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HDFC Bank

BSE: 500180|NSE: HDFCBANK|ISIN: INE040A01026|SECTOR: Banks - Private Sector
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Mar 15
Notes to Accounts Year End : Mar '16
1 Change in classification
 
 Pursuant to RBI circular dated July 16, 2015, deposits placed, with
 NABARD, SIDBI and NHB aggregating to Rs, 13,719.68 crore (previous year:
 Rs, 14,818.19 crore), arising out of the shortfall in meeting the
 priority sector lending targets / sub-targets, have been included under
 ''Other Assets'' and interest thereon aggregating to Rs, 861.15 crore
 (previous year: Rs, 847.12 crore) under ''Interest Earned - Others''.
 Hitherto, these were included under ''Investments'' and ''Interest Earned
 - Income on Investments'' respectively. Figures for the previous year
 have been regrouped / reclassified to conform to current year''s
 classification.  The above change in classification has no impact on
 the profit of the Bank for the years ended March 31, 2016 and March 31,
 2015.
 
 The Bank has not raised any additional tier I and tier II capital
 during the year ended March 31, 2016 and March 31, 2015.
 
 Subordinated debt (lower Tier II capital), upper Tier II capital and
 innovative perpetual debt instruments outstanding as at March 31, 2016
 are Rs, 10,812.00 crore (previous year: Rs, 12,014.00 crore), Rs, 4,078.45
 crore (previous year: Rs, 4,040.90 crore) and Rs, 200.00 crore (previous
 year: Rs, 200.00 crore) respectively.
 
 In accordance with RBI guidelines, banks are required to make Pillar 3
 disclosures under Basel III capital regulations. The Bank has made
 these disclosures which are available on its website at the following
 link: http://www.hdfcbank.com/aboutus/basel_disclosures/default.htm.
 These Pillar 3 disclosures have not been subjected to audit.
 
 2 Capital Infusion
 
 During the year ended March 31, 2016, the Bank allotted 2,16,91,200
 equity shares (previous year: 2,27,00,740 equity shares) aggregating to
 face value Rs, 4.34 crore (previous year: Rs, 4.54 crore) in respect of
 stock options exercised. Accordingly, share capital increased by Rs,
 4.34 crore (previous year: Rs, 4.54 crore) and share premium increased
 by Rs, 1,218.56 crore (previous year: Rs, 990.88 crore).
 
 Pursuant to the shareholder and regulatory approvals, the Bank on
 February 10, 2015, concluded a Qualified Institutions Placement (QIP)
 of 1,87,44,142 equity shares at a price of Rs, 1,067 per equity share
 aggregating Rs, 2,000 crore and an American Depository Receipt (ADR)
 offering of 2,20,00,000 ADRs (representing 6,60,00,000 equity shares)
 at a price of USD 57.76 per ADR, aggregating USD 1,271 million.
 Pursuant to these issuances, the Bank allotted 8,47,44,142 additional
 equity shares.  Accordingly, share capital increased by Rs, 16.95 crore
 and share premium increased by Rs, 9,705.84 crore, net of share issue
 expenses of Rs, 151.03 crore.
 
 Basic earnings per equity share have been computed by dividing net
 profit for the year attributable to the equity shareholders by the
 weighted average number of equity shares outstanding for the year.
 Diluted earnings per equity share have been computed by dividing the
 net profit for the year attributable to the equity shareholders by the
 weighted average number of equity shares and dilutive potential equity
 shares outstanding during the year, except where the results are
 anti-dilutive.  The dilutive impact is on account of stock options
 granted to employees by the Bank. There is no impact of dilution on the
 profits in the current year and previous year.
 
 4 Reserves and Surplus
 
 Draw down from reserves
 
 Share Premium
 
 The Bank has not undertaken any drawdown from reserves during the years
 ended March 31, 2016 and March 31, 2015, except towards share issue
 expenses of Rs, 151.03 crore, incurred for the equity raised through
 the Qualified Institutions Placement (QIP) and American Depository
 Receipt (ADR) routes during the year ended March 31, 2015, which have
 been adjusted in that year against the share premium account in terms
 of Section 52 of the Companies Act, 2013.
 
 Statutory Reserve
 
 The Bank has made an appropriation of Rs, 3,074.05 crore (previous
 year: Rs, 2,553.98 crore) out of profits for the year ended March 31,
 2016 to Statutory Reserve pursuant to the requirements of Section 17 of
 the Banking Regulation Act, 1949 and RBI guidelines dated September 23,
 2000.
 
 Capital Reserve
 
 During the year ended March 31, 2016, the Bank appropriated Rs, 222.15
 crore (previous year: Rs, 224.92 crore), being the profit from sale of
 investments under HTM category and profit on sale of immovable
 properties, net of taxes and transfer to statutory reserve, from Profit
 and Loss Account to Capital Reserve Account.
 
 General Reserve
 
 The Bank has made an appropriation of Rs, 1,229.62 crore (previous
 year: Rs, 1,021.59 crore) out of profits for the year ended March 31,
 2016, to General Reserve pursuant to provisions of the Companies Act,
 2013.
 
 Investment Reserve Account
 
 During the year ended March 31, 2016, the Bank has transferred Rs, 8.52
 crore (net) from Investment Reserve Account to Profit and Loss Account
 and in the previous year, the Bank appropriated Rs, 27.54 crore (net)
 from Profit and Loss Account to Investment Reserve Account as per RBI
 guidelines.
 
 5 Dividend on shares allotted pursuant to exercise of stock options
 
 The Bank may allot equity shares after the Balance Sheet date but
 before the book closure date pursuant to the exercise of any employee
 stock options. These equity shares will be eligible for full dividend
 for the year ended March 31, 2016, if approved at the ensuing Annual
 General Meeting.
 
 6 Accounting for employee share based payments
 
 The shareholders of the Bank approved grant of equity share options
 under Plan C in June 2005, Plan D in June 2007, Plan E in June
 2010 and Plan F in June 2013. Under the terms of each of these Plans,
 the Bank may issue Equity Stock Options (''ESOPs'') to employees and
 Whole Time Directors of the Bank, each of which is convertible into one
 equity share.  All the plans were framed in accordance with the SEBI
 (Employee Stock Option Scheme & Employee Stock Purchase Scheme)
 Guidelines, 1999 as amended from time to time and as applicable at the
 time of grant. Accounting for the stock options has been in accordance
 with the SEBI (Share Based Employee Benefits) Regulations, 2014 to the
 extent applicable.
 
 Plans C, D, E and F provide for the issuance of options at the
 recommendation of the Nomination & Remuneration Committee at the
 closing price on the working day immediately preceding the date when
 options are granted. The price being the closing price of the share on
 an Indian stock exchange with the highest trading volume as of the
 working day preceding the date of grant.
 
 Vesting conditions applicable to the options are at the discretion of
 the Nomination & Remuneration Committee. These options are exercisable
 on vesting, for a period as set forth by the Nomination & Remuneration
 Committee at the time of grant. The period in which options may be
 exercised cannot exceed five years. During the years ended March 31,
 2016 and March 31, 2015, no modifications were made to the terms and
 conditions of ESOPs as approved by the Nomination & Remuneration
 Committee.
 
 7 Other liabilities
 
 - The Bank held contingent provisions towards standard assets amounting
 to Rs, 2,001.21 crore as on March 31, 2016 (previous year: Rs, 1,558.42
 crore). These are included under other liabilities.
 
 - Provision for standard assets is made in accordance with RBI
 guidelines. Provision for standard assets is made @ 0.25% for direct
 advances to agriculture and Small and Micro Enterprises (SMEs) sectors,
 @ 1% for advances to commercial real estate sector, @ 0.75% for
 advances to commercial real estate - residential housing sector and @
 5% on restructured standard advances. Provision for standard assets is
 made @ 2% on all exposures to the wholly owned step down subsidiaries
 of the overseas subsidiaries of Indian companies, sanctioned / renewed
 after December 31, 2015.  For housing loans offered at a comparatively
 lower rate of interest in the first few years after which rates are
 reset at higher rates (teaser rate loans), provision for standard
 assets is made @ 2% until after one year from the date on which the
 rates are reset at higher rates. For accounts classified under special
 mention account SMA-2 category, provision for standard advances is
 made @ 5% where the Bank under consortium / multiple banking
 arrangement has the largest Aggregate Exposure (AE) or second largest
 AE with aggregate exposure of Rs, 1,000 million or above and Joint
 Lenders'' Forum (JLF) is not formed or the JLF fails to agree upon a
 common corrective action plan within the stipulated time frame. The
 Bank maintains general provision for standard assets including credit
 exposures computed as per the current
 marked to market values of interest rate and foreign exchange
 derivative contracts at levels stipulated by RBI from time to time. In
 accordance with regulatory guidelines and based on the information made
 available by its customers to the Bank, for exposures to customers who
 have not hedged their foreign currency exposures, provision for
 standard assets is made at levels ranging up to 0.80% depending on the
 likely loss the entities could incur on account of exchange rate
 movements. For all other loans and advances provision for standard
 assets is made @ 0.40%. Provision for standard assets of overseas
 branches has been made at higher of rates prescribed by the overseas
 regulator or RBI.
 
