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Notes to Accounts of RBL Bank Ltd.

Mar 31, 2023

During the current year, options were granted at exercise price of ? 92.20, ? 117.25, ? 128.75 and ? 171.90 as on the date of grant of options. The corresponding market price per share for these grants at the time of respective grant was ? 92.20, ? 117.25, ? 128.75 and ? 171.90 respectively, per option being the latest available closing price on the previous trading day prior to the Grant Date on the Stock Exchange which recorded the higher trading volume.

During the previous year, options were granted at exercise price of ? 144.00, ? 146.75, ? 173.80, ? 186.55 and ? 210.85 as on the date of grant of options. The corresponding market price per share for these grants at the time of respective grant was ? 144.00, ? 146.75, ? 173.80, ? 186.55 and ? 210.85 respectively, per option being the latest available closing price on the previous trading day prior to the Grant Date on the Stock Exchange which recorded the higher trading volume.

The Reserve Bank of India (RBI), through its clarification dated August 30, 2021, on guidelines on Compensation of Whole Time Directors/CEO/Material Risk Takers and Control Function Staff, has advised banks that the fair value of share-linked instruments granted after March 31,2021 should be recognised as an expense.

The Bank has changed its accounting policy from intrinsic value method to fair value method for valuation of stock options granted after March 31, 2021 for employees falling under these categories from April 1, 2021. Further, effective from April 1, 2022, the Bank has changed its accounting policy from intrinsic value method to Fair value method for valuation of stock options granted after March 31, 2021, to all employees. The change in the accounting policy results in recognition of additional ''Employee Cost'' of ? 17.23 crore related to the earlier period.

The fair value of stock options is estimated on the date of grant using the Black-Scholes model and is recognised as employee expense over the vesting period.

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during the period. The measure of volatility used in Black-Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on NSE of RBL Bank Limited over the expected tenor of each option vesting tranche.

4. Appropriation to/ Withdrawal from Reserve

For the year ended March 31, 2023, the Bank has appropriated ? 221.00 crore (previous year: Nil) towards Statutory Reserves, ? 3.00 crore (previous year: ? 43.00 crore) towards Capital Reserves, ? 200.00 crore (previous year: Nil) towards Revenue & Other Reserves, ? 10.00 crore (previous year: Nil) towards Special Reserves created under section 36(1)(viii) of Income Tax Act, 1961 and ? 187.14 crore (previous year: withdrawal of ? 36.00 crore) towards Investment Fluctuation Reserve (IFR) .

Appropriation to Revenue & Other Reserves from ESOP Reserve is ? 2.39 crore (previous year: Nil) on account of vested options cancelled/lapsed.

8. Investments:

8.1 During the current and previous year, there has been no sale/transfer from Held to Maturity (HTM) category in excess of 5% of the book value of investments held in HTM category. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with approval from Board of Directors permitted to be undertaken by Banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM.

8.2 The Bank''s shareholdings in Sical Logixpress Private Limited (formerly known as PNX Logistics Private Limited), Coffee Day Consultancy Service Private Ltd and Opal Luxury Time Product Limited was more than 20% at the date of acquisition on account of exercise of pledge on shares held by a defaulting borrower or on account of restructuring of the borrower. The shares of the investee company are acquired and held exclusively with a view to its subsequent disposal in the near future and accordingly has not been accounted for, as an associate under the purview of AS-23 - ''Accounting for Investments in Associates in Consolidated Financial Statements''. The Bank has classified these equity shares under AFS category.

8.3 The Bank holds 100% stake in RBL Finserve Limited, and thus the company is a ''Wholly Owned Subsidiary'' (WOS) of the Bank. The investment in the WOS is classified in Held to Maturity (HTM) category, in accordance with the RBI guidelines.

8.6 Collateralized Borrowing and Lending Obligation (CBLO) / Tri-party Repo Transactions (TREPS)

CBLO is a discounted money market instrument, established by CCIL and approved by RBI, which involves secured borrowings and lending transactions. CBLO was operational till November 5, 2018, post which Tri Party REPO / Reverse REPO(TREPS), substituted CBLO. Securities received as collateral from CCIL under TREPS lending are eligible for SLR maintenance.

As at March 31,2023, the Bank had outstanding borrowings as Face Value of T 1,000 crore (previous year: Nil) and outstanding lending as Nil (previous year: Nil) under TREPS.

9.5 Risk Exposure in Derivatives:

Qualitative disclosures:

Derivatives are financial instruments whose characteristics are derived from underlying asset or interest rates or exchange rates or indices. The Bank deals in interest rate and foreign exchange (Fx) derivatives for balance sheet management, proprietary trading and market making purposes whereby the Bank offers derivative products to its customers, enabling them to hedge their risks.

Proprietary traders manages trading positions within the approved risk limits. It deals in fixed income, equity and forex markets. The Bank transacts in derivative products such as forex options, currency swaps, interest rate swap, foreign currency interest rate swaps and long term foreign exchange contracts (LTFX) with its customers to hedge their market risk. The Bank also undertakes derivative transactions to hedge its balance sheet assets or liabilities.

These transactions expose the Bank to various risks, primarily credit, market and operational risk. The Bank has adopted the following mechanism for managing risks arising out of the derivative transactions.

a) The structure and organization for management of risk in derivatives trading.

The Bank has a separate Treasury Front Office, Treasury Middle Office, Treasury Back Office and Market Risk functions. Derivative transactions are originated by Treasury Front Office, which ensures compliance with the trade origination requirements as per the RBI guidelines and the Bank''s derivatives policy. Treasury Middle Office and Market Risk groups are responsible for identifying, measurement, monitoring, and analysis of derivative related risks. Treasury Back Office undertakes activities such as confirmations, settlements, documentation and accounting. Treasury functions are also subject to a concurrent audit.

b) The scope and nature of risk measurement, risk reporting and risk monitoring systems.

Derivative transactions are governed by the Bank''s Derivative Policy, Commercial Credit Policy, Market Risk Policy, Liquidity Risk Management, ALM Policy and Client Suitability and Appropriateness Policy as well as by the extant RBI regulations.

The Bank has set up various risk limits taking into account market volatility, business strategy and management experience. The Bank measures and monitors risk of its derivatives portfolio using risk metrics such as Value at Risk (VaR), stop loss limits, PV01 and other risk measures. All exposures are monitored against these limits on a daily basis and breaches, if any, are reported to senior management/Asset and Liability Committee (ALCO) for corrective action/ratification.

All counterparty exposures are monitored against counterparty credit limits on a daily basis and breaches, if any, are reported to senior management/ALCO for corrective action/ratification.

c) Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums and discounts, valuation of outstanding contracts.

The Bank has a Board approved FX and Derivative Policy which also govern the use of derivative for hedging purpose. The Bank undertakes derivative transactions for market making/trading and hedging purposes. Transactions for trading and hedging are recorded separately. The Bank revalue its trading positions on a daily basis and the resulting gain/loss is recorded in the Profit and Loss Account. The receivable and payable on marking the contracts to market are shown under ''Other Assets'' and ''Other Liabilities'' in the Balance Sheet.

Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction, and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premium or discount arising at the inception of such forward exchange contract is amortized as expense or income over the life of the contract.

The Bank follows the option premium accounting framework prescribed by FEDAI guidelines. Premium on option transaction is recognized as income/ expense on expiry or unwinding of the transaction. MTM gain/ loss, is recorded under ''Other Income''. The amounts received/paid on cancellation of option contracts are recognized as realised gains/ losses on options.

The charges receivable/payable on cancellation/ termination of foreign exchange Forward contracts and swaps are recognized as income/ expense on the date of cancellation/ termination under ''Other Income''. Pursuant to the RBI guidelines, any receivables (crystallised receivables and positive MTM) under Forex & derivatives contracts, which remain overdue for more than 90 days, are reversed through the Profit and Loss Account and are held in a separate Suspense account.

d) Counterparty Credit Risk Mitigation

The credit risk on customer derivative transactions is mitigated through a laid down policy on sanction of Loan Equivalent Risk (LER) limits, monitoring mechanism for LER limits and trigger events for escalations, margin calls and terminations.

The Bank measures the counterparty risk using current exposure method as stipulated by RBI. Counterparty limits are approved as per the Bank''s Credit Policies. The sanction terms may include the requirement, on a case to case basis, to provide upfront collateral, or place collateral if the mark to market (MTM) exceeds a specified threshold. The Bank retains the right to terminate transactions as a risk mitigation measure, in case the client does not adhere to the agreed terms.

Collateral requirements for derivative transactions determined through a usual credit appraisal process and are laid down in the credit sanction terms of the transactions.

11.8 During the current financial year ended March 31, 2023, there were no accounts where Resolution Plan (RP) involving change in ownership was implemented under ''Part B2: Prudential Norms Applicable to Restructuring'' of RBI circular DOR. STR.REC.4/21.04.048/2022-23 dated April 1, 2022, on ''Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances''. However, under Insolvency and Bankruptcy Code, 2016 (IBC) change in ownership was implemented in one borrower entity having aggregate outstanding of ^ 12.59 crores. During the previous year, there were no accounts where Resolution Plan (RP) involving change in ownership was implemented, under the said framework or under the IBC.

11.9 During the current and previous financial year ended March 31,2023, and March 31, 2022, respectively, there were no accounts where Resolution Plan (other than change in ownership) was implemented in terms of ''PART B1 - Framework for Resolution of Stressed Assets'' of RBI circular DOR.STR.REC.4/21.04.048/2022-23 dated April 1,2022, ''Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances''.

11.10 During the financial year ending March 31, 2023, there were no accounts where the Bank has acquired equity shares in terms of Resolution Plan (RP) implemented under ''Part B2: Prudential Norms Applicable to Restructuring'' of RBI circular DOR.STR. REC.4/21.04.048/2022-23 dated April 1,2022, on ''Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances''. The Bank has acquired 2,329,999 equity shares having aggregate book value of ^ 1 of one borrower entity due to conversion of debt as part change in ownership implemented under Insolvency and Bankruptcy Code, 2016 (IBC). During the previous year, there were no accounts where the Bank had acquired equity shares in terms of Resolution Plans (RP) implemented, under the said framework or under the IBC.

12. The Bank has not done any securitization of loan assets during the current and the previous year.

13. Segment Reporting: Information about business segments

In terms of the AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BP.BC.81/21.04.018/2006-07 dated April 18, 2007 read with DBR.BP.BC No.23/21.04.018/2015-16 dated July 1, 2015 and amendments thereto, the following business segments have been disclosed: 1

guidelines prescribed by RBI and in compliance with the Accounting Standard 17 - ''Segment Reporting''. In terms of the RBI guideline exposure upto ? 7.50 crore is classified as retail for the current year, however for the previous year, the Bank has considered threshold of ? 5.00 crore.

Segment revenues include earnings from external customers and earnings from other segments on account of funds transferred at negotiated rates, which are determined by the management. Segment results includes segment revenues as reduced by interest expense, charge from other segments on account of funds transferred at internal Fund Transfer Pricing (FTP) rates and operating expenses and provisions either directly identified or allocated to each segment.

• The Bank do not have any Digital Banking Units (DBUs) as mentioned in the RBI circular dated April 7, 2022. The disclosure in respect to sub-segment DBU within the Retail Banking Segment is hence nil for the current and previous financial year.

14. Related Party Transactions

As per AS 18 ''Related Party Disclosures'', the Bank''s related parties for the year ended March 31, 2023 are disclosed below:

1. Key Management Personnel (‘KMP'')

Mr. R Subramaniakumar (appointed as Managing Director & Chief Executive Officer with effect from June 23, 2022 afternoon)

Mr. Rajeev Ahuja (Interim Managing Director & Chief Executive Officer till June 23, 2022 and executive director thereafter)

Mr. Vishwavir Ahuja (Ceased to hold office as Managing Director & Chief Executive Officer with effect from June 23, 2022, Forenoon)

2. Relatives of Key Management Personnel

Ms. Shyamala S Kumar, Ms. Vasantha, Mr. Arvind Subramanian, Mr. Hemanth Subramanian, Ms. Subha Balakrishnan, Ms. Chitra Balachander, Ms. Kripa Subramanian, Mr. Srinivasan, Mrs. Nandita Ahuja, Ms. Aishwarya Ahuja, Mr. Raman Ahuja, Miss Asavari Ahuja, Mrs. Reva Ahuja1, Mr. Dharam Bir Ahuja1, Ms. Vasudhaa Ahuja1, Ms. Vrinda Ahuja1, Mrs. Deepika Dhand1, Ms. Kanika Ahuja1 and D. B. Ahuja & Sons (HUF)1.

3. Entities in which relatives of key management personnel are interested

Grocrate India Private Limited, Swyn Herds Private Limited, IKP Centre For Advancement in Agricultural Practice, Village Shop Private Limited (ceased to be related party during FY 2022-23), Fineprint Legal Technologies Private Limited1 (effective from Feb 2, 2022). 2

26. Penalties imposed by RBI

During the current year, the RBI has imposed penalty of ? 22,898,350/-, which includes penalty of ? 22,725,000/- imposed by RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949 (''Act''), for noncompliance with certain provisions of the directions issued by RBI, ? 160,000/- relating to ATM out of cash (16 instances) and ? 13,350/- relating to shortages observed in soiled notes, discrepancies detected during processing of soiled note remittances and shortages observed in remittances at Currency Chest (6 instances).

During the previous year, the RBI had imposed penalty of ? 20,033,800/-, which include the penalty of ? 20,000,000/- towards contravention of section 28 (h) of the Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 and for non-compliance with the provisions of clause (b) of sub-section (2) of section 10A of the Banking Regulation Act, 1949 (the Act) and ? 33,800/-relating to ATM out of cash (3 instances) and shortages observed in Soiled Notes at Currency Chest (1 instance).

38. Disclosure on Remuneration

Qualitative Disclosures

A. Information relating to the composition and mandate of the Nomination and Remuneration Committee (NRC).

The constitution of the Nomination and Remuneration Committee of the Bank is in accordance with the provisions of the Companies Act, 2013 (''the Act''), SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''SEBI Listing Regulations''), guidelines/circulars/notifications issued by Reserve Bank of India.

The list of members of the committee is given below.

1. Mr. Manjeev Singh Puri - Committee Chairperson - (Independent Director)

2. Dr. Somnath Ghosh - Member - (Independent Director)

3. Mr. Prakash Chandra (Part time Chairman & Non-executive Independent Director)

4. Ms. Veena Mankar (Non-Executive Director)

5. Ms. Ranjana Agarwal (Independent Director)

6. Mr. Gopal Jain (Non-Executive Director)

Mr. Manjeev Singh Puri and Ms. Veena Mankar are also in the Risk Management Committee.

Role of NRC include the following:

i) formulation of criteria in accordance with applicable regulatory requirements for determining qualifications, positive attributes and independence of a Director, as applicable, and recommend to the Board a policy, relating to the remuneration of the Directors, Key Managerial Personnel and other employees;

ii) identifying persons who are qualified to become Directors in accordance with the criteria laid down, determining the ''Fit and Proper'' status of the Directors based on their ''Fit and Proper'' declarations in line with the requirement of RBI and recommending to the Board their appointment/re-appointment and removal;

iii) formulation of criteria for evaluation of performance of Independent Directors and the Board of Directors;

iv) devising a policy on diversity of Board of Directors;

v) to decide whether to extend or continue the term of appointment of the Independent Director, on the basis of the report of performance evaluation of Independent Directors;

vi) identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the board of directors their appointment and removal;

vii) evaluate and approve key HR policies of the Bank;

viii) Administration and Superintendence of the Employee Stock Option Scheme and deciding on grant of stock options to employees of Bank and its subsidiary;

ix) to oversee the framing, review and implementation of compensation policy of our Bank on behalf of our Board;

x) to work in close co-ordination with the Risk Management Committee of our Bank, in order to achieve effective alignment between remuneration and risks;

xi) to ensure that the cost/income ratio of our Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio;

xii) appoint/discontinue trustees on the board of trustees of ''RBL Bank Limited Employees Provident Fund, ''RBL Bank Limited Employees Gratuity Fund'' and ''RBL Bank Limited Employees Pension Fund'' and to approve operational changes in the related trust deeds and/or decide on related matters;

xiii) to decide on granting of mandate to the Indian Bank Association for negotiating industry level wage settlements for workmen employee;

xiv) specify manner for effective evaluation of performance of Board, its committees and individual directors to be carried out either by the Board, by the Nomination and Remuneration Committee or by an independent external agency and review the implementation and compliance.

xv) recommend to the Board, all remuneration, payable to senior management.

xvi) carry out any other functions as mandated by the Board or as prescribed under SEBI regulations, Companies Act, 2013, RBI circulars and any other applicable laws as issued/amended from time to time.

B. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

Bank''s remuneration policy is designed and aimed at attracting & retaining best possible / available talent that it requires to effectively grow the business and become a highly respected institution. It comprises of a balanced mix of fixed & variable cash and non-cash compensation and benefits / perquisites to deliver maximum value to the employee and other stakeholders.

The remuneration is divided into following components:

Fixed Pay & Perquisites:

For employees governed by Indian Banking Association''s employment and compensation rules (IBA rules), their remuneration is based on the industry-wide bi-partite wage settlement agreements signed with the employees'' union. These rules provide for basic salary, allowances and certain retirement benefits to the employees which are uniformly applicable for the employees covered under the IBA scale.

For the employees governed by the ''Cost to Company'' (CTC) remuneration structure (i.e., Non-IBA scale employees), the CTC represents the total direct and fixed cost incurred by the Bank across all components of compensation including contributions paid by the Bank towards retiral benefits, and loans at concessional interest rates. It consists of Basic

Salary, House Rent Allowance, Personal Allowance / Special Allowances, Car Related Benefits, Leave Travel Assistance, Reimbursements and Retiral Benefits, etc.

Variable Pay

Share Linked Instruments

In order to align the interest of the Bank, the senior management, its shareholders and the employees, there is an effort to create long term ownership and commitment for the senior officers of the Bank. This is also done with a view to recognize and compensate key employees for intellectual capital, the domain expertise in terms of product, market knowledge and the business relationships that they bring along. Accordingly, the Bank has formulated Employee Stock Option Program (ESOP) and offer Joining ESOPs based on the role in the Bank, domain knowledge, experience, current ability, future potential and expertise of the candidate.

Further, to reward the performance and recognize the contribution of employees, the Bank has a Performance Employee Stock Option Program (PESOP). PESOPs are given after periodic evaluation of the individual performance, business unit as well as overall Bank performance during the review period. These plans are designed and implemented in such a way that they go a long way in aligning the objectives of an individual with those of the Bank.

These stock option programs are administered by the NRC.

Variable Pay - Cash (VPC):

Variable Pay - Cash is paid as a percentage of CTC as defined in the Remuneration Policy of the Bank.

Employees who are covered under monthly / quarterly incentives plans are not eligible for annual Variable Pay - Cash for the period of such coverage.

As per the RBI guidelines, Variable Pay - Cash will be paid in a staggered manner based on the quantum of Variable Pay -Cash. The schedule (timing and quantum) of pay-out of Variable Pay - Cash is described in sections of the compensation policy for respective categories of employees. However, in cases where Variable Pay - Cash is under ? 0.25 crore, deferral requirements would not be necessary.

C. Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks.

For the Whole Time Directors (WTDs) / Chief Executive Officers (CEOs) / Material Risk Takers (MRTs):

a) Compensation is adjusted for all types of risk

b) Compensation outcomes are symmetric with risk outcomes

c) Compensation pay-outs are sensitive to the time horizon of the risk and

d) Mix of cash, equity and other forms of compensation is consistent with risk alignment

The Bank will be using measures of credit, market, liquidity and various other risks for risk adjustment. It includes both quantitative and judgmental elements and is in compliance with all statutory requirements.

The variable compensation will be subject to malus/clawback arrangements in the event of subdued or negative financial performance of the Bank and/or the relevant line of business in any year.

The Bank will adopt modalities to incorporate malus/ clawback mechanism in respect of variable pay to address misconduct, risk and relevant statutory and regulatory stipulations, as applicable.

The basis for arriving at the representative set of situations to invoke the malus and clawback clauses applicable on entire variable pay are Misconduct, assessed divergence in performance, working against the interest of the Bank.

D. Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration.

The Performance Management process includes employees setting performance goals at the beginning of the fiscal year that are aligned to five themes namely, Shareholder Value as the Focus, Customer at the Heart, Employee as the Pillar and Community as the Cause and Risk Compliance. Employees are appraised and evaluated against these set of goals at the end of the review period. Employee performance and competence assessment are both considered for determining the performance rating. This has a direct correlation with the increments and variable pay to be awarded to the employee for the period of assessment.

E. A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

The variable pay will be in the form of share-linked instruments, or a mix of cash (referred as variable pay - cash or VPC) and share-linked instruments.

The Bank has defined composition, limit, deferral and period of deferral arrangement for Variable Pay. It has also laid down guidelines on vesting, inclusion of share linked instruments as a part of variable pay and malus/ clawback norms.

As per the RBI guidelines, Variable Pay - Cash will be paid in a staggered manner based on the quantum of Variable Pay -Cash. The schedule (timing and quantum) of payout of Variable Pay - Cash is described in the Compensation policy of the Bank.

• For WTDs and MRTs, a minimum of 60% of the total variable pay will be under deferral arrangements. Further, if Variable Pay - Cash is being paid as a part of variable pay, at least 50% of Variable Pay - Cash will also be deferred. However, in cases where Variable Pay - Cash is under ? 0.25 crore, deferral requirements would not be necessary

• For Risk Control & Compliance Staff and other category employees, Deferral will be applicable in case where Variable Pay - Cash is more than 40% of fixed pay and if it is greater than or equal to ? 0.25 crore.

For variable pay in the form of share-linked instruments, i.e., ESOPs, deferred remuneration will either vest fully at the end of the deferral period or be spread out over the course of the deferral period. The first such vesting shall not be before one year from the commencement of the deferral period. The vesting shall not be faster than on a pro rata basis. Additionally, vesting shall not take place more frequently than on a yearly basis to ensure a proper assessment of risks before the application of ex post adjustments.

