|1. Draw Down from Reserves
The Bank has made a draw down out of the Investment Reserve account
towards depreciation in investments in AFS and HFT categories in terms
of RBI guidelines. During the year ended 31 March, 2015, the Bank has
not undertaken any drawdown from reserves.
2. Letter of Comfort
The Bank has not issued any Letter of Comfort (LoC) on behalf of its
subsidiaries during the current and previous year.
3. Disclosure on Remuneration
a) Information relating to the bodies that oversee remuneration:
- Name, composition and mandate of the main body overseeing
The Nomination and Remuneration Committee of the Board oversees the
framing, review and implementation of the compensation policy of the
Bank on behalf of the Board. The Committee works in close co-ordination
with the Risk Management Committee of the Bank, in order to achieve
effective alignment between remuneration and risks.
As at 31 March, 2016, the Nomination and Remuneration Committee
comprises of the following Non- Executive Directors:
1. Shri Prasad R. Menon - Chairman
2. Shri V R. Kaundinya
3. Prof. Samir K. Barua
4. Shri Rohit Bhagat
In respect of Remuneration/HR matters, the Nomination and Remuneration
Committee of the Board, functions with the following main objectives:
a. Review and recommend to the Board for approval, the overall
remuneration framework and associated policy of the Bank (including
remuneration policy for Directors and key managerial personnel)
including the level and structure of fixed pay, variable pay,
perquisites, bonus pool, stock-based compensation and any other form of
compensation as may be included from time to time to all the employees
of the Bank including the Managing Director & CEO (MD & CEO), other
Whole-Time Directors (WTD) and senior managers one level below the
b. Review and recommend to the Board for approval, the total increase
in manpower cost budget of the Bank as a whole, at an aggregate level,
for the next year.
c. Recommend to the Board the compensation payable to the Chairman of
d. Review the Code of Conduct and HR strategy, policy and performance
appraisal process within the Bank, as well as any fundamental changes
in organisation structure which could have wide ranging or high risk
e. Review and recommend to the Board for approval, the talent
management and succession policy and process in the Bank for ensuring
business continuity, especially at the level of MD & CEO, the other
WTDs, senior managers one level below the Board and other key roles and
their progression to the Board.
f. Review and recommend to the Board for approval:
- the creation of new positions one level below MD & CEO
^ appointments, promotions and exits of senior managers one level below
the MD & CEO
g. Set the goals, objectives and performance benchmarks for the Bank
and for MD & CEO, the other WTDs for the financial year and over the
medium to long term.
h. Review the performance of the MD & CEO and other WTDs at the end of
i. Review organisation health through feedback from employee surveys
conducted on a regular basis.
j. Perform such other duties as may be required to be done under any
law, statute, rules, regulations etc.
enacted by Government of India, Reserve Bank of India or by any other
regulatory or statutory body.
- External consultants whose advice has been sought, the body by which
they were commissioned, and in what areas of the remuneration process:
The Nomination and Remuneration Committee has commissioned McLagan Aon
Hewitt, a globally renowned compensation benchmarking firm, to conduct
market benchmarking of employee compensation. The Bank participates in
the salary benchmarking survey conducted by Aon Hewitt every year. Aon
Hewitt collects data from multiple private sector peer banks across
functions, levels and roles which is then used by the Bank to assess
market competitiveness of remuneration offered to Bank employees.
- A description of the scope of the Bank's remuneration policy,
including the extent to which it is applicable to foreign subsidiaries
The Committee monitors the remuneration policy for both domestic and
overseas branches of the Bank on behalf of the Board. However, it does
not oversee the compensation policy for subsidiaries of the Bank.
- A description of the type of employees covered and number of such
Employees are categorised into following three categories from
remuneration structure and administration standpoint:
MD & CEO and WTDs. This category includes 3 employees.
All the employees in the Grade of Vice President and above engaged in
the functions of Risk Control and Compliance. This category includes 24
Category 3: Other Staff
'Other Staff has been defined as a "group of employees who pose a
material risk". This category includes all the employees of the Bank in
the grade of Executive Vice President (EVP) and above and also few
other key business roles in case they are below the grade of Executive
Vice President. This category includes 39 employees.
