Kotak Mahindra Bank Directors Report, Kotak Mahindra Reports by Directors
Kotak Mahindra Bank
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Directors Report Year End : Mar '15    « Mar 14
To the Members of
 The Directors present their Thirtieth Annual Report together with the
 audited accounts of your Bank for the year ended 31st March 2015.
 (A) Kotak Mahindra Bank Limited - Consolidated financial highlights:
                                    31st March 2015   31st March 2014 
                                     Rs.crore            Rs. crore
 Total income                       21,471.08          17,268.29
 Total expenditure, excluding 
 provisions and contingencies       16,715.37          13,263.82
 Operating Profit                    4,755.71           4,004.47
 Provisions and contingencies, 
 excluding provision for tax           205.73             308.97
 Profit before tax                   4,549.98           3,695.50
 Provision for taxes                 1,484.90           1,183.96
 Profit after tax                    3,065.08           2,511.54
 Less: Share of minority interest       59.51              62.17
 Add: Share in profit of Associates     39.88              15.62
 Consolidated profit for the Group   3,045.45           2,464.99
 Earnings per Equity Share:
 Basic (Rs.)                              39.49              32.19
 Diluted (Rs.)                            39.40              32.14
 (B) Kotak Mahindra Bank Limited - Standalone financial highlights:
                                31st March 2015    31st March 2014 
                                 Rs. crore                Rs. crore
 Total Income                       11,748.32          10,166.83
 Total expenditure, excluding 
 provisions and contingencies        8,750.86           7,589.68
 Operating Profit                    2,997.46           2,577.15
 Provisions and contingencies, 
 excluding tax provisions              164.50             304.70
 Profit before tax                   2,832.96           2,272.45
 Provision for taxes                   966.98             769.93
 Profit after tax                    1,865.98           1,502.52
 Add: Surplus brought forward from 
 the previous year                   4,005.29           3,016.60
 Amount available for appropriation  5,871.27           4,519.12
 Statutory Reserve under Section 17 
 of the Banking Regulation Act, 1949   466.50             375.63
 General Reserve                        93.30              75.13
 Transfer to / (from) Investment 
 Reserve Account                        86.65             (41.10)
 Transfer to Capital Reserve             5.91               0.40
 Transfer to Special Reserve            28.00              32.00
 Proposed Dividend                      82.07              63.08
 Corporate Dividend Tax                 13.58               8.69
 Surplus carried to Balance Sheet    5,095.26           4,005.29
 The Board of Directors confirms that there are internal controls in
 place with reference to the Financial Statements and that such controls
 are operating effectively.
 Your Directors are pleased to recommend a dividend of Rs. 0.90 per equity
 share (previous year Rs. 0.80 per equity share), entailing a payout of Rs.
 95.65 crore including dividend distribution tax (previous year Rs. 71.77
 crore). The dividend would be paid to all the shareholders (including
 the shareholders of the erstwhile ING Vysya Bank Ltd.), whose names
 appear on the Register of Members/Beneficial Holders list on the Book
 Closure date.
 Your Directors recommend an issue of bonus shares, subject to the
 approval of the members at the Annual General Meeting to be held on
 29th June 2015, in the ratio of 1:1 i.e. one additional equity share
 for every one equity share held by the members on a date to be fixed by
 the Board, by capitalizing a part of the reserves.
 The Board of Directors of your Bank and the Board of Directors of ING
 Vysya Bank Ltd. (''IVBL'') at their respective meetings held on 20th
 November 2014, had approved a Scheme of Amalgamation of IVBL with the
 Bank under Section 44A(4) of the Banking Regulation Act, 1949, subject
 to approval of the shareholders of both the Banks, Reserve Bank of
 India (RBI) and other regulatory authorities. On 7th January 2015, the
 shareholders of the Bank accorded their consent to the Scheme of
 Amalgamation of IVBL with the Bank. Further, RBI approved the Scheme of
 Amalgamation of IVBL with the Bank effective 1st April 2015.