Period of deferment and vesting for share-linked instruments i.e., ESOP will be as per the schedule specified in the ESOP scheme.

F. Description of the different forms of variable remuneration (i.e., cash and types of share-linked instruments) that the Bank utilizes and the rationale for using these different forms.

Various forms of variable remuneration used by the Bank are:

Variable Pay - Cash (VPC): VPC provides cash bonus in short to medium term to employees. The Bank utilizes VPC to reward superior performance.

Employee stock option (ESOP) plan: Employee stock option plan is a long-term remuneration benefit. ESOP is equity settled through which the employees will receive one equity share per option after vesting/ exercise. The stock options granted to employees vest over a period of three / four years, generally. Apart from rewarding for superior performance, ESOP is also used as a reward to align employee interests with the Bank, create long term ownership and commitment.

39. Contingent Liabilities

Description of nature of contingent liabilities is set out below:

i) Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress.

ii) Liability for partly paid investments:

These represent contingent liability on account of possible claims for uncalled amount by the issuer of the securities held by the Bank.

iii) Liability on account of forward exchange and interest rate contracts:

The Bank enters into foreign exchange contracts currency options, forward rate agreements, currency swaps with interbank participants on its own account and for the customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by the way of interest/principal in one currency against another, based on pre-determined rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. The amount recorded as contingent liability with respect to these contracts represents the underlying notional amounts of these contracts.

iv) Guarantees given on behalf of Constituents:

As a part of its corporate banking activities, the Bank issues documentary credit and guarantees on behalf of its customers. Documentary credits such as letters of credit enhance the credit standing of the customer of the Bank, by providing assurance of payment to the beneficiary on submission of credit compliant documents. Guarantees generally represent irrevocable assurances that the Bank will make the payment in the event of the customer failing to fulfill its financial or performance obligations.

v) Acceptances, endorsements and other obligations:

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

vi) Other contingent items:

a. Commitments for settlement date accounting for securities transactions;

b. Demands raised by income tax and other statutory authorities and disputed by the Bank.

c. Amount transferred to RBI under the Depositor Education and Awareness Fund (DEAF).

The Provident Fund, comprising of Employees'' as well as Employer contribution, is administered by an independent Trust. The Bank is currently in dispute with the Provident Fund authorities regarding applicability of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (the ''Act''). The matter is pending with Central Government Industrial Tribunal, Mumbai (''CGIT'') for further adjudication.

Any potential / likely impact on the financial statements, in view of the above will be ascertained, on the decision of the Central Government Industrial Tribunal, Mumbai and on clarification from the Provident Fund authorities / courts, if any.

Refer Schedule 12 for amounts relating to contingent liabilities.

40. The Bank has not issued any Letters of comfort and Letters of Undertaking during the year (previous year - Nil)

41. Liquidity Coverage Ratio (LCR)

Qualitative disclosure around LCR

Liquidity Coverage Ratio (LCR) is a global minimum standard aimed at measuring and promoting short-term resilience of banks to potential liquidity stress by ensuring maintenance of sufficient High Quality Liquid Assets (HQLAs) to survive net cash outflows over next 30 days under stress conditions. It is a ratio of Bank''s High Quality Liquid Assets (HQLAs) to the estimated net outflows over next 30 day period of significant liquidity stress.

The Board of Directors has the overall responsibility for liquidity risk management. The Board at overall level decides the liquidity risk tolerance and accordingly decides the strategy, policies and procedures of the Bank. The Board has constituted a Risk Management Committee (RMC) consisting of Managing Director & Chief Executive Officer (MD&CEO) /Chairman and other Board members. The committee is responsible for evaluating the overall risks faced by the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk Management Committee. At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk limits set by the Board and implements the liquidity risk management strategy of the Bank. ALM team within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management. ALCO channelizes various business segments of the Bank to target good quality asset and liability profile to meet the Bank''s profitability as well as liquidity requirements.

High Quality Liquid Assets (HQLAs) under LCR are divided into two parts i.e. Level 1 and Level 2 HQLA.

Level 1 HQLA comprises primarily of cash, excess CRR, government securities in excess of SLR , Marginal Standing Facility (currently 2% of NDTL) and Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) as permitted under prudential guidelines - Currently 16% (previously 15%)

Level 2 HQLA comprises of investments in highly rated non-financial corporate bonds, debentures, commercial papers issued by non-financial institutes and are further considered at prescribed haircuts.

Cash outflows are calculated by applying prescribed outflow run-off factors to contractual outflows on account of various categories of liabilities and cash inflows are calculated by applying prescribed weights and factors to the contractual inflows. Additionally, probable outflows on account of contingent liabilities such as letters of credit (LC) and bank guarantees (BGs) and undrawn commitments both for fund & non fund based exposures are considered by applying prescribed run-off factors. The Bank has also considered the impact of derivative portfolio in LCR as per RBI guidelines and it has very minimal impact on the liquidity of the Bank. The Bank does not provide clearing or custodial services eligible for operational deposits under the extant guidelines. Hence, operational deposits are not applicable to the Bank.

The Bank computes LCR on a daily basis in accordance with RBI guidelines. LCR is reported as a simple average of daily observations for the quarter. The Bank believes that all inflows and outflows which might have a material impact under the liquidity stress scenario have been considered for the purpose of LCR.

50. Credit Default Swap

The Bank has not entered into Credit Default Swap during the current year and the previous year.

51. The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Bank has reviewed and recorded adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

52. During the current and previous year, other than the transactions undertaken in the normal course of banking business and in accordance with extant regulatory guidelines and Bank''s internal policies, as applicable:

• the Bank has not granted any advance/loans or investments or provided guarantee or security or the like to any other person(s) or entities with an understanding, whether recorded in writing or otherwise, to further lend/invest/provide guarantee or security or the like to any other person on behalf of the Bank.

• the Bank has not received any funds from any person(s) or entities with an understanding, whether recorded in writing or otherwise, that the Bank shall further lend or invest or provide guarantee; or security or the like in any other person on behalf of and identified by such person(s)/entities.

53. Investor Education and Protection Fund

The unclaimed dividend amount, due for transfer to the Investor Education and Protection Fund (IEPF) during the current and previous year, has been transferred without any delay.

54. Implementation of IFRS converged Indian Accounting Standards (Ind AS)

The Institute of Chartered Accountants of India (ICAI) has issued a revised set of accounting standards, Indian Accounting Standards (Ind AS) which largely converges the existing Accounting Standards (AS) as issued by ICAI and further notified by Ministry of Corporate Affairs (MCA) with global accounting standards, named, International Financial Reporting Standards (IFRS). The Ministry of Corporate Affairs (MCA), Government of India notified the Companies (Indian Accounting Standards (Ind AS)) Rules, 2015 on February 16, 2015 for adoption and outlining the roadmap for implementation of Ind AS for banking companies. The Reserve Bank of India (RBI) vide its latest circular on Ind AS implementation dated March 22, 2019 has further deferred the implementation of Ind AS for scheduled commercial banks till further notice.

The Bank has formed a Steering Committee for Ind AS implementation. The Committee reviews the progress of implementation and provides guidance and necessary directions on critical aspects like technology, people, business impact and project management. An update on Pro-forma Ind AS financials is placed before the Audit Committee on a half yearly basis. The Bank has submitted Pro-forma Ind AS financial statements to RBI for the periods as required by RBI.

55. Figures for the previous year have been regrouped / reclassified wherever necessary to conform to current years'' presentation unless where specified.

1

Corporate/Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank.

• Retail Banking: Includes lending, deposits, credit cards and other banking services provided to retail customers of the Bank through branch network or other approved delivery channels. In terms of RBI circular no. RBI/2022-23/19 DOR.AUT. REC.12/22.01.001/2022-23 dated April 7, 2022, the Bank has disclosed the Digital Banking Segment as a sub-segment within the existing ''Retail Banking Segment''.

• Treasury: includes investments, all financial markets activities undertaken on behalf of the Bank''s customers, proprietary trading, bullion business, maintenance of reserve requirements and resource mobilization from other banks and financial Institutions. Intersegment earnings of Balance Sheet management function are included in the Treasury segment.

• Other Banking Operations: Includes para banking activities like Bancassurance, etc.

2

The business of the Bank is concentrated largely in India. Accordingly, geographical segment results have not been reported in accordance with AS-17 (Segment Reporting).

• The Bank commenced its operations at its International Financial Services Centre Banking Unit (IBU) in Gujarat International Finance Tec (GIFT) City, Gujarat in April 2017 and the same is included in Corporate and wholesale Banking segment.

• Income, expenses, assets, liabilities, depreciation for the year and Capital expenditure for the year have been either specifically identified to individual segment or allocated to segments on a reasonable basis or are classified as unallocated.

• Unallocated items include Property, Plant & Equipment, realized gains/losses on their sale, income tax expense, deferred income tax assets/liabilities, advance tax, cash in hand, share capital and reserves.

• Business Segments have been identified and reported taking into account the target customer profile, the nature of products and services, the differing risks and returns, the organization structure, the internal business reporting structure,


Mar 31, 2022

During the previous year, options were granted at the market price per share as on date of grant of options which carried exercise price of R 126.25, R 162.95, R 175.50 and R 222.75. The corresponding market value of the shares for these grants at the time of respective grant was R 126.25, R 162.95, R 175.50 and R 222.75 respectively.

The Reserve Bank of India (RBI), through its clarification dated August 30, 2021, on guidelines on Compensation of Whole Time Directors/CEO/Material Risk Takers and Control Function Staff, has advised banks that the fair value of share-linked instruments granted after March 31, 2021 should be recognised as an expense. The Bank has changed its accounting policy from intrinsic value method to fair value method for valuation of stock options granted after March 31, 2021 for employees falling under these categories. The fair value of stock options is estimated on the date of grant using Black-Scholes model and is recognised as employee expense over the vesting period. The Bank continue to follow the intrinsic value method for ESOPs granted to other employees.

In accordance with the revised accounting policy, the Bank has charged R 9.92 crore to the profit and loss account in current year (previous year R 0.22 crore using intrinsic value method).

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during the period. The measure of volatility used in Black-Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on NSE of RBL Bank over the expected tenor of each option vesting tranche.

4. Appropriation to/ Withdrawal from Reserve

For the year ended March 31, 2022, the Bank has appropriated Nil (previous year: R 127.00 crore) towards Statutory Reserves, R 43.00 crore (previous year: R 58.00 crore) towards Capital Reserves and Nil (previous year: R 300.00 crore) towards Revenue & Other Reserves.

Appropriation to/ withdrawal from Investments Reserve Account (IRA) in current year is Nil (previous year withdrawn R 8.00 crore) and withdrawal from Investments Fluctuation reserves (IFR) in current year is R 36.00 crore (previous year appropriation: R 39.00 crore)

8. Investments:

8.1 During the current and previous year, there has been no sale/transfer from Held to Maturity (HTM) category in excess of 5% of the book value of investments held in HTM category. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with approval from Board of Directors permitted to be undertaken by Banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM.

8.2 The Bank''s shareholdings in Kilburn Engineering Limited, Sical Logiexpress Private Limited, Coffee Day Consultancy Service Private Ltd and Opal Luxury Time Product Limited was more than 20% at the date of acquisition on account of exercise of pledge on shares held by a defaulting borrower or on account of restructuring of the borrower. The shares of the investee company are acquired and held exclusively with a view to its subsequent disposal in the near future and accordingly has not been accounted for, as an associate under the purview of AS-23 - ''Accounting for Investments in Associates in Consolidated Financial Statements''. The Bank has classified these equity shares under AFS category.

8.3 The Bank holds 100% stake in RBL Finserve Limited, and thus the company is a "Wholly Owned Subsidiary” (WOS) of the Bank. The investment in the WOS is classified in Held to Maturity (HTM) category, in accordance with the RBI guidelines.

8.5 Repo / Reverse Repo Transactions:

During the current year, the Bank has undertaken Repo / Reverse Repo transactions including Repo/ Reverse Repo transactions under Liquidity Adjustment Facility (LAF) / Marginal Standing Facility (MSF) with RBI. Outstanding lending under Reverse Repo deals with RBI under LAF / MSF as at March 31,2022 stood at R 10,036.00 crore (previous year: R 4,086.00 crore). Outstanding borrowing under Repo deals with RBI under LAF / MSF as at March 31, 2022 stood at Nil (previous year: Nil). Face Value of Outstanding lending under Reverse Repo deals with CCIL as at March 31, 2022 stood at Nil (previous year: R 1,930.44 crore). Outstanding borrowing under Repo deals with CCIL as at March 31, 2022 stood at Nil (previous year: Nil). Face value of outstanding borrowing under Corporate Bond Repo with counter party as at March 31, 2022 stood at Nil (previous year: Nil). Face value of outstanding lending under Corporate Bond Reverse Repo with counter party as at March 31, 2022 stood at Nil (previous year: Nil). The details of securities sold under repo and purchase under reverse repo are as under:

8.6 Collateralized Borrowing and Lending Obligation (CBLO) \ Tri-party Repo Transactions (TREPS)

CBLO is a discounted money market instrument, established by CCIL and approved by RBI, which involves secured borrowings and lending transactions. CBLO was operational till November 05, 2018, post which Tri Party REPO / Reverse REPO(TREPS), substituted CBLO. Securities received as collateral from CCIL under TREPS lending are eligible for SLR maintenance.

9.5 Risk Exposure in Derivatives:

Qualitative disclosures:

Derivatives are financial instruments whose characteristics are derived from underlying asset or interest rates or exchange rates or indices. The Bank deals in interest rate and foreign exchange (Fx) derivatives for balance sheet management, proprietary trading and market making purposes whereby the Bank offers derivative products to its customers, enabling them to hedge their risks.

Proprietary traders manages trading positions within the approved risk limits. It deals in fixed income, equity and forex markets. The Bank transacts in derivative products such as forex options, currency swaps, interest rate swap, foreign currency interest rate swaps and long term foreign exchange contracts (LTFX) with its customers to hedge their market risk. The Bank also undertakes derivative transactions to hedge its balance sheet assets or liabilities.

These transactions expose the Bank to various risks, primarily credit, market and operational risk. The Bank has adopted the following mechanism for managing risks arising out of the derivative transactions.

a) The structure and organization for management of risk in derivatives trading.

The Bank has a separate Treasury Front Office, Treasury Middle Office, Treasury Back Office and Market Risk functions. Derivative transactions are originated by Treasury Front Office, which ensures compliance with the trade origination requirements as per the RBI guidelines and the Bank''s derivatives policy. Treasury Middle Office and Market Risk groups are responsible for identifying, measurement, monitoring, and analysis of derivative related risks. Treasury Back Office undertakes activities such as confirmations, settlements, documentation and accounting. Treasury functions are also subject to a concurrent audit.

b) The scope and nature of risk measurement, risk reporting and risk monitoring systems.

Derivative transactions are governed by the Bank''s Derivative Policy, Commercial Credit Policy, Market Risk Policy, Liquidity Risk Management, ALM Policy and Client Suitability and Appropriateness Policy as well as by the extant RBI regulations.

The Bank has set up various risk limits taking into account market volatility, business strategy and management experience. The Bank measures and monitors risk of its derivatives portfolio using risk metrics such as Value at Risk (VaR), stop loss limits, PV01 and other risk measures. All exposures are monitored against these limits on a daily basis and breaches, if any, are reported to senior management/Asset and Liability Committee (ALCO) for corrective action/ratification.

All counterparty exposures are monitored against counterparty credit limits on a daily basis and breaches, if any, are reported to senior management/ALCO for corrective action/ratification.

c) Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums and discounts, valuation of outstanding contracts.

The Bank has a Board approved FX and Derivative Policy which also govern the use of derivative for hedging purpose. The Bank undertakes derivative transactions for market making/trading and hedging purposes. Transactions for trading and hedging are recorded separately. The Bank revalue its trading positions on a daily basis and the resulting gain/loss is recorded in the Profit and Loss Account. The receivable and payable on marking the contracts to market are shown under "Other Assets” and "Other Liabilities” in the Balance Sheet.

Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction, and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premium or discount arising at the inception of such forward exchange contract is amortized as expense or income over the life of the contract.

The Bank follows the option premium accounting framework prescribed by FEDAI guidelines. Premium on option transaction is recognized as income/ expense on expiry or unwinding of the transaction. MTM gain/ loss, is recorded under ''Other Income''. The amounts received/paid on cancellation of option contracts are recognized as realised gains/ losses on options.

The charges receivable/payable on cancellation/ termination of foreign exchange Forward contracts and swaps are recognized as income/ expense on the date of cancellation/ termination under ''Other Income''. Pursuant to the RBI guidelines, any receivables (crystallised receivables and positive MTM) under Forex & derivatives contracts, which remain overdue for more than 90 days, are reversed through the Profit and Loss Account and are held in a separate Suspense account.

d) Counterparty Credit Risk Mitigation

The credit risk on customer derivative transactions is mitigated through a laid down policy on sanction of Loan Equivalent Risk (LER) limits, monitoring mechanism for LER limits and trigger events for escalations, margin calls and terminations.

The Bank measures the counterparty risk using current exposure method as stipulated by RBI. Counterparty limits are approved as per the Bank''s Credit Policies. The sanction terms may include the requirement, on a case to case basis, to provide upfront collateral, or place collateral if the mark to market (MTM) exceeds a specified threshold. The Bank retains the right to terminate transactions as a risk mitigation measure, in case the client does not adhere to the agreed terms.

Collateral requirements for derivative transactions determined through a usual credit appraisal process and are laid down in the credit sanction terms of the transactions.

11.2 Divergence in Asset Classification and Provisioning for NPAs

RBI vide its circular dated April 1, 2019, has directed banks to make suitable disclosures, wherever either (a) the additional provisioning for NPA assessed by RBI exceeds 10 percent of the reported profits before provisions and contingencies for the reference period or (b) the additional Gross NPAs identified by RBI exceed 15 percent of the published incremental Gross NPAs for the reference period, or both.

The divergence observed by RBI for the financial year 2020-21 and financial year 2019-20 in respect of the Bank''s asset classification and provisioning under the extant prudential norms on income recognition asset classification and provisioning (IRACP) did not exceed the relevant prescribed thresholds as per the aforesaid circulars in force.

11.3 Particulars of Restructured Accounts:

11.3.1 In terms of RBI circular DBR.No.BPBC.45/21.04.048/2018-19 dated June 7, 2019, on ''Prudential Framework for Resolution of Stressed Assets'', during FY 2021-22, the Bank has restructured 106,951 accounts having aggregate outstanding of R 136.52 crore as on March 31, 2022. The Bank holds provision of R 131.06 crore against these accounts as on March 31, 2022. (in previous year, under above mentioned circular, the Bank had restructured 10,004 accounts having aggregate outstanding of R 64.44 crore and provision of R 60.53 crore was held against these accounts as on March 31, 2021)

On an aggregate level, the total portfolio restructured under this framework stands at R 159.42 crore as of March 31, 2022, against which the Bank holds total provision of R 149.60 crore (in previous year, the corresponding portfolio outstanding was R 75.33 crore, against which the Bank was holding total provision of R 63.25 crore as of March 31,2021).

11.3.2 As per the RBI circular DBR.No.BPBC.18/21.04.048/2018-19 dated January 1,2019, the following is the disclosure pertaining to MSME accounts restructured during the year in line with RBI circular DOR.No.BPBC/4/21.04.048/2020-21 dated August 6, 2020 and DOR.STR.REC.12/21.04.048/2021-22 dated May 5, 2021:-

* During FY 2021-22, technically written-off accounts with aggregate outstanding of R 185.51 crore of a corporate account and R 0.10 crore of 4 retail accounts were transferred to an ARC. (previous year: technically written-off accounts with aggregate outstanding of R 13.90 crore of a corporate account and R 1.07 crore of 4 retail accounts were transferred to an ARC)

@ During FY 2020-21, transfer to permitted transferees includes portfolio of technically written-off / written-off accounts with aggregate outstanding of R 53.00 crore of a corporate account and R 337.65 crore of 62,703 credit card accounts which was sold to the NBFC/Bank.

# During FY 2021-22, Investment made in Security Receipts (SRs) was R 50.15 crore (outstanding as on March 31, 2022 is R 46.84 crore) with Recovery Rating of RR1 (100%-150% Recovery Range). (previous year: Investment made in Security Receipts (SRs) was R 216.58 crore (outstanding as on March 31,2021 is R 216.58 crore & outstanding as on March 31,2022 is R 193.96 crore) with Recovery Rating of RR1 (100%-150% Recovery Range))

A During FY2021-22 & FY 2020-21, with respect to transfer to ARC, as per RBI guidelines, gain arising out of sale of NPAs is limited to the extent of cash received in excess of NBV of asset. Accordingly, in case of sale transaction where Bank has received the sale consideration partly in Cash and Partly in Security Receipts (SRs), the Bank has not booked any gains even though, overall sale consideration is in excess of NBV of asset.

11.8 During the current financial year ended March 31, 2022, there were no accounts where Resolution Plan (RP) involving change in ownership was implemented under the RBI circular RBI/2018-19/203/DBR.No.BP BC.45/21.04.048/2018-19 dated June 07, 2019, on ''Prudential Framework for Resolution of Stressed Assets''. During the previous year, RP involving change in ownership was implemented in respect of one Borrower entity having aggregate outstanding of R 94.00 crore, under the said framework.

11.9 During the current and previous financial year ended March 31,2022 and March 31,2021, respectively, there were no accounts where Resolution Plan (other than change in ownership) was implemented under the RBI circular RBI/2018-19/203/DBR.No.BP BC.45/21.04.048/2018-19 dated June 07, 2019, on ''Prudential Framework for Resolution of Stressed Assets''.