b) Information relating to the design and structure of remuneration
- An overview of the key features and objectives of remuneration
The compensation philosophy of the Bank aims to attract, retain and
motivate professionals in order to enable the Bank to attain its
strategic objectives and develop a strong performance culture in the
competitive environment in which it operates. To achieve this, the
following principles are adopted:
Affordability: Pay to reflect productivity improvements to retain
Maintain competitiveness on fixed pay in talent market
Pay for performance to drive meritocracy through variable pay
Employee Stock Options for long-term value creation
Benefits and perquisites to remain aligned with market practices and
Apart from the above, the compensation structure for MD & CEO and WTDs
is aligned to RBI's guidelines for sound compensation practices
(effective FY 2012-13) and addresses the general principles of:
Effective and independent governance and monitoring of compensation
Alignment of compensation with prudent risk-taking through well
designed and consistent compensation structures
Clear and timely disclosure to facilitate supervisory oversight by all
stakeholders Accordingly, the compensation policy for MD & CEO and WTDs
a) Ensure that the compensation, in terms of structure and total
amount, is in line with the best practices, as well as competitive
vis-…-vis that of peer banks
b) Establish the linkage of compensation with individual performance as
well as achievement of the corporate objectives of the Bank
c) Include a significant variable pay component tied to the achievement
of pre-established objectives in ine with Bank's scorecard while
ensuring that the compensation is aligned with prudent risk taking
d) Encourage attainment of long term shareholder returns through
inclusion of equity linked long-term incentives as part of compensation
Compensation is structured in terms of fixed pay, variable pay and
employee stock options (for selective employees), with the last two
being highly contingent on employee performance. The compensation
policy of the Bank is approved by the Nomination and Remuneration
Committee. Additional approval from Shareholders and RBI is obtained
specifically for compensation of MD & CEO and WTDs.
- Whether the remuneration committee reviewed the firm's remuneration
policy during the past year, and if so, an overview of any changes that
The Nomination and Remuneration committee reviews the Bank's
remuneration policy every year. There were no major changes made in the
remuneration policy during the year.
- A discussion of how the Bank ensures that risk and compliance
employees are remunerated independently of the businesses they oversee:
The Bank ensures that risk and compliance employees are remunerated
independently of the businesses they oversee and is guided by the
individual employee performance. The remuneration is determined on the
basis of relevant risk measures included in the Balanced Scorecard /
key deliverables of staff in these functions. The parameters reviewed
for performance based rewards are independent of performance of the
business area they oversee and commensurate with their individual role
in the Bank. Additionally, the ratio of fixed and variable compensation
is weighed towards fixed compensation.
c) Description of the ways in which current and future risks are taken
into account in the remuneration processes:
- An overview of the key risks that the Bank takes into account when
implementing remuneration measures:
The business activity of the Bank is undertaken within the limits of
the following risk measures to achieve the financial plan:
NPA - net slippages
Ratio of Risk Weighted Assets to Total Assets
Liquidity Coverage Ratio
- An overview of the nature and type of key measures used to take
account of these risks, including risk difficult to measure:
The Bank has a robust system of measuring and reviewing these risks.
The risk parameters are a part of the Balanced Scorecard used for
setting of performance objectives and for measuring performance which
includes, besides financial performance, adherence to internal
processes, compliance and people perspectives. Weightage is placed on
not only financial or quantitative achievement of objectives but also
on qualitative aspects detailing how the objectives were achieved.
- A discussion of the ways in which these measures affect
The relevant risk measures are included in the scorecards of MD & CEO
and WTDs. Inclusion of the above mentioned measures ensures that
performance parameters are aligned to risk measures at the time of
performance evaluation. The Nomination and Remuneration Committee takes
into consideration all the above aspects while assessing organisational
and individual performance and making compensation related
recommendations to the Board.
- A discussion of how the nature and type of these measures have
changed over the past year and reasons for the changes, as well as the
impact of changes on remuneration:
During FY 2015-16, the risk measures were reviewed and no major changes
were made to the performance parameters in the Balanced Scorecards.
d) Description of the ways in which the Bank seeks to link performance
during a performance measurement period with levels of remuneration:
The Bank's performance management and compensation philosophies are
structured to support the achievement of the Bank's on-going business
objectives by rewarding achievement of objectives linked directly to
its strategic business priorities. These strategic priorities are
cascaded through annualised objectives to the employees.
The Bank follows the Balanced Scorecard approach in designing its
performance management system. Adequate attention is given to the
robust goal setting process to ensure alignment of individual
objectives to support the achievement of business strategy, financial
and non-financial goals across and through the organisation. The non-
financial goals for employees includes customer service, process
improvement, adherence to risk and compliance norms, self-capability
development and behaviours such as integrity and team management.
- An overview of main performance metrics for Bank, top level business
lines and individuals:
The Bank follows a Balanced Scorecard approach for measuring
performance for the Bank, top business ines and individuals. The
approach broadly comprises financial, customer, internal processes,
compliance and people perspectives and includes parameters on revenue
and profitability, business growth, customer initiatives, operational
efficiencies, regulatory compliance, risk management and people
- A discussion of how amounts of individual remuneration are linked to
the Bank-wide and individual performance:
Performance appraisals are conducted annually and initiated by the
employee with self-appraisal. The immediate supervisor reviews the
appraisal ratings in a joint consultation meeting with the employee and
assigns the performance rating. The final ratings are discussed by a
Moderation Committee comprising of senior officials of the Bank. Both
relative and absolute individual performances are considered for the
moderation process. Individual fixed pay increases, variable pay and
ESOPs are linked to the final performance ratings. In addition, the
fixed pay increase is also influenced by an employee's position in the
- A discussion of the measures the Bank will in general implement to
adjust remuneration in the event that performance metrics are weak:
In cases where the performance metrics are weak or not well defined to
measure the performance effectively, the Bank uses discretion to reward
such employees. The remuneration is then influenced by the performance
of previous years and supervisor reviews.
