Mar 31, 2019
Directors' Report
To the Members of
KOTAK MAHINDRA BANK LIMITED
The Directors present their Thirty-fourth Annual Report together with the audited accounts of your Bank for the year ended 31st March, 2019.
FINANCIAL HIGHLIGHTS
(B) Kotak Mahindra Bank Limited - Standalone financial highlights:
* In accordance with the Companies (Indian Accounting Standards (IND AS)) Rules, 2015 the financial statements of the subsidiaries are being prepared in line with notified IND AS with effect from 1* April, 2018. The financial statements of the subsidiaries used for consolidation of the consolidated financial results are special purpose financial statements prepared in accordance with Generally Accepted Accounting Principles in India ('GAAP') specified under Section 133 of the Companies Act, 2013 read with relevant notifications.
** The Bank has paid a dividend at rate of Rs 0.70 per equity share for the year ended 31st' March, 2018 (previous year: 0.60 per equity share for the year ended 31st March, 2017) and has paid interim dividend at rate of 8.10% (on pro-rata basis) on preference shares for year ended 31st March, 2019 (previous year: NIL), to all shareholders, whose names appear on the Register of members / beneficial holders list on the book closure date. As per the requirements of revised AS 4 - 'Contingencies and Events Occurring After the Balance Sheet Date', this payout (including dividend distribution tax) has been appropriated from amount available for appropriation in the year of pay-out.
(A) Kotak Mahindra Bank Limited - Consolidated financial highlights *:
 |
31st March, 2019 Rs in crore |
31st March, 2018 Rs in crore |
Total Income |
28,547.24 |
23,800.70 |
Total expenditure, excluding provisions and contingencies |
20,199.06 |
16,642.53 |
Operating Profit |
8,348.18 |
7,158.17 |
Provisions and contingencies, excluding tax provisions |
962.39 |
939.95 |
Profit before tax |
7,385.79 |
6,218.22 |
Provision for taxes |
2,520.46 |
2,133.92 |
Profit after tax |
4,865.33 |
4,084.30 |
Add: Surplus brought forward from the previous year |
13,604.60 |
10,756.29 |
Amount available for appropriation |
18,469.93 |
14,840.59 |
Appropriations: |
 |
 |
Statutory Reserve under Section 17 of the Banking Regulation Act, 1949 |
1,216.34 |
1,021.08 |
Transfer to Investment Reserve Account |
31.06 |
 |
Transfer to Capital Reserve |
6.99 |
24.00 |
Transfer to Special Reserve |
40.00 |
55.00 |
Transfer to Investment Fluctuation Reserve Account |
70.89 |
114.21 |
Transfer to Fraud Provision |
1.40 |
- |
Dividend Paid ** |
160.28 |
- |
Corporate Dividend Tax |
23.68 |
21.70 |
Surplus carried to Balance Sheet |
16,919.29 |
13,604.60 |
Â
 |
31st March, 2019 Rs in crore |
31st March, 2018 Rs in crore |
Total income |
45,979.11 |
38,813.31 |
Total expenditure, excluding provisions and contingencies |
34,358.03 |
28,630.34 |
Operating Profit |
11,621.08 |
10,182.97 |
Provisions and contingencies, excluding provision for tax |
1,045.36 |
1,024.74 |
Profit before tax |
10,575.72 |
9,158.23 |
Provision for taxes |
3,456.02 |
3,011.09 |
Profit after tax |
7,119.70 |
6,147.14 |
Less: Share of minority interest |
- |
56.68 |
Add: Share in profit of Associates |
84.43 |
110.51 |
Consolidated profit for the Group |
7,204.13 |
6,200.97 |
Earnings per Equity Share: |
 |
 |
Basic (Rs.) |
37.78 |
32.70 |
Diluted (Rs.) |
37.74 |
32.66 |
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs. 0.80 per equity share (previous year Rs. 0.70 per equity share) for the year ended 31st March, 2019. This would entail a payout of Rs 184.10 crore including dividend distribution tax based on the number of shares as at 30th April, 2019. The dividend would be paid to all the shareholders, whose names appear on the Register of members/ beneficial holders list on the book closure date.
In March 2019, your Directors declared an interim dividend on Perpetual Non-Cumulative Preference Shares of face value of Rs 5 each issued by the Bank, carrying a dividend rate of 8.10%, on pro-rata basis, in respect of the financial year 2018-19, as per the terms of issuance. This entailed a payout of Rs 32.37 crore (including dividend distribution tax).
Pursuant to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 201 5, 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 viz. URL:https://www.kotak.com/en/investor-relations/governance/ policies.html
CAPITAL
During the year, authorized share capital of the Bank was altered and increased from Rs 1500 crore consisting of 300 crore equity shares of Rs.5 each to Rs 1900 crore divided into 280 crore equity shares of Rs.5 each and 100 crore preference shares of Rs.5 each.
In August 2018, your Bank has issued and allotted 100 crore 8.10% Perpetual Non-Cumulative Preference Shares (PNCPS) of Rs 5 each amounting to Rs 500 crore.
During the year, your Bank allotted 31,06,321 equity shares arising out of the exercise of Employees Stock Options granted to the whole time director and employees of your Bank and its subsidiaries.
Post allotment of equity shares as aforesaid, the issued, subscribed and paid-up share capital of the Bank as at 31st March, 2019 stood at Rs 14,54,37,74,135 comprising of 1,90,87,54,827 equity shares of Rs.5 each and 100,00,00,000 preference shares of Rs.5 each.
Your Bank has a Capital Adequacy Ratio ('CAR') under Basel III as at 31st March, 2019 of 17.45% with Tier I being 16.93%.
During the year, your Bank has not issued any capital under Tier II. As on 31st March, 2019, outstanding Unsecured, Redeemable Non-Convertible, Subordinated Debt Bonds were Rs 456 crore. The outstanding Unsecured, Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II have matured during the year.
Further, in March 2019, your Bank has issued and allotted 1500 Senior Unsecured Rated Listed Redeemable Long Term Bonds in the nature of Non-Convertible Debentures bearing a face value of Rs.10 lakh each aggregating to Rs 150 crore.
OPERATIONS
Consumer Banking
Your Bank services a customer base in excess of 16 million customers covering a wide spectrum across domestic individual and households, non-residents, small and medium business segments for a range of products from basic savings & current accounts to term deposits, credit cards, unsecured and secured loans, working capital and investment advisory.
Your Bank continued its strategy of calibrated expansion of its branch network. As of 31st March, 2019, your Bank had 1500 branches and 2352 ATMs, covering 744 locations. Of the 112 new branches commissioned this year, 44 were in metro, 24 were in urban, 15 semi urban & 29 rural branches. Aided partly by 811, your Bank saw fast paced customer acquisition across all core banking products including savings and current accounts, term deposits, overdrafts and non-resident accounts. Bank has also set up 27 e-lobbies to enable convenience banking for customers. Your Bank also relocated 36 branches across metro and semi urban locations to give easier access and higher convenience to its customers.
Your Bank rolled out several initiatives aimed at offering a superior and differentiated customer experience. Strengthened its customer relationship management capability by setting up a new channel for phone based remote engagement, called VRM (Virtual Relationship Management) channel. This led to a wider coverage and enabled your Bank to reach out to more than 6 lakh customers and service them across deposit, lending and investment needs. In the Retail Institutional Business, for segments like housing societies, educational institutions, etc. introduced a range of services like apartment management solution, smart card solution, closed loop payment solutions, etc. This has helped your Bank strengthen its relationship in this segment. Your Bank extended the Silk program for woman customers to cover salaried base and offers distinctive features like cash back on point of sale (POS) based transactions, linked accounts for minors and discount on lockers. Proposition around Image debit cards was further strengthened with introduction of images of Bank's brand ambassador Ranveer Singh and exclusive art works of renowned artist, Seema Kohli for the Silk program. A new current account proposition was launched specifically for constituents of agriculture produce market committee (APMC) markets and will be available across the 2400 markets in the country. For the Arthias segment in Punjab, a customized solution via Arthia Rupay card was launched which would help your Bank to build a significant market share in the state of Punjab.
Your Bank entered into a banking alliance with government procurement agency, Haryana State Co-operative Supply and Marketing Federation Limited (HAFED) in Haryana and National Agency for Export Development (NAFED) at national level for mustard seed procurement. This would  give a significant boost to the current account book linked to this line of business. The merchant acquiring line of business which was started in 2017-18, gained significant momentum in 2018-19, with the transaction thru put crossing 2 crore figure. Value added features like EMI facility on point of sale transactions were also offered. For customers desirous of investing in mutual funds, a facility was made available in the form of online investment account. This feature was also made available on netbanking and mobile banking. For the internationally aligned customers, ability to subscribe to forex card online, via net or mobile was made available. In line with the regulatory requirement, all the ATMs of your Bank, have been upgraded to become Europay, Mastercard, Visa (EMV) compliant. As per the Government mandate, your Bank has successfully set up aadhaar enrolment centers in 145 branches and also surpassed the transaction volume mandate given by Unique Identification Authority of India (UIDAI). Your Bank also participated in the Pradhan Mantri Gram Swaraj Abhiyan and achieved 100% of the targets under this program. India's first bilingual voice bot in Banking - Keya that responds to customer's queries in English and Hindi was launched by your Bank. Keya handled 17 lakh calls without human assistance.
Your Bank continued to ramp up 811 acquisition numbers this year as well. In order to drive higher engagement with 811 customers, your Bank, this year, focused on cross selling various bank products to the existing 811 customers.
In line with its commitment to enhance customer experience, your Bank joined Ripple's leading enterprise blockchain network (RippleNet) to provide impetus to its cross-border inward remittances. Ripple's settlement solution, xCurrent, is now used to provide the customers with real-time cross-border transactions in a safe and secure manner. FCNR deposits in Singapore Dollar (SGD) was re-introduced to provide NRI customers in Singapore the facility of placing deposit in India under the FCNR (B) scheme. Your Bank participated in a host of events, ranging from business forums, sports leagues & industry awards, etc. to engage with the Mariner community in India.
The Corporate salary business scaled up significantly in 2018-19 and it now services over 3.5 million customers across more than 25000 corporates. Acquisition and servicing capability has been further streamlined to enable inroads in Tier 2 & 3 markets as well and will be the focus in 2019-20.
The year 2018-19 continued to be strong for your Bank's credit card business. Spend volumes on credit card have grown by 56% driven heavily by e-commerce transactions and higher spends per transaction. Digital/Paperless acquisition of Credit Card customers through Sales App and other digital channels like Mobile and Net Banking saw a growth of 290% versus last year, showcasing a superior on-boarding journey to the customers. The business also introduced a unique solution under its Commercial Cards product line which enables a "Do-it-yourself" payment interface for corporates to streamline their indirect expenses like statutory and other ad-hoc payments.
On the Salaried Personal loans segment, loans on mail and SMS was launched to enhance the bouquet of instant loan offering. These along with other digital channels have enabled Salaried Personal Loans book to grow by 45% year on year.
With a view to enhance customer experience, your Bank introduced multiple self-serve features on Home Loan and Loan against Property on Mobile Banking. This helped the customers view their loan details on the Mobile App itself including details like tax certificate, disbursement and repayment details through a click of a button. The service, which went live in January 2019 has already seen over 1 lakh+ hits on the Mobile Banking App Loan section.
Commercial Banking
Your Bank's Commercial Banking business focuses on meeting the banking and financial needs of various customer segments with deeper coverage that goes beyond metro and urban centers through an expanding network of branches and associates. The business has specialized units which offer financial solutions in the areas of Commercial Vehicles, Construction Equipment, Tractor and Agriculture business. It services the priority sector through providing finance for Tractor, Crop loans, Small Enterprises and Allied agricultural activities thereby helping your Bank meet its financial inclusion goal. In line with growing rural incomes, our Bank's Commercial Bank branches have experienced robust growth across product lines on savings as well as lending side.
Your Bank's Construction Equipment (CE) and Tractor Finance businesses reported significant growth and gained market share in their respective businesses, while Commercial Vehicle (CV) business witnessed a slight drop in market share due to margin pressures & change in load carrying norms. Tractor Finance businesses witnessed double digit volume growth and continued to gain market share. The Government spending in the infrastructure sector has led to a strong demand in the CE and CV industry.
Your Bank's Agriculture Financing business continued its focus on the agriculture value chain funding for various agro processing activities. It has registered good growth despite volatility and uncertainty in the commodities market. Microfinance Institutions (MFI) segment growth remains robust and asset quality remains good.
Branches in semi-urban and rural area comes under the umbrella of Commercial Bank. This network plays a crucial role in meeting the financial inclusion goals and credit demand of 'Bharat'. Branch network has expanded and the Liability book has grown at a healthy pace.
Wholesale Banking
Your Bank's Wholesale Banking business caters to a wide range of corporate customer segments including major Indian corporates, conglomerates, financial institutions, public sector undertakings, multinational companies, mid-market companies, small and medium enterprises and realty businesses. This segment offers a comprehensive portfolio of products and services to these customers including working capital finance, medium term finance, trade finance, foreign exchange services, other transaction banking services, custody services, debt capital markets and treasury services.
The year has witnessed significant disruptions in the corporate banking space driven by high NPAs in the industry and stress in certain industry segments. With more capital from banks, mutual funds and NBFCs chasing the high rated end of the corporate space, this space is witnessing high competition which in turn is pushing down yields for banks. The overall credit offtake in the economy has also been muted over the last few years. Despite these challenges, the Wholesale Banking business has been able to achieve growth in the large corporate space in a healthy and profitable manner. Over the years, the Wholesale Banking business has grown its market share through higher customer acquisition, improved customer service and product innovations.
At the same time, your Bank has remained cautious in its exposure, especially in certain segments, which witnessed increased stress and uncertainty during the year. This year, the Small and Medium Enterprise (SME) business was brought into the Wholesale Banking fold. The last couple of years has witnessed disruptions in the SME space from demonetization and rollout of GST which manifested as stress in the Bank's books as well. This year, a number of initiatives were taken to stabilize the business while integrating it with the rest of the Wholesale Bank. The SME business is well poised to capture the growth opportunities in the market. However, this year, owing to the phase of consolidation, growth in this segment was muted. Your Bank has been cautious on the real estate developer segment given the stress in the sector. Your Bank compensated for this slowdown by ramping up exposure to lower risk businesses such as Lease Rental Discounting; however the spreads were impacted by this mix change. Your Bank has also been cautious on its lending to Non-Banking Financial Institutions and therefore changed mix towards higher rated NBFCs given the challenges that the NBFC sector went through during the year.
Your Bank has remained as focused on adding new customers in a profitable manner as increasing wallet share with existing customers. The last few years have seen a healthy addition of New-to-Bank customers in the large corporate segment, which in turn sets a strong foundation for future growth in the business. Going forward, your Bank will focus on increasing the momentum in New-to-Bank customer acquisition in the SME space too.
Your Bank has an integrated Corporate and Investment Banking (CIB) approach towards certain top conglomerates and large corporates. The CIB model has ramped up well and has helped it to deepen its presence with these clients and gain further market share.
Robust risk management practices are in place and your Bank has achieved growth over the years without compromising the health of the book. At a time when most corporate banks in the industry are facing huge NPAs, your Bank has kept a tight control on asset slippages. Other than SME, the rest of the corporate segment has witnessed minimal additions to the Gross NPA this year. In SME, a number of initiatives have been taken to stabilize the business. Across corporate segments, your Bank has been proactive in rebalancing the portfolios to reflect economic situations and reduction in exposure to situations with heightened risk. Your Bank's focus on risk management has helped the business reduce its Risk Weighted Assets (RWA) as a percentage of assets over the past few years. The use of Risk Adjusted Return on Capital (RaRoC) pricing models has become ingrained in the way the Wholesale Banking division conducts its business and has helped to optimize pricing, better utilize capital and improve return on equity. Economic Value Add (EVA) measurement tools have been implemented that help your Bank monitor the true risk adjusted value being derived from each client. These initiatives ensure greater focus on improving income mix in favour of non-capital intensive income streams.
The strong momentum in the Integrated Global Transaction Banking Services (GTS) continues across its large suite of products. Current Account & Savings Account balances saw significant growth through innovative solutions and focused marketing efforts. Through focused efforts, your Bank has been successful in capturing a higher market share in Cash Management Services (CMS) from identified flagship accounts. Your Bank launched various receivable solutions across C2B and B2B clients which witnessed a growth of more than 300% in flows through client accounts. Products like Smart Collect, Application Program Interface (API) based e-collection offerings, customized value added solutions using National Automated Clearing House (NACH) as clearing system have helped your Bank to acquire as well as increase its wallet share among various key clients. With focus on product development and building new age platforms, your Bank became primary banker to major unicorn companies. Your Bank has also invested in product development for the acquiring business and are now bankers to top aggregators in the e-commerce space. Your Bank was also the largest banking player for Bharat Bill Payment System (BBPS) as a biller on boarding participant during the year. Your Bank believes that, in this dynamic environment, bringing the best of solutions to clients will require engagement with solution providers in the country and your Bank has partnered with fintechs to provide value added solutions. These initiatives have helped increase Current Account balances substantially. On the trade side, the funded and non-funded book continued a strong double digit growth momentum. Strong focus on fee income through trade flows led to a robust growth in fees earned through trade finance and services, with the wholesale business almost doubling this fee income. The strong growth in GTS products has helped your Bank to partly compensate for the fall in spreads in its traditional lending business.
The Custody business continued to witness strong growth despite market uncertainty seen during the second half of this year. Your Bank is today one of India's largest domestic Custodians with Assets Under Custody (AUC) upwards of US$ 30 Bn and is strongly positioned in the India focused offshore funds space. The Custody business added a number of marquee Alternative Investment Funds (AIF) & Portfolio Management Services (PMS) clients in the Domestic segment in addition to having a good market share amongst India based Foreign Portfolio Investments (FPIs). Your Bank also obtained a Professional Clearing Member (PCM) License to offer clearing services on the INDIA INX Exchange in GIFT City becoming the first bank custodian to do so.
Your Bank's dedicated Service Solutions vertical has helped ensure faster customer response and improve customer experience. This vertical is the single point of contact for all service related and documentation issues with personnel present across the country. Your Bank has been successful in significantly reducing Turn-Around-Time (TAT) across various processes including account opening and disbursals. Initiatives such as digitization and workflow automation have helped reduce TAT further.
Strengthening its organizational platform, your Bank continues to target productivity and efficiency improvements. There is greater focus on measuring and improving employee productivity including of its sales force through use of technology and digital tools. Given high focus in this area, costs have been kept well in control further improving profitability of the business.
Your Bank has undertaken a series of digital initiatives primarily focused on improving customer experience. These digital initiatives encompass the entire gamut of transaction banking and include initiatives such as creation of a complete C2B platform for our corporate clients which includes one view for products like BBPS, Unified Payment Interface (UPI) and E-Collections. Corporate mobility platform has been extended for all segments of your Bank and is witnessing good growth in adoption. A number of new product initiatives have been taken in e-commerce -acquiring, issuances, liquidity management, UPI, BBPS, API based solutions, over the counter products, Government based initiatives, aadhaar based initiatives and structured receivable and payable solutions. Bank is investing on NACH and escrow platforms to make onboarding and transaction experience seamless for clients. Furthermore, a few long term initiatives are in various stages of implementation which include an online trade portal, an integrated corporate portal, incorporation of the block chain based technology in foreign and domestic trade products and multiple digital initiatives being undertaken for various Government Bodies.
Wealth Management
Wealth Management, your Bank's private banking arm, acts as advisor to a number of distinguished Indian families and is of the oldest and the most respected Indian wealth management firms. Its customers range from entrepreneurs to business families and professionals.
The business has a strong advisory capability for private clients across equities, fixed income & alternates with complete alignment of interest which makes it the preferred advisor across HNI investors. In addition to comprehensive financial solutions, the business goes beyond investments and includes value added services such as assistance with investment structuring, banking and credit, consolidated reporting, referral for philanthropy services and concierge services. With an in-depth understanding of client requirements and expertise across various asset classes, the business offers the widest range of financial solutions through transaction-based investment approach and asset-advisory based approaches. It has built a formidable suite of products and services for high net worth individuals and offers the same through its Asset-Advisory model. As per the Reserve Bank of India guidelines, advisory activities that were being offered out of your Bank are now offered out of Kotak Investment Advisors Limited, a subsidiary of your Bank with effect from 20th April, 2019.
In addition, your Bank has also built a large Priority Banking business, assisting mass affluent customers with products and solutions developed to meet their financial requirements. The total relationship value across your Bank's Wealth & Priority offerings is ~ Rs 2,70,000 crore.
The business has won several accolades & received recognition at various forums and recently, it has been recognized as the Best Private Bank, India two years in a row by Euromoney Private Banking & Wealth Management Survey 2018 & 2019 & Best Private Bank, India Domestic 2018 by Asian Private Banker among others.
International Business
The GIFT City Branch, an International Financial Services Center Banking Unit of your Bank, has helped your Bank to participate in syndication of overseas loans, lending to clients in international markets and providing External Commercial Borrowing to eligible Indian corporates. Client forex and derivative transactions were also undertaken to help offshore clients with management of interest rate and currency risks, in addition to routine investments in offshore bonds.
Asset Reconstruction
Insolvency and Bankruptcy Code (IBC) initiated to resolve bad and stressed loan is settling down and it may take few more years to see the major impact of this landmark legislation.
During FY 2018-19, resolutions of some large NPA's of the country are seen at an advanced stage through the IBC process.
Your Bank which has been an active player in the business for several years has made significant progress in acquiring several NPA's in all the categories like SME, Corporate and Retail Assets. The size of the book through acquisition from other banks largely by auctions, have sizeably increased in the last financial year. Your Bank believes that the market will continue to be robust for acquiring bad loans and it should be able to continue to acquire sizeable loans at a fair price in the coming year, as well.
Treasury
Your Bank's treasury actively contributes to your Bank by way of:
⢠Proprietary Trading: The various proprietary trading desks actively trade in products such as Fixed Income, Money Markets, Derivatives, Foreign Exchange and Equity. Primary Dealer Desk - part of the proprietary trading desk, actively participates in the primary auctions of government securities, makes market in government securities and engages in retailing of government securities.
⢠Customer Transactions:
o Forex &Derivatives: Facilitating customer access to foreign currency markets through cash & derivatives products for remittances, trade transactions and for managing foreign exchange and interest rate risks.
o Bullion: Under License from Reserve Bank of India (RBI), Bank imports gold and silver to meet needs of customers. The bullion desk provides efficient working capital solutions to domestic Jewellery manufacturers as per prescribed rules of RBI.
⢠Balance Sheet Management: The Balance Sheet Management Unit (BMU) ensures maintenance of regulatory reserves and adequate liquidity buffers and also manages the Interest rate risk & Liquidity risk within the Risk appetite of the Bank.
Human Resources
FY 2018-19 has been a year of strengthening initiatives in the area of digital adoption, employee engagement, employee wellness and development.
With the talent base of the Bank reaching to over 41,500 employees, more and more millennials being on boarded the average age of the employee base has gone younger by a year at 31 years now. Your Bank has taken various initiatives to engage using digital and technology platforms with employees. It has launched Mobile first app KLAPP for managing onboarding journey of from pre joining to post joining stage to transition from candidate to employee seamlessly. This has helped in engagement, quick assimilation and personalization of the onboarding journey for the new joinee.
Your Bank has also enhanced the focus on future readiness of mid to senior level employees through learning intervention of Digital Blurr, Design Thinking and Digi-Talk. With the renewed rigor on platform launched for on demand learning and byte size learning has enhanced the horizon for learning from behavioral and functional learning to developing skills for future career needs of the employees.
The focus on performance discussion has been enhanced with more through the year focus on "Talk2Do" between managers and their teams for constructive performance discussions.
With the objective to identify, build and nurture leaders across levels to deliver superior business results and address individual career aspirations your Bank continues to invest in spans, structures and assessment tools through various interventions of talent management, succession planning and career management.
Technology & Digitization
Technologies, this year, were leveraged to deliver customer experience, business efficiency, business collaborations and cybersecurity.
Mobile banking app continues to be the highest rated iOS app with 4.8 rating and Android app is at 4.5 rating. App was made more user friendly and saw improved customer experience with home page revamp and payment section revamp. App also became more comprehensive with new features like forex card section, premature withdrawal of fixed/recurring deposits, loan section, online investment account opening etc.
Newer channels, Keya Chatbot and WhatsApp Banking, were launched which use conversational banking approach and Natural Language Processing (NLP) to interact with customers. Keya Chatbot is enabled on all digital channels, viz. Mobile App, www.kotak.com website and Net Banking. Keya Chatbot is able to handle queries about products like Credit Card, Debit Card, Accounts, Fund Transfer, Bill Payment and Personal Loan. Your Bank is the first Indian bank to offer banking services on Whatsapp which allows customers to get services on WhatsApp without installing any app or visiting any webpages. Search and discovery use cases have been enabled on Google Assistant thru voice based interaction.
Kotak Net Banking features were further enhanced with revamped payment experience, online investment account opening, forex card section, buy insurance policies online, refreshed Home page for notifications and revamped Apply Now section.
To make website pages lighter and mobile friendly, which helps in improving SEO (Search Engine Optimization) ranking, 90+ Accelerated Mobile Pages (AMPs) made live on www.kotak.com. These AMP pages are 5 times faster than normal ones. Kotak website has been acknowledged as "Best in class brand for mobile experience" in Finance category - Google 'Masters of mobile' report.
Multiple digital payment methods were introduced for the Bank's customers including Visa Paywave, Samsung Pay, Bharat QR, UPI, BBPS (Bharat Bill Payment System) for Consumers & for Billers, AEPS (Aadhaar Enabled Payment System), AadhaarPay and FASTag - enabling more cashless payments for consumers, merchants, corporates, fintechs, billers etc. and reinforcing Kotak's commitment to the country's Digital India journey. M-store in the Mobile App has been re-branded to KayMall and encompasses multiple commerce categories like Travel (Train, Bus, Flights, Hotels), Shopping (Flipkart, Shopclues) and Subscriptions which the consumer can securely & seamlessly purchase from within the comfort of the Mobile App or Netbanking without having to use a third-party application. Some of the new products launched like Aadhaar Enabled Payment System (AEPS) and AadhaarPay have enabled last-mile payments for Business Correspondent Agents and have also allowed the Bank to service its customers for services like cash withdrawal and payments. For the second consecutive year, your Bank has been ranked amongst the Top 5 Banks in MeitY's 'Digital Payments Achievement Dashboard' (based on a point-scoring methodology) and has overachieved targets set by MeitY for FY 2018-19 on Digital Payments transaction @ -110% of target achievement.
Your Bank started fulfilling the digitally originated leads for Home loans and scaled up the Super-Fast Home Loan initiative.
There were certain digital initiatives of the Bank which were suspended basis the Supreme Court ruling on Aadhaar viz. credit card product as part of 811 Savings account opening journey by using Aadhaar stack and credit bureau; Project Velocity which aimed at servicing through biometric means was a hit with customers and branches with a high Net Promoter Score (NPS) of 77+ till September due to the immediate fulfilment of their service requests which had to be stopped post the ruling. But later different ways of automation were devised to keep the same experience of near realtime fulfilment; 811 FullKYC biometric based onboarding was suspended through this platform(s) post the ruling last year. However, subsequently, the non Aadhaar (scanned physical image based KYC with OTP authentication) full KYC platform for onboarding was made live.
Robotics Process Automation where more than 2 lakh transactions have been completed across multiple processes and Cognitive Machines Reading are the next scaleup areas which are taking shape in India and are said to bring in a culture of basic routine tasks being automated.
Ecosystem collaborations have been enabled thru the Bank's Open banking platform. The Bank has onboarded lending and payment application program interface (API) products, which have gone live with 57 partners availing those API products.
This year, the Bank focussed on SMEs and launched some initiatives around it. Your Bank is the first bank to take co-lending LIVE with Capital Float and participate in Market Place model of psbloansin59minutes.com. Digital processes have been set up for disbursing Business Loan instantly, for existing customers.
This year, technologies were put in place to provide support for customer lending. Starting with a Lead Management System to accept loan enquires, and track them, to systems to support loan application evaluation and a "business rule engine" that uses analytics to assist in disbursement decisions. The systems will provide a base for processing of a wide spectrum of different types loans from simple personal loans to the more complex housing loans in the coming years.
The foundation for NLP laid down last year to launch 'Keya' the first Artificial Intelligence (Al) powered Voicebot in the banking sector was further leveraged. The use of IVR was replaced by conversational banking, so that the customer's experience on calling the Bank's contact center was simplified and enhanced. A "Virtual Relationship Manager" capability was also introduced, to enable customers to telephonically connect to their personalized service manager.
With increased focus on digital solutions and heightened cybersecurity concerns, there is a need for constant innovation in the information security area. New solutions were implemented to mitigate the risk of APT (Advanced Persistent Threat) attacks. The solution detects and prevents custom malicious code being sent over the network into the Bank's environment.
SUBSIDIARIES & ASSOCIATES
As at 31st March, 2019, your Bank has nineteen (19) subsidiaries as listed below:
Domestic Subsidiaries
Kotak Mahindra Prime Limited
Kotak Mahindra Investments Limited
Kotak Securities Limited
Kotak Mahindra Capital Company Limited
Kotak Mahindra Life Insurance Company Limited
Kotak Mahindra General Insurance Company Limited
Kotak Mahindra Asset Management Company Limited
Kotak Mahindra Trustee Company Limited
Kotak Mahindra Pension Fund Limited
Kotak Investment Advisors Limited
Kotak Mahindra Trusteeship Services Limited
Kotak Infrastructure Debt Fund Limited
IVY Product Intermediaries Limited
BSS Microfinance Limited
International Subsidiaries
Kotak Mahindra (UK) Limited
Kotak Mahindra (International) Limited
Kotak Mahindra Inc.
Kotak Mahindra Financial Services Limited
Kotak Mahindra Asset Management (Singapore) Pte. Limited
The key business segments where the subsidiaries operate include investment banking, stock broking, vehicle finance, advisory services, asset management, life insurance and general insurance.
Kotak Mahindra Life Insurance Company Limited (KLI) has recorded a growth of 23.8% on the gross premium, mainly coming from Individual renewal premium. KLI has solvency ratio of 3.02 against requirement of 1.50.
Capital Markets witnessed a significant slowdown in primary market activity compared to previous fiscal; accordingly, Kotak Securities Limited and Kotak Mahindra Capital Company Limited reported lower profits compared to the previous year.
The growth in the mutual funds industry continued albeit with a relatively modest pace in FY 2019. Kotak Mahindra Asset Management Company (KMAMC), continues to be the 7th largest Fund House in the country in terms of Quarterly Average Asset Under Management (QAAUM). Market share in QAAUM has grown to 6.14% from 4.32% 3 years back. KMAMC has outperformed strong growth in the mutual funds industry.
The NBFC sector experienced liquidity problems in September 2018. This not only resulted in increase in borrowing costs but also Kotak Mahindra Prime Limited and Kotak Mahindra Investments Limited (KMIL) had to maintain surplus liquidity for sometime, which had an impact on their bottomline. The liquidity concern in NBFC sector eased post January 2019. International subsidiaries have performed well and continue to add to the shareholders value.
KMIL on 26th April, 2019 sold off its entire equity stake of 19.77% held in Matrix Business Services India Pvt. Ltd. ('Matrix'), an associate company of KMIL. Accordingly, Matrix ceased to be an associate company of KMIL & consequently of the Bank from that date.
The various activities of the subsidiaries and the performance and financial position of the subsidiaries and associates are outlined in the Management Discussion and Analysis section appended to this Report.
The Bank's Policy for determining material subsidiaries is available on the Bank's website viz. URL: https://www.kotak.com/en/investor-relations/ governance/policies.html in line with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. KLI is a material subsidiary of the Bank.
As at 31st March, 2019, your Bank has following four (4) Associate companies:
Infina Finance Private Limited
Phoenix ARC Private Limited
Matrix Business Services India Private Limited *
ACE Derivatives & Commodity Exchange Limited
⢠Ceased to be an Associate Company w.e.f. 26th April, 2019
The Annual Report which consists of the financial statements of your Bank on standalone basis as well as consolidated financial statements of the group for the year ended 31st March, 2019, is being sent to all the members of your Bank. The financial statements of the subsidiaries used for consolidation of the Bank's consolidated financial results are special purpose financial statements prepared in accordance with Generally Accepted Accounting Principles in India ('GAAP') specified under Section 133 of the Companies Act, 2013 read with relevant notifications. Web link of the Annual Report is sent to all members whose email IDs are registered with the Bank/Depository Participant(s). For members who have not registered their email IDs, physical copies of the Annual Report are sent. It does not contain Annual Reports of your Bank's subsidiary companies. Your Bank will make available full Annual Report (including the Annual Reports of all subsidiaries) either a hard or soft copy depending upon request by any member of your Bank. These Annual Reports will be available on your Bank's website viz. URL: https://www. kotak.com/en/investor-relations/financial-results/annual-reports.html and will also be available for inspection by any member at the Registered Office of your Bank during working hours.
EMPLOYEE STOCK OPTION & STOCK APPRECIATION RIGHTS SCHEMES
The stock options and the stock appreciation rights granted to the employees of the Bank and its subsidiaries currently operate under the following Schemes:
⢠Kotak Mahindra Equity Option Scheme 2007
⢠Kotak Mahindra Equity Option Scheme 2015
⢠Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2007
⢠Kotak Mahindra Bank Ltd. (IVBL) Employee Stock Option Scheme 2010
⢠Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2013
⢠Kotak Mahindra Stock Appreciation Rights Scheme 2015
The disclosures requirements under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, for the aforesaid ESOP& SARs Schemes, in respect of the year ended 31st March, 2019, are disclosed on the Bank's website viz. URL: https://www. kotak.com/en/investor-relations/financial-results/annual-reports.html
PROMOTER STAKE DILUTION MATTER
In August 2018, your Bank completed its issuance of Perpetual Non-Convertible Preference Shares (PNCPS) resulting in dilution of promoter stake to 19.70% of the paid-up capital of the Bank. However, the Reserve Bank of India (RBI) communicated to the Bank that the PNCPS issuance does not meet their promoter dilution requirement. The Bank has, by way of abundant caution, in December 2018, filed a writ petition with the Hon'ble Bombay High Court to validate its position. The writ petition is pending.
CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT
Pursuant to Regulation 27 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations), a separate section entitled 'Report on Corporate Governance' has been included in this Annual Report. The Report of Corporate Governance also contains certain disclosures required under the Companies Act, 2013. A Business Responsibility Report containing the requisite details under Regulation 34 of the SEBI LODR Regulations is disclosed on the Bank's website viz. URL: https://www.kotak.com/en/investor-relations/financial-results/ annual-reports.html
DIRECTORS & KEY MANAGERIAL PERSONNEL
Directors retiring by rotation
Mr. C Jayaram (DIN 00012214) retires by rotation at the Thirty Fourth Annual General Meeting (AGM) of the Bank and is eligible for re-appointment.
Appointment/Re-appointment of Directors
Dr. Shankar Acharya (DIN 00033242) who was Non-Executive Chairman of the Bank since July 2006, did not seek re-appointment as he completed 70 years of age and retired by rotation as a Director at the last Annual General Meeting of the Bank held on 19th July 2018. Mr. Prakash Apte (DIN 00196106), who has been on the Board of the Bank since March 2011 was appointed as part time Chairman of the Bank with effect from 20th July, 2018.
The Board of Directors of the Bank, at its meeting held on 14th/15th March, 2019, based on the recommendation of the Nomination and Remuneration Committee (NRC) and the results of the performance evaluation, re-appointed Mr. Prakash Apte, part-time Chairman of the Bank, as an Independent Director for a second term from 18th March, 2019 to 17th March, 2024, subject to necessary approvals. The Board, based on the recommendation of the NRC, also appointed Mr. Uday Shankar (DIN 01755963) as an Independent Director of the Bank with effect from 16th March, 2019 for a period of five years, subject to necessary approvals. Further, the Board recommended appointment of Mr. K.V.S. Manian (DIN 00031794) & Mr. Gaurang Shah (DIN 00016660) initially as Additional Directors acting as Whole-time Directors of the Bank for a period of three years with effect from the date of approval of the Reserve Bank of India, and subject to necessary approval from the shareholders.
As per Section 10-A(2-A) of the Banking Regulation Act, 1949 (B.R. Act), no director of a banking company, other than its chairman or whole-time director, by whatever name called, shall hold office continuously for a period exceeding eight years. In accordance with Section 10-A(2-A) of the B.R. Act and based on the recommendation of the NRC and the results of the performance evaluation, the Board of Directors of the Bank at its meeting held on 30th April, 2019 re-appointed Ms. Farida Khambata (DIN 06954123) as an Independent Director of the Bank for a second term i.e. the remaining period of three years from 7th September, 2019 to 6th September, 2022, subject to necessary approval from the shareholders.
Accordingly, approval of the shareholders for re-appointment of Mr. Apte & Ms. Khambata through special resolutions and appointment of Mr. Shankar and the Whole-time directors through ordinary resolutions is being sought at the ensuing AGM of the Bank. The details of the Directors being appointed/re-appointed are set out in the Notice of the ensuing AGM of the Bank.
Resignation/Cessation of Directors
Mr. Mark Newman (DIN 03518417), Non-Executive Non-independent Director, resigned from the Board of the Bank with effect from 22nd February, 2019.
Mr. Amit Desai (DIN 00310510), ceased to be a director of the Bank with effect from 17th March, 2019 on completion of his eight years tenure pursuant to the provisions of Section 10-A(2-A)(i) of the Banking Regulation Act, 1949.
Your Directors place on record their appreciation for the valuable advice and guidance rendered by Mr. Mark Newman and Mr. Amit Desai, during their tenure as Directors of the Bank.
Declaration from Independent Directors
The Board has received declarations from the Independent Directors as per the requirement of Section 149(7) of the Companies Act, 2013 and the Board is satisfied that the Independent Directors meet the criteria of independence and fulfill the conditions as mentioned in Section 149(6) of the Companies Act, 2013 and are independent of the management.
Board Evaluation
The Nomination and Remuneration Committee (NRC) of the Bank's Board has formulated the criteria for performance evaluation of the Directors and the Board as a whole which broadly covers the Board role, Board/Committee membership, practice & procedure and collaboration & style. The performance of the Committees of the Board is evaluated on the criteria viz. composition & quality, process & procedure and the terms of reference.
The NRC of the Bank's Board engaged an external professional services firm to facilitate the self-evaluation process of the Board, its committees, Chairman and individual directors.
A Board effectiveness assessment questionnaire designed for the performance evaluation of the Board, its Committees, Chairman and individual directors (including Independent directors) in accordance with the criteria set and covering various aspects of performance including structure of the board, meetings of the board, functions of the board, role and responsibilities of the board, governance and compliance, evaluation of risks, grievance redressal for investors, conflict of interest, stakeholder value and responsibility, relationship among directors, director competency, board procedures, processes, functioning and effectiveness was circulated to all the directors of the Bank for the annual performance evaluation.
Based on the assessment of the responses received to the questionnaire from the directors on the annual evaluation of the Board, its Committees, the Chairman and the individual directors, the Board Evaluation Report was placed before the meeting of the Independent Directors for consideration. Similarly, the Board at its meeting assessed the performance of the Independent Directors. The Directors noted that the results of the performance evaluation of the Board& its Committees, Chairman and individual directors indicated a high degree of satisfaction amongst the directors. In line with the last year's suggestions of the directors, changing market dynamics & emerging demographic status of the customers, it was felt to actively consider bringing on the Board a director with digital and/or IT expertise to guide the Bank to the next level. Accordingly, the Board has appointed Mr. Uday Shankar, Director who has been driving the digital initiatives of Star India and has expertise in the field especially in understanding the customers' digital needs. Some of the suggestions this year for improving the performance of the Board & Committees were viz. enhanced oversight and opportunities for improvement & functioning of some committees, continuing education of the Board on new developments from governance prospective and Independent directors meeting with the Chairman individually once a year. Accordingly, it is proposed to convene every year a meeting of the Independent Directors with the Chairman individually and also continue to educate the Board on new developments from governance prospective and enhance their understanding of relevant risks, regulatory & industry issues. Further, for improving the functioning of some of the committees, steps have been taken to enhance their scope.
Key Managerial Personnel (KMPs)
The following officials of the Bank continue to be the "Key Managerial Personnel" pursuant to the provisions of Section 203 of the Companies Act, 2013:
⢠Mr. Uday Kotak, Managing Director & CEO
⢠Mr. Dipak Gupta, Joint Managing Director
⢠Mr. Jaimin Bhatt, President & Group Chief Financial Officer
⢠Ms. Bina Chandarana, Company Secretary
Appointment & Remuneration of Directors & KMPs
The appointment and remuneration of Directors of the Bank is governed by the provisions of Section 35B of the Banking Regulation Act, 1949. The NRC of the Bank's Board has formulated criteria for appointment of Senior Management personnel and the Directors. Based on the criteria set it recommends to the Board the appointment of Directors and Senior Management personnel.
The NRC reviews the range of skills, experience and expertise on the Board and identify its needs. After a detailed search, a master list of candidates is prepared. The NRC then shortlists the candidates from the master list based on the selection criteria viz. qualifications, knowledge, experience, skills, expertise, fit & proper status, positive attributes as per the suitability of the role, independent status and various regulatory/ statutory requirements as may be required of the candidate. After detailed discussions and deliberations NRC recommends the candidate to the Board. Recognizing the skill set requirement at the Board, NRC went through the aforesaid process for selection of the new director on the Board this year and recommended the appointment of Mr. Uday Shankar who has been driving the digital initiatives of Star India and has expertise in the field especially in understanding the customers' digital needs.
The Reserve Bank of India ('RBI') vide its circular no.DBOD.No.BC.72/29.67.001/2011-12 dated 13th January 2012 has issued the Guidelines on Compensation of Whole Time Directors / Chief Executive Officers / Other Risk Takers of Private Sector Banks on Compensation Policy which inter alia cover the following:
⢠Proper balance between fixed pay and variable pay;
⢠Variable pay not to exceed 70% (Seventy Per Cent) of the fixed pay in a year;
In accordance with the aforesaid RBI Circular, the Board of the Bank has adopted a Compensation Policy for its Whole-time Directors, Chief Executive Officer of the Bank and other employees which includes issue of stock appreciation rights as a form of variable pay, linked to the Bank's stock price, payable over a period of time. The salient features of the Compensation Policy are as follows:
⢠Objective is to maintain fair, consistent and equitable compensation practices in alignment with Kotak's core values and strategic business goals.
⢠Applicable to all employees of the Bank. Employees classified into 3 groups: o Whole-time Directors/Chief Executive Officer
o Risk Control and Compliance Staff o Other categories of Staff
⢠Compensation structure broadly divided into Fixed, Variable and ESOPs
o Fixed Pay - Total cost to the Company i.e. Salary, Retirals and Other Benefits
o Variable Pay - Linked to assessment of performance and potential based on Balanced Key Result Areas (KRAs), Standards of Performance and achievement of targets with overall linkage to Bank budgets and business objectives. The main form of incentive compensation includes
Cash, Deferred Cash/Incentive Plan and Stock Appreciation Rights.
o ESOPs - Granted on a discretionary basis to employee based on their performance and potential with the objective of retaining the employee.
⢠Compensation Composition - The ratio of Variable Pay to Fixed Pay and the ratio of Cash v/s Non Cash within Variable pay outlined for each category of employee classification.
⢠Any variation in the Policy to be with approval of the Nomination & Remuneration Committee.
⢠Malus and Clawback clauses applicable on Deferred Variable Pay.
⢠Ensuring no personal hedging strategies by employees which undermine risk alignment effects as part of their remuneration.
The details of the remuneration paid to the Non-Executive Chairman, Executive and Non-Executive Directors of the Bank for the year ended 31st March, 2019 is provided in the Corporate Governance Report annexed to this Report.
The Non-Executive Chairman of the Bank receives a fixed amount of remuneration as recommended by the Board and approved by the shareholders of the Bank and RBI, from time to time. He also receives remuneration by way of sitting fees for attending meetings of the Board or Committees thereof.
RBI vide its circular no. DBR.No.BC.97/29.67.00172014-1 5 dated June 1, 2015 has issued guidelines on payment of compensation to the Non-Executive Directors (NEDs) of private sector banks which inter-alia specifies the following:
⢠The Board of Directors of the Bank (in consultation with the Nomination& Remuneration Committee) needs to formulate and adopt a comprehensive compensation policy for NEDs (other than part-time non-executive Chairman).
⢠Maximum amount of profit related commission not to exceed Rs 10 lakh per annum for each director of the Bank.
Accordingly, in line with the aforesaid RBI circular and pursuant to the relevant provisions of the Companies Act, 2013, the Board of the Bank has adopted a compensation policy for the NEDs (excluding the part-time Non-Executive Chairman). The salient features of the Compensation Policy are as follows:
⢠Compensation structure broadly divided into: o Sitting fees
o Re-imbursement of expenses o Commission (profit based)
⢠Amount of sitting fees and commission to be decided by the Board from time to time, subject to the regulatory limits.
⢠Overall cap on commission for each director Rs 10 lakh per annum.
⢠NEDs not eligible for any stock options of the Bank.
Remuneration paid to the KMPs is in line with the Compensation Policy of the Bank which is based on the RBI Guidelines.
Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 1. Ratio of the remuneration of each director to the median remuneration of the employees for the financial year:
Directors |
Title |
Ratio |
Mr. Uday Kotak |
Managing Director & CEO |
54.53x |
Mr. Dipak Gupta |
Joint Managing Director |
54.36x |
Dr. Shankar Acharya * |
Non-Executive Chairman |
- |
Mr. Prakash Apte * |
Non-Executive Chairman |
- |
* Refer Note 3 |
2. Percentage increase in remuneration of each director. Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:
Directors/KMP |
Title |
% increase in remuneration |
% increase in remuneration excluding SARs |
Mr. Uday Kotak |
Managing Director & CEO |
10.99 |
10.99 |
Mr. Dipak Gupta |
Joint Managing Director |
12.85 |
12.85 |
Dr. Shankar Acharya * |
Non-Executive Chairman |
- |
- |
Mr. Prakash Apte * |
Non-Executive Chairman |
 |
- |
Mr. Jaimin Bhatt |
Group CFO |
8.42 |
7.31 |
Ms. Bina Chandarana |
Company Secretary |
1.24 |
2.90 |
* Refer Note 3
3. Percentage increase in the median remuneration of employees in the financial year:
For employees who were in employment for the whole of FY 2017-18 and FY 2018-19 increase in the median remuneration is 11.19%.
4. Number of permanent employees on the rolls of Bank at the end of the year: 41,753
5. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
For employees other than managerial personnel who were in employment for the whole of FY 2017-18 and FY 2018-19 the average increase is 11.16% and 10.61% excluding SARs.
Average increase for managerial personnel is 9.66% and 9.76% excluding SARs.
6. Affirmation that the remuneration is as per the remuneration policy of the Bank:
The Bank is in compliance with its Compensation Policy. Notes:
1) Remuneration includes Fixed pay + Variable paid during the year + perquisite value as calculated under the Income Tax Act, 1961. Remuneration does not include value of Stock Options.