 Consequently, on 21st April 2015, the shareholders of the erstwhile
 IVBL were allotted 13,92,05,159 equity shares of Rs.5/- each fully paid
 up of the Bank, as on the record date of 17th April 2015, in the ratio
 of 725 equity shares of face value of Rs.5/- each of the Bank for every
 1000 equity shares of Rs.10/- each held by the shareholders of IVBL.
 During the year, your Bank has allotted 10,77,480 equity shares arising
 out of the exercise of Employees Stock Options granted to the employees
 and whole-time directors of your Bank and its subsidiaries.
 Post allotment of equity shares as aforesaid, the issued, subscribed
 and paid-up share capital of your Bank stands at Rs. 3,86,17,63,320
 comprising of 77,23,52,664 equity shares of Rs. 5 each as on 31st March
 Further, upon allotment of 13,92,05,159 equity shares to the
 shareholders of erstwhile ING Vysya Bank Ltd. pursuant to the scheme of
 amalgamation in April 2015, the issued, subscribed and paid-up share
 capital of your Bank stands at Rs. 4,55,77,42,615 comprising of
 91,15,48,523 equity shares of Rs. 5 each. On account of cross holding
 9300 equity shares of Rs.5 each have been cancelled.
 Your Bank is well capitalised and has a Capital Adequacy Ratio (''CAR'')
 under Basel III as at 31st March 2015 of 17.17% with Tier I being
 16.18%. At a consolidated level the CAR was 17.56% under Basel III.
 During the year, your Bank has not issued any capital under Tier II. As
 on 31st March 2015, outstanding Unsecured, Redeemable Non-Convertible,
 Subordinated Debt Bonds were Rs.482 crore and outstanding Unsecured,
 Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II
 stood at Rs. 417.25 crore.
 In August 2014, your Bank had sought approval of its shareholders
 through Postal Ballot for issuance of securities in the nature of
 non-convertible debentures, in Indian/foreign currencies in the
 domestic and/or overseas market for an amount upto Rs. 5000 crore on
 private placement basis. Accordingly, your Bank raised around Rs.962
 crore in the financial year under review through issuance of
 infrastructure bonds.
 In April 2006, your Bank had issued and allotted 1,50,00,000 equity
 shares of Rs. 10 each (post subdivision 3,00,00,000 equity shares of Rs. 5
 each) to The Bank of New York, in its capacity as Depository for
 registered Global Depository Receipts (GDR) holders. The GDRs were
 listed on Luxembourg Stock Exchange.
 The average daily trading volume was 2,449 and the number of
 outstanding Depository Receipts as on 31st March 2015 was 10,37,075.
 Due to low trading/conversion volume in GDR, the Board of Directors of
 the Bank at its meeting held on 5th May 2015 has decided to terminate
 the GDS program.  The requisite notice of termination is being issued
 to the Custodian and the Depository.
 Consumer Banking
 Your Bank consolidated its network presence through a measured
 expansion of its footprint across the country and as of 31st March 2015
 had 684 branches and 1273 ATMs, covering 379 locations. Of the 79 new
 branches commissioned this year, 21 were in rural and semi-urban
 locations. Your Bank added about eight hundred thousand new customers
 this year across core banking products of savings and checking
 accounts, term deposits, overdrafts and non-resident accounts.
 Your Bank rolled out several initiatives aimed at offering a superior
 and differentiated customer experience. Some key ones are:
 Digital Initiatives
 Enabling availing products and services through digital channels was a
 key focus area for your Bank in this year. Some of the highlights
 - Building onto the new digital account JIFI, launched last year,
 your Bank introduced its interest bearing variant, JIFI Saver, this
 year in January 2015.  The account offers up to 6% interest and has a
 slew of distinguishing features like Hashtag Banking, Loyalty Rewards,
 Credit Bureau Score and Money Watch to appeal the tech savvy Gen Y
 - Marked by the rise of e-commerce in the country and with a view to
 staying ahead of competition, your Bank introduced a loyalty rewards
 platform, in January, 2015. The platform is powered by
 100  ecommerce partners and 7000  hotels completely funding the points
 earned by Kotak customers while shopping on their portals. The platform
 offers extra points to JIFI & JIFI Saver customers.