Whilst determining fixed and variable remuneration, relevant risk
measures are included in scorecards of senior employees. Identified
risk parameters that are taken into account are as under:
Ratio of Risk Weighted Assets to Total Assets
Liquidity Coverage Ratio
As a prudent measure, a portion of variable pay if it exceeds a certain
threshold is deferred and is paid proportionately over a period of 3
years. The deferred variable pay amount of reference year would be held
back in case of any misrepresentation or gross inaccuracy resulting in
a wrong risk assessment.
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, if the fraction of variable remuneration
that is deferred differs across employees or groups of employees, a
description of the factors that determine the fraction and their
The deferral of the Variable Pay for the three categories of employees
as stated earlier is given below:
Category 1: MD & CEO and WTDs
Variable Pay will not exceed 70% of the Fixed Pay
To ensure that risk measures do not focus only on achieving short term
goals, variable payout is deferred. If the variable pay exceeds 40% of
fixed pay, 45% of the variable pay to be deferred proportionately over
a period of three years.
Category 2: All the employees in the Grade of Vice President and above
engaged in the functions of Risk Control and Compliance
Variable Pay will be paid on the basis of laid down risk control,
compliance and process improvement parameters in the balanced scorecard
/ key deliverables of staff in this function
The parameters will be independent of performance of the business area
they oversee and wil commensurate with their key role in the Bank
The ratio of fixed and variable compensation will be weighed towards
Percentage of variable pay to be capped at 70% of fixed pay
Appropriate deferral structure as approved by the Nomination and
Remuneration Committee will be applicable to this category of employees
Category 3: Other Staff
Variable Pay will be paid on the basis of performance against key
deliverables and overall business performance for the financial year
Percentage of variable pay to be capped at 70% of fixed pay
Appropriate deferral structure as approved by the Nomination and
Remuneration Committee will be applicable to this category of employees
- A discussion of the Bank's policy and criteria for adjusting
deferred remuneration before vesting and (if permitted by national law)
after vesting through claw back arrangements:
The deferred portion of the variable pay may be delayed in the event of
an enquiry determining gross negligence or breach of integrity. The
deferred portion is withheld by the Bank till the completion of such
enquiries, if any. As a result, no claw back arrangements are made on
the deferred portion of the variable pay.
f) Description of the different forms of variable remuneration that the
Bank utilizes and the rationale for using these different forms:
- An overview of the forms of variable remuneration offered:
Variable Pay: Variable Pay is linked to corporate performance, business
performance and individual performance and ensures differential pay
based on the performance levels of employees
Employee Stock Options (ESOPs): ESOPs are given to selective set of
employees at senior levels based on their level of performance and
role. ESOP scheme has an inbuilt deferred vesting design which helps in
directing long term performance orientation among employees
- A discussion of the use of different forms of variable remuneration
and, if the mix of different forms of variable remuneration differs
across employees or group of employees, a description of the factors
that determine the mix and their relative importance:
Variable pay in the form of performance based bonus is paid out
annually and is linked to performance achievement against balanced
performance measures and aligned with the principles of meritocracy.
The proportion of variable pay in total pay shall be higher at senior
management levels. The payment of all forms of variable pay is governed
by the affordability of the Bank and based on profitability and cost
income ratios. At senior management levels (and for certain employees
with potential to cause material impact on risk exposure), a portion of
variable compensation may be paid out in a deferred manner in order to
drive prudent behaviour as well as long term & sustainable performance
orientation. Long term variable pay is administered in the form of
ESOPs with an objective of enabling employee participation in the
business as an active stakeholder and to usher in an 'owner-manager'
culture. The quantum of grant of stock options is determined and
approved by the Nomination and Remuneration Committee, in terms of the
said Regulations and in line with best practices, subject to the
approval of RBI. The current ESOP design has an inbuilt deferral
intended to spread and manage risk.
4. During the year ended 31 March, 2016 the value of
sales/transfers of securities to/from HTM category (excluding one- time
transfer of securities, sales to RBI under OMO auctions, repurchase of
government securities by Government of India and sale/transfer of
securities consequent to reduction of ceiling on SLR securities under
HTM) did not exceed 5% of the book value of investments held in HTM
category at the beginning of the year.