 - The Bank has presented gross unrealised gain on foreign exchange and
 derivative contracts under other assets and gross unrealised loss on
 foreign exchange and derivative contracts under other liabilities.
 Accordingly, other liabilities as on March 31, 2016 include unrealised
 loss on foreign exchange and derivative contracts of Rs, 7,524.88 crore
 (previous year: Rs, 6,914.10 crore).
 
 8 Unhedged foreign currency exposure
 
 - The Bank has in place a policy and process for managing currency
 induced credit risk. The credit appraisal memorandum prepared at the
 time of origination and review of a credit is required to discuss the
 exchange risk that the customer is exposed to from all sources,
 including trade related, foreign currency borrowings and external
 commercial borrowings.  It could cover the natural hedge available to
 the customer as well as other hedging methods adopted by the customer
 to mitigate exchange risk. For foreign currency loans granted by the
 Bank beyond a defined threshold the customer will be encouraged to
 enter into appropriate risk hedging mechanisms with the Bank.
 Alternatively, the Bank will satisfy itself that the customer has the
 financial capacity to bear the exchange risk in the normal course of
 its business and / or has other mitigants to reduce the risk. On a
 monthly basis, the Bank reviews information on the unhedged portion of
 foreign currency exposures of customers, whose total foreign currency
 exposure with the Bank exceeds a defined threshold.  Based on the
 monthly review, the Bank proposes suitable hedging techniques to the
 customer to contain the risk.  A Board approved credit risk rating
 linked limit on unhedged foreign currency position of customers is
 applicable when extending credit facilities to a customer. The
 compliance with the limit is assessed by estimating the extent of drop
 in a customer''s annual EBID due to a potentially large adverse movement
 in exchange rate impacting the unhedged foreign currency exposure of
 the customer. Where a breach is observed in such a simulation, the
 customer is advised to reduce its unhedged exposure.
 
 - In accordance with RBI guidelines, provisions held for standard
 assets and capital maintained by the Bank as at March 31, 2016 in
 respect of the unhedged foreign currency exposure of customers was Rs,
 114.84 crore (previous year: Rs, 76.49 crore) and Rs, 275.44 crore
 (previous year: Rs, 199.59 crore) respectively.
 
 -/ Outstanding repo and deals with RBI under liquidity adjustment
 facility / marginal standing facility as of March 31, 2016 were X
 31,830.24 crore (previous year: X 5,200.00 crore). There were no
 outstanding reverse repo deals with RBI under liquidity adjustment
 facility / marginal standing facility as of March 31, 2016 and as of
 March 31, 2015.
 
 Movement in provisions held towards depreciation on investments have
 been reckoned on a yearly basis.
 
 - Repo transactions
 
 In accordance with RBI''s guidelines, accounting of repo / reverse repo
 transactions excludes those done with the RBI.  Following are the
 details of the repo / reverse repo transactions deals done during the
 years ended March 31, 2016 and March 31, 2015:
 
 # Amounts reported under these columns above are not mutually
 exclusive.
 
 * Excludes investments in equity shares and units of equity oriented
 mutual funds in line with extant RBI guidelines.
 
 ** Excludes investments in equity shares, units of equity oriented
 mutual funds, pass through certificates, security receipts, commercial
 paper and certificate of deposits in line with extant RBI guidelines.
 
 # Amounts reported under these columns above are not mutually
 exclusive.
 
 * Excludes investments in equity shares and units of equity oriented
 mutual funds and in line with extant RBI guidelines.
 
 ** Excludes investments in equity shares, units of equity oriented
 mutual funds, pass through certificates, security receipts, commercial
 paper and certificate of deposits in line with extant RBI guidelines.
 
 - Investments include securities of Face Value (FV) aggregating Rs,
 1,520.00 crore (previous year: FV Rs, 1,563.00 crore) which are kept as
 margin for clearing of securities, of FV Rs, 13,729.30 crore (previous
 year: FV Rs, 16,249.30 crore) which are kept as margin for
 Collateralised Borrowing and Lending Obligation (CBLO) and of FV
 aggregating Rs, 56.00 crore (previous year: FV Rs, 63.25 crore) which
 are kept as margin for Forex Forward segment - Default Fund with the
 Clearing Corporation of India Ltd.
 
 - Investments include securities of FV aggregating Rs, 16.00 crore
 (previous year: FV Rs, 16.00 crore) which are kept as margin with
 National Securities Clearing Corporation of India Ltd. (''NSCCIL), of FV
 aggregating Rs, 13.00 crore (previous year: FV Rs, 13.00 crore) which
 are kept as margin with MCX - SX Clearing Corporation Ltd. and of FV
 aggregating Rs, 1.00 crore (previous year: Rs, 2.00 crore) which are
 kept as margin with Indian Clearing Corporation Limited in the BSE
 currency derivatives segment.
 
 - Investments having FV aggregating Rs, 35,937.22 crore (previous year:
 FVRs, 34,127.16 crore) are kept as margin towards Real Time Gross
 Settlement (RTGS) and those having FV aggregating Rs, 13,091.46 crore
 (previous year: Rs, 19,077.83 crore) are kept as margin towards repo
 transactions with the RBI.
 
 - The Bank has made investments in certain companies wherein it holds
 more than 25% of the equity shares of those companies. Such investments
 do not fall within the definition of a joint venture as per AS-27,
 Financial Reporting of Interest in Joint Ventures and the said
 accounting standard is thus not applicable. However, pursuant to RBI
 guidelines, the Bank has classified and disclosed these investments as
 joint ventures.
 
 - During the year ended March 31, 2016, the aggregate book value of
 investment sold from, and transferred to / from, HTM category was in
 excess of 5% of the book value of investments held in HTM category at
 the beginning of the year.  The market value of investments (excluding
 investments in subsidiaries / joint ventures and Non SLR bonds) under
 HTM category as on March 31, 2016 was Rs, 75,466.02 crore (previous
 year: Rs, 83,733.68 crore) and was higher than the book value thereof
 as of that date. In accordance with the RBI guidelines, sale from, and
 transfer to / from, HTM category excludes:
 
 - one-time transfer of securities permitted to be undertaken by banks
 at the beginning of the accounting year with approval of the Board of
 Directors;
 
 - sales to the RBI under pre-announced open market operation auctions;
 
 - repurchase of Government securities by Government of India from
 banks; and
 
 - sale of securities or transfer to AFS / HFT consequent to the
 reduction of ceiling on SLR securities under HTM at the beginning of
 January, July and September 2015, in addition to the shifting permitted
 at the beginning of the accounting year, i.e, April 2015.
 
 - Concentration of credit risk arising from swaps is with banks as on
 March 31, 2016 and March 31, 2015.  ** Interest Rate Swaps comprises of
 INR Interest Rate Swaps and FCY Interest Rate Swaps.
 
 - Qualitative disclosures on risk exposure in derivatives
 
 Overview of business and processes
 
 Derivatives are financial instruments whose characteristics are derived
 from underlying assets, or from interest and exchange rates or indices.
 These include forwards, swaps, futures and options. The notional
 amounts of financial instruments such as foreign exchange contracts and
 derivatives provide a basis for comparison with instruments recognised
 on the Balance Sheet but do not necessarily indicate the amounts of
 future cash flows involved or the current fair value of the instruments
 and, therefore, do not indicate the Bank''s exposure to credit or price
 risks. The following sections outline the nature and terms of the
 derivative transactions generally undertaken by the Bank.
 