2) Stock Appreciation Rights (SARs) are awarded as variable pay. These are settled in cash and are linked to the average market price/closing market price of the Bank's stock on specified value dates. Cash paid out during the year is included for the purposes of remuneration.
3) Dr. Shankar Acharya retired as a Non-Executive Chairman of the Bank on 19th July, 2018 & Mr. Prakash Apte, a Non-Executive Independent Director of the Bank, was appointed as a Non-Executive Chairman of the Bank with effect from 20* July, 2018. Accordingly, disclosure with respect to their ratio of remuneration/percentage increase in remuneration is not made.
4) The Non-Executive Directors of the Bank, other than the Non-Executive Chairman receive remuneration in the form of sitting fees for attending the Board/ Committee meetings and in the form of an annual profit based commission. The Non-Executive Chairman gets sitting fees for attending meetings and gets a remuneration approved by the shareholders and RBI.
SECRETARIAL AUDITOR
Pursuant to Section 204 of the Companies Act, 2013 ('Act'), your Bank has appointed Ms. Rupal D. Jhaveri, a Company Secretary in Practice, as its Secretarial Auditor. The Secretarial Audit Report for the financial year ended 31st March, 2019 as required under Section 204 of the Act and Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to this Report. Your Bank is in compliance with the applicable Secretarial Standards issued by The Institute of Company Secretaries of India and approved by the Central Government under Section 118(10) of the Companies Act, 2013 for FY 2018-19.
Kotak Mahindra Life Insurance Company Limited ('KLI'), the Bank's material unlisted subsidiary has got its secretarial audit done and there are no reservations or adverse remarks or disclaimers made in the Secretarial Audit Report for the financial year ended 31st March, 2019. The Secretarial Audit Report of KLI is annexed to this Report.
ANNUAL RETURN
Pursuant to Section 134(3)(a) and Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Bank as on 31st March, 2019 once prepared shall be disclosed on the Bank's website viz. URL: https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html
An extract of the Annual Return as on 31st March, 2019 in Form MGT-9 is annexed to this Report.
DEPOSITS
Being a banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.
AUDITORS
Messrs S.R. Batliboi & Co. LLP, Chartered Accountants, statutory auditors of your Bank, retire on the conclusion of the Thirty fourth Annual General Meeting of the Bank. They have been auditors of the Bank for last four financial years. Pursuant to the guidelines issued by the Reserve Bank of India (RBI), an audit firm is allowed to continue as the statutory auditor of a bank for a continuous period of four years only. Accordingly, it is proposed to appoint, subject to the regulatory approvals, Messrs Walker Chandiok & Co. LLP, Chartered Accountants (Registration No. 001076N/N500013), as the statutory auditors of the Bank in place of Messrs S.R. Batliboi & Co. LLP, Chartered Accountants, who have completed four years as the statutory auditors. The necessary application has been made to RBI and approval is awaited. The appointment of auditors along with the relevant details is proposed to the members in the Notice of the current i.e. the Thirty fourth Annual General Meeting for a period of two years from the conclusion of the Thirty fourth Annual General Meeting until the conclusion of the Thirty sixth Annual General Meeting of the Bank, subject to the annual approval of RBI.
INTERNAL FINANCIAL CONTROLS
The Board of Directors confirms that your Bank has laid down set of standards, processes and structure which enables to implement internal financial controls across the organization with reference to financial statements and that such controls are adequate and are operating effectively. During the year under review, no material or serious observation has been observed for inefficiency or inadequacy of such controls.
IMPLEMENTATION OF IND AS
The Ministry of Finance, Government of India has vide its press release dated 18th January, 2016 outlined the roadmap for implementation of International Financial Reporting Standards (IFRS) converged Indian Accounting Standards (Ind AS) for Scheduled commercial bank (excluding RRBs), Non-banking Financial Companies and Insurance companies. RBI has advised Banks vide circular no. RBI/2015-16/315DBR.BPBC. No.76/21.07.001/2015-16 to follow the Ind AS from 1st April, 2018 as notified under the Companies (Indian Accounting Standards) Rules, 201 5 subject to any guideline/direction issued in this regard. Subsequently, RBI through its first monetary policy statement for FY 2018-19 on 5th April, 2018, deferred Ind AS implementation for the Scheduled commercial bank (excluding RRBs) by one year i.e. the implementation of Ind AS will begin from 1st April, 2019 onwards. Further, RBI through vide circular no. DBR.BRBC.No.29/21.07.001/2018-19 dated 22nd March 2019, deferred the implementation of Ind AS for scheduled commercial banks till further notice.
As per Reserve Bank of India (RBI) directions, your Bank has taken following steps so far:
Submitted Standalone Proforma Ind AS financial statements to RBI on a quarterly basis effective FY 2018-19, as required.
Formed Steering Committee for Ind AS implementation. The Steering Committee comprises of representatives from Finance, Risk, Operations and Treasury. The Committee oversees the progress of Ind AS implementation in the Bank, and provides guidance on critical aspects of the implementation such as Ind AS technical requirements, systems and processes, business impact, people and project management. The Committee closely review's progress of Ind AS implementation.
The Bank has identified gaps in IT Systems and the changes required to automate Ind AS. The Bank is in advanced stages for Ind AS implementation.
The Bank will continue to liaise with RBI and industry bodies on various aspects pertaining to Ind AS implementation.
RELATED PARTY TRANSACTIONS
All the Related Party Transactions that were entered into during the financial year were on arm's length basis and were in ordinary course of business.
Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014, there are no Related Party Transactions to be reported under Section 188(1) of the Companies Act, 2013, in form AOC-2.
All Related Party Transactions are placed before the Audit Committee for its review and approved on a quarterly basis. An omnibus approval of the Audit Committee is obtained for the Related Party Transactions which are repetitive in nature. Further, all Related Party Transactions are reviewed by the statutory auditors of the Bank. Also, during the year, the Bank had engaged the services of an external auditor for verification of the Related Party Transactions, its disclosure and validation of the process followed by the Bank.
All Related Party Transactions as required under Accounting Standards AS-18 are reported in Note 25 of Schedule 17 - Notes to Accounts of the Consolidated financial statements and Note 7 of Schedule 18B - Notes to Accounts of the Standalone financial statements of your Bank.
The Bank's Policy on dealing with Related Party Transactions is available on the Bank's website viz. URL: https://www.kotak.com/en/investor-relations/governance/policies.html
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given, securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from the disclosure requirement under Section 134(3)(g) of the Companies Act, 2013.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
Your Bank is committed to its "Vision Statement" of upholding its Global Indian Financial Services Brand creating an ethos of trust across all constituents, developing a culture of empowerment and a spirit of enterprise thereby becoming the most preferred employer in the financial services sector.
Consistent with the Vision Statement, your Bank is committed to maintain and provide to all its employees and directors highest standards of transparency, probity and accountability. The Kotak Group endeavours to develop a culture where it is safe and acceptable for all employees and directors to raise/voice genuine concerns in good faith, and in a responsible as well as effective manner.
A vigil mechanism has been implemented through the adoption of Whistleblower Policy with an objective to enable any employee or director or vendor, raise genuine concern or report evidence of activity by the Bank or its employee or director or vendor that may constitute: Instances of corporate fraud; unethical business conduct; a violation of Central or State laws, rules, regulations and/or any other regulatory or judicial directives; any unlawful act, whether criminal or civil; malpractice; serious irregularities; impropriety, abuse or wrong doing; deliberate breaches and non-compliance with the Bank's policies; questionable accounting/audit matters/financial malpractice. The concerns can be reported online on the website viz. URL: https://cwiportal.com/kotak which is managed by independent third party.
Safeguards to avoid discrimination, retaliation, or harassment, and confidentiality have been incorporated in the policy. All employees and directors have access to the Chairman of the Audit Committee in appropriate and exceptional circumstances. Further, the Chairman of the Audit Committee has access rights to the whistle blower portal.
The Policy has been uploaded on the Bank's intranet as well as website viz. URL: https://www.kotak.com/en/investor-relations/governance/ policies.html and regular communication is made for sustained awareness.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Bank has constituted a Board Corporate Social Responsibility Committee (CSR Committee). The CSR Committee presently consists of Prof. S. Mahendra Dev, Mr. C. Jayaram and Mr. Dipak Gupta.
Your Bank's CSR Committee drives the CSR programme of the Bank. Your Bank has a Board approved CSR policy, charting out its CSR approach. This policy articulates the Bank's aim to positively contribute towards economic, environmental and social well-being of communities through its CSR interventions. The core CSR focus areas outlined are:
⢠Education
⢠Vocational skills and livelihood
⢠Preventive healthcare and sanitation
⢠Reducing inequalities faced by socially and economically backward groups
⢠Sustainable development
⢠Relief and rehabilitation
⢠Clean India
⢠Sports
The Bank's CSR Policy is available on the Bank's website: https://www.kotak.com/en/about-us/corporate-responsibility.html
Pursuant to the provisions of Section 135, Schedule VII of the Companies Act, 2013 (the Act), read with the Companies (Corporate Social Responsibility) Rules, 2014 the report of the expenditure on CSR by the Bank is as under:
The average net profit u/s 198 of the Bank for the last three financial years preceding 31st March, 2019 is Rs 4,813.64 crore. The prescribed CSR expenditure required u/s 135, of the Act for FY 2018-19 is Rs 9,627 lakh.
The CSR expenditure incurred from 1st April, 2018 to 31st March, 2019 u/s 135 of the Companies Act, 2013 amounts to Rs 3,655 lakh as against Rs 2,640 lakh CSR Expenditure incurred in FY 2017-18. The unspent CSR expenditure amount for FY 2018-19 is Rs 5,972 lakh.
CSR expenditure of Rs 3,655 lakh as a percentage of average net profit u/s 198 of the Bank at Rs 4,813.64 crore is 0.76%.
The Bank's CSR programmes and expenditures are approved by the Board CSR Committee and the Board. The Bank's CSR programmes and expenditure are guided by the vision of creating long-term benefits for the society. The Bank has been building its CSR capabilities on a sustainable basis and is committed to gradually increasing its CSR spending in the coming year for its long-term projects. The Bank identifies suitable NGO partners for carrying out its CSR programmes. It undertakes CSR programmes that are scalable, sustainable and have the potential to be replicated across locations and create a sustainable and measurable impact in communities.
Most of the CSR programmes undertaken are in the area of education, healthcare, livelihood, vocational skill development, sports and other areas such as relief and rehabilitation and environmental sustainability etc. The Bank's CSR footprint has been consistently increasing over the years. The Bank is committed to stepping-up its CSR programmes and expenditure in the years ahead.
The Bank's CSR expenditure in FY 2018-19 of Rs 3,655 lakh, which is over 38% higher than the previous financial year. In FY 2016-17, the Bank's CSR expenditure was Rs 1,733 lakh, which increased to Rs 2,640 lakh in FY 2017-18-an increase of over 52% over the previous financial year.
One of the reasons for Bank CSR expenditure's underspend is the NGOs' inability to utilise large CSR expenditure allocated under the Bank's CSR Programmes.
Your Bank does not consider "administrative overheads" as part of its CSR Expenditure.
The details of CSR Programmes and Expenditure u/s 135 of the Companies Act, 2013, for FY 2018-19, are annexed to this report.
RISK MANAGEMENT POLICY
Your Bank has a Group Enterprise wide Risk Management (ERM) framework supported by appropriate policies and processes for management of Credit Risk, Market Risk, Liquidity Risk, Operational Risk and various other Risks. Details of identification, assessment, mitigations, monitoring and the management of these Risks are mentioned in the Management Discussion and Analysis section appended to this Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not applicable to your Bank.
EMPLOYEES
The employee strength of your Bank, standalone, was over 41,500 and along with its subsidiaries was over 60,000 as of 31st March, 2019.
146 employees employed throughout the year were in receipt of remuneration of Rs 102 lakh or more per annum and 40 employees employed for part of the year were in receipt of remuneration of Rs 8.5 lakh or more per month.
Culture and values drive have been enhanced through various interactions and employee communication platforms in the organization. Your Bank continued to reiterate this through cross functional meets conducted by senior business leaders for employees at mid management level under the "Meet 5" initiative. It has also enhanced the focus on mental and physical wellbeing of the employees through mobile first platform launched for managing, tracking and facilitative on various health and wellness related requirements of the employees.
Your Bank has continued on the Gender Diversity agenda.
⢠A differentiated talent acquisition strategy to increase women employee base across various suitable roles has helped us to continue adding 24% women amongst all new hires in the Bank. While continuing with our philosophy of providing equal opportunities, an aggressive push in this area will help us achieve a better balance in gender diversity.
⢠Prevention of Sexual Harassment (POSH): Bank continues with the belief on zero tolerance towards sexual harassment at workplace and continues to uphold and maintain itself as a safe and non-discriminatory organization. To achieve the same Kotak reinforces the understanding and awareness of Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Bank has formulated Internal Complaints Committee (ICC) at three regions for reporting any untoward instance. Any complaints pertaining to sexual harassment are diligently reviewed and investigated and treated with great sensitivity. The ICC members have been trained in handling and resolving complaints and have also designed an online e-learning POSH Awareness module which covers the larger employee base.
As Bank enters in its next phase of growth and expansion of footprint across urban and rural India, Bank and its subsidiaries continued to carry out several initiatives to attract and retain a pool of highly skilled and motivated employees who are aligned to the firm's vision of becoming the most trusted financial services provider.
In accordance with the provisions of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the names and other particulars of the employees are set out in the annexure to the Directors' Report. In terms of the proviso to Section 136(1) of
Following is a summary of sexual harassment complaints received and disposed off during the year 2018-19:
o No. of complaints received |
: 27 |
o No. of complaints disposed off * |
: 26 |
* In respect of one pending case, enquiries were in progress at the close of the year. All the cases pertaining to the previous year which were pending at the beginning have been closed. the Companies Act, 2013, the Directors' Report is being sent to all shareholders excluding the aforesaid annexure. The annexure is available for inspection at the Registered Office of your Bank. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of your Bank.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the operational management, confirm in pursuance of Section 134(5) of the Companies Act, 2013, that:
(i) your Bank has, in the preparation of the annual accounts for the year ended 31st March, 2019, followed the applicable accounting standards along with proper explanations relating to material departures, if any;
(ii) they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Bank as at 31st March, 2019 and of the profit of your Bank for the financial year ended 31st March, 2019;
(iii) they have taken proper and sufficient care to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Bank and for preventing and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared 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 are operating effectively; and
(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
ANNEXURES
Following statements/reports/certificates are set out as Annexures to the Directors' Report:
⢠Extract of Annual Return under Section 134(3)(a) of the Companies Act, 2013 read with Rule 12 (1) of Companies (Management & Administration) Rules, 2014.
⢠Secretarial Audit Report pursuant to Section 204 of the Companies Act, 2013 and Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
⢠Details of CSR activities and spends under Section 135 of the Companies Act, 2013.
⢠Certificate from the auditors regarding compliance of conditions of corporate governance as stipulated in para E of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the valuable guidance and support received from the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority and other Government and Regulatory agencies. Your Directors acknowledge the support of the members and also wish to place on record their appreciation of employees for their commendable efforts, teamwork and professionalism.
For and on behalf of the Board of Directors |
 |
Prakash Apte |
Place: Mumbai |
Chairman |
Date: 31st May, 2019 |
ANNEXURE - A
FORM NO. MGT-9
EXTRACT OF ANNUAL RETURN AS ON THE FINANCIAL YEAR ENDED ON 31ST MARCH, 2019
[Pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014]
I. REGISTRATION AND OTHER DETAILS
i) |
CIN |
L65110MH1985PLC038137 |
ii) |
Registration Date |
21st November, 1985 |
iii) |
Name of the Company |
Kotak Mahindra Bank Ltd. |
iv) |
Category / Sub-Category of the Company |
Banking Company |
v) |
Address of the Registered office and contact details |
27BKC, C 27, G Block, |
Bandra Kurla Complex, Bandra (E), |
||
Mumbai- 400051 |
||
Tel No. : (022)61660001 |
||
Fax No.: (022)67132403 |
||
vi) |
Whether listed company Yes / No |
Yes |
vii) |
Name, Address and Contact details of Registrar and Transfer Agent, if any |
Karvy Fintech Private Limited |
Karvy Selenium Tower B, |
||
Plot 31-32, Gachibowli Financial District, |
||
Nanakramguda, Hyderabad - 500032, |
||
Tel :+91 (040)67161559 |
II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY
All the business activities contributing 10% or more of the total turnover of the company shall be stated:-
SI. No. |
Name and Description of main products / services |
NIC Code of the Product/ service |
% to total turnover of the company |
1 |
Monetary intermediation of commercial banks, saving banks, postal savings bank and discount Houses |
64191 |
100% |
III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES
SI. No. |
Name and Address of the Company |
CIN/GLN |
Holding / Subsidiary / Associate |
% of shares held* |
Applicable Section |
Domestic Subsidiaries |
 |
||||
1 |
Kotak Mahindra Prime Limited 27BKC, C27, G Block Bandra Kurla Complex, Bandra (E), Mumbai -400051 |
U67200MH1996PLC097730 |
Subsidiary |
100.00 |
2(87) |
2 |
Kotak Mahindra Investments Limited 27BKC, C 27, G Block Bandra Kurla Complex, Bandra (E), Mumbai -400051 |
U65900MH1988PLC047986 |
Subsidiary |
100.00 |
2(87) |
3 |
Kotak Securities Limited 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai -400051 |
U99999MH1994PLC134051 |
Subsidiary |
100.00 |
2(87) |
4 |
Kotak Mahindra Capital Company Limited 27BKC, Plot No. C-27, "G" Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051 |
U67120MH1995PLC134050 |
Subsidiary |
100.00 |
2(87) |
5 |
Kotak Mahindra Life Insurance Company Limited 2nd Floor, Plot # C- 12, G- Block, BKC, Bandra (E), Mumbai -400051 |
U66030MH2000PLC128503 |
Subsidiary |
100.00 |
2(87) |
6 |
Kotak Mahindra General Insurance Company Limited 27 BKC, C27, G Block, Bandra Kurla Complex, Bandra (East), Mumbai -400051 |
U66000MH2014PLC260291 |
Subsidiary |
100.00 |
2(87) |
7 |
Kotak Mahindra Asset Management Company Limited 27BKC, C-27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400051 |
U65991MH1994PLC080009 |
Subsidiary |
100.00 |
2(87) |
8 |
Kotak Mahindra Trustee Company Limited 27BKC, C-27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400051 |
U65990MH1995PLC090279 |
Subsidiary |
100.00 |
2(87) |
9 |
Kotak Mahindra Pension Fund Limited 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai -400051 |
U67200MH2009PLC191144 |
Subsidiary |
100.00 |
2(87) |
10 |
Kotak Investment Advisors Limited 27 BKC, 7th Floor, Plot No. C-27, "G" Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051 |
U65990MH1994PLC077472 |
Subsidiary |
100.00 |
2(87) |
11 |
Kotak Mahindra Trusteeship Services Limited 27 BKC, 6th Floor, Plot No. C-27, "G" Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051 |
U65991MH2000PLC125008 |
Subsidiary |
100.00 |
2(87) |
12 |
Kotak Infrastructure Debt Fund Limited 27BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai -400051 |
U65910MH1988PLC048450 |
Subsidiary |
100.00 |
2(87) |
13 |
IVY Product Intermediaries Limited 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (East), Mumbai -400051 |
U85110MH1987PLC294572 |
Subsidiary |
100.00 |
2(87) |
14 |
BSS Microfinance Limited No. 11, 2nd Block, 2nd Stage, Outer Ring Road, Near BDA Complex, Nagarabhavi Layout, Bangalore -560072 |
U74899KA1994PLC049746 |
Subsidiary |
100.00 |
2(87) |
 |
International Subsidiaries |
 |
 |
 |
 |
15 |
Kotak Mahindra (UK) Limited 55 Baker Street, London, W1U7EU, UK |
 |
Subsidiary |
100.00 |
2(87) |
16 |
Kotak Mahindra (International) Limited Les Cascades Building, Edith Cavell Street, Port Louis, Mauritius |
 |
Subsidiary |
100.00 |
2(87) |
17 |
Kotak Mahindra Inc. 251 Little Falls Drive, New Castle County Wilmington, DE 19808 USA |
- |
Subsidiary |
100.00 |
2(87) |
18 |
Kotak Mahindra Financial Services Limited 7th Floor, 703, Office Tower - 2, Al Fattan Currency House, Dubai International Financial Centre, PO Box 16498, Dubai |
 |
Subsidiary |
100.00 |
2(87) |
19 |
Kotak Mahindra Asset Management (Singapore) Pte. Limited 16, Raffles Quay, #35-02, Hong Leong Building, Singapore - 048581 |
 |
Subsidiary |
100.00 |
2(87) |
 |
Associate Companies |
 |
 |
 |
 |
20 |
Infina Finance Private Limited 7th Floor, Dani Corporate Park, 158, C.S.T. Road, Kalina Santacruz (E), Mumbai - 400098. |
U67120MH1996PTC098584 |
Associate |
49.99 |
2(6) |
21 |
Phoenix ARC Private Limited 5th Floor, Dani Corporate Park, 1 58, CST Road, Kalina, Santacruz (E), Mumbai -400098 |
U67190MH2007PTC168303 |
Associate |
49.90 |
2(6) |
22 |
Matrix Business Services India Private Limited ** Shree Mahamadhi Towers, New No 17, Arulambal Street, T Nagar, Chennai - 600017 |
U74140TN2003PTC051482 |
Associate |
19.77 |
2(6) |
23 |
ACE Derivatives & Commodity Exchange Limited 1st Floor, Popular House, Ashram Road, Navrangpura, Ahmedabad, Gujarat- 380009. |
U67100GJ1956PLC000597 |
Associate |
40.00 |
2(6) |
 |
* Direct and indirect holdings ** Ceased to be an Associate Company w.e.f. 26* April 2019 |
 |
 |
 |
 |
Â
IV SHARE HOLDING PATTERN (EQUITY SHARE CAPITAL BREAKUP AS PERCENTAGE OF TOTAL EQUITY)
(i) Category-wise Share Holding
Category of Shareholders |
No. of Equity shares held at the beginning of the year |
No. of Equity shares held at the end of the year |
% change during the year |
||||||
Demat |
Physical |
Total |
% of Total Equity shares |
Demat |
Physical |
Total |
% of Total Equity shares |
||
A. Promoters |
 |
 |
 |
 |
 |
 |
 |
 |
 |
1) Indian |
 |
 |
 |
 |
 |
 |
 |
 |
 |
a) Individual /HUF |
571,841,408 |
 |
571,841,408 |
30.01 |
571,841,408 |
 |
571,841,408 |
29.96 |
-0.05 |
b) Central Govt |
 |
 |
 |
 |
 |
 |
 |
 |
 |
c) State Govt(s) |
 |
 |
- |
 |
 |
 |
 |
- |
- |
d) Bodies Corp |
624,556 |
 |
624,556 |
0.03 |
624,556 |
 |
624,556 |
0.03 |
0.00 |
e) Banks/FI |
 |
 |
 |
 |
 |
 |
 |
 |
 |
f) Any Other |
 |
 |
- |
 |
 |
 |
 |
- |
- |
Sub total (A) (1) |
572,465,964 |
- |
572,465,964 |
30.04 |
572,465,964 |
- |
572,465,964 |
29.99 |
-0.05 |
2) Foreign |
 |
 |
 |
 |
 |
 |
 |
 |
 |
a) NRIs - Individuals |
 |
 |
- |
 |
 |
 |
 |
- |
- |
b) Other- Individuals |
 |
 |
 |
 |
 |
 |
 |
 |
 |
c) Bodies Corp. |
 |
 |
- |
 |
 |
 |
 |
- |
- |
d) Banks/FI |
 |
 |
 |
 |
 |
 |
 |
 |
 |
e) Any Other. |
 |
 |
- |
 |
 |
 |
 |
- |
- |
Sub total (A) (2) |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Total shareholding of Promoter (A) = (A)(1)+(A)(2) |
572,465,964 |
- |
572,465,964 |
30.04 |
572,465,964 |
- |
572,465,964 |
29.99 |
-0.05 |
B. Public Shareholding as per classification given by Depository |
|||||||||
1. Institutions |
 |
 |
 |
 |
 |
 |
 |
 |
 |
a) Mutual Funds |
134,841,280 |
28,000 |
134,869,280 |
7.08 |
160,168,020 |
28,000 |
160,196,020 |
8.39 |
1.31 |
b) Banks/FI |
3,790,240 |
7,068 |
3,797,308 |
0.20 |
3,421,462 |
6,634 |
3,428,096 |
0.18 |
-0.02 |
c) Central Govt |
 |
 |
 |
 |
 |
 |
 |
 |
 |
d) State Govt(s) |
 |
 |
 |
 |
 |
 |
 |
 |
 |
e) Venture Capital Funds |
 |
 |
- |
 |
 |
 |
 |
- |
- |
f) Alternative Investment Funds |
2,255,479 |
 |
2,255,479 |
0.12 |
3,846,505 |
 |
3,846,505 |
0.20 |
0.08 |
g) Insurance Companies |
30,173,597 |
 |
30,173,597 |
1.58 |
52,349,181 |
 |
52,349,181 |
2.74 |
1.16 |
h) Flls |
753,862,041 |
25,600 |
753,887,641 |
39.56 |
768,539,880 |
25,600 |
768,565,480 |
40.27 |
0.71 |
i) Foreign Venture Capital Funds |
 |
 |
 |
 |
 |
 |
 |
 |
 |
j) Qualified Foreign Investor |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Sub-total (B)(1):- |
924,922,637 |
60,668 |
924,983,305 |
48.54 |
988,325,048 |
60,234 |
988,385,282 |
51.78 |
3.24 |
2. Non-Institutions |
 |
 |
 |
 |
 |
 |
 |
 |
 |
a) Bodies Corp. |
 |
 |
 |
 |
 |
 |
 |
 |
 |
i) Indian |
59,396,957 |
62,012 |
59,458,969 |
3.12 |
63,869,294 |
57,952 |
63,927,246 |
3.35 |
0.23 |
ii) Overseas |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Â
Category of Shareholders |
No. of Equity shares held at the beginning of the year |
No. of Equity shares held at the end of the year |
% change during the year |
|||||||
Demat |
Physical |
Total |
% of Total Equity shares |
Demat |
Physical |
Total |
% of Total Equity shares |
|||
b) |
Individuals |
 |
 |
 |
 |
 |
 |
 |
 |
 |
i) |
Individual shareholders holding nominal share capital upto Rs 1 lakh |
67,307,312 |
6,980,835 |
74,288,147 |
3.90 |
72,394,064 |
5,780,455 |
78,174,519 |
4.10 |
0.20 |
ii) |
Individual shareholders holding nominal share capital in excess of Rs 1 lakh |
109,118,228 |
331,816 |
109,450,044 |
5.74 |
103,965,192 |
214,992 |
104,180,184 |
5.46 |
-0.29 |
c) |
Others (specify) |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Non Resident Indians |
3,014,992 |
1,215,448 |
4,230,440 |
0.22 |
4,275,735 |
991,024 |
5,266,759 |
0.28 |
0.06 |
 |
Non Resident Indians Non- Repatriable |
2,757,697 |
- |
2,757,697 |
0.14 |
2,935,282 |
- |
2,935,282 |
0.15 |
0.01 |
 |
Overseas Bodies Corporate |
8,406,960 |
- |
8,406,960 |
0.44 |
8,406,960 |
- |
8,406,960 |
0.44 |
0.00 |
 |
Foreign Bank |
32,800,000 |
- |
32,800,000 |
1.72 |
32,800,000 |
- |
32,800,000 |
1.72 |
0.00 |
 |
Foreign Bodies |
97,166,170 |
 |
97,166,170 |
5.10 |
25,966,992 |
 |
25,966,992 |
1.36 |
-3.74 |
 |
Foreign Bodies-DR |
34,400 |
- |
34,400 |
0.00 |
1,744 |
- |
1,744 |
0.00 |
0.00 |
 |
Trust |
10,253,369 |
 |
10,253,369 |
0.54 |
13,137,126 |
 |
13,137,126 |
0.69 |
0.15 |
 |
HUF |
1,996,686 |
14 |
1,996,700 |
0.10 |
1,968,262 |
14 |
1,968,276 |
0.10 |
0.00 |
 |
IEPF |
2,452,525 |
- |
2,452,525 |
0.13 |
3,160,801 |
- |
3,160,801 |
0.17 |
0.04 |
 |
Clearing Members |
3,628,987 |
 |
3,628,987 |
0.19 |
6,414,483 |
 |
6,414,483 |
0.34 |
0.15 |
 |
NBFC |
1,273,379 |
- |
1,273,379 |
0.07 |
1,561,659 |
- |
1,561,659 |
0.08 |
0.01 |
 |
Foreign National |
1,450 |
- |
1,450 |
0.00 |
1,550 |
- |
1,550 |
0.00 |
0.00 |
 |
Sub-total(B)(2):- |
399,609,112 |
8,590,125 |
408,199,237 |
21.42 |
340,859,144 |
7,044,437 |
347,903,581 |
18.23 |
-3.19 |
 |
Total Public Shareholding (B)=(B)(1)+(B)(2) |
1,324,531,749 |
8,650,793 |
1,333,182,542 |
69.96 |
1,329,184,192 |
7,104,671 |
1,336,288,863 |
70.01 |
0.05 |
C. |
Shares held by Custodian for GDRs & ADRs |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Grand Total (A+B+C) |
1,896,997,713 |
8,650,793 |
1,905,648,506 |
100.00 |
1,901,650,156 |
7,104,671 |
1,908,754,827 |
100.00 |
 |
Note:
The increase in Equity Share Capital during FY 2018-19 is on account of allotment of equity shares under the various ESOP Schemes of the Bank.
SI no. |
Shareholder's Name |
Shareholding at the beginning of the year |
Shareholding at the end of the year |
% change in shareholding during the year |
||||
No. of Equity shares |
% of total Equity shares of the company |
% of Equity shares pledged / encumbered to total Equity shares |
No. of Equity shares |
% of total Equity shares of the company |
% of Equity shares pledged / encumbered to total Equity shares |
|||
1 |
Uday Suresh Kotak |
566,927,100 |
29.75 |
0.00 |
566,927,100 |
29.70 |
0.00 |
-0.05 |
2 |
Kotak Trustee Company Pvt. Ltd. Beneficial Owner Mr. Uday S Kotak |
624,556 |
0.03 |
0.00 |
624,556 |
0.03 |
0.00 |
0.00 |
3 |
Indira Suresh Kotak |
2,300,000 |
0.12 |
0.00 |
2,300,000 |
0.12 |
0.00 |
0.00 |
4 |
Pallavi Kotak |
1,111,580 |
0.06 |
0.00 |
1,111,580 |
0.06 |
0.00 |
0.00 |
5 |
Dinkarrai Kalidas Desai |
793,508 |
0.04 |
0.00 |
0 |
0.00 |
0.00 |
-0.04 |
6 |
Kusum Dinkarrai Desai |
298,260 |
0.02 |
0.00 |
0 |
0.00 |
0.00 |
-0.02 |
7 |
Suresh Amritlal Kotak |
200,000 |
0.01 |
0.00 |
200,000 |
0.01 |
0.00 |
0.00 |
8 |
Suresh A Kotak (HUF) |
110,000 |
0.01 |
0.00 |
110,000 |
0.01 |
0.00 |
0.00 |
9 |
Aarti Neal Chandaria |
57,360 |
0.00 |
0.00 |
57,360 |
0.00 |
0.00 |
0.00 |
10 |
Janak Dinkarrai Desai |
43,600 |
0.00 |
0.00 |
11,35,368 |
0.06 |
0.00 |
0.06 |
 |
Total |
572,465,964 |
30.04 |
0.00 |
572,465,964 |
29.99 |
0.00 |
0.00 |
(iii) Change in Promoters' Shareholding (please specify, if there is no change)
SI. no. |
 |
No. of Equity shares |
% of total Equity shares of the company |
Cumulative Shareholding during the year |
|
No. of Equity shares |
% of total Equity shares of the company |
||||
 |
At the beginning of the year Date wise Increase / Decrease in Promoters Shareholding during the year specifying the reasons for increase / decrease (e.g. allotment / transfer / bonus/ sweat equity etc.): |
572,465,964 |
30.04 |
572,465,964 |
30.04 |
1 |
Dinkarrai Kalidas Desai Gift 19/12/2018 |
-793,508 |
-0.04 |
 |
 |
2 |
Kusum Dinkarrai Desa Gift 19/12/2018 |
-298,260 |
-0.02 |
 |
 |
3 |
Janak Dinkarrai Desai Gift 19/12/2018 |
1,091,768 |
0.06 |
572,465,964 |
29.99 |
 |
At the End of the year |
 |
 |
572,465,964 |
29.99 |
(ii) Shareholding of Promoters
(iv) Shareholding Pattern of top ten shareholders (other than Directors, Promoters and Holders of GDRs and ADRs) |
|||||||||
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding during the year |
Date of change |
Cumulative Shareholding during the year |
||||
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the company |
|||
1 |
Canada Pension Plan Investment Board |
115,163,850 |
6.04 |
- |
 |
 |
31/03/2018 |
115,163,850 |
6.04 |
 |
 |
- |
 |
 |
31/03/2019 |
115,163,850 |
6.03 |
||
2 |
Europacific Growth Fund |
94,161,246 |
4.94 |
 |
 |
 |
31/03/2018 |
94,161,246 |
4.94 |
 |
 |
1,378,664 |
- |
Market Sale |
21/12/2018 |
92,782,582 |
4.86 |
||
321,938 |
 |
Market Sale |
28/12/2018 |
92,460,644 |
4.85 |
||||
116,862 |
 |
Market Sale |
04/01/2019 |
92,343,782 |
4.84 |
||||
30,387 |
- |
Market Sale |
11/01/2019 |
92,313,395 |
4.84 |
||||
279,917 |
 |
Market Sale |
18/01/2019 |
92,033,478 |
4.82 |
||||
 |
2,850,000 |
Market Purchase |
01/03/2019 |
94,883,478 |
4.97 |
||||
 |
- |
 |
31/03/2019 |
94,883,478 |
4.97 |
||||
3 |
Oppenheimer Developing Markets Fund |
57,073,844 |
2.99 |
 |
 |
 |
31/03/2018 |
57,073,844 |
2.99 |
 |
 |
 |
3,422,169 |
Market Purchase |
19/10/2018 |
60,496,013 |
3.17 |
||
 |
4,467,879 |
Market Purchase |
26/10/2018 |
64,963,892 |
3.41 |
||||
 |
1,088,361 |
Market Purchase |
15/02/2019 |
66,052,253 |
3.46 |
||||
 |
 |
 |
 |
 |
 |
 |
31/03/2019 |
66,052,253 |
3.46 |
4 |
Sumitomo Mitsui Banking Corporation |
32,800,000 |
1.72 |
 |
 |
 |
31/03/2018 |
32,800,000 |
1.72 |
 |
 |
 |
- |
 |
31/03/2019 |
32,800,000 |
1.72 |
||
5 |
SBI Mutual Funds |
31,615,462 |
1.66 |
 |
 |
 |
31/03/2018 |
31,615,462 |
1.66 |
 |
 |
 |
128,740 |
Market Purchase |
06/04/2018 |
31,744,202 |
1.67 |
||
- |
65,355 |
Market Purchase |
13/04/2018 |
31,809,557 |
1.67 |
||||
- |
1,176,481 |
Market Purchase |
20/04/2018 |
32,986,038 |
1.73 |
||||
 |
58,877 |
Market Purchase |
27/04/2018 |
33,044,915 |
1.74 |
||||
98,465 |
 |
Market Sale |
04/05/2018 |
32,946,450 |
1.73 |
||||
- |
129,665 |
Market Purchase |
11/05/2018 |
33,076,115 |
1.74 |
||||
- |
209,418 |
Market Purchase |
18/05/2018 |
33,285,533 |
1.75 |
||||
 |
7,112 |
Market Purchase |
25/05/2018 |
33,292,645 |
1.75 |
||||
692798 |
 |
Market sale |
01/06/2018 |
32,599,847 |
1.71 |
Â
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding during the year |
Date of change |
Cumulative Shareholding during the year |
||||
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the company |
|||
 |
 |
 |
 |
 |
322,221 |
Market Purchase |
08/06/2018 |
32,922,068 |
1.73 |
 |
187,096 |
Market Purchase |
15/06/2018 |
33,109,164 |
1.74 |
||||
 |
79,040 |
Market Purchase |
22/06/2018 |
33,188,204 |
1.74 |
||||
275,750 |
 |
Market sale |
29/06/2018 |
32,912,454 |
1.73 |
||||
- |
601,510 |
Market Purchase |
06/07/2018 |
33,513,964 |
1.76 |
||||
1,770 |
- |
Market sale |
13/07/2018 |
33,512,194 |
1.76 |
||||
 |
91,766 |
Market Purchase |
20/07/2018 |
33,603,960 |
1.76 |
||||
21,622 |
 |
Market sale |
27/07/2018 |
33,582,338 |
1.76 |
||||
- |
764,996 |
Market Purchase |
03/08/2018 |
34,347,334 |
1.80 |
||||
- |
145,213 |
Market Purchase |
10/08/2018 |
34,492,547 |
1.81 |
||||
 |
42,402 |
Market Purchase |
17/08/2018 |
34,534,949 |
1.81 |
||||
 |
183,403 |
Market Purchase |
24/08/2018 |
34,718,352 |
1.82 |
||||
 |
156,726 |
Market Purchase |
31/08/2018 |
34,875,078 |
1.83 |
||||
- |
1,361,830 |
Market Purchase |
07/09/2018 |
36,236,908 |
1.90 |
||||
- |
267,513 |
Market Purchase |
14/09/2018 |
36,504,421 |
1.91 |
||||
 |
126,795 |
Market Purchase |
21/09/2018 |
36,631,216 |
1.92 |
||||
54,248 |
 |
Market sale |
28/09/2018 |
36,576,968 |
1.92 |
||||
 |
96,838 |
Market Purchase |
05/10/2018 |
36,673,806 |
1.92 |
||||
162,494 |
 |
Market sale |
12/10/2018 |
36,511,312 |
1.91 |
||||
199,645 |
 |
Market sale |
19/10/2018 |
36,311,667 |
1.90 |
||||
 |
50,966 |
Market Purchase |
26/10/2018 |
36,362,633 |
1.91 |
||||
 |
259,413 |
Market Purchase |
02/11/2018 |
36,622,046 |
1.92 |
||||
 |
127,873 |
Market Purchase |
09/11/2018 |
36,749,919 |
1.93 |
||||
 |
345,604 |
Market Purchase |
16/11/2018 |
37,095,523 |
1.95 |
Â
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding during the year |
Date of change |
Cumulative Shareholding during the year |
||||
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the company |
|||
 |
 |
 |
 |
- |
115,927 |
Market Purchase |
23/11/2018 |
37,211,450 |
1.95 |
- |
91,452 |
Market Purchase |
30/11/2018 |
37,302,902 |
1.96 |
||||
 |
240,252 |
Market Purchase |
07/12/2018 |
37,543,154 |
1.97 |
||||
 |
115,555 |
Market Purchase |
14/12/2018 |
37,658,709 |
1.97 |
||||
 |
135,498 |
Market Purchase |
21/12/2018 |
37,794,207 |
1.98 |
||||
 |
20,261 |
Market Purchase |
28/12/2018 |
37,814,468 |
1.98 |
||||
 |
31,470 |
Market Purchase |
31/12/2018 |
37,845,938 |
1.98 |
||||
 |
188,929 |
Market Purchase |
04/01/2019 |
38,034,867 |
1.99 |
||||
 |
202,088 |
Market Purchase |
11/01/2019 |
38,236,955 |
2.00 |
||||
 |
205,803 |
Market Purchase |
18/01/2019 |
38,442,758 |
2.02 |
||||
 |
414,556 |
Market Purchase |
25/01/2019 |
38,857,314 |
2.04 |
||||
 |
224,299 |
Market Purchase |
01/02/2019 |
39,081,613 |
2.05 |
||||
 |
210,232 |
Market Purchase |
08/02/2019 |
39,291,845 |
2.06 |
||||
 |
39,364 |
Market Purchase |
15/02/2019 |
39,331,209 |
2.06 |
||||
 |
106,110 |
Market Purchase |
22/02/2019 |
39,437,319 |
2.07 |
||||
 |
241,159 |
Market Purchase |
01/03/2019 |
39,678,478 |
2.08 |
||||
- |
82,995 |
Market Purchase |
08/03/2019 |
39,761,473 |
2.08 |
||||
- |
278,883 |
Market Purchase |
15/03/2019 |
40,040,356 |
2.10 |
||||
- |
578,400 |
Market Purchase |
22/03/2019 |
40,618,756 |
2.13 |
||||
 |
52,530 |
Market Purchase |
29/03/2019 |
40,671,286 |
2.13 |
||||
 |
 |
 |
31/03/2019 |
40,671,286 |
2.13 |
Â
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding during the year |
Date of change |
Cumulative Shareholding during the year |
||||
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the company |
|||
6 |
Life Insurance Corporation of India |
12,226,354 |
0.64 |
 |
 |
 |
31/03/2018 |
12,226,354 |
0.64 |
 |
 |
 |
340,200 |
Market Purchase |
21/09/2018 |
12,566,554 |
0.66 |
||
 |
1,594,252 |
Market Purchase |
28/09/2018 |
14,160,806 |
0.74 |
||||
 |
1,240,025 |
Market Purchase |
05/10/2018 |
15,400,831 |
0.81 |
||||
 |
1,392,851 |
Market Purchase |
12/10/2018 |
16,793,682 |
0.88 |
||||
- |
690,074 |
Market Purchase |
19/10/2018 |
17,483,756 |
0.92 |
||||
- |
1,545,454 |
Market Purchase |
26/10/2018 |
19,029,210 |
1.00 |
||||
- |
790,684 |
Market Purchase |
02/11/2018 |
19,819,894 |
1.04 |
||||
 |
839,062 |
Market Purchase |
09/11/2018 |
20,658,956 |
1.08 |
||||
 |
2,060,690 |
Market Purchase |
16/11/2018 |
22,719,646 |
1.19 |
||||
 |
245,418 |
Market Purchase |
23/11/2018 |
22,965,064 |
1.20 |
||||
- |
429,472 |
Market Purchase |
30/11/2018 |
23,394,536 |
1.23 |
||||
- |
66,403 |
Market Purchase |
14/12/2018 |
23,460,939 |
1.23 |
||||
 |
468,032 |
Market Purchase |
21/12/2018 |
23,928,971 |
1.25 |
||||
 |
435,865 |
Market Purchase |
28/12/2018 |
24,364,836 |
1.28 |
||||
 |
144,000 |
Market Purchase |
31/12/2018 |
24,508,836 |
1.28 |
||||
 |
512,090 |
Market Purchase |
04/01/2019 |
25,020,926 |
1.31 |
||||
 |
638,519 |
Market Purchase |
11/01/2019 |
25,659,445 |
1.35 |
||||
 |
798,958 |
Market Purchase |
18/01/2019 |
26,458,403 |
1.39 |
||||
 |
190,463 |
Market Purchase |
25/01/2019 |
26,648,866 |
1.40 |
||||
 |
498,500 |
Market Purchase |
01/02/2019 |
27,147,366 |
1.42 |
Â
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding during the year |
Date of change |
Cumulative Shareholding during the year |
||||
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the company |
|||
 |
 |
 |
 |
- |
308,757 |
Market Purchase |
08/02/2019 |
27,456,123 |
1.44 |
- |
500,162 |
Market Purchase |
15/02/2019 |
27,956,285 |
1.47 |
||||
 |
525,590 |
Market Purchase |
22/02/2019 |
28,481,875 |
1.49 |
||||
 |
912,503 |
Market Purchase |
01/03/2019 |
29,394,378 |
1.54 |
||||
 |
646,888 |
Market Purchase |
08/03/2019 |
30,041,266 |
1.57 |
||||
 |
598,552 |
Market Purchase |
15/03/2019 |
30,639,818 |
1.61 |
||||
 |
287,000 |
Market Purchase |
22/03/2019 |
30,926,818 |
1.62 |
||||
 |
 |
 |
31/03/2019 |
30,926,818 |
1.62 |
||||
7 |
Capital World Growth and Income Fund |
28,150,731 |
1.48 |
 |
 |
 |
31/03/2018 |
28,150,731 |
1.48 |
 |
 |
533,452 |
- |
Market Sale |
24/08/2018 |
27,617,279 |
1.45 |
||
1,030,000 |
- |
Market Sale |
28/09/2018 |
26,587,279 |
1.39 |
||||
 |
2,404,752 |
Market Purchase |
07/12/2018 |
28,992,031 |
1.52 |
||||
 |
513,176 |
Market Purchase |
14/12/2018 |
29,505,207 |
1.55 |
||||
 |
622,072 |
Market Purchase |
01/02/2019 |
30,127,279 |
1.58 |
||||
 |
 |
 |
31/03/2019 |
30,127,279 |
1.58 |
||||
8 |
Caladium Investment Pte Ltd |
25,966,992 |
1.36 |
 |
 |
 |
31/03/2018 |
25,966,992 |
1.36 |
 |
 |
 |
 |
 |
31/03/2019 |
25,966,992 |
1.36 |
||
9 |
Axis Mutual Fund |
15,710,475 |
0.82 |
- |
 |
 |
31/03/2018 |
15,710,475 |
0.82 |
 |
 |
 |
210,351 |
Market Purchase |
06/04/2018 |
15,920,826 |
0.84 |
||
- |
318,000 |
Market Purchase |
13/04/2018 |
16,238,826 |
0.85 |
||||
125,200 |
 |
Market Sale |
20/04/2018 |
16,113,626 |
0.85 |
||||
 |
328,000 |
Market Purchase |
27/04/2018 |
16,441,626 |
0.86 |
||||
 |
199,830 |
Market Purchase |
11/05/2018 |
16,641,456 |
0.87 |
||||
206,291 |
 |
Market Sale |
01/06/2018 |
16,435,165 |
0.86 |
||||
- |
95,740 |
Market Purchase |
15/06/2018 |
16,530,905 |
0.87 |
Â
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding during the year |
Date of change |
Cumulative Shareholding during the year |
||||
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the company |
|||
 |
 |
 |
 |
 |
74,000 |
Market Purchase |
29/06/2018 |
16,604,905 |
0.87 |
 |
235,094 |
Market Purchase |
13/07/2018 |
16,839,999 |
0.88 |
||||
 |
78,500 |
Market Purchase |
20/07/2018 |
16,918,499 |
0.89 |
||||
 |
373,250 |
Market Purchase |
27/07/2018 |
17,291,749 |
0.91 |
||||
 |
213,600 |
Market Purchase |
03/08/2018 |
17,505,349 |
0.92 |
||||
27,000 |
- |
Market Sale |
10/08/2018 |
17,478,349 |
0.92 |
||||
4,800 |
- |
Market Sale |
17/08/2018 |
17,473,549 |
0.92 |
||||
161,800 |
 |
Market Sale |
24/08/2018 |
17,311,749 |
0.91 |
||||
- |
281,847 |
Market Purchase |
31/08/2018 |
17,593,596 |
0.92 |
||||
125,000 |
- |
Market Sale |
14/09/2018 |
17,468,596 |
0.92 |
||||
 |
149,430 |
Market Purchase |
21/09/2018 |
17,618,026 |
0.92 |
||||
- |
813,000 |
Market Purchase |
28/09/2018 |
18,431,026 |
0.97 |
||||
- |
243,171 |
Market Purchase |
05/10/2018 |
18,674,197 |
0.98 |
||||
- |
356,335 |
Market Purchase |
12/10/2018 |
19,030,532 |
1.00 |
||||
 |
175,000 |
Market Purchase |
19/10/2018 |
19,205,532 |
1.01 |
||||
 |
1,398,000 |
Market Purchase |
26/10/2018 |
20,603,532 |
1.08 |
||||
 |
140,002 |
Market Purchase |
02/11/2018 |
20,743,534 |
1.09 |
||||
466,400 |
 |
Market Sale |
09/11/2018 |
20,277,134 |
1.06 |
||||
881,800 |
 |
Market Sale |
16/11/2018 |
19,395,334 |
1.02 |
||||
102,200 |
 |
Market Sale |
23/11/2018 |
19,293,134 |
1.01 |
||||
 |
85,000 |
Market Purchase |
30/11/2018 |
19,378,134 |
1.02 |
||||
356,668 |
 |
Market Sale |
07/12/2018 |
19,021,466 |
1.00 |
||||
 |
80,638 |
Market Purchase |
14/12/2018 |
19,102,104 |
1.00 |
||||
 |
215,734 |
Market Purchase |
21/12/2018 |
19,317,838 |
1.01 |
||||
 |
363,700 |
Market Purchase |
04/01/2019 |
19,681,538 |
1.03 |
Â
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding during the year |
Date of change |
Cumulative Shareholding during the year |
||||
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the company |
|||
 |
 |
 |
 |
18,226 |
 |
Market Sale |
11/01/2019 |
19,663,312 |
1.03 |
 |
109,593 |
Market Purchase |
18/01/2019 |
19,772,905 |
1.04 |
||||
 |
20,800 |
Market Purchase |
25/01/2019 |
19,793,705 |
1.04 |
||||
- |
69,000 |
Market Purchase |
01/02/2019 |
19,862,705 |
1.04 |
||||
 |
125,245 |
Market Purchase |
08/02/2019 |
19,987,950 |
1.05 |
||||
 |
72,000 |
Market Purchase |
15/02/2019 |
20,059,950 |
1.05 |
||||
 |
650,000 |
Market Purchase |
22/02/2019 |
20,709,950 |
1.09 |
||||
- |
1,565,263 |
Market Purchase |
01/03/2019 |
22,275,213 |
1.17 |
||||
- |
393,600 |
Market Purchase |
08/03/2019 |
22,668,813 |
1.19 |
||||
 |
68,351 |
Market Purchase |
22/03/2019 |
22,737,164 |
1.19 |
||||
 |
148,000 |
Market Purchase |
29/03/2019 |
22,885,164 |
1.20 |
||||
 |
 |
 |
31/03/2019 |
22,885,164 |
1.20 |
||||
10 |
Caisse De Depot ET Placement DU Quebec |
22,344,947 |
1.17 |
- |
 |
 |
31/03/2018 |
22,344,947 |
1.17 |
 |
 |
- |
16,060 |
Market Purchase |
06/04/2018 |
22,361,007 |
1.17 |
||
22,586 |
 |
Market Sale |
29/06/2018 |
22,338,421 |
1.17 |
||||
88,388 |
 |
Market Sale |
06/07/2018 |
22,250,033 |
1.17 |
||||
19,724 |
 |
Market Sale |
03/08/2018 |
22,230,309 |
1.17 |
||||
 |
93,035 |
Market Purchase |
07/09/2018 |
22,323,344 |
1.17 |
||||
33,625 |
 |
Market Sale |
28/09/2018 |
22,289,719 |
1.17 |
||||
42,363 |
 |
Market Sale |
05/10/2018 |
22,247,356 |
1.17 |
||||
138,680 |
 |
Market Sale |
19/10/2018 |
22,108,676 |
1.16 |
||||
 |
 |
 |
31/03/2019 |
22,108,676 |
1.16 |
Notes:
1) Top ten shareholders (on basis of PAN numbers) of the Bank as on 31st March 2019 has been considered for the above disclosure.