During the year ended 31 March, 2015 the value of sales/transfers of
securities to/from HTM category (excluding one- time transfer of
securities and sales to RBI under OMO auctions) exceeded 5% of the book
value of investments held in HTM category at the beginning of the year
by Rs.2.57 crores.
During the year ended 31 March, 2016 and 31 March, 2015, the
intra-group exposures were within the limits specified by RBI.
5. Unhedged Foreign Currency Exposure
The Bank's Corporate Credit Policy lays down the framework to manage
credit risk arising out of unhedged foreign currency exposures of the
borrowers. Both at the time of initial approval as well as subsequent
reviews/renewals, the assessment of credit risk arising out of foreign
currency exposure of the borrowers include details of imports, exports,
repayments of foreign currency borrowings, as well as hedges done by
the borrowers or naturally enjoyed by them vis-a-vis their intrinsic
financial strength, history of hedging and losses arising out of
foreign currency volatility. The extent of hedge/ cover required on the
total foreign currency exposure including natural hedge and hedged
positions, is guided through a matrix of internal ratings. The hedging
policy is applicable for existing as well as new clients with foreign
currency exposures above a predefined threshold. The details of
un-hedged foreign currency exposure of customers for transactions
undertaken through the Bank are monitored periodically. The Bank also
maintains additional provision and capital, in line with RBI
During the year ended 31 March, 2016, the Bank has made incremental
provision of Rs.1.62 crores (previous year Rs.133.66 crores) and held
incremental capital of Rs.249.19 crores (previous year Rs.326.25 crores)
towards borrowers having un-hedged foreign currency exposures.
* Excluding one case amounting to Rs.11.78 crores reported as fraud
during the year (provision amount of Rs.11.78 crores) and subsequently
prudentially written off
6. Disclosure on Liquidity Coverage Ratio
The Bank has adopted the Basel III framework on liquidity standards as
prescribed by RBI and has put in place requisite systems and processes
to enable periodical computation and reporting of the Liquidity
Coverage Ratio (LCR). The mandated regulatory threshold as per the
transition plan is embedded into the Risk Appetite Statement of the
Bank thus subjecting LCR maintenance to Board oversight and periodical
review. The Risk department computes the LCR and reports the same to
the Asset Liability Management Committee (ALCO) every month for review
as well as to the Risk Management Committee of the Board. The Bank has
been submitting LCR reports to RBI commencing from January 2015.
The Bank follows the criteria laid down by RBI for month-end
calculation of High Quality Liquid Assets (HQLA), gross outflows and
inflows within the next 30-day period. HQLA predominantly comprises
Government securities viz. Treasury Bills, Central and State Government
securities. A relatively smaller part of HQLA is accounted for by the
corporate bonds rated AA- and above with mandated haircuts applied
The Bank monitors the concentration of funding sources from significant
counterparties, significant instruments/products as part of the asset
liability management framework. The Bank adheres to the regulatory and
internal limits on Inter-bank liability and call money borrowings which
form part of the ALM policy. The Bank's funding sources are fairly
dispersed across sources and maturities.
Expected derivative cash outflows and inflows are calculated for
outstanding contracts in accordance with laid down valuation
methodologies. Cash flows, if any, from collaterals posted against
derivatives are not considered.
The Bank monitors the LCR in US Dollar currency which qualifies as a
significant currency for monitoring LCR as per RBI guidelines.
The liquidity risk management of the Bank is undertaken by the Asset
Liability Management group in the Treasury in accordance with the Board
approved policies and ALCO approved funding plans. The Risk department
measures and monitors the liquidity profile of the Bank with reference
to the Board approved limits, for both domestic as well as overseas
operations, on a static as well as on a dynamic basis by using the gap
analysis technique supplemented by monitoring of key liquidity ratios
and periodical liquidity stress testing. Periodical reports are placed
before the Bank's ALCO for perusal and review.
All significant outflows and inflows determined in accordance with RBI
guidelines are included in the prescribed LCR computation template.
Notes:1) The above data represents simple average of monthly
observations for the respective quarters.
2) Classification of inflows and outflows for determining the run off
factors is based on the same estimates and assumptions as used by the
Bank for compiling the return submitted to the RBI, which has been
relied upon by the auditors.
7. Other disclosures
7.1 During the year, the Bank has appropriated Rs.55.84 crores
(previous year Rs.63.14 crores) to the Capital Reserve, net of taxes and
transfer to statutory reserve, being the gain on sale of HTM
investments in accordance with RBI guidelines. As advised by RBI, the
Bank has also appropriated Rs.6.20 crores (previous year Nil) to the
Capital Reserve, net of taxes and transfer to statutory reserve, being
the profit earned on sale of premises.