 Interest rate contracts
 
 Forward rate agreements give the buyer the ability to determine the
 underlying rate of interest for a specified period commencing on a
 specified future date (the settlement date). There is no exchange of
 principal and settlement is effected on the settlement date. The
 settlement amount is the difference between the contracted rate and the
 market rate prevailing on the settlement date.
 
 Interest rate swaps involve the exchange of interest obligations with
 the counterparty for a specified period without exchanging the
 underlying (or notional) principal.
 
 Interest rate caps and floors give the buyer the ability to fix the
 maximum or minimum rate of interest. The writer of the contract pays
 the amount by which the market rate exceeds or is less than the cap
 rate or the floor rate respectively.  A combination of interest rate
 caps and floors is known as an interest rate collar.
 
 Interest rate futures are standardised interest rate derivative
 contracts traded on a recognised stock exchange to buy or sell a
 notional security or any other interest bearing instrument or an index
 of such instruments or interest rates at a specified future date, at a
 price determined at the time of the contract.
 
 Exchange rate contracts
 
 Forward foreign exchange contracts are agreements to buy or sell fixed
 amounts of currency at agreed rates of exchange on future date. All
 such instruments are carried at fair value, determined based on either
 FEDAI rates or on market quotations.
 
 Cross currency swaps are agreements to exchange principal amounts
 denominated in different currencies. Cross currency swaps may also
 involve the exchange of interest payments on one specified currency for
 interest payments in another specified currency for a specified period.
 
 Currency options give the buyer, on payment of a premium, the right but
 not an obligation, to buy or sell specified amounts of currency at
 agreed rates of exchange on or before a specified future date. Option
 premia paid or received is recorded in Statement of Profit and Loss for
 rupee options at the expiry of the option and for foreign currency
 options on premium settlement date.
 
 Currency futures contract is a standardised contract traded on an
 exchange, to buy or sell a certain underlying asset or an instrument at
 a certain date in the future, at a specified price. The underlying
 instrument of a currency future contract is the rate of exchange
 between one unit of foreign currency and the INR.
 
 The Bank''s derivative transactions relate to sales and trading
 activities. Sale activities include the structuring and marketing of
 derivatives to customers to enable them to hedge their market risks
 (both interest rate and exchange risks), within the framework of
 regulations as may apply from time to time. The Bank deals in
 derivatives on its own account (trading activity) principally for the
 purpose of generating a profit from short term fluctuations in price or
 yields. The Bank also deals in derivatives to hedge the risk embedded
 in some of its Balance Sheet assets and liabilities.
 
 Constituents involved in derivative business
 
 The Treasury front-office enters into derivative transactions with
 customers and inter-bank counterparties. The Bank has an independent
 back-office and mid-office as per regulatory guidelines. The Bank has a
 credit and market risk department that assesses various counterparty
 risk and market risk limits, within the risk architecture and processes
 of the Bank.
 
 Derivative policy
 
 The Bank has in place a policy which covers various aspects that apply
 to the functioning of the derivative business.  The derivative business
 is administered by various market risk limits such as position limits,
 tenor limits, sensitivity limits and value-at-risk limits that are
 approved by the Board and the Risk Policy and Monitoring Committee
 (''RPMC'').  All methodologies used to assess credit and market risks for
 derivative transactions are specified by the market risk unit.  Limits
 are monitored on a daily basis by the mid-office.
 
 The Bank has implemented a Board approved policy on Customer
 Suitability & Appropriateness to ensure that derivative transactions
 entered into are appropriate and suitable to the customer''s nature of
 business / operations. Before entering into a derivative deal with a
 customer, the Bank scores the customer on various risk parameters and
 based on the overall score level it determines the kind of product that
 best suits its risk appetite and the customer''s requirements.
 
 Classification of derivatives book
 
 The derivative book is classified into trading and hedging book.
 Classification of the derivative book is made on the basis of the
 definitions of the trading and hedging books specified in the RBI
 guidelines. The trading book is managed within the trading limits
 approved by the RPMC.
 
 Hedging policy
 
 For derivative contracts designated as hedge the Bank documents, at
 inception, the relationship between the hedging instrument and the
 hedged item, the risk management objective for undertaking the hedge
 and the methods used to assess the hedge effectiveness. Hedge
 effectiveness is ascertained at the time of inception of the hedge and
 periodically thereafter. Hedge effectiveness is measured by the degree
 to which changes in the fair value or cash flows of the hedged item
 that are attributable to a hedged risk are offset by changes in the
 fair value or cash flows of the hedging instrument.
 
 The hedging book consists of transactions to hedge Balance Sheet assets
 or liabilities. The tenor of hedging instrument may be less than or
 equal to the tenor of underlying hedged asset or liability. Derivative
 contracts designated as hedges are not marked to market unless their
 underlying asset or liability is marked to market. In respect of
 derivative contracts that are marked to market, changes in the market
 value are recognised in the Statement of Profit and Loss in the
 relevant period. Gain or losses arising from hedge ineffectiveness, if
 any, are recognised in the Statement of Profit and Loss.  Foreign
 exchange forward contracts not intended for trading, that are entered
 into to establish the amount of reporting currency required or
 available at the settlement date of a transaction, and are outstanding
 at the Balance Sheet date, are effectively valued at the closing spot
 rate. The premia or discount arising at the inception of such forward
 exchange contract is amortised as expense or income over the life of
 the contract.
 
 - Provisioning, collateral and credit risk mitigation
 
 The Bank enters into derivative transactions with counter parties based
 on their business ranking and financial position.  The Bank sets up
 appropriate limits upon evaluating the ability of the counterparty to
 honour its obligations in the event of crystallisation of the exposure.
 Appropriate credit covenants are stipulated where required as trigger
 events to call for collaterals or terminate a transaction and contain
 the risk.
 
 The Bank, at the minimum, conforms to the RBI guidelines with regard to
 provisioning requirements. Overdue receivables representing
 crystallised positive mark-to-market value of a derivative contract are
 transferred to the account of the borrower and treated as
 non-performing assets, if these remain unpaid for 90 days or more. Full
 provision is made for the entire amount of overdue and future
 receivables relating to positive marked to market value of
 non-performing derivative contracts.
 
 - The notional principal amount of foreign exchange contracts
 classified as hedging and trading outstanding as on March 31, 2016
 amounted to X 23,182.85 crore (previous year: X 21,868.96 crore) and X
 505,892.93 crore (previous year: X 652,183.13 crore) respectively.
 
 - The notional principal amounts of derivatives reflect the volume of
 transactions outstanding as at the Balance Sheet date and do not
 represent the amounts at risk.
 
 - For the purpose of this disclosure, currency derivatives include
 currency options purchased and sold and cross currency interest rate
 swaps.
 
 - Interest rate derivatives include interest rate swaps, forward rate
 agreements and interest rate caps.
 
 - The Bank has computed the maximum and minimum of PV01 for the year
 based on the balances as at the end of every month.
 
 - In respect of derivative contracts, the Bank evaluates the credit
 exposure arising therefrom, in line with RBI guidelines. Credit
 exposure has been computed using the current exposure method which is
 the sum of:
 
 (a) the current replacement cost (marked to market value including
 accruals) of the contract or zero whichever is higher; and
 
 (b) the Potential Future Exposure (PFE) is a product of the notional
 principal amount of the contract and a factor that is based on the grid
 of credit conversion factors prescribed in RBI guidelines, which is
 applied on the basis of the residual maturity and the type of contract.
 
 NPAs include all loans, investments and foreign exchange and
 derivatives that are classified as non-performing by the Bank.
 
 - During the years ended March 31, 2016 and March 31, 2015, no
 non-performing financial assets were sold, excluding those sold to SC /
 RC.
 
 - During the years ended March 31, 2016 and March 31, 2015, no
 non-performing financial assets were purchased by the Bank.
 
 - Securitised assets as per books of SPVs sponsored by the Bank:
 
 There are no SPVs sponsored by the Bank as at March 31, 2016 and as at
 March 31, 2015.
 
 *includes loans purchased under the direct loan assignment route
 
 Of the above, exposure to real estate developers as at March 31, 2016
 is 0.5% (previous year: 0.3%) of total advances.
 
