17. Provisions, contingent liabilities and contingent assets
17.1 A provision is recognized when there is a present obligation
as a result of past event, and it is probable that an outflow
of resources will be required to settle the obligation, and in
respect of which a reliable estimate can be made. Provisions
are not discounted to their present value and are determined
based on best estimate required to settle the obligation at
the Balance Sheet date. These are reviewed at each Balance
Sheet date and adjusted to reflect the current best estimates.
17.2 A disclosure of contingent liability is made when there is:
(a) A possible obligation arising from a past event, the
existence of which will be confirmed by occurrence or
non-occurrence of one or more uncertain future events
not within the control of the Bank; or
(b) A present obligation arising from a past event which
is not recognized as it is not probable that an outflow
of resources will be required to settle the obligation
or a reliable estimate of the amount of the obligation
cannot be made.
17.3 When there is a possible obligation or a present obligation
in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
17.4 Contingent assets are not recognized or disclosed in the
financial statements. However, contingent assets are
assessed continually and if it is virtually certain that an inflow
of economic benefits will arise, the assets and related income
are recognized in the period in which the change occurs.
18. Accounting of Dividend
In accordance with 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, the Bank
does not account for proposed dividend as a liability through
appropriation from the profit and loss account. The same
is recognized in the year of actual payout post approval
of shareholders.
19. Share Issue Expenses
Share issue expenses are deducted from Share Premium
Account in terms of Section 52 of the Companies Act, 2013.
20. Impairment of Assets
The Bank assesses at each Balance Sheet date whether there
is any indication that an asset may be impaired. Impairment
loss, if any, is provided to the extent the carrying amount of
assets exceeds their estimated recoverable amount.
21. Cash and Cash equivalents
Cash and cash equivalents comprises of Cash in Hand and
Balances with RBI and Balances with Banks and Money at Call
and Short Notice.
22. Corporate Social Responsibility
Expenditure towards corporate social responsibility
obligations in accordance with provision of Companies Act,
2013, is recognized in the Profit and Loss Account.
1. Capital
1.1 Capital Issue
During the year, 51,620 equity shares of '10 each fully paid (Previous year 7,34,521 equity shares of '10 each fully paid) were allotted
on various dates to the employees who exercised their stock options, and consequently, the share capital of the Bank increased by
'0.05 crores (Previous year '0.73 crores) and share premium by '2.55 crores (Previous year '60.72 crores).
1.2 Capital Adequacy Ratio
The Bank computes Capital Adequacy Ratio as per Basel III Capital Regulations issued by RBI.
Under Basel III Capital Regulations, the Bank has to maintain a Minimum Total Capital of 11.50% including Capital Conversion Buffer
at 2.50%, of the total risk weighted assets. Out of the Minimum Total Capital (excluding CCB of 2.50%), at least 5.50% of risk weighted
assets, shall be from Common Equity Tier 1 capital and at least 7.00% from Tier 1 capital. The capital adequacy ratio of the Bank is
set out below.
2.3 Reclassification between categories of investments
The Bank has re-classified PTC Investments for a FV of '1,123 crores from AFS category to FVTPL category during the FY 2025-2026.
Inline with guidelines laid down by RBI in the Master Directions Classification, Valuation, and Operation of Investment Portfolio)
Directions, 2025, the Bank approached RBI seeking permission for the reclassification of PTC investments after the same was approved
by the Bank's Board. RBI approved the shifting in March 2025 and subsequently the shifting was carried out by the Bank in April 2025
inline with RBI Master Directions.
Consequent to the shifting of PTC securities from AFS to FVTPL category, an amount of '13.05 crores was recognized as MTM gain
in the P/L account of the Bank's books.
The synopsis of the PTC investment shifting is as follows:
2.9 Government securities lending transactions during the year ended March 31, 2026 and March 31, 2025 is Nil.
3. Derivatives
3.1 Interest Rate Swaps, Forward Rate Agreements and Cross Currency Swaps:
Bank offers derivative products such as Interest Rate Swaps (IRS), Forward Rate Agreements (FRA) and Cross Currency Swaps (CCS)
to its customers to enable them to hedge their interest rate risk and currency risk within the prevalent regulatory guidelines
An IRS is a financial contract between two parties exchanging or swapping a stream of interest payments for a 'notional principal'
amount on multiple occasions during a specified period. The Bank deals in interest rate benchmarks like Mumbai Inter-Bank Offered
Rate (MIBOR), Modified Mumbai Inter-Bank Forward Offer Rate (Mod MIFOR) and Alternative Reference Rates (ARR) like Sterling
Overnight Index Average (SONIA), Secured Overnight Financing Rate (SOFR), EURO Short term rate (ESTR), Tokyo Overnight Average
Rate (TONAR), etc.
A FRA is a financial contract between two parties to exchange interest payments for 'notional principal' amount on settlement date,
for a specified period from start date to maturity date. Accordingly, on the settlement date cash payments based on contract rate
and the settlement rate, which is the agreed bench-mark/reference rate prevailing on the settlement date, are made by the parties to
one another. Bond Forward Rate Agreement (Bond-FRA) is a derivative contract where two parties agree to exchange the difference
between a fixed price (determined today) and the actual market price of a specific bond at a future date.