 - In sync with the lifestyle of today''s social media savvy
 generation, with the launch of Hashtag banking in January 2015, your
 Bank took banking to a new high. With Hashtag banking, for the JIFI and
 JIFI Saver account holders, now Mobile & DTH recharge, account updates,
 cheque book request and many more account activities are just a tweet
 - Your Bank ventured into the burgeoning digital payments arena with
 the launch of Kaypay in October 2014. It''s a bank agnostic
 person-to-person payments application which allows funds transfer to
 about 250 million customers of 28 banks in the country. Kaypay is a web
 based application optimized for use on mobile and allows funds transfer
 in real time 24X7 for free.
 - Your Bank also launched an easy and hassle free person-to-person
 payment feature in Net Banking and Mobile Banking called Mail Money &
 Message Money. Mail Money, launched in September 2014, allows the Net
 Banking users to send money to anyone just by using their email
 addresses. On the same lines, for all Mobile Banking users, Message
 Money was launched in December 2014, to enable money transfer to any
 mobile number without the hassle of knowing the recipient''s account
 - Your Bank introduced Kotak Money Watch, a 360 degree personal
 finance management tool within Net banking, in March 2015. It enables
 all the Net Banking users to track expenses, set budgets and track cash
 out from ATM.
 Products & Services
 - Your Bank launched Grand, a new savings bank proposition tailored
 exclusively for customers above 55 years, deriving features & benefits
 from their needs of healthcare, convenience and personalized attention.
 Under the proposition, customers are provided with priority service for
 their transactions at the branch & a first aid card, which details a
 customer''s health status and emergency contacts for easy reference.
 Further, Grand customers are offered a health card from Indian Health
 Organization (IHO), offering discount on treatments, consultation and
 procedures. Also, available are services like customized cash delivery,
 courtesy call back, etc.
 - Your Bank launched SANMAN savings bank account in unbanked rural
 locations. The product is customized to cater to the banking needs of
 rural/ unbanked India such as farmers, small time traders,
 self-employed, low income group individuals, works etc. It offers key
 features like reduced Average Quarterly Balance (AQB) requirement and
 enhanced cash deposit limits to suit the seasonality of rural India
 apart from standard features.
 - Your Bank launched on-line PIN (for debit and credit card)
 generation feature through net-banking, mobile banking and IVR. On one
 end, this feature has provided a huge convenience to customers and on
 the other end, significant cost saving to the bank.
 - Your Bank has introduced differentiated cards with additional
 features. These include the RuPay Debit Card, for customers opening
 accounts under PMJDY scheme. Associate Card for representatives of
 customers whereby non-financial transactions can be made through ATMs
 within Kotak network.
 - Your Bank introduced electronic platform for KYC. Customers can
 walk in to the branch only with Aadhar number and with the help of
 biometric impression of customer or OTP, the KYC details can be
 downloaded from UIDAI database through eKYC application. This has
 enabled faster on boarding of new customers.
 Business Lines
 a) Non Resident Business
 Your Bank continues to deliver innovative products and services in its
 endeavor to become a preferred banker amongst the NRI community
 globally.  Some of the key initiatives taken this year are:
 1. Extended C2R money transfer mode for Australia. Your Bank''s NRI
 clients can now use this medium to transfer money from Australia to
 their Kotak Bank account in India.
 2. Your Bank has further expanded the network of exchange house
 relationships and the count now stands at 20.
 3. Launched a unique proposition for Indian IT professionals deputed to
 overseas assignments.
 4. Your Bank has signed an MOU with NED Bank South Africa. This
 alliance would address the needs of the Indians migrating to South
 Africa and those already present there. South Africa has one of the
 strongest Indian diaspora which include both the NRI and PIO.