 - Details of factoring exposure
 
 The factoring exposure of the Bank as on March 31, 2016 is Rs, 3,515.98
 crore (previous year: Rs, 3,298.59 crore)
 
 - Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL)
 exceeded by the Bank
 
 The RBI has prescribed single and group borrower exposure limits linked
 to a Bank''s capital funds and such limits can be enhanced by a further
 5 percent thereof with the approval of the Board of Directors of the
 Bank. During the year ended March 31, 2016 the Bank was within the
 limits prescribed by the RBI. During the year ended March 31, 2015 the
 Bank''s exposure to single and group borrowers were within the limits
 prescribed by RBI except, with the prior approval of the Board of the
 Bank, in respect of single borrower limits for Reliance Industries
 Limited.
 
 - Unsecured advances
 
 Advances for which intangible collaterals such as rights, licenses,
 authority etc. are charged in favour of the Bank in respect of projects
 financed by the Bank, are reckoned as unsecured advances under Schedule
 9 of the Balance Sheet in line with extant RBI guidelines. There are no
 such advances outstanding as on March 31, 2016 (previous year: Nil).
 
 - Inter-bank Participation with risk sharing
 
 The aggregate amount of participation issued by the Bank and reduced
 from advances as per regulatory guidelines as of March 31, 2016 was Rs,
 6,450.00 crore (previous year: Rs, 7,600.00 crore).
 
 Definitions of certain items in Business ratios / information:
 
 1.  Working funds is the daily average of total assets during the year.
 
 2.  Operating profit is net profit for the year before provisions and
 contingencies.
 
 3.  Business is the total of net advances and deposits (net of
 inter-bank deposits).
 
 4.  Productivity ratios are based on average employee numbers.
 
 5.  Gross advances are net of bills rediscounted and interest in
 suspense.
 
 6.  Net NPAs are non-performing assets net of interest in suspense,
 specific provisions, ECGC claims received, provisions for funded
 interest term loans classified as NPAs and provisions in lieu of
 diminution in the fair value of restructured assets classified as NPAs.
 
 7.  Net advances are equivalent to gross advances net of specific loan
 loss provisions, ECGC claims received, provision for funded interest
 term loans classified as NPA and provisions in lieu of diminution in
 the fair value of restructured assets.
 
 8.  Provision coverage ratio does not include assets written off.
 
 18 Interest income
 
 Interest income under the sub-head Income from Investments includes
 dividend received during the year ended March 31, 2016 on units of
 mutual funds, equity and preference shares amounting to Rs, 182.03
 crore (previous year: Rs, 192.58 crore).
 
 19 Earnings from standard assets securitised-out
 
 There are no Special Purpose Vehicles (''SPV''s) sponsored by the Bank
 for securitisation transactions. During the years ended March 31, 2016
 and March 31, 2015, there were no standard assets securitised-out by
 the Bank.
 
 Form and quantum of services and liquidity provided by way of credit
 enhancement
 
 The Bank has provided credit and liquidity enhancements in the form of
 cash collaterals / guarantees / subordination of cash flows etc., to
 the senior Pass Through Certificates (''PTC''s) as well as on loan
 assignment transactions. The RBI issued addendum guidelines on
 securitisation of standard assets vide its circular dated May 7, 2012.
 Accordingly, the Bank does not provide liquidity or credit enhancements
 on the direct assignment transactions undertaken subsequent to these
 guidelines.  The total value of credit enhancement outstanding in the
 books as at March 31, 2016 was Rs, 225.65 crore (previous year: Rs,
 345.79 crore), and liquidity enhancement was Nil (previous year: Rs,
 8.10 crore). Outstanding servicing liability was Rs, 0.10 crore
 (previous year: Rs, 0.14 crore).
 
 *Includes provisions for tax, legal and other contingencies Rs, 37.28
 crore (previous year: Rs, 36.47 crore), floating provisions Rs, 115.00
 crore (previous year: Nil), provisions / (write-back) for
 securitised-out assets Rs, (2.85) crore (previous year: Rs, 4.60 crore)
 and standard restructured assets Rs, (12.62) crore (previous year: Rs,
 17.93 crore).
 
 Provident fund
 
 The guidance note on AS-15, Employee Benefits, states that employer
 established provident funds, where interest is guaranteed are to be
 considered as defined benefit plans and the liability has to be valued.
 The Institute of Actuaries of India (IAI) has issued a guidance note on
 valuation of interest rate guarantees on exempt provident funds. The
 actuary has accordingly valued the same and the Bank held a provision
 of Nil as on March 31, 2016 (previous year: Rs, 0.52 crore), towards
 the present value of the guaranteed interest benefit obligation. The
 actuary has followed deterministic approach as prescribed by the
 guidance note.
 
 10 Disclosures on remuneration Qualitative Disclosures
 
 A.  Information relating to the bodies that oversee remuneration
 
 Name and composition
 
 The Board of Directors of the Bank has constituted the Nomination and
 Remuneration Committee (hereinafter, the ''NRC'') for overseeing and
 governing the compensation policies of the Bank. The NRC is comprised
 of four independent directors and is chaired by the Board of Directors
 of the Bank. Further, two members of the NRC are also members of the
 Risk Policy and Monitoring Committee (hereinafter, the ''RPMC'') of the
 Board.
 
 The NRC is comprised of the Chairperson, Mrs. Shyamala Gopinath, Mr. A
 N Roy, Mr. Partho Datta and Mr. Bobby Parikh. Further, Mrs. Shyamala
 Gopinath and Mr. Partho Dutta are also members of the RPMC. Mr. Bobby
 Parikh is the chairperson of the NRC.
 
 Mandate of the NRC
 
 The primary mandate of the NRC is to oversee the implementation of
 compensation policies of the Bank.
 
 The NRC periodically reviews the overall compensation policy of the
 Bank with a view to attract, retain and motivate employees. In this
 capacity it is required to review and approve the design of the total
 compensation framework, including compensation strategy programs and
 plans, on behalf of the Board of Directors. The compensation structure
 and pay revision for Whole Time Directors is also approved by the NRC.
 The NRC co-ordinates with the RPMC to ensure that compensation is
 aligned with prudent risk taking.
 
 External Consultants
 
 The Bank employed the services of the following consulting firms in the
 area of compensation and benefits and human resources.
 
 AON: The Bank employed the services of AON in the area of compensation
 market benchmarking, and executive compensation. AON, apart from being
 a globally reputed consulting firm, has the longest running year on
 year banking study in India and was found to be the most appropriate by
 the NRC.
 
 Ernst and Young: The Bank employed the services of Ernst and Young to
 review the compensation policy of the Bank in light of the best in
 class practices in the banking industry.
 
 Mercer Consulting: The Bank employed the services of Mercer Consulting
 in the area of job evaluation. Mercer''s International Position
 Evaluation system is a globally reputed job evaluation tool.
 
 Scope of the Bank''s Remuneration Policy:
 
 The Remuneration Policy of the Bank includes within its scope all
 business lines, all permanent staff in its domestic as well as
 international offices. Further the principles articulated in the
 compensation policy are universal, however in the event there are any
 statutory provisions in overseas locations the same shall take
 precedence over the remuneration policy of the Bank.
 
 All permanent employees of the Bank except those covered under the long
 term wage agreement are covered by the said compensation policy. The
 number of employees covered under the compensation policy was 87,263 as
 of March 31, 2016 (previous year: 75,977).
 
 B.  Information relating to the design and structure of remuneration
 processes and the key features and objectives of remuneration policy
 
 I.  Key Features and Objectives of Remuneration Policy
 
 
 The Bank''s Compensation Policy (the ''Policy'') is aligned to business
 strategy, market dynamics, internal characteristics and complexities
 within the Bank. The ultimate objective of the Policy is to provide a
 fair and transparent structure that helps in acquiring and retaining
 the talent pool critical to build competitive advantage and brand
 equity. The Policy has been designed basis the principles for sound
 compensation practices in accordance with regulatory requirements and
 provides a framework to create, modify and maintain appropriate
 compensation programs and processes with adequate supervision and
 control.
 
 The Bank''s performance management system provides a sound basis for
 assessing employee performance holistically. The Bank''s compensation
 framework is aligned with the performance management system and
 differentiates pay appropriately amongst its employees based on degree
 of contribution, skill and availability of talent owing to competitive
 market forces by taking into account factors such as role, skills,
 competencies, experience and grade / seniority.
 