A CCS is a financial contract between two parties primarily exchanging interest payments/principal, wherein interest payments/
principal in one currency would be exchanged for interest payments/principal in another currency.
These contracts are subject to the risks of changes in market interest rates and currency rates as well as the settlement risk with
the counterparties.
3.2 Exchange Traded Interest Rate Derivatives
The Exchange Traded Interest Rate Derivatives undertaken during the year ended March 31, 2026, and March 31, 2025, was Nil.
3.3 Risk Exposure in Derivatives
Derivatives are financial instruments whose characteristics are derived from an underlying asset, or from interest and exchange
rates or indices. Derivatives Policy approved by the Board of Directors defines the framework for carrying out derivatives business
and lays down policies and processes to measure, monitor and report risk arising from derivative transactions. The policy provides
for appropriate risk limits for different derivative products and action to be initiated in case of breaches. As part of the Derivatives
Policy, the Bank has a Product Suitability and Customer Appropriateness Policy, which is used to classify customers on the basis of
their need for various derivative products and their competence in understanding such products and the attendant risks involved.
The Bank undertakes derivative transactions for hedging customers' exposure, hedging the Bank's own exposure, as well as for
trading purposes, wherever permitted by RBI. The customers use these derivative products to hedge their forex and interest
rate exposures, in accordance with extant regulatory guidelines. The Bank has a policy on assessing the collateral required for
undertaking derivative transactions with clients as well as counterparty Banks. The credit appraisal process determines the collateral
requirements. The Bank retains the right to terminate transactions as a risk mitigation measure in certain circumstances.
The use of derivatives for hedging purposes is governed by the board approved Derivative policy. Bank enters into Forwards and
other derivative instruments such as Principal Only Swap (POS), etc. to hedge FX risk arising from its on-balance sheet liabilities such
as foreign currency deposits and borrowings. The effectiveness is assessed at inception of the hedge and quarterly thereafter. The
tenor of hedging instrument may be less than or equal to the tenor of underlying hedged asset or liability. Gains or losses arising from
hedge ineffectiveness, if any, are recognized in the profit and loss Account. Guidance Note on accounting for derivative contracts
and Accounting Standard 11 is applicable to all derivative contracts entered into by the Bank. Forward exchange contract or another
financial instrument that is in substance a forward exchange contract i.e. Principal only Swap (POS), etc., which are not intended
for trading or speculation purposes, to establish the amount of the reporting currency required or available at the settlement date
of a transaction are accounted for in line with AS 11. The premium or discount arising at the inception of such a forward exchange
contract is amortized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in
the statement of profit and loss in the reporting period in which the exchange rates change. Derivatives for market making purpose
are marked to market and the resulting gain/loss is recorded in the Profit and Loss Account.
Risk Management Department of the Bank is responsible for measuring, reporting and monitoring risk arising from derivatives
transactions. It functions independent of Treasury Business Department and undertakes the following activities:
• Monitoring risk utilization on derivatives portfolio against prescribed limits on a daily basis;
• Daily review of product-wise profitability and activity reports for derivatives operations;
• Daily submission of MIS to the Top Management
The Risk Management function applies many quantitative tools and methods such as Value at Risk, PV01, Greeks, stop-loss limits
and counterparty limits.
Refer Note 17.5 for the accounting policy on derivatives.
The following table presents quantitative disclosures relating to Derivatives:
4.4 Particulars of resolution plan and restructuring
Disclosure in accordance with the RBI Circular dated November 28, 2025 on Resolution of Stressed Assets .
i. During the year ended March 31, 2026, the Bank has not implemented any Resolution Plan in any account, (Previous Year- one
NPA case with exposure of '177.81 crore and one standard account with exposure of '55 crore).
ii. As on March 31, 2026, In addition to MSME, COVID-related, and DCCO-linked standard restructuring, Bank has also undertaken
restructuring under natural calamities for standard accounts amounting to '2.72 crore (FY 2025: '5.76 crore).
4.5 Divergence in Asset Classification and Provisioning for NPA
RBI vide circular no. RBI/DOR/2025-26/167 DOR.ACC.REC.No.86/21.04.018/2025-2026 dated November 28, 2025 on Reserve Bank
of India (Commercial Banks - Financial Statements: Presentation and Disclosures) Directions, 2025, has directed that Banks shall
make suitable disclosures in the financial statement for the year ended March 31, 2026, if either or both of the following conditions
are satisfied:
i. the additional provisioning for NPAs assessed by Reserve Bank of India as part of its supervisory process (RBI Inspection
conducted for the Bank's position as on March 31, 2025), exceeds five per cent of the reported profit before provisions and
contingencies for the reference period, and
ii. the additional Gross NPAs identified by the Reserve Bank of India as part of its supervisory process (RBI Inspection conducted for
the Bank's position as on March 31, 2025), exceed five per cent of the reported incremental Gross NPAs for the reference period.
Based on the criteria mentioned in the RBI Master Directions , no disclosure on divergence in asset classification and provisioning
for NPA is required with respect to RBI Supervisory Programme for Assessment of Risk and Capital (RBI Inspection conducted for
the Bank's position as on March 31, 2025) completed during the year pertaining to the previous year ended March 31, 2025.