11.10 During the financial year ended March 31,2022, there were no accounts where the Bank had acquired equity shares in terms of Resolution Plans (RP) implemented under the RBI circular RBI/2018-19/203/DBR.No.BPBC.45/21.04.048/2018-19 dated June 07, 2019, on ''Prudential Framework for Resolution of Stressed Assets''. During the previous year, the Bank had acquired equity shares having book value of R 13.50 crore of one borrower entity due to conversion of debt as part of implementation of RP

12 The Bank has not done any securitization of loan assets during the current and the previous year.

13 Segment Reporting: information about business segments

In terms of the AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BPBC.81/21.04.018/2006-07 dated April 18, 2007 read with DBR.BPBC No.23/21.04.018/2015-16 dated July 1, 2015 and amendments thereto, the following business segments have been disclosed:

• Corporate/Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank.

• Retail Banking: Includes lending, deposits, credit cards and other banking services provided to retail customers of the Bank through branch network or other approved delivery channels.

• Treasury: includes investments, all financial markets activities undertaken on behalf of the Bank''s customers, proprietary trading, bullion business, maintenance of reserve requirements and resource mobilization from other banks and financial Institutions. Intersegment earnings of Balance Sheet management function are included in the Treasury segment.

• Other Banking Operations: Includes para banking activities like Bancassurance, etc.

• Business Segments have been identified and reported taking into account the target customer profile, the nature of products

Segment revenues include earnings from external customers and earnings from other segments on account of funds transferred at negotiated rates, which are determined by the management. Segment results includes segment revenues as reduced by interest expense, charge from other segments on account of funds transferred at internal Fund Transfer Pricing (FTP) rates and operating expenses and provisions either directly identified or allocated to each segment.

and services, the differing risks and returns, the organization structure, the internal business reporting structure, guidelines prescribed by RBI and in compliance with the Accounting Standard 17 - "Segment Reporting”. The RBI guideline permits exposure to be classified as retail upto R 7.50 crore, however the Bank for segment purpose continues with threshold of R 5.00 crore.

14 Related Party Transactions

As per AS 18 "Related Party Disclosures”, the Bank''s related parties for the year ended March 31,2022 are disclosed below:

1. Key Management Personnel (‘KMP'')

Mr. Vishwavir Ahuja (Managing Director & Chief Executive Officer till December 25, 2021, proceeded on leave with effect from December 25, 2021)

Mr. Rajeev Ahuja (Executive Director till December 25, 2021, appointed as interim Managing Director & Chief Executive Officer with effect from December 25, 2021)

2. Relatives of Key Management Personnel

Mrs. Reva Ahuja, Mr. Dharam Bir Ahuja, Ms. Vasudhaa Ahuja, Ms. Vrinda Ahuja, Mrs. Deepika Dhand, Ms. Kanika Ahuja, D. B. Ahuja & Sons (HUF), Mrs. Nandita Ahuja, Ms. Aishwarya Ahuja, Mr. Raman Ahuja, Miss Asavari Ahuja.

3. Entities in which relatives of key management personnel are interested

Village Shop Private Limited, Grocrate India Private Limited, Swyn Herds Private Limited, IKP Centre For Advancement in Agricultural Practice, Fineprint Legal Technologies Private Limited (effective from Feb 2, 2022).

4. Subsidiary

RBL Finserve Limited

Notes:

• The business of the Bank is concentrated largely in India. Accordingly, geographical segment results have not been reported in accordance with AS-17 (Segment Reporting).

• The Bank commenced its operations at its International Financial Services Centre Banking Unit (IBU) in Gujarat International Finance Tec (GIFT) City, Gujarat in April 2017 and the same is included in Corporate and wholesale Banking segment.

• Income, expenses, assets, liabilities, depreciation for the year and Capital expenditure for the year have been either specifically identified to individual segment or allocated to segments on a reasonable basis or are classified as unallocated.

• Unallocated items include Property, Plant & Equipment, realized gains/losses on their sale, income tax expense, deferred income tax assets/liabilities, advance tax, cash in hand, share capital and reserves.

18. Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006, which came into force from October 2, 2006, the organisations are required to make certain disclosures relating to payments made to Micro, Small and Medium enterprises. The Bank has received intimations from "suppliers” regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006. During the current year there is no delay in payment of invoice (previous year: Nil).

v) identifying persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the Board of Directors their appointment and removal;

vi) recommend to the board, all remuneration, in whatever form, payable to senior management;

vii) devising a policy on diversity of Board of Directors;

viii) whether to extend or continue the term of appointment of the Independent Director, on the basis of the report of performance evaluation of Independent Directors;

ix) to assist and advice the MD& CEO in planning for senior management build-up of the our Bank so as to ensure appropriate leadership is in place for our Bank''s transformation strategy,

x) to evaluate and approve HR policies of our Bank;

xi) to evaluate and approve various employee stock ownerships schemes that may be required from time to time to ensure that our Bank gets the rights talent and it able to retain high-performing employees etc.;

xii) to award ESOPs to employees, whether in the form of joining or performance, The Committee may determine the grade of employees it desires to review and award;

xiii) to oversee the framing, review and implementation of compensation policy of our Bank on behalf of our Board;

xiv) to work in close co-ordination with the Risk Management Committee of our Bank, in order to achieve effective alignment between remuneration and risks;

xv) to ensure that the cost/income ratio of our Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio;

xvi) to appoint/discontinue trustees on the board of trustees of ''The Ratnakar Bank Limited Employees Provident Fund, ''The Ratnakar Bank Limited Employees Gratuity Fund'' and ''The Ratnakar Bank Limited Employees Pension Fund'' and to approve operational changes in the related trust deeds and/or decide on related matters;

xvii) to decide on grating of mandate to the Indian Bank Association for negotiating industry level wage settlements for workmen employee;

xviii) Any other related aspect to the above.

B. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

Bank''s remuneration policy is designed and aimed at attracting & retaining best possible / available talent that it requires to effectively grow the business and become a highly respected institution. It comprises of a balanced mix of fixed & variable cash and non-cash compensation and benefits / perquisites to deliver maximum value to the employee and other stakeholders.

The remuneration is divided into following components:

Fixed Pay & Perquisites:

For employees governed by Indian Banking Association''s employment and compensation rules (IBA rules), their remuneration is based on the industry-wide bi-partite wage settlement agreements signed with the employees'' union. These rules provide for basic salary, allowances and certain retirement benefits to the employees which are uniformly applicable for the employees covered under the IBA scale.

For the employees governed by the ''Cost to Company'' (CTC) remuneration structure (i.e., Non-IBA scale employees), the CTC represents the total direct and fixed cost incurred by the Bank across all components of compensation including contributions paid by the Bank towards retiral benefits, and loans at concessional interest rates. It consists of Basic Salary, House Rent Allowance, Personal Allowance / Special Allowances, Car Related Benefits, Leave Travel Assistance, Reimbursements and Retiral Benefits, etc.

Variable Pay

Share Linked Instruments

In order to align the interest of the Bank, the senior management, its shareholders and the employees, there is an effort to create long term ownership and commitment for the senior officers of the Bank. This is also done with a view to recognize and compensate key employees for intellectual capital, the domain expertise in terms of product, market knowledge and the business relationships that they bring along. Accordingly, the Bank has formulated Employee Stock Option Program (ESOP) and offer Joining ESOPs based on the role in the Bank, domain knowledge, experience, current ability, future potential and expertise of the candidate.

Further, to reward the performance and recognize the contribution of employees, the Bank has a Performance Employee Stock Option Program (PESOP). PESOPs are given after periodic evaluation of the individual performance, business unit as well as overall Bank performance during the review period. These plans are designed and implemented in such a way that they go a long way in aligning the objectives of an individual with those of the Bank.

These stock option programs are administered by the NRC.

Variable Pay - Cash (VPC):

Variable Pay - Cash is paid as a percentage of CTC as defined in the Remuneration Policy of the Bank.

Employees who are covered under monthly / quarterly incentives plans are not eligible for annual Variable Pay - Cash for the period of such coverage.

As per the RBI guidelines, Variable Pay - Cash will be paid in a staggered manner based on the quantum of Variable Pay -Cash. The schedule (timing and quantum) of pay-out of Variable Pay - Cash is described in sections of the compensation policy for respective categories of employees. However, in cases where Variable Pay - Cash is under R 0.25 crore, deferral requirements would not be necessary.

C. Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks.

For the Whole Time Directors (WTDs) / Chief Executive Officers (CEOs) / Material Risk Takers (MRTs):

a) Compensation is adjusted for all types of risk

b) Compensation outcomes are symmetric with risk outcomes

c) Compensation pay-outs are sensitive to the time horizon of the risk and

d) Mix of cash, equity and other forms of compensation is consistent with risk alignment

The Bank will be using measures of credit, market, liquidity and various other risks for risk adjustment. It includes both quantitative and judgmental elements and is in compliance with all statutory requirements.

The variable compensation will be subject to malus/clawback arrangements in the event of subdued or negative financial performance of the Bank and/or the relevant line of business in any year.

The Bank will adopt modalities to incorporate malus/ clawback mechanism in respect of variable pay to address misconduct, risk and relevant statutory and regulatory stipulations, as applicable.

The basis for arriving at the representative set of situations to invoke the malus and clawback clauses applicable on entire variable pay are Misconduct, assessed divergence in performance, working against the interest of the Bank.

D. Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration.

The Performance Management process includes employees setting performance goals at the beginning of the fiscal year that are aligned to five themes namely, Shareholder Value as the Focus, Customer at the Heart, Employee as the Pillar and Community as the Cause and Risk Compliance. Employees are appraised and evaluated against these set of goals at the end of the review period. Employee performance and competence assessment are both considered for determining the performance rating. This has a direct correlation with the increments and variable pay to be awarded to the employee for the period of assessment.

E. A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

The variable pay will be in the form of share-linked instruments, or a mix of cash (referred as variable pay - cash or VPC) and share-linked instruments.

The Bank has defined composition, limit, deferral and period of deferral arrangement for Variable Pay. It has also laid down guidelines on vesting, inclusion of share linked instruments as a part of variable pay and malus/ clawback norms.

As per the RBI guidelines, Variable Pay - Cash will be paid in a staggered manner based on the quantum of Variable Pay -Cash. The schedule (timing and quantum) of payout of Variable Pay - Cash is described in the Compensation policy of the Bank.

• For WTDs and MRTs, a minimum of 60% of the total variable pay will be under deferral arrangements. Further, if Variable Pay - Cash is being paid as a part of variable pay, at least 50% of Variable Pay - Cash will also be deferred. However, in cases where Variable Pay - Cash is under R 0.25 crore, deferral requirements would not be necessary

• For Risk Control & Compliance Staff and other category employees, Deferral will be applicable in case where Variable Pay - Cash is more than 40% of fixed pay and if it is greater than or equal to R 0.25 crore.

For variable pay in the form of share-linked instruments, i.e., ESOPs, deferred remuneration will either vest fully at the end of the deferral period or be spread out over the course of the deferral period. The first such vesting shall not be before one year from the commencement of the deferral period. The vesting shall not be faster than on a pro rata basis. Additionally, vesting shall not take place more frequently than on a yearly basis to ensure a proper assessment of risks before the application of ex post adjustments.

Period of deferment and vesting for share-linked instruments i.e., ESOP will be as per the schedule specified in the ESOP scheme.

F. Description of the different forms of variable remuneration (i.e., cash and types of share-linked instruments) that the Bank utilizes and the rationale for using these different forms.

Various forms of variable remuneration used by the Bank are:

Variable Pay - Cash (VPC): VPC provides cash bonus in short to medium term to employees. The Bank utilizes VPC to reward superior performance.

Employee stock option (ESOP) plan: Employee stock option plan is a long-term remuneration benefit. ESOP is equity settled through which the employees will receive one equity share per option after vesting/ exercise. The stock options granted to employees vest over a period of three / four years, generally. Apart from rewarding for superior performance, ESOP is also used as a reward to align employee interests with the Bank, create long term ownership and commitment.

36. Contingent Liabilities

Description of nature of contingent liabilities is set out below:

i) Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress.

ii) Liability for partly paid investments:

These represent contingent liability on account of possible claims for uncalled amount by the issuer of the securities held by the Bank.

iii) Liability on account of forward exchange and interest rate contracts:

The Bank enters into foreign exchange contracts currency options, forward rate agreements, currency swaps with interbank participants on its own account and for the customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by the way of interest/principal in one currency against another, based on pre-determined rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. The amount recorded as contingent liability with respect to these contracts represents the underlying notional amounts of these contracts.

iv) Guarantees given on behalf of Constituents, Acceptances, Endorsement and other obligations:

As a part of its corporate banking activities, the Bank issues documentary credit and guarantees on behalf of its customers. Documentary credits such as letters of credit enhance the credit standing of the customer of the Bank. Guarantees generally represent irrevocable assurances that the Bank will make the payment in the event of the customer failing to fulfill its financial or performance obligations.

v) Acceptances, endorsements and other obligations:

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

vi) Other contingent items:

a. Commitments for settlement date accounting for securities transactions;

b. Demands raised by income tax and other statutory authorities and disputed by the Bank.

c. Amount transferred to RBI under the Depositor Education and Awareness Fund (DEAF).

The Bank makes provident fund contributions to an independently administered Trust. The Bank is currently in dispute with the Provident Fund authorities regarding applicability of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (the ''Act'') on the Bank and the matter is pending with Central Government Industrial Tribunal, Mumbai ("CGIT”) for further adjudication.

Any potential likely impact on the financial statements in view of the above will be ascertained on the decision of the Central Government Industrial Tribunal, Mumbai and on clarification from the Provident Fund authorities / courts, if any.

Refer Schedule 12 for amounts relating to contingent liabilities.

37. The Bank has not issued any Letters of comfort and Letters of Undertaking during the year (previous year - Nil)

38. Liquidity Coverage Ratio (LCR)

Qualitative disclosure around LCR

Liquidity Coverage Ratio (LCR) is a global minimum standard aimed at measuring and promoting short-term resilience of banks to potential liquidity stress by ensuring maintenance of sufficient High Quality Liquid Assets (HQLAs) to survive net cash outflows over next 30 days under stress conditions. It is a ratio of Bank''s High Quality Liquid Assets (HQLAs) to the estimated net outflows over next 30 day period of significant liquidity stress.

The Board of Directors has the overall responsibility for liquidity risk management. The Board at overall level decides the liquidity risk tolerance and accordingly decides the strategy, policies and procedures of the Bank. The Board has constituted a Risk Management Committee (RMC) consisting of Managing Director & Chief Executive Officer (MD&CEO) /Chairman and other Board members. The committee is responsible for evaluating the overall risks faced by the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk Management Committee. At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk limits set by the Board and implements the liquidity risk management strategy of the Bank. ALM team within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management. ALCO channelizes various business segments of the Bank to target good quality asset and liability profile to meet the Bank''s profitability as well as liquidity requirements.

High Quality Liquid Assets (HQLAs) under LCR are divided into two parts i.e. Level 1 and Level 2 HQLA.

Level 1 HQLA comprises primarily of cash, excess CRR, government securities in excess of SLR , Marginal Standing Facility (currently 2% of NDTL) and Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) as permitted under prudential guidelines (Currently 15%).

Level 2 HQLA comprises of investments in highly rated non-financial corporate bonds, debentures, commercial papers issued by non-financial institutes and are further considered at prescribed haircuts.

Cash outflows are calculated by applying prescribed outflow run-off factors to contractual outflows on account of various categories of liabilities and cash inflows are calculated by applying prescribed weights and factors to the contractual inflows. Additionally, probable outflows on account of contingent liabilities such as letters of credit (LC) and bank guarantees (BGs) and undrawn commitments both for fund & non fund based exposures are considered by applying prescribed run-off factors. The Bank has also considered the impact of derivative portfolio in LCR as per RBI guidelines and it has very minimal impact on the liquidity of the Bank. The Bank does not provide clearing or custodial services eligible for operational deposits under the extant guidelines. Hence, operational deposits are not applicable to the Bank.

The Bank computes LCR on a daily basis in accordance with RBI guidelines. LCR is reported as a simple average of daily observations for the quarter. The Bank believes that all inflows and outflows which might have a material impact under the liquidity stress scenario have been considered for the purpose of LCR.

The Bank has maintained an additional provision of R 27.26 crore (previous year R 21.21 crore) towards UFCE of customers. Further, the Bank has maintained an additional capital of R 79.02 crore (previous year R 36.24 crore) towards UFCE of customers.

46. Credit Default Swap

The Bank has not entered into Credit Default Swap during the current year and the previous year.

47. The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Bank has reviewed and recorded adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

48. COVID - 19 pandemic has contributed to increase in volatility and an un-precedented level of disruption on social economic activities. India is emerging from the COVID-19 pandemic. The extent to which any new wave of COVID-19 will impact the Bank''s results will depend on ongoing as well as future developments, including, among other things, any new information concerning the severity of the COVID-19 pandemic, and any action to contain its spread or mitigate its impact whether government-mandated or elected by us.

49. The Governments of India, Ministry of finance via its letter F No. 2/12/2020-BOA.I dated 23rd October 2020, informed that the central government have approved "Scheme of grant of ex-gratia”. The Bank was required to make the payments for difference between the compounding interest and the simple interest for six months starts from 1st March 2020 to 31st August 2020 to the borrowers of specified loan categories. The Bank had paid R 69.92 crore as ex gratia to its borrowers as per the scheme framed by the governments and received the reimbursement claim during the year from the Central government through State Bank of India.

50. In accordance with the instructions in RBI circular dated April 7, 2021 on ''Asset Classification and Income Recognition following the expiry of Covid-19 regulatory package'', the Bank shall refund / adjust ''interest on interest'' charged to all borrowers including those who had availed of working capital facilities during the moratorium period, irrespective of whether moratorium had been fully or partially availed, or not availed. During the previous year, the Bank has created a liability towards estimated interest relief and reduced the same from the interest income. The Bank has made the payment R 8.11 crore in the current year.

51. During the financial year ended March 31, 2022, other than the transactions undertaken in the normal course of banking business and in accordance with extant regulatory guidelines and Bank''s internal policies, as applicable:

• the Bank has not granted any advance/loans or investments or provided guarantee or security or the like to any other person(s) or entities with an understanding, whether recorded in writing or otherwise, to further lend/invest/provide guarantee or security or the like to any other person on behalf of the Bank.

• the Bank has not received any funds from any person(s) or entities with an understanding, whether recorded in writing or otherwise, that the Bank shall further lend or invest or provide guarantee; or security or the like in any other person on behalf of and identified by such person(s)/entities.

52. Investor Education and Protection Fund

The unclaimed dividend amount, due for transfer to the Investor Education and Protection Fund (IEPF) during the current and previous year, has been transferred without any delay.

53. Implementation of IFRS converged Indian Accounting Standards (Ind AS)

The Institute of Chartered Accountants of India (ICAI) has issued a revised set of accounting standards, Indian Accounting Standards (Ind AS) which largely converges the existing Accounting Standards (AS) as issued by ICAI and further notified by Ministry of Corporate Affairs (MCA) with global accounting standards, named, International Financial Reporting Standards (IFRS). The Ministry of Corporate Affairs (MCA), Government of India notified the Companies (Indian Accounting Standards (Ind AS)) Rules, 2015 on February 16, 2015 for adoption and outlining the roadmap for implementation of Ind AS for banking companies. The Reserve Bank of India (RBI) vide its latest circular on Ind AS implementation dated March 22, 2019 has further deferred the implementation of Ind AS for scheduled commercial banks till further notice.

The Bank has formed a Steering Committee for Ind AS implementation. The Committee reviews the progress of implementation and provides guidance and necessary directions on critical aspects like technology, people, business impact and project management. An update on Pro-forma Ind AS financials is placed before the Audit Committee on a half yearly basis. The Bank has submitted Pro-forma Ind AS financial statements to RBI for the periods as required by RBI.

54. Figures for the previous year have been regrouped / reclassified wherever necessary to conform to current years'' presentation unless where specified.


Mar 31, 2019

BACKGROUND

RBL Bank Limited(‘the Bank’), incorporated in Kolhapur, India is a banking company governed by the Banking Regulation Act, 1949 with the Reserve Bank of India (‘RBI’) as its principal regulator. The Bank is engaged in providing a wide range of banking and financial services including commercial banking, retail banking, agriculture finance, financial inclusion, treasury operations and other banking related activities. The Bank commenced its operations at its International Financial Services Centre Banking Unit (IBU) in Gujarat International Finance Tec (GIFT) City, Gujarat in April 2017. Ordinary shares ofthe Bank were listed on August 31, 2016 on the National Stock Exchange of India Limited (‘NSE’) & BSE Limited (‘BSE’).

BASIS OF PREPARATION:

The accompanying financial statements have been prepared under the historical cost convention and on the accrual basis of accounting, unless otherwise stated, and comply with the requirements prescribed under the Third Schedule (Form A and Form B) of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to the Generally Accepted Accounting Principles in India (Indian GAAP’), the guidelines issued by RBI from time to time, the Accounting Standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014, to the extent applicable, and practices generally prevalent in the banking industry in India.

USE OF ESTIMATES:

The preparation of financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that are considered in the reported amount of assets, liabilities and disclosure of contingent liabilities on the date of the financial statements and reported income and expenses during the reporting period. The estimates and assumptions used in the accompanying financial statements are based upon the management’s evaluation ofthe relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively in the current and future periods.

1. Capital

During the current year, the Bank allotted 7,042,181 equity shares aggregating to Rs. 100.54 crore on various dates to the employees who exercised their stock options.

During the previous year, the Bank issued 32,621,354 equity shares of Rs. 10/- face value on preferential basis, each share allotted at a price of Rs. 515/- aggregating to Rs. 1,680.00 crore. Further the bank allotted 11,843,057 equity shares aggregating to Rs. 122.06 crore on various dates to the employees who exercised their stock options.

2. Proposed Dividend

The Board of Directors at their meeting on April 18, 2019, proposed a dividend of Rs. 2.70 per share (27%) [previous year - Rs. 2.10 per share (21%)], subject to the approval of members at the ensuing Annual General Meeting.