7.2 During the year, the Bank has appropriated an amount of Rs.1.74
crores (previous year Rs.0.96 crores) to Reserve Fund account towards
statutory reserve in accordance with guidelines issued by Central Bank
of Sri Lanka in respect of Colombo branch operations. Further during
the previous year ended 31 March, 2015, an amount of Rs.2.22 crores held
in the Reserve Fund towards investment reserve was transferred to the
profit and loss account in accordance with guidelines issued by Central
Bank of Sri Lanka.
7.3 Employee Stock Options Scheme ('the Scheme')
In February 2001, pursuant to the approval of the shareholders at the
Extraordinary General Meeting, the Bank approved an Employee Stock
Option Scheme. Under the Scheme, the Bank is authorised to issue upto
65,000,000 equity shares to eligible employees. Eligible employees are
granted an option to purchase shares subject to vesting conditions.
Further, over the period June 2004 to July 2013, pursuant to the
approval of the shareholders at Annual General Meetings, the Bank
approved an ESOP scheme for additional options aggregating 175,087,000.
The options vest in a graded manner over 3 years. The options can be
exercised within three/five years from the date of the vesting as the
case may be. Within the overall ceiling of 240,087,000 stock options
approved for grant by the shareholders as stated earlier, the Bank is
also authorised to issue options to employees and directors of the
231,975,450 options have been granted under the Scheme till the
previous year ended 31 March, 2015.
On 29 April, 2015, the Bank granted 6,844,500 stock options (each
option representing entitlement to one equity share of the Bank) to its
eligible employees/directors of the Bank/ subsidiary companies at a
price of Rs.535.00 per option.
On 10 September, 2015, the Bank granted 300,000 stock options (each
option representing entitlement to one equity share of the Bank) to one
of its Whole Time Directors at a price of Rs.486.25 per option.
The weighted average share price in respect of options exercised during
the year was Rs.444.13.
Fair Value Methodology
On applying the fair value based method in Guidance Note on 'Accounting
for Employee Share-based Payments' the impact on reported net profit
and EPS would be as follows:
Volatility is the measure of the amount by which a price has fluctuated
or is expected to fluctuate during a period. The measure of volatility
used in the Black-Scholes options pricing model is the annualised
standard deviation of the continuously compounded rates of return on
the stock over a period of time. For calculating volatility, the daily
volatility of the stock prices on the National Stock Exchange, over a
period prior to the date of grant, corresponding with the expected life
of the options has been considered.
The weighted average fair value of options granted during the year
ended 31 March, 2016 is Rs.178.22 (previous year Rs.109.72).
7.4 Proposed Dividend
The Board of Directors, in their meeting held on 26 April, 2016 have
proposed a final dividend of Rs.5.00 per equity share amounting to
Rs.1,404.61 crore, inclusive of corporate dividend tax. The proposal is
subject to the approval of shareholders at the Annual General Meeting.
In terms of revised Accounting Standard (AS) 4 'Contingencies and
Events occurring after the Balance sheet date' as notified by the
Ministry of Corporate Affairs through amendments to Companies
(Accounting Standards) Amendment Rules, 2016, dated 30 March, 2016,
proposed dividend is not recognised as a liability as on 31 March,
2016. Accordingly, the balance of Reserves and Surplus is higher by
Rs.1,404.61 crores (including corporate dividend tax) and the balance of
Other Liabilities is lower by an equivalent amount as on 31 March,
Appropriation to proposed dividend during the year ended 31 March, 2016
represents dividend of Rs.2.81 crores (previous year Rs.3.41 crores) paid
pursuant to exercise of employee stock options after the previous year
end but before the record date for declaration of dividend for the year
ended 31 March, 2015.
7.5 Segmental reporting
The business of the Bank is divided into four segments: Treasury,
Retail Banking, Corporate/Wholesale Banking and Other Banking Business.
These segments have been identified based on the RBI's revised
guidelines on Segment Reporting issued on 18 April, 2007 vide Circular
No. DBOD.No.BP.BC.81/21.04.018/2006-07. The principal activities of
these segments are as under:
Segment Principal Activities
Treasury Treasury operations include investments in sovereign and
corporate debt, equity and mutual funds, trading operations, derivative
trading and foreign exchange operations on the proprietary account and
for customers. The Treasury segment also includes the central funding
Retail Banking Constitutes lending to individuals/small businesses
through the branch network and other delivery channels subject to the
orientation, nature of product, granularity of the exposure and the
quantum thereof. Retail Banking activities also include liability
products, card services, internet banking, mobile banking, ATM
services, depository, financial advisory services and NRI services.
Corporate/Wholesale Banking Includes corporate relationships not
included under Retail Banking, corporate advisory services, placements
and syndication, project appraisals, capital market related services
and cash management services.
Other Banking Business Includes para banking activities like third
party product distribution and other banking transactions not covered
under any of the above three segments.