•includes written off loan amounting to 'Nil (Previous year - '780.81crores)
‘Including amount realized in written off trusts
The Bank has reversed nil excess provision (Previous Year of '34.12 crores) to Profit and Loss account on sale of the aforesaid loans
(iv) Bank has not acquired any Non-Performing Assets (NPAs) / Written off accounts during the period April 1, 2025 to March 31,
2026 (Previous year - Nil).
(v) Bank has not transferred any Special Mentioned Accounts (SMA) during the period April 1, 2025 to March 31, 2026. (Previous
year - Nil).
(vi) Bank has not acquired any Special Mentioned Accounts (SMA) during the period April 1, 2025 to March 31, 2026. (Previous
Year - Nil).
The number of frauds reported to RBI for the year 2025-2026 includes 3,023 frauds (Previous year 3,998 cases) amounting to '57.37 crores (Previous
year '40.33 crores), committed by the employees of Bharat Financial inclusion Limited, the wholly owned Business Correspondent subsidiary of the
Bank. The provisions made during the year represent the amount charged to the Profit and Loss Account of the Bank and does not include any charge
or provision recognized by the said Bharat Financial inclusion Limited in their financial statements.
Note 1 - This includes below mentioned accounting discrepancies identified during the financial year ended March 31, 2025 and reported as fraud
during the financial year 2025-2026. impact of the below accounting discrepancies had been duly considered in the financial statements for the period
ended March 31, 2025:
a) incorrect accounting of various derivative transactions referred to as internal trades resulting into notional income of '1,959.98 crores;
b) incorrect manual entries amounting to '595 crores resulted into unsubstantiated increase in other assets and other liabilities;
c) incorrect recording of cumulative interest income of '673.82 crores and fee income of '172.58 crores.
5.2 Liquidity Coverage Ratio (LCR)
The Bank has adopted the Basel III framework on liquidity standards, prescribed by the Reserve Bank of India (RBI) and has put in place
requisite systems and processes to enable periodic automated computation and reporting of the Liquidity Coverage Ratio (LCR). The
LCR is aimed at measuring and promoting the short-term resilience of the liquidity risk profile of Banks by ensuring maintenance of
sufficient High Quality Liquid Assets (HQLA) that can be easily and immediately converted into cash to meet the liquidity needs for
a 30 calendar day liquidity stress scenario.
The LCR Ratio is calculated by dividing the Bank's stock of HQLA by its total net cash flows over a 30 calendar day stress period,
measured on a daily basis for the following 30 days. The prime driver of LCR is determined by its HQLA and the proportion of retail and
wholesale funding sources. The HQLA comprises of two parts, i.e. Level 1 HQLA constituents which are primarily cash, excess CRR, SLR
securities in excess of the minimum SLR requirement and a portion of mandatory SLR as permitted by the RBI (under MSF and FALLCR)
and Level 2 HQLA constituents which are investments in highly rated non-financial corporate bonds and listed equity investments
considered with the prescribed regulatory haircuts. The average HQLA for the quarter ended March 31, 2026 was '1,14,559 crores,
as against '1,06,499 crores for the quarter ended March 31, 2025. The Cash outflows are determined by multiplying the outstanding
balances of the various types / categories of liabilities by the outflow run-off factor and the cash inflows are calculated by multiplying
the outstanding balances of the various categories of contractual receivables by inflow run-offs at which they are expected to flow
in. Expected derivative cash outflows and inflows are calculated for outstanding contracts in accordance with laid down valuation
methodologies and regulatory guidelines. All significant outflows and inflows determined in accordance with the RBI guidelines
and are included in the LCR computation as per the prescribed template. Other contractual funding and borrowings which are
expected to run down in a 30-day time frame are included in the cash outflows. There are no intragroup exposures for the Bank for
LCR purpose.
The Bank has maintained LCR well above the minimum regulatory requirements during the FY 2025-2026. The average LCR maintained
by the Bank for the quarter ended March 31, 2026 was at 117.99% against 118.43% for the quarter ended March 31, 2025.
The Asset Liability Committee (ALCO) of the Bank is a decision-making unit responsible for implementing the liquidity and interest
rate risk management strategies of the Bank in line with its risk management objectives and ensures adherence to the risk tolerance
/ limits set by the Board. Liquidity Risk Management of the Bank is centralized and is undertaken by the Asset Liability Management
Function in the Global Markets Group in accordance with the Board approved policies.
The Bank's funding sources are diversified across various sources and tenors. The Bank monitors the concentration of funding
from various counterparties and segments. The Bank adheres to the regulatory and internal limits on inter-Bank liabilities and call
money borrowings. Apart from LCR, the Risk Management Department measures and monitors the liquidity profile of the Bank with
reference to the Board approved policy and regulatory limits and undertakes liquidity stress testing periodically.
6.8 Unhedged Foreign Currency Exposure (UFCE) of Clients/ Borrowers
Currency induced credit risk refers to risk of inability of borrowers to service their debt obligations due to adverse movement in
the exchange rates and corresponding changes in their book values of trade payables, loan payables, trade receivables, etc. Bank
recognizes importance of adverse fluctuations of foreign exchange rates on profitability and financial position of borrowers who
are exposed to currency risk.
