle-blower policy and a coordinated approach to investigation and corrective actions.

The Risk Management Department has formed an efficient Fraud Risk management team to analyse gap in process, system, people or third party. The Fraud Prevention and Monitoring Committee is an integral part of the Bank''s Governance function. It is responsible for prevention of frauds, deliberation, analysis of fraud events, gaps in controls and processes and initiate remedial actions.

Information Technology at Bandhan Bank

Your Bank has adopted unique doorstep service centres, relationships and technology approach to digitise banking to deepen and broaden its reach and grow market-share among its consumer base. In today''s dynamic and ever-changing financial landscape, your Bank understands that innovation using technology can provide a differentiated customer experience. The banking industry is a clear representation of this transformation.

Consumers expect services to be available at the time and place of their choice as they are more mobile than ever before. Realising this customer requirement, your Bank created technology-led products to deliver seamless banking experience to customers at all places of their choice â whether at home, Bandhan Bank branches or on the move.

The consistency and speed in introducing these offerings has helped the Bank meet customer expectations. The Bank''s commitment to improve the banking experience for customers continues drives its innovativeness in delivering banking services using cutting-edge technology.

On The Move

Recent advances in technology have made modern the world an ''always connected globe'' where people demand and consumer products and services on the move. Your Bank leverages technology effectively to stay ahead of customer needs. mBandhan, the mobile banking application was launched in September 2015 and the Bank offers internet banking both for corporate and retail customers, and Bharat

Bill Payment System for paying bills. These smart digital offerings provide accessibility to customers while on the move.

Bharat QR payment option enabled on mobile banking for RuPay cards, which will facilitate the payments by scanning QR codes.

At Your Place

Your Bank has successfully brought micro banking closer to customers. The Bank''s Branch Sales Executive (BSE) or Door Step Banking Officer (DBO) visit customers and use hand-held devices (point-of-sale) to carry out banking transactions. This service is an industry-first and is widely acclaimed. Innovations like collections of loan installments and providing cash receipts and payments for customers at their doorsteps, shift the paradigm completely for a process that has always been felt arduous. Banking at the place of your choice was never so easy and simple.

Regeneration of ATM pin provided on retail internet banking platform, Aadhaar seeding and schedule payment feature on mobile banking application are digital feathers added by your Bank.

At Our Place

The banking experience at the Bandhan Bank branches today is a confluence of personalized human care and technology-supported services. Opening accounts, issuing drafts, paying cheques or transferring funds are all a walk in the park through the Bank''s state-of-the-art core banking solution. These services represent seamless integration of the digital and physical. The Bank aimed to set up 936 bank branches, an aim that was successfully achieved. Within 2 year and 7 months, at the end of FY 2017-18, the Bank has 936 branches, 460 ATMs and 2,764 Door Step Service centres.

Your Bank went live and stabilized with e-Kuber, Treasury Management System in its Treasury offerings, Structured

Financial Messaging Systems (SFMS), such as National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement System (RTGS) for corporate and retail customers and Clearing Corporation of India Limited (CCIL) suite of products, which include dealing platforms and reports. Immediate Payment System (IMPS) was another impressive offering that went live by tying up with National Payment Corporation of India (NPCI) to provide 24x7 fund transfer facility. Your Bank is live with e-commerce transactions on RuPay and Visa cards, where customer can shop and pay bills online using card details.

Your Bank also has tied up with two Payment Gateway Service providers for Online Net banking transactions and now the Bank''s customers can pay/shop online through net banking on 2,500 plus merchant websites.

Your Bank also started electronic data capture point-of-sale (EDC-PoS) business and acquired and deployed 18,000 PoS terminals at merchant outlets, which accept RuPay and Visa cards. Additional initiatives undertaken by your Bank for their customers include:

1. Lead generation screens deployed on NCR make ATMs

2. Public Financial Management System (PFMS) made live for getting government benefits to Bank''s customers; in Phase 1, the Bank is working as beneficiary bank

3. Wealth Management: Mutual Fund module live for the Bank branches, which helps customers to walk in and buy mutual fund products from any of the bank branches

4. Voice guidance enabled on ATMs for helping specially- abled people to operate ATMs in line with financial empowerment initiative

5. Development of Customer Complaint Management

Tracker to capture customer complaints

6. Enabled Demographic Authentication feature to authenticate Customers Aadhaar number from UIDAI Database and if authenticated then update authenticate CBS flay status

7. Monthly account statements being sent by email to all current account customers and Premium, Standard and Staff savings account customers

8. Integrated CBS with Income Tax website, so Bank branches can download Form 16 A for customers

Cyber Security

Your Bank has set up an effective governance framework to manage cyber security. A suitable organizational structure has been put in place to monitor various cyber security threats and minimize them. To protect critical assets from cyber-attacks, the Security Operations Centre (SOC) operates 24x7. During FY 2017-18, your Bank further enhanced the SoC to manage, respond and resolve cyber security in an effective and timely manner.

To ensure that the network and systems are free from any malware at any point of time, your Bank has implemented an advanced solution to scan and monitor the systems for early detection of such malware round-the-clock.

Moreover, your Bank conducts regular vulnerability assessment and penetration tests to assess/remedy vulnerabilities in applications and IT infrastructure. Antiphishing services have been obtained to ensure that the phishing sites are timely shutdown and customers prevented from being lured to fraudulent sites. Your Bank has been carrying out continuous awareness among employees through a Learning Management System (LMS) and customers through security posters/online guides.

Your Bank has obtained services and implemented solutions in strengthening protection against Distributed Denial of Service (DDoS) attacks and Web Application Firewall (WAF). The Bank also participated in IDBRT''s cyber security drills to identify weak links and strengthen defence.

Your Bank has got a state-of-the-art primary Data Centre and a Disaster Recovery Centre, both of which are ISO 27001 and PCI DSS certified, which are vital to your Bank''s business operations. Your Bank has taken cognizance of the RBI guidelines on Cyber Security Framework and implemented the recommendations therein. Your Bank is in the process of implementing additional IT security products and features to provide best-in-class information security features to provide safe and secure banking for all the Bank''s customers.

Material Changes and Commitment Affecting Financial Position of the Bank

There was no material changes and commitments, affecting the financial position of the Bank, which has occurred between the end of the financial year of the Bank i.e., March 31, 2018 and the date of the Directors'' Report.

Equity Shares in the Suspense Account

In terms of Regulation 39 (4) of the SEBI LODR read with Schedule VI of the said Regulation, the details of Equity shares lying in the suspense account are given below:

Particulars (From March 23, 2018 to March 31,2018)*	No. cases	No. oF shares
Number cases outstanding at beginning	25	1,000
Number of shareholders approached	0	0
Number of cases and shares Transferred	0	0
Number of cases outstanding	25	1,000

* Since the shares of the Bank were allotted on March 23, 2018 pursuant to IPO.

Acknowledgments

For and on behalf of the Board of Directors

Bandhan Bank Limited

Chairman

Place: Kolkata Harun Rasid Khan

Date: June 05, 2018 [DIN : 07456806]

Mar 31, 2017

Board''s Report

The Members,

The Directors take great pleasure in presenting the Third Annual Report of your Bank''s business and operations together with the audited accounts for the year ended March 31, 2017.

Table 1. Summary of Financial Performance

(Rs,in crore)

Particulars	For the year	ended
Particulars	March 31, 2017	March 31, 2016
Deposits:	23,228.66	12,088.75
- Savings Bank Deposits	5,384.72	2,371.05
- Current Account Deposits	1,452.62	234.55
Advances:	16,839.08	12,437.55
- Cash credits, overdrafts and loans repayable on demand	344.48	84.60
- Term loans	16,494.60	12,352.95
1 Total Assets/Liabilities	30,236. 09	19,756.50
Net Interest Income	2,403.50	932.84
Other Income:	411.41	149.89
- Fee Income	320.41	145.42
- Misc. Income	91.00	4.47
Operating Expenses (excluding depreciation)	955.15	580.14
Profit before Depreciation, Provisions and Tax	1,859.76	502.59
Depreciation	66.86	35.78
Provision for Tax	592.52	138.26
Other Provisions [Include Write-offs of 31.19 Crore]	88.43	53.30
	1,111.95	275.25
Balance in Profit & Loss Account brought forward from	215.38	0.58
previous year
Appropriations:
Transfer to Statutory Reserve	277.99	68.96
Transfer to Investment Reserve	-	-
Transfer to Capital Reserve	0.91	-
Transfer to/(from) Reserve Fund	-	-
Proposed Dividend	-	-
	1,048.43	206.87
EPS (Basic & Diluted)	10.15	3.40

Performance of the Bank

The Bank commenced its banking business with effect from August 23,

2015, with 501 branches on a pan-India basis and on March 31, 2017, its network consisted of 840 branches spread across metro, urban, semi-urban and rural areas. Out of the total 840 branches, 32.62 per cent branches are in rural areas demonstrating your Bank''s commitment to financial inclusion. The number of Doorstep Service Centres (DSCs) increased from 2,022 to 2,443 between March 31, 2016 and March 31, 2017. With the expanding network of branches and DSCs, the number of customers grew by over a quarter during 2016-17, with a corresponding growth in total deposits of 92 per cent to Rs, 23,228.66 crore, of which Rs, 6837.34 crore or 29.43 per cent was Current Account and Savings Account (CASA).

Your Bank, while providing service to customers and working on financial inclusion, also enhanced shareholders'' value by posting an increase of 149.54 per cent in total income to Rs, 4,320.12 crore in 2016-17. The profit after tax of Rs, 1,111.95 crore in 2016-17, after provisions of Rs, 680.95 crore, implies an increase in Return on Equity (ROE) from 16 per cent to 28.51 per cent, in Return on Assets (ROA) from 3.08 per cent to 4.47 per cent, basic earnings per share (EPS) from Rs, 3.40 to Rs, 10.15, and diluted earnings per share from Rs, 3.40 to Rs, 10.15 between 2015-16 and 2016-17.

The Net Interest Margin (NIM) went down from 11.04 per cent in the previous year to 10.44 per cent in 2016-17.

Priority Sector Lending (PSL), or lending to critical players

of the economy such as small and marginal farmers, and micro-enterprises, continued to be the core strength of your Bank, and PSL went up from Rs, 12,268.81 crore on March 31, 2016 to Rs, 16,456.64 crore on March 31, 2017.

At the end of 2016-17, as a proportion of the net advances of Rs, 16,864.17 crore, PSL at 97.58 per cent was marginally lower than 98.58 per cent at the end of 2015-16, but still well above the regulatory requirement of 40 per cent.