In accordance with the revised Accounting Standard (AS) - 4 ‘Contingencies and Events occurring after the Balance Sheet Date’, the Bank has not accounted for proposed dividend Rs. 115.21 crore (previous year - Rs. 88.13 crore) and corporate dividend tax Rs. 23.68 crore (previous year Rs. 18.12 crore), as a liability in the balance sheet both in the current year and the previous year.

3. Employee Stock Option Plan (“ESOP”)

The shareholders of the Bank have approved and enabled the Board and / or the Human Resource Committee to grant stock options to employees under one or more Employee Stock Option Plan (ESOP). The ESOP is equity settled where the employees will receive one equity share per option. The stock options granted to employees vest over a period of two years, three years or four years in the proportion of either 20:80,40:30:30,30:30:40 or 10:20:30:40, as the case may be. Vested options can be exercised within a period of three years from the date of vesting or within a period of one year from the date on which the shares of the Bank gets listed on a recognized stock exchange (listed since August 31, 2016), whichever is later.

Under Intrinsic Value method there is no charge to the profit and loss account for the current year (previous year - Nil) on account of grant of the ESOPs, since exercise price of the stock options granted is more than the underlying value of the shares (prior to listing) or at the market price (listed since August 31, 2016), as the case may be. If the Bank had adopted the Black-Scholes model based fair valuation, compensation cost for the year ended March 31, 2019, would have increased by Rs. 106.96 crore (previous year Rs. 47.75 crore) and the profit before tax would have been lower correspondingly. Accordingly, on a pro-forma basis, basic and diluted earnings per share for the year ended March 31, 2019 would have been Rs. 18.83 and Rs. 18.43, respectively (Previous year Rs. 14.60 and Rs. 14.03, respectively).

During the current year, options were granted at the price determined by the HR&R Committee and was based on the market price per share as on date of grant of options which carried exercise price of Rs. 479.85, Rs. 490.20, Rs. 503.50 Rs. 501.40, Rs. 510.00, Rs. 511.90, Rs. 512.65, Rs. 51 5.90, Rs. 518.08, Rs. 526.45, Rs. 530.55, Rs. 545.35, Rs. 552.05, Rs. 562.75, Rs. 564.1 5, Rs. 577.80 and Rs. 580.45. During the year corresponding market value of the shares for these grants at the time of respective grant was Rs. 479.85, Rs. 490.20, Rs. 503.50, Rs. 501.40, Rs. 510.00, Rs. 511.90, Rs. 51 2.65, Rs. 51 5.90, Rs. 545.35, Rs. 526.45, Rs. 530.55, Rs. 545.35, Rs. 552.05, Rs. 562.75, Rs. 564.15, Rs. 577.80 and Rs. 580.45 respectively.

Options granted during the previous year carry an exercise price of Rs. 506.95, Rs. 507.75, Rs. 510.10, Rs. 516.75, Rs. 525.40, Rs. 527.70, Rs. 534.75, Rs. 544.60 and Rs. 564.45 and were issued at the closing market price as at the date of the grant.

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

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during the period. The measure of volatility used in Black-Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on NSE of similar listed banks over the expected tenor of each tranche.

4. Appropriation to/from Reserves

For the year ended March 31, 2019, the Bank has appropriated Rs. 217.00 crore (previous year: Rs. 158.80 crore) towards Statutory Reserves, Rs. 9.00 crore (previous year: Rs. 9.39 crore) towards Capital Reserves, Rs. 78.36 crore (previous year: Nil) towards Investments Fluctuation reserves (IFR), Rs. 400.00 crore (previous year: Rs. 360.00 crore) towards Revenue & other Reserves.

For the year ended March 31, 2019, the Bank has transferred Nil (previous year - Rs. 2.20 crore) from Investment Reserve Account (IRA) to Profit and Loss account, in accordance with RBI guidelines.

5. Disclosures as per Accounting Standards

5.1. Disclosures under AS -15 on employee benefits Defined Contribution Plans:

Employer’s contribution recognized and charged off for the year to defined contribution plans are as under:

Defined Benefit Plans:

The following table sets out the status ofthe defined benefit Pension and Gratuity Plan as required under Accounting Standard15.

Compensated absences

The Bank does not have a policy of encashing unavailed leave for its employees, except for employees under Indian Banks-’ Association (‘IBA’) structure. The actuarial liability of compensated absences of accumulated privileged and sick leaves of the employees of the Bank is given below:

5.2. Segment Reporting: Information about business segments

In terms ofthe AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BP.BC.81/21.04.018/2006-07 dated April 18, 2007 read with DBR.BP.BC No.23/21.04.018/2015-16 dated July 1, 2015 and amendments thereto, the following business segments have been disclosed:

- Corporate/Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank.

- Retail Banking: Includes lending, deposits and other banking services provided to retail customers of the Bank through branch network or other approved delivery channels.

- Treasury: includes investments, all financial markets activities undertaken on behalf of the Bank’s customers, proprietary trading, bullion business, maintenance of reserve requirements and resource mobilization from other Banks and financial Institutions. Intersegment earnings of Balance Sheet management function are included in the Treasury segment.

- Other Banking Operations: Includes para banking activities like Bancassurance, Credit Cards etc.

Segment revenues include earnings from external customers and earnings from other segments on account of funds transferred at negotiated rates, which are determined by the management. Segment results includes segment revenues as reduced by interest expense, charge from other segments on account of funds transferred at negotiated rates and operating expenses and provisions either directly identified or allocated to each segment..

5.3. Related Party Transactions

As per AS 18 “Related Party Disclosures”, the Bank’s related parties for the year ended March 31, 2019 are disclosed below:

1. Key Management Personnel (‘KMP’)

Mr. Vishwavir Ahuja (Managing Director & Chief Executive Officer)

Mr. Rajeev Ahuja (Executive Director)

2. Relatives of Key Management Personnel

Mrs. Reva Ahuja, Mr. Dharam Bir Ahuja, Ms. Vasudhaa Ahuja, Ms. Vrinda Ahuja, Mrs. Dipeeka Dhand, Ms. Kanika Ahuja, D.

B. Ahuja & Sons (HUF)

Ms. Aishwarya Ahuja, Mrs. Priti Ahuja, Mr. Raman Ahuja, Ms. Nandita Ahuja, Miss Asavari Ahuja

3. Associates

RBL Finserve Limited (RFL) (formerly Swadhaar Finserve Private Limited (SFPL)) (till November 7, 2017)

4. Subsidiary

RBL Finserve Limited (RFL) (formerly Swadhaar Finserve Private Limited (SFPL)) (w.e.f. November 8, 2017)

5.4. Operational Leases

The Bank has taken certain premises on operating lease. The agreements entered into provide for renewal and rent escalation. Particular of future minimum lease payments in respect ofthe same are as mentioned below:

6. Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments during the years ended March 31, 2019 and March 31, 2018. The above is based on the information available with the Bank which has been relied upon by the statutory auditors.

7. Capital Adequacy

The Bank’s capital to risk-weighted asset ratio (‘Capital Adequacy Ratio’) as at March 31, 2019 is calculated in accordance with the RBI guidelines on Basel III capital regulations (‘Basel III’). The phasing-in ofthe minimum capital ratio requirement under Basel III is as follows:

7.1. Capital Adequacy Ratio as per RBI guidelines as per Basel III Capital Regulations dated July 1, 2015 and amended thereafter, as at March 31, 2019 is given below:

For the computation of CRAR the Bank has reduced the proposed dividend and corporate dividend tax thereon, totaling Rs. 138.89 crore and Rs. 106.25 crore for the year ending March 31, 2019 and of March 31, 2018 respectively, from CET Capital funds.

7.2. Tier II Capital

During the current year, the Bank did not issue any Basel III compliant Tier II bonds (previous year NIL). Basel III compliant Tier II bonds outstanding as at March 31, 2019 are as below:

8. Investments:

8.1. During the current year and the previous year there has been no sale/transfer from HTM categories in excess of 5% of the book value of investments held in the HTM category. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM.

8.2. In the financial year ending March 31, 2016, with RBI’s permission, the Bank acquired the shares of a company (investee Company) to realize it’s dues by exercising a pledge of investee company’s shares in its favor by one of the defaulting borrowers of the Bank. The Bank’s shareholding in the said investee company stands at 24.38% as at March 31, 2019 (previous year 24.38%). Investments in the shares of the investee company have been acquired and held exclusively with a view to its subsequent disposal in the near future and accordingly has not been accounted for as an associate under the purview of AS-23 - Accounting for Investments in Associates in Consolidated Financial Statements’. These equity shares have been classified under AFS category and have been valued as per the extant RBI guidelines for the valuation of investments. Accordingly, these exposures have not been considered as intra-group exposures.

8.3. During the year ended March 31, 2019, the Bank has increased its holding in RBL Finserve Limited (RFL) (formerly Swadhaar Finserve Private Limited (SFPL)) from 60.48% to 100%, following which the company has become a “Wholly Owned Subsidiary” (WOS) of the Bank w.e.f. June 28, 2018. The investment is classified in Held to Maturity (HTM) category, in accordance with the RBI guidelines.

During the previous year ended March 31, 2018, the Bank had increased its holding in RBL Finserve Limited (RFL) (formerly Swadhaar Finserve Private Limited (SFPL)) from 30.00% to 60.48%, following which the company had become a “Subsidiary” of the Bank w.e.f. November 8, 2017. The investment was classified in Held to Maturity (HTM) category, in accordance with RBI guidelines.

8.4. Repo / Reverse Repo Transactions:

During the year, the Bank has undertaken Repo / Reverse Repo transactions including Repo / Reverse Repo transactions under the Liquidity Adjustment Facility (LAF) / Marginal Standing Facility (MSF) with RBI. Outstanding lending under Reverse Repo deals with RBI under LAF / MSF as at March 31, 2019 stood at Rs. 2,315.00 crore (previous year: Rs. 628.00 crore). Outstanding borrowing under Repo deals with RBI under LAF / MSF as at March 31, 2019 stood at Nil (previous year: Rs. 500.00 crore). Outstanding lending under Reverse Repo deals with COIL as at March 31, 2019 were Nil (previous year: Rs. 214.99 crore). Outstanding borrowing under Repo deals with COIL as at March 31, 2019, Nil (previous year: Rs. 684.98 crore).

8.5. Collateralized Borrowing and Lending Obligation (CBLO) \ Tri-party Repo Transactions

CBLO is a discounted money market instrument, established by COIL and approved by RBI, which involves secured borrowings and lending transactions. At March 31, 2019, the Bank had outstanding net borrowings at Nil (March 31, 2018: Rs. 399.80 crore) in the form of CBLO. The amortized book value of securities given as collateral by the Bank to CCILfor availing the CBLO facility was Nil at March 31, 2019 (March 31, 2018: Rs. 412.79 crore).

At March 31, 2019, the Bank had net outstanding borrowings Nil (March 31, 2018: Nil), and net lending Rs. 99.93 crore (March 31, 2018: Nil) under Tri-party Repo transaction.

8.6. Issuer Composition of Non-SLR investments (investments not qualifying for the purpose of Statutory Liquidity Ratio (SLR) prescribed by RBI):

Issuer composition as at March 31, 2019 of non-SLR investments

9.1. Risk Exposure in Derivatives:

Qualitative disclosures:

Derivatives are financial instruments whose characteristics are derived from underlying asset or interest rates or exchange rates or indices. The Bank deals in interest rate and foreign exchange (Fx) derivatives for balance sheet management, proprietary trading and market making purposes whereby the Bank offers derivative products to its customers, enabling them to hedge their risks.

Proprietary Traders manages trading positions within the approved risk limits. It deals in fixed income, equity and forex markets. The Bank transacts in derivative products such as forex options, currency swaps, interest rate swap, foreign currency interest rate swaps and long term foreign exchange contracts (LTFX) with its customers to hedge their market risk. The Bank also undertakes derivative transactions to hedge its balance sheet assets or liabilities.

These transactions expose the Bank to various risks, primarily credit, market and operational risk. The Bank has adopted the following mechanism for managing risks arising out ofthe derivative transactions.

a) The structure and organization for management of risk in derivatives trading.

The Bank has separate Treasury Front Office, Treasury Middle Office, Treasury Back Office and Market Risk functions. The derivative transactions are originated by Treasury Front Office, which ensures compliance with the trade origination requirements as per the RBI guidelines and the Bank’s derivatives policy. The Treasury Middle Office and Market Risk groups are responsible for identifying, measurement, monitoring, and analysis of derivative related risks. Treasury Back Office undertakes activities such as confirmations, settlements, documentation and accounting. Treasury functions are also subject to a concurrent audit.

b) The scope and nature of risk measurement, risk reporting and risk monitoring systems.

Derivative transactions are governed by the Bank’s Derivative Policy, Commercial Credit Policy, Market Risk Policy, Liquidity Risk Management, ALM Policy and Client Suitability and Appropriateness Policy as well as by the extant RBI regulations.

The Bank has set up various risk limits taking into account market volatility, business strategy and management experience. The Bank measures and monitors risk of its derivatives portfolio using risk metrics such as Value at Risk (VaR), stop loss limits, PV01 and other risk measures. All exposures are monitored against these limits on a daily basis and breaches, if any, are reported to senior management/Asset and Liability Committee (ALCO) for corrective action/ratification.

All counterparty exposures are monitored against counterparty credit limits on a daily basis and breaches, if any, are reported to senior management/ALCO for corrective action/ratification.

c) Policies for hedging and/ or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants,

The Bank has a Board approved Hedge and Hedge effectiveness Policy, which govern the use of derivative for hedging purpose. Hedging transactions are undertaken by the Bank to protect the variability in the cash flow of the underlying Balance Sheet item. These deals are accounted on an accrual basis.

d) Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums and discounts, valuation of outstanding contracts.

The Bank undertakes derivative transactions for market making/trading and hedging purposes. Transactions for trading and hedging are recorded separately. The Bank revalue its trading positions on a daily basis and the resulting gain/loss is recorded in the Profit and Loss Account. The receivable and payable on marking the contracts to market are shown under “Other Assets” and “Other Liabilities” in the Balance Sheet.

Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction, and are outstanding at the Balance Sheet date, are effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract is amortized as expense or income over the life of the contract.

The Bank follows the option premium accounting framework prescribed by FEDAI guidelines. Premium on option transaction is recognized as income/ expense on expiry or unwinding of the transaction. MTM gain/ loss, is recorded under ‘Other Income’. The amounts received/paid on cancellation of option contracts are recognized as realised gains/ losses on options.

Charges receivable/payable on cancellation/termination of foreign exchange Forward contracts and swaps are recognized as income/ expense on the date of cancellation/ termination under ‘Other Income’. Pursuant to the RBI guidelines, any receivables (crystallised receivables and positive MTM) under Forex & derivatives contracts, which remain overdue for more than 90 days, are reversed through the Profit and Loss Account and are held in a separate Suspense account.

e) Counterparty Credit Risk Mitigation

The credit risk on customer derivative transactions is mitigated through a laid down policy on sanction of Loan Equivalent Risk (LER) limits, monitoring mechanism for LER limits and trigger events for escalations, margin calls and terminations.

The Bank measures the counterparty risk using current exposure method as stipulated by RBI. Counterparty limits are approved as per the Bank’s Credit Policies. The sanction terms may include the requirement, on a case to case basis, to provide upfront collateral, or place collateral if the mark to market (MTM) exceeds a specified threshold. The Bank retains the right to terminate transactions as a risk mitigation measure, in case the client does not adhere to the agreed terms.

Collateral requirements for derivative transactions determined through a usual credit appraisal process and are laid down in the credit sanction terms of the transactions. The Bank retains the right to terminate transactions as a risk mitigation measure in certain cases.

10. Restructured / Rescheduled / Renegotiated Investments

During the year Nil (Previous year: Nil)

11.1. Divergence in Asset Classification and Provisioning for NPAs

RBI vide its circular dated 18th April 2017, has directed banks to make suitable disclosures, wherever either (a) the additional provisioning requirements assessed by RBI exceed 15 percent of the published net profits after tax for the reference period or (b) the additional Gross NPAs identified by RBI exceed 15 percent of the published incremental Gross NPAs for the reference period, or both. The disclosure requirements were amended by RBI circular dated April 1, 2019, where the banks are required make suitable disclosures, wherever either (a) the additional provisioning for NPA assessed by RBI exceeds 10 percent of the reported profits before provisions and contingencies for the reference period or (b) the additional Gross NPAs identified by RBI exceed 15 percent of the published incremental Gross NPAs for the reference period, or both.

The divergence observed by RBI for the financial year 2017-18 and for the financial year 2016-17 in respect of the Bank’s asset classification and provisioning under the extant prudential norms on income recognition asset classification and provisioning (IRACP) did not exceed the relevant prescribed thresholds as per the aforesaid circulars in force.

11.1.1.Disclosures on Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period)

The Bank did not implement any scheme relating to change in the ownership outside the SDR during the current year and the previous year.

11.1.2.Disclosures on Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period)

The Bank did not implement any scheme relating to change in the ownership of Projects under Implementation during the current year and the previous year.

11.1.3.Disclosures on Flexible Structuring of Existing

The Bank did not do any flexible structuring of existing loans during the current year and the previous year.

11.1.4.The Bank has not acquired any equity shares under SDR scheme during the current year (previous year Nil).

11.1.5.During the current year ended March 31, 2019, there are no cases of resolution under the RBI circular RBI/ 2017-18/131 /DBR. NO.BP.BC.l 01/21.04.048/2017-18 dated February 12, 2018 on ‘Resolution of Stressed Assets - Revised Framework’ (previous year Rs. 55.65 crore). The said RBI circular has been subsequently quashed by the Honorable Supreme Court vide its judgement dated April 2, 2019.

12. The Bank has not done any securitization of loan assets during the current and the previous year.

13. Details of Single / Group Borrower limit exceeded by the Bank

During the current year and the previous year, the Bank has complied with the applicable RBI guidelines with regard to exposure to a single borrower and a group of the borrower. As per the exposure limits permitted under the extant RBI regulation, the Bank, with the approval of the Board of Directors, can enhance exposure to a single borrower or borrower group by a further 5 percent of capital funds.

During the current year and the previous year, the Bank’s credit exposures to single borrowers and group borrowers were within the prudential limits prescribed by RBI.

14. Penalties imposed by RBI

During the year ended March 31, 2019, RBI had levied penalties on the Bank totaling Rs. 4,100/- relating to currency chest transactions towards detection of counterfeit notes and soiled notes.

For the previous year ended March 31, 2018, RBI levied following penalties:

The Bank received cash deposits from various customers during the demonetisation period and subsequently deposited under chest guarantee scheme with RBI. RBI regional offices counted the deposited cash subsequently and levied penalty of Rs. 0.04 crore for various reasons e.g. mutilated notes & cash shortage, etc.

15. Drawdown from Reserves

The Bank has not undertaken any drawdown from any reserves during the current year and the previous year except for Rs. 2.20 crore drawdown from Investment Reserve Account (IRA) in the previous year, in accordance with RBI guidelines.

16. Floating Provisions

The Bank has not created or utilized any floating provisions during the current year ended March 31, 2019 and the previous year ended March 31, 2018. The floating provision as at March 31, 2019 was Nil (previous year: Nil).

17. Disclosure on Remuneration

Qualitative Disclosures

A. Information relating to the composition and mandate of the Remuneration Committee.

The Bank’s Human Resources and Remuneration Committee (HR&RC) comprises of the following Directors:

1. Mr. P. Sudhir Rao - Chairman of Committee

2. Mr. Prakash Chandra

3. Mr. Jairaj Purandare

4. Mr. Ishan Raina

All members of the HR&RC are independent directors. Mr. P. Sudhir Rao, Mr. Prakash Chandra and Mr. Jairaj Purandare are also members of the Risk Management Committee of the Board. Mr. Vishwavir Ahuja is a permanent attendee.

Following are the terms of reference of Human Resources and Remuneration Committee:

- To assist and advice the MD & CEO in planning for senior management build-up of our Bank so as to ensure appropriate leadership is in place for our Bank’s growth strategy, including identifying persons who may be appointed as senior management in accordance with the laid down criteria, and recommend to the Board their appointment or removal, as applicable

- Formulation of the criteria for determining qualifications, positive attributes and independence of a director and recommend to the board of directors a policy relating to, the remuneration of the key managerial personnel and other employees

- To evaluate and approve HR policies of our Bank

- To evaluate and approve various employee stock ownerships schemes that may be required from time to time to ensure that our Bank gets the rights talent and it is able to retain high-performing employees

- To award stock options to employees, whether in the form of joining ESOPs or performance ESOPs. The Committee may determine the level/grade of employees it desires to review and award

- To oversee the framing, review and implementation of compensation policy of our Bank on behalf of our Board

- To work in close co-ordination with the Risk Management Committee of our Bank, in order to achieve effective alignment between remuneration and risks

- To ensure that the cost/income ratio of our Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio

- To appoint/discontinue trustees on the board of trustees of The Ratnakar Bank Limited Employees Provident Fund, The Ratnakar Bank Limited Employees Gratuity Fund’ and The Ratnakar Bank Limited Employees Pension Fund’ and to approve operational changes in the related trust deeds and/or decide on related matters

- To decide on grating of mandate to the Indian Bank Association for negotiating industry level wage settlements for workmen employee.

B. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

Bank’s remuneration policy is designed and aimed at attracting & retaining best possible / available talent that it requires to effectively grow the business and become a highly respected institution. It comprises of a balanced mix of fixed & variable cash and noncash compensation and benefits / perquisites to deliver maximum value to the employee and other stakeholders.

The remuneration is divided into following components:

Fixed Remuneration:

For employees governed by Indian Banking Association’s employment and compensation rules (IBA rules), their remuneration is based on the industry-wide bi-partite wage settlement agreements signed with the employees’ union. These rules provide for basic salary, allowances and certain retirement benefits to the employees which are uniformly applicable for the employees covered under the IBA scale.