2) Date of change is the date of shareholding statement i.e. the date on which the beneficiary position is downloaded.
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding |
Date of change |
Cumulative Shareholding during the year |
||||
 |
 |
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the Company |
|
DIRECTORS # |
|||||||||
1 |
Dipak Gupta |
1,324,405 |
0.07 |
 |
 |
 |
31/03/2018 |
1,324,405 |
0.07 |
 |
 |
 |
21,764 |
ESOP Allotment |
28/06/2018 |
1,346,169 |
0.07 |
||
 |
4,080 |
ESOP Allotment |
17/08/2018 |
1,350,249 |
0.07 |
||||
78,000 |
 |
Gift |
23/08/2018 |
1,272,249 |
0.07 |
||||
10,000 |
 |
Market Sale |
09/11/2018 |
1,262,249 |
0.07 |
||||
 |
11,000 |
ESOP Allotment |
11/12/2018 |
1,273,249 |
0.07 |
||||
14,442 |
- |
Market Sale |
14/12/2018 |
1,258,807 |
0.07 |
||||
 |
16,429 |
ESOP Allotment |
27/12/2018 |
1,275,236 |
0.07 |
||||
5,558 |
- |
Market Sale |
24/01/2019 |
1,269,678 |
0.07 |
||||
12,500 |
 |
Market Sale |
28/01/2019 |
1,257,178 |
0.07 |
||||
15,000 |
 |
Market Sale |
07/02/2019 |
1,242,178 |
0.07 |
||||
 |
8,571 |
ESOP Allotment |
07/02/2019 |
1,250,749 |
0.07 |
||||
25,000 |
- |
Gift |
20/02/2019 |
1,225,749 |
0.07 |
||||
 |
19,580 |
ESOP Allotment |
26/03/2019 |
1,245,329 |
0.07 |
||||
 |
2,500 |
ESOP Allotment |
30/03/2019 |
1,247,829 |
0.07 |
||||
 |
 |
 |
31/03/2019 |
1,247,829 |
0.07 |
||||
2 |
C Jayaram |
1,108,040 |
0.06 |
 |
 |
 |
31/03/2018 |
1,108,040 |
0.06 |
 |
 |
 |
 |
 |
31/03/2019 |
1,108,040 |
0.06 |
||
3 |
Uday Shankar* |
- |
 |
 |
- |
 |
16/03/2019 |
297 |
0.00 |
 |
 |
 |
 |
 |
31/03/2019 |
297 |
0.00 |
||
4 |
Farida Dara Khambata |
36,000 |
0.00 |
 |
- |
 |
31/03/2018 |
36,000 |
0.00 |
 |
 |
 |
4,000 |
Market Purchase |
29/06/2018 |
40,000 |
0.00 |
||
 |
5,000 |
Market Purchase |
17/08/2018 |
45,000 |
0.00 |
||||
 |
4,000 |
Market Purchase |
24/08/2018 |
49,000 |
0.00 |
||||
 |
5,000 |
Market Purchase |
05/10/2018 |
54,000 |
0.00 |
||||
 |
 |
 |
31/03/2019 |
54,000 |
0.00 |
||||
5 |
Amit K Desai ** |
1,548,750 |
0.08 |
 |
 |
 |
31/03/2018 |
1,548,750 |
0.08 |
 |
 |
 |
 |
 |
17/03/2019 |
1,548,750 |
0.08 |
# Shareholding details of Mr. Uday Kotak, Managing Director & CEO has been given in the section on 'Shareholding of Promoters'.
* Appointed as an Independent Director w.e.f. 16th March 2019 ** Ceased to be a Director w.e.f. 17th March 2019
(v) Shareholding of Directors and Key Managerial Personnel:
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding |
Date of change |
Cumulative Shareholding during the year |
||||
 |
No. of Equity shares |
% of total Equity shares of the company |
No. of Equity Shares -Decrease |
No. of Equity shares -Increase |
Reason |
No. of Equity shares |
% of total Equity shares of the company |
||
KEY MANAGERIAL PERSONNEL |
|||||||||
1 |
Jaimin Mukund Bhatt |
1,287,504 |
0.07 |
 |
 |
 |
31/03/2018 |
1,287,504 |
0.07 |
 |
 |
 |
4,932 |
ESOP Allotment |
17/04/2018 |
1,292,436 |
0.07 |
||
 |
6,000 |
ESOP Allotment |
06/06/2018 |
1,298,436 |
0.07 |
||||
 |
5,052 |
ESOP Allotment |
25/07/2018 |
1,303,488 |
0.07 |
||||
 |
5,000 |
ESOP Allotment |
17/08/2018 |
1,308,488 |
0.07 |
||||
 |
3,552 |
ESOP Allotment |
28/09/2018 |
1,312,040 |
0.07 |
||||
 |
4,000 |
ESOP Allotment |
27/12/2018 |
1,316,040 |
0.07 |
||||
 |
2,500 |
ESOP Allotment |
16/01/2019 |
1,318,540 |
0.07 |
||||
 |
11,621 |
ESOP Allotment |
07/02/2019 |
1,330,161 |
0.07 |
||||
5,000 |
- |
Market Sale |
11/02/2019 |
1,325,161 |
0.07 |
||||
5,000 |
 |
Market Sale |
12/02/2019 |
1,320,161 |
0.07 |
||||
10,000 |
- |
Market Sale |
13/02/2019 |
1,310,161 |
0.07 |
||||
 |
11,052 |
ESOP Allotment |
26/03/2019 |
1,321,213 |
0.07 |
||||
 |
2,500 |
ESOP Allotment |
30/03/2019 |
1,323,713 |
0.07 |
||||
 |
 |
 |
31/03/2019 |
1,323,713 |
0.07 |
||||
2. |
Bina Rameshchandra Chandrana |
49,669 |
0.00 |
 |
- |
 |
31/03/2018 |
49,669 |
0.00 |
 |
 |
 |
716 |
ESOP Allotment |
28/06/2018 |
50,385 |
0.00 |
||
 |
448 |
ESOP Allotment |
25/07/2018 |
50,833 |
0.00 |
||||
 |
720 |
ESOP Allotment |
28/09/2018 |
51,553 |
0.00 |
||||
 |
 |
 |
31/03/2019 |
51,553 |
0.00 |
IV SHARE HOLDING PATTERN (PREFERENCE SHARE CAPITAL BREAKUP AS PERCENTAGE OF TOTAL PREFERENCE)
(i) Category-wise Share Holding
Category of Shareholders |
No. of Preference shares held at the beginning of the year |
No. of Preference shares held at the end of the year |
% change during the year |
||||||
Demat |
Physical |
Total |
% of Total Preference shares |
Demat |
Physical |
Total |
% of Total Preference shares |
||
A. Promoters |
 |
 |
 |
 |
 |
 |
 |
 |
 |
1) Indian |
 |
 |
 |
 |
 |
 |
 |
 |
 |
a) Individual /HUF |
 |
- |
- |
- |
 |
 |
 |
- |
- |
b) Central Govt |
 |
 |
 |
 |
 |
 |
 |
 |
 |
c) State Govt(s) |
 |
- |
- |
- |
 |
 |
 |
- |
- |
d) Bodies Corp |
 |
- |
- |
- |
 |
 |
 |
- |
- |
e) Banks/FI |
 |
 |
 |
 |
 |
 |
 |
 |
 |
f) Any Other |
 |
- |
- |
- |
 |
 |
 |
- |
- |
Sub total (A) (1) |
 |
- |
- |
- |
 |
- |
- |
- |
- |
2) Foreign |
 |
 |
 |
 |
 |
 |
 |
 |
 |
a) NRIs - Individuals |
 |
- |
- |
- |
 |
 |
 |
- |
- |
b) Other- Individuals |
 |
 |
 |
 |
 |
 |
 |
 |
 |
c) Bodies Corp. |
 |
- |
- |
- |
 |
 |
 |
- |
- |
d) Banks/FI |
 |
 |
 |
 |
 |
 |
 |
 |
 |
e) Any Other.... |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Sub total (A) (2) |
 |
- |
- |
- |
 |
⢠|
- |
- |
- |
Total shareholding of Promoter (A) = (A)(1)+(A) (2) |
 |
" " |
" |
" |
 |
" |
" |
" |
" |
B. Public Shareholding as per classification given by Depository |
 |
 |
 |
 |
 |
 |
 |
 |
 |
1. Institutions |
 |
 |
 |
 |
 |
 |
 |
 |
 |
a) Mutual Funds |
 |
 |
 |
 |
 |
 |
 |
 |
 |
b) Banks/FI |
 |
- |
- |
- |
 |
 |
 |
- |
- |
c) Central Govt |
 |
 |
 |
 |
 |
 |
 |
 |
 |
d) State Govt(s) |
 |
- |
- |
- |
 |
 |
 |
- |
- |
e) Venture Capital Funds |
 |
 |
 |
 |
 |
 |
 |
 |
 |
f) Alternative Investment Funds |
 |
 |
 |
 |
 |
 |
 |
 |
 |
g) Insurance Companies |
 |
- |
- |
- |
 |
 |
 |
- |
- |
h) Flls |
 |
- |
- |
- |
 |
 |
 |
- |
- |
i) Foreign Venture Capital Funds |
 |
 |
 |
 |
 |
 |
 |
 |
 |
j) Qualified Foreign Investor |
 |
- |
- |
- |
 |
 |
 |
- |
- |
Sub-total (B)(1):- |
 |
- |
- |
- |
 |
⢠|
- |
- |
- |
Â
Category of Shareholders |
No. of Preference shares held at the beginning of the year |
No. of Preference shares held at the end of the year |
% change during the year |
||||||
Demat |
Physical |
Total |
% of Total Preference shares |
Demat |
Physical |
Total |
% of Total Preference shares |
||
2. Non-Institutions |
 |
 |
 |
 |
 |
 |
 |
 |
 |
a) Bodies Corp. |
 |
 |
 |
 |
 |
 |
 |
 |
 |
i) Indian |
898,000,000 |
 |
898,000,000 |
89.80 |
889,735,000 |
 |
889,735,000 |
88.97 |
-0.83 |
ii) Overseas |
- |
- |
 |
 |
 |
- |
- |
 |
 |
b) Individuals |
 |
 |
 |
 |
 |
 |
 |
 |
 |
i) Individual shareholders holding nominal share capital upto Rs 1 lakh |
 |
 |
 |
 |
 |
 |
 |
 |
 |
ii) Individual shareholders holding nominal share capital in excess of Rs 1 lakh |
102,000,000 |
 |
102,000,000 |
10.20 |
109,065,000 |
 |
109,065,000 |
10.91 |
0.71 |
c) Others (specify) |
 |
 |
 |
 |
 |
 |
 |
 |
 |
HUF |
- |
- |
 |
 |
1,200,000 |
- |
1,200,000 |
0.12 |
0.12 |
Sub-total(B)(2):- |
1,000,000,000 |
- |
1,000,000,000 |
100.00 |
1,000,000,000 |
- |
1,000,000,000 |
100.00 |
0.00 |
Total Public Shareholding (B)=(B)(1)+(B)(2) |
1,000,000,000 |
- |
1,000,000,000 |
100.00 |
1,000,000,000 |
- |
1,000,000,000 |
100.00 |
0.00 |
C. Shares held by Custodian for GDRs & ADRs |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Grand Total (A+B+C) |
1,000,000,000 |
- |
1,000,000,000 |
100.00 |
1,000,000,000 |
- |
1,000,000,000 |
100.00 |
 |
(ii) Shareholding (Preference Shares) of Promoters - NIL
(iii) Change in Promoters' Shareholding (Preference Shares) (please specify, if there is no change) - NIL
(iv) Shareholding Pattern of top ten shareholders (Preference Shares) (other than Directors, Promoters and Holders of GDRs and ADRs)
SI no |
Name of the Shareholder |
Shareholding at the beginning of the year |
Increase/Decrease in Shareholding during the year |
Date of change |
Cumulative Shareholding during the year |
||||
 |
 |
No. of Preference shares |
% of total Preference shares of the company |
No. of Preference shares -Decrease |
No. of Preference shares -Increase |
Reason |
No. of Preference shares |
% of total Preference shares of the company |
|
1 |
Signet Chemical Corporation Private Limited |
 |
 |
 |
80,000,000 |
Allotment |
02/08/2018 |
80,000,000 |
8.00 |
 |
 |
 |
 |
 |
31/03/2019 |
80,000,000 |
8.00 |
||
2 |
Aditya Birla Finance Limited |
 |
 |
 |
70,000,000 |
Allotment |
02/08/2018 |
70,000,000 |
7.00 |
 |
 |
 |
 |
 |
31/03/2019 |
70,000,000 |
7.00 |
||
3 |
Tata Capital Financial Services Ltd. |
 |
 |
 |
70,000,000 |
Allotment |
02/08/2018 |
70,000,000 |
7.00 |
 |
 |
 |
 |
 |
31/03/2019 |
70,000,000 |
7.00 |
||
4 |
ICICI Lombard General Insurance Company Ltd. |
 |
 |
 |
66,000,000 |
Allotment |
02/08/2018 |
66,000,000 |
6.60 |
 |
 |
 |
 |
 |
31/03/2019 |
66,000,000 |
6.60 |
||
5 |
Bajaj Allianz General Insurance Company Limited-Policyholder Fund |
 |
 |
 |
66,000,000 |
Allotment |
02/08/2018 |
66,000,000 |
6.60 |
 |
 |
 |
 |
 |
31/03/2019 |
66,000,000 |
6.60 |
||
6 |
L and T Finance Limited |
 |
 |
 |
50,000,000 |
Allotment |
02/08/2018 |
50,000,000 |
5.00 |
 |
 |
 |
 |
 |
31/03/2019 |
50,000,000 |
5.00 |
||
7 |
Denali Finance Private Limited |
 |
 |
 |
40,000,000 |
Allotment |
02/08/2018 |
40,000,000 |
4.00 |
 |
 |
 |
 |
 |
31/03/2019 |
40,000,000 |
4.00 |
||
8 |
Famy Care Ltd. |
 |
 |
 |
30,000,000 |
Allotment |
02/08/2018 |
30,000,000 |
3.00 |
 |
 |
 |
 |
 |
31/03/2019 |
30,000,000 |
3.00 |
||
9 |
Star Line Leasing Ltd. |
 |
 |
 |
30,000,000 |
Allotment |
02/08/2018 |
30,000,000 |
3.00 |
 |
 |
 |
 |
 |
31/03/2019 |
30,000,000 |
3.00 |
||
10 |
Pidilite Industries Limited |
 |
 |
 |
30,000,000 |
Allotment |
02/08/2018 |
30,000,000 |
3.00 |
 |
 |
 |
 |
 |
31/03/2019 |
30,000,000 |
3.00 |
Note:
Top ten shareholders (on basis of PAN numbers) of the Bank as on 31st March 2019 has been considered for the above disclosure.
V. INDEBTEDNESS
Indebtedness of the Company including interest outstanding/accrued but not due for payment
(Rs in crore)
Particulars |
Secured Loans excluding deposits |
Unsecured Loans @ |
Deposits @@ |
Total Indebtedness |
Indebtedness at the beginning of the financial year |
 |
 |
 |
 |
i) Principal Amount |
NIL |
25,154.15 |
1,92,643.27 |
2,17,797.42 |
ii) Interest due but not paid |
NIL |
NIL |
NIL |
NIL |
iii) Interest accrued but not due |
NIL |
157.17 |
713.83 |
871.00 |
Total (i+ii+iii) |
NIL |
25,311.32 |
1,93,357.10 |
2,18,668.42 |
Change in Indebtedness during the financial year |
 |
 |
 |
 |
Addition |
 |
 |
 |
 |
Reduction |
 |
 |
 |
 |
Net Change |
NIL |
7,256.57 |
33,376.42 |
40,632.99 |
Indebtedness at the end of the financial year |
 |
 |
 |
 |
i) Principal Amount |
NIL |
32,248.07 |
2,25,880.36 |
2,58,128.44 |
ii) Interest due but not paid |
NIL |
NIL |
NIL |
NIL |
iii) Interest accrued but not due |
NIL |
319.82 |
853.16 |
1,172.98 |
Total (i+ii+iii) |
NIL |
32,567.89 |
2,26,733.52 |
2,59,301.41 |
& Unsecured Loans represent Borrowings made by the Bank from RBI, banks& other financial institutions (including those raised by way of Infrastructure bonds, Tier II Bonds & Upper Tier II Bonds)
@@ Deposits represent Deposits raised by the Bank under the Banking Regulation Act, 1949.
VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
A. Remuneration to Managing Director, Whole-time Directors and/or Manager:
(Rs. in lakh)
SI. no. |
Particulars of Remuneration |
Name of MD/WTD/Manager |
Total Amount |
|
Mr. Uday Kotak (MD) |
Mr. Dipak Gupta (WTD designated as Joint MD) |
|||
1. |
Gross salary * |
 |
 |
 |
(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961 |
324.55 |
323.58 |
648.13 |
|
(b) Value of perquisites u/s 17(2) Income-tax Act, 1961® |
0.40 |
633.61 |
634.01 |
|
(c) Profits in lieu of salary under section 17(3) Income- tax Act, 1961 |
 |
 |
 |
|
2. |
Stock Option |
- |
Cost included in 1(b) above |
 |
3. |
Sweat Equity |
- |
- |
- |
4. |
Commission |
 |
- |
- |
- as % of profit |
 |
 |
 |
|
- Others, specify... |
 |
 |
 |
|
5. |
Others, please specify |
- |
- |
- |
 |
Total (A) |
324.95 |
957.19 |
1282.14 |
 |
Ceiling as per the Act ** |
 |
 |
 |
Notes:
© The perquisite value towards stock options is the difference between exercise price and market price on the date of exercise. The same is not paid by the Bank, amounted to Nil for Mr. Uday Kotak and Rs 633.21 lakh for Mr. Dipak Gupta.
* Gross salary includes Basic salary, Drivers Allowance, Professional Allowance, Reimbursement of Medical expenses, Leave Travel Allowance and Annual Incentives.
** Remuneration of Directors of the Bank is governed by Section 35-B of the Banking Regulation Act, 1949.
B. Remuneration to other directors
(Rs in Lakh)
SI. no. |
Particulars of Remuneration |
Name of Directors |
Total Amount |
|||||
1 |
Independent Directors |
Mr. Amit Desai @ |
Prof. S. Mahendra Dev |
Mr. Prakash Apte@ |
Ms. Farida Khambata |
Mr. Uday Khanna |
Mr. Uday Shankar© |
 |
Fee for attending board/ committee meetings |
12.00 |
18.40 |
19.40 |
7.40 |
13.00 |
- |
70.20 |
|
Commission ** |
8.00 |
10.00 |
10.00 |
8.00 |
10.00 |
- |
46.00 |
|
Others - Remuneration @@ |
 |
 |
17.47 |
 |
 |
 |
17.47 |
|
Total (1) |
20.00 |
28.40 |
46.87 |
15.40 |
23.00 |
- |
133.67 |
|
2 |
Other Non-Executive Directors |
Dr. Shankar Acharya @ |
Mr. Mark Newman # @ |
Mr. C. Jayaram @ |
 |
 |
 |
 |
Fee for attending board/ committee meetings |
4.60 |
- |
11.80 |
 |
 |
 |
16.40 |
|
Commission ** |
 |
 |
10.00 |
 |
 |
 |
10.00 |
|
Others - Remuneration @@ |
9.03 |
 |
 |
 |
 |
 |
9.03 |
|
Total (2) |
13.63 |
- |
21.80 |
 |
 |
 |
35.43 |
|
Total(B)=(1+2) |
 |
 |
 |
 |
 |
 |
169.10 |
|
 |
Total Managerial Remuneration |
 |
 |
 |
 |
 |
 |
 |
 |
Overall Ceiling as per the Act * |
 |
 |
 |
 |
 |
 |
 |
Notes:
* Remuneration of Directors of the Bank is governed by Section 35-B of the Banking Regulation Act, 1949.
** Commission pertaining to FY2017-18paid during FY2018-19.
# Mr. Mark Newman has waived off the sitting fees & commission payable to him.
@ Dr. Shankar Acharya, Non-Executive Chairman, retired by rotation as a Director at the last Annual General Meeting of the [lank held on 19h July, 2018 and did not seek re-appointment as he completed 70 years of age.
Mr. Prakash Apte appointed as a Non-Executive Chairman w.e.f. 20th July, 2018 & re-appointed as an Independent Director w.e.f. 18th March, 2019. Mr. Mark Newman resigned as a Non-Executive Non-Independent Director w.e.f. 22nd February, 2019. Mr. Uday Shankar appointed as an Independent Director w.e.f. 16th March, 2019. Mr. Amit Desai ceasedto be a Director w.e.f. 17th March, 2019. @@ The Non-Executive Chairman in addition to the sitting fees for attending meetings gets a remuneration approved by the shareholders & Reserve Bank of India.
C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD
(Rs. in Lakh)
SI. no. |
Particulars of Remuneration |
Key Managerial Personnel |
||
Company Secretary |
CFO |
Total Amount |
||
1. |
Gross salary * |
 |
 |
 |
(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961 |
97.60 |
424.81 |
522.41 |
|
(b) Value of perquisites u/s 17(2) Income-tax Act, 1961 |
12.54 |
273.72 |
286.26 |
|
(c) Profits in lieu of salary under section 17(3) Income-tax Act, 1961 |
 |
 |
 |
|
2. |
Stock Option @ |
Cost included in 1(b) above |
||
3. |
Sweat Equity |
 |
 |
 |
4. |
Commission |
- |
- |
- |
 |
as % of profit |
 |
 |
 |
 |
others, specify... |
 |
 |
 |
5. |
Others, please specify |
- |
- |
- |
 |
Total |
110.14 |
698.53 |
808.67 |
Notes:
& The perquisite value towards stock options is the difference between exercise price and market price on the date of exercise. The same is not paid by the Bank, amounted to Rs12.22 lakh for Company Secretary and Rs 273.44 lakh for CFO.
* Gross salary includes Basic salary, House Rent Allowance, Professional Allowance, Reimbursement of Medical expenses, Leave Travel Allowance, Annual Incentives and cost towards Stock Appreciation Rights.
VII. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:
Type |
 |
Section of the Companies Act |
Brief Description |
Details of Penalty / Punishment / Compounding fees imposed |
Authority [RD / NCLT / COURT] |
Appeal made, if any (give Details) |
A. |
COMPANY |
 |
 |
NIL |
 |
 |
Penalty |
 |
 |
 |
 |
 |
|
Punishment |
 |
 |
 |
 |
 |
|
Compounding |
 |
 |
 |
 |
 |
|
B. |
DIRECTORS |
 |
 |
NIL |
 |
 |
Penalty |
 |
 |
 |
 |
 |
|
Punishment |
 |
 |
 |
 |
 |
|
Compounding |
 |
 |
 |
 |
 |
|
C. |
OTHER OFFICERS IN DEFAULT |
 |
 |
NIL |
 |
 |
Penalty |
 |
 |
 |
 |
 |
|
Punishment |
 |
 |
 |
 |
 |
|
Compounding |
 |
 |
 |
 |
 |
Secretarial Audit Report
ANNEXURE- B
FORM NO. MR-3
FOR THE FINANCIAL YEAR ENDED 31ST MARCH 2019
[Pursuant to Section 204(1) of the Companies Act, 2013 and Rule No. 9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014]
To,
The Members,
KOTAK MAHINDRA BANK LIMITED.
I have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by KOTAK MAHINDRA BANK LIMITED (hereinafter called the "Bank").
Secretarial Audit was conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing my opinion thereon.
Based on my verification of the Bank's books, papers, minute books, forms and returns filed and other records maintained by the Bank and also the information provided by the Bank, its officers, agents and authorized representatives during the conduct of secretarial audit, I hereby report that in my opinion, the Bank has, during the audit period covering the financial year ended on 31st March 2019, complied with the statutory provisions listed hereunder and also that the Bank has proper Board-processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter.
I have examined the books, papers, minute books, forms and returns filed and other records maintained by Bank for the financial year ended on 31st March 2019, according to the provisions of, as may be applicable:
(i) The Companies Act, 2013 (the Act) and the Rules made thereunder;
(ii) The Securities Contracts (Regulation) Act, 1956 ('SCRA') and the rules made thereunder;
(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;
(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowing;
(v) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
(vi) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;
(vii) The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 201 5;
(viii) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 ('SEBI Act') to the extent applicable:-
(a) The Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993;
(b) The Securities and Exchange Board of India (Bankers to an issue) Regulations, 1994;
(c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 ;
(d) The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.
(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
(f) The Securities and Exchange Board of India (Registrars to an issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;
(g) The Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992;
(h) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009;
(i) The Securities and Exchange Board of India (Buyback of Securities) Regulations, 1998 and The Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018;
(j) The Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 and SEBI (Depositories and Participants) Regulations, 2018;
(ix) Laws specifically applicable to the industry to which the Company belongs:
(a) The Banking Regulation Act, 1949;
(b) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (x) Other laws to the extent applicable to the Company as per the representations made by the Company;
I have also examined compliance with the applicable clauses of the following:
(i) Secretarial Standards issued pursuant to section 118(10) of the Act, by The Institute of Company Secretaries of India.
During the period under review the Bank has complied with the above Secretarial Standards issued by The Institute of Company Secretaries of India.
During the period under review the Bank has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above.
I further report that
The Board of Directors of the Bank is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.
Adequate notice is generally given to all directors to schedule the Board and Committee Meetings, agenda and detailed notes on agenda were sent at least 7 days in advance except in one case of Board Meeting and one case each of Nomination & Remuneration Committee Meeting & Corporate Social Responsibility Committee Meeting which were held at a short notice to transact urgent business, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.
Decisions at the meetings of the Board of Directors of the Bank were carried out unanimously. There were no dissenting views by any member of the Board of Directors during the period under review.
I further report that there are adequate systems and processes in the Bank commensurate with the size and operations of the Bank to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.
I further report that during the audit period:
1. A Special Resolution was passed at the Annual General Meeting of the Bank held on 19th July, 2018 by the Members approving appointment of Mr. Prakash Apte as part time Chairman of the Bank.
2. An Ordinary Resolution was passed at the Annual General Meeting of the Bank held on 19th July, 2018 by the Members pursuant to Section 61 of the Companies Act, 2013 for approval of increase in Authorized Share Capital from the present Rs.1 500,00,00,000 (Rupees Fifteen Hundred Crore Only) consisting of 300,00,00,000 (Three Hundred Crore) equity shares of Rs.5 (Rupees Five Only) each to Rs 1900,00,00,000 (Rupees One Thousand Nine Hundred Crore Only) divided into 280,00,00,000 (Two Hundred Eighty Crore) equity shares of Rs 5 (Rupees Five Only) each and 100,00,00,000 (One Hundred Crore) preference shares of Rs 5 (Rupees Five Only) each.
3. A Special Resolution was passed at the Annual General Meeting of the Bank held on 19th July, 2018 to alter Articles of Association of the Bank.
4. A Special Resolution was passed at the Annual General Meeting of the Bank held on 19th July, 2018 by the Members pursuant to Section 42 of the Companies Act, 2013 for approving issue of unsecured non-convertible debentures/bonds, in Indian/foreign currencies in the domestic and/or overseas markets for an amount up to Rs. 5,000 crore (Rupees Five Thousand Crore Only) on a private placement basis in one or more tranches and series.
5. A Special Resolution was passed at the Annual General Meeting of the Bank held on 19th July, 2018 by the members pursuant to Section 42 of the Companies Act,2013 for approving issue of Non-Convertible Preference Shares (hereinafter referred to as "NCPS") upto Rs 500 crore, on a private placement basis in one or more tranches and series.
6. The Bank has filed a writ petition with the Hon'ble Bombay High Court against the Reserve Bank of India (RBI) with respect to their requirement of bringing down the promoter shareholding.
 |
Rupal Dhiren Jhaveri |
 |
FCS No.: 5441 |
 |
Certificate of Practice No.: 4225 |
Place: Mumbai |
 |
Date: 26th April 2019 |
 |
This report is to be read with my letter of even date which is annexed as Annexure A and forms an integral part of this report.
To,
The Members,
KOTAK MAHINDRA BANK LIMITED
My report of even date is to be read along with this letter.
Annexure A
1. Maintenance of secretarial record is the responsibility of the management of the Bank. My responsibility is to express an opinion on these secretarial records based on my audit.
2. I have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in secretarial records. I believe that the processes and practices, I followed provide a reasonable basis for our opinion.
3. I have not verified the correctness and appropriateness of financial records and Books of Accounts of the Bank.
4. Where ever required, I have obtained the Management representation about the compliance of laws, rules and regulations and happening of events etc.
5. The compliance of the provisions of corporate and other applicable laws, rules, regulations, standards is the responsibility of management. My examination was limited to the verification of procedures on test basis.
6. The Secretarial Audit report is neither an assurance as to the future viability of the Bank nor of the efficacy or effectiveness with which the management has conducted the affairs of the Bank.
 |
Rupal Dhiren Jhaveri |
 |
PCS No.: 5441 |
 |
Certificate of Practice No.: 4225 |
Place : Mumbai |
 |
Date : 26th April 2019 |
 |
Secretarial Audit Report
FORM NO. MR-3 FOR THE FINANCIAL YEAR ENDED 31ST MARCH 2019
[Pursuant to section 204(1) of the Companies Act, 2013 and Rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]
To,
The Members,
KOTAK MAHINDRA LIFE INSURANCE COMPANY LIMITED
(Formerly known as Kotak Mahindra Old Mutual Life Insurance Limited)
I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Kotak Mahindra Life Insurance Company Limited, Formerly known as Kotak Mahindra Old Mutual Life Insurance Limited (hereinafter called the "Company"). Secretarial Audit was conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts / statutory compliances and expressing my opinion thereon.
Based on my verification of the Company's books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorised representatives during the conduct of Secretarial Audit, I hereby report that in my opinion, the Company has, during the audit period covering the financial year ended on March 31, 2019 ('Audit period') complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:
I have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on March 31, 2019 according to the provisions of:
(i) The Companies Act, 2013 (the Act) and the rules made thereunder;
(ii) The Securities Contracts (Regulation) Act, 1956 ('SCRA') and the rules made there under;
(iii) The Depositories Act, 1996 and the Regulations and Bye- Laws framed there under;
(iv) Foreign Exchange Management Act, 1999 ('FEMA') and the Rules and Regulations made thereunder to the extent of Foreign Direct Investment, overseas Direct Investment and External Commercial Borrowings: There was no overseas Direct Investment made or External Commercial Borrowings during the year.
(v) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
(vi) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;
(vii) The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
(viii) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 were not applicable to the Company during the Audit Period as the Company is not a listed entity:
(a) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018;
(b) The Securities and Exchange Board of India (Share Based Employee Benefit) Regulations, 2014;
(c) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;
(d) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;
(e) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009;
(f) The Securities and Exchange Board of India (Buy-back of Securities) Regulations, 1998 and The Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018; and
(ix) The Company, being a Life Insurance Company, has complied with the Insurance Act, 1938 and Regulations, Guidelines and Directions issued by the Insurance Regulatory & Development Authority of India (IRDAI). The company has its own robust compliance system and the Company is also subject to monitoring by and reporting of compliances to IRDAI.
(x) Other laws to the extent applicable to the Company as per the representations made by the Company;
I have also examined compliance with the applicable clauses of the following:
(i) Secretarial Standards issued pursuant to section 118(10) of the Act, by The Institute of Company Secretaries of India.
During the period under review the Company has generally complied with the above mentioned Secretarial Standards issued by The Institute of Company Secretaries of India.
During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards etc. mentioned above.
I further report that
The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.
Adequate notice is given to all directors to schedule the Board and Committee Meetings, agenda and detailed notes on agenda were sent at least 7 days in advance and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.
Majority decision is carried through while the dissenting members' views, if any, are captured and recorded as part of the minutes.
I further report that there are adequate systems and processes in the company commensurate with the size and operations of the company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.
I further report that during the audit period in my opinion, there are no specific events/actions having a major bearing on the Company's affairs in pursuance of the above referred laws, rules regulations, guidelines, standards, etc. referred to above.
 |
Rupal Dhiren Jhaveri |
 |
FCS No.: 5441 |
 |
Certificate of Practice No.: 4225 |
Place: Mumbai |
 |
Date: 16th April 2019 |
 |
This report is to be read with my letter of even date which is annexed as Annexure A and forms an integral part of this report.
To,
The Members,
KOTAK MAHINDRA LIFE INSURANCE COMPANY LIMITED
(Formerly known as Kotak Mahindra Old Mutual Life Insurance Limited)
My report of even date is to be read along with this letter.
Annexure A
1. Maintenance of secretarial record is the responsibility of the management of the company. My responsibility is to express an opinion on these secretarial records based on the audit.
2. I have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in secretarial records. I believe that the processes and practices, I followed provide a reasonable basis for my opinion.
3. I have not verified the correctness and appropriateness of financial records and Books of Accounts of the company.
4. Where ever required, I have obtained the Management representation about the compliance of laws, rules and regulations and happening of events, etc.
5. The compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. My examination was limited to the verification of procedures on test basis.
6. The Secretarial Audit report is neither an assurance as to the future viability of the company nor of the efficacy or effectiveness with which the management has conducted the affairs of the company.
 |
Rupal Dhiren Jhaveri |
 |
PCS No.: 5441 |
 |
Certificate of Practice No.: 4225 |
Place : Mumbai |
 |
Date : 16th April 2019 |
 |
ANNEXURE-C
Details of CSR activities and expenditure U/S 135 of The Companies Act, 2013
CSR project/ activity identified |
Sector in which the project is covered |
Area of project implementation (Name of the District/s. State / s where project / programme was undertaken) |
Programme / project wise outlay (budgeted) amount (Rs Lakh) |
Programme / project wise actual spend during the year - Direct expenditures (Rs Lakh) |
Programme / project wise actual spend during the year -Overheads (Rs Lakh) |
Cumulative Expenditure upto reporting period (Since FY 2014-15) (Rs Lakh) |
Amount spent: Direct or Through implementing agency (Rs Lakh) |
Promoting education |
Education |
Pan India |
2,013.29 |
1,372.69 |
175.36 |
7,697.81 (Out of Rs 2,013.29 Lakh, the NGOs did not utilise Rs 465.25 Lakh. This will be utilised for meeting the requirements for FY 2019-20) |
Implementing Agencies -2,013.29 |
Promoting livelihood |
Vocational Skills and Livelihood |
Pan India |
338.70 |
177.21 |
13.80 |
493.70 (Out of Rs. 338.70 Lakh, the NGOs did not utilise Rs 147.69 Lakh. This will be utilised for meeting the requirements for FY 2019-20) |
Implementing Agencies -338.70 |
Promoting healthcare |
Healthcare |
Pan India |
403.57 |
166.10 |
15.69 |
1,265.28 (Out of Rs 403.57 Lakh, the NGOs did not utilise Rs 221.78 Lakh. This will be utilised for meeting the requirements for FY 2019-20) |
Implementing Agencies -403.70 |
Relief and Rehabilitation |
Relief and Rehabilitation |
Kerala |
505.00 |
504.35 |
0.65 |
599.98 |
Implementing Agencies -505.00 |
Promoting Sports |
Sports |
Pan India |
115.00 |
90.94 |
0.71 |
270.00 (Out of Rs 115.00 Lakh, the NGOs did not utilise Rs 23.35 Lakh. This will be utilised for meeting the requirements for FY 2019-20) |
Implementing Agencies -115.00 |
Reducing Economic and Gender Inequality |
Reducing Inequalities |
Assam, Meghalaya, UP, Gujarat |
12.00 |
11.34 |
0.66 |
26.25 |
Implementing Agency- 12.00 |
Environment Sustainability |
Sustainable Development |
Pan India |
267.00 |
243.00 |
NIL |
483.52 (Out of Rs 267.00 Lakh the NGO did not utilise Rs 24.00 Lakh. This will be utilised towards meeting the requirements of FY 2019-20) |
Implementing Agency- 24.00 Direct Implementation -243.00 |
TOTAL CSR SPEND U/S 135 OF THE COMPANIES ACT, 2013, DURING FY 2018-19 3,654.56
Though the Bank is eligible to consider upto 5% of the total CSR spend as administrative expenditure towards building its CSR capacities, etc, the Bank has taken a call not to consider it as a part of its CSR spend for FY 2018-19.
NGO Partners for Bank's CSR Programme on Education: Kotak Education Foundation, Om Creations Trust, IT for Change, IIMPACT, DEEDS Public Charitable Trust, SOPAN, Action for Ability Development and Inclusion (AADI), VISHWAS Vision For Health Welfare and Special Needs, National Society for Clean Cities - India, Bandhan Konnagar, Haripada Ghosh Foundation, Blind Welfare Organisation Nashik, Pearl Special Needs Foundation, Dayanand Anglo Vedic College Trust And Management Society, National Centre For Performing Arts (NCPA), Sampark Foundation, Sarva Vidyalaya Kelavani Mandal, The Prabhakar Bantwal Foundation, Samarpan Foundation, Ramkrishna Sarada Mission Matri Bhavan, Dharamsinh Desai Foundation
NGO Partners for Bank's CSR Programme on Vocational Skills and Livelihood: Pratham Education Foundation, Bandhan Konnagar, Youth4Jobs Foundation, Head Held High Foundation, N M Sadguru Water and Development Foundation.
NGO Partners for Bank's CSR Programme on Healthcare: Lata Mangeshkar Medical Foundation, Association of Parents of Mentally Retarded Children (APMRC), KARO Trust, Vision Foundation of India, Cankid Kidscan, Tata Memorial Centre, CanSupport, OCA Foundation, Society for the Rehabilitation of Crippled Children, Dayanand Anglo Vedic College Trust And Management Society, Wockhardt Foundation, The Ganga Trust, Cancer Patients Aids Association (CPAA), The Indian Council For Mental Health (ICMH)
NGO Partners for Bank's CSR Programme on Sports: Foundation of Promotion of Sports and Games (Olympic Gold Quest), JSW Foundation, Pullela Gopichand Badminton Foundation
NGO Partners for Bank's CSR Programme on Reducing Inequalities: Mahila Sewa Trust
NGO Partners for Bank's CSR Programme on Relief and Rehabilitation: The Ganga Trust, Chief Minister's Distress Relief Fund - Kerala
NGO Partners for Bank's CSR Programme on Environmental Sustainability: Gram Gaurav Pratishthan
Details of CSR Programmes with our implementing partners is available in the Bank's Business Responsibility Report FY 2018-19.Â
Mar 31, 2018
Directors'' Report
To the Members of
KOTAK MAHINDRA BANK LIMITED
The Directors present their Thirty-third Annual Report together with the audited accounts of your Bank for the year ended 31st March, 2018. FINANCIAL HIGHLIGHTS
(A) Kotak Mahindra Bank Limited - Consolidated financial highlights:
31st March, 2018 |
31st March, 2017 |
|
Rs, in crore |
Rs, in crore |
|
Total income |
38,813.31 |
33,983.77 |
Total expenditure, excluding provisions and contingencies |
28,630.34 |
25,702.92 |
Operating Profit |
10,182.97 |
8,280.85 |
Provisions and contingencies, excluding provision for tax |
1,024.74 |
948.92 |
Profit before tax |
9,158.23 |
7,331.93 |
Provision for taxes |
3,011.09 |
2,382.85 |
Profit after tax |
6,147.14 |
4,949.08 |
Less: Share of minority interest |
56.68 |
78.83 |
Add: Share in profit of Associates |
110.51 |
70.18 |
Consolidated profit for the Group |
6,200.97 |
4,940.43 |
Earnings per Equity Share: |
||
Basic ('' |
32.70 |
26.89 |
Diluted ('' |
32.66 |
26.86 |
(B) Kotak Mahindra Bank Limited - Standalone financial highlights:
31st March, 2018 |
31st March, 2017 |
|
Rs, in crore |
Rs, in crore |
|
Total Income |
23,800.70 |
21,176.09 |
Total expenditure, excluding provisions and contingencies |
16,642.53 |
15,191.28 |
Operating Profit |
7,158.17 |
5,984.81 |
Provisions and contingencies, excluding tax provisions |
939.95 |
836.74 |
Profit before tax |
6,218.22 |
5,148.07 |
Provision for taxes |
2,133.92 |
1,736.57 |
Profit after tax |
4,084.30 |
3,411.50 |
Add: Surplus brought forward from the previous year |
10,756.29 |
8,214.12 |
Amount available for appropriation |
14,840.59 |
11,625.62 |
Appropriations: |
||
Statutory Reserve under Section 17 of the Banking Regulation Act, 1949 |
1,021.08 |
852.88 |
Transfer to / (from) Investment Reserve Account |
- |
(48.49) |
Transfer to Capital Reserve |
24.00 |
10.55 |
Transfer to Special Reserve |
55.00 |
55.00 |
Dividend / Proposed Dividend |
114.211 |
0.07* |
Corporate Dividend Tax |
21.70** |
(0.68)* |
Surplus carried to Balance Sheet |
13,604.60 |
10,756.29 |
* 4s per the requirements of pre-revised 45 4 - ''Contingencies and Events Occurring after the balance sheet date'' the Bank used to create a liability for dividend proposed / declared after the balance sheet date if dividend related to periods covered by the financial statements. 4s per 45 4 (Revised), with effect from 4pril 2016, the Bank is not required to provide for dividend proposed / declared after the balance sheet date.
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs, 0.70 per equity share (previous year Rs, 0.60 per equity share) for the year ended 31st March, 2018. This would entail a payout of Rs, 160.07 crore including dividend distribution tax based on the number of shares as at 31st March, 2018. The dividend would be paid to all the shareholders, whose names appear on the Register of members / beneficial holders list on the book closure date.
Pursuant to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, 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 viz. URL:https://www.kotak.com/en/investor-relations/governance/policies.html
CAPITAL
During the year, your Bank has issued and allotted 62,000,000 equity shares of face value of Rs, 5 each at an issue price of Rs, 936 per equity share by way of Qualified Institutions Placement thereby raising Rs, 58,032 million. Your Bank has also allotted 2,750,629 equity shares arising out of the exercise of Employees Stock Options granted to the employees and whole-time directors of your Bank and its subsidiaries.
Post allotment of equity shares as aforesaid, the issued, subscribed and paid-up share capital of the Bank stands at Rs, 9,528,242,530 comprising of 1,905,648,506 equity shares of Rs, 5 each as on 31st March, 2018.
Your Bank has a Capital Adequacy Ratio (''CAR'') under Basel III as at 31st March, 2018 of 18.22% with Tier I being 17.56%.
During the year, your Bank has not issued any capital under Tier II. As on 31st March, 2018, outstanding Unsecured, Redeemable NonConvertible, Subordinated Debt Bonds were Rs, 701.80 crore and outstanding Unsecured, Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II stood at Rs, 225.10 crore.
