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24 June 2021 | 03:59

Industry >> Finance - Banks - Private Sector

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ISIN No INE095A01012 52Week High 1120 Book Value (Rs.) 451.31 Face Value 10.00
Bookclosure 16/08/2019 52Week Low 461 EPS 37.87 P/E 26.43
Market Cap. 77429.80 Cr. P/BV 2.22 Div Yield (%) 0.50 Market Lot 1.00


You can view the entire text of Notes to accounts of the company for the latest year
Year End :2019-03 

1. Capital

1.1 Capital Issue

During the year ended March 31, 2019, 24,63,681 equity shares of Rs. 10 each fully paid (Previous year 20,74,482 equity shares of Rs. 10 each fully paid) aggregating to an amount of Rs. 100.54 crores (Previous year Rs. 101.97 crores) which includes the share capital and share premium, were allotted on various dates to the employees who exercised their stock options.

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, on an on-going basis, the Bank has to maintain a Minimum Total Capital (MTC) of 10.875% (Previous year 10.875%) including Capital Conversion Buffer (CCB) at 1.875% (Previous year 1.875%), of the total risk weighted assets (RWA). Out of the MTC, at least 7.375% (Previous year 7.375%) of RWA, which includes 1.875% (Previous year 1.875%) towards CCB, shall be from Common Equity Tier 1 (CET1) capital and at least 7.00% (Previous year 7.00%) from Tier 1 capital. The capital adequacy ratio of the Bank is set out below:


(1) Does not include amount of securities pledged with Central Counter Parties, viz., Clearing Corporation of India Limited, National Securities Clearing Corporation of India Limited and Multi Commodity Exchange of India Limited.

(2) Amounts reported under columns 4, 5, 6 and 7 are not mutually exclusive.

(3) Does not include investment in Security Receipts.

2.1 Sale / transfer from HTM category

During the year ended March 31, 2019 and year ended March 31, 2018, the value of sales and transfer of securities to/from HTM category, excluding one-time transfer of securities from HTM and sale on account of Open Market Operation (OMO), has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year. As such, in line with RBI guidelines, specific disclosures on book value, market value, and provisions if any, relating to such sale and transfers are not required to be made.

2.2 Risk Exposure in Derivatives

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 (a) appropriate risk limits for different derivative products and (b) authority levels for review of limit breaches and to take appropriate actions in such events. 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.

Risk Management Department of the Bank is responsible for measuring, reporting and monitoring risk arising from derivatives transactions. It functions independent of Treasury business and undertakes the following activities:

- Monitoring derivatives operations against prescribed policies and limits on a daily basis;

- Daily review of product-wise profitability and activity reports for derivatives operations;

- Daily submission of MIS and details of exceptions to the Top Management,

- Monitoring effectiveness of derivative deals identified as hedges against the terms of the hedging instruments and underlying hedged risk; and

- Review of collaterals that are generally kept as cash or cash equivalent for securing derivative transactions.

The Risk Management function applies a host of quantitative tools and methods such as Value at Risk, PV01, stop-loss limits, counterparty limits, deal size limits and overnight position limits. 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.

Note 1: Outstanding Notional principal amount of exchange traded currency future trades was Rs. 7.77 crores as at March 31, 2019 (Previous year Rs. 85.76 crores).

Note 2: Marked to Market positions include interest accrued on the swaps.

Note 3: Credit exposure is computed based on the current exposure method.

Note 4: Based on the absolute value of PV01 of the derivatives outstanding as at the year end.

Note 5: Based on the PV01 of the outstanding derivatives.

Note 6: PV01 for Currency Derivatives and Interest Rate Derivatives are presented in absolute terms. However, aggregate of net PV01 shall remain smaller as there are opposite positions in Currency Derivatives and Interest Rate Derivatives that will get netted off.


1) Recoveries include sale to SC / RC.

2) Amounts include impact of NPAs and provisions as assessed by RBI in their Supervisory Programme for Assessment of Risk and Capital.