Your Bank introduced a new product â Small Enterprises

Loan (SEL). SEL is a loan between Rs, 1 lakh and Rs, 10 lakh, without collateral, given for income generating activities of small enterprises. Small Enterprises are those enterprises whose investment in plant and machinery or equipment does not exceed Rs, 25 lakh for manufacturing enterprise and service enterprises, respectively. Given for working capital requirement, assets creation for business, and other short term business requirements, total SEL advances stood at Rs, 1,054.48 crore on March 31, 2017. A modest beginning, but with the potential of scaling up.

Your Bank also introduced Gold Loan product, Bank Guarantee Module of Trade Finance, Next Gen Yuva-Loan for Unemployed Youth to do 1 Year Residential Next Gen

Yuva Programme in Banking.

The withdrawal of legal tender status of specified bank notes (SBN), namely denominations of Rs, 500 and Rs, 1,000 already issued, on November 08, 2016 tested the operational abilities of all banks in India, including yours. Your Bank stepped into the implementation of exchange of SBN for other currency notes, which were scarce for several weeks, by not only its own customers but also others, and acquitted itself creditably. It also provided all its support to its customers to depositing SBN into their accounts within the parameters set by the regulators.

Dividend

Considering that it is desirable to plough back the income for generating growth of business in the initial few years, the Board does not recommend any dividend for 2016-17.

Since the Bank has not declared any dividend since its incorporation, in terms of Section 125 of the Companies Act, 2013 there is no unclaimed dividend relating to the financial year 2016-17, which requires to be transferred to the Investors Education and Protection Fund as per statutory requirement.

Board of Directors

The composition of the Board of Directors of the Bank ("Board") is governed by the provisions of the Companies Act, 2013 and the Banking Regulation Act, 1949. Board of your Bank consists of thirteen directors, of whom nine, an overwhelming majority, are Independent Directors. Of the remaining four, one Nominee Director (Non-executive) each is from International Financial Corporation and Caladium Investment Pte Ltd., one is a Non-executive & Non-Independent Additional Director, and one Managing Director and CEO.

Dr. Ashok Kumar Lahiri is the Non-executive Chairman of the Bank and Shri Chandra Shekhar Ghosh is the Managing Director & CEO. Other than Shri Ghosh, all Directors on the Board are non-executive.

Shri Ranodeb Roy [DIN: 00328764] was appointed as Non-executive Director of the Bank, liable to retire by rotation, with effect from July 26, 2016, subject to the approval of the Shareholders of the Bank at the 3rd Annual General Meeting of the Bank. The ordinary resolution in respect of this appointment has been included in the Notice convening the 3rd Annual General Meeting of the Bank. The notice also contains a brief profile of Shri Ranodeb Roy as an annexure.

Sm. Georgina Elizabeth Baker [DIN: 06601316] was appointed as Nominee Director of the Bank, not liable to retire by rotation, with effect from July 26, 2016.

Apart from the above, no other Director was appointed or resigned during the year under review.

The composition of the Board and attendance of the members at the meetings follow: Table 2. Board of Directors and Attendance at Meetings

Name of Director	Number of Board Meetings Attended (total 8 meetings)	Attendance at AGM on June 20, 2016
Dr. Ashok Kumar Lahiri, Chairman	8	Present
Shri Chandra Shekhar Ghosh, MD & CEO	8	Present
Shri Bhaskar Sen	8	Present
Shri Boggarapu Sambamurthy	7	No
Shri Chintaman Mahadeo Dixit	7	Present
Sm. Gerogina Elizabeth Baker	3	N.A.
Dr. Holger Dirk Michaelis	6	No
Prof. Krishnamurthy Venkata Subramanian	6	No
Shri Pradip Kumar Saha	7	Present
Shri Ranodeb Roy	5	N.A.
Shri Sisir Kumar Chakrabarti	6	No
Shri Snehomoy Bhattacharya	6	No
Sm. T. S. Raji Gain	8	Present

¹Sm. Georgina E. Baker was appointed with effect from July 26, 2016.

²Shri Ranodeb Roy was appointed with effect from July 26, 2016.

Selection and appointment of Directors

The appointment of Directors is guided by the provisions of the Companies Act, 2013 and the Banking Regulation Act, 1949 and the guidelines issued by the RBI in this regard. While appointing a Director on its Board, your Bank follows the direction of RBI with regard to ''fit and proper'' criteria as applicable to private sector banks, signing of deed of covenants which includes the requirement for Directors to discharge their duties and responsibilities to the best of their abilities, individually and collectively, in order to be eligible to be appointed as Directors of the Bank. Every year, the declarations given by the Directors are reviewed by the Nomination & Remuneration Committee of the Board (NRC) and sent with the NRC''s recommendations to the Board for its review and noting.

Declaration from Independent Directors

All the Independent Directors of your Bank have given their respective declarations stating that they meet the criteria of independence as laid down under Section 149(6) and (7) of the Companies Act, 2013. In the opinion of the Board, the Independent Directors meet the requirements of Section 149 of the Companies Act, 2013.

Key Managerial Personnel

Shri Chandra Shekhar Ghosh, Shri Sunil Samdani and Shri Indranil Banerjee, continue to be the Managing Director & CEO, Chief Financial Officer and Company Secretary, respectively. These three personnel are statutorily required under Section 203 of the Companies Act, 2013.

Board Evaluation

The NRC, and subsequently the Board, have approved "Performance Evaluation Policy for the Board, Non-independent/ Whole Time Directors and Independent Directors." A questionnaire for the evaluation of the Board and its Committees, and of individual Directors, covering various aspects of their respective performance, including quality, roles, responsibilities, process, functioning, adherence to the code of conduct, and best practices, was sent out to the Directors. The responses were discussed and reviewed at a meeting of the Independent Directors, where an individual Director being evaluated recused himself/herself. The NRC, after taking into account this review by the Independent Directors, also examined the performance of the all the Directors. Board evaluation has provided some valuable inputs for underscoring the optimal role and responsibilities of the Board and its Committees, for their functioning, and streamlining and improving the quality, quantity and timeliness of Row of information between Bank Management and the Board to effectively and reasonably perform its duties.

Board meetings

There were eight meetings of the Board during 2016-17 in calendar 2016, on April 13, May 11, June 20, July 26, September 19and November 11,andin2017,onJanuary 19 and February 22 functioning.

Board Committees

The Board has constituted the following committees to oversee specific areas:

- Audit Committee

- Nomination & Remuneration Committee

- Risk Management Committee

- Information Technology Strategy Committee

- Customer Service Committee

- Corporate Social Responsibility Committee

- Special Committee for Monitoring High Value Fraud

Audit Committee

The Audit Committee provides direction to the audit function, and monitors the quality of internal and statutory audit. Its responsibilities include examining the financial statements and auditors'' report and overseeing the financial reporting process to ensure fairness, sufficiency and credibility of financial statements, recommending appointment, terms of appointment and removal of statutory auditors, and reviewing and monitoring, jointly with Management, the internal audit of the Bank.

On March 31, 2017, the Audit Committee comprised of

four Independent Directors and was chaired by Shri Chintaman Mahadeo Dixit. During 2016-17, the Committee met seven times on April 13, May 10, July 25, September 19, and November 07 in 2016, and on January 17 and March 13 in 2017.

The composition of the Committee and attendance of the members at the meetings follow:

Table 3. Audit Committee of the Board and Attendance at Meetings

Name of Member	Number of meetings attended by the members out of the total meeting of 7
Shri Chintaman Mahadeo Dixit,	6
Chairman
Shri Bhaskar Sen	7
Shri Sisir Kumar Chakrabarti	5
Shri Pradip Kumar Saha (Note 1)	1

Note : 1. Shri Pradip Kumar Saha was appointed as member of the

Committee with effect from January 19, 2017.

Nomination & Remuneration Committee

Criteria For Directors'' Appointment

The NRC evaluates the composition of the Board and recommends how to fill up vacancies arising in the Board from time to time. While recommending candidature of a Director, it considers the special knowledge or expertise possessed by the candidate as specified under the Banking Regulation Act, 1949.

The Committee also evaluates prospective candidates for the position of a Director from the perspective of the criteria for independence prescribed under the Companies Act, 2013. For a non-executive Director to be classified as independent, he/she must sign a declaration of independence. The Committee reviews the same and determines the independence of a Director.

Remuneration policy

RBI vide its circular DBOD No. BC. 72/29.67.001/2011-12 dated January 13, 2012, has issued guidelines on "Compensation of Whole-time Directors/Chief Executive Officers/Risk takers and Control function staff etc." for implementation by private sector banks and foreign banks from the financial year 2012-13. The Bank''s Compensation Policy, adopted in March, 2016, is in line with the RBI circular and also in compliance with the requirements of the Remuneration Policy as prescribed under Companies Act, 2013.

Risk Management Committee

The Risk Management Committee has been formed as per guidelines of RBI on Risk Management Systems. The functions of the Committee are to review the Bank''s risk management policies pertaining to credit, market, liquidity, operational, outsourcing, reputation, business continuity and disaster recovery plan.

On March 31, 2017, the Risk Management Committee comprised five Directors and was chaired by Shri Bhaskar Sen, an independent Director. There were four Meetings of the Committee during the financialyear 2016-17-on May 10, September 20, and November 10, in 2016, and on

March 14, 2017. Committee composition and attendance at its meetings follow.

The remuneration payable to non-executive/independent Directors is governed by the provisions of the Banking Regulation Act, 1949, RBI guidelines issued from time to time and the provisions of the Companies Act, 2013, and related rules to the extent these are not inconsistent with the provisions of the Banking Regulation Act, 1949/RBI guidelines. The permitted modes of remuneration for the non-executive/independent Directors are sitting fee for attending each Meeting of the Committee/Board as approved by the Board from time to time within the limits as provided under the Companies Act, 2013, and related rules.

On March 31, 2017, the NRC comprised four Directors including three independent Directors and the Managing Director & CEO, and was chaired by Shri Bhaskar Sen, an Independent Director. There were six meetings of the Committee during the financialyear 2016-17-on April 13, May 09, July 26, and November 10, in 2016;and on January 18, and March 21,in 2017. Composition of the Committee and attendance at its meetings follow.

Table 4. Nomination & Remuneration Committee of the Board and Attendance at Meetings

Name of Members	Number of meetings attended by the members out of the total meeting of 6
Shri Bhaskar Sen, Chairman	6
Shri Chandra Shekhar Ghosh	6
Shri Boggarapu Sambamurthy	5
Shri Snehomoy Bhattacharya	5
Shri Ranodeb Roy (Note 1)	3

Note : 1. Shri Ranodeb Roy was appointed as member of the Nomination & Remuneration Committee with effect from September 19, 2016.