 5. As a platform to reach out to the overseas Indian community, your
 Bank participated in various international business forums such as
 Pravasi Bhartiya Diwas (PBD)-2015 and Vibrant Gujarat, the annual
 convention of AAPI-2014 (American Association of Physicians of Indian
 origin) at San Antonio (Houston.), AIA (Association of Indian
 Americans)-Annual Convention at New York, 2014.
 b) Priority Banking Business
 Privy League, the premium banking program of the Bank, now services
 more than 2.75 lakh customers. The segmental offering in Privy League
 was re-enforced with the launch of Trader current accounts and Grand
 savings accounts for senior citizens, under the Privy League program
 umbrella. An exclusive Privy League branch was launched in Hauz Khas,
 Delhi to create a differentiated service experience for the HNI
 customers with amenities like valet parking, private meetings rooms
 with video conference facility and a coffee lounge.
 c) Consumer Assets Business
 Your Bank has continued to grow the product lines under the Consumer
 Assets business.
 Credit Card: Your Bank''s credit card business has issued 4.80 lac cards
 by March 2015 and is in its seventh year of operations. The premium
 range of our products - VISA Signature and VISA Platinum have driven
 the spends growth in the portfolio and it contributes to 47% of spends,
 while accounting for 27% of customer base. The Credit card business has
 clocked total spends of Rs.3204 crore for the year at 31% growth Y-o-Y
 with a book size of Rs.643.5 crore. As per RBI data on electronic
 payments released for November 2014, total credit card spends for the
 industry has grown by 23% for April to November 2014 period over last
 Salaried Personal Loan: Your Bank''s Salaried Personal Loan business
 offers salaried individuals personal loans with a tenure of upto 60
 months. This year the business has grown by 68% with a SOH of Rs. 840
 crore as of March 2015. The total customer base stands at 34000
 Home Finance: Home Finance business clocked high growth of 37% in
 disbursements with loan book growth of 20% during the year with strong
 demand from both Tier I and Tier II Cities. Your Bank has expanded its
 home finance business further in Tier II Cities. Cross Sell through
 Bank Branches, Corporate Salary, Privy, and Wealth Teams contributed to
 around 30% of total volume. This year also witnessed very low losses on
 account of efficient and effective recovery and collection processes
 and policies adopted and we were able to resolve NPA cases.
 d) Business Banking Assets (BBA): Your Bank through its BBA division
 offers secured and unsecured Business loans, Loans against Property &
 Working Capital Finance to self-employed professionals /
 non-professionals and Small & Medium Enterprises. This has been a
 landmark year for your Bank''s BBA business with its book growing by
 27%. Your Bank continues to maintain its best in class portfolio
 quality through it effective and efficient risk management and recovery
 policies and practices. Capitalizing on the growing retail branch
 network, your Bank managed to expand its BBA product offering in over
 400 branches.
 Wholesale Banking
 Your Bank through its consolidated franchise has focussed on serving
 customers'' requirements across segments with its wide array of
 customized financial products and services that are driven through
 best-in-class technology platforms.
 Your Bank has also ensured a healthy portfolio with its continuous
 efforts through both volatile economic situation and tough credit
 environment in the last financial year. This has led to a stable credit
 The Transaction Banking Group has focussed on reinforcing your Bank as
 the Best Domestic Bank during the past year. Your Bank has been able to
 consistently add value to clients across Cash Management & Trade
 Services through its specialized product solutions that are steered by
 innovation and robust technology. This has helped clients optimize
 working capital & liquidity management. Proactive competition
 benchmarking, advanced processes and product parameters, continuous
 client feedback and customized solutions have helped the bank in
 catering to needs of this ever changing challenging industry. Your Bank
 has introduced the following key initiatives to serve customers better:
 - Service Support: To serve diverse financial needs your Bank has nine
 dedicated commercial branches & 135 CSM teams including cluster heads
 across 47 locations.
 - Tax Payment: Your Bank offers a ''Comprehensive Statutory Payment
 Solution'' to its customers via direct integration with Tax authorities,
 payment aggregators and various partner banks. Your Bank has developed
 a Government Business Module (GBM) for its customers to process payment
 of Direct (CBDT)/ Indirect Taxes (CBEC) through Net Banking and Branch
 channel. Currently, your Bank has been empanelled as Agency Bank for
 collecting tax for a) Delhi VAT & CST, Gujarat Commercial Tax, b)
 Andhra Pradesh Commercials Taxes, c) Punjab VAT & CST, Telengana
 Commercial Taxes d) an aggregator bank for Bihar VAT & CST and e)
 Odisha VAT & CST.