3) Advances granted to various companies and SPVs belonging to a Group in the infrastructure sector amounting to Rs. 3,004 crores (exposure to holding company of Rs. 2,000 crores and operating companies / SPVs Rs. 1,004 crores), were classified as ‘Non-performing -sub-standard’ and provided for, in excess of Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to the Advances Portfolio (IRAC norms) ; an accelerated provision has been made taking the provision against holding company exposure to 70% and operating companies / SPVs to 25%; a part of the loan to the holding company has been subsequently written off as at March 31, 2019.

4.1 Provision coverage ratio

Provision coverage ratio as at March 31, 2019 is 43.04% (Previous year 56.26%).

4.2 Divergence in Asset Classification and Provisioning for NPAs

RBI vide its circular no. DBR.BP.BC.No.63/21.04.018/2016-17 dated April 18, 2017 and DBR.BP.BC. No.32/21.04.018/2018-19 dated April 01, 2019, has directed that banks shall make suitable disclosure’s, wherever either (a) the additional provisioning requirements assessed by RBI exceeds 10 percent of the reported profit before provisions and contingencies for the reference period or (b) the additional Gross NPAs identified by RBI exceed 15 percent of the published incremental Gross NPAs for the reference period, or both. Based on the criteria mentioned in RBI circular, no disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBI Supervisory Programme for Assessment of Risk and Capital completed during the year, pertaining to the year ended March 31, 2018.


1) Out of Rs. 1,350.20 crores identified by RBI as non-performing advances, four accounts amounting to Rs. 809.50 crore were fully realised during the year ended March 31, 2018. This includes one large cement company account with an exposure of Rs. 551.70 crores that was resolved as per the resolution plan arrived at the Joint Lenders Forum. Borrower accounts with an exposure of Rs. 118.80 crore were resolved by way of sale to Asset Reconstruction Companies.

2) The remaining borrower accounts were classified as non-performing advances during the year ended March 31, 2018 and provided for accordingly.

1. Provision includes diminution / FITL / NPA provision, wherever applicable.

2. Sr. No. 2 includes loan assets restructured by the Bank on account of relief to borrowers affected by natural calamities amounting to? 170.87 crores (provision T 0.18 crores), and additions to existing restructured accounts amounting to Rs.0.28 crores (provision Rs.33.41 crores).

3. Sr. No. 6 includes reductions in existing restructured accounts amounting to Rs. 141.85 crores (provision Rs.27.95 crores) due to repayments, CDR exit, OTS, sold to ARC, and restructuring failures.

4. In case of NPAs, outstanding reported is net of unrealised interest.

1. Provision includes diminution / FITL / NPA provision, wherever applicable.

2. Sr. No. 2 includes additions to existing restructured accounts of Rs.17.60 crores (provision Rs.0.02 crores).

3. Sr. No. 6 includes reductions in existing restructured accounts of Rs.197.89 crores (provision Rs.50.44 crores) due to repayment, CDR exit, OTS, sold to ARC, and restructuring failures.

4. In case of NPAs, outstanding reported is net of unrealised interest.

4.3 In accordance with the Revised Framework on Resolution of Stressed Assets issued by RBI vide a circular dated February 12, 2018, the extant instructions on resolution of stressed assets such as Framework for Revitalising Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside SDR, and Scheme for Sustainable Structuring of Stressed Assets (S4A) have been withdrawn. The Joint Lenders’ Forum as an institutional mechanism for resolution of stressed accounts was also discontinued. However, accounts where the schemes have been implemented by then were allowed to continue, and the following details pertain to such accounts where the respective schemes have been implemented before the said circular became effective.

d) Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period) as at March 31, 2019: Nil (Previous year Nil)

e) Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period) as at March 31, 2019: Nil (Previous year Nil)

f) During the year ended March 31, 2019, no MSME account was restructured.

(a) This does not include SRs issued by Trusts that were closed and the outstanding SRs were cancelled and written off in the books of the Bank.

(b) During current year, no SRs issued by Trusts more than 8 years ago, were written off in the books of the Bank and held in physical form with Nil value. (Previous year Rs.Nil)

4.4 During the year ended March 31, 2019, there has been no individual purchase / sale of non-performing financial assets from/ to other banks (Previous year Nil).

4.5 During the year ended March 31, 2019, there was no sale of assets through securitization except sale of assets to SC/RC (Previous year Nil).