Table 5. Risk Management Committee and Attendance at Meetings

Name of Members	Number of meetings attended by the members out of the total meeting of 4
Shri Bhaskar Sen, Chairman	4
Shri Chandra Shekhar Ghosh	4
Prof. Krishnamurthy Venkata Subramanian	3
Shri. Ranodeb Roy (Note 1)	2
Shri. Pradip Kumar Saha (Note 2)	l 1

Note : 1. Shri Ranodeb Roy was appointed as member of the Committee with effect from September 19, 2016.

2. Shri Pradip Kumar Saha was appointed as member of the Committee with effect from November 11, 2016.

Information Technology (IT) Strategy Committee

The IT Strategy Committee, constituted pursuant to RBI

circulars/guidelines, approves strategy for IT and policy documents, ensures that IT strategy is aligned with the business strategy, reviews IT risks, ensures proper balance of IT investments for sustaining the Bank''s growth, oversees the aggregate funding of IT at Bank-level, ascertains if Management has adequate resources to ensure proper management of IT risks and reviews the contribution of IT to the Bank''s business.

On March 31, 2017, the IT Strategy Committee comprised three Directors â two Independent Directors and the Managing Director & CEO â and was chaired by Shri Boggarapu Sambamurthy, an Independent Director. There were four meetings of the Committee during 2016-17 - on July 28, September 20, and December 26, in 2016, and on March 21, 2017. Composition of the Committee and attendance at its meetings follow.

Table 6. IT Strategy Committee and Attendance at Meetings

Name of Members	Number of meetings attended by the members out of the total meeting of 4
Shri Boggarapu Sambamurthy,	4
Chairman
Shri Chandra Shekhar Ghosh	4
Prof. Krishnamurthy Venkata	4
Subramanian

Customer Service Committee

The functions of the Customer Service Committee of the Board, constituted pursuant to RBI circulars/guidelines, include reviewing customer service initiatives, overseeing the functioning of customer service, evolving innovative measures for enhancing the quality and improving the overall satisfaction level of customers.

On March 31, 2017, the Customer Service Committee comprised three Directors, including two independent Directors and Managing Director & CEO, and was chaired by Shri Sisir Kumar Chakrabarti, an Independent Director. There were four meetings of the Committee during 2016-17 - on June 07, September21,and December21, in 2016, and March 29, 2017. Composition of the Committee and attendance at its meetings follow.

Table 7. Customer Service Committee and Attendance at Meetings

Name of Members	Number of meetings attended by the members out of the total meeting of 4
Shri Sisir Kumar Chakrabarti,	4
Chairman
Shri Chandra Shekhar Ghosh	4
Shri Pradip Kumar Saha	4

Corporate Social Responsibility Committee

The functions of the Corporate Social Responsibility Committee include review of Corporate Social Responsibility (CSR) initiatives undertaken by the Bank for inclusive growth, formulation and recommendation to the Board of a CSR Policy indicating the activities to be undertaken by the Bank, and the amount of expenditure to be incurred on such activities. It also makes recommendations to the Board with respect to the CSR initiatives, policies and practices of the Bank, monitors the conformity of CSR activities, implementation and compliance with the CSR Policy, and reviews and implements, if required, any other matter related to CSR initiatives as recommended/suggested by RBI or any other body.

On March 31, 2017, the CSR Committee comprised three Directors including two Independent Directors and the

Managing Director & CEO, and was chaired by Sm. Thekedathumadam Subramani Raji Gain, an Independent Director. During the financial year, there were two meetings of the Committee on June 07, 2016 and March 13, 2017. The composition of the Committee and attendance at its meetings follow.

Table 8. Corporate Social Responsibility Committee and Attendance at Meetings

Name of Members	Number of meetings attended by the members out of the total meeting of 4
Sm. Thekedathumadam Subramani	2
Raji Gain
Shri Pradip Kumar Saha	2
Shri Chandra Shekhar Ghosh	2

Details of the policy developed and implemented by the Bank on CSR initiatives taken during 2016-17 have been hosted on the website of the Bank http://www. bandhanbank.com/pdf/CSR-Policv-New-Format.pdf. The Annual Report on CSR activities is at Annexure - 1.

Special Committee for Monitoring High Value Fraud

The Special Committee for Monitoring High Value Fraud was constituted as per RBI circulars/guidelines. The Committee is required to meet and review as and when a fraud involving an amount of '' 1 crore and above comes to light.

At March 31, 2017, the Special Committee for Monitoring

High Value Fraud comprised five Directors including four independent Directors and the Managing Director & CEO, and was chaired by Shri Sisir Kumar Chakrabarti, an Independent Director. Since there was no fraud during 2016-17 involving an amount '' 1 crore or more, no meeting of the Committee was required to be held. The details of the composition of the Committee follow.

Table 9. Special Committee for Monitoring High Value Fraud

Name of Member	Number of meetings held
Shri Sisir Kumar Chakrabarti, Chairman	Nil
Shri Chandra Shekhar Ghosh	Nil
Shri Bhaskar Sen	Nil
Shri Pradip Kumar Saha	Nil (Note 1)
Shri Snehomoy Bhattacharya	Nil (Note 2)

Note : 1. Shri Pradip Kumar Saha was appointed as member of Special

Committee for monitoring High Value Fraud with effect from July 26, 2016.

2. Shri Snehomoy Bhattacharya was appointed as member of Special

Committee for monitoring HighValue Fraud with effect from July 26, 2016.

Directors'' Responsibility Statement

Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Directors confirm:

i) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures.

ii) that they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2017, and of the profit of the Bank for the year ended on that date.

iii) that they have taken properand sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

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

v) that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively.

Issuance/Transfer of Equity Shares

Your Bank did not issue any equity shares during the financial year 2016-17. There was one transfer of 1,89,14,511 equity shares on May 11, 2016 as per details given below:

Table 10. Transfer of Equity Shares on May 11, 2016

Name of	Name of	No. of	Share	Distinctive Number
Transferor	Transferee	shares	Certificate Nos.	From	To
International Finance	IFC FIG	18,914,511	14	982,957,483	1,001,871,993
Corporation	Investment Company I
\| Total		18,914,511

As on March 31, 2017, the issued, subscribed and paid up capital of your Bank stood at '' 1095,14,10,340 comprising 109,51,41,034 equity shares of '' 10 each fully paid.

Information about Financial Performance / Financial Position of the Subsidiaries, Associates and Joint Venture Companies

The Bank does not have any subsidiaries, associates and JointVenture Companies.

Capital Adequacy Ratio

Your Bank''s Capital Adequacy Ratio (CAR), calculated in line with the relevant capital regulations, stood at 26.36 per cent on March 31, 2017, well above the minimum regulatory requirements of 13 per cent.

Internal Financial Controls, Audit and Compliance

Your Bank has an Internal Audit department and a Compliance department, which independently carry out evaluation of the adequacy of all internal controls, and ensure that operating and business units adhere to laid down internal processes and procedures as well as to regulatory and legal requirements. The audit department also proactively recommends improvements in operational processes and service quality. To mitigate operational risks, the Bank has put in place extensive internal controls including audit trails, appropriate segregation of front and back office operations, post-transaction monitoring processes at the back end to ensure independent checks and balances, adherence to the laid down policies and procedures of the Bank and to all applicable regulatory guidelines. Your Bank has adhered to the highest standards of compliance and governance and has put in place controls and appropriate structure to ensure this. To safeguard independence, the internal audit department reports directly to the Chairman of the Audit Committee of the Board. The Audit Committee of the Board also reviews the performance of the Audit department and Compliance department and reviews the effectiveness of controls and compliance with regulatory guidelines. The Board of Directors confirms that there are internal controls in place with reference to the Financial Statements and that such controls are operating effectively.

Particulars of Employees

The Bank had 24,220 employees on March 31, 2017. The details of employees in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are appended separately as Annexure - 2 and form part of this report.

Related Party Transactions

Pursuant to the proviso of Section 188(1) of the Companies Act, 2013, details of transactions with related parties are appended in Annexure - 3.

Particulars of Loans, Guarantees or Investments

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business. Further, in terms of the Companies (Removal of Difficulties) Order, 2015, nothing in Section 186 except sub section (1) shall apply to any acquisition made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of the Banking Regulation Act, 1949.

Whistle Blower Policy/ Vigil Mechanism

The Bank has adopted a Whistle Blower Policy pursuant to which employees of the Bank can raise their concerns relating to fraud, malpractice or any other activity or event which is against the interest of the Bank or society as a whole. As per the Whistle Blower Policy, the Audit Committee has been entrusted with the responsibility of reviewing the complaints received and the action taken thereof.

Corporate Social Responsibility

In alignment with the vision of the Bank, CSR initiatives continued to Endeavour helping the poorest of the poor, who are difficult to include under even the micro banking activity of your Bank, by proffering them not only financial assistance but also handholding and mentoring about the optimal use of funds. The outcome that your Bank strives for is to lift some of the poorest of the poor into the mainstream of society by making them able to generate sustained income on their own in due course. The civil society organization Bandhan-Konnagar continued to provide valuable partnership in this mission of your Bank.

The details of CSR activities/projects undertaken during the year is given as Annexure - 1 and forms part of this Board Report.

Significant and Material Orders Passed by Regulators or Courts or Tribunals

During the year under review no significant or material orders were passed by any Regulators or Courts or Tribunals against the Bank.

Auditors

At the Annual General Meeting (AGM) held on June 20,

2016, the members ratified the appointment of M/s. S.R. Batliboi & Associates LLP, Chartered Accountants, 22, Camac Street, Block C, 3rd Floor, Kolkata - 700016 (ICAI Firm Registration Number 101049W) as statutory auditors till the conclusion of the next AGM. As recommended by the Audit Committee, the Board has proposed the ratification of the appointment of S.R. Batliboi & Associates LLP, Chartered Accountants, as Statutory Auditors for the financial year 2017-18.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank has appointed Shri Deepak Kumar Khaitan, Practicing Company Secretary (C.P. 5615) to conduct Secretarial Audit of the Bank. The Secretarial Audit Report is given in Annexure - 4 to this report.

There are no qualifications, reservations or adverse remarks made by M/s. S.R. Batliboi & Associates LLP, Chartered Accountants, Statutory Auditors of the Bank, in their Auditors'' report, or by Shri Deepak Kumar Khaitan, Practicing Company Secretary (C.P. 5615), Secretarial Auditors of the Bank, in their Secretarial Audit Report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Rating

Table 11. Rating of Bank''s Financial Securities_

Instrument	Rating	Rating Agency	Amount
Long - term Bank Facilities	Care AA-	Care Ratings	'' 133.97 crore
Unsecured Subordinated Non-	Care AA-	Care Ratings	Rs, 160 crore
Convertible Debenture	[ICRA]AA-	ICRA
Term Loan from Banks	[ICRA]AA-	ICRA	Rs, 80 crore
Certificate of Deposit	[ICRA]A1	ICRA	Rs, 500 crore

Considering the nature of activities of the Bank, the provisions of Section 134(m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is however, constantly pursuing its goal of technological up gradation in a cost-effective manner for delivering quality customer service. There were no foreign exchange earnings and outgo during 2016-2017.