 - Online EPF Payment: Employees'' Provident Fund Organization has
 enabled online EPF payment for employers through payment aggregator
 with SBI as their primary banker. Your Bank has successfully integrated
 GBM module with concerned solution provider to enable all Kotak account
 holders to make EPF payment online using maker-checker workflow.
 - IFC: Your Bank has signed an agreement with International Finance
 Corporation (IFC) under Global Trade Finance Programme (GTFP) as a
 confirming bank. Under this arrangement IFC will issue us payment
 guarantees/ SBLC for letter of credit favouring Kotak Mahindra Bank
 Ltd., thereby mitigating the payment risk on the underlying banks.
 - Kotak Sarvartha Prepaid Card: Your Bank has initiated a comprehensive
 Prepaid Card program that will enable corporate clients to make
 payments to their employees, customers, affiliates, and vendors etc.
 and address their diverse payout needs like incentive payments, petty
 cash reimbursements, contract staff payouts, FI payouts etc.
 - Kotak Bill Pay: To ensure convenient & secure way of managing bill
 payments, your Bank introduced Kotak BillPay that offers customers the
 flexibility of making regular payments by one time registration.
 Your Bank''s in-depth understanding of clients'' requirement and ability
 to deliver tailored solutions in both Trade & Cash Management
 businesses has been acknowledged by industry''s leading agencies. Your
 Bank has been adjudged the Best Domestic Trade Bank in India by Trade
 & Forfaiting Review and Best Local Cash Management Bank in India 6th
 year in a row by Asiamoney. The Asiamoney awards are based on scores
 formed from a corporate survey conducted by Asiamoney (turnover less
 than or equal to USD 100mn). Your Bank won the Best Prepaid Card
 Programme at Financial Inclusion & Payments Systems Award 2014 for Amul
 Samriddhi. Your Bank has also received the Special Award for Innovation
 at the National Payments Excellence Award 2014 and was also recognised
 by NPCI for its role in launch of the RuPay Prepaid Card. Your Bank
 also received an award from the Honorable President of India Shri.
 Pranab Mukherjee at Rashtrapati Bhawan for its role in the launch of
 RuPay prepaid card leading to automation of the payout process for milk
 procurement by milk unions. These awards stand testimony to your Bank''s
 focussed approach towards Transaction Banking and client centric
 Commercial Banking
 The Commercial Banking business has registered a reasonable growth in
 FY 2014-15 despite subdued market sentiments and erratic monsoon.
 Commercial Vehicles (CV) and Construction Equipment (CE) sectors, which
 have been witnessing slowdown since 2011, showed signs of recovery.
 The CV situation seems to have improved slightly in the last two
 quarters of the previous year, especially in the case of Medium
 Commercial Vehicle (MCV) & Heavy Commercial Vehicle (HCV) sales across
 segments, which was driven by replacement demand. Decrease in energy
 prices and all around improvement of load factors have improved
 viability for transport operations and also reduced levels of
 delinquency. However, the recovery of Light Commercial Vehicle (LCV)
 segment is still weak. Further, de-growth is seen in the Small
 Commercial Vehicles (SCV) segment. Your Bank has started increasing
 exposure to this sector in the second half of FY 2014.
 At a macro level, GDP growth in FY 2015-16 is expected to be better
 than the previous year. MCV and HCV sectors are expected to grow in the
 next fiscal year, whereas the LCV segment could grow with a lag of 6
 months towards the latter half of FY 2015-16. Further, project
 clearances should pave the way for action in infrastructure, which in
 turn will lead to revival in the CE sector. Your Bank is well
 positioned to accelerate growth in these segments should a sustainable
 turnaround be seen.