4.6 Provision on Standard Assets

In accordance with RBI guidelines, general provision on standard assets is made at the following rates:

(a) At 1% on standard advances to Commercial Real Estate Sector;

(b) At 0.25% on standard direct advances to SME and Agriculture; and

(c) At 0.40% of the balance outstanding in other standard assets.

Standard assets provision also includes additional provision made pursuant to RBI instructions including provisions towards restructured standard assets.

4.7 Unhedged Foreign Currency Exposure (UFCE) of Clients

Foreign exchange risk is the risk of loss arising out of adverse movements in foreign exchange rates affecting both on-balance sheet and off-balance sheet exposures. The forex positions that are not effectively hedged either by way of natural hedge or through derivatives/forward contracts expose a client to the risk of loss due to volatility in the forex rates. The Bank assesses the risk arising out of such UFCE of the clients at the time of credit appraisal and monitors the same at regular intervals. The provision for standard assets as of March 31, 2019, included an amount of Rs. 52.00 crores (Previous year Rs. 52.00 crores) towards UFCE. Further, capital held under Basel III Capital Regulations, as of March 31, 2019, includes an amount of Rs. 169.29 crores (Previous year Rs. 185.09 crores) on account of UFCE, computed at the applicable risk weights.

4.8 As on March 31, 2019 and March 31, 2018, no resolution plan in respect of accounts wherein aggregate exposure of the lenders amounted to Rs. 2,000 crores or above, has been implemented in accordance with the Revised Framework on Resolution of Stressed Assets issued by RBI vide a circular dated February 12, 2018.


(1) Working funds are reckoned as the average of total assets as per the monthly returns in Form X filed with RBI during the year.

(2) Return on Assets is computed with reference to average working funds.

(3) Business per employee (deposits plus gross advances) is computed after excluding Inter-bank deposits.

4.8 Liquidity Coverage Ratio (LCR)

Liquidity Coverage Ratio (LCR) aims to ensure that the Bank is able to maintain an adequate level of unencumbered High Quality Liquid Assets (HQLAs) to meet its liquidity needs convertible into cash under significantly severe liquidity stress scenario lasting for a 30-calendar day time horizon. LCR measures the Bank’s potential to stand under combined idiosyncratic and market-wide liquidity stress condition, where the Bank experiences accelerated withdrawal of deposits from retail as well wholesale depositors, partial loss of secured funding, increase in collateral requirements and unscheduled draw down of unused credit lines.

The Bank maintains HQLA in terms of Cash, unencumbered excess SLR, proportion of statutory SLR as allowed by RBI, excess statutory cash reserve and high rated corporate bonds issued by entities other than financial institutions. For the purposes of LCR computation, the Bank has considered all inflows and outflows that may have a quantifiable impact under the liquidity stress scenario.

4.9 Single borrower limit and Group Borrower Limit

During the year ended March 31, 2019 and year ended March 31, 2018, the Bank’s credit exposures to single borrowers and group borrowers were within the prudential limits prescribed by RBI.

4.10 Unsecured advances

The Bank has not extended any project advances where the collateral is an intangible asset such as a charge over rights, licenses, authorizations, etc. (Previous year Nil). The Unsecured Advances of Rs. 37,444.15 crores (Previous year Rs. 29,396.20 crores) as disclosed in Schedule 9B (iii) are without any collateral or security.

4.11 Details of factoring exposure

The factoring exposure of the Bank as at March 31, 2019 is Rs. 138.95 crores (Previous year Rs. 46.59 crores).

5. Miscellaneous

5.1 Amount of Provisions for taxation during the year

5.2 Penalties imposed by RBI

During the year ended March 31, 2019, RBI imposed a penalty of Rs. 1.00 crore for non-compliance with direction issued in respect of time-bound implementation and strengthening of SWIFT-related operational controls in exercise of powers vested under Section 47(A)(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949. This penalty was duly paid by the Bank.

During the year ended March 31, 2018, RBI imposed a penalty of Rs. 3.00 crores for non-adherence to Income Recognition and Asset Classification norms and regulatory restriction pertaining to non-fund based facilities in exercise of powers vested under Section 47(A)(1)(c) read with section 46(4) of the Banking Regulation Act, 1949. This penalty was duly paid by the Bank.