Extract OF Annual Return

Pursuant to Section 92 (3) of the Companies Act, 2013, and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return is at Annexure - 5.

Management''s Discussions and Analysis

The Management Discussion and Analysis report enclosed as Annexure - 6 forms part of this report.

Information Under the Sexual Harassment of Women at Workplace (Prevention, Prohibition And Redressal) Act, 2013

Your Bank has zero tolerance towards any action on the part of any executive which may fall under the ambit of ''Sexual Harassment'' at workplace, and is fully committed to uphold and maintain the dignity of every woman executive working in the Bank. The Bank takes all necessary measures to ensure a harassment-free workplace and has instituted an Internal Complaints Committee for redressal of complaints and to prevent sexual harassment. The Policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints.

Number of complaints pending as at the beginning of the

Financial year

Number of complaints filed during the Financial year

Number of complaints pending as at the end of the

financial year

Nil

Reserves

As required under Section 134(3)(j) of the Companies Act, 2013, the reserves as on the close of 2016-17 stood at Rs, 3,351.31 crore.

Deposits

The details of the deposits received and accepted by your Bank as a banking company are enumerated in the financial statement for the year ended March 31, 2017.

Human Resource Management

Your Bank recognizes that strategic human resource is key to organizational success. Thus, the goal of the Human Resources (HR) department is to ensure that the employees are recruited, engaged, retained and motivated to contribute to the Bank''s growth and strategic mission. The HR Department proactively engages with employees at all levels for this purpose. The vision is to create an environment and culture of learning and superior performance by living the Bank''s corporate values and aligning the personal aspirations of employees to business imperatives.

The employee engagement initiatives includes placing greater emphasis on learning and development, providing opportunities to staff to seek inspirational roles, streamlining the Performance Management System and introducing performance-linked rewards. A host of programs are being run to meet the on-going learning and development needs in the Bank and promote a climate of learning, self-growth and excellence. The learning architecture in your Bank focusesses on:

1. Developing tailor-made, competency-mapped programs for different sets of employees, based on their roles in the Bank.

2. Induction/orientation of new hires for inculcating the culture of the Bank.

3. Training on operational risk, audit, compliance and regulatory aspects for frontline staff.

4. People management, customer-centric, and compliance-based programmes for employees in leadership roles.

Through its eight residential training centers across the country, and through a wide range of training programs, your Bank has provided 85,354 days (in FY 2016-17) of training to its employees, spread across departments and functions, to build their professional competence and improve their skill set, so as to contribute to your Bank''s mission.

Additionally, the Bank continues to engage with leading management institutes for leadership and management development programs and specialized programs for employees across senior and mid-management levels of staff.

Your Bank believes that the Performance Management (PM) process is a powerful driver of individual and corporate performance. An online PM System (PMS), with focus on building transparency in performance assessments, employee ownership of the goals and encouraging dialogue on performance and developmental feedback between the appraise and appraiser, was introduced in your Bank. Softer behavioral attributes, like the employee''s adherence to values of the organization, customer focus, accountability, ability to work in a team, etc. build a culture conducive to sustainable business performance and promote desired behavior. Recognizing their importance, attention was also paid to such softer behavioral attributes.

Risk Management Framework

Your Bank''s risk management framework seeks to ensure that there is an effective process in place to manage risks across the Bank. Risk management is integral to all aspects of the Bank''s activities and is the responsibility of all staff. The Board of Directors has oversight on all the risks assumed by the Bank.

The Risk Management Committee of the Board (RMCB) reviews risk management policies of the Bank pertaining to credit, market, liquidity, operational, outsourcing and business continuity management. Policies approved from time to time by the Board of Directors/Committees of the Board form the governing framework for each type of risk.

The Audit Committee of the Board (ACB) provides direction to and monitors the quality of internal audit function. The internal audit function monitors the effectiveness of the Bank''s risk program and provide objective assurance that risks are being managed appropriately.

As a part of ensuring senior Management participation, specific Committees, e.g., Credit Risk Management Committee (CRMC) for Credit Risk, Operational Risk Management Committee (ORMC) for Operational Risk, Asset Liability Committee (ALCO) for Market Risk and Asset Liability Management, have been constituted to facilitate focused oversight of various risks and report to the RMCB.

The overall Risk Limits and Appetite Statements are approved by the Board of Directors. The Risk Appetite

Framework (RAF) guides Management on the desired level of risk for various types of risk and helps steer the decision making process. The Board reviews the risk profile of the Bank, as approved by the RMCB, on a regular basis.

The Internal Capital Adequacy Assessment Process (ICAAP) assesses the overall capital adequacy of the Bank and the significant risks in terms of capital. Stress tests are done, as part of the ICAAP document, to evaluate the capital adequacy during stressed scenarios. The RMCB reviews the capital adequacy position of the Bank under normal and stressed conditions on a regular basis. The Bank is also striving towards building frameworks for managing Pillar II risks, like reputation risk, business risk and strategic risk.

Risk Management Department is responsible for setting up the appropriate risk control mechanism and for quantifying and measuring risk. Broadly classified into three major sub-segments (Credit Risk, Market Risk and Operational Risk), the Risk Management Department owns, maintains and updates the various policies. The Risk Management team also provides analysis of the existing and emerging risks to the committees such as ALCO,

CRMC, ORMC, as also to RMCB, and based on the deliberations thereof, provides guidance to the various business Groups. The Bank maintains independence of the risk function. The Risk Management Department operates under the direction of Chief Risk Officer (CRO), who reports directly to the RMCB.

Credit Risk:

Credit Risk Management Department (CRMD) is responsible for measurement, monitoring and assessment of the credit risk of the Bank. CRMD is responsible for thorough risk vetting of credit proposals and highlighting the inherent risks therein to the sanctioning authorities. It also carries out continuous monitoring of the portfolio for delinquency trend and credit limits. The CRMC is responsible for overseeing implementation of credit risk management framework across the Bank and providing recommendations to the RMCB. Responsibility of CRMC includes implementation of credit risk policy/strategy approved by the Board, monitoring credit risk, deciding delegation of credit approving powers, and prudential limits.

Market and Liquidity Risk:

Market Risk Management Department is responsible for assessing, measuring and monitoring investment risk (measured through PV01 or change in present value for a

1 basis point change in the yield curve, Modified Duration, monthly loss and marked-to-market or MTM position), liquidity risk, interest rate risk and risks emanating from commodity and equity price fluctuations. ALCO is responsible for managing these risks and reporting to the RMCB. ALCO has the power to determine pricing of assets, liabilities, maturity and also to play a role in approving the final benchmark marginal cost of lending rate (MCLR).

Operational Risk:

Operational Risk Management Department manages the risks emanating from people, process and systems of the Bank, including fraud risk, legal risk and outsourcing risk, and ensures that the appropriate risk controls are in place. The ORMC is responsible for measuring, monitoring and reporting of these risks as per the Board-approved policies. The Business Continuity Plan (BCP) framework ensures continuity of services.

Information Security Team assesses the IT-related vulnerabilities and manages the existing and emerging cyber security risks faced by your Bank.

Information Technology

Your Bank continues to try and further deepen and broaden its reach and expand its market share by establishing DSCs, building relationships and spreading digital banking by extensive use of modern technology. Information Technology has transformed the landscape of the banking industry. Today, the customer, who is highly mobile, expects services to be available at the time and place of their choice and this expectation can be met only through the provision of information technology-led or digital services. Your Bank''s technology-led products, e.g. mBandhan, its mobile banking application, try to deliver a seamless banking experience at the place of the customer''s choice, i.e., their place, at one of your Bank''s branches or wherever they are when on the move.

Technology has been used even for the delivery of micro-banking services, which is always close to the customer''s homes. Direct Sales Officers visit customers and use Hand-held devices (Point-of-sale machines) to carry out the banking transactions. With innovative ways of banking like collections of loan instalments and providing cash receipts and payments for customers at their doorsteps, banking near the place of the micro banking customer was never so easy and simple. Your Bank can be proud of introducing a new trend in micro-banking.

Your Bank has tied up with two Payment Gateway Service providers for online net banking transactions. Now Bank customers can shop and pay online through net banking on more than 2,500 merchant websites. Your Bank also started merchant acquiring services by deploying Electronic Draft Capture (EDC) or Point of Sale (PoS) terminals, which accept RuPay and Visa Cards at 5,743 merchant outlets.

Your Bank has also enabled customers to do Aadhar seeding and mobile registration through the Bank''s ATMs.

Your Bank recognizes that improving its use of information

technology is far from a one-off endeavour, the Bank has to run to be at the same place.

Banking at One oF the Bank''s Branches

Your Bank has ensured that opening of an account, issue of a bank draft, payment of a cheque, facility of scheduling payments or transfers of funds at any of its branches is a simple and fast operation with the state-of-the-art Core Banking Solution. This has been possible with a seamless integration of the digital and physical. The aim of setting up 840 branches by end-March 2017 was successfully achieved. Within 1 year and 7 months of commencing operations, your Bank also had 282 ATMs and 2,443 DSCs.

SaFe & Secure Banking

Your Bank has implemented a robust IT Policy, Information Security Policy and Cyber Security Policy. These policies, in line with international best practices, are reviewed periodically and suitably strengthened to address emerging threats.

Your Bank has got a state-of-the-art Primary Data Centre and Disaster Recovery Centre to secure the live systems.

The centres have got ISO 27001 and Payment Card Industry Data Security Standard (PCI DSS) certified. Your Bank has made substantial progress in implementing the RBI guidelines on Technology Risk Management, Information Security and Cyber Fraud. It is in the process of implementing additional IT security products and features to provide ''Best in Class Information Security'' features and safe and secure banking to all of its customers.

Your Bank conducts regular cyber security drills. Employee awareness programmes are conducted to ensure security and increase awareness.

Your Bank is one of the few banks to implement biometric login for all employees to access the Core Banking Application. With a two factor authentication, this provides an edge on the information security front. It has also implemented the state-of-the-art Advanced Malware Protection Solution to secure its systems from current cyber threats.

Your Bank has accomplished resiliency in treasury business by opening Treasury Front Office Operations in Mumbai and resiliency in Back Office Operations by opening Central Processing Unit in Indore.

Disaster Recovery Drills are conducted regularly as part of the implementation of the Business Continuity Management System (BCMS). Critical IT Systems of your

Bank are compliant with the International BCMS Standard

- ISO 22301 - 2012.

The Application setups undergo security reviews before

''Go Live'' and are also reviewed periodically.