For the employees governed by the ‘Cost to Company’ (CTC) remuneration structure (i.e. Non-IBA scale employees), the CTC represents the total direct and fixed cost incurred by the Bank across all components of compensation including contributions paid by the Bank towards retiral benefits, and loans at concessional interest rates. It consists of Basic Salary, House Rent Allowance, Personal Allowance / Special Allowances, Car Related Benefits, Medical Reimbursement, Leave Travel Assistance, Conveyance Allowance, Food Allowance and Retiral Benefits.

Employee Stock Options:

In order to align the interest of the Bank, the senior management, its shareholders and the employees, there is an effort to create long term ownership and commitment for the senior officers of the Bank. This is also done with a view to recognize and compensate senior officers for intellectual capital, the domain expertise in terms of product, market knowledge and the business relationships that they bring along. Accordingly, the Bank has formulated Employee Stock Option Program.

The underlying philosophy of Employee Stock Option Plan is to enable the present and future employees to share the value that they help to create for the Bank over a period of time. Joining Employee Stock Options (JESOPs) are granted based on the role in the Bank as well as experience, domain knowledge, current ability, future potential and expertise of the candidate. Further, to reward the performance and recognize the contribution of employees, the Bank has a Performance Employee Stock Option Program (PESOPs). PESOPs are given after periodic evaluation of the individual performance, business unit as well as overall Bank performance during the review period.

These plans are designed and implemented in such a way that an equity component in the compensation goes a long way in aligning the objectives of an individual with those ofthe Bank.

These stock option programs are administered by the HR&RC.

Annual Performance Linked Variable Compensation (APLVC):

APLVC is paid as a percentage of CTC as defined in the Compensation Policy ofthe Bank.

As per the guidelines issued by RBI vide circular ref. RBI/2011 -12/349, APLVC is capped at 70% of CTC for Whole-time Directors / CEO / Senior Executive Team and 40% for Risk Management & Compliance Staff. Also, the APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. APLVC does not include value of ESOPs.

C. Description of the ways in which current and future risks are taken into account in the remuneration processes.

Key determinant ofthe total variable pool is the overall performance ofthe Bank in any given year.

Further, the following principles apply:

i. In order for incentive-based remuneration to work, the variable part of remuneration should be truly and effectively variable and can even be reduced to zero.

ii. Methodologies for adjusting remuneration to risk and performance will be based on the general risk management and corporate governance framework adopted by the Bank.

iii. Risks taken need to be estimated (ex ante), risk outcomes observed (ex post) and both ex ante estimates and ex post outcomes would have a bearing on the payoffs.

iv. Risk adjustments would take into account the nature ofthe risks involved and the time horizons over which they could emerge. The impact of remuneration adjustments would be linked to actions taken by employees and / or business units, and their impact on the level of risk taken on by the Bank.

v. Both ESOP as well as APLVC provides long term remuneration benefits to employees. JESOP/ PESOP are equity settled where the employees will receive one equity share per option. JESOPs and PESOPs granted to employees vest over a period of three / four years, in the following proportion, 40:30:30, 30:30:40, 10:20:30:40 each year. Further, JESOP/PESOP and APLVC are subject to suitable claw-back and malus clauses to protect the Bank against misconduct, sub-optimal performance or decisions or actions leading to adverse financial consequence to the Bank.

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

The Bank has a performance management system in place. The Performance management system has goals on four themes namely Shareholder Value as the Focus, Customer at the Heart, Employee as the Pillar and Community as the Cause. Employees are appraised against the goals set at the beginning of the year. Employee performance and competence assessment are both considered for the performance rating. Performance Rating has a direct correlation with the increments and APLVC as well as PESOPs.

E. Description of the ways in which the Bank seeks to adjust remuneration to take account of the longer term performance

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

As per the guidelines issued by RBI, APLVC is capped at 70% of CTC for Whole-time Directors / CEO / Senior Executive Team and 40% for Risk Management & Compliance Staff. Also, the APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. APLVC does not include ESOPs/PESOPs.

Schedule for APLVC vesting and payout is as per pay schedule defined in the Compensation Policy of the Bank.

Deferred APLVC vests only in the year of payment. Voluntary Cessation of employment by the employee or termination with cause as defined in employment contract will result in forfeiture of the remaining APLVC. APLVC is subject to claw-back and malus clauses.

F. Description of the different forms of variable remuneration that the bank utilizes and the rationale for using these different forms.

Various forms of variable remuneration used by the Bank are:

APLVC: APLVC provides cash bonus in short to medium term to employees. The bank utilizes APLVC to reward superior performance.

Employee stock option (ESOP) plan: Employee stock option plan is a long term remuneration benefit. ESOP is equity settled where the employees will receive one equity share per option after vesting/ exercise. The stock options granted to employees vest over a period of three / four years, generally. ESOP is used to reward superior performance, aligning employee interests with the Bank, create long term ownership and commitment.

18. Contingent Liabilities

Description of nature of contingent liabilities is set out below:

i) Claims against the Bank not acknowledged as debts: These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress.

ii) Liability for partly paid investments:

These represent contingent liability on account of possible claims for uncalled amount by the issuer of the securities held by the Bank.

iii) Liability on account of forward exchange and interest rate contracts:

The Bank enters into foreign exchange contracts currency options, forward rate agreements, currency swaps with inter-bank participants on its own account and for the customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by the way of interest/principal in one currency against another, based on pre-determined rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows.The amount recorded as contingent liability with respect to these contracts represents the underlying notional amounts of these contracts.

iv) Guarantees given on behalf of Constituents, Acceptances, Endorsement and other obligations:

As a part of its corporate banking activities, the Bank issues documentary credit and guarantees on behalf of its customers. Documentary credits such as letters of credit enhance the credit standing of the customer ofthe Bank. Guarantees generally represent irrevocable assurances that the Bank will make the payment in the event of the customer failing to fulfill its financial or performance obligations.

v) Acceptances, endorsements and other obligations: These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank’s customers that are accepted or endorsed by the Bank.

vi) Other contingent items:

a. Commitments for settlement date accounting for securities transactions;

b. Demands raised by income tax and other statutory authorities and disputed by the Bank.

c. Amount transferred to RBI under the Depositor Education and Awareness Fund (DEAF).

The Bank makes provident fund contributions to an independently administered Trust. The Bank is currently in dispute with the Provident Fund authorities regarding applicability of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (the Act’) on the Bank and the matter is pending with Central Government Industrial Tribunal, Mumbai for further adjudication. Additionally, in light ofthe recent Honorable Supreme Court of India judgement on 28th February 2019, which clarified that any emolument paid universally, necessarily and ordinarily to all employees across the board are to be considered as basic wage and accordingly needs to be considered for calculation of Provident Fund contribution.

Any potential likely impact on the financial statements in view of the above will be ascertained on the decision of the Central Government Industrial Tribunal, Mumbai and on clarification from the Provident Fund authorities / courts, if any.

Refer Schedule 12 for amounts relating to contingent liabilities.

19. Bank has not issued any Letters of comfort and Letters of Undertaking during the year (previous year - NIL)

20. The disclosure regarding details of specified bank notes held and transacted during 8 November 2016 to 30 December 2016 has not been made in these financial statements since the requirement does not pertain to financial year ended 31 March 2019.

21. Liquidity Coverage Ratio (LCR)

Qualitative disclosure around LCR

Liquidity Coverage Ratio (LCR) is a global minimum standard aimed at measuring and promoting short-term resilience of banks to potential liquidity stress by ensuring maintenance of sufficient high quality liquid assets (HQLAs) to survive net cash outflows over next 30 days under stress conditions. It is a ratio of Bank’s High Quality Liquid Assets (HQLA) to the estimated net outflows over next 30 day period of significant liquidity stress.

The Board of Directors has the overall responsibility for liquidity risk management. The Board at overall level decides the liquidity risk tolerance and accordingly decides the strategy, policies and procedures of the Bank. The Board has constituted a Risk Management Committee (RMC) consisting of Managing Director & Chief Executive Officer (MD&CEO) /Chairman and other Board members. The committee is responsible for evaluating the overall risks faced by the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk Management Committee. At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk limits set by the Board and implements the liquidity risk management strategy of the Bank. ALM team within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management. ALCO channelizes various business segments of the Bank to target good quality asset and liability profile to meet the Bank’s profitability as well as liquidity requirements.

High quality liquid assets (HQLA) under LCR are divided into two parts i.e. Level 1 and Level 2 HQLA.

Level 1 HQLA comprises primarily of cash, excess CRR, government securities in excess of SLR , Marginal Standing Facility (Currently 2% of NDTL) and Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) as permitted under prudential guidelines Previously FALLCR was 9% of NDTL, this was increased to 11 % with effect from June 15, 2018. This has been further increased to 13% w.e.f. October 1, 2018.

Level 2 HQLA comprises of investments in highly rated non-financial corporate bonds, debentures, commercial papers issued by non-financial institutes and are further considered at prescribed haircuts.

Cash outflows are calculated by applying prescribed outflow run-off factors to contractual outflows on account of various categories of liabilities and cash inflows are calculated by applying prescribed weights and factors to the contractual inflows. Additionally, probable outflows on account of contingent liabilities such as letters of credit (LC) and bank guarantees (BGs) and undrawn commitments both for fund & non fund based exposures are considered by applying prescribed run-off factors. The Bank has a very limited exposure to liquidity risk on account of its derivatives portfolio. Further, the Bank is not taking any benefit of classifying any deposit as Operational Deposit on a conservative basis.

The Bank computes LCR on a daily basis in accordance with RBI guidelines. Effective January 1, 2017, the LCR is reported as a simple average of daily observations for the quarter. The Bank believes that all inflows and outflows which might have a material impact under the liquidity stress scenario have been considered for the purpose of LCR.

22 Corporate Social Responsibility (CSR)

Operating expenses include Rs. 10.55 crore for the current year, towards CSR (previous year Rs. 6.98 crore), in accordance with the Companies Act, 2013.

As a responsible organisation, the Bank has approached the mandatory requirements of CSR spends positively by laying a foundation on which it would build and scale future projects and partnerships. The Bank continues to evaluate strategic avenues for CSR expenditure in order to deliver maximum impact. In the years to come, the Bank will further strengthen its processes as per requirement.

Gross Amount required to be spent by the Bank on CSR activities during the current year - Rs. 13.83 crore (previous year Rs. 9.36 crore).

23 Un-hedged Foreign Currency Exposure (UFCE) of Bank’s Customer

The UFCE of corporate borrowers is assessed on a quarterly basis. The assessment includes foreign currency borrowings, foreign currency hedges, natural hedges available, as well as other foreign currency assets and liabilities on the balance sheet. RBI guidelines prescribe the methodology for computation of provision for UFCE. As per the guideline, UFCE leads to the determination of likely loss’. The ratio of likely loss’ to clients’ Earnings Before Interest and Depreciation (EBID), determines the provision as per the following grid.

The Bank has maintained an additional provision of Rs. 8.56 crore (previous year Rs. 6.83 crore) towards UFCE of customers. Further, the Bank has maintained an additional capital of Rs. 18.70 crore (previous year Rs. 26.28) towards UFCE of customers.

24 Credit Default Swap

The Bank has not entered into Credit Default Swap during the current year and the previous year.

25 The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Bank has reviewed and recorded adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

26 Figures for the previous year have been regrouped / reclassified wherever necessary to conform to current years’ presentation.


Mar 31, 2018

SCHEDULE 18 - NOTES TO ACCOUNTS FORMING PART OF

FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH

31, 2018

1 Capital

During the current year, the Bank had issued 32,621,354 equity shares of Rs, 10/- face value on preferential basis, each share allotted at a price of Rs, 515/- aggregating to Rs, 1,680.00 crore. Further the Bank allotted 11,843,057 equity shares aggregating to Rs, 122.06 crore on various dates to the employees who exercised their stock options.

During the previous year, the Bank issued 37,000,000 equity shares of Rs, 10/- face value through Initial Public Offer (IPO), each share allotted at a price of Rs, 225/- aggregating to Rs, 832.50 crore. Further the bank allotted 13,475,006 equity shares aggregating to Rs, 114.67 crore on various dates to the employees who exercised their stock options.

2 Proposed Dividend

The Board of Directors at their meeting on April 27, 2018, proposed a dividend of Rs, 2.10 per share (21 %) [previous year - Rs, 1.80 per share (18%)], subject to the approval of members at the ensuing Annual General Meeting.

In accordance with the revised Accounting Standard (AS) - 4 ''Contingencies and Events occurring after the Balance Sheet Date'', the Bank has not accounted for proposed dividend Rs, 88.13 crore (previous year - Rs, 67.54 crore) and corporate dividend tax Rs, 18.12 crore (previous year Rs, 13.75 crore), as a liability in the balance sheet both in the current year and the previous year.

3 Investments

3.1 During the current year and the previous year there has been no sale/transfer from HTM categories in excess of 5% of the book value of investments held in the HTM category. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under preannounced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM.

3.2 In the financial year ending March 31, 2016, with RBI''s permission, the Bank acquired the shares of a company (investee Company) to realise it''s dues by exercising a pledge of investee company''s shares in its favor by one of the defaulting borrowers of the Bank. The Bank''s shareholding in the said investee company stands at 24.38% as at March 31, 2018 (previous year 24.56%). Investments in the shares of the investee company have been acquired and held exclusively with a view to its subsequent disposal in the near future and accordingly has not been accounted for as an associate under the purview of AS-23 - ''Accounting for Investments in Associates in Consolidated Financial Statements''. These equity shares have been classified under AFS category and have been valued as per the extant RBI guidelines for the valuation of investments. Accordingly, these exposures have not been considered as intra-group exposures.

3.3 During the year ended March 31, 2018, the Bank has increased its holding in Swadhaar Finserve Private Limited (SFPL) from 30.00% to 60.48%, following which the company has become a "Subsidiary" of the Bank w.e.f. November 8, 2017. The investment is classified in Held to Maturity (HTM) category, in accordance with the RBI guidelines.

During the previous year ended March 31, 2017, the Bank increased its holding in Swadhaar Finserve Private Limited (SFPL) from 13.74% to 30.00%, following which the company had become an

"Associate" of the Bank. The investment was classified in Held to Maturity (HTM) category, in accordance with RBI guidelines.

4 Employee Stock Option Plan (“ESOP")

The shareholders of the Bank have approved and enabled the Board and / or the Human Resource Committee to grant stock options to employees under one or more Employee Stock Option Plan (ESOP). The ESOP is equity settled where the employees will receive one equity share per option. The stock options granted to employees vest over a period of one year, two years, three years or four years in the proportion of either 20:80, equal proportion, 40:30:30, 30:30:40 or 10:20:30:40, as the case may be. Vested options can be exercised within a period of three years from the date of vesting or within a period of one year from the date on which the shares of the Bank gets listed on a recognized stock exchange (listed since August 31, 2016), whichever is later.

Under Intrinsic Value method there is no charge to the profit and loss account for the current year (previous year - Nil) on account of grant of the ESOPs, since exercise price of the stock options granted is more than the underlying value of the shares (prior to listing) or at the market price (listed since August 31, 2016), as the case may be. If the Bank had adopted the Black-Scholes model based fair valuation, compensation cost for the year ended March 31, 2018, would have increased by Rs, 47.75 crore (previous year Rs, 24.73 crore) and the profit before tax would have been lower correspondingly. Accordingly, on a pro-forma basis, basic and diluted earnings per share for the year ended March 31, 2018 would have been Rs, 14.60 and Rs, 14.03, respectively (Previous year Rs, 11.89 and Rs, 11.15, respectively).

Options granted during the previous year carry an exercise price of Rs, 120.00, Rs, 377.90, Rs, 382.15, Rs, 476.70, Rs, 476.85 and Rs, 494.55. During the year corresponding value of the shares for these grants at the time of respective grant was Rs, 77.88, Rs, 377.90, Rs, 382.15, Rs, 476.70, Rs, 476.85 and Rs, 494.55 respectively.

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

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during the period. The measure of volatility used in Black-Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on NSE of similar listed banks over the expected tenor of each tranche.

5 Appropriation to/from Reserves

For the year ended March 31, 2018, the Bank has appropriated Rs, 158.80 crore (previous year: Rs, Ill .60 crore) towards Statutory Reserves, Rs, 9.39 crore (previous year: Rs, 0.31 crore) towards Capital Reserves and Rs, 360.00 crore (previous year: Rs, 250.00 crore) towards Revenue & other Reserves.

For the year ended March 31, 2018, the Bank has transferred Rs, 2.20 crore (previous year - NIL) from Investment Reserve account to Profit and Loss account, in accordance with RBI guidelines.

6.2 Segment Reporting: Information about business segments

In terms of the AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BRBC.81 /21 .04.018/2006-07 dated April 18, 2007 read with DBR.BP.BC No.23/21.04.018/2015-16 dated July 1, 2015 and amendments thereto, the following business segments have been disclosed:

. Corporate/Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank.

. Retail Banking: Includes lending, deposits and other banking services provided to retail customers of the Bank through branch network or other approved delivery channels.

. Treasury: includes investments, all financial markets activities undertaken on behalf of the Bank''s customers, proprietary trading, bullion business, maintenance of reserve requirements and resource mobilization from other Banks and financial Institutions. Intersegment earnings of Balance Sheet management function are included in the Treasury segment.

. Other Banking Operations: Includes para banking activities like Bancassurance, Credit Cards etc.

Segment revenues include earnings from external customers and earnings from other segments on account of funds transferred at negotiated rates, which are determined by the management. Segment results includes segment revenues as reduced by interest expense, charge from other segments on account of funds transferred at negotiated rates and operating expenses and provisions either directly identified or allocated to each segment..

Notes:

- The business of the Bank is concentrated largely in India. Accordingly, geographical segment results have not been reported in accordance with AS-17 (Segment Reporting).

- The Bank commenced its operations at its International Financial Services Centre Banking Unit (IBU) in Gujarat International Finance Tec (GIFT) City, Gujarat in April 2017 and the same is included in Corporate and wholesale Banking segment.

- Income, expenses, assets and liabilities have been either specifically identified to individual segment or allocated to segments on a reasonable basis or are classified as unallocated.

- Unallocated items include Fixed Assets, realized gains/losses on their sale, income tax expense, deferred income tax assets/liabilities, advance tax, cash in hand, share capital and reserves.

6.3 Related Party Transactions

As per AS 18 "Related Party Disclosures", the Bank''s related parties for the year ended March 31, 2018 are disclosed below:

1. Key Management Personnel (''KMP'')

Mr. Vishwavir Ahuja (Managing Director & Chief Executive Officer)

Mr. Rajeev Ahuja (Executive Director) (identified as related party w.e.f. February 21, 2017)

2. Relatives of Key Management Personnel

Mrs. Reva Ahuja, Mr. Dharam Bir Ahuja, Ms. Vasudhaa Ahuja, Ms. Vrinda Ahuja, Mrs. Dipeeka Dhand, Ms. Kanika Ahuja, D. B. Ahuja & Sons (HUF)

Ms. Aishwarya Ahuja, Mrs. Priti Ahuja, Mr. Raman Ahuja, Ms. Nandita Ahuja, Miss Asavari Ahuja

3. Associates

Swadhaar Finserve Private Limited (SFPL) (w.e.f. April 5, 2016 till November 7, 2017)

Swadhaar Information and Management Services Private Limited (''SIMSPL''), a wholly owned subsidiary of SFPL, has been merged with SFPL w.e.f. April 1, 2016 vide NCLT order March 8, 2017. All the transactions done by the Bank with SIMSPL during the previous year have been included with SFPL, for the purpose of related party transactions.

4. Subsidiary

Swadhaar Finserve Private Limited (SFPL) (w.e.f. November 8, 2017)

The following represents the significant transactions between the Bank and such related parties including relatives of above mentioned KMP during the year ended March 31, 2018.

# In accordance with RBI guidelines dated March 29, 2003 "Guidance on compliance with the accounting standards by banks", details pertaining to the related party transactions have not been provided where there is only one related party in each of the above categories.

5.Repo / Reverse Repo Transactions:

During the year, the Bank has undertaken Repo / Reverse Repo transactions including Repo / Reverse Repo transactions under the Liquidity Adjustment Facility (LAF) / Marginal Standing Facility (MSF) with RBI. Outstanding lending under Reverse Repo deals with RBI under LAF / MSF as at March 31, 2018 stood at Rs, 628.00 crore (previous year: Rs, 1,350.00 crore). Outstanding borrowing under Repo deals with RBI under LAF / MSF as at March 31, 2018 stood at Rs, 500.00 crore (previous year: Nil). Outstanding lending under Reverse Repo deals with COIL as at March 31, 2018 were Rs, 214.99 crore (previous year: Nil). Outstanding borrowing under Repo deals with COIL as at March 31, 2018, Rs, 684.98 crore (previous year: Nil).

6. Risk Exposure in Derivatives:

Qualitative disclosures:

Derivatives are financial instruments whose characteristics are derived from an underlying asset or from interest and exchange rates or indices. The Bank is currently dealing in interest rate and foreign exchange (FX) derivatives for balance sheet management and proprietary trading/ market making. The Bank also offers derivative products to its customers for hedging their interest rate and FX risk.

Proprietary trading also includes interest rate futures, currency futures and rupee interest rate swaps (MIBOR). The Bank undertakes transactions in cross currency swaps, principal only swaps, coupon only swaps, or both, foreign currency interest rate swaps and long term foreign exchange contracts (LTFX) with its customers. The Bank also undertakes derivative transactions in interest rate and currency swaps for hedging its balance sheet.

These transactions expose the Bank to various risks, primarily credit, market and operational risk. The Bank has adopted the following mechanism for managing risks arising out of the derivative transactions.

a) The structure and organization for management of risk in derivatives trading.

The Bank has separate Treasury Front Office, Treasury Middle Office, Market Risk and Treasury Back Office functions. The derivative transactions are originated by Treasury Front Office, which ensures compliance with the trade origination requirements as per the RBI guidelines and the Bank''s policy. The Treasury Middle Office and Market Risk groups are responsible for identifying, measurement, monitoring, and analysis of derivative related risks. Treasury Back Office undertakes activities such as confirmations, settlements, documentation and accounting. The Treasury activities are subject to a concurrent audit.

b) The scope and nature of risk measurement, risk reporting and risk monitoring systems.

