KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.   |   SEBI Notification - No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account.   |   Prevent unauthorized transactions in your account – Update your mobile numbers / email ids with your stock brokers. Receive information of your transactions directly from exchange on your mobile / email at the EOD   |   BSE Prices delayed by 5 minutes... << Prices as on Dec 02, 2016 >>  ABB India 1051.95  [ -0.34% ]  ACC 1322.9  [ -1.01% ]  Ambuja Cements Ltd. 204.75  [ -0.97% ]  Asian Paints Ltd. 905.55  [ -3.57% ]  Axis Bank Ltd. 459.8  [ -1.31% ]  Bajaj Auto Ltd. 2702.45  [ 0.64% ]  Bank of Baroda 161  [ -0.37% ]  Bharti Airtel 318.75  [ -0.11% ]  Bharat Heavy Ele 127  [ -1.40% ]  Bharat Petroleum 610.05  [ -3.15% ]  Britannia Ind. 2979.5  [ -0.76% ]  Cairn India Ltd. 245.8  [ -1.48% ]  Cipla 571.4  [ 0.57% ]  Coal India Ltd. 306.1  [ -0.11% ]  Colgate Palm. 926.2  [ -0.51% ]  Dabur India 282.6  [ -1.09% ]  DLF Ltd. 109.75  [ -2.31% ]  Dr. Reddy's Labs 3179.75  [ -1.87% ]  GAIL (India) Ltd. 431.85  [ -1.73% ]  Grasim Inds. 873.9  [ -0.07% ]  HCL Technologies 793.35  [ -1.04% ]  HDFC 1240.05  [ -2.35% ]  HDFC Bank 1191.2  [ -0.41% ]  Hero MotoCorp 3183.7  [ 0.17% ]  Hindustan Unilever L 833  [ -1.55% ]  Hindalco Indus. 168.8  [ -1.52% ]  ICICI Bank 259.65  [ 0.12% ]  IDFC L 55.35  [ -2.38% ]  Indian Hotels Co 99.4  [ -0.90% ]  IndusInd Bank 1056.2  [ -2.10% ]  Infosys 964.1  [ -1.22% ]  ITC Ltd. 228.4  [ -2.12% ]  Jindal St & Pwr 67.3  [ -1.32% ]  Kotak Mahindra Bank 723.35  [ -2.83% ]  L&T 1360.25  [ -1.82% ]  Lupin Ltd. 1488.7  [ -1.62% ]  Mahi. & Mahi 1143.85  [ -1.39% ]  Maruti Suzuki India 5068.45  [ -3.44% ]  MTNL 17.35  [ -1.14% ]  Nestle India 6238.15  [ -0.68% ]  NIIT Ltd. 77  [ 0.20% ]  NMDC Ltd. 116.5  [ -1.02% ]  NTPC 161.15  [ -0.28% ]  ONGC 291.25  [ -0.33% ]  Punj. NationlBak 133.95  [ -1.72% ]  Power Grid Corpo 183.85  [ -0.30% ]  Reliance Inds. 995.3  [ -0.19% ]  SBI 254.4  [ -0.53% ]  Vedanta 222.9  [ -1.76% ]  Shipping Corpn. 57.8  [ -2.69% ]  Sun Pharma. 719.45  [ -0.33% ]  Tata Chemicals 471.2  [ -1.03% ]  Tata Global Beverage 121.6  [ -0.25% ]  Tata Motors Ltd. 433.05  [ -3.37% ]  Tata Steel 406.4  [ -0.81% ]  Tata Power Co. 73.6  [ 1.03% ]  Tata Consultancy 2223.9  [ -1.88% ]  Tech Mahindra Ltd. 472.85  [ -0.49% ]  UltraTech Cement 3585.15  [ 0.64% ]  United Spirits 1896.75  [ -0.17% ]  Wipro Ltd 460.1  [ -1.61% ]  Zee Entertainment En 443.35  [ -2.94% ]  

Company Information

Indian Indices

  • Loading....

Global Indices

  • Loading....

Commodity

  • Loading....

Forex

  • Loading....

AXIS BANK LTD.

02 December 2016 | 12:00

Industry >> Finance - Banks - Private Sector

Select Another Company

ISIN No INE238A01034 52Week High 638 Book Value (Rs.) 224.00 Face Value 2.00
Bookclosure 22/07/2016 52Week Low 367 EPS 34.92 P/E 13.17
Market Cap. 109978.72 Cr. P/BV 2.05 Div Yield (%) 1.09 Market Lot 1.00

NOTES TO ACCOUNTS

You can view the entire text of Notes to accounts of the company for the latest year
Year End :2016-03 
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

Qualitative disclosures

a) Information relating to the bodies that oversee remuneration:

- Name, composition and mandate of the main body overseeing remuneration:

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 Board.

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 the Bank.

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 implications.

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 each year.

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 and branches:

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:

Employees are categorised into following three categories from remuneration structure and administration standpoint:

Category 1

MD & CEO and WTDs. This category includes 3 employees.

Category 2

All the employees in the Grade of Vice President and above engaged in the functions of Risk Control and Compliance. This category includes 24 employees.

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 processes:

- An overview of the key features and objectives of remuneration policy:

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 cost-income competitiveness

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 provide flexibility

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 seeks to:

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 were made:

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 remuneration:

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 management.

- 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 salary range.

- 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:

NPA-net slippages

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 relative importance:

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 fixed compensation

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 guidelines.

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

Qualitative disclosure

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 thereto.

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 subsidiary companies.

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, 2016.

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 unit.

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:

a) Promoters

The Bank has identified the following entities as its Promoters.

Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI)

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 crores)

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 crores)

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 f158.85 crores)

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 Nil)

Advance repaid: Axis Asset Management Company Ltd. Rs.44.69 crores (previous year Nil) and Axis Finance Ltd. Nil (previous yearRs.30.05 crores)

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 relationship.

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

Provident Fund

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 relevant factors.

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 determinable.

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 performance obligations.

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.