 After continuous growth in the last four years, the tractor industry
 was in the negative by 13.5% during FY 2014-15 as a result of late and
 deficit monsoon in the first half of the last fiscal year followed by
 unseasonal rain fall. Losses in Kharif and Rabi crops, drop in prices
 of major commodities and reduction in yields have led to more than 25%
 percent fall in tractor industry growth post January 2015. Your Bank''s
 fresh disbursement for tractors in FY 2014-15 was marginally lower than
 previous year but better than the industry de-growth. However, the
 slowdown in rural economy has led to marginal deterioration of
 portfolio quality.
 Although the monsoon also had an impact on the agri business industry,
 your Bank inched closer to the RBI target of 18% of the Bank''s advances
 in the agri loan portfolio. Your Bank has set up new branches in the
 tier two to tier six towns and villages. This is in keeping with the
 Banks philosophy of borrowing (deposits) from India (metro/urban
 cities) and lending (light on liabilities, heavy on assets) to Bharat
 (rural and semi-urban). Even though the portfolio quality of agri loans
 continues to remain satisfactory, there could be incremental stress in
 the next fiscal year, given the unpredictable weather patterns.
 The total agri portfolio of your Bank crossed Rs. 12,000 crore in the
 last fiscal. The Agri business is now offering new non-urban small
 ticket loan products in smaller towns and rural pockets. Under the
 micro loan segment, your Bank commenced direct lending in the state of
 Uttar Pradesh, specifically in and around Varanasi. Close to 4,000
 women customers were added through this initiative. Further, your Bank
 has acquired by assignment a large portfolio of micro loans given to
 women borrowers under the Joint Liability Group setup in the states of
 West Bengal, Bihar and Tripura.
 Emerging Corporate Group''s (ECG) strategy continues to focus on
 balanced growth and maintain asset quality. Further, its growth has
 been driven by new customer acquisition along with increasing product
 penetration to existing customers. In the last financial year, the ECG
 business expanded its operations to 19 locations across 13 states.
 While the portfolio has witnessed stress due to slow down in the
 economy majority of them are in advanced stage of resolution.
 Your Bank also diversified its gold loans and rural housing finance
 operations. Gold loan products are now available across 150 bank
 branches and Rural Housing finance is now offered at 50 locations.
 Asset Reconstruction
 This year your Bank received and invested in several proposals of
 special situation and last mile financing. This scenario is expected to
 continue for the next few years as well. However, recoveries from sale
 of large assets continues to be challenging.
 The retail recoveries of the assets purchased from other banks and
 NBFC''s continues to be robust. The retail portfolio sale from other
 banks and NBFC''s is expected to increase in the coming few years.
 Your Bank''s treasury actively contributes to your Bank by way of:
 - Proprietary Trading: The various proprietary trading desks actively
 trade in products such as Fixed Income, Money Markets, Derivatives,
 Foreign Exchange and Bullion. Primary Dealer Desk - part of the
 proprietary trading desk, actively participates in the primary auctions
 of government securities, makes market in government securities and
 engages in retailing of government securities.
 - Customer Transactions:
 o Facilitating access to foreign currency markets through cash &
 derivatives products and providing fine market rates to clients for
 remittance and trade transactions.
 o Client solutions - standardised and structured, pertaining to Debt
 Capital Markets including Syndication of Loans, Bonds, Mezzanine
 financing, Promoter funding and acquisition financing and
 - Balance Sheet Management: The Balance Sheet Management Unit (BMU)
 manages the Asset Liability mismatches, Interest rate & Liquidity gaps
 and implementation of Funds Transfer Pricing between various business
 units. The Correspondent Banking Division within treasury actively
 builds on relationships with offshore banks towards improving quality
 and international reach for its customers.
 Human Resources
 Investment in Human Capital continues to be significant as in earlier
 years. Programs related to Talent Attraction, Talent Development and
 Talent Management have been institutionalized basis our architectural
 framework of Value creation and Best employment Experience.
 Pre-trained manpower acquisition channels such as Kotak Probationary
 Officer (KPO) and Junior Probationary Officer (JPO) programs have been
 further strengthened to create a sustainable pipeline of quality and
 timely manpower who become specialist bankers with requisite managerial
 Talent management continues to be an integral part of overall
 performance management process in the Bank. Your Bank believes in
 driving businesses through its core values and our talent management
 process aims to provide long term, sustained and meaningful career to
 employees across the organization.