Derivative transactions are governed by the Bank''s Derivative Policy, Commercial Credit Policy, Market Risk Policy, Liquidity Risk Management and ALM Policy and Client Suitability and Appropriateness Policy as well as by the extant RBI guidelines.

Various risk limits are set up taking into account market volatility, business strategy and management experience. Risk limits are in place for risk parameters viz. PV01, Value at Risk, stop loss, and stress scenario limits. All exposures are monitored against these limits on a daily basis and breaches, if any, are reported for corrective action.

The Bank measures the counterparty risk using current exposure method as stipulated by RBI. Counterparty limits are approved as per the Bank''s Credit Policies. The sanction terms may include the requirement to post upfront collateral, or post collateral should the mark to market (MTM) exceed a specified threshold; on a case to case basis. The Bank retains the right to terminate transactions as a risk mitigation measure, in case the client does not adhere to the agreed terms.

All counterparty exposures are monitored against these limits on a daily basis and breaches, if any, are reported for corrective action.

c) Policies for hedging and/ or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigates,

The Bank has a Board approved Hedge and Hedge effectiveness Policy, which govern the use of derivative for hedging purpose. Hedging transactions are undertaken by the Bank to protect the variability in the cash flow of the underlying Balance Sheet item. These deals are accounted on an accrual basis.

d) Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums and discounts, valuation of outstanding contracts.

The Bank undertakes derivative transactions for market making/trading and hedging purposes. Transactions for trading and hedging are recorded separately. The Bank revalues its trading positions on a daily basis and the resulting gain/loss is recorded in the Profit and Loss Account. The receivable and payable on marking the contracts to market are shown under "Other Assets" and "Other Liabilities" in the Balance Sheet.

The Bank follows the option premium accounting framework prescribed by FEDAI circular. Premium on option transaction is recognized as income/ expense on expiry or early termination of the transaction. MTM gain/ loss, is recorded under

Other Income. The amounts received/paid on cancellation ot option contracts are recognized as realized gains/ losses on options.

Charges receivable/payable on cancellation/termination of foreign exchange Forward contracts and swaps are recognized as income/ expense on the date of cancellation/ termination under ''Other Income''. Pursuant to the RBI guidelines, any receivables (crystallised receivables and positive MTM) under Forex & derivatives contracts, which remain overdue for more than 90 days, are reversed through the Profit and Loss Account and are held in a separate Suspense account.

e) Collateral and Credit Risk Mitigation

The credit risk on customer derivative transactions is mitigated through a laid down policy on sanction of Loan Equivalent Risk (LER) limits, monitoring mechanism for LER limits and trigger events for escalations, margin calls and terminations.

Collateral requirements for derivative transactions determined through a usual credit appraisal process and are laid down in the credit sanction terms of the transactions. The Bank retains the right to terminate transactions as a risk mitigation measure in certain cases.

7 Divergence in Asset Classification and Provisioning for NPAs

RBI vide its circular dated 18th April 2017, has directed banks to make suitable disclosures, wherever either (a) the additional provisioning requirements assessed by RBI exceed 15 percent of the published net profits after tax for the reference period or

(b) the additional Gross NPAs identified by RBI exceed 15 percent of the published incremental Gross NPAs for the reference period, or both.

The divergence observed by RBI for the financial year 2016-17 in respect of the Bank''s asset classification and provisioning under the extant prudential norms on income recognition asset classification and provisioning (IRACP) did not exceed the prescribed threshold as per the aforesaid circular.

13.5.2 Disclosures on Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period)

The Bank did not implement any scheme relating to change in the ownership outside the SDR during the current year and the previous year.

13.5.3 Disclosures on Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period)

The Bank did not implement any scheme relating to change in the ownership of Projects under Implementation during the current year and the previous year.

13.5.4 Disclosures on Flexible Structuring of Existing Loans

The Bank did not do any flexible structuring of existing loans during the current year and the previous year.

13.5.5 Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A), as on March 31, 2018

13.5.5 The Bank has not acquired any equity shares under SDR scheme during the current year (previous year Rs, 4.75 crore).

13.5.7 During the quarter ended March 31, 2018, an NPA account of Rs, 55.65 crore was successfully resolved under the RBI guidelines RBI/ 2017-18/131 /DBR. NO.BP.BC.l 01/21.04.048/2017-18 dated February 12, 2018 on ''Resolution of Stressed Assets -Revised Framework''. The account has been subsequently upgraded in line with the extant RBI regulations.

8 Details of Single / Group Borrower limit exceeded by the Bank

During the current year and the previous year, the Bank has complied with the applicable RBI guidelines with regard to exposure to a single borrower and a group of the borrower. As per the exposure limits permitted under the extant RBI regulation, the Bank, with the approval of the Board of Directors, can enhance exposure to a single borrower or borrower group by a further 5 percent of capital funds.

During the current, year the Bank''s credit exposures to single borrowers and group borrowers were within the prudential limits prescribed by RBI.

9 Penalties imposed by RBI

The Bank received cash deposits from various customers during the demonetization period and subsequently deposited under chest guarantee scheme with RBI. RBI regional offices counted the deposited cash subsequently and levied penalty of Rs, 0.04 crore for various reasons e.g. mutilated notes & cash shortage, etc.

For the previous year ended March 31, 2017, RBI levied following penalties:

a) Rs, 1.00 crore for lapses in adhering to the RBI guidelines with respect to import of goods and services, lapses in adhering to provisions of the Master Circular on KYC/AML with respect to on-going monitoring of certain customer transactions, diligence of the beneficiaries of foreign exchange remittances and filing of suspicious transaction reports with the Financial Intelligence Unit - India

b) Rs, 0.01 crore for shortfall in maintenance Cash Reserve Ratio (CRR) requirement for one day in the financial year.

10 Drawdown from Reserves

The Bank has not undertaken any drawdown from reserves during the current year and the previous year except towards share issue expenses incurred for raising equity share capital on preferential basis during the current year and through Initial Public Offering (IPO) during the previous year, which had been adjusted against the share premium account, in terms of Section 52 of the Companies Act, 2013.

For the year ended March 31, 2018, the Bank has transferred Rs, 2.20 crore (previous year - NIL) from Investment Reserve account to Profit and Loss account, in accordance with RBI guidelines.

11 Floating Provisions

The Bank has not made any floating provisions (previous year NIL).

All members of the HR&RC are independent directors. Mr. Sudhir Rao, Mr. Narayan Ramachandran and Mr. Vimal Bhandari are also members of the Risk Management Committee of the Board. Mr. Vishwavir Ahuja is a permanent attendee.

Following are the terms of Reference of Human Resources and Remuneration Committee:

. To assist and advise the MD & CEO in planning for senior management build-out of the Bank so as to ensure appropriate leadership is in place for the Bank''s transformation strategy.

. To evaluate and approve HR policies of the Bank

. To evaluate and approve various Employee Stock Ownership Schemes that may be required from time to time to ensure that the Bank gets the right talent and is able to retain high performing employees etc.

. To award ESOPs to employees, whether in the form of joining or performance. The Committee may determine the level/grade of employees it desires to review and award.

. To oversee the framing, review and implementation of compensation policy of the bank on behalf of the Board.

. To work in close coordination with Risk Management Committee of the bank, in order to achieve effective alignment between remuneration and risks.

. To ensure that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

. Any other related aspect to the above.

B. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The remuneration is divided into following components:

Fixed Remuneration:

For employees governed by Indian Banking Association''s employment and compensation rules (IBA rules), their remuneration is based on the industry-wide bi-partite wage settlement agreements signed with the employees'' unions. These rules provide for basic salary, allowances and certain retirement benefits to the employees which are uniformly applicable for the employees covered under the IBA scale.

For the employees governed by the ''Cost to Company (CTC)'' remuneration structure (i.e. Non-IBA scale employees), the CTC represents the total direct and fixed cost incurred by the Bank across all components of compensation including contributions paid by the Bank towards retiral benefits, and loans at concessional interest rates. It consists of Basic Salary, House Rent Allowance, Personal Allowance / Special Allowances, Medical & other Reimbursements, Leave Travel Assistance and Retiral Benefits.

Employee Stock Options:

In order to align the interest of the Bank, the senior management, its shareholders and the employees, there is an effort to create long term ownership and commitment for the senior officers of the Bank. This is also done with a view to recognize and compensate senior officers for intellectual capital, the domain expertise in terms of product and market knowledge and the business relationships that they bring along. Accordingly, the Bank has formulated Employee Stock Option Program.

Further, to reward the performance and recognize the contribution of employees, the Bank has also introduced a Performance Employee Stock Option Program. The Bank had also introduced an Employee Retention Stock option program with the objective of retaining a very select group of highly valued middle and senior management as well as employees in key leadership roles.

The underlying philosophy of Employee Stock Option Plan is to enable the present and future employees to share the value that they help to create for the Bank over a period of time. Joining Employee Stock Options (ESOPs) are granted based on the primacy of the role to the Bank as well as experience, domain knowledge, current ability, future potential and expertise of

the candidate. Performance ESOPs are given after periodic evaluation of the employee against individual and overall performance of the Bank during the review period. The Plan has been designed and implemented in such a way that an equity component in the compensation goes a long way in aligning the objectives of an individual with those of the Bank. From FY12, the ESOP has been broad based to include long serving employees of the Bank to make them partners in the growth of the Bank.

These stock option programmes are administered by the HR&RC.

Annual Performance Linked Variable Compensation (APLVC):

APLVC is paid as a percentage of CTC as defined in the Compensation Policy of the Bank.

As per the guidelines issued by RBI, APLVC is capped at 70% of CTC for Whole-time Directors / CEO / Senior Executive Team and 40% for Risk Management & Compliance Staff. Also, the APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. APLVC does not include ESOPs.

C. Description of the ways in which current and future risks are taken into account in the remuneration processes.

Key determinant of the total variable pool is the overall performance of the Bank in any given year.

Further, the following principles apply:

i. In order for incentive-based remuneration to work, the variable part of remuneration should be truly and effectively variable and can even be reduced to zero.

ii. Methodologies for adjusting remuneration to risk and performance will be based on the general risk management and corporate governance framework adopted by the Bank.

iii. Risks taken need to be estimated (ex ante), risk outcomes observed (ex post) and both ex ante estimates and ex post outcomes would have a bearing on the payoffs.

iv. Risk adjustments would take into account the nature of the risks involved and the time horizons over which they could emerge. The impact of remuneration adjustments would be linked to actions taken by employees and / or business units, and their impact on the level of risk taken on by the Bank.

v. Both ESOP as well as APLVC provides long term remuneration benefits to employees. The ESOP/PESOP / RESOP are equity settled where the employees will receive one equity share per option. The ESOPs and PESOPs granted to employees vest over a period of three/ four years, in the following proportion, 40:30:30, 30:30:40, 10:20:30:40 each year whereas RESOPs vest over a period of two years in a proportion of 20:80 each year. Second vesting of RESOP is linked with IPO i.e. two years from the date of grant or one year from the date of IPO / Listing whichever is later. Similarly, as per the guidelines issued by RBI, APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. Further, the ESOP/PESOP and APLVC are subject to suitable claw-back and malus clauses to protect the Bank against misconduct, sub-optimal performance or decisions or actions leading to adverse financial consequence to the Bank.

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

The Bank has a performance management system in place. The Performance management system has goals on four themes namely Shareholder Value as the Focus, Customer at the Heart, Employee as the Pillar and Community as the Cause. Employees are appraised against the goals set at the beginning of the year. Employee performance and competence assessment are both considered for the performance rating. Performance Rating has a direct correlation with the increments and APLVC as well as PESOPs.

E. A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

As per the guidelines issued by RBI, APLVC is capped at 70% of CTC for Whole-time Directors / CEO / Senior Executive Team and 40% for Risk Management & Compliance Staff. Also, the APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. APLVC does not include ESOPs/PESOPs.

Schedule for APLVC vesting and payout is as per pay schedule defined in the Compensation Policy of the Bank.

Deferred APLVC vests only in the year of payment. Voluntary Cessation of employment by the employee or termination with cause as defined in employment contract will result in forfeiture of the remaining APLVC. APLVC is subject to claw-back and malus clauses.

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

Various forms of variable remuneration used by the Bank are:

APLVC: APLVC provides cash bonus in short to medium term to employees. The bank utilizes APLVC to reward superior performance.

Employee stock option (ESOP) plan: Employee stock option plan is a long term remuneration benefit.

ESOP is equity settled where the employees will receive one equity share per option after vesting. The stock options granted to employees vest over a period of three / four years, generally. ESOP is used to reward superior performance, aligning employee interests with the Bank, create long term ownership and commitment.

ii) Liability for partly paid investments:

These represent contingent liability on account of possible claims for uncalled amount by the issuer of the securities held by the Bank.

iii) Liability on account of forward exchange and interest rate contracts:

The Bank enters into foreign exchange contracts currency options, forward rate agreements, currency swaps with interbank participants on its own account and for the customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by the way of interest/principal in one currency against another, based on pre-determined rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows.The amount recorded as contingent liability with respect to these contracts represents the underlying notional amounts of these contracts.

iv) Guarantees given on behalf of Constituents, Acceptances, Endorsement and other obligations:

As a part of its corporate banking activities, the Bank issues documentary credit and guarantees on behalf of its customers. Documentary credits such as letters of credit enhance the credit standing of the customer of the Bank. Guarantees generally represent irrevocable assurances that the Bank will make the payment in the event of the customer failing to fulfill its financial or performance obligations.

v) Acceptances, endorsements and other obligations:

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

vi) Other contingent items:

a. Commitments for settlement date accounting for securities transactions;

b. Amount of bills rediscounted by the Bank;

c. Demands raised by income tax and other statutory authorities and disputed by the Bank.

d. Amount transferred to RBI under the Depositor Education and Awareness Fund (DEAF).

Refer Schedule 12 for amounts relating to contingent liabilities.

33 Bank has not issued any letters of comfort during the year (previous year - NIL).

34 Liquidity Coverage Ratio (LCR)

Qualitative disclosure around LCR

The Liquidity Coverage Ratio (LCR) is a global minimum standard for Liquidity Risk Management framework operating in banks. It aims to ensure that a bank has an adequate stock of unencumbered High-Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs for the 30 calendar day horizon in a stressed liquidity scenario. It is a ratio of Bank''s High Quality Liquid Assets (HQLA) to the estimated net outflows over next 30 day period of significant stress.

The Board of Directors has the overall responsibility for liquidity risk management. The Board at overall level decides the liquidity risk tolerance and accordingly decides the strategy, policies and procedures of the Bank. The Board has constituted a Risk Management Committee (RMC) consisting of Managing Director & Chief Executive Officer (MD&CEO) /Chairman and other Board members. The committee is responsible for evaluating the overall risks faced by the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk Management Committee. At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk limits set by the Board and implements the liquidity risk management strategy of the Bank. ALM team within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management. ALCO channelizes various business segments of the Bank to target good quality asset and liability profile to meet the Bank''s profitability as well as liquidity requirements.

The LCR is a ratio of High Quality Liquid Assets (HQLA) to total estimated net outflows over a period of 30 calendar days under severe liquidity stress scenario.

The Bank''s HQLA mainly consists of Level 1 Assets comprising of excess of SLR balances, the extent allowed under the Marginal Standing Facility (MSF) and Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR). Additionally, cash, balances in excess of cash reserve requirement with RBI also form part of Level 1 HQLA.

Level 2 HQLA primarily consists of corporate bonds, debentures, commercial papers issued by non-financial institutions which are rated AA- and above as Level 2A and rated BBB- to A , as level 2B, respectively, considered after applying prescribed haircuts.

Cash outflows are calculated by applying prescribed outflow run-off factors as prescribed to contractual outflows on account various categories of liabilities. Additionally, probable outflows on account of contingent liabilities such as Letters of Credit (LC) and Bank Guarantees (BGs) and undrawn commitment are estimated and considered by applying prescribed run-off factors.

Cash inflows are calculated by applying prescribed weights and factors to the contractual inflows.

The Bank computes LCR on a daily basis in accordance with RBI guidelines. Effective January 1, 2017, the LCR numbers are reported as a simple average of daily observations for the quarter. The Bank believes that all inflows and outflows which might have a material impact under the liquidity stress scenario have been considered for the purpose of LCR.

In accordance with the RBI guidelines, the minimum LCR requirement for the calendar year 2017 stood at 80% which has been increased to 90% for the calendar year 2018.

12. Corporate Social Responsibility (CSR)

Operating expenses include Rs, 6.98 crore for the current year towards CSR (previous year Rs, 3.68 crore), in accordance with the Companies Act, 2013.

As a responsible organization, the Bank has approached the mandatory requirements of CSR spends positively by laying a foundation on which it would build and scale future projects and partnerships. The Bank continues to evaluate strategic avenues for CSR expenditure in order to deliver maximum impact. In the years to come, the Bank will further strengthen its processes as per requirement.

Gross Amount required to be spent by the Bank on CSR activities during the current year - Rs, 9.36 crore (previous year Rs, 5.68 crore).

13 The disclosure required on holdings as well as dealings in Specified Bank Notes (SBN) during the period from November 8,2016 to December 30, 2016 as envisaged in notification GSR 308(E) dated March 30, 2017 issued by the Ministry of Corporate Affairs (MCA), is not applicable to the Bank.

14 Unheeded Foreign Currency Exposure (UFCE) of Bank''s Customer

The Bank has maintained an additional provision of Rs, 6.83 crore (previous year Rs, 7.46 crore) on account of UFCE of the customer. Further, the Bank had maintained an additional capital of Rs, 26.28 crore (previous year Rs, 27.73) towards UFCE of the customer.

15 Credit Default Swap

The Bank has not entered into Credit Default Swap during the current year and the previous year.

16 The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Bank has reviewed and recorded adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

17 Figures for the previous year have been regrouped / reclassified wherever necessary to conform to current years'' presentation.


Mar 31, 2017

1 Capital

During the year ended March 31, 2017, the Bank issued 37,000,000 equity shares of Rs. 10/- through Initial Public Offer (IPO), each shares allotted at a price of Rs. 225/-aggregating to Rs.832.50 crore. Further the bank allotted13,475,005 equity shares aggregating to Rs.114.57 crore on various dates to the employees who exercised their stock options

During the previous year, the Bank issued 25,000,000 equity shares of Rs.10/ - aggregating Rs.487.50 crore through pre-IPO placement. Further, the Bank allotted 5,278,500 equity shares aggregating to Rs. 37.53 crore on various dates to the employees who exercised their stock options

2 Proposed Dividend

The Board of Directors at their meeting on May 2, 2017, proposed a dividend of Rs.1.8 per share (18:%) [previous year - Nil], subject to the approval of the members at the ensuing Annual General Meeting

In accordance with the revised Accounting Standard (AS) - 4 ''Contingencies and Events occurring after the Balance Sheet Date'', the Bank has not accounted for proposed dividend Rs. 57.54 crore (previous year - Nil) and corporate dividend tax Rs.13.75 crore (previous year-NiI), as a liability, as at March 31, 2017

3 Investments

3.1 During the year ended March 31, 2017 and the previous year ending March 31, 2015 there has been no sale/ transfer from HTM categories in excess of 5% of the book value of investments held in the HTM category. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SFR securities under HTM

4. During the previous year ending March 31, 2015, in an effort to realise its dues, the Bank with the permission of RBI, acquired the shares of a company (investee Company) by exercise of a pledge of investee company''s shares in its favor by one of the defaulting borrowers of the Bank. The Bank''s shareholding in the said investee company remained unchanged at 24.55%during whole of the current financial year. Investments in the shares of the investee company have been acquired and held exclusively with a view to its subsequent disposal in the near future and accordingly has not been accounted for as an associate under the purview of AS-23 - ''Accounting for Investments in Associates in Consolidated Financial Statements''. These equity shares have been classified under AFS category and have been valued as per the extant guidelines of the Reserve Bank of India for valuation of investments accordingly, these exposures have not been considered as intra-group exposures

5. During the year ended March 31, 2017, the Bank has increased its holding in Swadhaar Finserve Private Limited (SFPL) from 13.74%to 30.00%,following which the company has become an "Associate" of the Bank. The investment is classified in Held to Maturity (HTM) category, in accordance with RBI guidelines

6 Employee Stock Option Plan ("ESOP")

The members of the Bank have approved granting of stock options to employees under one or more Employee Stock Option Plan (ESOP) enabling the Board and / or the Human Resource Committee to grant such number of Options of the Bank not exceeding 12% of the aggregate number of issued and paid up equity shares of the Bank. The ESOP is equity settled where the employees will receive one equity share per option. The stock options granted to employees vest over a period of two years, three years or four years in the proportion of either 20:80, equal proportion, 40:30:30, 30:30:40 or 10:20:30:40, as the case may be. Vested options can be exercised within a period of three years from the date of vesting or within a period of one year from the date on which the shares of the Bank gets listed on a recognized stock exchange (listed since August 31, 2015), whichever is later

Under Intrinsic Value method there is no charge to the profit and loss account for the current year (previous year - Nil) on account of grant of the ESOPs, since exercise price of the stock options granted is more than the underlying value of the shares (prior to listing) or at the market price (listed since August 31, 3016), as the case may be. If the Bank had adopted the Black-Scholes model based fair valuation, compensation cost for the year ended March 31, 3017, would have increased by Rs.34.73 crore (previous year Rs.33.63 crore) and the profit before tax would have been lower correspondingly. Accordingly, on a proforma basis, basic and diluted earnings per share for the year ended March 31, 3017 would have been Rs. 11.89 and Rs.11.15, respectively (Previous year Rs.9.11 and Rs.8.95, respectively)

Options granted during the year carry an exercise price of Rs.130.00, Rs.377.90, Rs.383.15, Rs.476.70, Rs.476,85 and Rs.494.55. During the year corresponding value of the shares for these grants at the time of respective grant was Rs.77.88, Rs.377.90 Rs.383.15 Rs.476.70, Rs.476.85 and Rs.494.55 respectively.