 The NRC reviews the following critical principles enunciated in the
 policy and ensures that:
 
 (a) the compensation is adjusted for all types of prudent risk taking;
 
 (b) compensation outcomes are symmetric with risk outcomes;
 
 (c) compensation payouts are sensitive to the time horizon of risk; and
 
 (d) the mix of cash, equity and other forms of compensation are aligned
 with risk.
 
 II.  Design and Structure of Remuneration
 
 a) Fixed Pay
 
 The NRC ensures that the fixed component of the compensation is
 reasonable, taking into account all relevant factors including industry
 practice.
 
 Elements of Fixed Pay
 
 The fixed pay component of the Bank''s compensation structure typically
 consists of elements such as base salary, allowances, perquisites,
 retirement and other employee benefits. Perquisites extended are in the
 nature of company car, hard furnishing, company leased accommodation,
 club membership and such other benefits or allowances in lieu of such
 perquisites / benefits. Retirement benefits include contributions to
 provident fund, superannuation fund (for certain job bands) and
 gratuity. The Whole Time Directors of the Bank are entitled to other
 post-retirement benefits such as car and medical facilities, in
 accordance with specified terms of employment as per the policy of the
 Bank, subject to RBI approval. The Bank also provides pension to
 certain employees of the erstwhile Lord Krishna Bank (eLKB) under the
 Indian Banks'' Association (''IBA'') structure.
 
 Determinants of Fixed Pay
 
 The fixed pay is primarily determined by taking into account factors
 such as the job size, performance, experience, location, market
 competitiveness of pay and is designed to meet the following key
 objectives of:
 
 (a) fair compensation given the role complexity and size;
 
 (b) fair compensation given the individual''s skill, competence,
 experience and market pay position;
 
 (c) sufficient contribution to post retirement benefits; and
 
 (d) compliance with all statutory obligations.
 
 For Whole Time Directors additional dimensions such as prominence of
 leadership among industry leaders, consistency of the Bank''s
 performance over the years on key parameters such as profitability,
 growth and asset quality in relation to its own past performance and
 that of its peer banks would be considered. The quantum of fixed pay
 for Whole Time Directors is approved by the NRC as well as the Board
 and is subject to the approval of the RBI.
 
 b) Variable Pay
 
 The performance management system forms the basis for variable pay
 allocation of the Bank. The Bank ensures that the performance
 management system is comprehensive and considers both, quantitative and
 qualitative performance measures.
 
 Whole Time Directors
 
 The bonus for Whole Time Directors will not exceed 70% of the fixed pay
 in a year, thereby ensuring that there is a balance between the fixed
 and variable pays. The variable pay for Whole Time Directors is
 approved by the NRC as well as the Board and is subject to the approval
 of the RBI. The variable pay component is paid out subject to the
 following conditions:
 
 - The Bank has devised appropriate malus and claw back clauses as a
 risk mitigant for any negative contributions of the Bank and / or
 relevant line of business in any year. Under the malus clause the
 incumbent foregoes the vesting of the deferred variable pay in full or
 in part. Under the claw back clause the incumbent is obligated to
 return all the tranches of payout received of bonus amounts pertaining
 to the relevant performance year.
 
 Employees other than Whole Time Directors
 
 The Bank has formulated the following variable pay plans:
 
 - Annual bonus plan
 
 The quantum of variable payout is a function of the performance of the
 Bank, performance of the business unit, performance of the individual
 employee, job band of the employee and the functional category. Basis
 these key determinants and due adjustment for risk alignment, a payout
 matrix for variable pay is developed. Market trends for specific
 businesses / functions along with inputs from compensation surveys may
 also be used in finalising the payout.
 
 Bonus pools are designed to meet specific business needs therefore
 resulting in differentiation in both the quantum and the method of
 payout across functions. Typically higher levels of responsibility
 receive a higher proportion of variable pay vis--vis fixed pay. The
 Bank ensures that the time horizon for risk is assessed and the
 deferment period, if any, for bonus is set accordingly. Employees on
 the annual bonus plan are not part of performance-linked plans. The
 following is taken into account while administering the annual bonus:
 
 - In the event the proportion of variable pay to fixed pay is
 substantially high (variable pay exceeding 50% of fixed pay), the Bank
 may devise an appropriate deferment schedule after taking into
 consideration the nature of risk, time horizon of risk, and the
 materiality of risk.
 
 - In cases of deferment of variable pay the Bank makes an assessment
 prior to the due date for payment of the deferred portion for any
 negative contribution. The criteria for negative contribution are
 decided basis pre-defined financial benchmarks. The Bank has in place
 appropriate methods for prevention of vesting of deferred variable pay
 or any part thereof, on account of negative contribution. The Bank also
 has in place claw back arrangements in relation to amounts already paid
 in the eventuality of a negative contribution.
 
 - Performance-linked Plans (PLPs)
 
 PLPs are formulated for sales personnel who are given sales targets but
 have limited impact on risk since credit decisions are exercised
 independent of the sales function. All PLP payouts are based on a
 balanced scorecard framework and are subject to achievement of
 individual targets enumerated in the respective scorecards of the
 employees. A portion of the PLP payouts is deferred till the end of the
 year to provide for any unforeseen performance risks.
 
 Review of Remuneration Policy of the Bank during the past year:
 
 The Compensation Policy of the Bank was reviewed by the NRC. The Bank
 has appointed Ernst and Young a globally reputed consulting firm to
 assess the compensation policy of the Bank in light of best in class
 practices. The study is currently underway.
 
 c) Guaranteed Bonus
 
 Guaranteed Bonuses may not be consistent with sound risk management or
 pay for performance principles of the Bank and therefore do not form an
 integral part of the general compensation practice.
 
 For critical hiring for some select strategic roles, the Bank may
 consider granting of a sign-on bonus as a prudent way to avoid loading
 the entire cost of attraction into the fixed component of the
 compensation which could have a long term cost implication for the
 Bank. For such hiring, the sign-on bonus is generally decided by taking
 into account appropriate risk factors and market conditions.
 
 For hiring at levels of Whole Time Directors / Managing Director a
 sign-on bonus, if any, is limited to the first year only and is in the
 form of Employee Stock Options.
 
 d) Employee Stock Option Plan (''ESOP''s)
 
 The Bank considers ESOPs as a vehicle to create a balance between short
 term rewards and long term sustainable value creation. ESOPs play a key
 role in the attraction and retention of key talent. The Bank grants
 equity share options to its Whole Time Directors and other employees
 above a certain grade. Options are also granted to employees in the
 talent pool across all levels. All plans for grant of options are
 framed in accordance with the SEBI guidelines, 1999 as amended from
 time to time and are approved by the shareholders of the Bank. These
 plans provide for the grant of options post approval by the NRC.
 
 The grant of options is reviewed and approved by the NRC. The number of
 options granted varies at the discretion of the NRC after considering
 parameters such as the incumbent''s grade and performance rating, and
 such other appropriate relevant factors as may be deemed appropriate by
 the NRC. Equity share options granted to the Whole Time Directors are
 subject to the approval of the NRC, the Board and the RBI.
 
 e) Severance Pay
 
 The Bank does not grant severance pay other than accrued benefits (such
 as gratuity, pension) except in cases where it is mandated by any
 statute.
 
 f) Hedging
 
 The Bank does not provide any facility or fund or permit its Whole Time
 Directors and employees to insure or hedge their compensation structure
 to offset the risk alignment effects embedded in their compensation
 arrangement.
 
 III.  Remuneration Processes
 
 Fitment at the time of Hire
 
 Pay ranges of the Bank are set basis the job size, experience, location
 and the academic and professional credentials of the incumbent.
 
 The compensation of new hires is in line with the existing pay ranges
 and consistent with the compensation levels of the existing employees
 of the Bank at similar profiles. The pay ranges are subject to change
 basis market trends and the Bank''s talent management priorities. While
 the Bank believes in the internal equity and parity as a key
 determinant of pay it does acknowledge the external competitive
 pressures of the talent market. Accordingly, there could be certain key
 profiles with critical competencies which may be hired at a premium and
 treated as an exception to the overall pay philosophy. Any deviation
 from the defined pay ranges is treated as a hiring exception requiring
 approval with appropriate justification.
 