In this regard, Bank had put in place Board approved policy & internal processes for monitoring and mitigation of currency induced
credit risk of borrowers on account of un-hedged foreign currency exposures ("UFCE") which includes analysis in credit appraisal
notes, risk assessment of borrowers having un-hedged foreign currency exposures based on likely loss / EBID ratio and incremental
provisioning (over and above provision applicable for standard assets) made depending on the likely loss / EBID ratio as per
regulatory guidelines.
The provision for standard assets as of March 31, 2026, included an amount of '56.13 crores (Previous year '68.79 crores) towards
UFCE. Further, capital maintained under Basel III Capital Regulations, as of March 31, 2026, includes an amount of '287.30 crores
(Previous year '295.47 crores) on account of UFCE, computed at the applicable risk weights.
6.9 Single Borrower limit and Group Borrower Limit
During the year ended March 31, 2026, and year ended March 31, 2025, the Bank's credit exposures to single borrowers and group
borrowers were within the prudential limits prescribed by RBI.
12. Penalties imposed by RBI
During the FY 2025-2026, the Reserve Bank of India imposed monetary penalties aggregating '1,30,000 (12 instances) for non¬
adherence to the regulatory guidelines pertaining to exchange of mutilated/soiled notes and coins during the incognito visits
conducted by RBI officials at various Bank Branches.
RBI had levied a total penalty of '2,12,750 (15 instances) on account of the irregularities observed in the soiled note remittance
received from IndusInd Bank Currency Chest. RBI had imposed monetary penalties of '500 on Chandigarh Currency Chests towards
discrepancies observed during the inspection of Currency Chest.
During the FY 2024-25 The Reserve Bank of India imposed a monetary penalty of '27.30 lakh for opening savings deposit accounts
in the name of ineligible entities based on findings from a statutory inspection of the Bank's financial position as of March 31, 2023.
This penalty was imposed due to violations of the Reserve Bank of India (Interest Rate on Deposits) Directions, 2016.
Reserve Bank of India imposed monetary penalties aggregating '80,000 (6 instances) for non-adherence to the regulatory guidelines
pertaining to exchange of mutilated/soiled notes and coins during the incognito visits conducted by RBI officials at various
Bank Branches
RBI had levied a total penalty of '19,150 (25 instances) on account of the irregularities observed in the soiled note remittance received
from IndusInd Bank Currency Chest. RBI had imposed monetary penalties aggregating '30,000 on our two Currency Chests towards
discrepancies / irregularities observed during the inspection of Currency Chest.
13. Disclosure on Remuneration
Effective October 1, 2022, the Compensation Committee was merged with the Nomination and Remuneration Committee (NRC) and
was renamed Compensation and Nomination & Remuneration Committee (C & NRC). The C & NRC presently comprises four members.
All these members are Independent Directors including the Chairperson of the Committee. On aspects relating to remuneration, the
mandate of the C & NRC is to establish, implement and maintain remuneration policies, procedures and practices that help to achieve
effective alignment between remuneration and risks. The Compensation and Nomination & Remuneration Committee is mandated
to oversee framing, review and implementation of the Compensation Policy of the Bank as per the RBI guidelines on Compensation
of Whole Time Directors / Chief Executive Officers / Risk Takers and Control function staff. The C & NRC is also required to ensure that
the cost to income ratio of the Bank supports the remuneration expense of the Bank consistent with the objective of maintaining
sound capital adequacy ratio. The Compensation and Nomination & Remuneration Committee also reviews compensation policies
of the Bank with a view to attract, retain and motivate talent. The Compensation and Nomination & Remuneration Committee also
looks after the administration and superintendence of grant of Options under the Employee Stock Option Schemes.
Compensation Policy
From April 1, 2020 onwards, the Bank has implemented the RBI Guidelines on Compensation of Whole Time Directors /Chief Executive
Officers/Material Risk Takers and Control Function Staff, issued vide circular dated November 4, 2019.
The Bank has formulated its Compensation Policy in alignment with the RBI guidelines, covering all components of compensation
including Fixed pay, Perquisites, Performance bonus, Guaranteed bonus (joining / sign-on bonus), Share-linked instruments
(Employee Stock Option Plan), Retirement benefits such as Provident Fund and Gratuity.
The Bank's updated Compensation Policy was reviewed and approved by the Board in their meeting dated March 26, 2026.
The Bank's approach to compensation is intended to drive meritocracy & fairness within the framework of prudent risk management
with effective supervisory oversight and stakeholder engagement. The compensation is linked to corporate performance, business
performance and individual performance. The compensation policy ensures a balance mix of fixed, variable & long-term pay, where
the current variable pay scheme is designed to reward employees based on holistic assessment of performance and actions in the
long term. The Compensation policy adheres to the principles as prescribed by the RBI.
The Bank's Compensation Policy provides the overarching governance framework for all employees of the Bank including MD/ CEO
and Whole time Directors of the Bank, Material Risk Taker (MRT), Risk Controller (RC) and Senior Management Personnels (SMP) of
the Bank.
Some of the important features of the Compensation Policy are as follows:
• Basis the RBI description of Material Risk Takers, the Bank defines Material Risk Takers (MRTs) whose actions have a material impact
on the risk exposure of the Bank, and who satisfy the qualitative and quantitative criteria prescribed by the RBI guidelines and
the Bank's Compensation policy.