6.1 Fixed Assets

6.1.1 Cost of premises includes Rs. 4.09 crores (Previous year Rs. 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 Rs. 1.48 crores (Previous year Rs. 1.51 crores) and has filed a suit for the same.

6.1.2 Premises owned by the Bank were revalued as at March 31, 2019 in accordance with Bank’s policy and an amount of Rs. 29.69 crores (Previous year Nil) was debited to Revaluation Reserve Account.

7.1 Contingent 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 provided for where provisions are required, and disclosed as contingent liabilities where applicable. Claims against the Bank not acknowledged as debts comprise of tax demands of Rs. 89.41 crores (Previous year Rs. 176.28 crores) in respect of which the Bank is in appeal, and legal cases sub judice of Rs. 306.22 crores (Previous year Rs. 300.24 crores). The Bank carries a provision of Rs. 4.52 crores (Previous year Rs. 4.52 crores) against 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.

The Judgment of the Hon’ble Supreme Court dated February 28, 2019, in the matter of The Regional Provident Fund Commissioner (II) West Bengal vs. Vivekananda Vidyamandir and Ors sets out principles for computation of contribution towards Provident Fund where “basic wage” includes all emoluments paid to an employee as per the terms of his/ her contract of employment. The Judgment has also laid down the standards applicable to determine “basic wage” as that amount that is payable to all employees uniformly and is to be included within the definition of “basic wage’. A review petition against this decision has been filed and is pending before the SC for disposal. Since there are no other directions from the EPFO and pending decision of the review petition on the subject, no liability is currently ascertainable and consequently no effect has been given in the financial statement.

7.2 The Bank has a process to assess periodically all long term contracts (including derivative contracts), for material foreseeable losses. At the year end, the Bank has reviewed and adequate provision as required under any law or an accounting standard for material foreseeable losses on such long term contracts (including derivative contracts), has been made.

7.3 Overseas Asset, NPAs and Revenue

During the year, the Bank earned a revenue of Rs. 305.53 crores through overseas assets (Previous year Rs. 116.78 crores). The overseas assets as at March 31, 2019 amounted to Rs. 4,547.40 crores (Previous year Rs. 4,396.30 crores) and there were no NPAs (Previous year Nil). Assets for this purpose is defined to include client advances.

7.4 The Bank does not have any Off-Balance Sheet SPVs which are required to be consolidated as per accounting standards (Previous year Nil).

7.5 There is no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank (Previous year Nil).

7.6 Corporate Social Responsibility (CSR)

During the year, the Bank has spent an amount of Rs. 55.46 crores (Previous year Rs. 20.47 crores) towards CSR initiatives through various projects in the areas of Environment (Watershed Development, Afforestation, Lake/ Pond Rejuvenation), Education, Rural Development and Inclusiveness, Preventive Healthcare and Sports. Of the total CSR spends, no amount was incurred towards capital expenditure (Previous year Rs. 0.13 crores).

7.7 Drawdown from Reserves

During the year ended March 31, 2019 and year ended March 31, 2018, the Bank did not draw down from the reserves (refer note 12.5 of Schedule 18).

7.8 Credit Default Swaps

The Bank has not undertaken any transactions in Credit Default Swaps (CDS) during the year ended March 31, 2019 (Previous year Nil).

7.9 On October 14, 2017, the Board of Directors of the Bank and Bharat Financial Inclusion Limited (BFIL), at their respective meetings, approved a merger of BFIL with the Bank in an all-stock transaction through a Composite Scheme of Arrangement (Scheme). The Competition Commission of India has approved the proposed Scheme and RBI has conveyed their ‘No Objection’ for the Scheme and an approval for incorporating a Wholly-Owned-Subsidiary to act as Business Correspondent of the Bank. The Scheme has received ‘no adverse remarks’ from the National Stock Exchange of India Limited and BSE Limited, basis the comments received from the Securities and Exchange Board of India. For the purposes of implementing the Scheme, IndusInd Financial Inclusion Limited (IFIL) has been incorporated on August 06, 2018 as a wholly owned subsidiary of the Bank. Pursuant to an order of National Company Law Tribunal (NCLT), the following meetings were convened: (a) shareholders’ meeting of the Bank, on December 11, 2018; (b) shareholders’ meeting and creditors’ meetings of BFIL, on December 11, 2018; and (c) shareholders’ meeting of IFIL, on December 7, 2018. The shareholders and creditors of the Bank, BFIL and IFIL, as applicable, have approved the Scheme at the aforesaid meetings. The petition filed with NCLT to sanction the Scheme was heard on April 23, 2019 and the matter was reserved by the NCLT for final order. Accordingly, the proposed Scheme has not been given effect to in the standalone profit for the year ended March 31, 2019 or the standalone balance sheet as at that date.