Acknowledgments

The Board of Directors places on record its gratitude to the RBI, other government and regulatory authorities, financial institutions and correspondent banks for their strong support and guidance. The Board acknowledges the support of the shareholders, and also places on record its sincere thanks to its valued clients and customers for their patronage. The Board also expresses its deep sense of appreciation to all employees of the Bank for their strong work ethic, excellent performance, professionalism, teamwork, commitment and initiative, which has led to the Bank making commendable progress in today''s challenging environment. However, it also assures Management and staff that the Board will continue to ask for more and more improvements as your Bank continues its unique journey by combining micro-banking with traditional commercial banking.

For and on behalf of the Board of Directors

Bandhan Bank Limited

Chairman

Place: Kolkata Ashok Kumar Lahiri

Date: 26th April, 2017 (DIN: 07234290)

Mar 31, 2016

BOARDS'' REPORT

To the Members,

The Directors take great pleasure in presenting the Second Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2016.

SUMMARY OF FINANCIAL PERFORMANCE (Rs, In Crore)
Particulars	For the year ended
	March 31, 2016	March 31, 2015
Deposits:	12,088.75	-
- Savings Bank Deposits	2,371.05	-
- Current Account Deposits	234.55	-
Advances:	12,437.55	-
- Cash credits, Overdrafts and Loans repayable on demand	84.46	-
- Term Loans	12,353.08	-
Total Assets/Liabilities	19,915.73	526.89
Net Interest Income	932.73	-
Other Income:	150.00	-
- Fee Income	145.42	-
- Misc. Income	4.58	7.95
Operating Expenses (Excluding depreciation)	580.14	5.64
Profit before Depreciation, Provisions and Tax	502.59	2.31
Depreciation	35.77	-
Provision for Tax	138.26	1.73
Other Provisions and Write-offs	53.30	-
Net Profit	275.25	0.58
Appropriations:
Transfer to Statutory Reserve	68.96	-
Transfer to Investment Reserve	-	-
Transfer to Capital Reserve	-	-
Transfer to/(from) Reserve Fund	-	-
Proposed Dividend	-	-
Surplus carried over to Balance Sheet	206.87	0.58
EPS (Basic & Diluted)	3.40	0.01

On April 9, 2014, Bandhan Financial Services Limited (''BFSL'') was accorded in-principle approval by Reserve Bank of India (âRBI") for setting up a Bank in the private sector (âin-principle approval"). Pursuant to the in-principle approval and in accordance with the guidelines, BFSL incorporated a subsidiary Bandhan Financial Holdings Limited (BFHL). BFHL, a Public Limited Company, acts as the Non-Operating Financial Holding Company (âNOFHC"). BFHL has in turn incorporated a wholly owned subsidiary Bandhan Bank Limited (âBank"). Pursuant to the guidelines, BFHL has been registered with RBI as an NBFC - NOFHC with effect from June 4, 2015. The Bank, after complying with all applicable RBI guidelines and Banking Regulation Act, 1949 (âBR Act"), applied for issuance of licence under Section 22(1) of the BR Act. On June 17, 2015, RBI issued the Banking licence under Section 22(1) of the BR Act to your Bank to carry on banking business in India. The Bank commenced its banking business with effect from August 23, 2015, with 501 branches on a pan-India basis. On September 3, 2015, the name of the Bank was included in the Second Schedule of the Reserve Bank of India Act, 1934 (âRBI Act, 1934").

Within 222 days from the date of commencement of banking business, your Bank has posted a total income of Rs, 1731.25 crore. The profit after tax for the year stood at Rs, 275.25 crore after provisions of Rs, 191.56 crore. Your Bank was also able to garner total deposits of f 12,088.75 crore including Current Account and Savings Bank (CASA) of Rs, 2605.60 crore. CASA percentage is maintained at a healthy rate of 21.55% of total deposits. In its seven months of operation your Bank achieved robust earnings not only in its core micro-lending business but also from the retail business, which indicates a clear strategic focus. The key ratios continued to remain strong, with Return on Equity (ROE) at 17.1% (annualized) and Return on Assets (ROA) at 3.18% (annualized).

With its outstanding performance in the area of Priority Sector Lending (PSL), in terms of percentage achievement, your Bank would be the top performer amongst all commercial banks.

Out of its total loan portfolio, an amount of Rs, 12,268.81 crore is eligible to be classified under PSL, which constituted 98.64% of net advances, a remarkable performance against the regulatory requirement of 40% of net advances. Agri and allied loans stood at Rs, 6,426.79 crore, which contributed 51.67% of net loan outstanding of your Bank; here again your Bank''s achievement was well above the regulatory stipulation of 18%. The portfolio overwhelmingly comprised loans to women borrowers under micro-finance, which are additionally eligible to be classified under various sub-categories of PSL, such as advances to Small and Marginal Farmers and Weaker Sections. Your Bank also extended loans to clients under Micro Small & Medium Enterprises (MSMEs). Bandhan Bank has thus been making unique and commendable contributions to the socio-economic uplift of the regions where it operates.

DIVIDEND

Not even a year has passed since your Bank commenced banking operations on August 23, 2015. In view of the above, the Board believes that it is desirable to wait for the Bank''s operations to stabilize and have a full year to evaluate the Bank''s operations to consider the question of recommending dividends. In view of this, the Board does not recommend any dividend for 2015-16.

TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND

Unclaimed dividends are required to be transferred to the Investors Education and Protection Fund. Since the Bank has not declared any dividends from its incorporation, in terms of Section 125 of the Companies Act, 2013 (âthe Act"), there is no unclaimed dividend relating to the financial year 2014-15, which needs to be transferred to the Investors Education and Protection Fund.

RATING

Instrument	Rating	Rating Agency	Amount
Long - term Bank Facilities	A	Care Ratings	f 1000 crore
Unsecured Subordinated Tier II Non-Convertible Debenture	A	Care Ratings	f 160 crore
Secured Non -Convertible Debenture Issue	A	Care Ratings	f 60 crore
Secured Non-Convertible Debenture Issue	AA-	ICRA	f 100 crore
Long Tem - Bank Term loans	AA-	ICRA	f 80 crore
Certificate of Deposits	A1	ICRA	f 500 crore

In compliance with the conditions of the banking licence issued under Section 22(1) of the BR Act, the entire business (assets and liabilities) of BFSL was transferred to the Bank on August 23, 2015. This was done on a slump sale basis under a Business Transfer Agreement dated February 11, 2015.

ISSUANCE OF EQUITY SHARES

Your Bank issued 59,40,91,034 equity shares during the financial year 2015-16 to ensure adequate capital to support performance and business of the Bank and for general corporate purposes.

Sl. No.	Name of Allottee	Address of Allottee	Date of allotment	Number of shares Allotted	Total Amount Paid ( in f)	Remarks
1	2	3	4	5	6	7
1	Bandhan Financial Holdings Limited	DN-32, Sector-V, Salt Lake, Kolkata-700091	August 21, 2015	26,15,91,452	1123,01,21,034.36	Investment by BFHL in the Bank - 1st tranche
2	Bandhan Financial Holdings Limited	DN-32, Sector-V, Salt Lake, Kolkata-700091	August 25, 2015	22,03,16,030	945,81,67,167.90	Investment by BFHL in the Bank - 2nd tranche
3	International Finance Corporation	2121, Pennsylvania Avenue, N.W, Washington, D.C 20433, USA	February 12, 2016	5,40,41,462	231,99,99,963.66	Shares issued pursuant to Shareholders Agreement dated April 24, 2015
4	Caladium Investment Pte. Ltd	168 Robinson Road, #37-01 Capital Tower, Singapore 068912	February 12, 2016	5,46,48,030	234,60,39,927.90	Shares issued pursuant to Shareholders Agreement dated April 24, 2015
5	Small Industries Development Bank of India	SIDBI Tower, 15, Ashok Marg, Lucknow- 226001	February 12, 2016	34,94,060	14,99,99,995.80	Shares issued pursuant to Shareholders Agreement dated April 24, 2015

As on March 31, 2016, the issued, subscribed and paid up capital of your Bank stood at f 1095,14,10,340 comprising 109,51,41,034 equity shares of f 10 each fully paid.

CAPITAL ADEQUACY RATIO

Your Bank''s Capital Adequacy Ratio (CAR) calculated in line with the relevant capital regulations stood at 29.01%, well above the regulatory minimum of 13.0%.

INFORMATION ABOUT FINANCIAL PERFORMANCE / FINANCIAL POSITION OF THE SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

The Bank does not have any subsidiaries, associates and Joint Venture Companies.

INTERNAL FINANCIAL CONTROLS, AUDIT AND COMPLIANCE

Your Bank has Internal Audit and Compliance functions which independently carry out evaluation of the adequacy of all internal controls, and ensure operating and business units adhere to internal processes and procedures as well as to regulatory and legal requirements. The audit function also proactively recommends improvements in operational processes and service quality. To mitigate operational risks, the Bank has put in place extensive internal controls including audit trails, appropriate segregation of front and back office operations, post-transaction monitoring processes at the back end to ensure independent checks and balances, adherence to the laid down policies and procedures of the Bank, and to all applicable regulatory guidelines. Your Bank has adhered to the highest standards of compliance and governance and has put in place controls and appropriate structure to ensure this. To safeguard independence, the internal audit function has a reporting line to the Chairman of the Audit Committee of the Board. The Audit Committee of the Board also reviews the performance of the Audit and Compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines. The Board of Directors confirms that there are internal controls in place with reference to the Financial Statements, and that such controls are operating effectively.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Shri Bhaskar Sen [DIN: 03193003], Shri Sisir Kumar Chakrabarti [DIN: 02848624] and Shri Chandra Shekhar Ghosh [DIN: 00342477] were appointed as the first three Directors of the Bank and were regularised in the Annual General Meeting held on June 29, 2015. After obtaining the banking licence under section 22(1) of the BR Act, the entire Board of the Bank was reconstituted on July 9, 2015. Shri Boggarapu Sambamurthy [DIN: 00246211], Shri Chintaman Mahadeo Dixit [DIN: 00524318], Prof. Krishnamurthy Venkata Subramanian [DIN: 00487747], Shri Pradip Kumar Saha [DIN: 02947368], and Shri Snehomoy Bhattacharya [DIN: 02422012] were appointed as Additional Directors (category - Independent) with effect from July 9, 2015. Shri Ashok Kumar Lahiri [DIN: 07234290] was appointed as Additional Director (category - Independent) on July 10, 2015. Their appointments were regularized in the Extra-ordinary General Meeting (EGM) held on July 18, 2015. Smt. Thekedathumadam Subramani Raji Gain [DIN: 07256149] was appointed as an Additional Director (category - Independent) on August 6, 2015. Her appointment was regularized in the EGM held on February 8, 2016. Dr. Holger Dirk Michaelis [DIN:07205838] was appointed as Nominee Director of Caladium Investment Pte. Ltd. with effect from February 12, 2016. As on the date of this report, total strength of the Board of your Bank is 11 including one Managing Director & CEO and one Nominee Director.