• Definition of Senior Management Personnel: The Companies Act, 2013 (the Act) defines 'Senior Management" under the
explanation to Section 178 of the Act as personnel of the company, who are members of its Core management team excluding
the Board of Directors comprising all members of the management team one level below the Whole-time Directors, including the
functional heads'. The Senior Management of the Bank includes all employees who report directly to the MD & CEO or WTD, who
are bound by regulatory mandate to report to the Board or a Committee of the Board. Company Secretary and Chief Financial
Officer are included in the category of "Senior Management Personnel".
• The Bank defines employees in Other Control Functions (RC's) such as Head of Audit, Chief Compliance officer, Chief Risk Officer.
The objective is to ensure that they are compensated in a manner that is independent of the business areas they oversee and
commensurate with their key role in the firm.
• The total compensation will be a prudent mix of fixed pay and variable pay. Fixed pay will include basic pay, allowances,
perquisites, contribution towards superannuation/ retirals and any other form of benefits including reimbursable perquisites
with monetary ceilings.
• The Variable compensation will be in the form of share-linked instruments or cash or mix of cash and share linked instruments.
The share linked instruments include 'Employee Stock option' governed by Bank's Employee Stock Option Scheme- 2020.
• As per the RBI guidelines, the Bank would seek RBI approval for Annual Performance Variable pay of WTDs / CEOs under Section
35 B of the Banking Regulation Act 1949. The Annual Bonus of the WTDs / CEOs would be fixed by the C & NRC of the Board,
recommended by the Board and approved by the RBI in accordance with the stipulated RBI guidelines.
• Compensation for SMPs, MRTs, & RC's including Performance - Linked Variable Pay will be recommended by MD & CEO and
reviewed & approved by C & NRC. The quantum of Performance - Linked Variable Pay for all other employees including WTDs,
CEO, SMPs, MRTs, and RCs to be disbursed for a Financial Year would be decided based on the financial performance of the Bank
in the financial year.
• The mix of fixed and variable compensation of staff engaged in control functions including Risk, Compliance and Internal Audit
should be weighed in favor of fixed compensation.
• The quantum of the variable pay for an employee will not exceed 300% of total fixed pay in a year. The proportion of variable
pay will be higher at senior levels and lower at junior levels. At least 50% of overall pay would be variable for WTDs, CEO, MRTs
and SMPs as a design. However, they can earn less variable pay based on various performance criteria.
• As per the new RBI Compensation policy effective April 1, 2020, the overall compensation of WTDs/CEOs/Material Risk Takers / Risk
Controllers comprises Fixed Pay and Variable Pay. The Variable Pay for FY25 paid to the Material Risk Taker and Risk Controllers
was a mix of cash and share linked instruments. The Bank followed the Variable pay composition and Deferral guidelines as per
the RBI policy.
• The Bank ensures a representative set of situations in its compensation policy, which requires them to invoke the Malus and
Claw back clauses that may be applicable on entire variable pay. The Malus & Claw back provisions mentioned in the Bank's
Compensation policy would be applicable for all concerned employees in the categories of WTDs, CEO, SMPs, MRTs, and RCs. The
Bank may apply similar principles of Malus and Clawback to other employees of the Bank as the situation may arise.
In the event of reasonable deterioration in the financial performance, as defined in the board approved business plan, the C &
NRC shall evaluate the conditions leading to deterioration, including changes in regulations, force majeure, market conditions,
industry performance, economic social or other conditions whether in or outside control of the Bank or any person and related
factors. and decide if malus needs to be applied on none, part or all the unvested deferred variable compensation of the previous
years. The Malus and Claw back arrangements would have a look-back period of 3 years.
• The Compensation Policy does not provide for guaranteed bonus or sign on bonus in cash. However, in case of select critical
hires, joining / sign on bonus can be granted in form of pre-hiring ESOPs (a one-time grant made at the time of joining).
The Compensation Policy does not provide for severance pay other than the accrued benefits of Gratuity, Provident Fund, Leave
encashment wherever applicable, for any employee of the Bank. Retirement benefits in the form of Provident Fund and Gratuity
are as per the Bank's HR policies which are in line with the statutory norms.
(i) All Perquisites for employees are laid down in the HR Policies of the Bank.
(ii) For WTDs /CEO/ Senior Management Personnel / Material Risk Takers / Risk Controllers, share linked instruments such
as ESOPs form a part of the Variable pay and are a part of the total compensation. For other employees, ESOPs do not
form a part of the Variable Pay. ESOPs are very selectively granted to attract and retain talent. ESOP grant criteria include
grade of the employee, criticality of the position in terms of business continuity and growth, market value of the position/
perceived future value creation, performance and behavioural track record of the employee.
14.6 Implementation of IFRS converged Indian Accounting Standards (Ind AS)
The Reserve Bank of India (RBI) issued a circular in February 2016, requiring Scheduled Commercial Banks to implement Indian
Accounting Standards (Ind AS) from April 1, 2018. Vide a press release dated April 5, 2018 the implementation was deferred by one
year. The legislative amendments recommended by the Reserve Bank towards implementation of Ind AS are still under consideration
of the Government of India. Accordingly, RBI had, through a notification dated March 22, 2019, deferred the Ind AS implementation
until further notice.