8. Employee Stock Option Scheme (ESOS)

8.1 The shareholders of the Bank approved Employee Stock Option Scheme (ESOS 2007) on September 18, 2007. ESOS enables the Board and the Compensation Committee to grant such number of stock options of the Bank not exceeding 7% of the aggregate number of issued and paid up equity shares of the Bank, in line with the guidelines issued by the SEBI. The options vest within a maximum period of five years from the date of grant of option. The exercise price for each grant is decided by the Compensation Committee, which is normally based on the latest available closing price. Upon vesting, the options have to be exercised within a maximum period of five years. The stock options are equity settled where the employees will receive one equity share per stock option.

8.2 Recognition of expense

The Bank follows the intrinsic value method to recognize employee costs relating to ESOS, in accordance with the Guidance Note on Accounting for Employee Share-based Payments issued by the ICAI. Excess of fair market price over the exercise price of an option at the grant date, is recognized as a deferred compensation cost and amortized on a straight-line basis over the vesting period of such options. The compensation so recognised 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 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.

Expected volatility is a measure of the amount by which the equity share price is expected to fluctuate during a period. The measure of volatility used in Black -Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the share over a period of time. Expected volatility has been computed by considering the historical data on daily volatility in the closing equity share price on the National Stock Exchange of India Limited (NSE), over a prior period equivalent to the expected life of the options, till the date of the grant.

The stock-based compensation cost calculated as per the intrinsic value method for the year ended March 31, 2019 is Rs. 0.30 crores (Previous year Rs. 1.21 crores). Had the Bank adopted the Black - Scholes model based fair valuation, compensation cost for the year ended March 31, 2019, would have increased by Rs. 91.80 crores (Previous year Rs. 68.81 crores) and the pro forma profit after tax would have been lower by Rs. 59.72 crores (Previous year Rs. 44.99 crores). On a pro forma basis, the basic and diluted earnings per share would have been as follows:

9. Disclosures - Accounting Standards

9.1 Employee Benefits (AS-15)


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 funded status and amounts recognized in the Balance Sheet, on the basis of actuarial valuation.

Contributions expected to be paid to the plan during the annual period beginning after the Balance Sheet date is Rs. 35 crores (Previous year Rs. 28 crores).

Provident Fund

Contributions towards Provident Fund are made to trusts separately established for the purpose and the scheme administered by Regional Provident Fund Commissioner (RPFC), as applicable. In accordance with the guidance note on Valuation of Interest Rate Guarantees on Exempt Provident Funds under AS 15 (Revised) issued by the Institute of Actuaries of India, interest shortfall is provided for based on actuarial valuation.

9.2 Segment Reporting (AS 17)

The Bank operates in four business segments, viz. Treasury, Corporate / Wholesale Banking, Retail Banking and Other Banking Operations. There are no significant residual operations carried by the Bank.


Fixed Assets, tax paid in advance and tax deducted at source (net of provisions), stationery and stamps, nonbanking 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 provided as per MIS for internal reporting purpose and relied upon by the auditors.

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.

9.3 Related party transactions (AS-18)

The following is the information on transactions with related parties:

Key Management Personnel

Mr. Romesh Sobti, Managing Director


IndusInd Marketing and Financial Services Private Limited


The Bank has incorporated a wholly owned subsidiary named IndusInd Financial Inclusion Limited during the financial year ended March 31, 2019. The aforesaid subsidiary company is yet to commence its operations as on March 31, 2019.

In accordance with RBI guidelines, details pertaining to the related party transactions have not been provided as there is only one related party in each of the above categories.