The Board of Directors of the Bank at its meeting held on 19th May, 2018, subject to the approval of the shareholders and any statutory/ regulatory approvals as may be necessary, has approved (i) raising of funds by way of non-convertible debentures/bonds for an amount not exceeding Rs, 5000 crore and by way of non-convertible preference shares for an amount not exceeding Rs, 500 crore and (ii) alteration and increase in the authorized share capital of the Bank and consequent amendment to the Memorandum and Articles of Association of the Bank. Approval of the shareholders in this regard is being sought at the ensuing Annual General Meeting of the Bank.
OPERATIONS
Consumer Banking
Your Bank, services a customer base in excess of 13 million customers covering a wide spectrum across domestic individual and households, non-residents, small and medium business segments for a range of products from basic savings & checking accounts to term deposits, credit cards, unsecured and secured loans, working capital and distribution of investment products.
The Bank continued its strategy of calibrated expansion of its branch network. As of 31st March, 2018 the Bank had 1388 branches and 2199 ATMs, covering 724 locations. Of the 27 new branches commissioned this year, 15 were in metro and 12 were in urban locations. 8 branches related to rural and semi urban locations were closed during the year. Aided partly by 811, your Bank saw fast paced customer acquisition across all core banking products including savings and checking accounts, term deposits, overdrafts and non-resident accounts. Bank has also set up 5 E-Lobbies to enable convenience banking for customers. The Bank also relocated 72 branches across metro and semi urban locations to give easier access and higher convenience to its customers.
Your Bank rolled out several initiatives aimed at offering a superior and differentiated customer experience. Launched in March 2017, the 811 bank account has been a strong savings account acquisition engine for the Bank. The quick, seamless and technology driven on-boarding experience of 811 has been widely appreciated by customers and Industry bodies. In 2018, the Bank launched its Merchant Acquiring business entailing the launch of Point of Sale (POS) terminals and Bharat QR products. Under this business, the Bank has installed 7262 POS terminals and 2160 Bharat QR decals (QR stickers), thereby facilitating 28.4 lakh transactions. Some initiatives around Current Account and Business Banking include launch of a scan based account opening and customer onboarding process which has enabled a sharp reduction in processing time launch of an insta-kit & biometric based Current Account for Individuals. An online instant National Pension System (NPS) account opening for the Bank''s customers was also launched thereby achieving a completely paperless process for NPS account opening for individual & corporate customers.
Under the Bank''s Non Resident Indian (NRI) Business an online outward remittance platform for NRI customers was enabled thereby facilitating NRI customers to remit money abroad to most of the overseas countries completely online. Engagement with the sea farer community was strengthened further with the Bank tying up with the sea farer community app, ''Offing'' and through setting up of exclusive account for the sea farers, which addresses some of their key requirements. The process for providing solutions to NRI customers on their concerns was further simplified. FCNR deposits in Australian Dollar (AUD) was re-introduced to provide NRI clients an additional foreign currency for booking their deposits along with US Dollars, British Pound, EURO & Japanese Yen currencies that the Bank already offered FCNR deposits.
Under the Priority Banking Business, key initiatives includes the launch of a revamped Privy League program (across all 3 tiers viz. Prima, Optima and Insignia) to ensure better customer coverage and service. Now all branches of your Bank can source and manage Privy League customers. Further, to ensure higher levels of customer service, the Bank''s existing Relationship Value (RV) construct was simplified and upgrade process between various tiers was made simpler.
Under the Corporate salary business an Aadhaar assisted, biometric based customer on-boarding platform was introduced to reduce customer on-boarding time and significantly enhance customer experience. This roll out helped in reducing the turnaround time for customer on boarding to under 60 minutes. Last year''s initiative around Premier Acquisition model helped consolidate the Bank''s market share in this segment with 500 new corporate having signed up in this fiscal.
Your Bank has continued to grow the product lines under the Consumer Assets business. It launched ''Superfast Home Loans'' for salaried customers - which enables a sanction within four hours, thereby redefining customer experience. Launched in December 2017, these Superfast Home Loans have resulted in a 150% increase in the number of Salaried Home Loan disbursals in Q4 of FY18 as compared to the same period in FY17. The existing online platform for instant loans for salaried & self-employed customers was further strengthened. Salaried Personal Loans sourced through digital channels contributed 32% by value of the total value of Salaried Personal Loans disbursed in Q4FY18. The value of Salaried Personal Loans sourced through digital channels saw an increase of 168% Y-o-Y. Frictionless payment options for credit cards -Contactless Cards for Signature Cards, Samsung Pay and Bharat QR were launched. The total value of transactions routed through your Bank''s internet banking payment gateway in March 2018 saw a growth of 76% versus the value routed in March 2017. The business also launched Insta Credit for Working Capital Loans up to Rs, 1 crore thereby enabling instant decision basis various underwriting parameters. Such initiatives, launched under the Bank''s overall digital strategy, have facilitated superior growth rates across retail asset product lines.
Your Bank''s Home Loans & Loan Against Property business grew by 24% to Rs, 32,429 crore and the Small business, Personal Loans & Credit Cards business grew by 45% to Rs, 25,189 crore depicting a robust growth rate during the year under review.
Commercial Banking
The Commercial Banking business focuses on meeting the banking and financial needs of various customer segments with deeper coverage beyond metro and urban centers through an expanding network of branches and business correspondents. The business has specialized units which offer financial solutions in the areas of commercial vehicles, construction equipment, tractor, small and medium enterprises (SME), gold loans and agriculture business. It services the priority sector through providing finance for tractor, crop loans, small enterprises and allied agricultural activities thereby helping the Bank meet its financial inclusion goal. In line with growing rural incomes, your Bank''s Commercial Bank branches have experienced robust growth across product lines on both in savings and lending side. Post completion of integration with ING Vysya Bank, these Commercial Bank branches have stabilized and have started contributing towards your Bank''s growth in a significant manner.
Demonetization followed by GST roll-out had a temporary downward impact on the SME industry. However now, with GST stabilizing substantially, we are witnessing green shoots. Growth is returning to the sector. Your Bank''s SME portfolio has not been immune from the industry-wide experienced challenges, manifesting in a muted portfolio growth in FY 2018. There have been challenges with regards to stressed accounts as well. Your Bank continues to work pro-actively with the sector to resolve experienced challenges and be a preferred partner in the expected upcoming growth phase.
The Commercial Vehicle (CV), Construction Equipment (CE) and Tractor Finance businesses reported significant growth and continued to gain market share in their respective businesses. The Government spending in the infrastructure sector has led to a strong demand in the CE and CV industry. Good monsoon gave fillip to demand for tractor finance.
The Agriculture Financing business continued its focus on the agriculture value chain funding for various agro processing activities. It has registered good growth despite volatility and uncertainty in the commodities market.
Wholesale Banking
The Wholesale Banking business caters to the diverse needs of a wide range of corporate customer segments including major Indian corporate, conglomerates, financial institutions, public sector undertakings, multinational companies, mid-market companies and realty businesses. The business offers a comprehensive portfolio of products and services to these customers including working capital finance, medium term finance, trade finance, foreign exchange services, other transaction banking services, custody services, debt capital markets and treasury services.
The year has witnessed significant disruptions in the corporate banking space driven by high NPAs in the industry and tightening regulations. With more capital from banks, mutual funds and NBFCs chasing the high rated end of the corporate space, this space is witnessing high competition which in turn is pushing down yields for banks. The overall credit offtake in the economy has also been muted over the last couple of years. Despite these challenges, the Wholesale Banking business has been able to achieve growth in a healthy and profitable manner. Over the years, the Wholesale Banking business has been able to grow its market share and this has been achieved through higher customer acquisition, improved customer service and product innovations.
Your Bank has been as focused on adding new customers as increasing wallet share with existing customers. The last few years have seen a healthy addition of New-to-Bank customers across customer segments, which in turn sets a strong foundation for future growth in the business.
Robust risk management practices are in place and the Bank has achieved growth over the years without compromising the health of the book. At a time when most corporate banks in the industry are facing huge NPAs, your Bank has kept a tight control on asset slippages. This year, the Wholesale Banking division has had to take accelerated provisioning on a few legacy stressed cases due to regulatory changes and this has impacted profitability for the year. However, except for these few legacy cases, there has been very little addition to Gross NPAs from new cases in the last few years. This has been achieved through proactive rebalancing of the portfolio to reflect economic situations and reduction in exposure to situations with heightened risk. The focus on risk management has helped the business reduce its Risk Weighted Assets (RWA) over the past few years despite an increase in its exposure. The use of Risk Adjusted Return on Capital (RaRoC) pricing models has become ingrained in the way the Wholesale Banking division conducts its business and has helped to optimize pricing, better utilize capital and improve return on equity. Your Bank intends to carry this initiative forward and implement Economic Value Add (EVA) measurement models that will help the Bank monitor the true risk adjusted value being derived from each client. This will ensure greater focus on improving income mix in favour of non-asset income streams.
Integrated Corporate and Investment Banking (CIB) approach of the Bank towards certain top conglomerates and large corporate has helped it to deepen its presence with these clients and gain further market share. The CIB model has ramped up well and it has added more accounts to this CIB model this year. As a testimony to its success under the CIB initiative, it has been awarded the Best Domestic and Investment Bank in India by Asiamoney for the second consecutive year.
The strong momentum in the Integrated Global Transaction Banking Services (GTS) continues across its large suite of products. Current Account & Savings Account balances saw significant growth through innovative solutions and focused marketing efforts and early to launch products such as Smart Collect and Mibor Linked Savings Account. Trade funded book continued to show strong growth and maintained an average of over Rs, 10,000 crore this year. Bank''s Cash Management System (CMS) has won a number of awards this year including the Best Cash Management Bank in India by the Asian Banker and Asia Money. The decisive parameter for Cash Management is client satisfaction and the Bank has India''s highest net Client Satisfaction Rating of 39.8% as per Asiamoney Cash Management Poll - ahead of all its peers in the public and private sector. A separate drive to launch Smart Collect was set up which improved cash flow management and helped grow the Cash Management business significantly. The strong growth in GTS products has helped the Bank to partly compensate for the fall in spreads in its traditional lending business.
The year has also witnessed significant growth in the Custody business. Your Bank is today one of India''s largest domestic Custodians with Assets Under Custody (AUC) upwards of USD 27 billion and is strongly positioned in the India focused offshore funds space. It was earlier the first to extend a Real Time Online Platform for Derivatives Clearing with systems built specifically to cater to Indian capital market needs. This year, the Custody business has also gained significant traction in the Domestic Custody space. The Custody business has won a number of awards this year including being judged as the Category Outperformer - 2017 by the Global Custodian India and Emerging Markets Survey.
The dedicated Service Solutions vertical of the Bank has helped ensure faster customer response and improve customer experience. This vertical is the single point of contact for all service related and documentation issues with personnel present across the country. The Bank has been successful in significantly reducing Turn-Around-Time (TAT) across various processes including account opening and disbursals. Initiatives such as digitization and workflow automation have helped reduce TAT further.
Your Bank continues to target productivity and efficiency improvements by strengthening its organizational platform. This year too, it has implemented a number of initiatives towards this end including a formal exercise of client classification and key account plans. Workflows and Processes were redesigned for Ease of Business. There is greater focus on measuring and improving employee productivity including of its sales force through use of technology and digital tools. Given high focus in this area, costs have been kept well in control further improving profitability of the business.
It has undertaken a series of digital initiatives primarily focused on improving customer experience and positioning oneself as a ''digital-first'' organization. These digital initiatives encompass the entire gamut of transaction banking and include initiatives such as the Corporate Mobility Application, Retail Remittances through Earth port, Smart Collect, Direct Debit Online, Two Factor Authentication, GST Compliance Solution and Co-branded cards, to name a few. Furthermore, a few long term initiatives are in early stages of implementation which include an online trade portal, an integrated corporate portal, incorporation of the block chain based technology in foreign and domestic trade products and multiple digital initiatives being undertaken for various Government bodies.
Wealth Management
Wealth Management, your Bank''s private banking arm, acts as advisor to a number of distinguished Indian families as one of the oldest and the most respected Indian wealth management firms. Its customers range from entrepreneurs to business families and professionals. The business caters to around 40% of India''s top 100 families.
The Family Office service provides a strategic consolidated view on the client''s overall portfolio across multiple advisors, in addition to comprehensive financial solutions that go beyond investments. These include value added services such as assistance with Investment Structuring, Banking and Credit, Consolidated Reporting, Referral for Philanthropy Services and Concierge Services. The Trusteeship Services offers Estate Planning services helping clients with succession planning activities through creation of private trusts.
With an in-depth understanding of client requirements and expertise across various asset classes, the business offers the widest range of financial solutions through transaction-based investment approach and asset-advisory based approaches. It has built a formidable suite of products and services for high net worth individuals and offers the same through its Asset-Advisory model.
In addition, your Bank has also built a large Priority Banking business, assisting mass affluent customers with products and solutions developed to meet their financial requirements. The total relationship value across your Bank''s Wealth & Priority offerings is in excess of Rs, 225,000 crore.
The business has won several accolades & received recognition at various fora. It was awarded as the Best Private Bank, India at Euromoney Private Banking Survey 2018 and has also been consistently adjudged as the Best Private Bank through FinanceAsia for 7 years in a row.
Your Bank''s focus at the Wealth Management in the digital space includes some key initiatives such as the Wealth Smart Solutions app, which allows access to portfolios on the go. This also allows clients to complete their risk profiling, get their ideal asset allocation and also execute investments in Mutual Funds. This initiative of the Bank has the potential to become significantly bigger in the days to come.
International Business
The GIFT City Branch set up by your Bank in May 2016 is its first Branch in an International Financial Services Center Banking Unit (IBU). The Gift City Branch has helped the Bank to participate in syndication of overseas loans, lending to clients in international markets and providing External Commercial Borrowing (ECB) to eligible Indian corporates.
Asset Reconstruction
India faces a significant challenge on stressed loans. The new Insolvency and Bankruptcy Code aims to provide lenders like your Bank strong tools to aid in faster recovery and in retention of maximum value of the underlying assets in stress cases. The young law is continuously evolving and should see stability in the next few years.
During FY 2017-18, resolution of some large NPA''s of the country through the Insolvency and Bankruptcy Code process was seen.
Your Bank is also expecting a sizeable number of resolutions from the earlier acquired portfolios in the coming financial year.
The Division continues to focus on cash flow based last mile financing and acquiring stressed retail assets and expects significant traction. It is geared up to capitalize on any opportunities in the stressed asset space that may arise, as various lenders seek to off-load such stressed assets off their books.
Treasury
Your Bank''s treasury actively contributes to your Bank by way of:
- Proprietary Trading: The various proprietary trading desks actively trade in products such as Fixed Income, Money Markets, Derivatives, Foreign Exchange and Equity. Primary Dealer Desk - part of the proprietary trading desk, actively participates in the primary auctions of government securities, makes market in government securities and engages in retailing of government securities.
- Customer Transactions:
- Forex & Derivatives: Facilitating access to foreign currency markets through cash & derivatives products and providing fine market rates to clients for remittance and trade transactions.
- Bullion: Under License from Reserve Bank of India (RBI), Bank imports gold and silver to meet needs of customers. The bullion desk provides efficient working capital solutions to domestic Jewellery manufacturers as per prescribed rules of RBI.
- Balance Sheet Management: The Balance Sheet Management Unit (BMU) ensures maintenance of regulatory reserves and adequate liquidity buffers and also manages the Interest rate risk & Liquidity risk within the Risk appetite of the Bank.
Human Resources
FY 2017-18 has been a year of strengthening initiatives in the area of digital initiatives, employee engagement and learning.
With the talent base of the Bank reaching to 35,717 employees more and more millennial being on boarded the average age of the employee base has gone younger by a year at 32 years now. Your Bank has taken various initiatives to engage using digital and technology platforms. It has launched Mobile first app KLAPP for ensuring seamless learning on product and processes for employees. This has helped to ensure learning is not time bound and location bound at the same time employees have access to the information at the time of interaction with customers.
Your Bank has also embarked on the journey to facilitate learning needs for building future skills for mid to senior level employees. With the platform launched for on demand learning and byte size learning has enhanced the horizon for learning from behavioral and functional learning to developing skills for future career needs of the employees.
The focus on performance discussion has been enhanced by bringing in additional rigor on dialogue "Talk2Do" between managers and their teams for constructive performance discussions.
With the objective to identify, build and nurture leaders across levels to deliver superior business results and address individual career aspirations Bank continues to put efforts through various interventions of talent management and succession planning. Robust Talent Management framework has been put in practice for identification of critical roles in the organization and succession planning for these roles.
Technology & Digitization
This year, technologies were leveraged to deliver customer experience and business efficiency
Customer account opening experience was enhanced by the launch of the "digital native, downloadable" 811 account, which can be opened in 5 minutes. The 811 journey was further enriched, with a paperless credit card opening capability. By leveraging biometric technology, the entire process was made paperless and sales productivity was increased by 60%. Biometric account opening was then extended to corporate salary accounts and for onboarding individual current accounts.
Loan account processing was enriched with the launch of Instant personal loans, Superfast home loans and Instant business loans. For customers who prefer non-digital channels, a "Loan on Phone" capability was provided. A new mobile application was launched to facilitate the sales team''s customer interaction for credit card applications.
The Bank''s wealth management customers'' digital experience was enhanced with the initiation of ''Kotak Smart Solutions'' mobile application for portfolio viewing and management. A comprehensive content repository and sharing platform that enables SMS and WhatsApp based information sharing in real time was enabled.
Multiple digital payment methods were introduced for the Bank''s customers including Visa Paywave, Samsung Pay, Bharat QR, UPI, BBPS (Bharat Billpayment System), AEPS (Aadhaar Enabled Payment System) and FasTag - enabling more cashless payments and strong commitment to the country''s Digital India journey.
In addition to innovation in customer account opening and payments, this year saw a number of new technology foundations being laid down to facilitate state of the art capability for the future.
Modern responsive site technology, content management and website analytics have been implemented to facilitate the launch of a new customer centric web portal. Improved customer experience has been evident, in the 30% increased customer traffic on the website.
A foundation for Natural Language Processing (NLP) was laid down and enabled the launch of ''Keya'' the first Artificial Intelligence (AI) powered Voicebot in the banking sector. Developed on a library of millions of phone banking conversations, ''Keya'' services customers in English and Hindi and facilitates the resolution of customer queries in a single interaction. ''Keya'' will also soon be available on the mobile to enrich the 811 and other customer journeys.
Since "data is the new oil", the ability to manage and analyse data becomes key. Hence, strategic technology initiatives this year were the implementation of an upgraded Enterprise Data Warehouse and a Big Data platform. These platforms facilitate the Bank''s ability to use analytics to provide personalized customer experience with improved service and customized offers.
The Bank''s ability to collaborate with external merchants, developers and service providers has been enhanced with the implementation of an ''API Manager''. The technology facilitates rapid time to market for integrating in a secure and simplified manner with all entities outside the Bank. The resulting interface to the customer with information and services from third parties and the Bank, provides a holistic, seamless end user experience.
Employees, the internal customers, were also a focus with the launch of a new ''Redscape'' intranet, and ''Edcast'' a platform to share digital experiences and facilitate employees in their customer interaction. Robotics and biometrics were employed to automate customer service processes to provide faster turnaround times for the customer and improved employee productivity.
As always, cyber security and customer data protection were a priority, keeping pace with increased digital interactions with customers. Your Bank is mindful of client data privacy issues and takes full care in preserving this. New security measures were initiated from the customer interface through step up authentication for device authentication, to server protection through deep security measures.
SUBSIDIARIES & ASSOCIATES
As at 31st March, 2018, your Bank has nineteen (19) subsidiaries as listed below:
Domestic Subsidiaries
Kotak Mahindra Prime Limited
Kotak Securities Limited
Kotak Mahindra Capital Company Limited
Kotak Mahindra Life Insurance Company Limited
(formerly known as ''Kotak Mahindra Old Mutual Life Insurance Limited'')
Kotak Mahindra Investments Limited
Kotak Mahindra Asset Management Company Limited
Kotak Mahindra Trustee Company Limited
Kotak Investment Advisors Limited
Kotak Mahindra Trusteeship Services Limited
Kotak Infrastructure Debt Fund Limited
Kotak Mahindra Pension Fund Limited
Kotak Mahindra General Insurance Company Limited
IVY Product Intermediaries Limited
BSS Microfinance Limited
International Subsidiaries
Kotak Mahindra (International) Limited Kotak Mahindra (UK) Limited Kotak Mahindra Inc,
Kotak Mahindra Financial Services Limited
Kotak Mahindra Asset Management (Singapore) Pte. Limited
Your Bank in October 2017 completed the acquisition of 26% equity stake of Old Mutual plc in Kotak Mahindra Old Mutual Life Insurance Limited (KLI). Post-acquisition, the Bank along with its subsidiaries holds 100% beneficial interest in KLI. Subsequently, in November 2017, the name of Kotak Mahindra Old Mutual Life Insurance Limited was changed to Kotak Mahindra Life Insurance Company Limited,
Acquisition of BSS Microfinance Private Limited was completed during the year and it is now a wholly owned subsidiary of the Bank, Subsequently, the word ''Private'' was deleted and name of the company changed to BSS Microfinance Limited. It has been appointed as Business Correspondent for sourcing micro finance business for Bank.
The key business segments where the subsidiaries operate include investment banking, stock broking, vehicle finance, advisory services, asset management, life insurance and general insurance.
KLI has recorded a growth of 28.4% on the gross premium, mainly coming from Individual renewal premium. KLI has solvency ratio of 3.05 against requirement of 1.50,
Capital Markets saw a significant uptick in primary market activity; accordingly, Kotak Securities Limited and Kotak Mahindra Capital Company Limited have performed well during the year. Kotak Securities Limited has posted its highest ever profits in FY18,
Kotak Mahindra Asset Management Company (KMAMC), is one of the fastest growing Mutual Fund houses & among the top ten Fund Houses by Quarterly Average Asset Under Management (QAAUM) and continues to be the 7th largest Fund House in the country in terms of QAAUM, KMAMC has outperformed strong growth in the mutual funds industry
Kotak Mahindra Prime Limited and Kotak Mahindra Investments Limited and international subsidiaries have performed well and continue to add to the shareholders value.
The various activities of the subsidiaries and the performance and financial position of the subsidiaries and associates are outlined in the Management Discussion and Analysis section appended to this Report.
The Bank''s Policy for determining material subsidiaries is available on the Bank''s website viz. URL: ......................................................................... in line with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,
As at 31st March, 2018, your Bank has following four (4) Associate companies:
ACE Derivatives & Commodity Exchange Limited Infina Finance Private Limited Matrix Business Services India Private Limited Phoenix ARC Private Limited
The Annual Report which consists of the financial statements of your Bank on standalone basis as well as consolidated financial statements of the group for the year ended 31st March, 2018, has been sent to all the members of your Bank. Web link of the Annual Report has been sent to all members whose email IDs are registered with the Bank/Depository Participant(s). For members who have not registered their email IDs, physical copies of the Annual Report are sent. It does not contain Annual Reports of your Bank''s subsidiary companies. Your Bank will make available full Annual Report (including the Annual Reports of all subsidiaries) either a hard or soft copy depending upon request by any member of your Bank. These Annual Reports will be available on your Bank''s website viz. URL: https://www.kotak.com/en/investor-relat:ions/finandal-results/annual-reports.ht:ml and will also be available for inspection by any member at the Registered Office of your Bank,
EMPLOYEE STOCK OPTION & STOCK APPRECIATION RIGHTS SCHEMES
The stock options and the stock appreciation rights granted to the employees of the Bank and its subsidiaries currently operate under the following Schemes:
- Kotak Mahindra Equity Option Scheme 2007
- Kotak Mahindra Equity Option Scheme 2015
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2007
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2010
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2013
- Kotak Mahindra Stock Appreciation Rights Scheme 2015
The disclosures requirements under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, for the aforesaid ESOP & SARs Schemes, in respect of the year ended 31st March, 2018, are disclosed on the Bank''s website viz. URL: https://www.kotak.com/en/investor-relations/financial-results/annual-reports.html
CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT
Pursuant to Regulation 27 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations), a separate section entitled ''Report on Corporate Governance'' has been included in this Annual Report. The Report of Corporate Governance also contains certain disclosures required under the Companies Act, 2013. A Business Responsibility Report containing the requisite details under Regulation 34 of the SEBI LODR Regulations is disclosed on the Bank''s website viz. URL: https://www. kotak.com/en/investor-relations/financial-results/annual-reDorts.html
DIRECTORS & KEY MANAGERIAL PERSONNEL
Directors retiring by rotation
Dr. Shankar Acharya (DIN 00033242), Non-Executive Chairman of the Bank, aged 72 years, retires by rotation as a Director at the conclusion of this Annual General Meeting and is not offering himself for re-appointment as he has crossed the age of 70 years.
The Bank does not intend to fill this vacancy at the ensuing Annual General Meeting,
Changes in Directors
The Board of Directors of the Bank at its meeting held on 30th April, 2018, appointed Mr. Prakash Apte, aged 63, as part time Chairman of the Bank post Dr. Acharya''s retirement for a period up to 31st December, 2020, subject to regulatory approvals. Mr. Apte is a non-executive Independent Director of the Bank since March 2011. Mr. Apte, B.E. (Mechanical) has considerable experience in agricultural sector. In a career spanning over 36 years, he has extensive experience in various areas of management and business leadership. The details of Mr. Apte are set out in the Corporate Governance Report annexed to this Report.
The Board of Directors of the Bank, at the same meeting, re-designated Mr. Uday Kotak as Managing Director & CEO with effect from 1st May, 2018, in line with good corporate governance practice,
Your Directors place on record their appreciation for the valuable advice and guidance rendered by Dr. Shankar Acharya during his tenure as a Director and part-time Chairman of the Bank. Dr. Acharya has been the director of the Bank since May 2003 and part-time Chairman since July 2006.
Declaration from Independent Directors
The Board has received declarations from the Independent Directors as per the requirement of Section 149(7) of the Companies Act, 2013 and the Board is satisfied that the Independent Directors meet the criteria of independence as mentioned in Section 149(6) of the Companies Act, 2013.
Board Evaluation
The Nomination and Remuneration Committee of the Bank''s Board has formulated the criteria for performance evaluation of the Directors and the Board as a whole which broadly covers the Board role, Board/Committee membership, practice & procedure and collaboration & style,
The Nomination and Remuneration Committee of the Bank''s Board further engaged an external professional services firm to facilitate the self-evaluation process of the Board, its committees, Chairman and individual directors.
In line with the SEBI Guidance note on Board Evaluation, a Board effectiveness assessment questionnaire was designed for the performance evaluation of the Board, its Committees, Chairman and individual directors and in accordance with the criteria set and covering various aspects of performance including structure of the board, meetings of the board, functions of the board, role and responsibilities of the board, governance and compliance, evaluation of risks, grievance redressal for investors, conflict of interest, stakeholder value and responsibility, relationship among directors, director competency, board procedures, processes, functioning and effectiveness. The said questionnaire was circulated to all the directors of the Bank for the annual performance evaluation.
Based on the assessment of the responses received to the questionnaire from the directors on the annual evaluation of the Board, its Committees, Chairman and the individual Directors, the Board Evaluation Report was placed before the meeting of the Independent Directors for consideration. Similarly, the Board at its meeting assessed the performance of the Independent Directors. The Directors noted that the results of the performance evaluation of the Board & its Committees, Chairman and individual directors were similar to the results of previous year''s performance evaluation and the Directors were quite satisfied with the same. Like last year, this year too there had been no observations on the areas of governance where the directors had concern. However, there were a few suggestions for improving the performance of the Board viz. apprising the Board of the latest developments in Information Technology from time to time and the continuing education of the Board from governance prospective,
Key Managerial Personnel (KMPs)
The following officials of the Bank continue to be the "Key Managerial Personnel" pursuant to the provisions of Section 203 of the Companies Act, 2013:
- Mr. Uday Kotak, Managing Director & CEO
- Mr. Dipak Gupta, Joint Managing Director
- Mr. Jaimin Bhatt, President & Group Chief Financial Officer
- Ms. Bina Chandarana, Company Secretary Appointment & Remuneration of Directors & KMPs
The appointment and remuneration of Directors of the Bank is governed by the provisions of Section 35B of the Banking Regulation Act, 1949, The Nomination and Remuneration Committee of the Bank''s Board has formulated criteria for appointment of Senior Management Personnel and the Directors. Based on the criteria set it recommends to the Board the appointment of Directors and Senior Management Personnel. The Committee considers the qualifications, experience, fit & proper status, positive attributes as per the suitability of the role, independent status and various regulatory/statutory requirements as may be required of the candidate before such appointment,
The Reserve Bank of India (''RBI'') vide its circular no.DBOD.No.BC.72/29.67.001/2011-12 dated 13th January, 2012 has issued the Guidelines on Compensation of Whole Time Directors / Chief Executive Officers / Other Risk Takers of Private Sector Banks on Compensation Policy which inter alia cover the following:
- Proper balance between fixed pay and variable pay;
- Variable pay not to exceed 70% (Seventy Per Cent) of the fixed pay in a year;
In accordance with the aforesaid RBI Circular, the Board of the Bank has adopted a Compensation Policy for its Whole-time Directors, Chief Executive Officer of the Bank and other employees which includes issue of stock appreciation rights as a form of variable pay, linked to the Bank''s stock price, payable over a period of time. The salient features of the Compensation Policy are as follows:
- Objective is to maintain fair, consistent and equitable compensation practices in alignment with Kotak''s core values and strategic business goals.
- Applicable to all employees of the Bank. Employees classified into 3 groups: o Whole-time Directors/Chief Executive Officer
- Risk Control and Compliance Staff o Other categories of Staff
- Compensation structure broadly divided into Fixed, Variable and ESOPs
- Fixed Pay - Total cost to the Company i.e. Salary, Retirals and Other Benefits
- Variable Pay - Linked to assessment of performance and potential based on Balanced Key Result Areas (KRAs), Standards of Performance and achievement of targets with overall linkage to Bank budgets and business objectives. The main form of incentive compensation includes - Cash, Deferred Cash/Incentive Plan and Stock Appreciation Rights.
- ESOPs - Granted on a discretionary basis to employee based on their performance and potential with the objective of retaining the employee.
- Compensation Composition - The ratio of Variable Pay to Fixed Pay and the ratio of Cash v/s Non Cash within Variable pay outlined for each category of employee classification.
- Any variation in the Policy to be with approval of the Nomination & Remuneration Committee,
- Malus and Clawback clauses applicable on Deferred Variable Pay
- Ensuring no personal hedging strategies by employees which undermine risk alignment effects as part of their remuneration,
The details of the remuneration paid to the Non-Executive Chairman, Executive and Non-Executive Directors of the Bank for the year ended 31st March, 2018 is provided in the Corporate Governance Report annexed to this Report,
The Non-Executive Chairman of the Bank receives a fixed amount of remuneration as recommended by the Board and approved by the shareholders of the Bank and RBI, from time to time. He also receives remuneration by way of sitting fees for attending meetings of the Board or Committees thereof.
RBI vide its circular no. DBR.No.BC.97/29.67.001/2014-15 dated 1st June, 2015 has issued guidelines on payment of compensation to the NonExecutive Directors (NEDs) of private sector banks which inter-alia specifies the following:
- The Board of Directors of the Bank (in consultation with the Nomination & Remuneration Committee) needs to formulate and adopt a comprehensive compensation policy for NEDs (other than part-time non-executive Chairman).
- Maximum amount of profit related commission not to exceed '' 10 lakh per annum for each director of the Bank,
Accordingly, in line with the aforesaid RBI circular and pursuant to the relevant provisions of the Companies Act, 2013, the Board of the Bank has adopted a compensation policy for the NEDs (excluding the part-time Non-Executive Chairman). The salient features of the Compensation Policy are as follows:
- Compensation structure broadly divided into o Sitting fees
- Re-imbursement of expenses o Commission (profit based)
- Amount of sitting fees and commission to be decided by the Board from time to time, subject to the regulatory limits
- Overall cap on commission for each director '' 10 lakh per annum
- NEDs not eligible for any stock options of the Bank
Remuneration paid to the KMPs is in line with the Compensation Policy of the Bank which is based on the RBI Guidelines,
Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014
1. Ratio of the remuneration of each director to the median remuneration of the employees for the financial year:
Directors |
Title |
Ratio |
Mr. Uday Kotak |
Managing Director & CEO |
48.44x |
Mr. Dipak Gupta |
Joint Managing Director |
47.50x |
Dr. Shankar Acharya |
Non-Executive Chairman |
4.96x |
2. Percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:
Directors/KMP |
Title |
% increase in remuneration |
% increase in remuneration excluding SARs |
Mr. Uday Kotak |
Managing Director & CEO |
11.03 |
11.03 |
Mr. Dipak Gupta |
Joint Managing Director |
10.00 |
10.00 |
Dr. Shankar Acharya |
Non-Executive Chairman |
8.03 |
8.03 |
Mr. Jaimin Bhatt |
Group CFO |
8.11 |
9.62 |
Ms. Bina Chandarana |
Company Secretary |
2.48 |
3.69 |
3. Percentage increase in the median remuneration of employees in the financial year:
For employees who were in employment for the whole of FY 2016-17 and FY 2017-18 increase in the median remuneration is 8.53%.
4. Number of permanent employees on the rolls of Bank at the end of the year: 35,717
5. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
For employees other than managerial personnel who were in employment for the whole of FY 2016-17 and FY 2017-18 the average increase is 6.56% and 5.77% excluding SARs,
Average increase for managerial personnel is 8.86% and 9.57% excluding SARs,
6. Affirmation that the remuneration is as per the remuneration policy of the Bank:
The Bank is in compliance with its Compensation Policy,
Notes:
1) Remuneration includes Fixed pay Variable paid during the year perquisite value as calculated under the Income Tax Act, 1961. Remuneration does not include value of Stock Options.
2) Stock Appreciation Rights (SARs) are awarded as variable pay. These are settled in cash and are linked to the average market price/closing market price of the Bank''s stock on specified value dates. Cash paid out during the year is included for the purposes of remuneration.
3) The Non-Executive Directors of the Bank, other than Non-Executive Chairman receive remuneration in the form of sitting fees for attending the Board/ Committee meetings and in the form of an annual profit based commission. The Non-Executive Chairman gets sitting fees for attending meetings and gets a remuneration approved by the shareholders and RBI.
SECRETARIAL AUDITOR
Pursuant to Section 204 of the Companies Act, 2013, your Bank has appointed Ms. Rupal D. Jhaveri, a Company Secretary in Practice, as its Secretarial Auditor. The Secretarial Audit Report for the financial year ended 31st March, 2018 is annexed to this Report. Your Bank is in compliance with the applicable Secretarial Standards issued by The Institute of Company Secretaries of India and approved by the Central Government under Section 118(10) of the Companies Act, 2013 for FY 2017-18.
DEPOSITS
Being a banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to your Bank,
AUDITORS
In terms of Section 139 of the Companies Act, 2013, Messrs S.R. Batliboi & Co. LLP, Chartered Accountants, were appointed as statutory auditors of your Bank for a period of four years from the conclusion of the Thirtieth Annual General Meeting until the conclusion of the Thirty fourth Annual General Meeting of the Bank, subject to the annual approval of RBI and ratification by the members every year. However, pursuant to Section 40 of the Companies (Amendment) Act, 2017 (i.e. Section 139 of the Companies Act, 2013) which was notified with effect from 7th May, 2018, ratification of the appointment of the statutory auditors by the members at every annual general meeting is no longer required. Accordingly, ratification resolution is not being taken up at the ensuing Annual General Meeting of the Bank. The Bank has already received the approval of the Reserve Bank of India for Messrs S.R. Batliboi & Co. LLP, Chartered Accountants to continue as auditors for the year 2018-19.
INTERNAL FINANCIAL CONTROLS
The Board of Directors confirms that your Bank has laid down set of standards, processes and structure which enables to implement Internal Financial controls across the organization with reference to Financial Statements and that such controls are adequate and are operating effectively. During the year under review, no material or serious observation has been observed for inefficiency or inadequacy of such controls,
IMPLEMENTATION OF IND AS
The Ministry of Finance, Government of India has vide its press release dated 18th January, 2016 outlined the roadmap for implementation of International Financial Reporting Standards (IFRS) converged Indian Accounting Standards (Ind AS) for Scheduled commercial bank (excluding RRBs), Non-banking Financial Companies and Insurance companies. Reserve Bank of India (RBI) has advised Banks vide RBI/2015-16/315DBR. BP.BC.No.76/21.07.001/2015-16 to follow the Ind AS from 1st April, 2018 as notified under the Companies (Indian Accounting Standards) Rules, 2015 subject to any guideline/direction issued in this regard,
RBI through its first monetary policy statement for FY 2018-19 on 5th April, 2018, deferred Ind AS implementation for the Scheduled commercial bank (excluding RRBs) by one year i.e. the implementation of Ind AS will begin from 1st April, 2019 onwards,
As per RBI directions, your Bank has taken following steps so far:
- Submitted Standalone Proforma Ind AS financial statements to the RBI for the half-year ended 30th September, 2016 in FY 2016-17 and quarter ended 30th June, 2017 in FY 2017-18, as required.
- Formed Steering Committee for Ind AS implementation. The Steering Committee comprises of representatives from Finance, Risk, Operations and Treasury. The Committee oversees the progress of Ind AS implementation in the Bank, and provides guidance on critical aspects of the implementation such as Ind AS technical requirements, systems and processes, business impact, people and project management. The Committee closely reviews progress of Ind AS implementation,
- The Bank has identified gaps in IT Systems and the changes required to automate Ind AS. The Bank is in advanced stages for Ind AS implementation.
The Bank will continue to liaise with RBI and industry bodies on various aspects pertaining to Ind AS implementation,
RELATED PARTY TRANSACTIONS
All the Related Party Transactions that were entered into during the financial year were on arm''s length basis and were in ordinary course of business.
Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014, there are no Related Party Transactions to be reported under Section 188(1) of the Companies Act, 2013, in form AOC-2.
All Related Party Transactions are placed before the Audit Committee for its review and approval on a quarterly basis. Further, an omnibus approval of the Audit Committee is obtained for the Related Party Transactions which are repetitive in nature and the management appraises the Audit Committee of such transactions every quarter
All Related Party Transactions as required under Accounting Standards AS-18 are reported in Note 25 of Schedule 17 - Notes to Accounts of the Consolidated financial statements and Note 7 of Schedule 18 B - Notes to Accounts of the Standalone financial statements of your Bank.
The Bank''s Policy on dealing with Related Party Transactions is available on the Bank''s website viz,
URL: https://www.kotak.com/en/investor-relations/governance/policies.html
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given, securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from the disclosure requirement under Section 134(3)(g) of the Companies Act, 2013.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
Your Bank is committed to its "Vision Statement" of upholding its Global Indian Financial Services Brand creating an ethos of trust across all constituents, developing a culture of empowerment and a spirit of enterprise thereby becoming the most preferred employer in the financial services sector.
Consistent with the Vision Statement, your Bank is committed to maintain and provide to all its employees and directors highest standards of transparency, probity and accountability. The Kotak Group endeavours to develop a culture where it is safe and acceptable for all employees and directors to raise / voice genuine concerns in good faith, and in a responsible as well as effective manner,
A vigil mechanism has been implemented through the adoption of Whistleblower Policy with an objective to enable any employee or director or vendor, raise genuine concern or report evidence of activity by the Bank or its employee or director or vendor that may constitute: Instances of corporate fraud; unethical business conduct; a violation of Central or State laws, rules, regulations and/or any other regulatory or judicial directives; any unlawful act, whether criminal or civil; malpractice; serious irregularities; impropriety, abuse or wrong doing; deliberate breaches and non-compliance with the Bank''s policies; questionable accounting/audit matters/financial malpractice. The concerns can be reported on the website viz. URL: https://cwiportal.com/kotak.
Currently an online mechanism enabling aforementioned reporting has been implemented over and above other modes of communication like e-mail, or a letter sent by mail, courier or fax to designated persons.
Safeguards to avoid discrimination, retaliation, or harassment, and confidentiality have been incorporated in the policy. All employees and directors have access to the Chairman of the Audit Committee in appropriate and exception circumstances. Further, the Chairman of the Audit Committee has access rights to the whistle blower portal,
The Policy has been uploaded on the Bank''s intranet as well as website viz. URL: https://www.kotak.com/en/investor-relations/aovernance/policies.html and regular communication is made for sustained awareness,
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Bank has constituted a Board Corporate Social Responsibility Committee (CSR Committee). The CSR Committee presently consists of Mr. C. Jayaram, Mr. Dipak Gupta and Prof. S. Mahendra Dev,
Your Bank''s CSR Committee drives the CSR programme of the Bank. Your Bank has a Board approved CSR policy, charting out its CSR approach, This policy articulates the Bank''s aim to positively contribute towards economic, environmental and social well-being of communities through its CSR interventions. The core CSR focus areas outlined are:
- Education
- Vocational skills and livelihood
- Preventive healthcare and sanitation
- Reducing inequalities faced by socially and economically backward groups
- Sustainable development
- Relief and rehabilitation
- Clean India
- Sports
The Bank''s CSR Policy is available on the Bank''s website: https://www.kotak.com/en/about-us/corporate-responsibility.html
Pursuant to the provisions of Section 135, Schedule VII of the Companies Act, 2013 (the Act), read with the Companies (Corporate Social Responsibility) Rules, 2014 the report of the expenditure on CSR by the Bank is as under:
The average net profit U/S 198 of the Bank for the last three financial years preceding 31st March, 2018 is Rs, 3,698.45 crore,
The prescribed CSR expenditure required U/S 135, of the Act for FY 2017-18 is Rs, 7,397 lakh.
The CSR expenditure incurred from 1st April, 2017 to 31st March, 2018 under Section 135 of Companies Act, 2013 amounts to Rs, 2,640 lakh as against Rs, 1,733 lakh CSR expenditure in FY 2016-17. The unspent amount for FY 2017-18 is Rs, 4,757 lakh.
CSR expenditure of Rs, 2,640 lakh in FY 2017-18 as a percentage of average net profit U/S 198 of the Bank at Rs, 3,698.45 crore is 0.71%.
The Bank''s budget in CSR focussed sectors and programmes are approved by the Board CSR Committee and the Board. The bank''s CSR budget is guided by the vision of creating long-term benefits for the society. The Bank has been building its CSR capabilities on a sustainable basis and is committed to gradually increasing its CSR spending in the coming year for its long-term projects. The Bank identifies suitable NGO partners for carrying out its CSR programmes. It undertakes CSR programmes that are scalable, sustainable and have the potential to be replicated across locations and create a sustainable and measurable impact in communities. Most of the CSR programmes undertaken are in education, healthcare, livelihood and environmental sustainability. The Bank''s CSR footprint has been consistently increasing over the years. The Bank is committed to stepping-up its CSR programmes and expenditure in the years ahead. In FY 2016-17, the Bank''s expenditure was Rs, 1,733 lakh and in FY 2015-16 it was Rs, 1,641 lakh. In FY 2017-18, the CSR expenditure was Rs, 2,640 lakh. Your Bank does not consider "administrative overheads" as a part of its CSR spends.
The details of CSR activities and spends under Section 135 of the Companies Act, 2013 for FY 2017-18, are annexed to this report.
RISK MANAGEMENT POLICY
Your Bank has in place a comprehensive Group Enterprise wide Risk Management (ERM) framework supported by detailed policies and processes for management of Credit Risk, Market Risk, Liquidity Risk, Operational Risk and various other Risks. Details of identification, assessment, mitigations, monitoring and the management of these Risks are mentioned in the Management Discussion and Analysis section appended to this Report,
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not applicable to your Bank.
EMPLOYEES
The employee strength of your Bank, standalone, was over 35,500 and along with its subsidiaries was over 50,000 as of 31st March, 2018,
121 employees employed throughout the year and 62 employees employed for part of the year were in receipt of remuneration of Rs, 1.02 crore or more per annum.
Culture and values drive have been enhanced through various interactions and employee communication platforms in the organization. Your Bank continued to reiterate this through cross functional meets conducted by senior business leaders for employees at mid management level under the "Meet 5" initiative,
Your Bank has continued on the Gender Diversity agenda,
- A differentiated talent acquisition strategy to increase women employee base across various suitable roles has helped us to continue adding 22% women amongst all new hires in the Bank. While continuing with our philosophy of providing equal opportunities, an aggressive push in this area will help us achieve a better balance in gender diversity,
- Prevention of Sexual Harassment (POSH): Bank continues with the belief on zero tolerance towards sexual harassment at workplace and continues to uphold and maintain itself as a safe and non-discriminatory organization. To achieve the same Kotak reinforces the understanding and awareness of Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Bank has formulated Internal Complaints Committee (ICC) at three regions for reporting any untoward instance. Any complaints pertaining to sexual harassment are diligently reviewed and investigated and treated with great sensitivity. The ICC members have been trained in handling and resolving complaints and have also designed an online e-learning POSH Awareness module which covers the larger employee base,
Following is a summary of sexual harassment complaints received and disposed off during the year 2017-18: o No. of complaints received : 34
o No. of complaints disposed off * : 27
* Includes 7 pending cases pertaining to FY 2016-17. In the case of balance 14 pending cases, enquiries were in progress at the close of the year of which 9 have been closed subsequently.
As Bank enters in its next phase of growth and expansion of footprint across urban and rural India, Bank and its subsidiaries continued to carry out several initiatives to attract and retain a pool of highly skilled and motivated employees who are aligned to the firm''s vision of becoming the most trusted financial services provider.
In accordance with the provisions of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the names and other particulars of the employees are set out in the annexure to the Directors'' Report. In terms of the Proviso to Section 136(1) of the Companies Act, 2013, the Directors'' Report is being sent to all shareholders excluding the aforesaid annexure. The annexure is available for inspection at the Registered Office of your Bank. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of your Bank,
DIRECTORS'' RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the operational management, confirm in pursuance of Section 134(5) of the
Companies Act, 2013, that:
(i) your Bank has, in the preparation of the annual accounts for the year ended 31st March, 2018, followed the applicable accounting standards along with proper explanations relating to material departures, if any;
(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 state of affairs of your Bank as at 31st March, 2018 and of the profit of your Bank for the financial year ended 31st March, 2018;
(iii) they have taken proper and sufficient care to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Bank and for preventing and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared 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 are operating effectively; and
(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively,
ANNEXURES
Following statements/reports/certificates are set out as Annexure to the Directors'' Report:
- Extract of Annual Return under Section 134(3)(a) of the Companies Act, 2013 read with Rule 12 (1) of Companies (Management & Administration) Rules, 2014.
- Secretarial Audit Report pursuant to Section 204 of the Companies Act, 2013,
- Details of CSR activities and spends under Section 135 of the Companies Act, 2013,
- Certificate from the auditors regarding compliance of conditions of corporate governance as stipulated in para E of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015,
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the valuable guidance and support received from the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority and other Government and Regulatory agencies.
Your Directors acknowledge the support of the members and also wish to place on record their appreciation of employees for their commendable efforts, teamwork and professionalism.