Pursuant to the RBI Circular dated February 11, 2016, the Bank had formed a Steering Committee, comprising members from cross¬
functional areas, for the purpose of reviewing and monitoring the progress of implementation. The Bank had set up a Working
Group under the guidance of the Steering Committee and has conducted Gap Assessment and identified the differences between
the current accounting framework and Ind AS, including the identification of the accounting policy options provided under Ind AS
101, First Time Adoption.
The Audit Committee of the Board of Directors has an oversight on the progress of the Ind AS implementation. In accordance
with RBI directions, the Bank has been submitting half yearly standalone pro forma Ind- AS financial statements along with other
computations to the RBI, from time to time.
The Bank had implemented since April 1, 2024, the revised norms on classification, measurement and valuation of investments, as
required under RBI (Commercial Banks - Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025. These
norms are closer to Ind AS in terms of classification and accounting of investments..
15.2 Fixed Assets
15.2.1 Cost of premises includes '4.09 crores (Previous year '4.09 crores) in respect of properties for which execution of documents and
registration formalities are in progress. Of these properties, the Bank has not obtained full possession of one property having
written down value of '1.19 crores (Previous year '1.26 crores) and has filed a suit for the same. During financial year ended March
31, 2025, Hon. Court has passed an order in favour of the Bank and has awarded us a compensation of '1.27 crores along with 10%
interest from the date of filing of matter i.e. from 2006 plus legal costs. The matter is being pursued further.
15.2.2 Intangible Assets
The movement in fixed assets capitalized as computer software is given below:
15.3Contingent Liabilities
The Bank's pending litigations include claims against the Bank by clients and counterparties and proceedings pending with tax
authorities. The Bank has reviewed its pending litigations and proceedings and has adequately made, provisions wherever required
and disclosed as contingent liabilities wherever applicable. Claims against the Bank not acknowledged as debts comprise of tax
demands of '521.61 crores (Previous year '475.22 crores) in respect of which the Bank is in appeal, and legal cases sub judice of
'145.39 crores (Previous year '21.03 crores) . The Bank carries a provision of '19.07 crores (Previous year '13.04 crores) against legal
cases sub judice. The amount of contingent liabilities is based on management's estimate, and it is not probable that any liability is
expected to arise out of the same.
15.4 The Bank has a process to assess periodically all long-term contracts (including derivative contracts), for material foreseeable losses.
As at March 31, 2026, as well as March 31, 2025, the Bank has reviewed and made adequate provision as required under any law or
an accounting standard for material foreseeable losses on such long term contracts (including derivative contracts).
15.5 During the year ended March 31, 2026 and March 31, 2025, the Bank has transferred requisite amounts to the Investor Education
and Protection Fund, without any delay.
15.6 Corporate Social Responsibility (CSR)
In accordance with the provisions of the Companies Act, 2013, during the year, the Bank was required to spend on CSR activities an
amount of '165.65 crores (Previous year '181.34 crores).
The amount incurred towards CSR activities during the year and recognised in the statement of profit and loss amounted to
'166.77 crores (including unspent amount of '31.31 crores) (Previous year '181.34 crores including unspent amount of '9.48 crores)
comprising of the following
15.9.1 On September 25, 2020, the shareholders of the Bank approved the IndusInd Bank Employee Stock Option Scheme 2020 (ESOS
2020), which comprehensively replaced the erstwhile Employee Stock Option Scheme 2007 (ESOS 2007) that was approved by the
shareholders earlier on September 18, 2007. ESOS 2020 enables the Board and the Compensation and Nomination & Remuneration
Committee to grant such number of stock options of the Bank not exceeding 7% of the aggregate number of paid up equity shares
of the Bank, in line with the guidelines issued by the SEBI. The options vest at one time or at various points of time as stipulated in
the Award Confirmation issued by the Compensation and Nomination & Remuneration Committee, and there shall be a minimum
period of one year between the grant of option and vesting of the option. The unvested options shall expire by such period as
stipulated in the Award Confirmation or five years from the grant of options whichever is earlier, or such further or other period as
the Compensation and Nomination & Remuneration Committee may determine. The exercise price for each grant is decided by
the Compensation and Nomination & Remuneration Committee, which is normally based on the latest available closing price and
shall not be lower than the face value of the shares. Upon vesting, the options have to be exercised within a maximum period of
five years or such period as may be determined by the Compensation and Nomination & Remuneration Committee from time to
time. The stock options are equity settled where the employees will receive one equity share per stock option.
Pursuant to a Composite Scheme of Arrangement with the erstwhile Bharat Financial Inclusion Limited, the shareholders of the
Bank approved the IBL Special Incentive ESOS for BFIL Merger 2018 (ESOS 2018) on December 11, 2018. ESOS 2018 was approved
with a pool of 57,50,000 options which are equity settled. 50% of the options vest over a period of three years from the grant date
and the remaining options vest over a period of three years from the first anniversary of the grant date. Upon vesting, the options
have to be exercised within a maximum period of five years.
ESOS 2020 and ESOS 2018 are, hereinafter, collectively referred to as ESOS.