DECLARATION BY INDEPENDENT DIRECTORS

Shri Ashok Kumar Lahiri, Shri Bhaskar Sen, Shri Boggarapu Sambamurthy, Shri Chintaman Mahadeo Dixit, Prof. Krishnamurthy Venkata Subramanian, Shri Pradip Kumar Saha, Shri Sisir Kumar Chakrabarti, Shri Snehomoy Bhattacharya and Smt. Thekedathumadam Subramani Raji Gain are the Independent Directors on the Board of the Bank. All the above named Independent Directors have given their respective declarations under Section 149 (6) and Section 149 (7) of Companies Act, 2013, and the Rules made there under. In the opinion of the Board, the Independent Directors fulfill the conditions relating to their status as Independent Directors as specified in Section 149 of the Companies Act, 2013, and rules made there under. Further, all the Independent Directors also meet the criteria laid in Section 10A of the BR Act.

CHAIRMAN

Shri Ashok Kumar Lahiri was appointed as part-time non-executive Chairman of the Bank in terms of Section 10B(1A)(i) of the BR Act for a period of three years with effect from July 10, 2015. Shri Lahiri, an economist, has a rich and varied experience in various facets of banking and finance. RBI has granted approval for the appointment of Shri Ashok Kumar Lahiri as Chairman with effect from July 10, 2015.

MANAGING DIRECTOR & CEO

Shri Chandra Shekhar Ghosh, founder of the Bank, has been appointed as the Managing Director & CEO under Section 35B of the BR Act with effect from July 10, 2015, for a period of three years. RBI has granted approval for the appointment of Shri Chandra

Shekhar Ghosh as Managing Director & CEO with effect from July 10, 2015. In compliance with section 152 of the Companies Act, 2013, Mr. Chandra Shekhar Ghosh, who retires by rotation and being eligible, offers himself for re-appointment.

KEY MANAGERIAL PERSONNEL (KMP)

Shri Chandra Shekhar Ghosh, Managing Director & CEO, Shri Sunil Samdani, Chief Financial Officer and Shri Indranil Banerjee, Company Secretary of the Bank, have been appointed as the Key Managerial Personnel as required under Section 203 of the Companies Act, 2013, and Rules made there under.

BOARD EVALUATION

A set of questionnaire for the evaluation of the Board and its Committees, designed in accordance with the relevant statutes and covering various aspects of the performance of the Board and its Committees, including composition and quality, roles and responsibilities, processes and functioning, adherence to Code of Conduct and Ethics and best practices in Corporate Governance, was sent out to each Director. The responses received to the questionnaire on evaluation of the Board and its Committees were placed before the meeting of the Independent Directors for consideration. The assessment of the Independent Directors on the performance of the Board and its Committees was subsequently discussed by the Board at its meeting. The framework for evaluation of the Board, Committees and the Directors is subject to an annual review. The Board opined that, given the short period for which it has functioned, a streamlined evaluation questionnaire and methodology be devised by the Nomination and Remuneration Committee (NRC) of the Board for evaluating the Board and the Director''s performance.

The Bank has in place a process whereby declarations are obtained from the Directors regarding fulfillment of âFit and Proper" criteria in accordance with RBI guidelines. The declarations from the Directors were placed before the NRC to assess whether the Directors fulfil the said criteria.

POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

The NRC recommends the appointment of Directors to the Board. The NRC identifies persons who are qualified to become Directors on the Board and evaluates them by criteria, such as academic qualifications, previous experience, track record and integrity, before recommending their appointment to the Board.

The Remuneration Policy for Whole-time Directors is governed by the Compensation Policy of the Bank. The Compensation Policy of the Bank, duly reviewed and recommended by the NRC, has been approved by the Board and is articulated in line with the RBI guidelines.

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

Your Bank''s approach is to have a ''Pay for performance'' culture based on the belief that the performance management system should provide a sound basis for assessing performance holistically. The compensation system also takes into account on various factors like roles, skills/competencies, experience and grade/seniority to differentiate pay appropriately on the basis of contribution, skill and availability of the talent in the light of competitive market conditions.

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

PARTICULARS OF EMPLOYEES

The information in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is given in Annexure - 1 to this report.

The Bank had 20,548 employees at end-March, 2016. Five employees employed for part of the year were in receipt of remuneration of not less than Rs,5 lakh per month. The details of such employees in terms of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are appended separately and given in Annexure - 1 as referred to above and form part of this report.

BOARD OF DIRECTORS

Bandhan Bank has a broad-based Board of Directors, constituted in compliance with the Banking Regulation Act, 1949, the Companies Act, 2013, and in accordance with good corporate governance practices. The Board functions either as a full Board or through various committees constituted to oversee specific operational areas. The Board has constituted seven committees, viz.

- Audit Committee,

- Nomination & Remuneration Committee,

- Corporate Social Responsibility Committee,

- Customer Service Committee,

- Special Committee for Monitoring High Value Fraud,

- Information Technology Strategy Committee, and

- Risk Management Committee.

As on March 31, 2016, all these Board Committees comprised a majority of Independent Directors and were chaired by Independent Directors.

At end-March, 2016, the Board of Directors consisted of 11 members. During the year under review, eleven Meetings of the Board were held: May 29, 2015; June 18, 2015; July 9, 2015; July 10, 2015; August 6, 2015; August 24, 2015; September 22, 2015; November 9, 2015, January 12, 2016, February 12, 2016 and March 18, 2016.

The names of the Directors, their attendance at Board Meetings during the year, and attendance at the last Annual General Meeting (AGM) are set out in the following table:

Name of Members	Number of Meetings	Attendance at AGM on June 29, 2015
Shri Ashok Kumar Lahiri, Chairman	8/8 (Note 1)	N.A.
Shri Chandra Shekhar Ghosh	11/11	Present
Shri Bhaskar Sen	10/11	No

Shri Sisir Kumar Chakrabarti	9/11	No
Shri Pradip Kumar Saha	8/9 (Note 2)	N.A.
Shri Boggarapu Sambamurthy	8/9 (Note 2)	N.A.
Shri Chintaman Mahadeo Dixit	9/9 (Note 2)	N.A.
Prof. Krishnamurthy Venkata Subramanian	5/9 (Note 2)	N.A.
Shri Snehomoy Bhattacharya	5/9 (Note 2)	N.A.
Smt. Thekedathumadam Subramani Raji Gain	6/7 (Note 3)	N.A.
Dr. Holger Dirk Michaelis	1/2 (Note 4)	N.A.

Note :

1. Shri Ashok Kumar Lahiri was appointed as a Director with effect from July 10, 2015.

2. Shri Pradip Kumar Saha, Shri Boggarapu Sambamurthy, Shri Chintaman Mahadeo Dixit, Prof. Krishnamurthy Venkata Subramanian and Shri Snehomoy Bhattacharya were appointed as Directors with effect from July 9, 2015.

3. Smt. Thekedathumadam Subramani Raji Gain was appointed as Director with effect from August 6, 2015.

4. Dr. Holger Dirk Michaelis was appointed as Director with effect from February 12, 2016.

The terms of reference of the Board Committees as mentioned earlier, their composition and attendance of the respective members at the various Committee Meetings held during financial year 2015-16 are set out below:

Audit Committee

The Audit Committee provides direction to the audit function and monitors the quality of internal and statutory audit.

The basic functions & responsibilities of the Audit Committee are as follows:

i. Apart from the scope of service stated in Section 177(4) of the Companies Act, 2013, the Committee shall have periodic discussions with the auditors about internal control system and the scope of audit, including the observations of the auditors,

ii. Shall review the financial statements before their submission to the Board and shall discuss any related issues with the internal and statutory auditors and Management of the Bank.

iii. In discharging its functions, it shall have authority to investigate into any matter in relation to any items specified in Section 177 or referred to it by the Board.

iv. The Board may assign any matter of important nature relating to accounts, finance, taxation, internal control systems, inspection and investigation from time to time to the Committee, and may require the Committee to submit a report to the Board on such matters within a stipulated time.

v. Besides, the Committee shall submit its observations to the Board from time to time on any matter relating to financial management, including audit report.

vi. The Chairman of the Audit Committee shall attend the Annual General meeting of the Bank to provide clarification on any matter relating to Audit.

Composition

On March 31, 2016, the Audit Committee comprised three Independent Directors and was chaired by Shri Chintaman Mahadeo Dixit, an Independent Director to consider the operation of your registered Bank. Including the period before the commencement of the banking operation, there were four Meetings of the Committee during the financial year, - on May 29, 2015, November 8, 2015, January 11, 2016 and March 17, 2016.

The details of the composition of the Committee and attendance at its meetings are set out in the following table:

Name of the Members	Number of meetings attended
Shri Chintaman Mahadeo Dixit , Chairman	3/3 (Note 1)
Shri Bhaskar Sen,	3/4
Shri Sisir Kumar Chakrabarti	4/4
Shri Chandra Shekhar Ghosh (up to July 9, 2015)	1/1 (Note 2)

Note : 1. Shri Chintaman Mahadeo Dixit was appointed as a member of the Committee with effect from July 9, 2015 and functioned as Chairman thereon.

2. With the induction of new members on the Board, the Audit Committee was reconstituted with effect from July 9, 2015 : before that Shri Ghosh was the Chairman.

Nomination & Remuneration Committee

The basic responsibilities of the NRC are:-

(a) To identify persons who are qualified to become Directors in accordance with the criteria laid down, recommend to the Board their appointment, re-appointment or removal, and to carry out evaluation of every Director''s performance;

(b) To formulate the criteria for determining qualifications, positive attributes and independence of a Director and decide their ''fit & proper'' status;

(c) To oversee the framing, review and implementation of the compensation policy of the Bank and recommend to the Board the overall remuneration philosophy and policy, including the level and structure of fixed pay, variable pay, perquisites, bonus pool, and stock-based remuneration to employees;

(d) To oversee the framing, implementation and review of the remuneration of the Whole-time Directors/Managing Director & CEO as per the RBI Guidelines and Companies Act, 2013. The NRC recommends to the Board regarding the remuneration package for the Managing Director & CEO and the other Whole time Directors - including the level of fixed pay, variable pay, stock based remuneration and perquisites;

(e) To review the human resource (HR) strategy and policy, including the conduct and ethics of the Bank, and review any fundamental changes in the organization structure which could have wide ranging and high risk implications;

(f) To review and recommend to the Board the succession policy at the level of Managing Director & CEO, other Whole-time Directors, and senior Management positions one level below the Board and with key roles.