Options granted during the previous year carry an exercise price of Rs.100.00 and Rs.130.00. During the previous year corresponding value of the shares for these grants at the time of respective grant was Rs.85.34,Rs. 96.30, Rs.94.93 and Rs.90.38 respectively.

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during the period. The measure of volatility used in Black-Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on NSE of similar listed banks over the expected tenor of each tranche

7 Appropriation to Reserves

For the year ended March 31, 3017, the Bank has appropriated Rs.111.60 crore (previous year: Rs.73.30 crore) towards Statutory Reserves, Rs. 0.31 crore (previous year: Rs.1.00 crore) towards Capital Reserves and Rs.350.00 crore (previous year: Rs.160.00 crore) towards Revenue & other Reserves

8 Disclosures as per Accounting Standards

9. Disclosures under AS - 15 on employee benefits Defined Contribution Plans:

Defined Benefit Plans:

The following table sets out the status of the defined benefit Pension and Gratuity Plan as required under Accounting Standard15.

Change in the present value of the defined benefit obligation

10. Segment Reporting: Information about business segments

In terms of the AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BP.BC.81 /71 ,04.018/2006-07 dated April IS: 7007 read with DBR.BP.BC No.73/71.04.018/7015-16 dated July 1, 7015 and amendments thereto, the following business segments have been disclosed

- Corporate/Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank

- Retail Banking: Includes lending, deposits and other banking services provided to retail customers of the Bank through branch network or other approved delivery channels

- Treasury: includes investments, all financial markets activities undertaken on behalf of the Bank''s customers, proprietary trading, bullion business, maintenance of reserve requirements and resource mobilization from other Banks and financial Institutions. Intersegment earnings of Balance Sheet management function are included in the Treasury segment

- Other Banking Operations: Includes para banking activities like Bancassurance, Credit Cards etc

Segment revenues include earnings from external customers and earnings from other segments on account of funds transferred at negotiated rates, which are determined by the management. Segment results includes segment revenues as reduced by interest expense, charge from other segments on account of funds transferred at negotiated rates and operating expenses and provisions either directly identified or allocated to each segment

Notes:

- The business of the Bank does not extend outside India and it does not have any assets outside India or earnings emanating from outside India. Accordingly, the Bank has reported operations in the domestic segment only.

- Income, expenses, assets and liabilities have been either specifically identified to individual segment or allocated to segments on a reasonable basis or are classified as unallocated

- Unallocated items include Fixed Assets, realized gains/losses on their sale, income tax expense, deferred income tax assets/liabilities, advance tax, cash in hand, share capital and reserves

11. Related Party Transactions

As per AS 18 "Related Party Disclosures", the Bank''s related parties for the year ended March 31, 3017 are disclosed below:

1. Key Management Personnel (''KMP'')

Mr. Vishwavir Ahuja (Managing Director & Chief Executive Officer)

Mr. Rajeev Ahuja (Executive Director) (identified as related party w.e.f. February 31, 3017)

2. Relatives of Key Management Personnel

Mrs. Reva Ahuja, Mr. Dhararn Bir Ahuja, Ms. Vasudhaa Ahuja, Ms. Vrinda Ahuja, Mrs. Dipeeka Dhand, Ms. KanikaAhuja, D.

B. Ahuja & Sons (HUF)

Ms. Aishwarya Ahuja, Mrs. Priti Ahuja, Mr Raman Ahuja (identified as related party w.e.f. February 21, 2017)

3. Associates

Swadhaar Finserve Private Limited (SFPL) (identified as related party w.e.f. April 5, 2016)

Swadhaar Information and Management Services Private Limited (SIIVISPL), a wholly owned subsidiary of SFPL, has been merged with SFPL w.e.f. April 1, 2016 vide NCLT order March 8, 2017. All the transactions done by the Bank with SIMSPL during the current year have been included with SFPL, for the purpose of related party transactions

The following represents the significant transactions between the Bank and such related parties including relatives of above mentioned KMP during the year ended March 31, 2017

In accordance with RBI guidelines dated March 29, 2003 "Guidance on compliance with the accounting standards by banks", details pertaining to the related party transactions have not been provided where there is only one related party in each of the above categories

During the previous year, there was only one related party in each of the relevant category.

12 Small and Micro Industries

Based on information available with the Bank, during the year, there were no amounts outstanding the due date, to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006

13. Capital Adequacies

13.1 Capital Adequacy Ratio as per RBI guidelines as per Basel III Capital Regulations dated July 1, 2015 and amended thereafter, as at March 31, 3017 is given below:

For computation of CRAR as of March 31, 3017, the Bank has reduced the proposed dividend for the FY 3016-3017 (subject to approval of members in the ensuing Annual general meeting) and corporate dividend tax thereon, totaling Rs.81.39 crore, for determining the CET Capital funds

14. Repo / Reverse Repo Transactions:

During the year, the Bank has not undertaken Repo / Reverse Repo transactions other than Repo / Reverse Repo transactions under the Liquidity Adjustment Facility (LAF) / Marginal Standing Facility (MSF) with RBL Outstanding lending under Reverse Repo deals with RBI under LAF / MSF as at March 31, 3017 were Rs.1,350.00 crore (previous year: Nil). Outstanding borrowing under Repo deals with RBI under LAF / MSF as at March 31, 3017, Nil (previous year: Rs.3,417.00 crore)

15. Risk Exposure in Derivatives:

Qualitative disclosures:

Derivatives are financial instruments whose characteristics are derived from an underlying asset, or from interest and exchange rates or indices. The Bank is currently dealing in Interest Rate and Foreign Exchange (FX) Derivatives for balance sheet management and proprietary trading/ market making. The Bank also offers derivative products to its customers for hedging their interest rate and FX risk

Proprietary trading also includes Interest Rate Futures, Currency Futures and Rupee Interest Rate Swaps (MIBOR). The Bank undertakes transactions in Cross Currency Swaps, Principal Only Swaps, Coupon Only Swaps, or both, FCY IRS, and Fong Term Forex Contracts (FTFX) to offers them to its customers. The Bank also undertakes derivative transactions in OIS swap and Currency Swap for hedging its Balance Sheet

These transactions expose the Bank to various risks, primarily credit, market and operational risk. The Bank has adopted the following mechanism for managing risks arising out of the derivative transactions

a) The structure and organization for management of risk in derivatives trading.

The Bank has separate Treasury Front Office, Treasury Middle Office, Market Risk and Treasury Back Office functions The derivative transactions are originated by Treasury Front Office, which ensures compliance with the trade origination requirements as per the Bank''s policy and the RBI guidelines. Treasury Middle Office and Market Risk Group are responsible for identifying, measurement, monitoring, and analysis of derivative related risks. Treasury Back Office undertakes activities such as confirmations, settlements, documentation and accounting. The Treasury activities are subject to a concurrent audit

b) The scope and nature of risk measurement, risk reporting and risk monitoring systems.

Derivative transactions are governed by the Bank''s Derivative Policy, Commercial Credit Policy, Market Risk Policy, Liquidity Risk Management and ALM Policy and Client Suitability and Appropriateness Policy as well as by the extant RBI guidelines

Various risk limits are set up taking into account market volatility, business strategy and management experience. Risk limits are in place for risk parameters viz. PV01, Value at Risk, stop loss, and stress scenario limits. All exposures are monitored against these limits on a daily basis and breaches, if any, are reported for corrective action

The Bank measures counterparty risk using current exposure method. Counterparty limits are approved as per the Bank''s Credit Policies. The sanction terms may include the requirement to post upfront collateral, or post collateral should the mark to market (MTM) exceed a specified threshold; on a case to case basis. The Bank retains the right to terminate transactions as a risk mitigation measure, in case the client does not adhere to the agreed terms

All counterparty exposures are monitored against these limits on a daily basis and breaches, if any, are reported for corrective action

c) Policies for hedging and/ or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants,

The Bank has a Board approved Hedge and Hedge effectiveness Policy, which govern the use of derivative for hedging purpose. Hedging transactions are undertaken by the Bank to protect the variability in the cash flow of the underlying Balance Sheet item. These deals are accounted on an accrual basis

d) Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums and discounts, valuation of outstanding contracts.

The Bank undertakes derivative transactions for market making/trading and hedging purposes. Transactions for trading and hedging are recorded separately. The Bank revalues its trading positions on a daily basis and the resulting gain/loss is recorded in the Profit and Foss Account. The receivable and payable on marking the contracts to market are shown under "Other Assets" and "Other Liabilities" in the Balance Sheet.

Derivatives other than FX forward transactions are covered under International Swaps and Derivatives Association (ISDA) master agreements with respective counterparties.

The Bank follows the option premium accounting framework prescribed by FEDAI circular. Premium on option transaction is recognized as income/ expense on expiry or early termination of the transaction. MTM gain/ loss, is recorded under ''Other Income''. The amounts received/paid on cancellation of option contracts are recognized as realized gains/ losses on options

Charges receivable/ payable on cancellation / termination of foreign exchange Forward contracts and swaps are recognized as income/ expense on the date of cancellation/ termination under ''Other Income''. Pursuant to the RBI guidelines, any receivables (crystallized receivables and positive MTM) under Forex & derivatives contracts, which remain overdue for more than 90 days, are reversed through the Profit and Foss Account and are held in a separate Suspense account

e) Collateral and Credit Risk Mitigation

The credit risk on customer derivative transactions is mitigated through a laid down policy on sanction of Foan Equivalent Risk (FER) limits, monitoring mechanism for FER limits and trigger events for escalations, margin calls and terminations

Collateral requirements for derivative transactions determined through a usual credit appraisal process and are laid down in the credit sanction terms of the transactions. The Bank retains the right to terminate transactions as a risk mitigation measure in certain cases

(1) Mark to Market for currency Swap & Interest Rate Derivative includes Interest accrued on the swap

(3) Maximum and minimum PVO''I for the year is computed based on balances at the end of every month. The Notional principal of Forward Contracts does not include Tom and Spot Foreign Exchange trades

(3) The notional principal of derivative contracts reflect the volume of transactions outstanding as at the balance sheet date and do not represent the amount of risk taken by the Bank.

16 Restructured / Rescheduled / Renegotiated Investments

During the year Nil (Previous year: Nil)

17 Asset Quality

17.1 Movement of NPA and NPA Provision

Mote: March 31, 2016 is the close of the reference period in respect of which divergences were assessed

- This includes five borrower accounts where divergence on the asset classification as at March 31, 2016, was observed by RBI. All these borrower accounts except one have been repaid / realized during the year.

17.2 Particulars of Restructured Accounts:

Details of loan assets subjected to restructuring during the year are given below:

Restructured Advances as at March 31, 3017

* Amount in this column indicates the movement i.e. recovery / (increase) in the balance during the year A- Mo. of borrowers, B- Amt. outstanding, C- Provision thereon

Classification of assets and liabilities under the different maturity buckets for both current and previous financial years is based on the same estimates and assumptions as used by the Bank for compiling the return submitted to the RBL Maturity profile of assets and liabilities excludes off balance sheet items

18 Details of Single / Group Borrower limit exceeded by the Bank

During the current year and the previous year, the Bank has complied with the applicable RBI guidelines with regard to exposure to a single borrower and a group of the borrower. As per the exposure limits permitted under the extant RBI regulation, the Bank, with the approval of the Board of Directors, can enhance exposure to a single borrower or borrower group by a further 5 percent of capital funds

During the current, year the Bank''s credit exposures to single borrowers and group borrowers were within the prudential limits prescribed by RBI. During the previous year, the Bank with the prior approval of the Board of Directors, sanctioned enhancement to single borrower limit for Gujarat State Petro net Limited (infrastructure company within the definition of RB exposure norms) from 30% of Capital Funds to 35% of Capital Funds

19 Penalties imposed by RBI

During the current year, RBI levied following penalties:

a) Rs.1.00 crore for lapses in adhering to the RBI guidelines with respect to import of goods and services, lapses in adhering to provisions of the Master Circular on KYC/AML with respect to on-going monitoring of certain customer transactions, diligence of the beneficiaries of foreign exchange remittances and filing of suspicious transaction reports with the Financial Intelligence Unit - India

b) Rs. 0.01 crore for shortfall in maintenance Cash Reserve Ratio (CRR) requirement for one day in the financial year For the previous year ended March 31, 3016, no penalty was imposed by RBI on the Bank.

20 Drawdown from Reserves

The Bank has not undertaken any drawdown from reserves during the year ended March 31, 3017 and March 31, 3016 except towards share issue expenses of Rs.46.84 crore, incurred for raising equity share capital through Initial Public Offering (IPO) during the year ended March 31, 3017, which have been adjusted against the share premium account, in terms of Section 53 of the Companies Act, 3013

21 Floating Provisions

The Bank has not made any floating provisions

22 Disclosure on Remuneration

Qualitative Disclosure

A. Information relating to the composition and mandate of the Remuneration Committee

The Bank''s Human Resources and Remuneration Committee (HR6RC) comprises of the following directors:

1. Mr. P. Sudhir Rao - Chairman of Committee

2. Mr. Narayan Rarnachandran

3 Mr. Vimal Bhandar

4. Mr. Jai raj Purandare

5. Mr. Ishan Raina

All members of the HR6RCare independent directors Mr. Sudhir Rao, Mr. Narayan Rarnachandran and Mr. Vimal Bhandari are also members of the Risk Management Committee of the Board. Mr. Vishwavir Ahuja is a permanent attendee

Following are the terms of Reference of Human Resources and Remuneration Committee:

- To assist and advise the MD & CEO in planning for senior management build-out of the Bank so as to ensure appropriate leadership is in place for the Bank''s transformation strategy.

- To evaluate and approve HR policies of the Bank

- To evaluate and approve various Employee Stock Ownership Schemes that may be required from time to time to ensure that the Bank gets the right talent and is able to retain high performing employees etc

- To award ESOPs to employees, whether in the form of joining or performance. The Committee may determine the level/grade of employees it desires to review and award

- To oversee the framing, review and implementation of compensation policy of the bank on behalf of the Board

- To work in close coordination with Risk Management Committee of the bank, in order to achieve effective alignment between remuneration and risks

- To ensure that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio

- Any other related aspect to the above

B. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The remuneration is divided into following components

Fixed Remuneration:

For employees governed by Indian Banking Association''s employment and compensation rules (IBA rules), their remuneration is based on the industry-wide bi-partite wage settlement agreements signed with the employees'' unions These rules provide for basic salary, allowances and certain retirement benefits to the employees which are uniformly applicable for the employees covered under the IBA scale

For the employees governed by the ''Cost to Company (CTC)'' remuneration structure (i.e. Non-IBA scale employees), the CTC represents the total direct and fixed cost incurred by the Bank across all components of compensation including contributions paid by the Bank towards retrial benefits, and loans at concessional interest rates. It consists of Basic Salary, House Rent Allowance, Personal Allowance / Special Allowances, Medical & other Reimbursements, Leave Travel Assistance and Retrial Benefits

Employee Stock Options:

In order to align the interest of the Bank, the senior management, its members and the employees, there is an effort to create long term ownership and commitment for the senior officers of the Bank. This is also done with a view to recognize and compensate senior officers for intellectual capital, the domain expertise in terms of product and market knowledge and the business relationships that they bring along Accordingly, the Bank has formulated Employee Stock Option Program

Further, to reward the performance and recognize the contribution of employees, the Bank has also introduced a Performance Employee Stock Option Program. The Bank had also introduced an Employee Retention Stock option program with the objective of retaining a very select group of highly valued middle and senior management as well as employees in key leadership roles

The underlying philosophy of Employee Stock Option Plan is to enable the present and future employees to share the value that they help to create for the Bank over a period of time. Joining Employee Stock Options (ESOPs) are granted based on the primacy of the role to the Bank as well as experience, domain knowledge, current ability, future potential and expertise of the candidate. Performance ESOPs are given after periodic evaluation of the employee against individual and overall performance of the Bank during the review period. The Plan has been designed and implemented in such a way that an equity component in the compensation goes a long way in aligning the objectives of an individual with those of the Bank. From FY13, the ESOP has been broad based to include long serving employees of the Bank to make them partners in the growth of the Bank.

These stock option programmes are administered by the HRORC

Annual Performance Linked Variable Compensation (APLVC):

APLVC is paid as a percentage of CTC as defined in the Compensation Policy of the Bank.

As per the guidelines issued by RBI, APLVC is capped at 7070 of CTC for Whole-time Directors / CEO / Senior Executive Team and 407, for Risk Management & Compliance Staff. Also, the APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. APLVC does not include ESOPs.

C. Description of the ways in which current and future risks are taken into account in the remuneration processes

Key determinant of the total variable pool is the overall performance of the Bank in any given year

Further, the following principles apply:

In order for incentive-based remuneration to work, the variable part of remuneration should be truly and effectively variable and can even be reduced to zero

i. Methodologies for adjusting remuneration to risk and performance will be based on the general risk management and corporate governance framework adopted by the Bank

ii. Risks taken need to be estimated (ex ante), risk outcomes observed (ex post) and both ex ante estimates and ex post outcomes would have a bearing on the payoffs

iv. Risk adjustments would take into account the nature of the risks involved and the time horizons over which they could emerge. The impact of remuneration adjustments would be inked to actions taken by employees and / or business units, and their impact on the level of risk taken on by the Bank.

v. Both ESOP as well as APLVC provides long term remuneration benefits to employees. The ESOP/PESOP / RESOP are equity settled where the employees will receive one equity share per option. The ESOPs and PESOPs granted to employees vest over a period of three / four years, in the following proportion, 40:30:30, 30:30:40,10:30:30:40 each year whereas RESOPs vest over a period of two years in a proportion of 30:80 each year. Second vesting of RESOP is linked with IPO i.e. two years from the date of grant or one year from the date of IPO / Listing whichever is later. Similarly, as per the guidelines issued by RBI, APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. Further, the ESOP/PESOP and APLVC are subject to suitable claw-back and clauses to protect the Bank against misconduct, sub-optimal performance or decisions or actions leading to adverse financial consequence to the Bank.

D. Description of the ways in which the bank seeks to ink performance during a performance measurement period with levels of remuneration

The Bank has a performance management system in place. The Performance management system has goals on four perspectives namely Financial, Customer, Process and People. Employees are appraised against the goals set at the beginning of the year. Employee performance and competence assessment are both considered for the performance rating. Performance Rating has a direct correlation with the increments and APLVC as well as PESOPs

E. A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting

As per the guidelines issued by RBI, APLVC is capped at 70% of CTC for Whole-time Directors / CEO / Senior Executive Team and 40% for Risk Management & Compliance Staff. Also, the APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. APLVC does not include ESOPs/PESOPs.

Schedule for APLVC vesting and payout is as per pay schedule defined in the Compensation Policy of the Bank.

Deferred APLVC vests only in the year of payment Voluntary Cessation of employment by the employee or termination with cause as defined in employment contract will result in forfeiture of the remaining APLVC. APLVC is subject to claw-back and malus clauses

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

Various forms of variable remuneration used by the Bank are:

APLVC: APLVC provides cash bonus in short to medium term to employees. The bank utilizes APLVC to reward superior performance

Employee stock option (ESOP) plan: Employee stock option plan is a long term remuneration benefit

ESOP is equity settled where the employees will receive one equity share per option after vesting The stock options granted to employees vest over a period of three / four years, generally. ESOP is used to reward superior performance, aligning employee interests with the Bank, create long term ownership and commitment.

23 Contingent Liabilities

Description of nature of contingent liabilities is set out below:

i) Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress

ii) Liability for partly paid investments:

These represent contingent liability on account of possible claims for uncalled amount by the issuer of the securities held by the Bank

iii) Liability on account of forward exchange and interest rate contracts:

The Bank enters into foreign exchange contracts currency options, forward rate agreements, currency swaps with interbank participants on its own account and for the customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows by the way of interest/principal in one currency against another, based on pre-determined rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. The amount recorded as contingent liability with respect to these contracts represents the underlying notional amounts of these contracts

iv) Guarantees given on behalf of Constituents, Acceptances, Endorsement and other obligations:

As a part of its corporate banking activities, the Bank issues documentary credit and guarantees on behalf of its customers Documentary credits such as letters of credit enhance the credit standing of the customer of the Bank. Guarantees generally represent irrevocable assurances that the Bank will make the payment in the event of the customer failing to fulfill its financial or performance obligations

v) Acceptances, endorsements and other obligations:

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

vi) Other contingent items:

a. Commitments for settlement date accounting for securities transactions;

b. Amount of bills rediscounted by the Bank;

c. Demands raised by income tax and other statutory authorities and disputed by the Bank.

Refer Schedule 12 for amounts relating to contingent liabilities

24 Bank has not issued any letters of comfort during the year

25 Liquidity Coverage Ratio (LCR)

Qualitative disclosure around LCR

Liquidity Coverage Ratio (LCR) is a global minimum standard for Bank''s liquidity. The ratio aims to ensure that a bank has an adequate stock of unencumbered High - Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs for a BO calendar days of severe liquidity stress scenario

Bank monitors and measures Liquidity Coverage Ratio in accordance with the guidelines issued by Reserve Bank of India (RBI) i.e. Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards Based and amendments thereto issued from time to time.

LCR became effective on January 1, 2015 with minimum requirement set at 50%, increasing in equal annual increments of 10% to reach 100 per cent on January 1, 2019. The minimum LCR requirement was 70%for calendar year 2015 and increased to 80% for calendar year 2017. LCR has to be computed based on simple average of monthly observations during the quarter. W.e.f. from January 1, 2017, LCR has to be computed based on simple average of daily observations during the quarter

The LCR is a ratio of High Quality Liquid unencumbered Assets (HQLA) to total estimated net outflows over a stressed period of 30 calendar days.