 Cultural integration of people is a very key focus area and in this
 context our organizational learning initiatives are designed around
 assimilation and development of individuals and team competencies, on
 aspects such as people management, productivity and service quality.
 Your Bank has partnered with top academic institutions as well as
 renowned industry experts for the same
 Your Bank recognises that functional training is key to equip employees
 with strong domain knowledge and it continues the commitment of
 developing strong functional competencies in its employees through its
 robust e-learning platform as well as classroom trainings. The
 organization learning team runs around 350 plus unique functional and
 developmental programs in the above context.
 Specialized certifications for specific roles continue to be run as
 mandatory programs to ensure employee awareness of various regulatory
 norms in this dynamic external environment.
 This year, your Bank increased emphasis on digital products. Three
 major upgrades on the mobile banking application saw a large increase
 in adoption of usage. Several new native digital products were
 launched including Kaypay, Message Money and Hashtag Banking. On the
 loans management side, mobility has been introduced for collections on
 personal loans and credit card payments.
 Customer connect was improved by leveraging the Unica platform launched
 the previous year. Further automation of the marketing operations
 enabled your Bank to increase its ability to increase scale in offers
 to customers, tailored to their needs.
 A new system was introduced for the Bank''s Wealth Management customers,
 enabling them to get a consolidated, single view of all their
 investments.  This will serve as the foundation for portal and mobile
 access to customer dashboards and alerts in the coming year.
 To ensure customer data security, technology programs in the area of
 information security kept pace with the digital innovation. Customers
 are now given an option to login using digital certificates. New
 technology to prevent leakage of customer data has been implemented
 across the Bank and a new initiative for fraud detection on channels
 has been started.
 Governance and control continued to be an area of concentration, with
 new systems being deployed for internal audit automation, anti-money
 laundering, asset-liability management and compliance management.
 Your Bank''s subsidiaries are established players in the different areas
 of financial services, viz. car finance, investment banking, stock
 broking, asset management and life insurance.
 As at 31st March 2015, your Bank has seventeen (17) subsidiaries as
 listed below:
 Domestic Subsidiaries
 Kotak Mahindra Prime Limited
 Kotak Securities Limited
 Kotak Mahindra Capital Company Limited
 Kotak Mahindra Old Mutual Life Insurance Limited
 Kotak Mahindra Investments Limited
 Kotak Mahindra Asset Management Company Limited
 Kotak Mahindra Trustee Company Limited
 Kotak Investment Advisors Limited
 Kotak Mahindra Trusteeship Services Limited
 Kotak Forex Brokerage Limited
 Kotak Mahindra Pension Fund Limited
 Kotak Mahindra General Insurance Limited
 International Subsidiaries
 Kotak Mahindra (International) Limited Kotak Mahindra (UK) Limited
 Kotak Mahindra Inc.
 Kotak Mahindra Financial Services Limited
 Kotak Mahindra Asset Management (Singapore) Pte. Limited
 During the year, Global Investment Opportunities Fund Limited, ceased
 to be a subsidiary of your Bank with effect from 13th May 2014.
 Further, a new subsidiary of the Bank viz. Kotak Mahindra General
 Insurance Limited was incorporated in December 2014, with principal
 objective of carrying on business of general insurance. It is awaiting
 approval from Insurance Regulatory and Development Authority of India
 (IRDAI) to commence the business of general insurance.
 The various activities of the subsidiaries and the performance and
 financial position of the subsidiaries and associates are outlined in
 the Management Discussion and Analysis section appended to this Report.
 The Bank''s Policy for determining material subsidiaries is available on
 the Bank''s website viz. URL:
 As at 31st March 2015, your Bank has following four (4) Associate
 ACE Derivatives & Commodity Exchange Limited Infina Finance Private
 Limited Matrix Business Services India Private Limited Phoenix ARC
 Private Limited
 The Annual Report which consists of the financial statements of your
 Bank on standalone basis as well as consolidated financial statements
 of the group for the year ended 31st March 2015, has been sent to all
 the members of your Bank. It does not contain Annual Reports of your
 Bank''s subsidiary companies. Your Bank will make available full Annual
 Report (including the Annual Reports of all subsidiaries) upon request
 by any member of your Bank.