Criteria for Directors'' Appointment

The NRC evaluates the composition of the Board and vacancies arising in the Board from time to time. The Committee while recommending candidature of a Director considers the special knowledge or expertise possessed by the candidate as specified under the Banking Regulation Act, 1949. The

Committee assesses the ''fit and proper'' credentials of the candidate and the companies/entities with which the candidate is associated either as a director or otherwise as to whether such association is permissible under RBI guidelines and the internal norms adopted by the Bank. For the above assessment, the Committee follows the relevant guidelines issued by RBI in this regard.

The Committee also evaluates the prospective candidate for the position of a Director from the perspective of the criteria for independence prescribed under the Companies Act, 2013. For a non-executive Director to be classified as independent, he/she must satisfy the criteria of independence as prescribed and sign a declaration of independence. The Committee reviews the same and determines the independence of a Director.

Remuneration policy

RBI vide its circular DBOD No. BC. 72/29.67.001/2011-12 dated January 13, 2012, has issued guidelines on âCompensation of Whole-time Directors/ Chief Executive Officers/Risk takers and Control function staff etc." for implementation by private sector banks and foreign banks from the financial year 2012-13. The Bank''s Compensation Policy was adopted in March, 2016. The current Compensation Policy of the Bank as adopted in line with the RBI circular is in compliance with the requirements for the Remuneration Policy as prescribed under Companies Act, 2013.

The remuneration payable to non-executive/independent Directors is governed by the provisions of the Banking Regulation Act, 1949, RBI guidelines issued from time to time and the provisions of the Companies Act, 2013, and related rules to the extent, these are not inconsistent with the provisions of the Banking Regulation Act, 1949/RBI guidelines. The permitted modes of remuneration for the non-executive/independent Directors would be sitting fee for attending each Meeting of the Committee/Board as approved by the Board from time to time within the limits as provided under the Companies Act, 2013, and related rules.

For a non-executive Chairman, the remuneration would also include such fixed payments on such periodicity as may be recommended by the Board and approved by the Members and RBI from time to time and maintaining a Chairman''s office at the Bank''s expense, bearing expenses for travel on official visits and participation in various forums (both in India and abroad) as Chairman of the Bank and bearing travel/halting/other expenses and allowances for attending to duties as Chairman of the Bank and any other modes of remuneration as may be permitted by RBI through any circulars/guidelines as may be issued from time to time.

All the non-executive/independent Directors would be entitled to reimbursement of expenses for attending Board/ Committee Meetings, official visits and participation in various forums on behalf of the Bank.

Performance Evaluation of the Board, Committees and Directors

During the year under review a meeting of the Independent Directors of the Board was held and assessment was done of the Board of Directors, Chairperson, working of Audit Committee, Nomination & Remuneration Committee, Corporate Social Responsibility Committee, Customer Service Committee, Special Committee for Monitoring High Value Frauds, Information Technology Strategy Committee and Risk Management Committee. The assessment is based on the evaluation of the compliance with the terms of reference of the Committees. The assessment was conducted based on the quality, quantity and timeliness of flow of information between Bank''s Management and the Board that is necessary for the Board to effectively and reasonably perform its duties. The assessment criteria for the Directors was based on their participation, contribution and offering guidance to and understanding of the relevant areas.

Composition

On March 31, 2016, the NRC comprised four Directors including three independent Directors and the Managing Director & CEO, and was chaired by Shri Bhaskar Sen, an independent Director. To consider the operation of your registered Bank, including the period before the commencement of the banking operation, there were eight meetings of the Committee during the financial year 2015-16 - on May 29, 2015; July 9, 2015 (two meetings); November 9, 2015; January 12, 2016; February 12, 2016; March 15, 2016; and March 18, 2016. The details of the composition of the Committee and attendance at its meetings are set out in the following table:

Name of the Members	Number of meetings attended
Shri Bhaskar Sen, Chairman	7/8
Shri Chandra Shekhar Ghosh	8/8
Shri Boggarapu Sambamurthy	4/6 (Note 1)

Shri Snehomoy Bhattacharya	5/6 (Note 1)
Shri Sisir Kumar Chakrabarti (up to July 9, 2015)	2/2 (Note 2)

Note: 1. Shri Boggarapu Sambamurthy, Shri Snehomoy Bhattacharya were appointed as members of the Nomination & Remuneration Committee with effect from July 9, 2015.

2. With the induction of new members on the Board, the NRC was reconstituted with effect from July 9, 2015.

Corporate Social Responsibility Committee

The terms of reference for working of the Committee are:-

a) To formulate and recommend to the Board, a CSR policy which shall indicate the activities to be undertaken by the Company in accordance with the Companies Act, 2013;

b) To review and recommend the amount of expenditure to be incurred on the activities to be undertaken by the company;

c) To monitor the CSR policy of the Company from time to time;

d) Any other matter as the CSR Committee may deem appropriate after approval of the Board of Directors or as may be directed by the Board of Directors from time to time;

Composition

On March 31, 2016, the CSR Committee comprised three Directors including

two independent Directors and the Managing Director & CEO, and was chaired by Smt. Thekedathumadam Subramani Raji Gain, an independent Director. During the financial year, there was one meeting of the Committee on March 15, 2016. The details of the composition of the Committee and attendance at its Meeting are set out in the following table:

Name of Members	Number of meetings attended
Smt. Thekedathumadam Subramani Raji Gain, Chairman	1/1
Shri Pradip Kumar Saha	1/1
Shri Chandra Shekhar Ghosh	1/1

Details of the policy developed and implemented by the Bank on corporate social responsibility initiatives taken during the year have been hosted on the website of the Bank http://www.bandhanbank.com/pdf/CSR-Policy-New-Format.pdf. The Annual Report on CSR activities is at Annexure 2.

Customer Service Committee

The functions of the Customer Service Committee of the Board, constituted pursuant to RBI circulars/guidelines, include review of customer service initiatives, overseeing the functioning of customer service, and evolving innovative measures for enhancing the quality of customer service and improving the overall satisfaction level of customers.

The basic responsibilities of the Committee are:-

(a) To formulate a comprehensive deposit policy;

(b) To monitor product approval process with a view to suitability and appropriateness;

(d) To review Regulatory guidelines issued from time to time and formulate policies for their implementation;

(e) To set up a grievance redressal mechanism for the Bank to handle customer complaints;

(f) To monitor, follow up and resolve complaints/grievances escalated by Banking

Ombudsmen of the various States;

(g) To implement awards under the Banking Ombudsman Scheme;

(h) To address issues of systemic deficiencies, if any, brought out by the awards;

(i) To monitor awards remaining unimplemented for more than three months with the reasons (for report to the Board) for such delays in implementation, and for initiating necessary remedial action;

(j) To review customer service/customer care aspects in the Bank and submit a detailed memorandum in this regard to the Board of Directors, once every six months, and initiate prompt corrective action wherever service quality/skill gaps are noticed;

(k) To oversee and review/modify the initiatives taken by Customer Service Committees of the branches and other departments; and

(l) To address any other issues having a bearing on the quality of customer service rendered, such as examining reports on number and nature of complaints received and status of resolution thereof, etc.

Composition

At March 31, 2016, the Customer Service Committee comprised three Directors, including two independent Directors and Managing Director & CEO, and was chaired by Shri Sisir Kumar Chakrabarti, an independent Director. There were two Meetings of the Committee during the financial year 2015-16 - on December 22, 2015 and March 16, 2016. The details of the composition of the Committee and attendance at its Meetings are set out in the following table:

Name of Members	Number of meetings attended
Shri Sisir Kumar Chakrabarti, Chairman	2/2
Shri Chandra Shekhar Ghosh	2/2
Shri Pradip Kumar Saha	2/2

Special Committee for Monitoring High Value Fraud

The Special Committee for Monitoring High Value Fraud was constituted as per RBI circulars/guidelines. The Committee should meet and review as and when a fraud involving an amount of Rs,1 crore and above comes to light.

The basic responsibilities of the Committee are:

(a) To identify the systematic lacunae, if any, that facilitated perpetration of the fraud, and put in place measures to plug the same;

(b) To identify the reasons for delay in detection, and/or reporting to top Management of the Bank and RBI, if any;

(c) To monitor progress of investigation by law enforcing agencies and recovery position;

(d) To ensure that staff accountability is examined at all levels in all the cases of frauds and staff side action, if required, is completed quickly without loss of time;

(e) To review the efficacy of the remedial action taken to prevent recurrence of frauds, such as strengthening of internal controls; and

(f) To put in place other measures as may be considered relevant to strengthen preventive measures against frauds.

Composition

At March 31, 2016, the Special Committee for Monitoring High Value Fraud comprised three Directors including two independent Directors and the Managing Director & CEO, and was chaired by Shri Sisir Kumar Chakrabarti, an independent Director. No meetings of the Committee was required to be held during the financial year 2015-16. The details of the composition of the Committee are set out in the following table:

Name of Members	Number of meetings held
Shri Sisir Kumar Chakrabarti, Chairman	Nil
Shri Chandra Shekhar Ghosh	Nil
Shri Pradip Kumar Saha	Nil

Information Technology Strategy Committee

The IT Strategy Committee was constituted pursuant to RBI circulars/guidelines. The functions of the Committee are to approve strategy for Information Technology (IT) and policy documents, ensure that IT strategy is aligned with business strategy, review IT risks, ensure proper balance of IT investments for sustaining the Bank''s growth, oversee the aggregate funding of IT at Bank-level, ascertain if Management has adequate resources to ensure proper management of IT risks and review the contribution of IT to businesses.

The Committee has the following responsibilities:

(a) To approve IT strategy and policy documents;

(b) To ensure Management has put an effective strategic planning in place;

(d) To ensure that IT organization structure complements the business model and its direction;

(e) To ascertain that Management has implemented processes and practices which ensure that IT delivers value to the business;

(f) To ensure that the IT investments represents a balance of risk and benefits and that the budgets are acceptable;

(g) To monitor the methods that Management uses to determine the IT resources needed to achieve strategic goals and provide high-level direction for sourcing and use of IT resources;

(h) To ensure proper balance of IT investments for sustaining the Bank''s growth;

(i) To be aware of the exposures towards IT risks and controls and evaluate effectiveness of Management''s monitoring of IT risks;

Oâ) To assess senior Management''s performance in implementing IT strategies;

(k) To issue high level policy guidance (e.g. related to risk, funding or sourcing tasks);

(l) To confirm that IT or business architecture is designed to derive the maximum business value from IT;

(m) To oversee the aggregate funding of IT at Bank-level and ascertain if Management has resources to ensure the proper management of IT risks; and

(n) To review IT performance measurement and contribution of IT to business (i.e. delivering the promised value).