 Increment / Pay Revision
 
 It is the endeavor of the Bank to ensure external competitiveness as
 well as internal equity without diluting the overall focus on
 optimising cost. In order to enhance our external competitiveness the
 Bank participates in an annual salary survey of the banking sector to
 understand key market trends as well as get insights on relative market
 pay position compared to peers. The Bank endeavors to ensure that most
 employees progress to the median of the market in terms of fixed pay
 over time. This coupled with key internal data indicators like
 performance score, job family, experience, job grade and salary budget
 form the basis of decision making on revisions in fixed pay.
 
 Increments in fixed pay for majority of the employee population are
 generally undertaken effective April 1 every year. However promotions,
 confirmations and change in job dimensions could also lead to a change
 in the fixed pay during other times of the year.
 
 The Bank also makes salary corrections and adjustments during the year
 for those employees whose compensation is found to be below the market
 pay and who have a good performance track record. However such pay
 revisions are done on an exception basis.
 
 Risk, Control and Compliance Staff
 
 The Bank has separated the Risk, Control and Compliance functions from
 the Business functions in order to create a strong culture of checks
 and balances thereby ensuring good asset quality and to eliminate any
 possible conflict of interest between revenue generation and risk
 management and control. Accordingly, the overall variable pay as well
 as the annual salary increment of the employees in the Risk, Control
 and Compliance functions is based on their performance, functional
 objectives and goals. The Bank ensures that the mix of fixed to
 variable compensation for these functions is weighted in favour of
 fixed compensation.
 
 C.  Description of the ways in which current and future risks are taken
 into account in the remuneration processes.  It should include the
 nature and type of the key measures used to take account of these risks
 
 An overview of the key risks that the Bank takes into account when
 implementing remuneration measures.
 
 The Bank takes into account all types of risks in its remuneration
 processes. The Bank takes into consideration the fact that a portion of
 the Bank''s profits are directly attributable to various types of risks
 the Bank is exposed to, such as credit risk, market risk, operational
 risk and other quantifiable risks. The Bank uses the capital charge on
 these risks as a key measure to
 
 
 evaluate the quantum of risk. The Bank takes into consideration the
 surplus available post adjustment of the cost of capital to cover all
 such risks and pre bonus profit as the basis for allocation of variable
 pay. Further the Bank also evaluates the impact of such remuneration on
 the overall cost to income ratio of the Bank. The Bank takes into
 consideration both Ex-Ante as well as Ex-Post risks. The above
 mentioned risks are Ex-Ante in their approach. The Bank also provides
 for deferment of bonus in the event the proportion of variable pay as
 compared to fixed pay is substantially high. The Bank has also devised
 appropriate malus and claw back clauses as a risk mitigant for any
 negative contributions of the Bank and / or relevant line of business
 in any year. Under the malus clause, the incumbent foregoes the vesting
 of the deferred variable pay in full or in part. Under the claw back
 clause, the incumbent is obligated to return all the tranches of payout
 received of bonus amounts pertaining to the relevant performance year.
 This is an Ex-Post risk management provision.
 
 The Bank also takes into consideration key steps to mitigate talent
 risk. The key measures here include attrition rate of employees as well
 as key talent. In order to moderate talent risk the Bank conducts a
 comprehensive market benchmarking exercise to ensure that employees are
 competitively positioned against market in terms of fixed, variable as
 well as long term incentives (LTI).
 
 The risk measures and the models for assessing risk were introduced for
 the first time in financial year ended March 31, 2013.  Post the
 introduction of the risk models the adjustment of risk for remuneration
 has become fundamentally more comprehensive and robust in coverage both
 from an Ex-Ante as well as an Ex-Post approach. There have not been any
 changes to the Bank''s risk adjustment model over the past year.
 
 D.  Description of the ways in which the Bank seeks to link performance
 during a performance measurement period with levels of remuneration
 
 The Bank has a very comprehensive multi-dimensional performance
 measurement metrics that takes into consideration multiple factors that
 include qualitative as well as quantitative factors. The following are
 the key performance measurement metrics for the Bank. These also form
 part of the key metrics for the measurement of the performance of Whole
 Time Directors and impact the final remuneration:
 
 A.  Business Growth - This includes growth in advances and deposits;
 
 B.  Profitability - This includes growth in profit after tax;
 
 C.  Asset Quality - Gross NPA, Net NPA and % of Restructured assets to
 net advances;
 
 D.  Financial Soundness - Capital Adequacy Ratio Position and Tier I
 capital;
 
 E.  Shareholder value creation - Return on equity; and
 
 F.  Financial Inclusion - Growth in number of households covered,
 growth in the value of loans disbursed under this category and
 achievement against priority sector lending targets.
 
 Most of the above parameters are evaluated in two steps:
 
 A.  Achievement against the plans of the Bank; and
 
 B.  Achievement against the performance of peers.
 
 Apart from the factors related to business growth there is also a key
 qualitative factor such as regulatory compliance.  Compliance is the
 key qualitative factor that acts as the moderator in the entire
 organisation evaluation process. A low score on compliance can
 significantly moderate the other performance measures and depending on
 severity may even nullify their impact.
 
 While the above parameters form the core evaluation parameters for the
 Bank each of the business units are measured on the following from a
 remuneration standpoint:
 
 
 A.  Increase in plan over the previous year;
 
 B.  Actual growth in revenue over previous year;
 
 C.  Growth in net revenue (%);
 
 D.  Achievement of net revenue against plan (%);
 
 E.  Actual profit before tax;
 
 F.  Growth in profit before tax compared to the previous year;
 
 G.  Current cost to income; and
 
 H.  Improvement in cost to income over the previous year.
 
 Apart from the above the business units are also measured against
 certain key business objectives that are qualitative in nature.
 
 The process by which levels of remuneration in the Bank are aligned to
 the performance of the Bank, business unit and individual employees is
 articulated below.
 
 Fixed Pay
 
 At the conclusion of every financial year the Bank reviews the fixed
 pay portion of the compensation structure basis merit-based increments
 and market corrections. These are based on a combination of performance
 rating, job band and the functional category of the individual
 employee. For a given job band, the merit increment is directly related
 to the performance rating. The Bank strives to ensure that most
 employees progress to the median of the market in terms of fixed pay
 over time. All other things remaining equal, the correction percentage
 is directly related to the performance rating of the individual.
 
 Variable Pay
 
 Basis the performance of the business unit, individual performance and
 role, the Bank has formulated the following variable pay plans:
 
 - Annual Bonus Plan
 
 The Bank''s annual bonus is computed as a percentage of the gross salary
 for every job band. The bonus multiple is based on performance of the
 business unit (based on the parameters above), performance rating, job
 band and the functional category of the individual employee. The
 business performance re-categorised into different performance levels.
 The performance level determines the multiplier for the bonus. All
 other things remaining equal, for a given job band, the bonus is
 directly related to the performance rating. The proportion of variable
 pay to fixed pay increases with job band. Employees on the annual bonus
 plan are not part of the PLPs.
 
 - Performance-linked Plans (PLPs)
 
 The Bank has formulated PLPs for its sales personnel who are given
 sales targets basis a balanced scorecard methodology.  All PLP payouts
 are subject to the achievement of individual targets enumerated in the
 respective scorecards of the employees and moderated by qualitative
 parameters. A portion of the PLP payouts is deferred till the end of
 the year to provide for any unforeseen performance risks.
 
 E.  Description of the ways in which the Bank seeks to adjust
 remuneration to take account of the longer term performance
 
 A discussion of the Bank''s policy on deferral and vesting of variable
 remuneration and a discussion of the Bank''s policy and criteria for
 adjusting deferred remuneration before vesting and after vesting
 
 
 Whole Time Directors
 
 The bonus for Whole Time Directors will not exceed 70% of the fixed pay
 in a year, thereby ensuring that there is a balance between the fixed
 and variable pay. The variable pay for Whole Time Directors is approved
 by the NRC as well as the Board and is subject to the approval of the
 RBI. The variable pay component is paid out subject to the following
 conditions:
 
 - The Bank has devised appropriate malus and claw back clauses as a
 risk mitigant for any negative contributions of the Bank and / or
 relevant line of business in any year.
 
 - Malus clause
 
 Under the malus clause the incumbent foregoes the vesting of the
 deferred variable pay in full or in part.  In the event there is a
 deterioration in specific performance criteria (such as criteria
 relating to profit or asset quality) that are laid down by the NRC,
 then the NRC would review the deterioration in the performance taking
 into consideration the macroeconomic environment as well as internal
 performance indicators and accordingly decide whether any part of the
 deferred tranche pertaining to that financial year merits a withdrawal.
 