For and on behalf of the Board of Directors
Dr. Shankar Acharya
Place: Mumbai Chairman
Date: 19th May, 2018
Mar 31, 2017
To the Members of
KOTAK MAHINDRA BANK LIMITED
The Directors present their Thirty-second Annual Report together with the audited accounts of your Bank for the year ended 31st March 2017. FINANCIAL HIGHLIGHTS
(A) Kotak Mahindra Bank Limited - Consolidated financial highlights:
31st March 2017 Rs, crore |
31st March 2016 Rs, crore |
|
Total income |
33,983.77 |
28,032.36 |
Total expenditure, excluding provisions and contingencies |
25,702.92 |
22,017.06 |
Operating Profit |
8,280.85 |
6,015.30 |
Provisions and contingencies, excluding provision for tax |
948.92 |
991.56 |
Profit before tax |
7,331.93 |
5,023.74 |
Provision for taxes |
2,382.85 |
1,592.62 |
Profit after tax |
4,949.08 |
3,431.12 |
Less: Share of minority interest |
78.83 |
65.19 |
Add: Share in profit of Associates |
70.18 |
92.92 |
Consolidated profit for the Group |
4,940.43 |
3,458.85 |
Earnings per Equity Share: |
||
Basic (Rs,) |
26.89 |
18.91 |
Diluted (Rs,) |
26.86 |
18.87 |
(B) Kotak Mahindra Bank Limited - Standalone financial highlights:
31st March 2017 Rs, crore |
31st March 2016 Rs, crore |
|
Total Income |
21,176.09 |
18,996.42 |
Total expenditure, excluding provisions and contingencies |
15,191.28 |
14,955.33 |
Operating Profit |
5,984.81 |
4,041.09 |
Provisions and contingencies, excluding tax provisions |
836.74 |
917.37 |
Profit before tax |
5,148.07 |
3,123.72 |
Provision for taxes |
1,736.57 |
1,033.94 |
Profit after tax |
3,411.50 |
2,089.78 |
Add: Surplus brought forward from the previous year |
8,214.12 |
5,095.26 |
Add: Net Additions on Amalgamation |
- |
1,674.71 |
Amount available for appropriation |
11,625.62 |
8,859.75 |
Appropriations: Statutory Reserve under Section 17 of the Banking Regulation Act, 1949 |
852.88 |
522.45 |
General Reserve |
- |
- |
Transfer to / (from) Investment Reserve Account |
(48.49) |
(41.52) |
Transfer to Capital Reserve |
10.55 |
9.17 |
Transfer to Special Reserve |
55.00 |
45.00 |
Dividend / Proposed Dividend |
0.071 |
91.84 |
Corporate Dividend Tax |
(0.68)* |
18.69 |
Surplus carried to Balance Sheet |
10,756.29 |
8,214.12 |
DIVIDEND
Your Directors are pleased to recommend a dividend of '' 0.60 per equity share (previous year ''0.50 per equity share) for the year ended 31st March 2017. This would entail a payout of Rs,132.94 crore including dividend distribution tax (previous year Rs, 110.53 crore) based on the number of shares as at 31st March 2017. The dividend would be paid to all the shareholders, whose names appear on the Register of Members/Beneficial Holders list on the Book Closure date.
Pursuant to Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, 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 Banks website viz. URL:http://ir. kotak.com/governance/policies.html
CAPITAL
During the year, your Bank has allotted 50,89,746 equity shares arising out of the exercise of Employees Stock Options granted to the employees and whole-time directors of your Bank and its subsidiaries and 14,25,313 equity shares arising out of the exercise of Employee Stock Options under the adopted ESOP Schemes of the erstwhile ING Vysya Bank Ltd. (eIVBL). Further, in November 2016, your Bank allotted 660 equity shares in lieu of the rights entitlement held in abeyance by eIVBL and bonus entitlement thereon.
Post allotment of equity shares as aforesaid, the issued, subscribed and paid-up share capital of the Bank stands at Rs, 9,20,44,89,385 comprising of 1,840,897,877 equity shares of Rs, 5 each as on 31st March 2017.
Your Bank has a Capital Adequacy Ratio (''CAR'') under Basel III as at 31st March 2017 of 16.77% with Tier I being 15.90%.
During the year, your Bank has not issued any capital under Tier II. As on 31st March 2017, outstanding Unsecured, Redeemable Non-Convertible, Subordinated Debt Bonds were Rs, 858.80 crore and outstanding Unsecured, Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II stood at Rs,348.28 crore.
Pursuant to the approval of the Board of Directors on 30th March 2017 and approval of the shareholders on 9th May 2017, your Bank undertook a Qualified Institutions Placement of up to 6.2 crore equity shares of Rs, 5 each of the Bank at an issue price of Rs, 936 per equity share which received an overwhelming response. Allotment of the equity shares pursuant to the issue is pending and are proposed to be allotted on 18th May 2017.
OPERATIONS Consumer Banking
The Consumer Banking business of your Bank, services a wide spectrum of customers including domestic individual and households, non-residents, small and medium business segments for a range of products from basic savings & checking accounts to term deposits, credit cards, unsecured and secured loans, working capital and distribution of investment products.
Your Bank completed integration of branches and technology of the merged network of the erstwhile ING Vysya Bank during the course of the year. This has enabled your Bank a wider foot print coupled with the Digital push. Bank has engaged in a calibrated network expansion and as of 31st March 2017 had 1369 branches and 2163 ATMs, covering 689 locations. Of the 36 new branches commissioned this year, 12 were in rural and semi-urban locations. It added about 13.99 lac new customers this year across core banking products of savings and checking accounts, term deposits, overdrafts and non-resident accounts.
Your Bank rolled out several initiatives aimed at offering a superior and differentiated customer experience. Some key ones are:
Products and Services
- Enhanced its suite of products positioned at customer clusters and launched a new offer, Flexi-Balance - a Current Account proposition tailored exclusively for SMEs having common/same family promoters. The proposition gives the benefit of pooling in balances across related SMEs without each SME needing to maintain independent balance in each of the Current Accounts.
- Overall strategy of segmented approach continues to yield benefits. The segmented Savings programs like Silk and Junior continue to show significant growth Y-o-Y.
- Launched a new program, MY FAMILY, focused on acquiring banking relationship of the whole family by giving proposition to pool the balances across multiple savings accounts and get additional benefits. The Investment led Savings Account - Alpha was re-launched in the last quarter on this fiscal based on customer and channel feedback.
- Instituted Customer life cycle management programs, targeting key journeys of the customer. The New to Bank Customer life cycle management program was launched to ensure a smooth and seamless on-boarding of new customers. The other significant journey that was launched was Inactive / Dormant life cycle to manage attrition of the customers.
Business Lines
a) Non Resident Indian Business
Some of the key initiatives taken this year are:
- Extended C2R money transfer mode for UAE. NRI clients can now use this medium to transfer money from UAE to their Kotak Bank account in India.
- Further expanded the network of exchange house relationships and the count now stands at 35, covering the following countries -Australia, Canada, GCC, Hong Kong, Malaysia, New Zealand, Singapore, UK and USA.
- Participated in various international business forums organized by the Indian community in various countries, as a platform to reach out to the overseas Indian community,
- Signed MoU with Ecobank, Nigeria for mutual customer referrals. Ecobank is a leading pan-African bank with operations in 36 countries across the continent.
b) Priority Banking Business
A new tier - "Maxima" was launched across semi urban and rural branches to cater to the aspiring and affluent segment in these locations. A Privy League branded variant of the "Delight" credit card with exclusive benefits, was also launched for the Privy League Prima customers.
c) Corporate Salary Business
Corporate salary business introduced a niche team of Premier Acquisition Managers to tap the every growing boutique and niche smaller firms in finance; technology and start-up segment. With this initiative, the corporate salary business on-boarded over 35 large niche corporates this year.
d) Consumer Assets
Your Bank has continued to grow the product lines under the Consumer Assets business.
Credit Card: Credit card business has issued 9.03 lac cards by March 2017 and is in its eighth year of operations. The credit card business has clocked total spends of Rs,6,696 crore for the year at 47.3% growth Y-o-Y with a book size of Rs,1459 crore.
Home Finance: As on 31st March 2017, Home Loan disbursement volumes were up 20% Y-o-Y while book growth was at 12% Y-o-Y. The Non Individual LAP book growth was 14% while disbursement volumes in LAP were up 18% Y-o-Y. Your Bank has expanded its home finance business further in Tier II cities.
Cross Sell through Bank Branches, Corporate Salary, Priority Channel, and Wealth Teams contributed to around 44% of total volume.
This year also witnessed very low losses on account of effective recovery and collection processes and policies adopted.
Commercial Banking
The Commercial Banking business focuses on meeting the banking and financial needs of various segments. It partners Small and Medium Enterprises (SMEs) across the country and provides financing in the manufacturing, trading and service industry. The business has specialized units which offer financial solutions in the areas of commercial vehicles, construction equipment, tractor, gold loans and agriculture business. It services the priority sector by providing finance for tractor, crop loans, small enterprises and allied agricultural activities. The business plays a significant role in meeting financial inclusion goals and financing deep into Rs,Bharat'' through an expanding network of branches and associates.
Following the merger with the erstwhile ING Vysya Bank Ltd., the SME/Business Banking portfolio was consolidated during the year, which has resulted in creating efficiency and a wider customer base. While the stress levels in the sector went up in the first half, they have stabilized considerably in the second half.
The Commercial Vehicle (CV), Construction Equipment (CE) and Tractor Finance businesses reported significant growth and gained market share in their respective businesses. The demand for commercial vehicles was primarily led by replacement and regulatory changes such as revised body specifications and transition from BSIII to BSIV. Further, Government spending in the infrastructure sector has led to a strong demand in the CE industry. The growth in the tractor finance portfolio was driven by higher tractor sales following a good monsoon. The overall delinquency percentage of the CV, CE and tractor finance portfolios has reduced.
The Agriculture Financing business continued its focus on the agriculture value chain funding for various agro processing activities. It has registered growth despite volatility and uncertainty in the commodities market. Further, the Bank has expanded its crop loan business, so far concentrated in Punjab and Haryana, to Western and Central India.
Wholesale Banking
The Wholesale Banking business caters to the diverse needs of a wide range of corporate customer segments including major Indian corporate, conglomerates, financial institutions, public sector undertakings, multinational companies, mid-market companies and realty businesses. The business offers a comprehensive portfolio of products and services to these customers including working capital finance, medium term finance, trade finance, foreign exchange services, other transaction banking services, custody services, debt capital markets and treasury services.
Having completed the integration of the erstwhile ING Vysya Bank last year, the Wholesale Banking division has been focused on maximizing the benefits of this transaction through higher growth in a profitable manner.
Given the slow credit off-take in the economy during the year, the Wholesale Banking Business has targeted growth through growth of market share and this has been achieved through higher customer acquisition, improved customer service and product innovations.
Some of the key initiatives to serve customers better are:
- Continue to have equally high focus on adding new customers as increasing its wallet share with the existing customers. The year saw a healthy addition of New-to-Bank customers across customer segments, which in turn sets a strong foundation for future growth in the business.
- Set up a dedicated Service Solutions vertical to ensure faster customer response and improve customer experience. This vertical is the single point of contact for all service related and documentation issues with personnel present across the country. Focus on this area has helped your Bank significantly improve its Turn-Around-Time (TAT) across various processes including account opening and disbursals. Ongoing initiatives such as digitization and Tablet Banking will help reduce TAT further in the coming year,
- Focus on improving its suite of product offerings. During the year, the Wholesale Banking business launched a number of new innovative state of the art, best in class product solutions sets. The Bank witnessed significant addition of assets through higher focus on products such as LCBDs (discounting of Letters of Credit), Factoring, external benchmarked linked loans and discounting of long term lease rentals (LRDs). Your Bank has set up its GIFT City branch this year which has helped it to participate in syndication of overseas loans.
Your Bank has continued to work on ensuring a healthy portfolio through a volatile economic environment and has kept a tight control on asset slippages. This has been achieved through a proactive rebalancing of the portfolio to reflect economic situations and reduction in exposure to situations with heightened risk. Your Bank''s focus on risk management has helped the business reduce its risk weighted assets (RWA) over the past few years despite an increase in its exposure. Bank has also put in place a pricing mechanism based on the Risk Adjusted Return on Capital (RaRoC) model which has helped to optimize pricing and better utilize capital. Coupled with the reduction in RWA, the business has achieved a significant improvement in its return on equity.
It has an integrated Corporate and Investment Banking (CIB) coverage model for some of the top conglomerates and large corporate. The year saw a stabilization of the CIB model with the Bank being able to significantly increase its banking wallet share and also increase its investment banking business with these large corporate. As a testimony to your Bank''s efforts in this area, Asia money has awarded your Bank the Best Corporate and Investment Bank in 2017 in India.
It has continued to focus on institutionalizing and improving practices leading to better efficiencies. A number of tools are being put in place to monitor the productivity and efficiency of the sales force. Given high focus in this area, costs have been kept well in control further improving profitability of the business.
The Integrated Global Transaction Banking Services has had a strong year across its large suite of products. Current Account & Savings Account balances saw significant growth through focused marketing efforts and early to launch products such as ASBA. Trade funded book crossed Rs,10,000 crore this year. Bank''s Cash Management System (CMS) has won a number of awards this year including Best Cash Management Bank in India by the Asian Banker. A separate LCBD desk was set up which reduced TAT and helped grow this business significantly.
Digitization and Automation are key pillars of your Bank''s growth strategy and coupled with ease of doing business and improvisations of our internal processes, have led to efficiency improvements apart from improving TAT compared to competition across products & Services. The year saw a number of digital initiatives by the Wholesale Banking division. The response to the Bank''s Liquidity management product, a state-of-the art integrated treasury management solution for corporate has been encouraging. Your Bank also launched All-Pay, a one-stop shop for all payment needs of e-commerce and m-commerce companies. A number of other Digital initiatives including a corporate mobility solution, an online trade portal and an integrated corporate portal are currently under implementation. The business has also demonstrated proof of concept for transactions using the advanced block chain technology and further implementations are in progress.
Asset Reconstruction
The new bankruptcy code was introduced this year by the government to expedite the turnaround of the stressed assets. One needs to wait and watch the evolution of this new legislation.
The Division continued to focus on last mile turn around financing due to cash flow based recoveries possible in such cases.
The Bank is seeing signs of some green shoots in resolutions and turn around in the stress asset space. More opportunities are expected in the coming year and your Bank is well positioned to play a pivotal role in providing financial and other turnaround solutions.
Treasury
Your Bank''s treasury actively contributes to your Bank by way of:
- Proprietary Trading: The various proprietary trading desks actively trade in products such as Fixed Income, Money Markets, Derivatives, Foreign Exchange and Bullion. Primary Dealer Desk - part of the proprietary trading desk, actively participates in the primary auctions of government securities, makes market in government securities and engages in retailing of government securities.
- Customer Transactions:
- Facilitating access to foreign currency markets through cash & derivatives products and providing fine market rates to clients for remittance and trade transactions.
- Client solutions - standardized and structured, pertaining to Debt Capital Markets including Syndication of Loans, Bonds, Mezzanine financing, Promoter funding and acquisition financing and Securitization.
- Balance Sheet Management: The Balance Sheet Management Unit (BMU) ensures maintenance of regulatory reserves and adequate liquidity buffers and also manages the Interest rate risk & Liquidity risk within the Risk appetite of the Bank.
Human Resources
FY 2016-17 has been a year with increased focus on assimilation of integrated employees through improved engagement with the organization.
To ensure a seamless alignment, various initiatives were launched to internalize behavioral parameters, transitioning to the expected behaviors and ownership to the cause at the first line of leadership hierarchy in the organization.
Your Bank enhanced the focus to drive customer experience and service quality with interventions in back office functions. Bank has been focused on improving productivity through process simplification, automation and training. The talent base bank has reached to 33013 employees. A proactive approach has been adopted to bring automation on query management and engagement of employees with the aid of technology to manage the distributed workforce.
With an average age of 33 years Bank continues to attract talent across all its businesses and hierarchy and has put in place various processes and systems to ensure alignment of employee behaviors with the organization''s core values. Pre-trained manpower acquisition channels such as Kotak Sales Officer (KSO) and Junior Sales Officer (JSO) programs have been creating a sustainable workforce pipeline.
To enhance engagement and connect with workforce, a dedicated team was institutionalized to focus on employee connect, engagement and communication. Focus of engagement initiatives was driven from the internal model for improved connect. Bank continues its focus on engagement and retention through initiatives that provide a holistic environment where employees get opportunities to realize their potential. Talent management as an integral part of overall performance management process in the Bank aims to provide long term, sustained and meaningful careers to employees across the organization. ''Pulse'' engagement survey, along with other engagement initiatives, provided insights on distinct employee needs that helped developing appropriate interventions.
Your Bank is committed to developing its capabilities as an organization and as individuals to meet current and future business challenges. In the year 2016-17, it has invested significantly in training and professional development - leveraging the latest technologies to deliver highly impactful and relevant training programs to its employees. These learning initiatives are designed around development of individual and team. Leadership Development Programs focused on developing the leadership capabilities of the senior executives, to help them prepare for future roles in the organization.
With the wave of digital, employee touch points are also digitized with the launch of digital portal for all employee HR touch points. The portal facilitates simplifications, access to information and self-service for employees.
Guided by our value system that motivates our attitudes and action, your Bank is focused on forward looking policies, lean processes and nurturing talent.
Technology
The merger of all technology systems of the erstwhile ING Vysya Bank Ltd. with the Bank''s systems was concluded. With this integration, all staff in the merged entity have a standardized technology environment to work in; from call center telephony to desktops and networks. This has enabled seamless communication and collaboration amongst the Bank''s personnel. The merger and rationalization of four data centers down to two datacenters has resulted in streamlined technology operations with financial gains ensuing from the synergies. The Bank''s customers are all now serviced out of a single set of business applications, ensuring a consistent experience to all customers of the merged entity
Digitization
The introduction of Digital products and services was key a focus throughout the Bank. Some of the highlights being:
- The Bank''s retail customers'' mobile experience was enriched with a full range capabilities from online shopping, restaurant payments, movies ticket booking, and magazine subscriptions.
- Keeping up with the digital infrastructure introduced in the country, the Bank''s customers have been provided with a wide variety of payment mechanisms to choose from, ranging from UPI, Mvisa and Bharat QR code. While the traditional payment methods of NEFT and RTGS continued to see growth, the IMPs payment option, available to the customers 24 hours a day, is a much appreciated feature showing constantly increasing adoption throughout the year,
- The Bank''s (salaried) customers can now avail themselves of a pre-approved Personal Loan on mobile app. A pre-qualified customer can apply for a personal loan while logged into the Mobile app and the disbursed amount is instantly credited to customer''s banking account.
- Leveraging the digital infrastructure provided by the Government of India, the Bank''s Net banking now offers access to customers to a ''DigiLocker''. This is a platform that enables a customer to store and verify personal documents online.
- The culmination of the digital offerings in the year has been the Rs,811'' product on the mobile application. Kotak 811 is a mobile based account opening platform using Aadhaar OTP, where customers can open an account with their Aadhaar details. It enables a new customer to simply download an application on his/her mobile phone, and open an account in less than 5 minutes. Customers can set their PINs for the mobile banking app during the process and they also receive a virtual debit card. A first of its kind in the banking industry, the product has already seen much interest.
- On the lending side, the commercial customers'' experience of applying for a loan was enhanced by equipping the sales and relationship personnel, with mobile and tablet applications to accept loan application details and even make immediate initial loan eligibility information available to the customers.
- The wealth management customers got a new mobile app for quick and easy access to investment information. In the digital arena, the corporate banking business focused on online merchant acquisition capability for their customers.
- An Innovation Hub has been established to incubate ideas and develop proof of concepts in emerging technologies such as Artificial Intelligence and Block chain.
Cyber security
As customers get more knowledgeable about security considerations, they have been empowered to directly control the access to their debit cards. The mobile application and net banking provide functions that enable the customer to "turn off" his/her debit card when not in use, and "turn on" the card at the point of usage. Thus putting control, directly in the customers'' hands.
To keep pace with the Bank''s digital initiatives, there is a constant need to raise the bar on information security. Several advanced security monitoring measures that track unrelated transactions and data streams for possible correlation and potential cyber threats were implemented. In accordance with RBI guidelines released in the year, your Bank''s cyber security policies and procedures were enhanced.
SUBSIDIARIES & ASSOCIATES
Your Bank''s subsidiaries are established players in the different areas of financial services, viz. car finance, investment banking, stock broking, asset management and life insurance.
As at 31st March 2017, your Bank has eighteen (18) subsidiaries as listed below:
Domestic Subsidiaries
Kotak Mahindra Prime Limited
Kotak Securities Limited
Kotak Mahindra Capital Company Limited
Kotak Mahindra Old Mutual Life Insurance Limited
Kotak Mahindra Investments Limited
Kotak Mahindra Asset Management Company Limited
Kotak Mahindra Trustee Company Limited
Kotak Investment Advisors Limited
Kotak Mahindra Trusteeship Services Limited
Kotak Infrastructure Debt Fund Limited (formerly known as ''Kotak Forex Brokerage Limited'')
Kotak Mahindra Pension Fund Limited
Kotak Mahindra General Insurance Company Limited
IVY Product Intermediaries Limited
International Subsidiaries
Kotak Mahindra (International) Limited Kotak Mahindra (UK) Limited Kotak Mahindra Inc.
Kotak Mahindra Financial Services Limited
Kotak Mahindra Asset Management (Singapore) Pte. Limited
During the year, Kotak Forex Brokerage Limited changed its name to Kotak Infrastructure Debt Fund Limited, to commence new business activity of an Infrastructure Debt Fund. It has received approval of Reserve Bank of India in April 2017 for commencing the new business.
Your Bank has executed a Share Purchase Agreement in April 2017 for acquisition of the 26% equity stake of Old Mutual plc in Kotak Mahindra Old Mutual Life Insurance Limited (KLI). The transaction is subject to obtaining all necessary regulatory and other approvals. Upon completion of the said acquisition, the Bank along with its subsidiaries will hold 100% beneficial interest in KLI.
The various activities of the subsidiaries and the performance and financial position of the subsidiaries and associates are outlined in the Management Discussion and Analysis section appended to this Report.
The Bank''s Policy for determining material subsidiaries is available on the Bank''s website viz. URL: http://ir.kotak.com/governance/policies.html
As at 31st March 2017, your Bank has following four (4) Associate companies:
ACE Derivatives & Commodity Exchange Limited Infina Finance Private Limited Matrix Business Services India Private Limited Phoenix ARC Private Limited
The Annual Report which consists of the financial statements of your Bank on standalone basis as well as consolidated financial statements of the group for the year ended 31st March 2017, has been sent to all the members of your Bank. Web link of the Annual Report has been sent to all members whose email IDs are registered with the Bank/Depository Participant(s). For members who have not registered their email IDs, physical copies of the Annual Report are sent. It does not contain Annual Reports of your Bank''s subsidiary companies. Your Bank will make available full Annual Report (including the Annual Reports of all subsidiaries) either a hard or soft copy depending upon request by any member of your Bank. These Annual Reports will be available on your Bank''s website viz. URL: http://ir.kotak.com/annual-reports and will also be available for inspection by any member at the Registered Office of your Bank.
EMPLOYEE STOCK OPTION & STOCK APPRECIATION RIGHTS SCHEMES
The stock options and the stock appreciation rights granted to the employees of the Bank and its subsidiaries currently operate under the following Schemes:
- Kotak Mahindra Equity Option Scheme 2007
- Kotak Mahindra Equity Option Scheme 2015
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2007
- Kotak Mahindra Bank Ltd. (IVBL) Employee Stock Option Scheme 2010
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2013
- Kotak Mahindra Stock Appreciation Rights Scheme 2015
The disclosures requirements under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, for the aforesaid ESOP & SARs Schemes, in respect of the year ended 31st March 2017, are disclosed on the Bank''s website viz. URL: http://ir.kotak.com/annual-reports
CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT
Pursuant to Regulation 27 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations), a separate section entitled ''Report on Corporate Governance'' has been included in this Annual Report. The Report of Corporate Governance also contains certain disclosures required under the Companies Act, 2013. A Business Responsibility Report containing the requisite details under Regulation 34 of the SEBI LODR Regulations is disclosed on the Bank''s website viz. URL: http://ir.kotak.com/annual-reports
DIRECTORS & KEY MANAGERIAL PERSONNEL
Directors retiring by rotation
Mr. Mark Newman, retires by rotation as a Director at this Annual General Meeting and is eligible for re-appointment.
Directors appointed during the year
Mr. Uday Khanna (DIN 00079129) was appointed as an Additional Director of the Bank with effect from 16th September 2016. Mr. Khanna who holds office as a Director up to the date of this Annual General Meeting is proposed to be appointed as an Independent Director, not liable to retire by rotation, for a term of 5 years from the date of his appointment i.e. 16 September 2016, under Section 149 of the Companies Act, 2013, at the ensuing Annual General Meeting. In terms of Section 160 of the Companies Act, 2013, your Bank has received notice in writing from a member along with requisite deposit of Rs,1,00,000 proposing candidature of Mr. Khanna for his appointment as an Independent Director of the Bank.
Prof. S. Mahendra Dev (DIN 06519869) was appointed as an Independent Director of the Bank for a term of 5 years up to 14th March 2018. Based on the recommendation of the Nomination & Remuneration Committee, the Board of Directors of the Bank, at its meeting held on 15th May 2017 reappointed Prof. Dev as an Independent Director for a further term of 3 years pursuant to the provisions of Section 149, 150(2) & 152 of the Companies Act, 2013 and Section 10-A(2-A) of the Banking Regulation Act, 1949, subject to the approval of the shareholders at the ensuing Annual General Meeting of the Bank.
The Board of Directors of the Bank, at the same meeting, also re-appointed Mr. Uday Kotak as Executive Vice-Chairman and Managing Director for the period from 1st January 2018 to 31st December 2020, subject to the approval of the shareholders and of the Reserve Bank of India. Further, Mr. Dipak Gupta has been re-appointed as Whole-time Director of the Bank designated as Joint Managing Director for the period from 1st January 2018 to 31st December 2020 subject to the approval of the shareholders and of the Reserve Bank of India. The approval of the shareholders in this regard is being sought at the ensuing Annual General Meeting of the Bank.
The details of the Directors appointed/re-appointed are set out in the Corporate Governance Report annexed to this Report.
Declaration from Independent Directors
The Board has received declarations from the Independent Directors as per the requirement of Section 149(7) of the Companies Act, 2013 and the Board is satisfied that the Independent Directors meet the criteria of independence as mentioned in Section 149(6) of the Companies Act, 2013.
Board Evaluation
The Nomination and Remuneration Committee of the Bankâs Board under the expert advice of an external agency specialized in human resource and management consultancy, has formulated the criteria for performance evaluation of the Directors and the Board as a whole. The criteria formulated broadly covers the Board role, Board/Committee membership, practice & procedure and collaboration & style.
In line with the SEBI Guidance note on Board Evaluation, a Board effectiveness assessment questionnaire was designed for the performance evaluation of the Board, its Committees, Chairman and individual directors and in accordance with the criteria set and covering various aspects of performance including structure of the board, meetings of the board, functions of the board, role and responsibilities of the board, governance and compliance, evaluation of risks, grievance redressal for investors, conflict of interest, stakeholder value and responsibility, relationship among directors, director competency, board procedures, processes, functioning and effectiveness. The said questionnaire was circulated to all the directors of the Bank for the annual performance evaluation.
Based on the assessment of the responses received to the questionnaire from the directors on the annual evaluation of the Board, its Committees, Chairman and the individual Directors, the Board Evaluation Report was placed before the meeting of the Independent Directors for consideration. Similarly, the Board at its meeting assessed the performance of the Independent Directors. The Directors were quite satisfied with the results of the performance evaluation of the Board & its Committees, Chairman and individual directors.
Key Managerial Personnel (KMPs)
The following officials of the Bank continue to be the "Key Managerial Personnel" pursuant to the provisions of Section 203 of the Companies Act, 2013:
- Mr. Uday Kotak, Executive Vice Chairman and Managing Director
- Mr. Dipak Gupta, Joint Managing Director
- Mr. Jaimin Bhatt, President & Group Chief Financial Officer
- Ms. Bina Chandarana, Company Secretary
Appointment & Remuneration of Directors & KMPs
The appointment and remuneration of Directors of the Bank is governed by the provisions of Section 35B of the Banking Regulation Act, 1949. The Nomination and Remuneration Committee of the Bank''s Board has formulated criteria for appointment of Senior Management personnel and the Directors. Based on the criteria set it recommends to the Board the appointment of Directors and Senior Management personnel. The Committee considers the qualifications, experience, fit & proper status, positive attributes as per the suitability of the role, independent status and various regulatory/ statutory requirements as may be required of the candidate before such appointment.
The Reserve Bank of India (''RBI'') vide its circular no.DBOD.No.BC.72/29.67.001/201 1-12 dated 13th January 2012 has issued the Guidelines on Compensation of Whole Time Directors / Chief Executive Officers / Other Risk Takers of Private Sector Banks on Compensation Policy which inter alia cover the following:
- Proper balance between fixed pay and variable pay;
- Variable pay not to exceed 70% (Seventy Per Cent) of the fixed pay in a year;
In accordance with the aforesaid RBI Circular, the Board of the Bank has adopted a Compensation Policy for its Whole-time Directors, Chief Executive Officer of the Bank and other employees which includes issue of stock appreciation rights as a form of variable pay, linked to the Bank''s stock price, payable over a period of time. The salient features of the Compensation Policy are as follows:
- Objective is to maintain fair, consistent and equitable compensation practices in alignment with Kotak''s core values and strategic business goals.
- Applicable to all employees of the Bank. Employees classified into 3 groups: o Whole-time Directors/Chief Executive Officer
- Risk Control and Compliance Staff o Other categories of Staff
- Compensation structure broadly divided into Fixed, Variable and ESOPs
- Fixed Pay - Total cost to the Company i.e. Salary, Retrials and Other Benefits
- Variable Pay - Linked to assessment of performance and potential based on Balanced Key Result Areas (KRAs), Standards of Performance and achievement of targets with overall linkage to Bank budgets and business objectives. The main form of incentive compensation includes - Cash, Deferred Cash/Incentive Plan and Stock Appreciation Rights.
- ESOPs - Granted on a discretionary basis to employee based on their performance and potential with the objective of retaining the employee.
- Compensation Composition - The ratio of Variable Pay to Fixed Pay and the ratio of Cash v/s Non Cash within Variable pay outlined for each category of employee classification.
- Any variation in the Policy to be with approval of the Nomination & Remuneration Committee.
- Malus and Clawback clauses applicable on Deferred Variable Pay.
- Ensuring no personal hedging strategies by employees which undermine risk alignment effects as part of their remuneration.
The details of the remuneration paid to the Non-Executive Chairman, Executive and Non-Executive Directors of the Bank for the year ended 31st March 2017 is provided in the Corporate Governance Report annexed to this Report.
The Non-Executive Chairman of the Bank receives a fixed amount of remuneration as recommended by the Board and approved by the shareholders of the Bank and RBI, from time to time. He also receives remuneration by way of sitting fees for attending meetings of the Board or Committees thereof.
RBI vide its circular no. DBR.No.BC.97/29.67.001/2014-15 dated June 1, 2015 has issued guidelines on payment of compensation to the Non-Executive Directors (NEDs) of private sector banks which inter-alia specifies the following:
- Compensation structure broadly divided into o Sitting fees
- Re-imbursement of expenses o Commission (profit based)
- Amount of sitting fees and commission to be decided by the Board from time to time, subject to the regulatory limits.
- Overall cap on commission for each director Rs,10 lac per annum.
- NEDs not eligible for any stock options of the Bank.
At the Annual General Meeting of the Bank held on 22nd July 2016, the shareholders have approved the payment of commission to the NEDs of the Bank with effect from the financial year 2015-16.
Remuneration paid to the KMPs is in line with the Compensation Policy of the Bank which is based on the RBI Guidelines.
Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014
1. Ratio of the remuneration of each director to the median remuneration of the employees for the financial year:
Directors |
Title |
Ratio |
Mr Uday Kotak |
Vice Chairman & Managing Director |
46.86x |
Mr Dipak Gupta |
Joint Managing Director |
46.38x |
Dr Shankar Acharya |
Non-Executive Chairman |
5.33x |
2. Percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:
Directors/KMP |
Title |
% increase in remuneration |
% increase in remuneration excluding SARs |
Mr Uday Kotak |
Vice Chairman & Managing Director |
6.55 |
6.55 |
Mr Dipak Gupta |
Joint Managing Director |
6.85 |
6.85 |
Dr Shankar Acharya |
Non-Executive Chairman |
11.11 |
11.11 |
Mr Jaimin Bhatt |
Group CFO |
1.18 |
5.84 |
Ms Bina Chandarana |
Company Secretary |
5.48 |
13.08 |
3. Percentage increase in the median remuneration of employees in the financial year:
For employees who were in employment for the whole of FY 2015-16 and FY 2016-17 increase in the median remuneration is 10.26%.
4. Number of permanent employees on the rolls of Bank at the end of the year: 33,013
5. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:
For employees other than managerial personnel who were in employment for the whole of FY 2015-16 and FY 2016-17 the average increase is 10.34% and 11.95% excluding SARs.
Average increase for managerial personnel is 4.48% and 7.07% excluding SARs.
6. Affirmation that the remuneration is as per the remuneration policy of the Bank:
The Bank is in compliance with its Compensation Policy Notes:
1) Remuneration includes Fixed pay Variable paid during the year perquisite value as calculated under the Income Tax Act, 1961. Remuneration does not include value of Stock Options.
2) Stock Appreciation Rights (SARs) are awarded as variable pay. These are settled in cash and are linked to the average market price/closing market price of the Bank''s stock on specified value dates. Cash paid out during the year is included for the purposes of remuneration.
3) The Non-Executive Directors of the Bank (other than the Non-Executive Chairman) receive remuneration in the form of sitting fees for attending the Board/Committee meetings and in the form of an annual profit based commission. Such annual profit based commission was paid for the first time for FY 2015-16 during FY 2016-17.
4) Increase in remuneration of Mr. C. Jayaram who retired as Joint Managing Director on 30th April 2016, but continues as non-executive director w.e.f. 1st May 2016, has not been provided.
SECRETARIAL AUDITOR
Pursuant to Section 204 of the Companies Act, 2013, your Bank has appointed Ms. Rupal D. Jhaveri, a Company Secretary in Practice, as its Secretarial Auditor. The Secretarial Audit Report for the financial year ended 31st March 2017 is annexed to this Report.
DEPOSITS
Being a banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.
AUDITORS
In terms of Section 139 of the Companies Act, 2013, Messrs S.R. Batliboi & Co. LLP, Chartered Accountants, were appointed as statutory auditors of your Bank for a period of four years from the conclusion of the Thirtieth Annual General Meeting until the conclusion of the Thirty fourth Annual General Meeting of the Bank, subject to the annual approval of RBI and ratification by the members every year. Accordingly, requisite resolution forms part of the Notice convening the Annual General Meeting.
INTERNAL FINANCIAL CONTROLS
The Board of Directors confirms that your Bank has laid down set of standards, processes and structure which enables to implement Internal Financial controls across the organization with reference to Financial Statements and that such controls are adequate and are operating effectively. During the year under review, no material or serious observation has been observed for inefficiency or inadequacy of such controls.
IMPLEMENTATION OF IND AS
The Ministry of Finance, Government of India has vide its press release dated January 18, 2016 outlined the roadmap for implementation of International Financial Reporting Standards (IFRS) converged Indian Accounting Standards (Ind AS) for Banks, Non-banking Financial Companies and Insurance companies. RBI has advised Banks vide RBI/2015-16/315DBR.BP.BC.No.76/21.07.001/2015-16 to follow the Ind AS as notified under the Companies (Indian Accounting Standards) Rules, 2015 subject to any guideline/direction issued in this regard. For Banking companies, the implementation of Ind AS will begin from April 1, 2018 onwards, with comparatives for the year beginning April 1, 2017. The Ind AS quarterly financials of FY 2017-18 will need to be published as Y-o-Y comparison from June 2018 onwards.
As per Reserve Bank of India (RBI) directions, your Bank has taken following steps so far:
- Submitted Standalone Performa Ind AS financial statements to the RBI for the half-year ended September 30, 2016, as required.
- Formed Steering Committee for Ind AS implementation. The Steering Committee comprises of representatives from Finance, Risk, Operations and Treasury. The Committee oversees the progress of Ind AS implementation in the Bank, and provides guidance on critical aspects of the implementation such as Ind AS technical requirements, systems and processes, business impact, people and project management. The Committee closely reviews progress of Ind AS implementation.
- Evaluating various IT solutions to automate Ind AS especially Expected Credit Losses (ECL) computation and other accounting changes in order to improve the robustness of the process.
The Bank will continue to liaise with RBI and industry bodies on various aspects pertaining to Ind AS implementation.
RELATED PARTY TRANSACTIONS
All the Related Party Transactions that were entered into during the financial year were on arm''s length basis and were in ordinary course of business.
Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014, there are no related party transactions to be reported under Section 188(1) of the Companies Act, 2013, in form AOC-2.
All Related Party Transactions as required under Accounting Standards AS-18 are reported in Note 23 of Schedule 17 - Notes to Accounts of the Consolidated financial statements and Note 7 of Schedule 18 - Notes to Accounts of the Standalone financial statements of your Bank.
The Bank''s Policy on dealing with Related Party Transactions is available on the Bank''s website viz. URL: http://ir.kotak.com/governance/policies.html
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given, securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from the disclosure requirement under Section 134(3)(g) of the Companies Act, 2013.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
Your Bank is committed to its "Vision Statement" of upholding its Global Indian Financial Services Brand creating an ethos of trust across all constituents, developing a culture of empowerment and a spirit of enterprise thereby becoming the most preferred employer in the financial services sector.
Consistent with the Vision Statement, your Bank is committed to maintain and provide to all its employees and directors highest standards of transparency, probity and accountability. The Kotak Group endeavors to develop a culture where it is safe and acceptable for all employees and directors to raise / voice genuine concerns in good faith, and in a responsible as well as effective manner,
A vigil mechanism has been implemented through the adoption of Whistleblower Policy with an objective to enable any employee or director, raise genuine concern or report evidence of activity by the Bank or its employee or director that may constitute: Instances of corporate fraud; unethical business conduct; a violation of Central or State laws, rules, regulations and/or any other regulatory or judicial directives; any unlawful act, whether criminal or civil; malpractice; serious irregularities; impropriety, abuse or wrong doing; deliberate breaches and non-compliance with the Bank''s policies; questionable accounting/audit matters/financial malpractice. The same option has now been extended to the vendors of the Bank also. The concerns can be reported on the website viz. URL: https://cwiportal.com/kotak.
Currently an online mechanism enabling aforementioned reporting has been implemented over and above other modes of communication like e-mail, or a letter sent by mail, courier or fax to designated persons.
Safeguards to avoid discrimination, retaliation, or harassment, and confidentiality have been incorporated in the policy. All employees and directors have access to the Chairman of the Audit Committee in appropriate and exception circumstances.
The Policy has been uploaded on the Bank''s intranet as well as website viz. URL: http://ir.kotak.com/governance/policies.html and regular communication is made for sustained awareness.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Bank has constituted a Board Corporate Social Responsibility Committee (CSR Committee). The CSR Committee presently consists of Mr. C. Jayaram, Mr. Dipak Gupta and Prof. S. Mahendra Dev.
Your Bank''s CSR Committee drives the CSR programme of the Bank. Your Bank has a Board approved CSR policy, charting out its CSR approach. This policy articulates the Bank''s aim to positively contribute towards economic, environmental and social well-being of communities through its Corporate Social Responsibility agenda. The Bank''s CSR agenda is driven by its key focus areas:
a. Promoting education - primary focus area
b. Enhancing vocational skills and livelihood
c. Promoting preventive healthcare and sanitation
d. Reducing inequalities faced by socially and economically backward groups
e. Sustainable development
f. Relief and rehabilitation
g. Clean India
h. Sports
The Bank''s CSR policy is available on the Bank''s website viz. URL : http://www.kotak.com/corporate-responsibility.html
Pursuant to the provisions of Section 135, schedule VII of the Companies Act 2013 (the Act), read with the Companies (Corporate Social Responsibility) Rules, 2014 the report of the expenditure on CSR by the Company is as under:
The average net profit u/s 198 of the Bank standalone for the last three financial years preceding 31st March 2017 is Rs, 2,746.24 crore.
The prescribed CSR expenditure required u/s 135, of the Act for FY 2016-17 is Rs, 5,492 lac.
The CSR expenditure incurred for the period 1st April 2016 to 31st March 2017 under Section 135 of Companies Act, 2013 amounts to Rs, 1,733 lac as against Rs, 1,641 lac CSR spend in the financial year 2015-16. The unspent amount for FY 2016-17 is Rs,3,759 crore.
CSR expenditure of Rs, 1,733 lac in FY 2016-17 as a percentage of average net profit u/s 198 of the Bank standalone at Rs, 2,746.24 crore is 0.63%.
The Bank has been spending on CSR focused themes and programmes, which have been approved by the Board CSR Committee and the Board. The CSR spending is guided by the vision of creating long-term benefit to the society. The Bank is building its CSR capabilities on a sustainable basis and is committed to gradually increase its CSR spend in the coming years The Bankâs commitment to achieve the mandated spend can be seen from the increasing CSR spends over the years. In FY 2014-15, Bank''s CSR spend was Rs,1,197 lac, in FY 2015-16 it was Rs,1,641 lac. In the reporting period, FY 2016-17, the CSR expenditure has been further increased to Rs,1,733 lac.
Though the Bank is eligible to consider up to 5% of total CSR spend as administrative expenditure towards building its CSR capacities, etc., the Bank has taken a call not to consider it as a part of CSR spend for the year FY 2016-17.
The details of CSR activities and report under Section 135 of the Companies Act, 2013 for FY 2016-17, are annexed to this Report.
RISK MANAGEMENT POLICY
Your Bank has in place a comprehensive Group Enterprise wide Risk Management (ERM) framework supported by detailed policies and processes for management of Credit Risk, Market Risk, Liquidity Risk, Operational Risk and various other Risks. During the year, the Group ERM Policy was revised, keeping in mind the advances in Risk Management over the past few years and emerging / evolving guidelines. Details of identification, assessment, mitigations, monitoring and the management of these Risks are mentioned in the Management Discussion and Analysis section appended to this Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
The provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not applicable to your Bank.
EMPLOYEES
The employee strength of your Bank, standalone, was over 33,000 and along with its subsidiaries was over 44,000 as of 31st March 2017.
114 employees employed throughout the year and 56 employees employed for part of the year were in receipt of remuneration of Rs, 1.02 crore or more per annum.
Organizational culture aspects like trust & inclusiveness were also reiterated through cross functional meets conducted by senior business leaders for employees at mid management level under the "Meet 5" initiative.
In a very short span, your Bank has crossed several milestones in its Gender Diversity agenda.
- A differentiated talent acquisition strategy to increase women employee base across various suitable roles has helped us to continue adding 21% women amongst all new hires in the Bank. While continuing with our philosophy of providing equal opportunities, an aggressive push in this area will help us achieve a better balance in gender diversity,
- Prevention of Sexual Harassment (POSH): Bank continues with the belief on zero tolerance towards sexual harassment at workplace and continues to uphold and maintain itself as a safe and non-discriminatory organization. To achieve the same Kotak reinforces the understanding and awareness of Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Bank has formulated Internal Complaints Committee (ICC) at three regions for reporting any untoward instance. Any complaints pertaining to sexual harassment are diligently reviewed and investigated and treated with great sensitivity. The ICC members have been trained in handling and resolving complaints and have also designed an online e-learning POSH Awareness module which covers the larger employee base.
Following is a summary of sexual harassment complaints received and disposed off during the year 2016-17:
- No. of complaints received : 19
- No. of complaints disposed off : 12
In the case of 7 pending cases, enquiries were in progress at the close of the year.
With our objective to identify, build and nurture leaders across levels to deliver superior business results and address individual career aspirations bank continues to put efforts through various interventions.
As Bank enters in its next phase of growth and expansion of footprint across urban and rural India, Bank and its subsidiaries continued to carry out several initiatives to attract and retain a pool of highly skilled and motivated employees who are aligned to the firmâs vision of becoming the most trusted financial services provider.
In accordance with the provisions of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the names and other particulars of the employees are set out in the annexure to the Directors'' Report. In terms of the Proviso to Section 136(1) of the Companies Act, 2013, the Directors'' Report is being sent to all shareholders excluding the aforesaid annexure. The annexure is available for inspection at the Registered Office of your Bank. Any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of your Bank.
DIRECTORS'' RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the operational management, confirm in pursuance of Section 134(5) of the Companies Act, 2013, that:
(i) your Bank has, in the preparation of the annual accounts for the year ended 31st March 2017, followed the applicable accounting standards along with proper explanations relating to material departures, if any;
(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 state of affairs of your Bank as at 31st March 2017 and of the profit of your Bank for the financial year ended 31st March 2017;
(iii) they have taken proper and sufficient care to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Bank and for preventing and detecting fraud and other irregularities;
(iv) the annual accounts have been prepared 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 are operating effectively; and
(vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively
ANNEXURES
Following statements/reports/certificates are set out as Annexure to the Directors'' Report:
- Extract Of Annual Return under Section 134(3)(a) of the Companies Act, 2013 read with Rule 12 (1) of Companies (Management & Administration) Rules, 2014.
- Secretarial Audit Report pursuant to Section 204 of the Companies Act, 2013.
- Certificate from the auditors regarding compliance of conditions of corporate governance as stipulated in para E of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the valuable guidance and support received from the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority and other Government and Regulatory agencies. Your Directors acknowledge the support of the members and also wish to place on record their appreciation of employees for their commendable efforts, teamwork and professionalism.
For and on behalf of the Board of Directors
Dr. Shankar Acharya
Place: Delhi
Chairman
Date: 16th May 2017
Mar 31, 2016
The Directors present their Thirty-first Annual Report together with
the audited accounts of your Bank for the year ended 31st March 2016.
FINANCIAL HIGHLIGHTS
Pursuant to the approval of the Reserve Bank of India to the Scheme of
Amalgamation of ING Vysya Bank Ltd. (IVBL) with Kotak Mahindra Bank
Ltd. (the Bank), IVBL merged with the Bank effective from 1st April
2015. The current year consolidated and standalone figures include
operations of the erstwhile IVBL. Hence, the previous year figures are
not comparable.