Revenues of the Treasury segment primarily consist of fees and gains or
losses from trading operations and interest income on the investment
portfolio. The principal expenses of the segment consist of interest
expense on funds borrowed from external sources and other internal
segments, premises expenses, personnel costs, other direct overheads
and allocated expenses.
Revenues of the Corporate/Wholesale Banking segment consist of interest
and fees earned on loans given to customers falling under this segment
and fees arising from transaction services and merchant banking
activities such as syndication and debenture trusteeship. Revenues of
the Retail Banking segment are derived from interest earned on loans
classified under this segment, fees for banking and advisory services,
ATM interchange fees and card products. Expenses of the
Corporate/Wholesale Banking and Retail Banking segments primarily
comprise interest expense on deposits and funds borrowed from other
internal segments, infrastructure and premises expenses for operating
the branch network and other delivery channels, personnel costs, other
direct overheads and allocated expenses.
Segment income includes earnings from external customers and from funds
transferred to the other segments. Segment result includes revenue as
reduced by interest expense and operating expenses and provisions, if
any, for that segment. Segment-wise income and expenses include
certain allocations. Inter segment interest income and interest expense
represent the transfer price received from and paid to the Central
Funding Unit (CFU) respectively. For this purpose, the funds transfer
pricing mechanism presently followed by the Bank, which is based on
historical matched maturity and internal benchmarks, has been used.
Operating expenses other than those directly attributable to segments
are allocated to the segments based on an activity-based costing
methodology. All activities in the Bank are segregated segment-wise and
allocated to the respective segment.
7.6 Related party disclosure
The related parties of the Bank are broadly classified as:
The Bank has identified the following entities as its Promoters.
Administrator of the Specified Undertaking of the Unit Trust of India
Life Insurance Corporation of India (LIC)
General Insurance Corporation and four Government-owned general
insurance companies - New India Assurance Co. Limited, National
Insurance Co. Limited, United India Insurance Co. Limited and The
Orienta Insurance Co. Limited
b) Key Management Personnel
Mrs. Shikha Sharma (Managing Director & Chief Executive Officer)
Mr. V Srinivasan (Deputy Managing Director)
Mr. Sanjeev K. Gupta [Executive Director (Corporate Centre)] upto 1 8
March, 201 6
c) Relatives of Key Management Personnel
Mr. Sanjaya Sharma, Mrs. Usha Bharadwaj, Mr. Tilak Sharma, Ms. Tvisha
Sharma, Dr. Sanjiv Bharadwaj, Dr. Prashant Bharadwaj, Dr. Brevis
Bharadwaj, Dr. Reena Bharadwaj, Mrs. Gayathri Srinivasan, Mrs. Vanjulam
Varadarajan, Mr. V Satish, Mrs. Camy Satish, Ms. Ananya Srinivasan,
Ms. Anagha Srinivasan, Ms. Geetha N., Ms. Chitra R., Ms. Sumathi N.,
Mr. S. Ranganathan, Mr. R. Narayan, Mr. S. Narayanan, Mrs. Poonam
Gupta, Mr. Somya Gupta, Mr. Shubham Gupta, Mr. Rajeev Agarwal and Mr.
Deepak Kumar Gupta.
d) Subsidiary Companies
Axis Capital Limited
Axis Private Equity Limited
Axis Trustee Services Limited
Axis Asset Management Company Limited
Axis Mutual Fund Trustee Limited
Axis Bank UK Limited
Axis Finance Limited
Axis Securities Limited
Axis Securities Europe Limited
The significant transactions between the Bank and related parties
during the year ended 31 March, 2016 and 31 March 2015 are given below.