9.4 Operating Leases (AS 19)

The Bank has taken a number of premises on operating lease for branches, offices, ATMs and residential premises for staff. The Bank has not given any assets on operating lease. The details of maturity profile of future operating lease payments are given below:

The Bank has not sub-let any of the properties taken on lease. There are no provisions relating to contingent rent.

The terms of renewal and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements.

In respect of two borrower accounts where fraud was detected during the year ended March 31, 2018, the Bank opted to make the provision over four quarters, in accordance with the RBI circular DBR.No.BP.BC.92/21.04.048/2015-16 dated April 18, 2016. Accordingly, the Bank has charged to the Profit and Loss account an amount of Rs. 71.52 crores during the year (Previous Year Rs. 23.84 crores).

9.4 Proposed Dividend:

The Board of Directors, in their meeting held on May 22, 2019 have proposed a final dividend of Rs. 7.50 per equity share amounting to Rs. 544.93 crores, inclusive of corporate dividend tax. The proposal is subject to the approval of shareholders at the ensuing 25th Annual General Meeting and accordingly, this proposed dividend amounting to Rs. 544.93 crores is not recognised as a liability on March 31, 2019 and the same has not been considered as an appropriation from the Profit and Loss Account for the year ended March 31, 2019.

Dividend for the year ended March 31, 2018 paid during the year pursuant to the approval of the shareholders at the 24th Annual General Meeting, at the rate of Rs. 7.50 per equity share amounting to Rs. 542.94 crores including corporate dividend tax, has been considered as an appropriation from the Profit and Loss Account during the year.

9.5 Non-banking Assets acquired in Satisfaction of Claims

During the financial year 2017-18, Bank acquired a vacant land parcel, the value of which at Rs. 347.55 crores, was included under the head “Non-Banking Asset acquired in satisfaction of claims” vide item No. IV of Schedule 11 - Other Assets in the Balance Sheet as at March 31, 2018. Impairment, if any, was tested basis the valuation reports from two independent valuers / appraisers. In accordance with the clarification issued by RBI on May 8, 2019, a provision of Rs. 130.35 crores has been made by debiting Rs. 76.05 crores to the Profit and Loss Account and Rs. 54.30 crores to Reserves and Surplus - Balance in Profit and Loss Account which will be reversed, along with the corresponding charge, into the Profit and Loss Account over the next three quarters.

9.6 Letters of Comfort

The Bank has not issued any letters of comfort during the year ended March 31, 2019 (Previous year Nil).

9.7 Disclosure on Remuneration

Nomination and Remuneration Committee

The Nomination and Remuneration Committee (NRC) presently comprises four members, three of whom are Independent Directors. On aspects relating to remuneration, the mandate of the NRC is to establish, implement and maintain remuneration policies, procedures and practices that help to achieve effective alignment between remuneration and risks. The NRC is also mandated to oversee framing, implementation and review of the Compensation Policy of the Bank as per RBI guidelines on Compensation of Whole Time Directors / Chief Executive Officers / Risk Takers and Control function staff. The 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 Nomination and Remuneration Committee also reviews compensation policies of the Bank with a view to attract, retain and motivate employees.

Compensation Policy

The Compensation Policy is formulated by the Board in alignment with the RBI guidelines and covers all components of compensation including fixed pay, variable pay, perquisites, retirement benefits as Provident Fund and Gratuity and Employee Stock Options.

The key objectives of the policy are:

(i) Benchmark employee compensation for various job positions and skills with that of the market.

(ii) Maintain an optimal balance between fixed and variable pay

(iii) Pay for ‘Position, Performance and Person’

(iv) Build employee ownership and long term association through long term incentive plans (ESOPs)

Some of the important features of the Compensation Policy are as follows:

(i) The Bank has identified “Risk Takers and Risk Controllers” separately. Risk Takers includes all employees in Grades Senior Vice President 3 (SVP3) and above belonging to the business line functions of Corporate & Commercial Banking Group, Global Markets Group, Transaction Banking Group, Gems and Jewellery business, Consumer Banking and Consumer Finance Division, whose functioning and decisioning impacts the Bank materially on tangible financial performance aspects of revenues, costs, and profits. Risk Controllers are employees in Grades SVP3 and above belonging to the business support functions of Operations, Finance & Accounts, Information Technology, Secretarial, Credit, Risk, Financial Restructuring & Reconstruction Group, Credit Quality Loan Assurance Review, Human Resources, Inspection and Audit, Investor Relations, Marketing, Client Experience and Quality etc., who support the business line functions through back office processes and activities and their functioning does not have a revenue impact through business generation on the Bank’s financial performance.