 - Claw back clause
 
 Under the claw back clause the incumbent is obligated to return all the
 tranches of payout received of bonus amounts pertaining to the relevant
 performance year. In the event there is any act attributable to the
 concerned Whole Time Director / Managing Director resulting in an
 incident of willful and deliberate misinterpretation / misreporting of
 financial performance (inflating the financials) of the Bank, for a
 financial year, which comes to light in the subsequent three years, the
 incumbent is obligated to return all the tranches of payout received of
 bonus amounts pertaining to the relevant performance year.
 
 The specific criteria on the applicability of malus and claw back
 arrangements are reviewed by the NRC annually.
 
 Employees other than Whole Time Directors
 
 The Bank has formulated the following variable pay plans:
 
 - Annual bonus plan
 
 The quantum of variable payout is a function of the performance of the
 Bank, performance of the individual employee, job band of the employee
 and the functional category. Basis these key determinants and due
 adjustment for risk alignment, a payout matrix for variable pay is
 developed. Market trends for specific businesses / functions along with
 inputs from compensation surveys may also be used in finalising the
 payout.
 
 11. Segment reporting
 
 Business 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 system and the guidelines prescribed by
 RBI. The Bank operates in the following segments:
 
 a) Treasury
 
 The treasury segment primarily consists of net interest earnings from
 the Bank''s investment portfolio, money market borrowing and lending,
 gains or losses on investment operations and on account of trading in
 foreign exchange and derivative contracts.
 
 b) Retail banking
 
 The retail banking segment serves retail customers through a branch
 network and other delivery channels. This segment raises deposits from
 customers and provides loans and other services to customers with the
 help of specialist product groups. Exposures are classified under
 retail banking taking into account the status of the borrower
 (orientation criterion), the nature of product, granularity of the
 exposure and the quantum thereof.
 
 Revenues of the retail banking segment are derived from interest earned
 on retail loans, interest earned from other segments for surplus funds
 placed with those segments, subvention received from dealers and
 manufacturers, fees from services rendered, foreign exchange earnings
 on retail products etc. Expenses of this segment primarily comprise
 interest expense on deposits, commission paid to retail assets sales
 agents, infrastructure and premises expenses for operating the branch
 network and other delivery channels, personnel costs, other direct
 overheads and allocated expenses of specialist product groups,
 processing units and support groups.
 
 c) Wholesale banking
 
 The wholesale banking segment provides loans, non-fund facilities and
 transaction services to large corporates, emerging corporates, public
 sector units, government bodies, financial institutions and medium
 scale enterprises. Revenues of the wholesale banking segment consist of
 interest earned on loans made to customers, interest / fees earned on
 the cash float arising from transaction services, earnings from trade
 services and other non-fund facilities and also earnings from foreign
 exchange and derivative transactions on behalf of customers. 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 of delivery channels, specialist product groups, processing
 units and support groups.
 
 d) Other banking business
 
 This segment includes income from para banking activities such as
 credit cards, debit cards, third party product distribution, primary
 dealership business and the associated costs.
 
 e) Unallocated
 
 All items which are reckoned at an enterprise level are classified
 under this segment. This includes capital and reserves, debt classified
 as Tier I or Tier II capital and other unallocable assets and
 liabilities such as deferred tax, prepaid expenses, etc.
 
 Segment revenue includes earnings from external customers plus earnings
 from funds transferred to other segments.  Segment result includes
 revenue less interest expense less operating expense and provisions, if
 any, for that segment.  Segment-wise income and expenses include
 certain allocations. Interest income is charged by a segment that
 provides funding to another segment, based on yields benchmarked to an
 internally approved yield curve or at a certain agreed transfer price
 rate. Transaction charges are levied by the retail banking segment to
 the wholesale banking segment for the use by its customers of the
 retail banking segment''s branch network or other delivery channels.
 Such transaction costs are determined on a cost plus basis. Segment
 capital employed represents the net assets in that segment.
 
 Qualitative disclosure on LCR
 
 The Liquidity Coverage Ratio (LCR) is a global minimum standard for
 bank liquidity. It aims to ensure that a bank has an adequate stock of
 unencumbered High Quality Liquid Assets (HQLA) that can be converted
 into cash easily and immediately to meet its liquidity needs for a 30
 calendar day liquidity stress scenario.
 
 The LCR is calculated by dividing the amount of High Quality Liquid
 unencumbered Assets (HQLA) by the estimated net outflows over a
 stressed 30 calendar day period. The net cash outflows are calculated
 by applying RBI prescribed outflow factors to the various categories of
 liabilities (deposits, unsecured and secured wholesale borrowings), as
 well as to undrawn commitments and derivative-related exposures,
 partially offset by inflows from assets maturing within 30 days. The
 average LCR was at 80.61% for the quarter ended March 2016. The average
 HQLA was Rs, 87,390.70 crore of which government securities constituted
 about 73%. The outflows related to derivative exposures (net of cash
 inflows) / collateral requirements and undrawn commitments constituted
 about 2% and 6% respectively of average cash outflow of Rs, 185,910.04
 crore. Average inflows from assets were Rs, 77,496.07 crore.
 
 Average LCR for the quarter ended March 2016 is 80.61%, which is
 comfortably above RBI prescribed minimum requirement of 70%.
 
 Major reasons for movement in average LCR as compared to the previous
 quarter ended December 2015 are as follows:
 
 - HQLA for the quarter ended March 2016 increased as additional FALLCR
 (3% of NDTL) is permitted by RBI to be considered as HQLA from February
 2016.
 
 - Within the unsecured wholesale funding, the proportion of unsecured
 debt which attracts higher outflow factors has decreased.
 
 - Within the retail deposits, the proportion of less stable funding
 which attract higher outflow factors, has increased.
 
 - Inflows from performing advances have increased.
 
 - Other cash inflows have increased mainly on account of increase in
 inflows from short term lending.
 
 - A strong and diversified liabilities profile has been at the helm on
 Bank''s growth strategy. The Bank has consistently maintained a robust
 funding profile with a significant portion of funding through deposits.
 As of March 2016 the top 20 depositors comprised of around 5% of total
 deposits.
 
 Note:
 
 1.  CCIL guaranteed deals were netted for computing FX & Derivatives
 numbers from December 2015 quarter end. Hence, the numbers for serial
 number 5(i) and 11 are not strictly comparable with previous quarter
 numbers.
 
 2.  LCR for the quarter end March 2015 had been computed based on the
 guidelines applicable at that point in time.  Subsequently there have
 been amendments in the RBI guidelines w.e.f. April 2015. Hence, the
 previous year end numbers are not comparable with current financial
 year.
 
 12. Related party disclosures
 
 As per AS-18, Related Party Disclosure, the Bank''s related parties are
 disclosed below:
 
 Promoter
 
 Housing Development Finance Corporation Limited
 
 Subsidiaries
 
 HDFC Securities Limited
 
 HDB Financial Services Limited
 
 Associates
 
 Atlas Documentary Facilitators Company Private Limited
 
 HBL Global Private Limited
 
 International Asset Reconstruction Company Private Limited
 
 Welfare trust of the Bank
 
 HDB Employees Welfare Trust
 
 Key management personnel
 
 Aditya Puri, Managing Director
 
 Paresh Sukthankar, Deputy Managing Director
 
 Kaizad Bharucha, Executive Director
 
 Related parties to key management personnel
 
 Salisbury Investments Private Limited, Tanaksh Innovations Private
 Limited, Anita Puri, Amit Puri, Amrita Puri, Adishwar Puri, Aarti Sood,
 Sangeeta Sukthankar, Dattatraya Sukthankar, Shubhada Sukthankar, Akshay
 Sukthankar, Ankita Sukthankar, Madhavi Lad, Havovi Bharucha, Huzaan
 Bharucha, Danesh Bharucha, Daraius Bharucha.
 
 In accordance with paragraph 5 of AS - 18, the Bank has not disclosed
 certain transactions with relatives of key management personnel as they
 are in the nature of banker-customer relationship.
 