A specific related party transaction is disclosed as a significant
related party transaction wherever it exceeds 10% of the aggregate
value of all related party transactions in that category:
Dividend paid: Administrator of The Specified Undertaking of the Unit
Trust of India f126.43 crores (previous year Rs.109.94 crores), Life
Insurance Corporation of India Rs.130.91 crores (previous year Rs.127.35
Dividend received: Axis Securities Ltd. f 14.45 crores (previous year f
18.06 crores), Axis Trustee Services Ltd. Rs.11.25 crores (previous year
Rs.10.50 crores), Axis Capital Ltd. Rs.51.45 crores (previous year Nil),
Axis Finance Ltd. Rs.62.60 crores (previous year Nil) and Axis Private
Equity Ltd. Nil (previous year Rs.5.25 crores)
Interest paid: Administrator of The Specified Undertaking of the Unit
Trust of India Rs.70.97 crores (previous year Rs.41.75 crores) and Life
Insurance Corporation of India Rs.530.85 crores (previous year Rs.744.04
Interest received: Life Insurance Corporation of India Rs.0.37 crores
(previous year Rs.0.04 crores), Axis Asset Management Company Ltd. Rs.2.29
crores (previous year Rs.0.04 crores), Axis Bank UK Ltd. Rs.7.94 crores
(previous year Rs.6.85 crores) and Axis Finance Ltd. Rs.1.81 crores
(previous year Rs.1.59 crores)
Investment of the Bank: Axis Finance Ltd. f100.00 crores (previous year
f100.00 crores) and Axis Asset Management Company Ltd. Nil (previous
year Rs.48.75 crores)
Investment of related party in bonds of the Bank: Life Insurance
Corporation of India Nil (previous year Rs.500.00 crores)
Investment of related party in the Bank: Mrs. Shikha Sharma f 16.08
crores (previous year Rs.22.65 crores), Mr. V. Srinivasan Rs.11.52 crores
(previous year Rs.6.81 crores) and Mr. Sanjeev K. Gupta Rs.11.43 crores
(previous year Rs.3.25 crores)
Redemption of subordinated debt: Life Insurance Corporation of India
Rs.50.00 crores (previous year Nil)
Sale of Investments: General Insurance Corporation of India f 195.00
crores (previous year Rs.211.06 crores), New India Assurance Company Ltd.
Nil (previous year Rs.50.00 crores), National Insurance Company Ltd.
Rs.80.12 crores (previous year Rs.222.34 crores), United India Insurance
Company Ltd. Rs.50.00 crores (previous year Rs.120.02 crores)
Management Contracts: Axis Securities Ltd. Rs.5.02 crores (previous year
Rs.4.41 crores), Axis Trustee Services Ltd. Rs.3.21 crores (previous year
Rs.2.62 crores), Axis Finance Ltd. Rs.2.91 crores (previous year Rs.2.70
crores), Mrs. Shikha Sharma Rs.5.37 crores (previous year Rs.4.18 crores),
Mr. V. Srinivasan Rs.3.39 crores (previous year Rs.2.46 crores) and Mr.
Sanjeev K. Gupta Rs.4.41 crores (previous year Rs.0.84 crores)
Contribution to employee benefit fund: Life Insurance Corporation of
India f 15.67 crores (previous year Rs.16.04 crores)
Placement of Deposit by the Bank (net): Life Insurance Corporation of
India Rs.0.08 crores (previous year f0.14 crores)
Non-funded commitments (net): Life Insurance Corporation of India Nil
(previous year f0.01 crores)
Call/Term lending to related party: Axis Bank UK Ltd. Rs.66.00 crores
(previous year Nil)
Swap/forward contracts: Axis Bank UK Ltd. Rs.48.19 crores (previous year
Advance granted (net): Axis Asset Management Company Ltd. Nil (previous
year Rs.44.69 crores) and Axis Finance Ltd. Rs.65.11 crores (previous year
Advance repaid: Axis Asset Management Company Ltd. Rs.44.69 crores
(previous year Nil) and Axis Finance Ltd. Nil (previous yearRs.30.05
Purchase of loans: Axis Bank UK Ltd. Nil (previous year Rs.8.92 crores)
Sell down of loans (including undisbursed loan commitments): Axis Bank
UK Ltd. Nil (previous year Rs.321.44 crores)
Advance to related party against rendering of services: Axis Securities
Ltd. Rs.24.00 crores (previous year Rs.21.00 crores)
Receiving of services: Oriental Insurance Company Ltd. Rs.57.88 crores
(previous year Rs.61.47 crores) and Axis Securities Ltd. Rs.418.56 crores
(previous year Rs.318.10 crores)
Rendering of services: Axis Asset Management Company Ltd. Rs.63.59 crores
(previous year f 194.15 crores), Axis Bank UK Ltd. Rs.0.84 crores
(previous year Rs.0.94 crores) and Axis Capital Ltd. Rs.4.55 crores
(previous year Rs.5.90 crores)
Purchase of equity shares from related party: Axis Capital Ltd. f 19.02
crores (previous year Nil)
Refund of share capital from related party: Axis Private Equity Ltd. f
13.50 crores (previous year Nil)
Other reimbursement from related party: Axis Securities Ltd. Rs.0.66
crores (previous year Rs.0.93 crores), Axis Asset Management Company Ltd.
Rs.1.94 crores (previous year Rs.1.70 crores), Axis Bank UK Ltd. f0.67
crores (previous year Rs.0.16 crores) and Axis Capital Ltd. Rs.4.20 crores
(previous year Rs.4.67 crores)
Other reimbursement to related party: Life Insurance Corporation of
India Rs.0.40 crores (previous year Rs.0.37 crores) and Axis Capital Ltd.
Nil (previous year Rs.0.50 crores).