The financial highlights are summarized below:
(A) Kotak Mahindra Bank Limited  Consolidated financial highlights:
31st March 2016 31st March 2015
Rs, crore Rs, crore
Total income 28,032.36 21,471.08
Total expenditure, excluding
provisions and contingencies 22,017.06 16,715.37
Operating Profit 6,015.30 4,755.71
Provisions and contingencies,
excluding provision for tax 991.56 205.73
Profit before tax 5,023.74 4,549.98
Provision for taxes 1,592.62 1,484.90
Profit after tax 3,431.12 3,065.08
Less: Share of
minority interest 65.19 59.51
Add: Share in Profit
of Associates 92.92 39.88
Consolidated Profit for
the Group 3,458.85 3,045.45
Earnings per Equity
Share:
Basic (Rs,) 18.91 19.75
Diluted (Rs,) 18.87 19.70
(B) Kotak Mahindra Bank Limited  Standalone financial highlights:
31st March 2016 31st March 2015
Rs, crore Rs, crore
Total Income 18,996.42 11,748.32
Total expenditure, excluding
provisions and contingencies 14,955.33 8,750.86
Operating Profit 4,041.09 2,997.46
Provisions and contingencies,
excluding tax provisions 917.37 164.50
Profit before tax 3,123.72 2,832.96
Provision for taxes 1,033.94 966.98
Profit after tax 2,089.78 1,865.98
Add: Surplus brought forward
from the previous year 5,095.26 4,005.29
Add: Net Additions on
Amalgamation 1,674.71 -
Amount available for
appropriation 8,859.75 5,871.27
Appropriations:
Statutory Reserve under
Section 17 of the Banking
Regulation Act, 1949 522.45 466.50
General Reserve - 93.30
Transfer to / (from)
Investment Reserve Account (41.52) 86.65
Transfer to Capital Reserve 9.17 5.91
Transfer to Special Reserve 45.00 28.00
Proposed Dividend 91.84 82.07
Corporate Dividend Tax 18.69 13.58
Surplus carried to
Balance Sheet 8,214.12 5,095.26
BONUS ISSUE OF SHARES
During the year, pursuant to approval of the shareholders of the Bank
at the Annual General meeting held on 29th June 2015, your Bank issued
91,28,41,920 Bonus shares in the ratio of 1:1 i.e. one equity share for
every one equity share held on the Record Date, to the Members on 10th
July 2015.
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs, 0.50 per
equity share entailing a payout of Rs, 110.53 crore including dividend
distribution tax. The dividend would be paid to all the shareholders,
whose names appear on the Register of Members/Beneficial Holders list
on the Book Closure date.
CAPITAL
During the year, your Bank has allotted 99,91,715 equity shares
(adjusted for bonus) arising out of the exercise of Employees Stock
Options granted to the employees and whole-time directors of your Bank
and its subsidiaries. As per the ESOP Schemes of erstwhile ING Vysya
Bank Ltd. (eIVBL), the stock options granted to the employees vested on
an accelerated basis upon the merger. Consequently, the number of stock
options on which vesting was accelerated was 1,04,91,900 (on a post
swap basis, adjusted for bonus shares).
Post allotment of equity shares as aforesaid and the bonus allotment,
the issued, subscribed and paid-up share capital of your Bank stands at
Rs, 9,17,19,10,790 comprising of 1,83,43,82,158 equity shares of Rs, 5
each as on 31st March 2016.
Your Bank is well capitalized and has a Capital Adequacy Ratio (''CAR'')
under Basel III as at 31st March 2016 of 16.34% with Tier I being
15.28%.
During the year, your Bank has not issued any capital under Tier II. As
on 31st March 2016, outstanding Unsecured, Redeemable Non-Convertible,
Subordinated Debt Bonds were Rs, 969.7 crore and outstanding Unsecured,
Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II
stood at Rs, 806.31 crore.
TERMINATION OF GDS PROGRAM
The Global Depository Shares (GDS) of the Bank were listed on
Luxembourg Stock Exchange. Consequent to the issuance of notice of
termination of the GDS program by the Bank to the Custodian and the
Depository, the Depository Agreement entered into between the Bank and
the Depository was terminated. Subsequently, the GDS program has been
terminated with effect from 4th September 2015.
OPERATIONS Consumer Banking
The merger of ING Vysya Bank (IVBL) with your Bank brought in 577
branches and 657 ATMs from the erstwhile IVBL.
Your Bank consolidated its network presence through a measured
expansion of its footprint across the country and as of 31st March 2016
had 1333 branches and 2032 ATMs, covering 706 locations. Of the 74 new
branches commissioned this year, 32 were in rural and semi-urban
locations. Your Bank added about 10.96 lac new customers this year
across core banking products of savings and checking accounts, term
deposits, overdrafts and non-resident accounts.
Your Bank rolled out several initiatives aimed at offering a superior
and differentiated customer experience. Some key ones are:
Products and Services
l Launched its first E-Lobby at Andheri Metro Station, Mumbai. The
e-lobby offers a host of self service capabilities such as ATM, Banking
Kiosk, Tablets, Surface Table, etc. which can be used by both customers
and non-customers.
- Enhanced its suite of products positioned at specific customer
segments and launched two new propositions, MY FAMILY - a savings bank
proposition tailored exclusively for the entire family. The proposition
gives the benefit of pooling in balances across family members & also
gives them the benefit of a dedicated relationship manager for the
family, and, ALPHA - a savings bank proposition linked to investments.
The customer gets the benefit of a NMC waived savings account when they
choose an RD (or) MF SIP (or) NPS along-with a term insurance premium
of Rs, 300 per month (which offers a cover of Rs,20 lac) linked to
their savings account. The proposition also offers Cash Back on Debit
Card spends & is targeted for the age group of 18-55.
- Tied up with Thomas Cook and Kuoni Travels to offer a Holiday Savings
Account linked to a Recurring Deposit. Customers get benefit of various
schemes & offers launched by these travel companies and the banking
linkage enables them to save on a monthly basis to facilitate the
holiday expense.
- Appointed as Authorised Collection Centre (ACC) by Stock Holding
Corporation of India Ltd (SHCIL) for providing E-stamping facility in
the states of Punjab and Rajasthan.
- Appointed as one of the collecting Banks for Government of India''s
Sovereign Gold Bonds and was actively involved in raising subscriptions
across all three tranches.
- Launched three new Current Account products - Kotak Pro Plus, Kotak
Elite Plus and Kotak Ace Plus offering more efficient cash management
in select locations.
- Introduced Kotak Cheque Protect, a calibrated credit oriented program
for offering cheque protection facility to existing customers for
honouring cheques in the event of shortfall in the bank account, based
on certain pre-approved parameters.
- Implemented Foreign Account Tax Compliance Act (FATCA) / Common
Reporting Standard (CRS) which requires the Bank to carry out due
diligence of its customers to identify the individuals and entities
which fulfill the indices as prescribed by the regulatory bodies and
reporting to the Indian tax authorities for onward submission of
information to foreign authorities as appropriate.
Business Lines
a) Non Resident Indian Business
Some of the key initiatives taken this year are:
- Extended C2R money transfer mode for Canada. Your Bank''s NRI clients
can now use this medium to transfer money from Canada to their Kotak
Bank account in India.
- Further expanded the network of exchange house relationships and the
count now stands at 26.
- As a platform to reach out to the overseas Indian community, your
Bank has participated in various international business forums
organized by the Indian community in various countries.
- In order to work closely with the mariner community & shipping
companies your Bank has participated in various mariner events
nationally.
b) Priority Banking Business
Privy League program, positioned to cater to the affluent segment, now
services 3.4 lac customers. A new tier-"Insignia" was launched at
select locations to cater to customers with group relationship value of
at least Rs, 1 crore. A Corporate Credit card with exclusive benefits
for Privy League Business banking customers was introduced to increase
the segmental focus in the program. To address customers'' need for
legacy planning, Smart Will, an automated online will writing solution
was launched in association with Kotak Securities.
c) Corporate Salary Business
Salary2Wealth  Your Bank''s corporate salary business now caters to
over 17 lac customers across 13,700 corporate. The Salary2Wealth book
grew by 33% Y-o-Y to close the year at Rs, 3,988 crore and acquired
4.90 lac new customers with more than 1,700 new corporate sign-up''s.
d) Consumer Assets
Your Bank has continued to grow the product lines under the Consumer
Assets business.
Credit Card: Credit card business has issued 6.34 lac cards by March
2016 and is in its seventh year of operations. The premium range of our
products  VISA Signature and VISA Platinum have driven the spends
growth in the portfolio and it contributes to 42% of spends. The credit
card business has clocked total spends of Rs, 4,543 crore for the year
at 42% growth Y-o-Y with a book size of Rs,942 crore.
Salaried Personal Loan: Salaried personal loan business offers salaried
individuals personal loans with a tenure of upto 60 months. This year
the business has grown by 70% with outstanding loans of Rs, 1,416 crore
as of March 2016. The total customer base stands at 47,500 customers.
Home Finance: Home finance business clocked growth of 19% in
disbursements with loan book growth of 19%. Your Bank has expanded its
home finance business further in Tier II cities. Cross Sell through
Bank Branches, Corporate Salary, Privy, and Wealth Teams contributed to
around 38% of total volume. This year also witnessed very low losses on
account of effective recovery and collection processes and policies
adopted.
e) Business Banking Assets (BBA)
Your Bank through its BBA division offers secured and unsecured
Business loans, Loans against Property & Working Capital Finance to
self- employed professionals / non-professionals and Small & Medium
Enterprises. This has been a landmark year for your Bank''s BBA business
with its book growing by 30%. It continues to maintain its best in
class portfolio quality through it effective and efficient risk
management and recovery policies and practices. Capitalizing on the
growing retail branch network, your Bank managed to expand its BBA
product offering in over 450 branches.
Wholesale Banking
Your Bank through its consolidated franchise has focused on serving
customers'' requirements across segments with its wide array of
customized financial products and services that are driven through
best-in-class technology platforms. Your Bank is a trusted banking
franchise consistently delivering right and customized solutions to
high quality customers through a passionate and entrepreneurial team.
Focused approach on client selection and constant portfolio monitoring
has ensured a healthy portfolio through both volatile economic
situation and tough credit environment in the last financial year. In
order to give more focus to our client activities, your Bank created a
separate Corporate, Institutional & Investment Banking vertical which
covers selected large Indian corporate houses with a view to provide a
single platform to service both their corporate banking and investment
banking needs. Consequent to the merger of ING Vysya Bank Limited with
your Bank, we now have a strong presence in the multinational segment
i.e. as a banker to various multinational companies present in India.
The Integrated Global Transaction Banking with enhanced suite of
products and solutions is steered by innovation, technology & "Kona
Kona Kotak". The merger has opened up new opportunities to cater to
needs of customer segments such as Insurance, Corresponding Banking and
Multinational Companies. In addition to serving existing customers as
well as being bankers'' Bank on Global Transaction Banking, your Bank
has led from the front in offering services to new age segments viz.
E-com and M-com. Your Bank recognizes the dynamic landscape in
Transaction Banking and the evolving Banking space and has suitably
invested in fetch initiatives. It is your Bank''s Endeavour to continue
to provide simple, secure, reliable solutions leading to superior
customer experience.
Your Bank has been in the limelight for its people, products and
services. It has been adjudged Best Cash Management Bank across
business categories  Small, Medium and Large Corporate. The Global
Custodian magazine has conferred a dual recognition for the Custody
Business in the India Domestic Survey and later in the Survey of Agent
Banks in Emerging Markets.
Your Bank has introduced the following key initiatives to serve
customers better:
- Service Support: To ensure a faster customer response, a Service
Solutions vertical was set up during the year. This vertical is the
single point of contact for all service related and documentation
issues for wholesale customers with personnel present across all key
major 9 locations across the country.
- Secure Internet Banking: Given the growing online frauds, the
security of the net banking platform has been further strengthened by
offering secured token for logging in. Customers can use the dynamic
number on the token along with the password to access the account
online and transact thereafter.
- KashPay: Offers "walkin" cash and cheque collection services through
branch network thereby enhancing the reach and convenience for the
customer. The product is capable of validating the collection data
pre-fed by customer to ensure only valid requests are processed. The
transaction processing is supported by comprehensive MIS for ease of
reconciliation and instant status of collection.
- Operation SAHAJ: In order to gain increased efficiencies, your Bank
has started Operation SAHAJ. This focuses on improving existing client
facing or back-end process in order to deliver superior service to the
client with a lower turnaround time without compromising on credit /
operational risk. One of our client facing Endeavour''s has been able to
open any account in one day post receiving the complete documentation.
As of today, courtesy Operation SAHAJ, accounts are being opened within
the target of one day. Further, various products are implementing
monitoring and control systems to measure and improve service
parameters.
- Trade: Tie up with multiple offshore banks for facilitating client
transactions like offshore guarantees, ECA financing, ECB funding,
offshore subsidiary funding etc. Your Bank is preferred trade partner
for top banks for Europe and US region for their India centric
business. Financial/ Performance Guarantees, Letter of Credit and
remittances of these banks now are handled at your Bank counters.
Commercial Banking
The Commercial Banking business has registered a reasonable growth in
FY 2015-16 despite subdued market sentiments and erratic monsoon.
Commercial Vehicles (CV) and Construction Equipment (CE) sectors, which
have been witnessing slowdown since 2011, showed strong signs of
recovery. The CV situation has improved significantly over the previous
year, especially in the case of Medium Commercial Vehicle (MCV) & Heavy
Commercial Vehicle (HCV) sales across segments, which was driven by
replacement demand. Your Bank has increased exposure significantly to
this sector in FY 2015-16. Light Commercial Vehicle (LCV) segment has
also grown over the previous year. Further, decrease in energy prices
and all round improvement of load factors have improved viability for
transport operations and also reduced levels of delinquency. Small
Commercial Vehicles (SCV) segment is also showing signs of recovery
with marginal growth in the last quarter.
Despite a second back to back dry spell last year, the agri business
(including the tractor finance business) managed to grow last year with
the loans outstanding of Rs,17,993 crore. The agri business increased
its focus on financial inclusion activities by directly financing the
micro loans segment for women''s Joint Liability Groups. Close to 56,000
women borrowers were added with loan sizes of around Rs,20,000 each to
women in the states of UP and Bihar.
Your Bank has maintained its market share in the tractor finance
business. While the delinquencies in this segment have increased, it is
under control.
Activities in focus were loans for construction of ware houses & cold
storages, warehouse receipt funding under pledge, micro loans and loans
for purchase of pumps etc. These loans qualified for small and marginal
farmer categorizations and direct individual farmer funding. Other Agri
loans included loans for food and Agro processing units.
The agri division (including tractor finance) continued to manage its
delinquency though incremental stress was observed across locations due
to monsoon shortfall.
The growth of the Emerging Corporate Group''s (ECG) portfolio has been
modest in FY 2015-16. There has been an increase in delinquencies in
this segment, mainly on account of volatile commodity prices and
uncertainty in the economy.
Asset Reconstruction
It was challenging to sell large assets under possession as the market
was sluggish for real estate sales. The legal judicial system continues
to languish in terms of passing timely orders which cause significant
delay in timely and effective recoveries.
The division continued to focus on last mile financing to companies
which are on the turnaround path with clear focus on cash fow based
recoveries.
The recoveries from NPA purchase of retail portfolio continues to be
robust.
Your Bank believes that banks and NBFCs in the next few years will
continue to sell their retail NPA portfolios, which will help the
division to acquire more portfolios.
Treasury
Your Bank''s treasury actively contributes to your Bank by way of:
- Proprietary Trading: The various proprietary trading desks actively
trade in products such as Fixed Income, Money Markets, Derivatives,
Foreign Exchange and Bullion. Primary Dealer Desk  part of the
proprietary trading desk, actively participates in the primary auctions
of government securities, makes market in government securities and
engages in retailing of government securities.
- Customer Transactions:
- Facilitating access to foreign currency markets through cash &
derivatives products and providing fine market rates to clients for
remittance and trade transactions.
- Client solutions - standardized and structured, pertaining to Debt
Capital Markets including Syndication of Loans, Bonds, Mezzanine
financing, Promoter funding and acquisition financing and
Securitization.
- Balance Sheet Management: The Balance Sheet Management Unit (BMU)
manages the Asset Liability mismatches, Interest rate & Liquidity gaps
and implementation of Funds Transfer Pricing between various business
units. The Correspondent Banking Division within treasury actively
builds on relationships with offshore banks towards improving quality
and international reach for its customers.
Human Resources
The year 2015-16 has been a year of continued focus on employee
well-being and investment in human capital stayed significant.
Your Bank undertook substantial work to drive the ''core'' values and
culture of the Bank in the last year that strengthened the merger of
erstwhile ING Vysya Bank with Kotak Mahindra Bank. To ensure a seamless
cultural integration, various initiatives were launched to internalize
behavioral parameters and the values across the organization. Further
thrust was laid on employee engagement through its linkage to
behavioral parameters.
Your Bank has taken strides in the past year and continues to grow with
a talent base of over 31,000 employees. A proactive approach to
adopting the best of human resource practices, efficient systems,
processes and continuous investments in technology has helped manage
the scale and complexity of a large and distributed workforce.
With an average age of 33 years your Bank continues to attract talent
across all its businesses and hierarchy. Pre-trained manpower
acquisition channels such as Kotak Sales Officer (KSO) and Junior Sales
Officer (JSO) programs have been further strengthened to create a
sustainable workforce pipeline. To enhance ability to deliver on
strategic work-force planning and hiring goals, a dedicated team was
institutionalized to focus on end to end talent acquisition process Â
maximizing channel efficiencies, optimizing costs, simplifying and
standardizing hiring process and creating a seamless hiring experience
to potential employees.
With 19% of the workforce being women, your Bank realizes that
achieving progressive gender representation requires addressing
mindsets and developing a more inclusive, holistic diversity agenda.
Your Bank continues to strive to provide opportunities for a diverse
and competent workforce.
Your Bank is committed to developing its capabilities as an
organization and as individuals to meet current and future business
challenges. In the year 2015-16, we have invested significantly in
training and professional development  leveraging the latest
technologies to deliver highly impactful and relevant training programs
to our employees. These learning initiatives are designed around
development of individual and team competencies in partnership with top
academic institutions and renowned industry professionals. Leadership
Development Programs focused on developing the leadership capabilities
of our senior executives, to help them prepare for future roles in the
organization.
Your Bank continues its focus on engagement and retention through
initiatives that provides a holistic environment where employees get
opportunities to realize their potential. Talent management as an
integral part of overall performance management process in the Bank
aims to provide long term, sustained and meaningful careers to
employees across the organization. ''Pulse'' engagement survey, along
with other engagement initiatives, provided insights on distinct
employee needs that helped developing appropriate interventions.
We are entering a new age where digital is default and this
technological change is shaping the sociological change impacting every
facet of life and work. Anticipating digital being a significant
transformation opportunity, we are on the journey to leverage digital
technology to enable greater engagement, interaction and flexibility.
Guided by our value system that motivates our attitudes and action,
your Bank is focused on forward looking policies, lean processes and
nurturing talent.
Technology
With the announcement of the merger with ING Vysya Bank, your Bank took
up the initiative of merging the technology systems and data of the two
banks. The merger provided an opportunity to leverage the "best of
breed" systems from both banks. As the technology integration
progressed across business verticals, your Bank identified synergies in
systems and capabilities to optimize costs across the technology
operations of the two banks. The merged systems will provide a standard
customer experience across all channels to all customers of the merged
entities.
Customer data security and risk management need to keep pace with
digital offerings. With this in mind, the Distributed Denial of Service
was augmented with an in-premise solution. A fraud management solution
to track customer transactions across channels was implemented. On the
regulatory side, a new Enterprise Risk System was implemented for the
Value at Risk calculation of the treasury products.
Digitization
Focus on creating more and more digitally enabled services across
channels remained a key priority for your Bank in this year. Some of
the highlights being:
- Launched a comprehensive micro site for New Pension System with
various calculators and educative content to demystify the concept of
pension and also enable people to get started with opening their
pension account online.
- Launched a real time customer acquisition platform for personal loan,
where a customer PAN, Adhaar & CIBIL are checked real time & decision
about the loan amount and interest rate can be given instantly.
- Launched Pre-approved Personal Loan on Net Banking for salaried
customers. This enables a pre-qualified customer to apply for personal
loan while logged into the net-banking account and the disbursed amount
is instantly credited to customer''s banking account.
- Launched tab based account opening process for Saving Account. This
is an end-to-end digitized workflow, from lead capture to account set
up, thereby reducing the processing time and enhancing customer
experience.
- Hashtag banking was given further fillip by creating capability to
order a book or special promotional movies by just a single tweet.
- Launched Kotak Bharat Banking - India''s first internet-free app. This
app does not need internet to transact. Customer can do 25 different
transactions including mobile recharge and small value fund transfer.
The app is available in 6 languages (Hindi, Gujarati, Marathi, Tamil,
Kannada and English). Response messages within the app will also be in
regional language.
- Rolled out e-store on Net Banking after successful roll out of
m-store on banking app. This includes travel categories like fight
tickets, bus tickets and hotel booking.
- Introduced new features in the iPhone version of mobile app. iPhone
customers can now book a Recurring Deposit (RD), Add a new biller and
set Auto Pay amongst various new services introduced.
- Turn-around times for lending to commercial customers significantly
improved by digitizing the process by introducing a tablet based lead
management system for use by sales people in the field.
- Corporate customers got an upgraded FX trading portal.
- Digitization for wealth management customers was also strengthened
with the launch of a portal providing a single view of all their
investments.
Investment in Airtel M Commerce Services Ltd.
Airtel M Commerce Services Ltd. Company (AMSL), 100% subsidiary of
Bharti Airtel Ltd. (BAL), had been granted in-principle approval for
setting up a Payments Bank by the Reserve Bank of India (RBI) in August
2015. Basic but critical services such as small savings account,
remittances etc. will bring a large number of low income households and
small businesses under formal banking network. Your Bank in February
2016 has signed a Share Subscription and Shareholders Agreement with
AMSL and BAL for acquisition of 19.90% equity stake in AMSL.
Subsequently, your Bank has invested in AMSL. AMSL has received final
license from RBI in April 2016.
SUBSIDIARIES & ASSOCIATES
Your Bank''s subsidiaries are established players in the different areas
of financial services, viz. car finance, investment banking, stock
broking, asset management and life insurance.
As at 31st March 2016, your Bank has eighteen (18) subsidiaries as
listed below:
Domestic Subsidiaries
Kotak Mahindra Prime Limited
Kotak Securities Limited
Kotak Mahindra Capital Company Limited
Kotak Mahindra Old Mutual Life Insurance Limited
Kotak Mahindra Investments Limited
Kotak Mahindra Asset Management Company Limited
Kotak Mahindra Trustee Company Limited
Kotak Investment Advisors Limited
Kotak Mahindra Trusteeship Services Limited
Kotak Forex Brokerage Limited
Kotak Mahindra Pension Fund Limited
Kotak Mahindra General Insurance Company Limited
IVY Product Intermediaries Limited (formerly known as ''ING Vysya
Financial Services Limited'')
International Subsidiaries
Kotak Mahindra (International) Limited
Kotak Mahindra (UK) Limited
Kotak Mahindra Inc.
Kotak Mahindra Financial Services Limited
Kotak Mahindra Asset Management (Singapore) Pte. Limited
Kotak Mahindra General Insurance Company Limited, which was
incorporated in December 2014 with principal objective of carrying on
business of general insurance, received approval from Insurance
Regulatory and Development Authority of India (IRDAI) to commence the
business of general insurance in November 2015 and subsequently
commenced its operations in December 2015.
The various activities of the subsidiaries and the performance and
financial position of the subsidiaries and associates are outlined in
the Management Discussion and Analysis section appended to this Report.
The Bank''s Policy for determining material subsidiaries is available on
the Bank''s website viz. URL:
http://ir.kotak.com/governance/policies.html
As at 31st March 2016, your Bank has following four (4) Associate
companies:
ACE Derivatives & Commodity Exchange Limited Infna Finance Private
Limited Matrix Business Services India Private Limited Phoenix ARC
Private Limited
The Annual Report which consists of the financial statements of your
Bank on standalone basis as well as consolidated financial statements
of the group for the year ended 31st March 2016, is sent to all the
members of your Bank. Web link of the Annual Report is sent to all
members whose email IDs are registered with the Bank/Depository
Participant(s). For members who have not registered their email IDs,
physical copies of the Annual Report are sent. It does not contain
Annual Reports of your Bank''s subsidiary companies. Your Bank will make
available full Annual Report (including the Annual Reports of all
subsidiaries) either a hard or soft copy depending upon request by any
member of your Bank. These Annual Reports will be available on your
Bank''s website viz. URL: http://ir.kotak.com/annual-reports and will
also be available for inspection by any member at the Registered Office
of your Bank.
EMPLOYEE STOCK OPTION & STOCK APPRECIATION RIGHTS SCHEMES
The shareholders of the Bank at its Annual General Meeting held on 29th
June 2015 approved a new Scheme under the Securities and Exchange Board
of India (Share Based Employee Benefits) Regulations, 2014, for the
purposes of granting options and stock appreciation rights to the
employees of the Bank, its subsidiaries and its associate companies, as
applicable, viz. Kotak Mahindra Share Based Employee Benefit Scheme
2015 comprising of:
- Kotak Mahindra Equity Option Scheme 2015 and
- Kotak Mahindra Stock Appreciation Rights Scheme 2015
Further, pursuant to the Scheme of Amalgamation of ING Vysya Bank
(IVBL) with the Bank, the ESOP Schemes of the erstwhile IVBL have been
renamed and adopted by the Bank, as given below:
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2005
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2007
- Kotak Mahindra Bank Ltd. (IVBL) Employee Stock Option Scheme 2010
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2013
The stock options granted to the employees currently operate under the
following Schemes:
- Kotak Mahindra Equity Option Scheme 2007
- Kotak Mahindra Equity Option Scheme 2015
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2007
- Kotak Mahindra Bank Ltd. (IVBL) Employee Stock Option Scheme 2010
- Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2013
The disclosure requirements under the Securities and Exchange Board of
India (Share Based Employee Benefits) Regulations, 2014, for the
aforesaid ESOP & SARs Schemes, in respect of the year ended 31st March
2016, are disclosed on the Bank''s website viz. URL:
http://ir.kotak.com/annual-reports
CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT
Pursuant to Regulation 27 of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations), a
separate section entitled ''Report on Corporate Governance'' has been
included in this Annual Report. The Report of Corporate Governance also
contains certain disclosures required under the Companies Act, 2013. A
Business Responsibility Report containing the requisite details under
Regulation 34 of the SEBI LODR Regulations is disclosed on the Bank''s
website viz. URL: http://ir.kotak.com/annual-reports
DIRECTORS & KEY MANAGERIAL PERSONNEL
Directors retiring by rotation
Mr. N.P. Sarda (DIN 03480129), Non-Executive & Non-Independent Director
of the Bank, retires by rotation as a Director at this Annual General
Meeting but having crossed 70 years of age is not offering himself for
re-appointment in line with Reserve Bank of India policy and
directions.
The Bank does not intend to fll this vacancy at this Annual General
Meeting.
Changes in Directors
Mr. C. Jayaram (DIN 00012214), retired as Joint Managing Director of
the Bank on 30th April 2016, on attaining the age of superannuation.
However, Mr. Jayaram continues as a Non-Executive Non-Independent
Director of the Bank with effect from 1st May 2016 up to the date of
this Annual General Meeting. Approval of shareholders is being sought
at this Annual General Meeting for his appointment as a Non-executive
Non-Independent Director of the Bank who would be liable to retire by
rotation.
Mr. Asim Ghosh (DIN 00116139), retired as a Director of the Bank with
effect from 9th May 2016 due to completion of his eight years tenure
pursuant to the provisions of Section 10A(2A)(i) of the Banking
Regulation Act, 1949.
Your Directors place on record their appreciation for the valuable
advice and guidance rendered by Mr. N.P. Sarda and Mr. Asim Ghosh
during their tenure as Directors of the Bank.
The details of the Directors appointed are set out in the Corporate
Governance Report annexed to this Report.
Declaration from Independent Directors
The Board has received declarations from the Independent Directors as
per the requirement of Section 149(7) of the Companies Act, 2013 and
the Board is satisfied that the Independent Directors meet the criteria
of independence as mentioned in Section 149(6) of the Companies Act,
2013.
Board Evaluation
The Nomination and Remuneration Committee of the Bank''s Board under the
expert advice of an external agency specialized in Human Resource and
management consultancy, has formulated the criteria for performance
evaluation of the Directors and the Board as a whole. The Criteria
formulated broadly covers the Board role, Board/Committee membership,
practice & procedure and collaboration & style.
A Board effectiveness assessment questionnaire was designed for the
performance evaluation of the Board, its Committees, Chairman and
individual directors in accordance with the criteria set and covering
various aspects of performance including composition, relationship
among directors, director competency, contribution to risk management
compliance, roles and responsibility, board procedures, processes,
functioning and effectiveness. The said questionnaire was circulated to
all the directors of the Bank for the annual performance evaluation.
Based on the assessment of the responses received to the questionnaire
from the directors on the annual evaluation of the Board, its
Committees, Chairman and the individual Directors, the Board Evaluation
Report was placed before the meeting of the Independent Directors for
consideration. Similarly, the Board at its meeting assessed the
performance of the Independent Directors. The Directors were satisfied
with the results of the performance evaluation of the Board & its
Committees, Chairman and individual directors.
Key Managerial Personnel (KMPs)
Mr. C. Jayaram ceased to be a ''Key Managerial Personnel'' with effect
from 1st May 2016 upon his retirement as a Joint Managing Director of
the Bank.
The following offcials of the Bank continue to be the "Key Managerial
Personnel" pursuant to the provisions of Section 203 of the Companies
Act, 2013:
- Mr. Uday Kotak, Executive Vice Chairman and Managing Director
- Mr. Dipak Gupta, Joint Managing Director
- Mr. Jaimin Bhatt, President & Group Chief Financial Officer
- Ms. Bina Chandarana, Company Secretary
Appointment & Remuneration of Directors & KMPs
The appointment and remuneration of Directors of the Bank is governed
by the provisions of Section 35B of the Banking Regulation Act, 1949.
The Nomination and Remuneration Committee of the Bank''s Board has
formulated criteria for appointment of Senior Management personnel and
the Directors. Based on the criteria set it recommends to the Board the
appointment of Directors and Senior Management personnel. The Committee
considers the qualifications, experience, ft & proper status, positive
attributes as per the suitability of the role, independent status and
various regulatory/statutory requirements as may be required of the
candidate before such appointment.
The Reserve Bank of India (''RBI'') vide its circular
no.DBOD.No.BC.72/29.67.001/2011-12 dated 13th January 2012 has issued
the Guidelines on Compensation of Whole Time Directors / Chief
Executive Officers / Other Risk Takers of Private Sector Banks on
Compensation Policy which inter alia cover the following:
- Proper balance between fixed pay and variable pay;
- Variable pay not to exceed 70% (Seventy Per Cent) of the fixed pay in
a year;
In accordance with the aforesaid RBI Circular, the Board of the Bank
has adopted a Compensation Policy for its Whole-time Directors, Chief
Executive Officer of the Bank and other employees which includes issue
of stock appreciation rights as a form of variable pay, linked to the
Bank''s stock price, payable over a period of time. The salient features
of the Compensation Policy are as follows:
- Objective is to maintain fair, consistent and equitable compensation
practices in alignment with Kotak''s core values and strategic business
goals.
- Applicable to all employees of the Bank. Employees classified
into 3 groups:
- Whole-time Directors/Chief Executive Officer
- Risk Control and Compliance Staff
- Other categories of Staff l Compensation structure broadly divided
into Fixed, Variable and ESOPs
- Fixed Pay  Total cost to the Company i.e. Salary, Retirals and Other
Benefits
- Variable Pay  Linked to assessment of performance and potential
based on Balanced Key Result Areas (KRAs), Standards of Performance and
achievement of targets with overall linkage to Bank budgets and
business objectives. The main form of incentive compensation includes Â
Cash, Deferred Cash/Incentive Plan and Stock Appreciation Rights.
- ESOPs  Granted on a discretionary basis to employee based on their
performance and potential with the objective of retaining the employee.
- Compensation Composition  The ratio of Variable Pay to Fixed Pay and
the ratio of Cash v/s Non Cash within Variable pay outlined for each
category of employee classification.
- Any variation in the Policy to be with approval of the Nomination &
Remuneration Committee.
- Malus and Clawback clauses applicable on Deferred Variable Pay.
- Ensuring no personal hedging strategies by employees which undermine
risk alignment effects as part of their remuneration.
The details of the remuneration paid to the Non-Executive Chairman,
Executive and Non-Executive Directors of the Bank for the year ended
31st March 2016 is provided in the Corporate Governance Report annexed
to this Report.
The Non-Executive Chairman of the Bank receives a fixed amount of
remuneration as recommended by the Board and approved by the
shareholders of the Bank and RBI, from time to time. He also receives
remuneration by way of sitting fees for attending meetings of the Board
or Committees thereof.
RBI vide its circular no. DBR.No.BC.97/29.67.001/2014-15 dated June 1,
2015 has issued guidelines on payment of compensation to the NEDs of
private sector banks which inter-alia specifies the following:
- The Board of Directors of the Bank (in consultation with the
Nomination & Remuneration Committee) needs to formulate and adopt a
comprehensive compensation policy for NEDs (other than part-time
non-executive Chairman).
- Maximum amount of Profit related commission not to exceed Rs,10 lac
per annum for each director of the Bank.
Accordingly, in line with the RBI circular and pursuant to the relevant
provisions of the Companies Act, 2013, and the recommendation of the
Nomination and Remuneration Committee of the Bank, the Board of
Directors have adopted a compensation policy for the NEDs (excluding
the part- time Non-Executive Chairman). The salient features of the
Compensation Policy are as follows:
- Compensation structure broadly divided into
- Sitting fees
- Re-imbursement of expenses
- Commission (Profit based)
- Amount of sitting fees and commission to be decided by the Board
from time to time, subject to the regulatory
limits.
- Overall cap on commission for each director Rs,10 lac per annum.
- NEDs not eligible for any stock options of the Bank.
Approval of shareholders for the payment of commission to the NEDs of
the Bank is being sought at the ensuing Annual General Meeting of the
Bank.
Sr. Disclosure Requirement Disclosure Details No.
4 Number of permanent employees on the rolls of Bank at the 31,410 end
of the year
5 Explanation on the relationship between average increase in
Recommendation for increase in remuneration is based on the following
remuneration and Bank performance factors:
- Compensation trends based on industry benchmarking
- Compensation positioning vis-Ã -vis market trend
- Alignment between risks and remuneration
- Applicable regulatory guidelines
Increase in remuneration for FY 15-16 vis-Ã -vis FY 14-15 not comparable
on account of merger (Please refer note 4 below)
6 Comparison of the remuneration of the Key Managerial For the FY
2015-16, KMPs were paid approximately 0.38% in aggregate Personnel
against the performance of the Bank of the Profit Before Tax of the
Bank on standalone basis and 0.24% on consolidated basis.
7 Variations in the market capitalization of the Bank, price The market
capitalization of the Bank has increased from Rs, 101,429 crore
earnings ratio as at the closing date of the current financial as of
31st March 2015 to Rs, 124,857 crore as of 31st March 2016. Over the
year and previous financial year and percentage increase or same
period, the price earnings ratio on consolidated Profits moved up from
decrease in the market quotations of the shares of the Bank 33.33 to
36.08. Kotak Bank stock price as at 31st March 2016 has increased in
comparison to the rate at which the company came out by 18,051% to Rs,
680.65 over the last public offering i.e. IPO in March 1993 at with the
last public offer the price of Rs,150 per share (post bonuses &
subdivision adjusted price Rs, 3.75).
8 Average percentile increase already made in the salaries of Average
percentile increase in remuneration for employees other than employees
other than the managerial personnel in the last managerial personnel
for FY 15-16 vis-Ã -vis FY 14-15 not comparable on financial year and
its comparison with the percentile increase account of merger (Please
refer note 4 below)
in the managerial remuneration and justification thereof
and point out if there are any exceptional circumstances for Average
increase for managerial personnel is 7.04% and 9.20% excluding
increase in the managerial remuneration SARs
10 Key parameters for any variable component of remuneration The key
parameters for variable component of remuneration availed by the
availed by the directors directors are:
- Overall Performance
- Achievement of budgets
- Various risks
- Variable pay will not exceed 70% of the fixed pay.
- Cash component of the variable pay will not exceed 50% of the Fixed
Pay.
- If variable pay is higher than 50% of fixed pay, at least 40% of the
variable pay will be deferred over a period of 3 years or longer on a
pro- rata basis.
- ESOPs are not considered as variable pay for this purpose
Sr. Disclosure Requirement Disclosure Details No.
11 Ratio of the remuneration of the highest paid director to There are
11 employees who are not directors but received remuneration in that of
the employees who are not directors but receive excess of the highest
paid director during the year.
remuneration in excess of the highest paid director during
Considering the average remuneration of these employees, the ratio
works the year
out to 1:1.36
12 Affirmation that the remuneration is as per the remuneration The
Bank is in compliance with its Compensation Policy policy of the Bank
Notes:
1) Remuneration includes Fixed pay Variable paid during the year
perquisite value as calculated under the Income Tax Act, 1961.
Remuneration does not include value of Stock Options.
2) Stock Appreciation Rights (SARs) are awarded as variable pay. These
are settled in cash and are linked to the average market price of the
Bank''s stock on specified value dates. Cash paid out during the year is
included for the purposes of remuneration.
3) * Mr. C. Jayaram retired as Joint Managing Director of the Bank on
30th April 2016, on attaining the age of superannuation. He continues
as a non-executive non-independent director of the Bank w.e.f. 1st May
2016.
4) The merger of ING Vysya Bank (''IVBL'') with Kotak Mahindra Bank
(''Bank'') was effective from 1st April 2015. Accordingly, there has been
integration of the erstwhile IVBL with the Bank and a consequent
increase in the employee base for the FY 2015-16. Hence, the numbers
for FY 2015-16 are not comparable with that of FY 2014-15.
SECRETARIAL AUDITOR
Pursuant to Section 204 of the Companies Act, 2013, your Bank has
appointed Ms. Rupal D. Jhaveri, a Company Secretary in Practice, as its
Secretarial Auditor. The Secretarial Audit Report for the financial
year ended 31st March 2016 is annexed to this Report.
DEPOSITS
Being a banking company, the disclosures required as per Rule 8(5)(v) &
(vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and
74 of the Companies Act, 2013 are not applicable to your Bank.
AUDITORS
In terms of Section 139 of the Companies Act, 2013, Messrs S.R.
Batliboi & Co. LLP, Chartered Accountants, were appointed as statutory
auditors of your Bank for a period of four years from the conclusion of
the Thirtieth Annual General Meeting until the conclusion of the Thirty
fourth Annual General Meeting of the Bank, subject to the annual
approval of RBI and ratification by the members every year.
Accordingly, requisite resolution forms part of the Notice convening
the Annual General Meeting.
INTERNAL FINANCIAL CONTROLS
The Board of Directors confirms that your Bank has laid down set of
standards, processes and structure which enables to implement Internal
Financial controls across the organization with reference to Financial
Statements and that such controls are adequate and are operating
effectively. During the year under review, no material or serious
observation has been observed for inefficiency or inadequacy of such
controls.
RELATED PARTY TRANSACTIONS
All the Related Party Transactions that were entered into during the
financial year were on arm''s length basis and were in ordinary course
of business.
Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies
(Accounts) Rules, 2014, there are no transactions to be reported under
Section 188(1) of the Companies Act, 2013, in form AOC-2.
All Related Party Transactions as required under Accounting Standards
AS-18 are reported in Note 24 of Schedule 17 - Notes to Accounts of the
Consolidated financial statements and Note 7 of Schedule 18 C - Notes
to Accounts of the Standalone financial statements of your Bank.
The Bank''s Policy on dealing with Related Party Transactions is
available on the Bank''s website viz. URL:
http://ir.kotak.com/governance/policies.html
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Pursuant to Section 186(11) of the Companies Act, 2013, loans made,
guarantees given, securities provided or acquisition of securities by a
banking company in the ordinary course of its business are exempted
from the disclosure requirement under Section 134(3)(g) of the
Companies Act, 2013.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
Your Bank is committed to its "Vision Statement" of upholding its
Global Indian Financial Services Brand creating an ethos of trust
across all constituents, developing a culture of empowerment and a
spirit of enterprise thereby becoming the most preferred employer in
the financial services sector.
Consistent with the Vision Statement, your Bank is committed to
maintain and provide to all its employees and directors highest
standards of transparency, probity and accountability. The Kotak Group
Endeavour''s to develop a culture where it is safe and acceptable for
all employees and directors to raise / voice genuine concerns in good
faith, and in a responsible as well as effective manner.
A vigil mechanism has been implemented through the adoption of
Whistleblower Policy with an objective to enable any employee or
director, raise genuine concern or report evidence of activity by the
Bank or its employee or director that may constitute: Instances of
corporate fraud; unethical business conduct; a violation of Central or
State laws, rules, regulations and/or any other regulatory or judicial
directives; any unlawful act, whether criminal or civil; malpractice;
serious irregularities; impropriety, abuse or wrong doing; deliberate
breaches and non-compliance with the Bank''s policies; questionable
accounting/audit matters/financial malpractice. The same option has now
been extended to the vendors of the Bank also. The concerns can be
reported on the website viz. URL: https://cwiportal.com/kotak.
Currently an online mechanism enabling aforementioned reporting has
been implemented over and above other modes of communication like
e-mail, or a letter sent by mail, courier or fax to designated persons.
Safeguards to avoid discrimination, retaliation, or harassment, and
confidentiality have been incorporated in the policy. All employees and
directors have access to the Chairman of the Audit Committee in
appropriate and exception circumstances.
The Policy has been uploaded on the Bank''s intranet as well as website
viz. URL: http://ir.kotak.com/governance/policies.html and regular
communication is made for sustained awareness.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Bank has constituted a Board Corporate Social Responsibility
Committee (CSR Committee) and consists of the following Directors:
- Mr. C Jayaram, Non-Executive Non-Independent Director & Chairman of
the CSR Committee
- Mr. Dipak Gupta, Joint Managing Director
- Prof S. Mahendra Dev, Independent Director
Your Bank''s CSR Committee drives the CSR programme of the Bank. Your
Bank has a Board approved CSR policy, charting out its CSR approach.
This policy articulates the Bank''s aim to positively contribute towards
economic, environmental and social well-being of communities through
its Corporate Social Responsibility agenda. The Bank''s CSR agenda is
driven by its key focus areas:
a. Promoting education  primary focus area
b. Enhancing vocational skills and livelihood
c. Promoting preventive healthcare and sanitation
d. Reducing inequalities faced by socially and economically backward
groups
e. Sustainable development
f. Relief and rehabilitation
g. Clean India h. Sports
The Bank''s CSR policy is available on the Bank''s website viz. URL :
http://www.kotak.com/corporate-responsibility.html
Pursuant to the provisions of Section 135, schedule VII of the
Companies Act 2013 (the Act), read with the Companies (Corporate Social
Responsibility) Rules, 2014 the report of the expenditure on CSR by the
Company is as under:
The average net Profit U/S 198 of the Bank standalone for the last
three financial years preceding 31st March, 2016 is Rs, 2,366.37 crore.
The prescribed CSR expenditure required U/S 135, of the Act for FY
2015-16 is Rs, 4,733 lac.
The CSR expenditure incurred for the period 1st April 2015 to 31st
March 2016 under Section 135 of Companies Act, 2013 amounts to Rs,
1,641 lac as against Rs, 1,197 lac CSR spend in the financial year
2014-15.
CSR expenditure of Rs, 1,641 lac in FY 2015-16 as a percentage of
average net Profit U/S 198 of the Bank standalone at Rs, 2,366.37 crore
is 0.69%.
Your Bank is building its CSR capabilities on a sustainable basis and
is committed to gradually increase its CSR spend in the coming years.
The CSR Committee of the Board confirms that the implementation and
monitoring of CSR Policy, is in compliance with CSR objectives and
Policy of the company.
The details of CSR activities and spends under Section 135 of the
Companies Act, 2013 for FY 2015-16, are annexed to this Report.
RISK MANAGEMENT POLICY
Your Bank has in place a comprehensive Enterprise wide Risk Management
(ERM) framework supported by detailed policies and processes for
management of Credit Risk, Market Risk, Liquidity Risk, Operational
Risk and various other Risks. Details of identification, assessment,
mitigations, monitoring and the management of these Risks are mentioned
in the Management Discussion and Analysis section appended to this
Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
EARNINGS AND OUTGO
The provisions of Section 134(3)(m) of the Companies Act, 2013 read
with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not
applicable to your Bank.
EMPLOYEES
The employee strength of your Bank, standalone, was over 31,000 and
along with its subsidiaries was over 46,000 as of 31st March 2016.
312 employees employed throughout the year and 132 employees employed
for part of the year were in receipt of remuneration of Rs, 60 lac or
more per annum.
With an average age of 33 years your Bank continues to attract talent
across all its businesses and hierarchy and has put in place various
processes and systems to ensure alignment of employee behaviors with
the organization''s core values.
Organizational culture aspects like trust & inclusiveness were also
reiterated through 90 cross functional meets conducted by senior
business leaders for employees at mid management level under the "Meet
5" initiative.
In a very short span, your Bank has crossed several milestones in its
Gender Diversity agenda.
- A differentiated talent acquisition strategy to increase women
employee base across various suitable roles has helped us to continue
adding 20% women amongst all new hires in the Bank. While continuing
with our philosophy of providing equal opportunities, an aggressive
push in this area will help us achieve a better balance in gender
diversity.
- Your Bank''s top senior women professionals (around forty women across
Kotak) have been brought together under our diversity initiative
"Astra" and these women leaders now play a pivotal role in guiding and
mentoring other mid-level women employees to sustain and grow in the
careers.
- Prevention of Sexual Harassment (POSH): Your Bank continues with the
belief on zero tolerance towards sexual harassment at workplace and
continues to uphold and maintain itself as a safe and
non-discriminatory organization. To achieve the same Kotak reinforces
the understanding and awareness of Prevention of Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Your Bank has formulated Internal Complaints Committee (ICC) at three
regions for reporting any untoward instance. Any complaints pertaining
to sexual harassment are diligently reviewed and investigated and
treated with great sensitivity. The ICC members have been trained in
handling and resolving complaints and have also designed an online
e-learning POSH Awareness module which covers the larger employee base.
Following is a summary of sexual harassment complaints received and
disposed of during the year 2015-16: o No. of complaints received : 8
- No. of complaints disposed of : 4
In the case of 4 pending cases, enquiries were in progress at the close
of the year.
With our objective to identify, build and nurture leaders across levels
to deliver superior business results and address individual career
aspirations, this year your Bank introduced a new contemporary approach
to assess and diagnose leadership competency gaps followed by a
development plan.
As your Bank enters in its next phase of growth and expansion of
footprint across urban and rural India, your Bank and its subsidiaries
continued to carry out several initiatives to attract and retain a pool
of highly skilled and motivated employees who are aligned to the firm''s
vision of becoming the most trusted financial services provider.
In accordance with the provisions of Rule 5 of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 the
names and other particulars of employees are set out in the annexure to
the Directors'' Report. In terms of the Proviso to Section 136(1) of the
Companies Act, 2013, the Directors'' Report is being sent to all
shareholders excluding the aforesaid annexure. The annexure is
available for inspection at the Registered Office of your Bank. Any
shareholder interested in obtaining a copy of the said annexure may
write to the Company Secretary at the Registered Office of your Bank.