As at March 31,2026, the Compensation and Nomination & Remuneration Committee of the Bank has granted a total of 5,57,54,320
options that includes 5,04,66,514 options granted under ESOS 2020 and 52,87,806 options granted under ESOS 2018, as set
out below:
RBI, vide its clarification dated August 30, 2021, on Guidelines on Compensation of Whole Time Directors / Chief Executive Officers
/ Material Risk Takers and Control Function Staff, advised Banks that the fair value of share-linked instruments granted to such
personnel on the date of grant should be recognized as an expense for all the instruments granted after the accounting period
ending March 31, 2021. Accordingly, the Bank has changed its accounting policy from the intrinsic value method to the fair value
method for all share-linked instruments granted after March 31, 2021. The fair value of the stock-based compensation is estimated on
the date of grant using Black-Scholes option pricing model and is recognized as compensation expense over the vesting period. The
compensation so recognized in respect of which exercise of options is outstanding, is shown as Employee Stock Options Outstanding
on the face of the Balance Sheet.
The fair market price is the latest closing price prior to the date of the meeting of the Compensation and Nomination & Remuneration
Committee in which stock options are granted, available on the stock exchange on which the shares of the Bank are listed. Since
shares are listed on more than one stock exchange, the exchange where the Bank's shares have been traded highest on the said
date is considered for this purpose.
15.11 Non-Banking Assets acquired in Satisfaction of Claims
Bank has not acquired any non Banking assets in satisfaction of claims for years ended on March 31, 2026 and March 31,
2025 respectively.
15.12 Proposed Dividend
The Board of Directors, in their meeting held on April 24, 2026, have proposed dividend of ? 1.50 per equity share (previous year: Nil).
The proposal is subject to the approval of shareholders at the ensuing 32nd Annual General Meeting and accordingly, this proposed
dividend is not recognized as a liability on March 31, 2026 and has not been considered as an appropriation from the Profit and Loss
Account for the year ended March 31, 2026.
15.13Letters of Comfort
The Bank has not issued any letters of comfort during the year ended March 31, 2026 (Previous year Nil).
15.14 The Micro, Small and Medium Enterprises Development Act, 2006 that came into force from October 2, 2006, provides for certain
disclosures in respect of Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro
and small enterprises or interest payments due to delays in such payments.
15.15 During the financial year ended March 31, 2026, other than the transactions undertaken in the normal course of Banking business
and in accordance with extant regulatory guidelines and Bank's internal policies, as applicable:
1. No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources
or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the
understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or
invest in other persons or entities identified in any manner whatsoever by or on behalf of the Bank ("Ultimate Beneficiaries")
or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
2. No funds have been received by the Bank from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with
the understanding, whether recorded in writing or otherwise, that the Bank shall, whether, directly or indirectly, lend or invest
in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries")
or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
15.16 Disclosure of Material Items
Details of expenditure in excess of 1% of total income and classified under "Other Expenditure" has been provided below. Further,
details of Other assets in excess of 1% of total assets and classified under "Other Liabilities- Others" and "Other Assets- Others" has
been provided below.
15.17 Portfolio-level information on the use of funds raised from green deposits
The Bank has not raised any green deposit during the period April 1, 2025 to March 31, 2026. (Previous year -Nil)
16. Disclosures - Accounting Standards
16.1 Employee Benefits (AS-15)
On November 21, 2025, the Government of India notified four Labour Codes collectively referred to as the 'New Labour Codes',
consolidating 29 existing labour laws. The Ministry of Labour & Employment has published draft Central Rules and FAQs on December
30, 2025, to facilitate assessment of the financial impact arising from these regulatory changes. Accordingly, the Bank has recognised
an additional impact of '228.96 crore under 'Employees cost' in the Profit and Loss Account during the quarter ended December 31,
2025 and year ended March 31, 2026. The above impact will be re-assessed and finalised based on the final Rules.
Gratuity:
Gratuity is a defined benefit plan. The Bank has obtained qualifying insurance policies from insurance companies approved by the
IRDA. The following table presents a summary of the components of net expenses recognized in the Profit and Loss account, and
the funded status and amounts recognized in the Balance Sheet, on the basis of actuarial valuation.
Information about business and geographical segments:
Business segments have been identified and reported taking into account the target customer profile, the nature of products and
services, the differing risks and returns, the organisation structure, the internal business reporting structure, guidelines prescribed
by the RBI and in accordance with the Accounting Standard 17.
• Treasury: Includes investments, all financial markets activities undertaken on behalf of the customers, proprietary trading,
maintenance of reserve requirements and resource mobilisation from other Banks and financial institutions.
• Corporate Banking / Wholesale Banking: Includes lending, deposit taking and other services offered to corporate customers.
• Retail Banking: Includes lending, deposit taking and other services offered to retail customers. RBI in its Circular DOR.AUT.
REC.12/22.01.001/2022-23 dated April 7, 2022, for the purpose of disclosure under Accounting Standard 17, Segment Reporting,
has identified 'Digital Banking' as a sub-segment under Retail Banking. The Bank has presented segment results pertaining to
the said DBU of the Bank in sub-segment 'Digital Banking' of Retail Banking segment
• Other Banking Operations: Includes para Banking activities like third party product distribution which is undertaken through
branches, custody, clearing and demat operations etc.