The Bank has been maintaining HQLA (Level 1) primarily in the form of Excess CRR, excess SLR investments over and above mandatory requirement; and regulatory dispensation allowed up to 8:% of Net Demand and Time Liabilities (NDTL) and additional 3% effective from February 2015, in the form of borrowing limit available through Marginal Standing Facility (IVISF) and Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR). While, a small portion of HQLA (Level 2) is accounted with corporate bonds, debentures, Commercial Papers issued by Non-Financial Institutions which are rated AA- and above and rated BBB- to A as level 2A and 2B respectively.

The Bank has not been maintaining HQLA in FCY given the lack of regulatory options available as well as limited availability of non-callable FCY liabilities. The Bank believes that all inflows and outflows which might have a material impact under the liquidity stress scenario have been considered for the purpose of LCR

SLR investments as well as Corporate Bond portfolio of the Bank considered for HQLA is well diversified across various instruments and liquid asset type mix and should provide the Bank with adequate and timely liquidity.

The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivative-related exposures, partially offset by inflows from assets maturing within 30 days.

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the liquidity risk tolerance/limits and accordingly decides the strategy, policies and procedures of the Bank for managing liquidity risk.

The Board has constituted a Risk Management Committee (RIV1C), and consisting of Chief Executive Officer (CEO) /Chairman and certain other Board members. The committee is responsible for evaluating the overall risks faced by the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk Management Committee

At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk tolerance/limits set by the Board as well as implementing the liquidity risk management strategy of the Bank. ALM team within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management

ALCO of the Bank channelizes various business segments of the Bank to target good quality asset and liability profile to meet the Bank''s profitability as well as Liquidity requirements with the help of robust MIS and Risk Limit architecture of the Bank.

26 Corporate Social Responsibilities (CSR)

Operating expenses include Rs. 3.68 crore (previous year Rs.1.60 crore) for the year ended March 31,3017 towards Corporate Social Responsibility (CSR), in accordance with Companies Act, 3013

As a responsible organization, the Bank has approached the mandatory requirements of CSR spends positively by laying a foundation on which it would build and scale future projects and partnerships. The Bank continues to evaluate strategic avenues for lSR expenditure in order to deliver maximum impact. In the years to come, the Bank will further strengthen its processes as per requirement

Gross Amount required to be spent by the Bank on CSR activities during current year – Rs. 5.68 crore (previous year Rs. 3.71 crore)

27 Transfers to Depositor Education and Awareness Fund (DEAF)

Below mentioned are the details of funds transferred to Depositor Education and Awareness Fund during financial year ended March 31, 7017.

28 The disclosure required on holdings as well as dealings in Specified Bank Notes (SBN) during the period from November 8, 2016 to December 30, 3016 as envisaged in notification GSR 308(E) dated March 30, 3017 issued by the Ministry of Corporate Affairs (MCA), is not applicable to the Bank.

29 Credit Default Swap

The Bank has not entered into Credit Default Swap during the financial year 3016-17 and 3015-16

30 Unhedged Foreign Currency Exposure (UFCE) of Bank''s Customer

The Bank has maintained an additional provision of Rs.7.46 crore (previous year Rs. 4.67 crore) on account of UFCE of the customer Further, the Bank had maintained an additional capital of Rs. 37.73 crore (previous year Rs. 8.45) towards UFCE of the customer.

31. The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Bank has reviewed and recorded adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.


Mar 31, 2016

1. Segment Reporting: Information about business segments

In terms of the AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BP.BC.81 /21 ,04.018/2006-07 dated April 18, 2007 read with DBR.BP.BC No.23/21.04.018/2015-16 dated July 1, 2015 and amendments thereto, the following business segments have been disclosed

- Corporate/Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank.

- Retail Banking: Includes lending, deposits and other banking services provided to retail customers of the Bank through branch network or other approved delivery channels

- Treasury: includes investments, all financial markets activities undertaken on behalf of the Bank''s customers, proprietary trading, maintenance of reserve requirements and resource mobilization from other Banks and financial Institutions Intersegment earnings of Balance Sheet Management function are included in the Treasury segment

- Other Banking Operations: Includes para banking activities like Bank assurance, credit cards etc

Segment revenues include earnings from external customers and earnings from other segments on account of funds transferred at negotiated rates, which are determined by the management. Segment results includes segment revenues as reduced by interest expense, charge from other segments on account of funds transferred at negotiated rates and operating expenses and provisions either directly identified or allocated to each segment

2. Related Party Transactions

As per AS 18 "Related Party Disclosures", the Bank''s related parties for the year ended March 31, 2016 are disclosed below:

Key Management Personnel (''KMP'') as defined under AS 18:

Mr. Vrshwavir Ahuja, Managing Director & CEO

In the financial year 2015-16 and 2014-15, there was only one related party in the said category, hence the Bank has not disclosed the details of transactions in accordance with circular issued by RBI on March 29, 2003 "Guidance on compliance with the accounting standards by banks".

Risk Exposure in Derivatives- Qualitative disclosures:

Derivatives are financial instruments whose characteristics are derived from an underlying asset, or from interest and exchange rates or indices. The Bank is currently dealing in Interest Rate and Foreign Exchange (FX) Derivatives for balance sheet management and proprietary trading/ market making. The Bank also offers derivative products to its customers for hedging their interest rate and FX risk.

These transactions expose the Bank to various risks, primarily credit, market and operational risk. The Bank has adopted the following mechanism for managing risks arising out of the derivative transactions

a) The structure and organization for management of risk in derivatives trading.

The Bank has separate Treasury Front Office, Treasury Middle Office, Market Risk and Treasury Back Office functions The derivative transactions are originated by Treasury Front Office, which ensures compliance with the trade origination requirements as per the Bank''s policy and the RBI guidelines. Treasury Middle Office and Market Risk Group are responsible for identifying, measurement, monitoring, and analysis of derivative related risks. Treasury Back Office undertakes activities such as confirmations, settlements, documentation and accounting. The Treasury activities are subject to a concurrent audit.

b) The scope and nature of risk measurement, risk reporting and risk monitoring systems.

Derivative transactions are governed by the Bank''s Derivative Policy, Commercial Credit Policy, Market Risk Policy and Client Suitability and Appropriateness Policy as well as by the extant RBI guidelines

Various risk limits are set up taking into account market volatility, business strategy and management experience. Risk limits are in place for risk parameters viz. PV01, Value at Risk, stop loss, and stress scenario limits. All exposures are monitored against these limits on a daily basis and breaches, if any, are reported for corrective action

The Bank measures counterparty risk using current exposure method. Counterparty limits are approved as per the Bank''s Credit Policies. The sanction terms may include the requirement to post upfront collateral, or post collateral should the mark to market (MTM) exceed a specified threshold; on a case to case basis. The Bank retains the right to terminate transactions as a risk mitigation measure, in case the client does not adhere to the agreed terms

All counterparty exposures are monitored against these limits on a daily basis and breaches, if any, are reported for corrective action

c) Policies for hedging and/ or mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants.

The Bank has a Board approved Hedge and Hedge effectiveness Policy, which govern the use of derivative for hedging purpose

d) Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums and discounts, valuation of outstanding contracts.

The Bank has undertaken derivative transactions for market making and trading purposes. The Bank revalues its trading positions on a daily basis and records the same in the books of accounts. The receivable and payable on marking the contracts to market are shown under "Other Assets" and "Other Liabilities" in the balance sheet

Derivatives other than FX forward transactions are covered under International Swaps and Derivatives Association (ISDA) master agreements with respective counterparties

The Bank follows the option premium accounting framework prescribed by FEDAI circular. Premium on option transaction is recognised as income/ expense on expiry or early termination of the transaction. MTM gain/ loss, is recorded under ''Other Income''. The amounts received/paid on cancellation of option contracts are recognised as realised gains/ losses on options

Charges receivable/payable on cancellation/ termination of foreign exchange Forward contracts and swaps are recognised as income/ expense on the date of cancellation/ termination under ''Other Income''.

(1) As per recommendatory provisions of AS-d''l, Financial Instrument: Presentation, mark to market position is reported on gross basis. Marked to Market positions are reported only for trading portfolio

(2) The Bank has computed maximum and minimum of PVO''I for the year based on balances at the end of every month

(3) Mark to Market position for Currency Swap & Interest Rate Derivative includes Interest accrued on the swap

(4) The Notional principal of Forward Exchange Contract does not include notional for Torn and Spot Foreign Exchange Contract

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

3. Restructured / Rescheduled / Renegotiated - Investments during the year is Nil (Previous year: Nil)

4. Details of Single / Group Borrower limit exceeded by the Bank:

During the year ended March 31, 2016 and March 31, 2015, the Bank has complied with the applicable RBI guidelines with regard to exposure to a single borrower and a group of the borrower. As per the exposure limits permitted under the extant RBI regulation, the Bank, with the approval of the Board of Directors, can enhance exposure to a single borrower or borrower group by a further 5 percent of capital funds. Accordingly, during the year ended March 31, 2016, with the prior approval of the Board of Directors, the Bank sanctioned enhancement in single borrower limit for Gujarat State Petronet Limited (infrastructure company within the definition of RBI exposure norms) from 20% of Capital Funds to 25% of Capital Funds

5. Penalties imposed by RBI:

During the current year, RBI has not imposed any penalty on the Bank.

During the previous year ended March 31, 2015, the Reserve Bank had carried out a scrutiny of the loan and current accounts of M/s. Deccan Chronicle holdings Ltd., in various banks in late 2013. As per RBI''s assessment, the Bank had not complied with the extant guidelines designed to protect the banks while lending to companies that do not provide full disclosure, requiring banks to exchange information among lending banks on borrowers on a periodic basis and accordingly levied a penalty of Rs. 0.05 Crore

6. Drawdown from Reserves:

There has been no draw down from reserves during the year ended March 31, 2016 and March 31, 2015

7. Floating Provisions:

The Bank has not made any floating provisions

8. Disclosure on Remuneration

Qualitative Disclosure

A. Information relating to the composition and mandate of the Remuneration Committee.

The Bank''s Human Resources and Remuneration Committee (HRORC) comprises of the following directors:

1. Mr. P. Sudhir Rao - Chairman of Committee

2. Mr. Narayan Rarnachandran

3. Mr. Virnal Bhandar

4. Mr. Jairaj Purandare

All members of the HRO RCare independent directors. Mr. Sudhir Rao, Mr. Narayan Rarnachandran and Mr. Virnal Bhandari are also members of the Risk Management Committee of the Board. Mr. Vrshwavir Ahuja is a permanent attendee

Following are the terms of Reference of Human Resources and Remuneration Committee:

- To assist and advise the MD & CEO in planning for senior management build-out of the Bank so as to ensure appropriate leadership is in place for the Bank''s transformation strategy.

- To evaluate and approve HR policies of the Bank

- To evaluate and approve various Employee Stock Ownership Schemes that may be required from time to time to ensure that the Bank gets the right talent and is able to retain high performing employees etc

- To award ESOPs to employees, whether in the form of joining or performance. The Committee may determine the level/grade of employees it desires to review and award

- To oversee the framing, review and implementation of compensation policy of the Bank on behalf of the Board

- To work in close coordination with Risk Management Committee of the bank, in order to achieve effective alignment between remuneration and risks

- To ensure that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio

- Any other related aspect to the above

B. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The remuneration is divided into following components:

Fixed Remuneration:

For employees governed by Indian Banking Association''s employment and compensation rules (IBA rules), their remuneration is based on the industry-wide bi-partite wage settlement agreements signed with the employees'' unions These rules provide for basic salary, allowances and certain retirement benefits to the employees which are uniformly applicable for the employees covered under the IBA scale

For the employees governed by the ''Cost to Company (CTC)'' remuneration structure (i.e. Non- BA scale employees), the CTC represents the total direct and fixed cost incurred by the Bank across all components of compensation including contributions paid by the Bank towards retiral benefits, and loans at concessional interest rates It consists of Basic Salary, House Rent Allowance, Personal Allowance / Special Allowances, Medical & other Reimbursements, Leave Travel Assistance and Retiral Benefits

Employee Stock Options:

In order to align the interest of the Bank, the senior management, its shareholders and the employees, there is an effort to create long term ownership and commitment for the senior officers of the Bank. This salso done with aviewto recogmzeand compensate senior officers for intellectual capital, the domain expertise in terms of product and market knowledge and the business relationships that they bring along Accordingly, the Bank has formulated Employee Stock Option Program

Further, to reward the performance and recognise the contribution of employees, the Bank has also introduced a Performance Employee Stock Option Program. The Bank has also introduced a Employee Retention Stock option program with the objective of retaining a very select group of highly valued middle and senior management as well as employees in key leadership roles

The underlying philosophy of Employee Stock Option Plan is to enable the present and future employees to share the value that they help to create for the Bank over a period of time. Joining Employee Stock Options (ESOPs) are granted based on the primacy of the role to the Bank as well as experience, domain knowledge, current ability, future potential and expertise of the candidate. Performance ESOPs are given after periodic evaluation of the employee against individual and overall performance of the Bank during the review period. The Plan has been designed and implemented in such a way that an equity component in the compensation goes a long way in aligning the objectives of an individual with those of the Bank. From FY1L, the ESOP has been broad based to include long serving employees of the Bank to make them partners in the growth of the Bank.

These stock option programmes are administered by the HRORC

Annual Performance Linked Variable Compensation (APLVC)

APLVC is paid as a percentage of CTC as defined in the Compensation Policy of the Bank.

As per the guidelines issued by RBI, APLVC is capped at70%of CTC for Whole-time Directors / CEO / Senior Executive Team and 40% for Risk Management & Compliance Staff. Also, the APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. APLVC does not include ESOPs.

C. Description of the ways in which current and future risks are taken into account in the remuneration processes.

Key determinant of the total variable pool is the overall performance of the Bank in any given year

Further, the following principles apply:

In order for incentive-based remuneration to work, the variable part of remuneration should be truly and effectively variable and can even be reduced to zero

i. Methodologies for adjusting remuneration to risk and performance will be based on the general risk management and corporate governance framework adopted by the Bank.

ii. Risks taken need to be estimated (ex ante), risk outcomes observed (ex post) and both ex ante estimates and ex post outcomes would have a bearing on the payoffs

iv. Risk adjustments would take into account the nature of the risks involved and the time horizons over which they could emerge. The impact of remuneration adjustments would be inked to actions taken by employees and / or business units, and their impact on the level of risk taken on by the Bank.

v. Both ESOP as well as APLVC provides long term remuneration benefits to employees The ESOP/PESOP / RESOP are equity settled where the employees will receive one equity share per option. The ESOPs and PESOPs granted to employees vest over a period of three years, in either equal proportion or 40:30:30 each year whereas RESOPs vest over a period of two years in a proportion of 20:80 each year. Second vesting of RESOP is linked with IPO. Similarly, as per the guidelines issued by RBI, APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. Further, the ESOP/ PESOP and APLVC are subject to suitable claw- back and rnalus clauses to protect the Bank against misconduct, sub-optimal performance or decisions or actions leading to adverse financial consequence to the Bank.

D. Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration.

The Bank has a performance management system in place. The Performance management system has goals on four perspectives namely Financial, Customer, Process and People. Employees are appraised against the goals set at the beginning of the year. Employee performance and competence assessment are both considered for the performance rating. Performance Rating has a direct correlation with the increments and APLVC as well as PESOPs

E. A discussion of the Bank''s policy on deferral and vesting of variable remuneration and a discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

As per the guidelines issued by RBI, APLVC is capped at70%ofCTC for Whole-time Directors / CEO / Senior

Executive Team and 40% for Risk Management & Compliance Staff. Also, the APLVC could be paid in a staggered manner based on the quantum of APLVC as a percentage of the CTC. APLVC does not include ESOPs/PESOPs.

Schedule for APLVC vesting and payout is as per pay schedule defined in the Compensation Policy of the Bank.

Deferred APLVC vests only in the year of payment. Voluntary Cessation of employment by the employee or termination with cause as defined in employment contract will result in forfeiture of the remaining APLVC. APLVC is subject to claw-back and rnalus clauses

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

Various forms of variable remuneration used by the Bank are:

APLVC: APLVC provides cash bonus in short to medium term to employees. The bank utilizes APLVC to reward superior performance

Employee stock option (ESOP) plan: Employee stock option plan is a long term remuneration benefit

ESOP is equity settled where the employees will receive one equity share per option after vesting The stock options granted to employees vest over a period of three years, generally, in equal proportion each year. ESOP is used to reward superior performance, aligning employee interests with the Bank, create long term ownership and commitment

9. Description of nature of contingent liabilities is set out below:

i) Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress

ii) Liability for partly paid investments:

These represent contingent liability on account of possible claims for uncalled amount by the issuer of the securities held by the Bank.

iii) Liability on account of forward exchange and interest rate contracts:

The Bank enters into foreign exchange contracts currency options, forward rate agreements, currency swaps with inter- bank participants on its own account and for the customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows bythe way of interest /principal in one currency against another, based on pre-deter mined rates. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows. The amount recorded as contingent liability with respect to these contracts represents the underlying notional amounts of these contracts

iv) Guarantees given on behalf of Constituents, Acceptances, Endorsement and other obligations:

As a part of its corporate banking activities, the Bank issues documentary credit and guarantees on behalf of its customers. Documentary credits such as letters of credit enhance the credit standing of the customer of the Bank. Guarantees generally represent irrevocable assurances that the Bank will make the payment in the event of the customer failing to fulfill its financial or performance obligations

v) Acceptances, endorsements and other obligations:

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

vi) Other contingent items:

These include:

a. Commitments for settlement date accounting for securities transactions;

b. Amount of bills rediscounted by the Bank;

c. Demands raised by income tax and other statutory authorities and disputed by the Bank.

Refer schedule 12 for amounts relating to contingent liabilities

10. Bank has not issued any letters of comfort during the year

Qualitative disclosure around LCR

The Bank measures and monitors the LCR in line with guidelines issued by RBIon"Base III Frame work on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards" dated June 09, 2014 and subsequent amendments thereon The LCR guidelines issued by RBI became binding on Banks from January 1, 2015. The LCR guidelines aim to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (HQLAs) that can be converted to cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario. At a minimum, the stock of liquid assets should enable the Bank to survive a liquidity stress scenario for at least 30 days, by which time it is assumed that appropriate corrective actions can be taken

Banks were required to maintain HQLA of a minimum of 50% of its Net Cash Outflows in the calendar year 2015 This minimum requirement has been increased to 70% for the current calendar year 2015 and will increase in the steps of 10% each year to 100% by January 1, 2019

The Bank follows the criteria laid down in RBI guidelines from time to time, for rnonth-end calculations of HQLA, gross outflows and inflows within the next 30- day period LCR for the Bank for both the year end period as well on quarterly average basis is above the minimum threshold set by RBI of 50% for calendar year 2015 and 70% for calendar year 2015 (till March 31, 2015) respectively. This has been on account of robust liquidity management framework put in place by the Bank to meet various liquidity ratios / stipulations prescribed by RBI from time to time. The LCR has been maintained for both the year end as well as quarterly average basis is on account increase in excess SLR balance and increase in retail deposits

The Bank holds High Quality Liquidity Assets "HQLA" in two categories:

- Level 1 Assets comprising of excess Cash Reserve Ratio (CRR) balance with RBI, excess SLR balance (comprising of eligible central government and state government securities) and regulatory dispensation Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) allowing 10% (7% till February 2015) of NDTL in the form of borrowing limit under Marginal Standing Facility (IVISF).

- A relatively smaller part of HQLA is accounted as Level 2 Assets comprising of corporate bonds, debentures, commercial papers issued by non- financial institutions which are rated AA- and above and rated BBB- to A , as Level 2A and Level 2B, respectively.

The HQLAs in the Bank''s portfolio in the form of SLR and corporate bonds are well diversified across instruments and maturity to provide the Bank with adequate and timely liquidity.

The Bank has diverse sources of funding from retail deposits, small business customers, wholesale bank and other institutional deposits. Bank has seen continuing growth in deposit accounts both from retail and wholesale deposits

The Bank monitors the concentration of funding sources from significant counterparties, Top depositors as part of the Asset Liability Management (ALM) framework. The Bank adheres to regulatory and internal limits on Inter- bank liability and borrowings in Money Markets like Call Money, CBLO borrowings, Borrowings from RBI under LAF & MSF. These form part of the Bank''s ALM policy.

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the liquidity risk tolerance/limits and accordingly decides the strategy, policies and procedures of the Bank for managing liquidity risk. The Board has constituted Risk Management Committee (RMC), which reports to the Board, and consisting of Chief Executive Officer (CEO)/Chairman and certain other Board members. The committee is responsible for evaluating the overall risks faced by the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk Management Committee

At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk tolerance/limits set by the Board as well as implementing the liquidity risk management strategy of the Bank in line with Bank''s risk management objectives and risk tolerance. There is a dedicated desk within Treasury function of the Bank which is responsible for the day-to- day/intra-day liquidity management

The LCR is currently monitored and managed at overall level (all currencies taken together) as the level of exposure for individual foreign currencies is not very significant

Other inflows and outflows in the LCR calculation that are not captured in the LCR common template are negligible in the Bank''s portfolio and do not have any material impact in the LCR numbers

11. Intra-Group Exposures

The Bank does not have any subsidiaries or associated entities. As such, the Bank does not have any "Intra Group" exposures as defined under the RBI circular issued in this regard

12. Credit Default Swap

Bank has not entered into Credit Default Swap during the financial year 2015-16 and 2014-15.

13. Unhedged Foreign Currency Exposure of Bank''s Customer

The Bank has maintained additional provision of Rs. 4.67 crore (previous year - Rs. 3.80 crore) on account of Unhedged Foreign Currency Exposure of the customer. Further, the Bank had maintained additional capital of Rs. 8.45 crore (previous year Rs. 12.75 crore) towards Unhedged Foreign Currency Exposure of the customer

14. The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Bank has reviewed and recorded adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements

15. Figures for the previous year have been regrouped / rearranged wherever necessary.

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