DIRECTORS'' RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the
operational management, confrm in pursuance of Section 134(5) of the
Companies Act, 2013, that:
(i) your Bank has, in the preparation of the annual accounts for the
year ended 31st March 2016, followed the applicable accounting
standards along with proper explanations relating to material
departures, if any;
(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 state of affairs of
your Bank as at 31st March 2016 and of the Profit of your Bank for the
financial year ended 31st March 2016;
(iii) they have taken proper and sufficient care to the best of their
knowledge and ability, for the maintenance of adequate accounting
records in accordance with the provisions of the Act for safeguarding
the assets of your Bank and for preventing and detecting fraud and
other irregularities;
(iv) the annual accounts have been prepared 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 are
operating effectively; and
(vi) they have devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems are adequate
and operating effectively.
ANNEXURES
Following statements/reports/certificates are set out as Annexure to
the Directors'' Report:
- Extract of Annual Return under Section 134(3)(a) of the Companies
Act, 2013 read with Rule 12 (1) of Companies (Management &
Administration) Rules, 2014 (Annexure - A).
- Secretarial Audit Report pursuant to Section 204 of the Companies
Act, 2013 (Annexure - B).
- Details of CSR Activities and Spends (Annexure - C).
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the
valuable guidance and support received from the Reserve Bank of India,
Securities and Exchange Board of India, Insurance Regulatory and
Development Authority and other Government and Regulatory agencies.
Your Directors acknowledge the support of the members and also wish to
place on record their appreciation of employees for their commendable
efforts, teamwork and professionalism.
For and on behalf of the Board of Directors
Dr. Shankar Acharya Uday Kotak Place: Mumbai,
Chairman Executive Vice Chairman
and Managing Director Date: 11th May 2016
Mar 31, 2015
To the Members of
KOTAK MAHINDRA BANK LIMITED
The Directors present their Thirtieth Annual Report together with the
audited accounts of your Bank for the year ended 31st March 2015.
FINANCIAL HIGHLIGHTS
(A) Kotak Mahindra Bank Limited - Consolidated financial highlights:
31st March 2015 31st March 2014
Rs.crore Rs. crore
Total income 21,471.08 17,268.29
Total expenditure, excluding
provisions and contingencies 16,715.37 13,263.82
Operating Profit 4,755.71 4,004.47
Provisions and contingencies,
excluding provision for tax 205.73 308.97
Profit before tax 4,549.98 3,695.50
Provision for taxes 1,484.90 1,183.96
Profit after tax 3,065.08 2,511.54
Less: Share of minority interest 59.51 62.17
Add: Share in profit of Associates 39.88 15.62
Consolidated profit for the Group 3,045.45 2,464.99
Earnings per Equity Share:
Basic (Rs.) 39.49 32.19
Diluted (Rs.) 39.40 32.14
(B) Kotak Mahindra Bank Limited - Standalone financial highlights:
31st March 2015 31st March 2014
Rs. crore Rs. crore
Total Income 11,748.32 10,166.83
Total expenditure, excluding
provisions and contingencies 8,750.86 7,589.68
Operating Profit 2,997.46 2,577.15
Provisions and contingencies,
excluding tax provisions 164.50 304.70
Profit before tax 2,832.96 2,272.45
Provision for taxes 966.98 769.93
Profit after tax 1,865.98 1,502.52
Add: Surplus brought forward from
the previous year 4,005.29 3,016.60
Amount available for appropriation 5,871.27 4,519.12
Appropriations:
Statutory Reserve under Section 17
of the Banking Regulation Act, 1949 466.50 375.63
General Reserve 93.30 75.13
Transfer to / (from) Investment
Reserve Account 86.65 (41.10)
Transfer to Capital Reserve 5.91 0.40
Transfer to Special Reserve 28.00 32.00
Proposed Dividend 82.07 63.08
Corporate Dividend Tax 13.58 8.69
Surplus carried to Balance Sheet 5,095.26 4,005.29
INTERNAL FINANCIAL CONTROLS
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.
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs. 0.90 per equity
share (previous year Rs. 0.80 per equity share), entailing a payout of Rs.
95.65 crore including dividend distribution tax (previous year Rs. 71.77
crore). The dividend would be paid to all the shareholders (including
the shareholders of the erstwhile ING Vysya Bank Ltd.), whose names
appear on the Register of Members/Beneficial Holders list on the Book
Closure date.
BONUS ISSUE OF SHARES
Your Directors recommend an issue of bonus shares, subject to the
approval of the members at the Annual General Meeting to be held on
29th June 2015, in the ratio of 1:1 i.e. one additional equity share
for every one equity share held by the members on a date to be fixed by
the Board, by capitalizing a part of the reserves.
AMALGAMATION OF ING VYSYA BANK WITH THE BANK
The Board of Directors of your Bank and the Board of Directors of ING
Vysya Bank Ltd. (''IVBL'') at their respective meetings held on 20th
November 2014, had approved a Scheme of Amalgamation of IVBL with the
Bank under Section 44A(4) of the Banking Regulation Act, 1949, subject
to approval of the shareholders of both the Banks, Reserve Bank of
India (RBI) and other regulatory authorities. On 7th January 2015, the
shareholders of the Bank accorded their consent to the Scheme of
Amalgamation of IVBL with the Bank. Further, RBI approved the Scheme of
Amalgamation of IVBL with the Bank effective 1st April 2015.
Consequently, on 21st April 2015, the shareholders of the erstwhile
IVBL were allotted 13,92,05,159 equity shares of Rs.5/- each fully paid
up of the Bank, as on the record date of 17th April 2015, in the ratio
of 725 equity shares of face value of Rs.5/- each of the Bank for every
1000 equity shares of Rs.10/- each held by the shareholders of IVBL.
CAPITAL
During the year, your Bank has allotted 10,77,480 equity shares arising
out of the exercise of Employees Stock Options granted to the employees
and whole-time directors of your Bank and its subsidiaries.
Post allotment of equity shares as aforesaid, the issued, subscribed
and paid-up share capital of your Bank stands at Rs. 3,86,17,63,320
comprising of 77,23,52,664 equity shares of Rs. 5 each as on 31st March
2015.
Further, upon allotment of 13,92,05,159 equity shares to the
shareholders of erstwhile ING Vysya Bank Ltd. pursuant to the scheme of
amalgamation in April 2015, the issued, subscribed and paid-up share
capital of your Bank stands at Rs. 4,55,77,42,615 comprising of
91,15,48,523 equity shares of Rs. 5 each. On account of cross holding
9300 equity shares of Rs.5 each have been cancelled.
Your Bank is well capitalised and has a Capital Adequacy Ratio (''CAR'')
under Basel III as at 31st March 2015 of 17.17% with Tier I being
16.18%. At a consolidated level the CAR was 17.56% under Basel III.
During the year, your Bank has not issued any capital under Tier II. As
on 31st March 2015, outstanding Unsecured, Redeemable Non-Convertible,
Subordinated Debt Bonds were Rs.482 crore and outstanding Unsecured,
Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II
stood at Rs. 417.25 crore.
In August 2014, your Bank had sought approval of its shareholders
through Postal Ballot for issuance of securities in the nature of
non-convertible debentures, in Indian/foreign currencies in the
domestic and/or overseas market for an amount upto Rs. 5000 crore on
private placement basis. Accordingly, your Bank raised around Rs.962
crore in the financial year under review through issuance of
infrastructure bonds.
TERMINATION OF GDS PROGRAM
In April 2006, your Bank had issued and allotted 1,50,00,000 equity
shares of Rs. 10 each (post subdivision 3,00,00,000 equity shares of Rs. 5
each) to The Bank of New York, in its capacity as Depository for
registered Global Depository Receipts (GDR) holders. The GDRs were
listed on Luxembourg Stock Exchange.
The average daily trading volume was 2,449 and the number of
outstanding Depository Receipts as on 31st March 2015 was 10,37,075.
Due to low trading/conversion volume in GDR, the Board of Directors of
the Bank at its meeting held on 5th May 2015 has decided to terminate
the GDS program. The requisite notice of termination is being issued
to the Custodian and the Depository.
OPERATIONS
Consumer Banking
Your Bank consolidated its network presence through a measured
expansion of its footprint across the country and as of 31st March 2015
had 684 branches and 1273 ATMs, covering 379 locations. Of the 79 new
branches commissioned this year, 21 were in rural and semi-urban
locations. Your Bank added about eight hundred thousand new customers
this year across core banking products of savings and checking
accounts, term deposits, overdrafts and non-resident accounts.
Your Bank rolled out several initiatives aimed at offering a superior
and differentiated customer experience. Some key ones are:
Digital Initiatives
Enabling availing products and services through digital channels was a
key focus area for your Bank in this year. Some of the highlights
being:
- Building onto the new digital account JIFI, launched last year,
your Bank introduced its interest bearing variant, JIFI Saver, this
year in January 2015. The account offers up to 6% interest and has a
slew of distinguishing features like Hashtag Banking, Loyalty Rewards,
Credit Bureau Score and Money Watch to appeal the tech savvy Gen Y
segment.
- Marked by the rise of e-commerce in the country and with a view to
staying ahead of competition, your Bank introduced a loyalty rewards
platform, Kotakrewards.com in January, 2015. The platform is powered by
100 ecommerce partners and 7000 hotels completely funding the points
earned by Kotak customers while shopping on their portals. The platform
offers extra points to JIFI & JIFI Saver customers.
- In sync with the lifestyle of today''s social media savvy
generation, with the launch of Hashtag banking in January 2015, your
Bank took banking to a new high. With Hashtag banking, for the JIFI and
JIFI Saver account holders, now Mobile & DTH recharge, account updates,
cheque book request and many more account activities are just a tweet
away.
- Your Bank ventured into the burgeoning digital payments arena with
the launch of Kaypay in October 2014. It''s a bank agnostic
person-to-person payments application which allows funds transfer to
about 250 million customers of 28 banks in the country. Kaypay is a web
based application optimized for use on mobile and allows funds transfer
in real time 24X7 for free.
- Your Bank also launched an easy and hassle free person-to-person
payment feature in Net Banking and Mobile Banking called Mail Money &
Message Money. Mail Money, launched in September 2014, allows the Net
Banking users to send money to anyone just by using their email
addresses. On the same lines, for all Mobile Banking users, Message
Money was launched in December 2014, to enable money transfer to any
mobile number without the hassle of knowing the recipient''s account
details.
- Your Bank introduced Kotak Money Watch, a 360 degree personal
finance management tool within Net banking, in March 2015. It enables
all the Net Banking users to track expenses, set budgets and track cash
out from ATM.
Products & Services
- Your Bank launched Grand, a new savings bank proposition tailored
exclusively for customers above 55 years, deriving features & benefits
from their needs of healthcare, convenience and personalized attention.
Under the proposition, customers are provided with priority service for
their transactions at the branch & a first aid card, which details a
customer''s health status and emergency contacts for easy reference.
Further, Grand customers are offered a health card from Indian Health
Organization (IHO), offering discount on treatments, consultation and
procedures. Also, available are services like customized cash delivery,
courtesy call back, etc.
- Your Bank launched SANMAN savings bank account in unbanked rural
locations. The product is customized to cater to the banking needs of
rural/ unbanked India such as farmers, small time traders,
self-employed, low income group individuals, works etc. It offers key
features like reduced Average Quarterly Balance (AQB) requirement and
enhanced cash deposit limits to suit the seasonality of rural India
apart from standard features.
- Your Bank launched on-line PIN (for debit and credit card)
generation feature through net-banking, mobile banking and IVR. On one
end, this feature has provided a huge convenience to customers and on
the other end, significant cost saving to the bank.
- Your Bank has introduced differentiated cards with additional
features. These include the RuPay Debit Card, for customers opening
accounts under PMJDY scheme. Associate Card for representatives of
customers whereby non-financial transactions can be made through ATMs
within Kotak network.
- Your Bank introduced electronic platform for KYC. Customers can
walk in to the branch only with Aadhar number and with the help of
biometric impression of customer or OTP, the KYC details can be
downloaded from UIDAI database through eKYC application. This has
enabled faster on boarding of new customers.
Business Lines
a) Non Resident Business
Your Bank continues to deliver innovative products and services in its
endeavor to become a preferred banker amongst the NRI community
globally. Some of the key initiatives taken this year are:
1. Extended C2R money transfer mode for Australia. Your Bank''s NRI
clients can now use this medium to transfer money from Australia to
their Kotak Bank account in India.
2. Your Bank has further expanded the network of exchange house
relationships and the count now stands at 20.
3. Launched a unique proposition for Indian IT professionals deputed to
overseas assignments.
4. Your Bank has signed an MOU with NED Bank South Africa. This
alliance would address the needs of the Indians migrating to South
Africa and those already present there. South Africa has one of the
strongest Indian diaspora which include both the NRI and PIO.
5. As a platform to reach out to the overseas Indian community, your
Bank participated in various international business forums such as
Pravasi Bhartiya Diwas (PBD)-2015 and Vibrant Gujarat, the annual
convention of AAPI-2014 (American Association of Physicians of Indian
origin) at San Antonio (Houston.), AIA (Association of Indian
Americans)-Annual Convention at New York, 2014.
b) Priority Banking Business
Privy League, the premium banking program of the Bank, now services
more than 2.75 lakh customers. The segmental offering in Privy League
was re-enforced with the launch of Trader current accounts and Grand
savings accounts for senior citizens, under the Privy League program
umbrella. An exclusive Privy League branch was launched in Hauz Khas,
Delhi to create a differentiated service experience for the HNI
customers with amenities like valet parking, private meetings rooms
with video conference facility and a coffee lounge.
c) Consumer Assets Business
Your Bank has continued to grow the product lines under the Consumer
Assets business.
Credit Card: Your Bank''s credit card business has issued 4.80 lac cards
by March 2015 and is in its seventh year of operations. The premium
range of our products - VISA Signature and VISA Platinum have driven
the spends growth in the portfolio and it contributes to 47% of spends,
while accounting for 27% of customer base. The Credit card business has
clocked total spends of Rs.3204 crore for the year at 31% growth Y-o-Y
with a book size of Rs.643.5 crore. As per RBI data on electronic
payments released for November 2014, total credit card spends for the
industry has grown by 23% for April to November 2014 period over last
year.
Salaried Personal Loan: Your Bank''s Salaried Personal Loan business
offers salaried individuals personal loans with a tenure of upto 60
months. This year the business has grown by 68% with a SOH of Rs. 840
crore as of March 2015. The total customer base stands at 34000
customers.
Home Finance: Home Finance business clocked high growth of 37% in
disbursements with loan book growth of 20% during the year with strong
demand from both Tier I and Tier II Cities. Your Bank has expanded its
home finance business further in Tier II Cities. Cross Sell through
Bank Branches, Corporate Salary, Privy, and Wealth Teams contributed to
around 30% of total volume. This year also witnessed very low losses on
account of efficient and effective recovery and collection processes
and policies adopted and we were able to resolve NPA cases.
d) Business Banking Assets (BBA): Your Bank through its BBA division
offers secured and unsecured Business loans, Loans against Property &
Working Capital Finance to self-employed professionals /
non-professionals and Small & Medium Enterprises. This has been a
landmark year for your Bank''s BBA business with its book growing by
27%. Your Bank continues to maintain its best in class portfolio
quality through it effective and efficient risk management and recovery
policies and practices. Capitalizing on the growing retail branch
network, your Bank managed to expand its BBA product offering in over
400 branches.
Wholesale Banking
Your Bank through its consolidated franchise has focussed on serving
customers'' requirements across segments with its wide array of
customized financial products and services that are driven through
best-in-class technology platforms.
Your Bank has also ensured a healthy portfolio with its continuous
efforts through both volatile economic situation and tough credit
environment in the last financial year. This has led to a stable credit
growth.
The Transaction Banking Group has focussed on reinforcing your Bank as
the Best Domestic Bank during the past year. Your Bank has been able to
consistently add value to clients across Cash Management & Trade
Services through its specialized product solutions that are steered by
innovation and robust technology. This has helped clients optimize
working capital & liquidity management. Proactive competition
benchmarking, advanced processes and product parameters, continuous
client feedback and customized solutions have helped the bank in
catering to needs of this ever changing challenging industry. Your Bank
has introduced the following key initiatives to serve customers better:
- Service Support: To serve diverse financial needs your Bank has nine
dedicated commercial branches & 135 CSM teams including cluster heads
across 47 locations.
- Tax Payment: Your Bank offers a ''Comprehensive Statutory Payment
Solution'' to its customers via direct integration with Tax authorities,
payment aggregators and various partner banks. Your Bank has developed
a Government Business Module (GBM) for its customers to process payment
of Direct (CBDT)/ Indirect Taxes (CBEC) through Net Banking and Branch
channel. Currently, your Bank has been empanelled as Agency Bank for
collecting tax for a) Delhi VAT & CST, Gujarat Commercial Tax, b)
Andhra Pradesh Commercials Taxes, c) Punjab VAT & CST, Telengana
Commercial Taxes d) an aggregator bank for Bihar VAT & CST and e)
Odisha VAT & CST.
- Online EPF Payment: Employees'' Provident Fund Organization has
enabled online EPF payment for employers through payment aggregator
with SBI as their primary banker. Your Bank has successfully integrated
GBM module with concerned solution provider to enable all Kotak account
holders to make EPF payment online using maker-checker workflow.
- IFC: Your Bank has signed an agreement with International Finance
Corporation (IFC) under Global Trade Finance Programme (GTFP) as a
confirming bank. Under this arrangement IFC will issue us payment
guarantees/ SBLC for letter of credit favouring Kotak Mahindra Bank
Ltd., thereby mitigating the payment risk on the underlying banks.
- Kotak Sarvartha Prepaid Card: Your Bank has initiated a comprehensive
Prepaid Card program that will enable corporate clients to make
payments to their employees, customers, affiliates, and vendors etc.
and address their diverse payout needs like incentive payments, petty
cash reimbursements, contract staff payouts, FI payouts etc.
- Kotak Bill Pay: To ensure convenient & secure way of managing bill
payments, your Bank introduced Kotak BillPay that offers customers the
flexibility of making regular payments by one time registration.
Your Bank''s in-depth understanding of clients'' requirement and ability
to deliver tailored solutions in both Trade & Cash Management
businesses has been acknowledged by industry''s leading agencies. Your
Bank has been adjudged the "Best Domestic Trade Bank in India" by Trade
& Forfaiting Review and "Best Local Cash Management Bank in India" 6th
year in a row by Asiamoney. The Asiamoney awards are based on scores
formed from a corporate survey conducted by Asiamoney (turnover less
than or equal to USD 100mn). Your Bank won the Best Prepaid Card
Programme at Financial Inclusion & Payments Systems Award 2014 for Amul
Samriddhi. Your Bank has also received the Special Award for Innovation
at the National Payments Excellence Award 2014 and was also recognised
by NPCI for its role in launch of the RuPay Prepaid Card. Your Bank
also received an award from the Honorable President of India Shri.
Pranab Mukherjee at Rashtrapati Bhawan for its role in the launch of
RuPay prepaid card leading to automation of the payout process for milk
procurement by milk unions. These awards stand testimony to your Bank''s
focussed approach towards Transaction Banking and client centric
solutions.
Commercial Banking
The Commercial Banking business has registered a reasonable growth in
FY 2014-15 despite subdued market sentiments and erratic monsoon.
Commercial Vehicles (CV) and Construction Equipment (CE) sectors, which
have been witnessing slowdown since 2011, showed signs of recovery.
The CV situation seems to have improved slightly in the last two
quarters of the previous year, especially in the case of Medium
Commercial Vehicle (MCV) & Heavy Commercial Vehicle (HCV) sales across
segments, which was driven by replacement demand. Decrease in energy
prices and all around improvement of load factors have improved
viability for transport operations and also reduced levels of
delinquency. However, the recovery of Light Commercial Vehicle (LCV)
segment is still weak. Further, de-growth is seen in the Small
Commercial Vehicles (SCV) segment. Your Bank has started increasing
exposure to this sector in the second half of FY 2014.
At a macro level, GDP growth in FY 2015-16 is expected to be better
than the previous year. MCV and HCV sectors are expected to grow in the
next fiscal year, whereas the LCV segment could grow with a lag of 6
months towards the latter half of FY 2015-16. Further, project
clearances should pave the way for action in infrastructure, which in
turn will lead to revival in the CE sector. Your Bank is well
positioned to accelerate growth in these segments should a sustainable
turnaround be seen.
After continuous growth in the last four years, the tractor industry
was in the negative by 13.5% during FY 2014-15 as a result of late and
deficit monsoon in the first half of the last fiscal year followed by
unseasonal rain fall. Losses in Kharif and Rabi crops, drop in prices
of major commodities and reduction in yields have led to more than 25%
percent fall in tractor industry growth post January 2015. Your Bank''s
fresh disbursement for tractors in FY 2014-15 was marginally lower than
previous year but better than the industry de-growth. However, the
slowdown in rural economy has led to marginal deterioration of
portfolio quality.
Although the monsoon also had an impact on the agri business industry,
your Bank inched closer to the RBI target of 18% of the Bank''s advances
in the agri loan portfolio. Your Bank has set up new branches in the
tier two to tier six towns and villages. This is in keeping with the
Banks philosophy of borrowing (deposits) from India (metro/urban
cities) and lending (light on liabilities, heavy on assets) to Bharat
(rural and semi-urban). Even though the portfolio quality of agri loans
continues to remain satisfactory, there could be incremental stress in
the next fiscal year, given the unpredictable weather patterns.
The total agri portfolio of your Bank crossed Rs. 12,000 crore in the
last fiscal. The Agri business is now offering new non-urban small
ticket loan products in smaller towns and rural pockets. Under the
micro loan segment, your Bank commenced direct lending in the state of
Uttar Pradesh, specifically in and around Varanasi. Close to 4,000
women customers were added through this initiative. Further, your Bank
has acquired by assignment a large portfolio of micro loans given to
women borrowers under the Joint Liability Group setup in the states of
West Bengal, Bihar and Tripura.
Emerging Corporate Group''s (ECG) strategy continues to focus on
balanced growth and maintain asset quality. Further, its growth has
been driven by new customer acquisition along with increasing product
penetration to existing customers. In the last financial year, the ECG
business expanded its operations to 19 locations across 13 states.
While the portfolio has witnessed stress due to slow down in the
economy majority of them are in advanced stage of resolution.
Your Bank also diversified its gold loans and rural housing finance
operations. Gold loan products are now available across 150 bank
branches and Rural Housing finance is now offered at 50 locations.
Asset Reconstruction
This year your Bank received and invested in several proposals of
special situation and last mile financing. This scenario is expected to
continue for the next few years as well. However, recoveries from sale
of large assets continues to be challenging.
The retail recoveries of the assets purchased from other banks and
NBFC''s continues to be robust. The retail portfolio sale from other
banks and NBFC''s is expected to increase in the coming few years.
Treasury
Your Bank''s treasury actively contributes to your Bank by way of:
- Proprietary Trading: The various proprietary trading desks actively
trade in products such as Fixed Income, Money Markets, Derivatives,
Foreign Exchange and Bullion. Primary Dealer Desk - part of the
proprietary trading desk, actively participates in the primary auctions
of government securities, makes market in government securities and
engages in retailing of government securities.
- Customer Transactions:
o Facilitating access to foreign currency markets through cash &
derivatives products and providing fine market rates to clients for
remittance and trade transactions.
o Client solutions - standardised and structured, pertaining to Debt
Capital Markets including Syndication of Loans, Bonds, Mezzanine
financing, Promoter funding and acquisition financing and
Securitisation.
- Balance Sheet Management: The Balance Sheet Management Unit (BMU)
manages the Asset Liability mismatches, Interest rate & Liquidity gaps
and implementation of Funds Transfer Pricing between various business
units. The Correspondent Banking Division within treasury actively
builds on relationships with offshore banks towards improving quality
and international reach for its customers.
Human Resources
Investment in Human Capital continues to be significant as in earlier
years. Programs related to Talent Attraction, Talent Development and
Talent Management have been institutionalized basis our architectural
framework of Value creation and Best employment Experience.
Pre-trained manpower acquisition channels such as Kotak Probationary
Officer (KPO) and Junior Probationary Officer (JPO) programs have been
further strengthened to create a sustainable pipeline of quality and
timely manpower who become specialist bankers with requisite managerial
skills.
Talent management continues to be an integral part of overall
performance management process in the Bank. Your Bank believes in
driving businesses through its core values and our talent management
process aims to provide long term, sustained and meaningful career to
employees across the organization.
Cultural integration of people is a very key focus area and in this
context our organizational learning initiatives are designed around
assimilation and development of individuals and team competencies, on
aspects such as people management, productivity and service quality.
Your Bank has partnered with top academic institutions as well as
renowned industry experts for the same
Your Bank recognises that functional training is key to equip employees
with strong domain knowledge and it continues the commitment of
developing strong functional competencies in its employees through its
robust e-learning platform as well as classroom trainings. The
organization learning team runs around 350 plus unique functional and
developmental programs in the above context.
Specialized certifications for specific roles continue to be run as
mandatory programs to ensure employee awareness of various regulatory
norms in this dynamic external environment.
Technology
This year, your Bank increased emphasis on digital products. Three
major upgrades on the mobile banking application saw a large increase
in adoption of usage. Several new "native digital" products were
launched including Kaypay, Message Money and Hashtag Banking. On the
loans management side, mobility has been introduced for collections on
personal loans and credit card payments.
Customer connect was improved by leveraging the Unica platform launched
the previous year. Further automation of the marketing operations
enabled your Bank to increase its ability to increase scale in offers
to customers, tailored to their needs.
A new system was introduced for the Bank''s Wealth Management customers,
enabling them to get a consolidated, single view of all their
investments. This will serve as the foundation for portal and mobile
access to customer dashboards and alerts in the coming year.
To ensure customer data security, technology programs in the area of
information security kept pace with the digital innovation. Customers
are now given an option to login using digital certificates. New
technology to prevent leakage of customer data has been implemented
across the Bank and a new initiative for fraud detection on channels
has been started.
Governance and control continued to be an area of concentration, with
new systems being deployed for internal audit automation, anti-money
laundering, asset-liability management and compliance management.
SUBSIDIARIES & ASSOCIATES
Your Bank''s subsidiaries are established players in the different areas
of financial services, viz. car finance, investment banking, stock
broking, asset management and life insurance.
As at 31st March 2015, your Bank has seventeen (17) subsidiaries as
listed below:
Domestic Subsidiaries
Kotak Mahindra Prime Limited
Kotak Securities Limited
Kotak Mahindra Capital Company Limited
Kotak Mahindra Old Mutual Life Insurance Limited
Kotak Mahindra Investments Limited
Kotak Mahindra Asset Management Company Limited
Kotak Mahindra Trustee Company Limited
Kotak Investment Advisors Limited
Kotak Mahindra Trusteeship Services Limited
Kotak Forex Brokerage Limited
Kotak Mahindra Pension Fund Limited
Kotak Mahindra General Insurance Limited
International Subsidiaries
Kotak Mahindra (International) Limited Kotak Mahindra (UK) Limited
Kotak Mahindra Inc.
Kotak Mahindra Financial Services Limited
Kotak Mahindra Asset Management (Singapore) Pte. Limited
During the year, Global Investment Opportunities Fund Limited, ceased
to be a subsidiary of your Bank with effect from 13th May 2014.
Further, a new subsidiary of the Bank viz. Kotak Mahindra General
Insurance Limited was incorporated in December 2014, with principal
objective of carrying on business of general insurance. It is awaiting
approval from Insurance Regulatory and Development Authority of India
(IRDAI) to commence the business of general insurance.
The various activities of the subsidiaries and the performance and
financial position of the subsidiaries and associates are outlined in
the Management Discussion and Analysis section appended to this Report.
The Bank''s Policy for determining material subsidiaries is available on
the Bank''s website viz. URL:
http://ir.kotak.com/governance/policies.html
As at 31st March 2015, your Bank has following four (4) Associate
companies:
ACE Derivatives & Commodity Exchange Limited Infina Finance Private
Limited Matrix Business Services India Private Limited Phoenix ARC
Private Limited
The Annual Report which consists of the financial statements of your
Bank on standalone basis as well as consolidated financial statements
of the group for the year ended 31st March 2015, has been sent to all
the members of your Bank. It does not contain Annual Reports of your
Bank''s subsidiary companies. Your Bank will make available full Annual
Report (including the Annual Reports of all subsidiaries) upon request
by any member of your Bank.
These Annual Reports will be available on your Bank''s website viz. URL
: http://ir.kotak.com/annual-reports and will also be available for
inspection by any member at the Registered Office of your Bank.
The Bank has received in-principle approvals from the Stock Exchanges
for the above schemes.
Further, the Board of Directors of the Bank at its meeting held on 5th
May 2015 has approved and adopted, subject to the shareholders approval
and other necessary approvals, a new Scheme under the Securities and
Exchange Board of India (Share Based Employee Benefits) Regulations,
2014 for the purposes of granting options and stock appreciation rights
to the employees of the Bank, its subsidiaries and its associate
companies, as applicable. viz. Kotak Mahindra Share Based Employee
Benefit Scheme 2015 comprising of:
- Part A - Kotak Mahindra Equity Option Scheme 2015
- Part B - Kotak Mahindra Stock Appreciation Rights Scheme 2015
Approval of the shareholders in this regard is being sought at the
ensuing Annual General Meeting of the Bank.
CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT
Pursuant to Clause 49 and 55 of the Listing Agreement with the Stock
Exchanges, separate sections entitled ''Report on Corporate Governance''
and ''Business Responsibility Report'' have been included in this Annual
Report. The Report of Corporate Governance also contains certain
disclosures required under the Companies Act, 2013.
DIRECTORS & KEY MANAGERIAL PERSONNEL
Directors retiring by rotation
Dr. Shankar Acharya, Chairman - Non-Independent Director of the Bank,
retires by rotation at the Thirtieth Annual General Meeting and is
eligible for re-appointment.
Directors appointed during the year
The Board of Directors of the Bank, at its meeting held on 7th
September 2014 had appointed Ms. Farida Khambata as an Additional
Director of the Bank.
The shareholders of the Bank at their Extraordinary General Meeting
held on 7th January 2015 pursuant to Section 149, 150 (2) & 152 of the
Companies Act, 2013 and Section 10-A(2-A) of the Banking Regulation
Act, 1949, appointed the following directors as Independent Directors,
not liable to retire by rotation:
- Mr. Asim Ghosh (DIN : 00116139) for a term upto 8th May 2016
- Mr. Amit Desai (DIN : 00310510) for a term upto 17th March 2019
- Prof. S. Mahendra Dev (DIN : 06519869) for a term upto 14th March
2018
- Mr. Prakash Apte (DIN : 00196106) for a term upto 17th March 2019
- Ms. Farida Khambata (DIN : 06954123) for a term upto 6th September
2019
Further, the shareholders at the same meeting re-appointed Mr. C.
Jayaram (DIN : 00012214) as Whole-time Director of the Bank designated
as Joint Managing Director for the period from 1st January 2015 to 30th
April 2016, subject to the approval of the Reserve Bank of India.
The Board of Directors of the Bank, at its meeting held on 5th May
2015, has re-appointed Dr. Shankar Acharya (DIN : 00033242) as the
Chairman of the Bank subject to the approval of the shareholders and of
the Reserve Bank of India. The approval of the shareholders in this
regard is being sought at the ensuing Annual General Meeting of the
Bank.
Mr. Mark Newman (DIN : 03518417) was appointed as an Additional
Director of the Bank with effect from 5th May 2015. Mr. Newman holds
office as a Director up to the date of this Annual General Meeting and
is eligible to be appointed as a Director. In terms of Section 160 of
the Companies Act, 2013, your Bank has received notice in writing from
a member along with requisite deposit of Rs. 1,00,000/- proposing
candidature of Mr. Newman for his appointment as a Director.
The details of the Directors appointed are set out in the Corporate
Governance Report annexed to this Report.
Declaration from Independent Directors
The Board has received declarations from the Independent Directors as
per the requirement of Section 149(7) of the Companies Act, 2013 and
the Board is satisfied that the Independent Directors meet the criteria
of independence as mentioned in Section 149(6) of the Companies Act,
2013.
Board Evaluation
The Independent Directors of the Bank at their meeting held on 6th
September 2014, had advised the management to appoint an external
agency specialized in HR and management consultancy to finalise the
criteria for performance evaluation of Non-Executive directors,
Whole-time Directors and the Chairperson. Accordingly, the management
has identified and shortlisted one external agency for finalizing the
criteria for the performance evaluation of the Directors and would be
presenting the proposal to the Independent Directors at their next
meeting for their consideration and approval.
Key Managerial Personnel (KMPs)
The Board of Directors of the Bank at its meeting held on 30th April
2014 confirmed and approved the appointment of the following officials
of the Bank as "Key Managerial Personnel" pursuant to the provisions of
Section 203 of the Companies Act, 2013:
- Mr. Uday Kotak, Executive Vice Chairman and Managing Director
- Mr. C. Jayaram, Joint Managing Director
- Mr. Dipak Gupta, Joint Managing Director
- Mr. Jaimin Bhatt, President & Group Chief Financial Officer
- Ms. Bina Chandarana, Company Secretary
Appointment & Remuneration of Directors & KMPs
The appointment and remuneration of Directors of the Bank is governed
by the provisions of Section 35B of the Banking Regulation Act, 1949.
The Nomination and Remuneration Committee recommends to the Board the
appointment of Directors. The Committee considers the qualifications,
fit & proper status, positive attributes as per the suitability of the
role and independent status as may be required of the candidate before
such appointment.
The Reserve Bank of India (''RBI'') vide its circular
no.DBOD.No.BC.72/29.67.001/201 1-12 dated 13th January 2012 has issued
the Guidelines on
Compensation of Whole Time Directors / Chief Executive Officers / Other
Risk Takers of Private Sector Banks on Compensation Policy which inter
alia cover the following:
- Proper balance between fixed pay and variable pay;
- Variable pay not to exceed 70% (Seventy Per Cent) of the fixed pay
in a year.
In accordance with the aforesaid RBI Circular, the Board of the Bank
has adopted a Compensation Policy for its Whole-time Directors, Chief
Executive
Officer of the Bank and other employees which includes issue of stock
appreciation rights as a form of variable pay, linked to the Bank''s
stock price, payable over a period of time. The salient features of the
Compensation Policy are as follows:
- Objective is to maintain fair, consistent and equitable
compensation practices in alignment with Kotak''s core values and
strategic business goals.
- Applicable to all employees of the Bank. Employees classified into
3 groups:
o Whole-time Directors/Chief Executive Officer
o Risk Control and Compliance Staff
o Other categories of Staff
- Compensation structure broadly divided into Fixed, Variable and
ESOPs
o Fixed Pay - Total cost to the Company i.e. Salary, Retirals and Other
Benefits
o Variable Pay - Linked to assessment of performance and potential
based on Balanced Key Result Areas (KRAs), Standards of Performance and
achievement of targets with overall linkage to Bank budgets and
business objectives. The main form of incentive compensation includes -
Cash, Deferred Cash/Incentive Plan and Stock Appreciation Rights.
o ESOPs - Granted on a discretionary basis to employee based on their
performance and potential with the objective of retaining the employee.
- Compensation Composition - The ratio of Variable Pay to Fixed Pay
and the ratio of Cash v/s Non Cash within Variable pay outlined for
each category of employee classification.
- Any variation in the Policy to be with approval of the Nomination &
Remuneration Committee.
- Malus and Clawback clauses applicable on Deferred Variable Pay.
- Ensuring no personal hedging strategies by employees which
undermine risk alignment effects as part of their remuneration.
The details of the remuneration paid to the Non-Executive Chairman,
Executive and Non-Executive Directors of the Bank for the year ended
31st March 2015 is provided in the Corporate Governance Report annexed
to this Report.
The Non-Executive Directors of the Bank receive remuneration only by
way of sitting fees for attending meetings of the Board or Committees
thereof. Remuneration paid to the KMPs is in line with the
Compensation Policy of the Bank which is based on the RBI Guidelines.
AUDITORS
Messrs S. B. Billimoria & Co., Chartered Accountants, auditors of your
Bank, retire on the conclusion of the Thirtieth Annual General Meeting.
In terms of Section 139 of the Companies Act, 2013, every Company is
required to appoint auditors for a term of five years subject to their
appointment being ratified at every Annual General Meeting. However,
pursuant to the guidelines issued by the Reserve Bank of India (RBI),
an audit firm is allowed to continue as the statutory auditor of a bank
for a continuous period of four years only.
Accordingly, it is proposed to appoint, subject to the regulatory
approvals, Messrs S. R. Batliboi & Co. LLP, Chartered Accountants, as
the statutory auditors of the Bank in place of Messrs S. B. Billimoria
& Co., Chartered Accountants, who have completed four years as the
statutory auditors. The appointment of Auditors is proposed to the
members in the Notice of the current i.e. the Thirtieth Annual General
Meeting for a period of four years from the conclusion of the Thirtieth
Annual General Meeting until the conclusion of the Thirty fourth Annual
General Meeting of the Bank, subject to the annual approval of RBI and
ratification by the members every year.
SECRETARIAL AUDITOR
Pursuant to Section 204 of the Companies Act, 2013, your Bank has
appointed Ms. Rupal D. Jhaveri, a Company Secretary in Practice, as its
Secretarial Auditor. The Secretarial Audit Report for the financial
year ended 31st March 2015 is annexed to this Report.
DEPOSITS
Being a banking company, the disclosures required as per Rule 8(5)(v) &
(vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and
74 of the Companies Act, 2013 are not applicable to your Bank.
RELATED PARTY TRANSACTIONS
All the Related Party Transactions that were entered into during the
financial year were on arm''s length basis and were in ordinary course
of business.
Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies
(Accounts) Rules, 2014, there are no transactions to be reported under
Section 188(1) of the Companies Act, 2013.
All Related Party Transactions as required under Accounting Standards
AS-18 are reported in Note 21 of Schedule 17 - Notes to Accounts of the
Consolidated financial statements and Note 8 of Schedule 17 - Notes to
Accounts of the Standalone financial statements of your Bank.
The Bank''s Policy on dealing with Related Party Transactions is
available on the Bank''s website viz. URL:
http://ir.kotak.com/governance/policies.html PARTICULARS OF LOANS,
GUARANTEES OR INVESTMENTS
Pursuant to Section 186(11) of the Companies Act, 2013, loans made,
guarantees given, securities provided or acquisition of securities by a
banking company in the ordinary course of its business are exempted
from the disclosure requirement under Section 134(3)(g) of the
Companies Act, 2013.
WHISTLE BLOWER POLICY / VIGIL MECHANISM
Your Bank is committed to its "Vision Statement" of upholding its
Global Indian Financial Services Brand creating an ethos of trust
across all constituents, developing a culture of empowerment and a
spirit of enterprise thereby becoming the most preferred employer in
the financial services sector.
Consistent with the Vision Statement, your Bank is committed to
maintain and provide to all its employees and directors highest
standards of transparency, probity and accountability. The Kotak Group
endeavours to develop a culture where it is safe and acceptable for all
employees and directors to raise / voice genuine concerns in good
faith, and in a responsible as well as effective manner.
A vigil mechanism has been implemented through the adoption of
Whistleblower Policy with an objective to enable any employee or
director, raise genuine concern or report evidence of activity by the
Bank or its employee or director that may constitute: Instances of
corporate fraud; unethical business conduct; a violation of Central or
State laws, rules, regulations and/or any other regulatory or judicial
directives; any unlawful act, whether criminal or civil; malpractice;
serious irregularities; impropriety, abuse or wrong doing; deliberate
breaches and non-compliance with the Bank''s policies; questionable
accounting / audit matters / financial malpractice. The same option has
now been extended to the vendors of the Bank also. The concerns can be
reported on the website viz. URL: https://cwiportal.com/kotak.
Currently an online mechanism enabling aforementioned reporting has
been implemented over and above other modes of communication like
e-mail, or a letter sent by mail, courier or fax to designated persons.
Safeguards to avoid discrimination, retaliation, or harassment, and
confidentiality have been incorporated in the policy. All employees and
directors have access to the Chairman of the Audit Committee in
appropriate and exception circumstances.
The Policy has been uploaded on the Bank''s intranet as well as website
viz. URL: http://ir.kotak.com/governance/policies.html and regular
communication is made for sustained awareness.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Bank has constituted a Corporate Social Responsibility (CSR)
Committee consisting of the following Directors:
- Mr. C Jayaram Joint Managing Director and Chairman of CSR Committee
- Mr. Dipak Gupta, Joint Managing Director
- Prof S. Mahendra Dev, Independent Director
Your Bank''s CSR Committee drives the CSR programme of the Bank. Your
Bank has a Board approved CSR policy, charting out its CSR approach,
and is available on the Bank''s website viz. URL:
http://www.kotak.com/corporate-responsibility.html.
The CSR expenditure incurred for the period 1st April 2014 to 31st
March 2015 under Section 135 of Companies Act, 2013 in the financial
year 2014-15 amounts to Rs. 1,197 lac as against Rs. 363 lac CSR spent in
the financial year 2013-14.
Your Bank is building its CSR capabilities on a sustainable basis and
is committed to gradually increase its CSR spend in the coming years.
The CSR Committee of the Board confirms that the implementation and
monitoring of CSR Policy, is in compliance with CSR objectives and
Policy of the company.
The details of CSR activities and report under Section 135 of the
Companies Act, 2013, are provided on pages 145-146 and 152-161 of the
annual report FY 2014-15.
RISK MANAGEMENT POLICY
Your Bank has in place a comprehensive Enterprise wide Risk Management
(ERM) framework supported by detailed policies and processes for
management of Credit Risk, Market Risk, Liquidity Risk, Operational
Risk and various other Risks. Details of identification, assessment,
mitigations, monitoring and the management of these Risks are mentioned
in the Management Discussion and Analysis section appended to this
Report.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
EARNINGS AND OUTGO
The provisions of Section 134(3)(m) of the Companies Act, 2013 read
with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not
applicable to your Bank. However, your Bank has been increasingly using
information technology in its operations.
EMPLOYEES
The employee strength of your Bank, standalone, was 18,335 and along
with its subsidiaries was 31,432 as of 31st March 2015. Upon the
merger, 10,314 employees have been added up in the Bank and 514
employees in the subsidiaries.
191 employees employed throughout the year and 30 employees employed
for part of the year were in receipt of remuneration of Rs. 60 lacs or
more per annum.
With an average age of 31 years your Bank continues to attract talent
across all its businesses and hierarchy and has put in place various
processes and systems to ensure alignment of employee behaviors with
the organization''s core values.
Organizational culture aspects like trust & inclusiveness were also
reiterated through 113 cross functional meets conducted by senior
business leaders for employees at mid management level under the "Meet
5" initiative.
In a very short span of two years, your Bank has crossed several
milestones in its Gender Diversity agenda.
- A differentiated talent acquisition strategy to increase women
employee base across various suitable roles has helped us to continue
adding 20% women amongst all new hires in the Bank.
- Your Bank''s top senior women professionals (around forty women
across Kotak) have been brought together under our diversity initiative
"Astra" and these women leaders now play a pivotal role in guiding and
mentoring other mid-level women employees to sustain and grow in the
careers.
- Your Bank''s internal women''s cell Strisangini continues to address
women issues at workplace and facilitates mass-mentoring programs with
senior women leaders.
- POSH: Prevention Of Sexual Harassment (POSH) Policy has been
formally instituted with 3 Regional Internal Complaints Committees
(ICC). The ICC members have been trained in handling and resolving
complaints and have also designed an online e-learning POSH Awareness
module which covers the larger employee base.
Following is a summary of sexual harassment complaints received and
disposed off during the year 2014-15: o No. of complaints received : 5
o No. of complaints disposed off : 4
As part of the Leadership Transformation program, new promotes are now
put through an intensive two day intervention to orient them on
expected skill-sets and competencies and create a leadership mindset
apart from other managerial and leadership development program.
As your Bank enters in its next phase of growth and expansion of
footprint across urban and rural India, your Bank and its subsidiaries
continued to carry out several initiatives to attract and retain a pool
of highly skilled and motivated employees who are aligned to the firm''s
vision of becoming the most trusted financial services provider.
I n accordance with the provisions of Rule 5 of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 the
names and other particulars of employees are set out in the annexure to
the Directors'' Report. In terms of the Proviso to Section 136(1) of the
Companies Act, 2013, the Directors'' Report is being sent to all
shareholders excluding the aforesaid annexure. The annexure is
available for inspection at the Registered Office of your Bank. Any
shareholder interested in obtaining a copy of the said annexure may
write to the Company Secretary at the Registered Office of your Bank.
DIRECTORS'' RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the
operational management, confirm in pursuance of Section 134(5) of the
Companies Act, 2013, that:
(i) your Bank has, in the preparation of the annual accounts for the
year ended 31st March 2015, followed the applicable accounting
standards along with proper explanations relating to material
departures, if any;
(ii) they have selected such accounting policies and applied them
consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
your Bank as at 31st March 2015 and of the profit of your Bank for the
financial year ended 31st March 2015;
(iii) they have taken proper and sufficient care to the best of their
knowledge and ability, for the maintenance of adequate accounting
records in accordance with the provisions of the Act for safeguarding
the assets of your Bank and for preventing and detecting fraud and
other irregularities;
(iv) the annual accounts have been prepared 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 are
operating effectively; and
(vi) they have devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems are adequate
and operating effectively.
ANNEXURES
Following statements/reports are set out as Annexures to the Directors''
Report:
- Extract Of Annual Return under Section 134(3)(a) of the Companies
Act, 2013 read with Rule 12 (1) of Companies (Management &
Administration) Rules, 2014 (Annexure-A).
- Secretarial Audit Report pursuant to Section 204 of the Companies
Act, 2013 (Annexure-B).
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the
valuable guidance and support received from the Reserve Bank of India,
Securities and Exchange Board of India, Insurance Regulatory and
Development Authority and other Government and Regulatory agencies.
Your Directors acknowledge the support of the members and also wish to
place on record their appreciation of employees for their commendable
efforts, teamwork and professionalism.
For and on behalf of the Board of Directors
Dr. Shankar Acharya
Place: Mumbai,
Chairman
Date: 5th May 2015
Mar 31, 2011
The Directors present their Twenty Sixth Annual Report together with
the audited accounts of your Bank for the year ended 31st March 2011.