The transactions with Promoters and Key Management Personnel excluding
those under management contracts are in nature of the banker-customer
Details of transactions with Axis Mutual Fund and Axis Infrastructure
Fund-I, the funds floated by Axis Asset Management Company Ltd. and
Axis Private Equity Ltd., the Bank's subsidiaries have not been
disclosed since these entities do not qualify as Related Parties as
defined under the Accounting Standard 18, Related Party Disclosure, as
notified under Section 2(2) and Section 133 of the Companies Act, 2013
and as per RBI guidelines.
* Upto 31 December, 2014, the Bank had entered into an arrangement with
Axis Asset Management Company Ltd. (Axis AMC), the Bank's subsidiary,
in terms of which payment of brokerage in respect of distribution of
certain schemes is scheduled over the period of the schemes. This
arrangement, however, has no effect on the accounting policy of the
Bank, as such brokerage income is recognised by the Bank as and when
the same is due. Other receivables include such brokerage recoverable
from Axis AMC as on the reporting date.
The Bank has sub-leased certain of its properties taken on lease.
There are no provisions relating to contingent rent.
The terms of renewal/purchase options and escalation clauses are those
normally prevalent in similar agreements. There are generally no undue
restrictions or onerous clauses in the agreements.
7.7 Employee Benefits
The rules of the Bank's Provident Fund administered by a Trust require
that if the Board of Trustees are unable to pay interest at the rate
declared for Employees' Provident Fund by the Government under para 60
of the Employees' Provident Fund Scheme, 1952 for the reason that the
return on investment is less or for any other reason, then the
deficiency shall be made good by the Bank. Based on an actuarial
valuation conducted by an independent actuary, there is no deficiency
as at the Balance Sheet date.
The following tables summarise the components of net benefit expenses
recognised in the Profit and Loss Account and funded status and amounts
recognised in the Balance Sheet for the Provident Fund benefit plan.
Profit and Loss Account
The estimates of future salary increases considered in actuarial
valuation take account of inflation, seniority, promotion and other
The expected rate of return on plan assets is based on the average
long-term rate of return expected on investments of the Fund during the
estimated term of the obligations.
As the contribution expected to be paid to the plan during the annual
period beginning after the balance sheet date is based on various
internal/external factors, a best estimate of the contribution is not
The above information is as certified by the actuary and relied upon by
the auditors. 2.2.12 Provisions and contingencies
7.8 Small and Micro Industries
Under the Micro, Small and Medium Enterprises Development Act, 2006
which came into force from 2 October, 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. The above is based on the information available with the Bank
which has been relied upon by the auditors.
7.9 Corporate Social Responsibility (CSR)
a) Amount required to be spent by the Bank on CSR during the year
Rs.163.03 crores (previous year Rs.133.77 crores).
7.10 Description of contingent liabilities
a) 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. These
also include demands raised by income tax authorities and disputed by
the Bank. Apart from claims assessed as possible, the Bank holds
provision of Rs.25.67 crores as on 31 March, 2016 (previous year Rs.25.63
crores) towards claims assessed as probable.
b) Liability on account of forward exchange and derivative contracts
The Bank enters into foreign exchange contracts, currency
options/swaps, interest rate/currency futures and forward rate
agreements on its own account and for 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 way of interest/principal in two currencies, based on
ruling spot rates. Interest rate swaps are commitments to exchange
fixed and floating interest rate cash flows. Interest rate futures are
standardised, exchange-traded contracts that represent a pledge to
undertake a certain interest rate transaction at a specified price, on
a specified future date. Forward rate agreements are agreements to pay
or receive a certain sum based on a differential interest rate on a
notional amount for an agreed period. A foreign currency option is an
agreement between two parties in which one grants to the other the
right to buy or sell a specified amount of currency at a specific price
within a specified time period or at a specified future time. An
Exchange Traded Currency Option contract is a standardised foreign
exchange derivative contract, which gives the owner the right, but not
the obligation, to exchange money denominated in one currency into
another currency at a pre-agreed exchange rate on a specified date on
the date of expiry. Currency Futures contract is a standardised,
exchange-traded contract, to buy or sell a certain underlying currency
at a certain date in the future, at a specified price.
c) Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on
behalf of its customers to enhance their credit standing. Guarantees
represent irrevocable assurances that the Bank will make payments in
the event of the customer failing to fulfill its financial or
d) 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.
e) Other items
Other items represent outstanding amount of bills rediscounted by the
Bank, estimated amount of contracts remaining to be executed on capital
account, notional principal on account of outstanding Tom/Spot foreign
exchange contracts, commitments towards underwriting and investment in
equity through bids under Initial Public Offering (IPO) of corporates
as at the year end, demands raised by statutory authorities (other than
income tax) and disputed by the Bank and amount transferred to
Depositor Education and Awareness Fund (DEAF).
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, where applicable.
7.11 Previous year figures have been regrouped and reclassified,
where necessary to conform to current year's presentation.