 The significant transactions between the Bank and related parties for
 year ended March 31, 2016 are given below. A specific related party
 transaction is disclosed as a significant related party transaction
 wherever it exceeds 10% of all related party transactions in that
 category:
 
 - Interest paid: HDFC Securities Limited Rs, 18.96 crore (previous
 year: Rs, 2.89 crore); Housing Development Finance Corporation Limited
 Rs, 7.25 crore (previous year: Rs, 7.60 crore); HDB Financial Services
 Limited Rs, 4.52 crore (previous year: Rs, 1.99 crore); Atlas
 Documentary Facilitators Company Private Limited Rs, 3.84 crore
 (previous year: Rs, 4.25 crore).
 
 - Interest received: HDB Financial Services Limited Rs, 100.06 crore
 (previous year: Rs, 117.17 crore).
 
 - Rendering of services: Housing Development Finance Corporation
 Limited Rs, 178.83 crore (previous year: Rs, 144.37 crore); HDFC
 Securities Limited Rs, 21.07 crore (previous year: Rs, 13.94 crore).
 
 - Receiving of services: HBL Global Private Limited Rs, 702.20 crore
 (previous year: Rs, 589.50 crore); Atlas Documentary Facilitators
 Company Private Limited Rs, 471.44 crore (previous year: Rs, 449.50
 crore); Housing Development Finance Corporation Limited Rs, 247.21
 crore (previous year: Rs, 139.83 crore).
 
 - Dividend paid: Housing Development Finance Corporation Limited Rs,
 314.57 crore (previous year: Rs, 269.35 crore).
 
 - Dividend received: HDB Financial Services Limited Rs, 88.40 crore
 (previous year: Rs, 25.00 crore); HDFC Securities Limited Rs, 60.64
 crore (previous year: Rs, 7.58 crore).
 
 - Purchase of fixed assets: HDFC Securities Limited Rs, 0.12 crore
 (previous year: Nil).
 
 Figures in bracket indicate maximum balance outstanding during the year
 based on comparison of the total outstanding balances at each
 quarter-end.
 
 Remuneration paid excludes value of employee stock options exercised
 during the year.
 
 The Bank being an authorised dealer, deals in foreign exchange and
 derivative transactions with parties which include its promoter. The
 foreign exchange and derivative transactions are undertaken in line
 with the RBI guidelines. The notional principal amount of foreign
 exchange and derivative contracts transacted with the promoter that
 were outstanding as on March 31, 2016 is Rs, 491.21 crore (previous
 year: Rs, 100.00 crore). The contingent credit exposure pertaining to
 these contracts computed in line with the extant RBI guidelines on
 exposure norms is Rs, 18.90 crore (previous year: Rs, 2.80 crore).
 
 During the year ended March 31, 2016, the Bank purchased debt
 securities from Housing Development Finance Corporation Limited Rs,
 1,415.00 crore (previous year: Nil) and from HDB Financial Services
 Limited Rs, 322.00 crore (previous year: Rs, 485.00 crore) issued by
 these entities.
 
 During the year ended March 31, 2016, the Bank made investment of Rs,
 1,748.66 crore (previous year: Rs, 204.05 crore) in pass through
 certificates in respect of assets securitised out by HDB Financial
 Services Limited.
 
 During the year ended March 31, 2016, the Bank paid rent of Rs, 0.66
 crore (previous year: Rs, 0.66 crore) to parties related to the Bank''s
 key management personnel in relation to residential accommodation. As
 at March 31, 2016, the security deposit outstanding was Rs, 3.50 crore
 (previous year: Rs, 3.50 crore).
 
 The deposit outstanding from HDB Employees Welfare Trust as of March
 31, 2016 was Rs, 46.46 crore (previous year: Rs, 44.13 crore). The Bank
 also paid interest on deposit from HDB Employees Welfare Trust
 aggregating to Rs, 3.88 crore (previous year: Rs, 4.19 crore).
 
 13. Penalties levied by the RBI
 
 During the year ended March 31, 2016, RBI has not imposed any penalties
 on the Bank.
 
 During the previous year ended March 31, 2015, RBI levied on the Bank a
 penalty of Rs, 0.05 crore on the grounds that the Bank failed to
 exchange information about the conduct of a corporate borrower''s
 account with other banks at intervals as prescribed in the RBI
 guidelines on ''Lending under Consortium Arrangement / Multiple Banking
 Arrangements'' and the same was paid by the Bank.
 
 - Top areas of customer complaints
 
 The average number of customer complaints per branch, including ATM
 transaction disputes, was 3.3 per month during the year ended March 31,
 2016 (previous year: 3.8 per month). For the year ended March 31, 2016,
 retail branch banking segment accounted for 82.60% of the total
 complaints (an increase from 76.62% for the previous year) followed by
 credit cards at 11.86% of the total complaints (a reduction from 14.09%
 for the previous year), retail assets at 3.68% of the total complaints
 (a reduction from 4.52% for the previous year), while other segments
 accounted for 1.86% of total complaints (as against 4.77% in the
 previous year). The top 10 areas of customer complaints for the year
 ended March 31, 2016, including ATM transaction disputes, accounted for
 1,23,323 complaints and were 74.57% of total complaints as against
 1,16,708 complaints which were 70.33% of the total complaints for the
 year ended March 31, 2015. The top 5 areas of customer complaints on
 which the Bank is working towards root cause remediation are - ''cash
 not dispensed or less cash dispensed in the Bank''s ATMs'', ''instant
 account not activated - personal details not updated'', ''statement
 related - credit cards'', ''delay in closure of account'' and ''marketing
 related - credit cards''.
 
 - Position of BO complaints as per RBI annual report
 
 As per a report published by the RBI for the year ended June 30, 2015,
 the number of BO complaints per branch for the Bank was 1.36 (previous
 year: 1.44). The number of BO complaints other than credit cards per
 1,000 accounts was at 0.10 (previous year: 0.09).The number of BO
 complaints (credit card related) per 1,000 cards was at 0.06 (previous
 year: 0.08) for the Bank.
 
 14. Disclosure of Letters of Comfort (LoC) issued by the Bank
 
 The Bank has not issued any Letter of Comfort during the years ended
 March 31, 2016 and March 31, 2015.
 
 15. Small and micro industries
 
 Under the Micro, Small and Medium Enterprises Development Act, 2006
 which came into force from October 2, 2006, certain disclosures are
 required to be made relating to Micro, Small and Medium enterprises.
 There have been no reported cases of delays in payments to micro and
 small enterprises or of interest payments due to delays in such
 payments.
 
 16. Off-Balance Sheet SPVs
 
 There are no Off-Balance Sheet SPVs sponsored by the Bank, which need
 to be consolidated as per accounting norms.
 
 17. Credit default swaps
 
 The Bank has not transacted in credit default swaps during the year
 ended March 31, 2016 (previous year: Nil).
 
 18. Corporate social responsibility
 
 Operating expenses include Rs, 194.81 crore (previous year: Rs, 118.55
 crore) for the year ended March 31, 2016 towards Corporate Social
 Responsibility (CSR), in accordance with Companies Act, 2013.
 
 The Bank has spent 1.6% (previous year: 1.2%) of its average net profit
 for the last three financial years as part of its CSR for the year
 ended March 31, 2016. As a responsible bank, it has approached the
 mandatory requirements of CSR spends positively by laying a foundation
 on which it would build and scale future projects and partnerships. The
 Bank continues to evaluate strategic avenues for CSR expenditure in
 order to deliver maximum impact. In the years to come, the Bank will
 further strengthen its processes as per requirement.
 
 19. Investor education and protection fund
 
 There has been no delay in transferring amounts, required to be
 transferred to the Investor Education and Protection Fund by the Bank.
 
 20. Disclosure on remuneration to Non-Executive Directors
 
 The Non-Executive Directors are paid remuneration by way of sitting
 fees for attending meetings of the Board and its committees. Sitting
 fees are paid at the rate of Rs, 100,000 per Board meeting and at the
 rate of Rs, 50,000 per meeting of the Board Committees. An amount of
 Rs, 1.33 crore was paid as sitting fees to the Non-Executive Directors
 during the year ended March 31, 2016 (previous year: Rs, 0.76 crore).
 
 In accordance with RBI guidelines, the Board of Directors has, subject
 to the approval of the shareholders at the ensuing Annual General
 Meeting, approved payment of profit related commission to all
 Non-Executive Directors at the rate of Rs, 10 lacs per annum per
 Director other than the Chairperson.
 
 21. Comparative figures
 
 Figures for the previous year have been regrouped and reclassified
 wherever necessary to conform to the current year''s presentation.
Source :
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