FINANCIAL HIGHLIGHTS
(A) Kotak Mahindra Bank Limited à Consolidated financial highlights:
31st March 2011 31st March 2010
Rs. crore Rs. crore
Total income 11,029.27 10,053.30
Total expenditure, excluding
provisions and contingencies 8,634.27 7,639.71
Operating Profit 2,395.00 2,413.59
Provisions and contingencies,
excluding provision for tax 147.60 510.73
Profit before tax 2,247.40 1,902.86
Provision for taxes 678.16 575.50
Profit after tax 1,569.24 1,327.36
Less: Share of minority interest 26.36 18.00
Add: Share in profit of Associates 23.86 (2.36)
Consolidated profit for the
Group 1,566.74 1,307.00
Earnings per Equity Share
Basic (Rs.) 21.73 18.84
Diluted (Rs.) 21.60 18.64
(B) Kotak Mahindra Bank Limited à Standalone financial highlights:
31st March 2011 31st March 2010
Rs. crore Rs. crore
Total Income 4,936.60 3,883.86
Total expenditure, excluding
provisions and contingencies 3,611.81 2,586.86
Operating Profit 1,324.79 1,297.00
Provisions and contingencies,
excluding tax provisions 137.09 485.89
Profit before tax 1,187.70 811.11
Provision for taxes 369.52 250.00
Profit after tax 818.18 561.11
Add: Surplus brought forward from
the previous year 965.91 648.94
Amount available for appropriation 1,784.09 1,210.05
Appropriations:
Statutory Reserve under Section 17
of the Banking Regulation Act, 1949 204.55 140.28
General Reserve 40.91 28.06
Transfer to / (from) Investment
Reserve Account (26.83) 1.19
Transfer to Capital Reserve 0.69 6.96
Transfer to Special Reserve 29.00 40.00
Proposed Dividend 36.88 29.66
Corporate Dividend Tax 4.37 (2.01)
Surplus carried to Balance Sheet 1,494.52 965.91
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs. 0.50 per equity
share of the face value of Rs. 5 each (previous year Rs. 0.85 per equity
share of the face value of Rs.10 each), entailing a payout of Rs. 41.25
crore including dividend distribution tax (previous year Rs. 27.65
crore). The dividend would be paid to all the shareholders, whose names
appear on the Register of Members/Beneficial Holders list on the Book
Closure date.
CAPITAL
Pursuant to the approval granted by the Members at an Extraordinary
General Meeting held on 27th July 2010 and receipt of other necessary
approvals, in August 2010 your Bank allotted 1,64,00,000 equity shares
of face value of Rs.10/- each to Sumitomo Mitsui Banking Corporation, a
public company registered under the laws of Japan on a preferential
basis at a price per equity share of Rs. 833/- for a total consideration
of Rs. 1366.12 crore.
In September 2010, each equity share of your Bank having a face value
of Rs. 10 was subdivided into two equity shares of the face value of Rs. 5
each.
During the year, your Bank has also allotted 77,88,550 equity shares
(adjusted for stock split number) arising out of the exercise of
Employee Stock Options granted to the employees and Executive Directors
of the Bank and its subsidiaries.
Post allotment of equity shares and sub-division of equity shares as
aforesaid, the issued, subscribed and paid-up Share Capital of the Bank
stands at Rs. 368.44 crore comprising of 73,68,71,504 equity shares of Rs.
5 each.
The Bank has a Capital Adequacy Ratio (CAR) under Basel II as at 31st
March 2011 of 19.92% with Tier I being 17.98%. At a consolidated level
the CAR was 19.46% under Basel II.
During the year, your Bank has not issued any Capital under Tier II. As
on 31st March 2011, outstanding Unsecured, Redeemable Non- Convertible,
Subordinated Debt Bonds was Rs. 465.70 crore and outstanding Unsecured,
Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II
stood at Rs. 336.68 crore.
OPERATIONS
Your Bank worked on a very balanced expansion plan of the network and
added 72 branches and 246 ATMs and ended the year with 321 Branches and
710 ATMs, and thereby increasing the presence to 183 locations. Your
Bank added over half a million new customers this year across core
banking products of savings and checking account, term deposits,
overdrafts and non resident accounts.
The robustness of the network manifested in the healthy growth in
demand and time liabilities. The momentum gained last year in terms of
distribution of asset products from the network continued in the
current year. The initiatives launched last year on higher end segment
of customers through a branded programme titled "Privy League"
continued to show encouraging results. Your Bank maintained its
ambition of becoming a bank of choice for the small and mid segment
business enterprises and doubled the base of customers engaging in
trade and foreign currency transactions. The increased network of ATMs
benefitted your Bank by bringing in much higher usage from non
customers and growing the interchange income manifold.
Your Bank continued to put significant focus in reaching out to the NRI
community last year. Lot of path breaking initiatives were rolled out.
Many alliances were signed with leading exchange houses across Gulf
countries to provide channels for attracting inward remittances.
Through the strategic partnership with OIFC (Overseas India
Facilitation Centre) your Bank participated in 3 global meets in Dubai,
London and Birmingham which has firmly established your Bank as a key
service provider with the NRI community. This alliance further helped
your Bank to engage another 30 sub-alliances enabling the growth in
business thru NRIs. Your Bank also reached out to a larger canvass of
NRI customers by launching a variant to savings account targeted for
the mid-income segment, P.O. Box facility in USA & UK. Your Bank
launched a new remittance solution under the brand name Click2Remit.
This is a multi currency platform and customers can send money into
India from anywhere in the world in 8 different currencies. Your Bank
also launched a credit card for the NRI customers and started the Home
Loan product for NRIs in select markets. To provide higher convenience
to the NRI customer your Bank launched a unique service called
Click2Call & SMS2Call wherein the Bank calls back the customer within
30 minutes of receiving the intimation. Your Bank focussed on the
online space including social media engagement through a partner portal
called NRIMatters.com; NRI Power Podium campaign which got 13000 NRI
signups in one month and found its way into India Book of Records. The
number of hits on the NRI website today stands at 150000 per month, up
from 2000 per month last year.
Your Bank implemented several initiatives aimed towards enhancing
customer service and widening the product/ services bouquet. Some of
the key ones being:
- Annual Combined Statement on Net Banking - Customers can now view and
download their Annual Combined Statement for Savings and Current
account, Investment and Demat holdings for the previous financial year.
This will help customers to file Tax Returns, apply for loan etc.
- Card Protection Plan à Your Bank in association with CPP Assistance
Service Pvt. Ltd. offers card protection to protect all Kotak customers
cards (Credit, Debit, ATM etc) against loss and resultant fraud.
- Multilingual ATMs - Multilingual (English, Hindi and Marathi) on all
ATMs in Maharashtra has gone live. Other regional languages will get
covered during the course of next fiscal year.
- Recharge Services - This enables customers to recharge their pre-paid
mobile and DTH services through Kotak Net Banking using Kotak Bill Pay.
- Statement Registration on Net Banking - Customers now have the option
to register for their preferred statement frequency and mode option on
Net Banking.
- Your Bank has also taken steps to participate in the eco drive. An
E-Statement campaign was run through the year aiming to convert the
customers who have registered for monthly physical statements &
quarterly physical statements to register for monthly E-Statements with
the theme of Save Trees, Save the Environment! Say no to Physical
Statements.
- Interbank Mobile Payment Service à This feature allows customers to
transfer money instantly through mobile phone within own accounts &
third party accounts within the IMPS member banks.
- Kotak Stock Ace - This is loan (overdraft) against securities
product. Under this product your Bank provides an overdraft to
customers against equity shares and mutual funds.
The last year saw several regulatory changes in the third party
investment and insurance products space. While these regulatory
interventions put a significant amount of revenue pressure your Bank
recognises the opportunity to create a well differentiated business if
it is able to create a more robust platform to advise its customers.
Hence significant focus was put to creating processes with an objective
to bring maximum transparency in the Banks sales process of these
products and to bring more internal accountability to ensure
appropriateness of sale as per customer suitability and risk profile.
Your Bank believes that its customers will benefit from such stringent
internal standards and in the long run it will be able to build a
sustainable and robust business model around these processes.
Your Bank has always focussed on its employees as the key to building a
sustainable franchise and has in the past won several awards as one of
the best employers. Continuing with this emphasis your Bank launched an
E-Learning platform for employees which again won accolades in the IBA
Technology Awards. This platform enabled your Bank to introduce courses
in real time. It also has features of individual learning plans, chat
facilities to enable trainers and trainees to interact online, video
streaming facility, online completion status tracking, etc. Your Bank
believes this will improve the quality of training inputs and will
result in raising the service standards.
Your Bank took definitive steps towards risk control. These include set
up of - N Vigil (Internal Cameras) in all the ATMs. This will ensure
that the Bank has images of the customers who did the transactions at
all times and can also facilitate during fraud investigations or
customer complaints. A dedicated Risk Containment Unit has been put in
place to do pre-on-boarding checks and transaction level checks to
ensure conformity to AML guidelines and fraud prevention etc.
Your Bank continued its in-depth coverage and servicing of large and
mid market corporate clients during the year. Your Bank was able to
build significant franchise with many well known, reputed large
corporate groups during this year while focusing on deepening existing
clients through an array of customized and regular product offerings.
The year saw a strong trend in credit demand from the corporate and mid
market business segments both for working capital and term facilities.
This is in keeping with the strong underlying economic growth. Your
Bank was able to tap this opportunity and increase its share of
business by offering a variety of products and services.
Your Bank added 160 new cash management service customers during the
year by offering them technology driven working capital cycle
enhancement & efficiency solutions to effectively enrich and optimize
their cash flows and liquidity through an entire suite of CMS products
and services. This has been made possible through constant innovation,
continuous feedback sessions and a high degree of customization to
cater to the dynamic and evolving industry scenario.
Your Banks dedicated team of product solution experts strives to
provide systemic structured solutions to suit to the customers needs.
The in- depth understanding of the customers business and the superior
delivery models has helped in achieving high levels of customer
satisfaction. The Commercial Vehicle and Infrastructure sectors
continued the growth momentum through the year aided by the positive
IIP (Index of Industrial Production) and Agriculture growth numbers.
Commercial Vehicle operator margins improved as a result of higher
freight realisations, which offset the increase in diesel cost. The
growth in the core sector and focus on infrastructure led to a healthy
growth in the order book position of contractors in the Infrastructure
space. As a result, disbursement numbers touched record levels as did
the bottom line. The year also saw good growth in bank lines in both
the sectors.
The monsoon has been more than adequate this year. However the impact
of the growing economy and increasing purchasing power of the rural
population has meant a steep rise in prices of all agro commodities.
Riding this boom the Agri Business of your Bank has shown a robust
growth with the total portfolio slated to cross Rs. 4300 crore this year,
up from last years portfolio of Rs. 3200 crore. This is a growth of 35%
year-on-year. Your Bank also ensured to reach the targeted norms for
lending to the Agri sector as laid out by the regulator for the second
year running.
The Agri business rode on an impressive growth in the tractor loans,
commodity funding which doubled in portfolio size and an impressive
growth in the working capital facilities to agro-processing sector.
Delinquency levels in this portfolio have also been at all time lows
and are even better than some of the other urban oriented advances
indicating the financial strength of clients associated with
agriculture who are riding the commodity price boom.
The Agri business has also become the corner stone for your Banks
targets for meeting financial inclusion and lending to the weaker
sections of the society such as small and marginal farmers, village
artisans and other socially deprived sectors identified by the
government. These advances now have crossed a level of 8% of your
Banks total advances. Your Bank is in the process of identifying more
target segments in this sector to reach out to.
In the Home Finance business while there was strong growth in the first
half of the year, the second half of the year saw stabilisation and
slight drop in demand from customers. Your Bank introduced innovative
new products during the year such as part tenure fixed home loans and
loan against property. Your Bank branches continued to play an
important part and evolved into a stable contributor month on month.
There was an increased focus on existing Bank customers and their
contribution among the secured asset products went up.
The Personal Finance business saw good growth and established your Bank
as one of the leading lenders of unsecured loans in the market.
High-ticket products continued to be the focus and were the biggest
contributor to the overall volumes. The Personal Finance business also
added new products to their existing bouquet of financial services for
businessmen. Working capital products in Rs. 50 lacs to Rs. 1.5 crore range
(both fund based as well as non-fund based) were some of the new
offerings.
Your Bank resolved several NPA accounts pertaining to stressed assets
acquisition. Supreme Court upheld the NPA assignment between banks and
other financial institutions. This landmark judgment will further help
in resolving several NPA accounts, which were litigated in several
courts for the past few years. The NPA portfolio sale by banks
continued to be sluggish and the serious pricing mismatch between the
buyers and sellers continued, this year as well.
Your Bank continued to invest in large single asset transactions, with
good prospects of turnaround in stressed companies. Further, your Bank
has diversified in buying large retail NPA loans from other banks.
During the year, your Bank saw a robust growth in its overall advances
portfolio. This was primarily driven by the overall growth of the
corporate sector, spurred by strong domestic consumption demand for
their products post the recessionary period. A robust NPA management
practice and strong internal controls, aided by a strong economic
growth, has led to a reduction in your Banks gross/net NPAs.
On Treasury side, your Bank has an active proprietary desk trading in
all products such as Fixed Income, Money Markets, Derivatives, Foreign
Exchange and Bullion. The Treasury plays an important role in balance
sheet management and implementation of Funds Transfer Price between
various business units. In the area of Debt Capital Markets (DCM) your
Bank offered the following products: syndication of loans, bonds,
mezzanine financing, promoter funding and acquisition financing and
securitisation. During the year, your Banks Treasury started
Correspondent Banking Division to build and leverage on relationships
with offshore banks for improving quality and international reach for
its customers.
Your Banks credit card business has issued 1.5 lac cards and is in its
third year of operations. The card design and product benefits have
received overwhelming response from customers. The customer spends
across all variants of cards have been amongst the top three in
industry. The premium range of our products à VISA Platinum and VISA
Signature have driven the spends growth in the portfolio and it
contributes to 34% of the spends while accounting for 12% of customer
base. This has reaffirmed the customer acceptability of the product.
Credit card business clocked Rs. 600 crore of total spends in the year
with a book size of Rs. 300 crore. Industry credit cards spends has shown
sign of growth after last years recessionary economic conditions.
Your Bank entered into a strategic arrangement with PVR Cinemas, one of
the elite name in entertainment industry, to distribute credit card
products aimed at upmarket customers. This partnership opens up the
opportunity to tap new customer segment hitherto untapped by your Bank.
Your Banks technology team concentrated on innovation to provide new
products and conveniences to the customers. This ranged from mobile to
mobile payments (IMPs) to providing ATMs at remote locations on an "air
card".
System upgrades for continuous improvement in customer experience were
a focus. The excellence of the CRM and Call Center which were rolled
out across the Kotak Group, were recognized by awards from the Indian
Banking Association and Asian Bankers Technology Summit respectively.
In preparation of the planned Core Banking upgrade, the technology
foundation has been enhanced. Service Oriented Architecture was
introduced with the use of a world class product for system
integration. Standard frameworks for digitization and internal
development expedite deployment of new systems.
SUBSIDIARIES
Your Banks subsidiaries are established players in the different areas
of financial services, viz. car finance, investment banking, stock
broking, asset management and life insurance.
While the Indian economy continued its growth path the businesses in
which the subsidiaries operate had its own share of challenges on
account of market fragmentation, change in market mix, dramatic
regulatory changes and the like.
Kotak Mahindra Prime Limited, the car finance company continues to have
robust growth in lending coupled with fall in delinquencies. Kotak
Securities Limited, the stock broking company continued to face adverse
effects of changes in mix in market volumes shifting to the low-yield
equity derivative segment. The company also continues to face
competition in the market place due to continuous entry of new players.
Kotak Mahindra Capital Company Limited had a relatively better year,
thanks to handling primary issues. But nevertheless, the investment
banking industry continues to face pressure. Kotak Mahindra Asset
Management Company Limited faced an outflow of a large portion of
liquid funds. Coupled with changes in regulations in the mutual fund
industry it had to tweak its business strategy. Kotak Mahindra Old
Mutual Life Insurance Limited had to deal with regulatory changes that
changed the direction of the industry. Business strategy, product mix
and management of costs had to be continuously worked upon to stay on
course. Due to range bound secondary equity markets and net outflows in
many India dedicated International funds, the International
subsidiaries reported drop in profits.
The various activities of the subsidiaries are outlined in the
Management Discussion and Analysis section appended to this Report.
In terms of the general exemption granted by the Central Government
vide their General Circular No.2/2011 dated 8th February 2011 under
Section 212(8) of the Companies Act, 1956, abridged Annual Report which
consists of the financial statements of your Bank on standalone basis
as well as consolidated financial statements of the group for the year
ended 31st March 2011, have been sent to all the members of the Bank.
It does not contain Annual Reports of the Banks subsidiary companies.
The Bank will make available full Annual Report (including the Annual
Reports of all subsidiaries) upon request by any member of the Bank.
These Annual Reports will be available on the Banks website viz. URL :
http://ir.kotak.com/annual-reports and will also be available for
inspection by any member at the Registered Office of the Bank.
CORPORATE GOVERNANCE
Pursuant to Clause 49 of the Listing Agreement with the Stock
Exchanges, a separate section entitled Corporate Governance has been
included in this Annual Report. The Bank has implemented number of
recommendations given in the "Corporate Governance Voluntary Guidelines
2009" by the Ministry of Corporate Affairs and is examining the
possibility of implementing the remaining recommendations.
DIRECTORS
Mr. Asim Ghosh retires by rotation at the Twenty Sixth Annual General
Meeting and is eligible for re-appointment.
Mr. Prakash Apte and Mr. Amit Desai were appointed with effect from
18th March 2011 and Mr. N.P. Sarda with effect from 1st April 2011 as
Additional Directors of the Bank. Pursuant to the proviso to Section
260 of the Companies Act, 1956, they hold office as Directors up to the
date of this Annual General Meeting but are eligible to be appointed as
Directors. In terms of Section 257 of the Companies Act, 1956 the Bank
has received notice in writing from members along with a requisite
deposit of Rs. 500/- each proposing the candidature of Mr. Prakash Apte,
Mr. Amit Desai and Mr. N. P. Sarda for their appointment as Directors.
Mr. Prakash Apte is presently the Non-Executive Chairman of Syngenta
India Limited with considerable experience in agricultural sector. Mr.
Amit Desai is an eminent professional with 30 years experience. Mr.
N.P. Sarda is a Chartered Accountant for more than 40 years and past
President of ICAI.
Mr. Anand Mahindra, Mr. Cyril Shroff and Mr. Shivaji Dam have retired
as Directors of the Bank effective 21st March 2011 due to completion of
their eight years tenure pursuant to the provisions of Section
10A(2A)(i) of the Banking Regulation Act, 1949. Your Directors place on
record their appreciation for the valuable advice and guidance rendered
by each one of them during their tenure as Directors of the Bank.
The Board of Directors of the Bank, at its meeting held on 5th May
2011, has re-appointed Mr. Uday Kotak as Whole-time Director of the
Bank designated as Executive Vice-Chairman and Managing Director for a
period from 22nd March 2012 to 31st December 2014, subject to the
approval of the shareholders and of the Reserve Bank of India. Mr.
Dipak Gupta and Mr. C. Jayaram have been re-appointed as Whole- time
Directors of the Bank designated as Joint Managing Directors for a
period from 1st January 2012 to 31st December 2014, subject to the
approval of the shareholders and of the Reserve Bank of India. The
approval of the shareholders in this regard is being sought at the
ensuing Annual General Meeting of the Bank.
AUDITORS
Messrs S. R. Batliboi & Co., Chartered Accountants, auditors of your
Bank, retire on the conclusion of Twenty Sixth Annual General Meeting.
Pursuant to the guidelines issued by the Reserve Bank of India, an
audit firm is allowed to continue as the Statutory Central Auditor of a
bank for a continuous period of four years only. Accordingly, it is
proposed to appoint, subject to regulatory approvals, Messrs S. B.
Billimoria & Co., Chartered Accountants as the statutory auditors of
the Bank for the current financial year in place of Messrs S. R.
Batliboi & Co. who have completed four years as the statutory auditors.
The approval of the shareholders in this regard is being sought at the
ensuing Annual General Meeting of the Bank.
STATUTORY INFORMATION
The Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1998, are not applicable to your Bank.
EMPLOYEES
The employee strength of your Bank along with its subsidiaries as of
31st March 2011 was around 20,500 as compared to around 20,000
employees a year ago.
The Bank standalone had around 11,000 employees as of 31st March 2011.
102 employees employed throughout the year and 23 employees employed
for part of the year were in receipt of remuneration of Rs. 60 lacs or
more per annum.
Your Bank was adjudged amongst Top 25 in Indias Best Companies to Work
For in 2010 by The Great Places to Work Institute and continues to be
amongst Top 25 Best Employers in India consistently from 2007 till date
as adjudged by the AON Hewitt Best Employers Survey.
While your Bank and its subsidiaries continued to focus on various
initiatives to provide the best employment experience to the employees,
new and innovative products and processes were introduced to further
enhance both quality and productivity of our human capital.
Substantial investments were made in training and developing employees
across levels to improve productivity, service quality, personal
effectiveness and supervisory capability. Structured leadership
development programs and customized courses in association with leading
academic institutions were also rolled out to groom future leaders and
build a talent pool that has depth in knowledge and competence.
The best in class Talent Management practices and HR processes have
enabled the organization to build a cadre of highly committed and
engaged employees who consistently excel in delivering our customer
value proposition.
In accordance with the provisions of Section 217(2A) of the Companies
Act, 1956 and the rules framed thereunder, the names and other
particulars of employees are set out in the annexure to the Directors
Report. In terms of the provisions of Section 219 (1)(b)(iv) of the
Companies Act, 1956, the Directors Report is being sent to all the
shareholders of the Bank excluding the aforesaid annexure. The annexure
is available for inspection at the Registered Office of the Bank. Any
shareholder interested in obtaining a copy of the said annexure may
write to the Company Secretary at the Registered Office of the Bank.
DIRECTORS RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the
operational management, confirm in pursuance of Section 217 (2AA) of
the Companies Act, 1956 that:
(i) your Bank has, in the preparation of the annual accounts for the
year ended 31st March 2011, followed the applicable accounting
standards along with proper explanations relating to material
departures, if any;
(ii) they have selected such accounting policies and applied them
consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Bank as at 31st March 2011 and of the profit of your Bank for the
financial year ended 31st March 2011;
(iii) they have taken proper and sufficient care to the best of their
knowledge and ability, 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; and
(iv) the annual accounts have been prepared on a going concern basis.
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the
valuable guidance and support received from the Reserve Bank of India,
Securities and Exchange Board of India, Insurance Regulatory and
Development Authority and other Government and Regulatory agencies.
Your Directors acknowledge the support of the shareholders and also
wish to place on record their appreciation of employees for their
commendable efforts, teamwork and professionalism.
For and on behalf of the Board of Directors
Dr. Shankar Acharya Place: Mumbai,
Chairman Date : 5th May 2011
Mar 31, 2010
The Directors present their Twenty Fifth Annual Report together with
the audited accounts of your Bank for the year ended 31st March 2010.
FINANCIAL HIGHLIGHTS
(A) Kotak Mahindra Bank Limited - Consolidated financial highlights:
31st March 2010 31st March 2009
Rs. crore Rs. crore
Total income 10,053.30 7,218.27
Total expenditure, excluding provisions
and contingencies 7,639.71 5,940.90
Operating Profit 2,413.59 1,277.37
Provisions and contingencies, excluding
provision for tax 510.73 261.16
Profit before tax 1,902.86 1,016.21
Provision for taxes 575.50 363.53
Profit after tax 1,327.36 652.68
Less: Share of minority interest 18.00 3.73
Add: Share in Profit of Associates (2.36) 3.44
Consolidated Profit for the Group 1,307.00 652.39
Earnings per Equity Share
Basic (Rs.) 37.68 18.90
Diluted (Rs.) 37.28 18.87
(B) Kotak Mahindra Bank Limited - Standalone financial highlights:
31st March 2010 31st March 2009
Rs. crore Rs. crore
Total Income 3,883.86 3,338.77
Total expenditure, excluding
provisions and contingencies 2,586.86 2,743.02
Operating Profit 1,297.00 595.75
Provisions and contingencies,
excluding tax provisions 485.89 169.69
Profit before tax 811.11 426.06
Provision for taxes 250.00 149.96
Profit after tax 561.11 276.10
Add: Surplus brought forward from
the previous year 648.94 528.17
Amount available for appropriation 1,210.05 804.27
Appropriations:
Statutory Reserve under Section
17 of the Banking Regulation Act, 1949 140.28 69.03
General Reserve 28.06 13.81
Transfer to Investment Reserve Account 1.19 41.70
Transfer to Capital Reserve 6.96 2.97
Transfer to Special Reserve 40.00 -
Proposed Dividend 29.66 25.96
Corporate Dividend Tax (2.01) 1.86
Surplus carried to Balance Sheet 965.91 648.94
DIVIDEND
Your Directors are pleased to recommend a dividend of Rs. 0.85 per
share (previous year Rs. 0.75 per share), entailing a payout of Rs.
27.65 crore including dividend distribution tax (previous year Rs.
27.82 crore). The dividend would be paid to all the shareholders, whose
names appear on the Register of Members/Benefcial Holders list on the
Book Closure date.
CAPITAL
The Bank has a high Capital Adequacy Ratio (ÃCAR). The CAR (under
Basel II) as at 31st March 2010 was 18.35% with Tier I being 15.42%. At
a consolidated level the CAR was 19.3% under Basel II.
During the year, your Bank has not issued any Capital under Tier II. As
on 31st March 2010, outstanding Unsecured, Redeemable Non-Convertible,
Subordinated Debt Bonds was Rs. 465.70 crore and outstanding Unsecured,
Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II
stood at Rs. 338.05 crore.
SUB-DIVISION OF EQUITY SHARES
In order to facilitate more liquidity of your Banks Equity Shares in
the stock markets and to make it affordable for the small investors to
invest in the Equity Shares of your Bank, on the occasion of the 25th
year of the organization, the Board of Directors of your Bank at its
meeting held on 11th May 2010, has approved sub-division (stock-split)
of each Equity Share having a face value of Rs.10 into two Equity
Shares of face value of Rs. 5 each, subject to the approval of the
shareholders at the forthcoming Annual General Meeting of your Bank and
approval of all concerned regulatory/statutory authority(ies).
OPERATIONS
India has bounced back strongly on the backdrop of strong domestic
demand and growth in almost all sectors of the economy. As the clouds
of uncertainty moved away your Bank re-assessed its expansion plans on
the Branch Banking Business and added 32 branches and 105 ATMs and
ended the year with 249 Branches and 492 ATMs. The regulatory changes
offering limited free usage of ATMs to customers across all ATMs of
banks has helped, as your Bank has benefted by higher usage of the
network. Your Bank is now present in 145 locations across the country.
Your Bank added over half a million new customers this year.
The advantage of a growing network was clearly visible in the CASA
growth rates, Asset Distribution, Mutual Fund & other equity products
and Insurance penetration. Your Bank also saw a robust growth in
transaction income which grew by over 100% compared to last financial
year.
The strategy of your Bank of leveraging the Bank branches for
distribution of asset products continued to improve quality of earnings
by reducing acquisition costs and improving credit quality. The results
in this area have been very heartening. The growth was spread across
all products ranging from Home Loans, Personal Loans, Commercial Loans,
Credit Cards, loans to small business and referrals for Car Loans.
A holistic proposition on Trade Services coupled with Credit facilities
helped your Bank create a Profitable segment of customers. Your Bank
also launched 2 commercial branches aimed at servicing the specifc
needs of its trade customers.
In the Retail Institutional business your Bank received empanelment
from some states and was able to add many reputed Trusts, Associations,
Educational Institutions and Societies to its list of clients. The
Corporate Salary Accounts business continued to add to its marquee
clients across the country and has shown a steady growth in deposits.
Your Bank developed and launched customer centric product programs
specifcally aimed at HNIs and NRIs. These product programs with its
enhanced and enriched features make its unique offerings in the
respective customer segments. Your Bank has also put in signifcant
investment in technology to provide world class experience to these
specifc customer segments. Your Bank successfully launched best in
class, Private Banking System for its Privy League customers. A new
micro site was created for this segment of customers. It has also
successfully re-launched its upgraded site for Non Resident Indians.
This website provides a compendium of information required by NRIs
across banking and investment and loan products. Non Resident segment
continues to be a major thrust area for the business. There has been a
growth of 46% on the NRI deposits. Your Bank was also selected as a
strategic partner to Overseas Indians Facilitation Centre an initiative
of Ministry of Overseas Indian Affairs. Your Bank also operationalised
its Representative Offce in Dubai.
On Investment Advisory side, this year saw the market volumes going
through huge gyrations. The uncertainty among customers impacted
distribution volumes for Mutual Fund and Insurance products. In spite
of all these changes in the environment your Bank succeeded in growing
its third party distribution volumes for Mutual Funds and Insurance.
Your Bank continues to offer a best in class bouquet of investment
products to its customers.
Several new products, features and services were added during the year.
A lower variant current account product for the micro and small
business enterprise was launched. Priority banking was extended to
NRIs. All branches of your Bank were ASBA (Application Supported by
Blocked Account) enabled. Your Bank was chosen as one of the few banks
to accept applications under the New Pension Schemes. Your Bank now
accepts NPS applications across 150 branches. Customized "One View
page" and customized Net offers were launched based on each individual
customers relationship with your Bank. In Phone Banking a new state of
the art IP based call centre solution was installed this has helped in
faster response rates to customer calls and optimizing call centre
resources across multiple locations.
This year saw your Bank embarking on a journey to use "Service" as a
differentiator in the highly competitive banking space. In line with
this philosophy your Bank took big strides in improving Customer
Satisfaction levels by raising its Service Quality standards.
Implementation of world class CRM platform which began last year was
successfully completed during the year. The benefts from such robust
sales and service oriented Customer Relationship Program enables your
Bank to strive for best in class sales productivity and high service
standards. Coupled with this technology driven platform, your Bank also
launched process driven program titled "SPIRIT" which focuses on
quality and consistency for service delivery across all channels.
Focus on "transaction security" has always been at the centre while
designing and implementing business solutions which encourages customer
to use alternate channels like Net banking, ATMs, Mobile/SMS banking,
Home banking etc. During the year, several improvements to existing
features like, On line password generation, two factor authentication,
improved features for security of fund transfers, PIN based IVR were
introduced. A very fne balancing act between security and process
controls vis-ÃÂ -vis customer service is a critical aspect of this
business and requires continuous evaluation of processes and features
keeping in mind customer feedback.
As we move ahead, the primary focus for your Bank would be to ensure
enhanced Customer Profitability by achieving better Cross Sales through
well defned Customer Engagement Programs and Higher Service Quality
Standards. Having emerged as the most critical distributor for the
entire groups products across Liabilities, Assets and Investment
products the business will continue to expand by adding more branches
and drive productivity, effciency and through put across products,
locations, channels and act as the one stop shop for all customers of
the Group.
Your Bank continued its in depth coverage of large corporate and mid
market corporate clients during the year. Your Bank was able to build
signifcant franchise with many well known, reputed large corporate
groups during this year while focusing on deepening existing clients
through an array of customized offerings.
The year saw mixed trend in credit demand from the corporate and mid
market business segments both for working capital and term facilities.
The last quarter saw a surge in credit demand as compared to the
earlier quarters. This is in keeping with the economic and corporate
investment cycle. Your Bank was able to tap this opportunity and
increase its share of business by offering a variety of products and
services.
Trade Finance volumes grew by over 80% vis-ÃÂ -vis last year. The fund
based trade assets nearly doubled this year as compared to last year
and the non fund based trade assets grew by around 60%. Your Banks
dedicated team of trade fnance experts strives to provide structured
solutions to suit to the customers needs. The in-depth understanding
of the customers business and the superior delivery models has helped
in achieving high levels of customer satisfaction.
Your Bank added 225 new cash management service customers during the
year by offering them technology driven solutions to effectively
enhance and optimize their cash fows and liquidity through an entire
suite of CMS products and services. This has been made possible through
constant innovation and a high degree of customization to cater to the
dynamic and evolving industry scenario.
The Commercial Vehicle and Infrastructure sectors showed remarkable
resilience to get back into the growth mode all through the year,
picking up momentum on the way. This has resulted in higher than
budgeted disbursement numbers and bottom line in the Commercial Vehicle
and Infrastructure divisions. Freight rates and order book size have
increased which has improved realisations consequent to better operator
and contractor margins. GDP numbers and the emphasis on infrastructure
as a policy measure should spur the growth in both these sectors, going
forward. The businesses have been realigned to meet the growth demands
both on the retail and strategic customer segments.
Despite the fear of a bad monsoon and a rising food prices infation,
the Agri sector continued to show resilience in repayments. In this
backdrop, the Agri business continued to show growth and crossed Rs.
3150 crores this year, up from Rs. 2365 crores in the last year, in the
process crossing the required 18% of the Net Bank Credit stipulated by
Reserve Bank of India for the frst time.
The focus of the Agri business continued in activities like Tractor
loans, crop loans, agriculture project fnancing, working capital
facilities to agriculture and agro processing facilities where it
consolidated its presence in its existing markets. The Agri business
also built up business volumes in fresh segments like gold loans and
microfnance loans in the rural sector as part of the financial inclusion
initiatives of your Bank.
The year started cautiously with declining demand in the Home Finance
business, as the customer adopted a policy of wait and watch. However,
post the stable election results the market received a boost. Your Bank
has taken great strides in achieving robust sales and Profit numbers.
Competitive pricing resulted in an upsurge in disbursements as compared
to previous years. There was a major focus on Bank branches as a
channel for sourcing Home Finance business.
In the Personal Finance business, there was an opportunity for lenders
to capitalize on the latent loan demand in the market and focus on
high-ticket products, with most lenders still being wary of the
low-ticket unsecured segments. Collection effciencies showed an
improved trend. Your Bank continued its stress on quality based
underwriting for fresh bookings.
It has been a roller coaster year for the Asset Reconstruction
business. The frst half of the financial year was challenging one in
terms of resolution. However in the second half, with markets easing
and several of the assets having been sold, substantial amount of
recoveries were made. If the buoyancy in the market continues, your
Bank hopes to recover substantial amount in the coming financial year,
as well. Acquisition of new portfolio continued to be lukewarm, but the
same is expected to improve in the coming financial year.
On Treasury side, your Bank has an active proprietary desk trading in
all products such as Fixed Income, Money Markets, Derivatives, Foreign
Exchange and Bullion. The Treasury plays an important role in balance
sheet management and implementation of Funds Transfer Price between
various business units. In the area of Debt Capital Markets (DCM) your
Bank offered the following products: syndication of loans, bonds,
mezzanine fnancing, promoter funding and acquisition fnancing and
securitisation.
Your Bank launched credit card business and reached the milestone of 1
lac cards in the frst year of operations. The card design and product
benefts have received overwhelming response from customers. The
customer spends across all variants of cards have been amongst the top
three in industry. This has reaffrmed the customer acceptability of
the product. Credit Card business clocked Rs. 511 crore of total spends
in the year with a book size of Rs. 281 crore. Industry credit cards
spends growth rate has witnessed slowdown owing to current market
conditions.
Your Bank entered into a Strategic arrangement with Bharti Group for
their foray into the retail business along with Walmart to distribute
Credit Card products in their retail outlets, targeting both individual
and business users. This partnership opens up the opportunity to tap
new markets and new customer segment hitherto untapped by your Bank.
The card aimed at business users offers one of its kind 14-day credit
free cycle that starts afresh on every purchase.
After consolidation of the data centers last year, the primary focus
this year has been on facilitating "green energy" initiatives. As a
part of this strategy a transformational project of "virtualizing" a
majority of the servers in the data center, was executed. Thereby
saving on power consumption and enabling redeployment of the existing
servers for future expansion. There was continued focus on enhancement
of customer experience across all channels. Interactions with Corporate
customer applications were also enhanced. Innovative technology
solutions were introduced to support new product offerings. As in the
previous years, your Banks technology continued to be recognized for
its excellence. Your Bank received awards for storage virtualization
and e-Governance.
SUBSIDIARIES
Your Bank along with its subsidiaries offers complete financial
solutions to its customers. The key business segments where the
subsidiaries operate include investment banking, stock broking, car
fnance, asset management and life insurance.
Due to improved business environment, the lending businesses have
reported good Profits compared to last year. The life insurance
subsidiary, Kotak Mahindra Old Mutual Life Insurance Limited has
continued to report Profit. Kotak Mahindra Capital Company Limited,
Kotak Mahindra Asset Management Company Limited, Kotak Securities
Limited and the international subsidiaries posted higher Profits due to
strong capital markets and the good domestic economic growth.
The various activities of the subsidiaries are outlined in the
Management Discussion and Analysis section appended to this Report.
In terms of the approval granted by the Central Government vide their
letter dated 16th February 2010 under Section 212(8) of the Companies
Act, 1956, abridged Annual Report which consists of the financial
statements of your Bank on standalone basis as well as consolidated
financial statements of the group for the year ended 31st March 2010,
have been sent to all the members of the Bank. It does not contain
Annual Reports of the Banks subsidiary companies. The Bank will make
available full Annual Report (including the Annual Reports of all
subsidiaries) upon request by any member of the Bank. These Annual
Reports will be available on the Banks website and will also be
available for inspection by any member at the Registered Offce of the
Bank.
EMPLOYEE STOCK OPTION SCHEME
The stock options granted to the employees currently operate under two
schemes, namely Kotak Mahindra Equity Option Scheme 2005 ("Scheme
2005") and Kotak Mahindra Equity Option Scheme 2007 (Scheme 2007).
The disclosures below are in respect of the year ended 31st March 2010.
Options granted
during the year Scheme 2005 - Nil
Scheme 2007 - 1,53,020 options
Pricing Formula ESOP Scheme 2005 & 2007 -
The Exercise Price shall be a price, as
may be determined by the Board/ESOP/ Compensation
Committee, equivalent to or discounted up to
50% of the Average Market Price. The Average
Market Price for this purpose would mean the
average of the closing price of Equity Shares of
the Bank, during two weeks period prior to
the date of the meeting of Board/ESOP/Compen
sation Committee at which Plan Series under the
Scheme is approved, on the Stock Exchange,
where there was highest trading volume during the
said two week period, on which the Equity
Shares of the Bank are listed.
Plan Series means a documented plan framed by
Board/ESOP/Compensation Committee for each
tranche of grant of Options, to all Eligible
Employees, at a specifc Exercise Price
(which is determined by the
Board/ESOP/Compensation Committee for the
purpose of that particular Plan Series) and
other terms and conditions as mentioned in
that Plan Series.
The Board/ESOP/Compensation Committee under
special circumstances decides that the Exercise
Price shall be Rs. 10/- per share. In such
cases, the immediately succeeding Directors
Report/Corporate Governance Report shall carry
details of the same.
Options in force at
the beginning of
the year Scheme 2005 - 33,79,670 options
Scheme 2007 - 84,77,297 options
Options Vested during
the year Scheme 2005 - 5,77,320 options
Scheme 2007 - 20,66,136 options
Options exercised
during the year Scheme 2005 - 7,19,750 options
Scheme 2007 - 17,52,868 options
Total number of
shares arising as a
result of exercise Scheme 2005 - 7,19,750 equity
shares of Rs. 10/- each
of options Scheme 2007 - 17,52,868 equity
shares of Rs. 10/- each
Options lapsed Scheme 2005 - 1,65,620 options
Scheme 2007 - 4,70,324 options
Variation of terms
of options No variations made in the terms of the
options granted except in respect of
Scheme 2005 with respect to recovery from
the relevant eligible employees, the Fringe
Beneft Tax on exercise of options as permitted
by regulations.
Money realized by
exercise of options Exercise amount received:
Scheme 2005 - Rs. 13,20,87,500/-
Scheme 2007 - Rs. 60,66,21,265/-
Total number of
options in force Scheme 2005 - Outstanding options -
24,94,300
Scheme 2007 - Outstanding options -
64,07,125
Details of options
granted during the
year to Nil
(i) Senior management
personnel
(ii) Any other
employee who
receives a grant
in any Nil
one year of
options amounting
to 5% or more of
options granted
during that year
(iii) Identifed emplo
yees who were granted
option, Nil
during any one
year, equal to or
exceeding 1% of the
issued capital
(excluding outstanding
warrants and conver
sions) of the Company
at the time of grant
Diluted Earnings Per
Share (EPS) pursuant
to issue of *The diluted Earnings Per Share (EPS) pursuant
to issue of shares on exercise of
shares on exercise of
options calculated in
accordance options calculated in accordance with AS20 is
Rs. 37.28 (Consolidated) and
with AS-20 Earnings
Per Share Rs. 16.00 (Standalone).
Where the company has
calculated the employee *Had the Bank (Consolidated) followed
the fair value method for accounting the
compensation cost
using the intrinsic
value of stock stock option compensation expense would have
been higher by Rs. 43.41 crore
options, the
difference between the
employee with consequent lower Consolidated Profits. On
account of the same the diluted
compensation cost so
computed and the
employee EPS of the Bank (Consolidated) would have been
less by Rs. 0.82 per share.
compensation cost that
shall have been recogn
ized if it had used the
fair value of the opti
ons, shall be
disclosed.
The impact of this
difference on Profits
and on EPS of the
Company shall also
be disclosed.
Weighted - average
exercise prices and
weighted *The weighted average price of the stock
options exercised is Rs. 298.75 and the
- average fair values
of options shall be
disclosed weighted average fair value is Rs. 262.29.
separately for options
whose exercise price
either equals or exc
eeds or is less than
the market price of
the stock.
*Note: Above fgures are derived by considering the options granted and
exercised by employees of the Bank and its subsidiaries.
A description of the method and signifcant assumptions used during the
year to estimate the fair values of options, including the following
weighted à average information:
A. Stock price
It is the closing market price on the National Stock Exchange of India
Limited prior to the meeting of the Board in which the options are
granted.
B. Volatility
Volatility is a measure of the amount by which a price has fuctuated or
is expected to fuctuate during a period. The measure of volatility used
in the Black-Scholes option-pricing model is the annualized standard
deviation of the continuously compounded rates of return on the stock
over a period of time.
Accordingly, daily volatility of the Banks stock price on the NSE for
the period corresponding to the respective expected live of the
different vests, prior to the grant date has been considered.
C. Risk free interest rate
The risk-free interest rate being considered for the calculation is the
interest rate applicable for maturity equal to the expected life of the
options based on the zero-coupon yield curve for Government Securities
as on the date of the respective grant.
D. Time to Maturity/Expected Life of options
The minimum life of a stock option is the vesting period and the
maximum life is vesting period plus the exercise period. The Expected
life of the options has been calculated as the average of the two
extremes à the minimum life and the maximum life. Since each vest has
been considered as a separate grant, the expected life has been
calculated for each vest separately.
E. Dividend yield
The dividend yield for each grant has been derived by dividing the
dividend per share by the market price per share.
Weighted average information in respect of above assumptions has been
provided in note 12 of Schedule 17 of the notes to accounts to the
consolidated financial statement of the Bank.
CORPORATE GOVERNANCE
Pursuant to Clause 49 of the Listing Agreement with the Stock
Exchanges, a separate section entitled ÃCorporate Governance has been
included in this Annual Report. The Bank has implemented number of
recommendations given in the "Corporate Governance Voluntary Guidelines
2009" by the Ministry of Corporate Affairs and is examining the
possibility of implementing the remaining recommendations.
DIRECTORS
Mr. Shishir Bajaj resigned as a Director of the Bank with effect from
26th October 2009. Your Directors place on record their appreciation
for the valuable advice and guidance rendered by Mr. Bajaj during his
tenure as a Director of the Bank.
Mr. Anand Mahindra and Mr. Cyril Shroff, Directors of the Bank retire
by rotation at the Twenty Fifth Annual General Meeting and are eligible
for re-appointment.
Dr. Sudipto Mundle was appointed as an Additional Director of the Bank
with effect from 27th October 2009 and, pursuant to the proviso to
Section 260 of the Companies Act, 1956, holds offce as a Director up to
the date of this Annual General Meeting but is eligible to be appointed
as a Director. In terms of Section 257 of the Companies Act, 1956 the
Bank has received notice in writing from a member along with a
requisite deposit of Rs. 500/- proposing the candidature of Dr. Sudipto
Mundle for his appointment as a Director.
Dr. Sudipto Mundle, a Ph. D in Economics was a Director in the Strategy
& Policy Department, Asian Development Bank. He is an Emeritus
Professor (Hon.) at National Institute of Public Finance and Policy, a
Member of the National Statistical Commission, and President of PREETI
Foundation. In his earlier career, Dr. Mundle was Reserve Bank of India
Chair Professor at the National Institute of Public Finance and Policy,
New Delhi and served in other academic institutions including the
Indian Institute of Management, Ahmedabad and Centre for Development
Studies, Trivandrum. He was also an Economic Adviser in the Ministry of
Finance. Dr. Mundle has extensive experience in economic work and
provision of development assistance, including projects and policy
loans for agriculture, infrastructure, including irrigation, fnance,
education and health, technical assistance, and regional cooperation
assistance in many countries in Asia.
AUDITORS
Messrs S. R. Batliboi & Co., Chartered Accountants, auditors of your
Bank, retire on the conclusion of Twenty Fifth Annual General Meeting
and are eligible for re-appointment. You are requested to appoint
auditors for the current financial year and to fx their remuneration.
STATUTORY INFORMATION
The Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1998, are not applicable to your Bank.
EMPLOYEES
The employee strength of your Bank along with its subsidiaries as of
31st March 2010 was around 20,000 as compared to around 18,000
employees a year ago.
The Bank standalone had around 8,800 employees as of 31st March 2010.
224 employees employed throughout the year and 36 employees employed
for part of the year were in receipt of remuneration of Rs. 24 lacs or
more per annum.
Your Bank has in place policies relating to employee service
conditions, welfare and training which are reviewed on an ongoing basis
by your Banks Management Committee.
Your Bank continues to focus on training its employees on a continuing
basis by deputation to reputed training institutions by holding
workshops on various areas including Regulatory Compliance, Risk
Management, Customer Care and Communication, Trade Finance, Foreign
Exchange Rules and Treasury.
In accordance with the provisions of Section 217(2A) of the Companies
Act, 1956 and the rules framed thereunder, the names and other
particulars of employees are set out in the annexure to the Directors
Report. In terms of the provisions of Section 219 (1)(b)(iv) of the
Companies Act, 1956, the Directors Report is being sent to all the
shareholders of the Bank excluding the aforesaid annexure. The annexure
is available for inspection at the Registered Offce of the Bank. Any
shareholder interested in obtaining a copy of the said annexure may
write to the Company Secretary at the Registered Offce of the Bank.
DIRECTORS RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the
operational management, confrm in pursuance of Section 217 (2AA) of the
Companies Act, 1956 that:
(i) your Bank has, in the preparation of the annual accounts for the
year ended 31st March 2010, followed the applicable accounting
standards along with proper explanations relating to material
departures, if any;
(ii) they have selected such accounting policies and applied them
consistently and made judgements and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Bank as at 31st March 2010 and of the Profit of your Bank for the
financial year ended 31st March 2010;
(iii) they have taken proper and suffcient care to the best of their
knowledge and ability, 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; and
(iv) the annual accounts have been prepared on a going concern basis.
ACKNOWLEDGEMENTS
Your Directors would like to place on record their gratitude for the
valuable guidance and support received from the Reserve Bank of India,
Securities and Exchange Board of India, Insurance Regulatory and
Development Authority and other Government and Regulatory agencies.
Your Directors acknowledge the support of the shareholders and also
wish to place on record their appreciation of employees for their
commendable efforts, teamwork and professionalism.
For and on behalf of the Board of Directors
Dr. Shankar Acharya
Place : Mumbai,
Chairman
Date : 11th May 2010