(ii) The Nomination and Remuneration Committee will oversee the framing, implementation and review of the Compensation Policy.

(iii) In respect of WTDs / CEO / Risk Takers / Control function staff of the Bank, the Compensation policy provides for a reasonable annual increase in fixed pay in line with the market benchmarks. Their individual increments are linked to their annual performance rating and increment percentages at various performance rating levels, are decided on the basis of the financial performance of the Bank. Exceptions are restricted to a select few high performers to reward performance, motivate and retain critical employees.

(iv) The quantum of overall variable pay to be disbursed in a year for all eligible employees including the Risk Takers and Risk Controllers as defined above would vary from year to year on the basis of the financial performance of the Bank measured through various parameters such as Net Interest Margin, Net Interest Income, Return on Assets, Profit After Tax and Return on Equity.

(v) Employee Compensation is linked to performance. Increments and variable pay are linked to their annual performance rating. Annual Performance Rating for an employee is arrived on the basis of tangible performance against pre-set Key Results Areas (KRAs) / measurable objectives set at the beginning of the financial year.

(vi) The individual variable pay is linked to the annual performance rating, and based on variable pay grids that outline variable pay as a percentage of Annual Guaranteed cash at various rating levels for a grade band. Exceptional increments and variable pay may be paid to select high performers, but in no case they would violate the stipulated RBI guidelines. The Bank also makes a distinction between Risk Takers and Risk Controllers and incorporates separate parameters on variable pay for these segments in its Compensation Policy.

(vii) The individual variable pay would not exceed 70% of the fixed pay. Wherever variable pay exceeds a substantial portion of fixed pay as defined by the Bank, (currently set at 65% of fixed pay), the variable pay will be deferred over a period of 3 years in a ratio to be decided by the management in accordance with the RBI guidelines.

(viii) The Bank will implement malus/ claw-back arrangements with the concerned employees in case of deferred variable pay as defined above. The criteria would be negative contributions to the bank and/or relevant line of business in any year. As applicable, malus arrangement would adjust deferred remuneration before vesting and claw-back arrangement would adjust deferred remuneration after vesting.

(ix) The Compensation Policy does not provide for guaranteed bonus or sign on bonus in cash. However, in case of select critical hires, 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 for any employee of the Bank, irrespective of the reasons for severance.

(x) 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.

(xi) Perquisites are laid down in HR Policies of the Bank.

(xii) At present, the Bank uses cash based form of variable compensation. Cash based form of variable compensation is easy to administer and leads to an instant reward to the concerned employees.

(xiii) ESOPs do not form a part of the variable pay and are kept outside the computation of total compensation of an employee. They are very selectively granted to attract and retain talent. ESOPs are not granted with a defined periodicity. ESOP grant criteria include grade of the employee, criticality of the position in terms of business contribution, market value of the position, and performance and behavioural track record of the employee.

Disclosure on remuneration to Non-Executive Directors:

The Non-Executive Directors are paid Sitting Fees for attending meetings of the Board at the rate of Rs. 1,00,000/per meeting, at the rate of Rs. 50,000/- per meeting of the Audit Committee of the Board, the Committee of Directors (CoD), and the Risk Management Committee, and at the rate of Rs. 20,000/- per meeting, in respect of all the other Committees. An amount of Rs. 1.44 crores was paid as sitting fees to the Non-Executive Directors during the year ended March 31, 2019 (Previous year Rs. 1.28 crores). In accordance with RBI guidelines and the approval accorded at the 22nd Annual General Meeting, an amount of Rs. 0.86 crores (Previous year Rs. 0.93 crores) has been paid as remuneration to Non-Executive Directors during the year ended March 31, 2019.

10. 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.

11. Previous year’s figures have been regrouped / reclassified wherever necessary.