Composition

On March 31, 2016, the IT Strategy Committee comprised three Directors, including two independent Directors and the Managing Director & CEO, and was chaired by Shri Boggarapu Sambamurthy, an independent Director. There were three Meetings of the Committee during the financial year 2015-16 - on October 6, 2015, December 10, 2015 and March 17, 2016. The details of the composition of the Committee and attendance at its Meetings are set out in the following table:

Name of Members	Number of meetings attended
Shri Boggarapu Sambamurthy, Chairman	3/3
Shri Chandra Shekhar Ghosh	3/3
Prof. Krishnamurthy Venkata Subramanian	3/3

Risk Management Committee

The basic responsibilities of the Committee are:-

(a) To oversee risk management function and obtain assurance from the respective committees and Risk Department that the risk faced by the Bank have been properly identified and are being appropriately managed;

(b) To define the risk appetite of the Bank within overall parameters set by the Board in terms of business strategy and growth;

(c) To ensure effectiveness in the conduct of the overall risk governance;

(d) To approve risk limits at the Bank-wide level for various portfolios such as product, industry, geography, risk types, etc.;

(e) To approve risk management and measurement policies. guidelines and procedures before submission to the Board;

(f) To ensure effectiveness and performance of risk rating system and associated processes and controls through pre-approval validation, periodic review or as a part of annual validation exercise;

(g) To oversee allocation and maintenance of sufficient resources (including IT support) for risk identification, measurement, monitoring and reporting;

(h) To approve risk capital computation and place it to the Board for approval; and

(i) To reinforce the culture and awareness of risk management throughout the organisation.

Composition

At March 31, 2016, the Risk Management Committee comprised three Directors, including two independent Directors and the Managing Director & CEO, and was chaired by Shri Bhaskar Sen, an independent Director. There were three Meetings of the Committee during the financial year 2015-16 - on August 5, 2015; December 10, 2015 and March 17, 2016. The details of the composition of the Committee and attendance at its meetings are set out in the following table:

Name of Members	Number of meetings attended
Shri Bhaskar Sen, Chairman	3/3
Shri Chandra Shekhar Ghosh	3/3
Prof. Krishnamurthy Venkata Subramanian	3/3

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Board of Directors hereby state that:

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

ii) We have selected such accounting policies and applied them consistently and made

judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2016, and of the profit of the Bank for the year ended on that date;

iii) We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

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

v) We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively.

AUDITORS

At the first Annual General Meeting (AGM) held on June 29, 2015, the members approved the appointment of M/s S. R. Batliboi & Associates, LLP, Chartered Accountants, 22, Camac Street, Block C, 3^rd Floor, Kolkata - 700016 (ICAI Firm Registration Number 101049W) as statutory auditors for a period of five years commencing from the first AGM till the conclusion of the sixth AGM subject to the annual approval of RBI and ratification by the Members every year. As recommended by the Audit Committee, the Board has proposed the ratification of the appointment of S. R. Batliboi & Associates, LLP, Chartered Accountants, as Statutory Auditors for the financial year 2016-17.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013, and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank has appointed Shri Deepak Kumar Khaitan, Practicing Company Secretary (C.P. 5027) to conduct Secretarial Audit of the Bank. The Secretarial Audit Report is given in Annexure

- 3 to this report.

There are no qualifications, reservations or adverse remarks made by M/s. S.R. Batliboi & Associates. LLP, Chartered Accountants, Statutory Auditors of the Bank, in their Auditors'' report, or by Shri Deepak Kumar Khaitan, Practicing Company Secretary (C.P. 5207), Secretarial Auditors of the Bank, in their Secretarial Audit Report.

RELATED PARTY TRANSACTIONS

Pursuant to the proviso of Section 188(1) of the Companies Act, 2013, all related party transactions entered into during the financial year were on an arm''s length basis and in the ordinary course of the business of the Bank. Form AOC-2 is attached and marked as Annexure - 6.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except the sub-section (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

CORPORATE SOCIAL RESPONSIBILITY

In alignment with vision of the Bank, CSR initiatives, will continue to enhance value creation and inclusion of hard core poor people in the mainstream of society and in the community in which it operates, through its services, conduct and initiatives, so as to promote sustained growth of society and the community, in fulfilment of its role as a socially responsible corporate.

The details of CSR activities/projects undertaken during the year is given as Annexure -2 and forming part of the Boards'' Report.

As per the CSR Policy approved by the Board, the focus would be healthcare, education, livelihood development, food security and physical living conditions. New areas would be added as and when required with the approval of the CSR Committee/Board.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALS

During the year under review, no significant or material orders were passed by any Regulators or Courts or Tribunals against the Bank.

TRAINING AND DEVELOPMENT

Learning and development at your Bank is all about making a ''continuous long term investment'' in building a high quality workforce, capable of accomplishing the organisation''s mission now and in the future. Keeping in mind the relevance and importance of building the capacity of its employees, the Bank has eight learning centres across the country - three in West Bengal and one each in Assam, Bihar, Maharashtra, Tripura and NCR. These eight centres have in aggregate 16 class rooms, 9 computer laboratories, one meeting-cum-conference room and is capable of training 400 staff at a time. The in-house learning team comprises 35 faculty members and includes experienced bankers from public and private banks. Besides, visiting faculty with distinguished academic and professional achievements in different areas of business management are actively engaged round the year to foster a dynamic learning environment.

The learning architecture in the Bank focuses on

i. developing tailor-made, competency-mapped programs for different sets of employees based on their roles in the Bank;

ii. training on operational risk, audit, compliance and regulatory aspects for frontline staff;

iii. induction / orientation of new hires for inculcating the culture of the Bank; and

iv. people management, customer-centric, compliance-based programs for employees in leadership roles.

RISK MANAGEMENT FRAMEWORK

The Bank''s risk management framework seeks to ensure that there is an effective process in place to manage risk across the Bank. Risk management is integral to all aspects of the Bank''s activities and is the responsibility of all staff. The Board of Directors has oversight on all the risks assumed by the Bank.

The Risk Management Committee of the Board reviews risk management policies of the Bank pertaining to credit, market, liquidity, operational, outsourcing and business continuity management. Policies approved from time to time by the Board of Directors/ Committees of the Board form the governing framework for each type of risk.

As a part of ensuring senior Management participation, specific Committees have been constituted, reporting to the RMCB, to facilitate focused oversight of various risks, e.g., Credit Risk Management Committee (CRMC) for Credit Risk, Operational Risk Management Committee (ORMC) for Operational Risk, Asset Liability Committee (ALCO) for Market Risk and Asset Liability Management.

The Risk Governance Model defines three key roles:

Business that takes, manages and monitor risks:

Business Managers have a particular responsibility to evaluate their risk environment, to put in place appropriate controls and to monitor the effectiveness of those controls. The risk management culture emphasizes careful analysis and management of risk in all business processes.

Risk Management Department that provides policy, guidance and analysis:

Risk Management Department is responsible for setting up the appropriate risk control mechanism and for quantifying and measuring risk. Broadly classified into three major sub segments (Credit Risk, Market Risk and Operational Risk), the Risk Management Department owns, maintains and updates the various policies. The Risk Management team also provide analysis on the existing and emerging risks to the Committees such as ALCO, CRMC, ORMC, as also to RMCB, and based on the deliberations thereof, provide guidance to the various Business Groups.

Internal Audit Team that provides independent assurance:

There is an internal audit team to monitor and report on the effectiveness of the Bank''s risk programme to the Audit Committee of the Board, and thereby provide objective assurance that risks are being managed appropriately.

INFORMATION TECHNOLOGY

Technology is a critical enabler to achieve key goals of your Bank, and is identified as one of its strategic pillars. As your Bank commenced its transformational journey in 2015 -16, the IT plan was well underway to help your Bank to differentiate within the markets served, and achieve significant economies of scale through centralized resources. The aim was to go ''Live with 501 Branches'' on day 1, an aim that was more or less achieved with some initial hiccups. Within 7 months, at the end of 2015-16, the Bank had 656 Branches, 228 ATMs, and 2,022 Micro-banking centres. There is IT connectivity throughout the Bank, and residual problems are being sorted out expeditiously.

Your Bank scaled its technology infrastructure to create a stable, secure and robust setup to support Branch Banking and Channel Banking Platforms. There are challenges in providing seamless network connectivity to remote rural branches and the same is being addressed. The technology initiatives in 2015-16 affirmed your Bank''s commitment to a significantly enhanced customer experience across mobile, internet and ATM channels. Your Bank has equipped its Core Banking System with more processing capacity to meet the scale and transaction volume requirements in future.

As an issuing bank, your Bank enhanced its card portfolio by issuing RuPay along with VISA cards. On the Treasury-IT front, your Bank went live and stabilized with e-Kuber, Treasury Management System, Structured Financial Messaging Systems (SFMS), such as National Electronic Fund Transfer (NEFT) and Real Time Gross Settlement System (RTGS) and Clearing Corporation of India Limited (CCIL) suite of products, which include dealing platforms and reports. Your Bank has also enabled Immediate Payment System (IMPS) by tying up with National Payment Corporation of India (NPCI) to provide 24X7 fund transfer facility for customers.

Your Bank''s ''Application Service Provider'', FIS Global, has provided a state-of-the-art primary Data Centre and Disaster Recovery Centre, to secure the live systems, which are vital to your Bank''s business operations. Your Bank has embarked on a programme to implement the RBI guidelines on Technology Risk Management, Information Security and Cyber Fraud, and is in the process of recommending additional IT security products for implementation.

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

Considering the nature of activities of the Bank, the provisions of Section 134(m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 relating to conservation of energy and technological absorption do not apply to the Bank. The Bank is however, constantly pursuing its goal of technological up-gradation in a cost-effective manner for delivering quality customer service. There were no foreign exchange earnings and outgo during the financial year 2015-2016.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 (3) of the Companies Act, 2013, and Rule 12 (1) of the Companies (Management and Administration) Rules, 2014, the extract of the Annual Return is annexed as Annexure - 4.

MANAGEMENT''S DISCUSSIONS AND ANALYSIS

The Management Discussion and Analysis report enclosed as Annexure - 5 forms part of this report.

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

Number of complaints pending as at the beginning of the financial year - 0

Number of complaints filed during the financial year - 01

Number of complaints pending as on the end of the financial year - 01

As on May 11, 2016, the day of signing of this report, the complaint pending at end-March, 2016 has been redressed.

RESERVES

As required under Section 134(3)0) of the Companies Act, 2013, the reserves as on the close of the financial year stood at Rs, 2,239.36 crore.

DEPOSITS

Your Bank being a banking company receives and accept deposits. The details of the deposits are enumerated in the financial statement for the year ended March 31, 2016.

ACKNOWLEDGMENTS

For and on behalf of the Board of Directors

Bandhan Bank Limited

Place: Kolkata

Date: May 11, 2016 Chairman

Ashok Kumar Lahiri

DIN:07234290

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