Note:
• Fixed Assets, tax paid in advance and tax deducted at source (net of provisions), stationery and stamps, non-Banking assets
acquired in satisfaction of claims, and others which cannot be allocated to any segments, have been classified as unallocated
assets; Depreciation on Fixed Assets has been classified as unallocated expenses. The unallocated liabilities include share capital,
employee stock option outstanding, reserves and surplus, dividend and others.
• The above information is extracted from the Management Information System of the Bank.
*RBI's Master Direction on Financial Statements - Presentation and Disclosures, requires to sub-divide 'Retail Banking' into (a) Digital
Banking and (b) Other Retail Banking segment.
Geographic Segments:
The business operations of the Bank are largely concentrated in India. Activities outside India are restricted to resource mobilization in
the international markets and lending to a few overseas entities through the IFSC Banking Unit at the GIFT City, Gujarat. Since the Bank
does not have material earnings emanating from foreign operations, the Bank is considered to operate only in domestic segment.
16.3 Related party transactions (AS-18)
The following is the information on transactions with related parties during the year ended March 31, 2026:
a) Name of Related Party with whom Bank has transactions during the year
Key Management Personnel (KMP)
Mr. Rajiv Anand (appointed w.e.f. August 25, 2025); Mr. Sumant Kathpalia - Managing Director & CEO (ceased w.e.f. April 29,
2025); Mr. Arun Khurana - Whole Time Director & Deputy CEO (ceased w.e.f. April 28, 2025).
Relatives of KMP
Mrs. Gitanjali Mehta Anand, Tara Anand, Nandita Anand, P. L Narain, P. Sriniwas, Ratna Rao Shekar, Mrs. Ira Kathpalia, Mr. Karan
Kathpalia, Mr. Arvind Kathpalia, Mr. Ranjeet Kathpalia, Dr. Krishan Kumar Khurana, Mrs. Padma Khurana, Mrs. Nisha Khurana,
Mr. Karan Khurana, Mr. Krish Khurana, Dr. Rohit Khurana, Ms. Tanu Mehtani.
Associates
IndusInd Marketing and Financial Services Private Limited
Subsidiaries
Bharat Financial Inclusion Limited
The following represents the significant transactions between the Bank and such related parties including relatives
of above mentioned KMP during the year ended March 31, 2025:
a) Name of Related Party with whom Bank had transactions during the year
Key Management Personnel (KMP)
Mr. Sumant Kathpalia - Managing Director & CEO (upto April 29, 2025); Mr. Arun Khurana - Whole Time Director & Deputy CEO
(upto April 28, 2025)
Relatives of KMP
Mrs. Ira Kathpalia, Mr. Karan Kathpalia, Mr. Arvind Kathpalia, Mr. Ranjeet Kathpalia, Dr. Krishan Kumar Khurana, Mrs. Padma
Khurana, Mrs. Nisha Khurana, Mr. Karan Khurana, Mr. Krish Khurana, Dr. Rohit Khurana, Ms. Tanu Mehtani
Associates
IndusInd Marketing and Financial Services Private Limited
Subsidiaries
Bharat Financial Inclusion Limited
21. Significant Matters and its Impact
1. In respect of the significant matters mentioned in note numbers 17.1 to 17.3 of Schedule 18 of the financial statements for the previous
year ended March 31, 2025, the Bank concluded the discrepancies mentioned therein, as fraud against the Bank during the financial
year ended March 31, 2026.
The Bank had accounted for these discrepancies, in relation to the accounting of derivative trades amounting to '1,959.98 crores,
manual entries posted in the 'Other Assets' and 'Other Liabilities' amounting to '595.00 crores and accounting of interest and fee
income totalling to '846.40 crores pertaining to MFI portfolio during the financial year ended on March 31, 2025.
The Board of Directors of the Bank had set up an executive level Project Management Group (Group) to provide oversight and to ensure
that necessary steps including strengthening of systems, processes, internal financial and other controls, minimization of manual
accounting entries and control over reconciliation and other measures are taken. These have been since implemented effectively.
Further, the Bank has taken necessary steps to assess roles and responsibilities and fix accountability of its officials involved in the
above matters, initiated the process of disciplinary action against the concerned officials as per the Code of Conduct of the Bank
and concluded the said process in respect of majority of the employees.
2. During the current financial year, erstwhile Whole Time Director & Deputy CEO and Managing Director & CEO of the Bank resigned
on April 28, 2025 and April 29, 2025 respectively. Basis approval from the RBI vide its letter dated April 29, 2025, the Bank constituted
a "Committee of Executives", to oversee the operations of the Bank under the oversight and guidance of an oversight committee
of the Board. Pursuant to the appointment of new Managing Director & CEO with effect from August 25, 2025, the Committee of
Executive had been dissolved.
22. Audit Trail
The Bank has used accounting software for maintaining its books of account (including two accounting software managed and
maintained by a third -party software service provider), which have a feature of recording the audit trail (edit log).The audit trail
feature in respect of one accounting software was enabled at database level with effect from June 13, 2025 and another with effect
from June 17, 2025.
Further, where enabled, the audit trail feature has operated for all relevant transactions recorded in the accounting software
throughout the year, except for two accounting software as mentioned in the previous para. Additionally, the audit trail wherever
maintained, has been preserved by the Bank as per the statutory requirements for record retention from April 1, 2023 except, that
the logs related to database level changes is retained from April 1, 2024.
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