 These Annual Reports will be available on your Bank''s website viz. URL
 : and will also be available for
 inspection by any member at the Registered Office of your Bank.
 The Bank has received in-principle approvals from the Stock Exchanges
 for the above schemes.
 Further, the Board of Directors of the Bank at its meeting held on 5th
 May 2015 has approved and adopted, subject to the shareholders approval
 and other necessary approvals, a new Scheme under the Securities and
 Exchange Board of India (Share Based Employee Benefits) Regulations,
 2014 for the purposes of granting options and stock appreciation rights
 to the employees of the Bank, its subsidiaries and its associate
 companies, as applicable. viz.  Kotak Mahindra Share Based Employee
 Benefit Scheme 2015 comprising of:
 - Part A - Kotak Mahindra Equity Option Scheme 2015
 - Part B - Kotak Mahindra Stock Appreciation Rights Scheme 2015
 Approval of the shareholders in this regard is being sought at the
 ensuing Annual General Meeting of the Bank.
 Pursuant to Clause 49 and 55 of the Listing Agreement with the Stock
 Exchanges, separate sections entitled ''Report on Corporate Governance''
 and ''Business Responsibility Report'' have been included in this Annual
 Report. The Report of Corporate Governance also contains certain
 disclosures required under the Companies Act, 2013.
 Directors retiring by rotation
 Dr. Shankar Acharya, Chairman - Non-Independent Director of the Bank,
 retires by rotation at the Thirtieth Annual General Meeting and is
 eligible for re-appointment.
 Directors appointed during the year
 The Board of Directors of the Bank, at its meeting held on 7th
 September 2014 had appointed Ms. Farida Khambata as an Additional
 Director of the Bank.
 The shareholders of the Bank at their Extraordinary General Meeting
 held on 7th January 2015 pursuant to Section 149, 150 (2) & 152 of the
 Companies Act, 2013 and Section 10-A(2-A) of the Banking Regulation
 Act, 1949, appointed the following directors as Independent Directors,
 not liable to retire by rotation:
 - Mr. Asim Ghosh (DIN : 00116139) for a term upto 8th May 2016
 - Mr. Amit Desai (DIN : 00310510) for a term upto 17th March 2019
 - Prof. S. Mahendra Dev (DIN : 06519869) for a term upto 14th March
 - Mr. Prakash Apte (DIN : 00196106) for a term upto 17th March 2019
 - Ms. Farida Khambata (DIN : 06954123) for a term upto 6th September
 Further, the shareholders at the same meeting re-appointed Mr. C.
 Jayaram (DIN : 00012214) as Whole-time Director of the Bank designated
 as Joint Managing Director for the period from 1st January 2015 to 30th
 April 2016, subject to the approval of the Reserve Bank of India.
 The Board of Directors of the Bank, at its meeting held on 5th May
 2015, has re-appointed Dr. Shankar Acharya (DIN : 00033242) as the
 Chairman of the Bank subject to the approval of the shareholders and of
 the Reserve Bank of India. The approval of the shareholders in this
 regard is being sought at the ensuing Annual General Meeting of the
 Mr. Mark Newman (DIN : 03518417) was appointed as an Additional
 Director of the Bank with effect from 5th May 2015. Mr. Newman holds
 office as a Director up to the date of this Annual General Meeting and
 is eligible to be appointed as a Director. In terms of Section 160 of
 the Companies Act, 2013, your Bank has received notice in writing from
 a member along with requisite deposit of Rs. 1,00,000/- proposing
 candidature of Mr. Newman for his appointment as a Director.
 The details of the Directors appointed are set out in the Corporate
 Governance Report annexed to this Report.
 Declaration from Independent Directors
 The Board has received declarations from the Independent Directors as
 per the requirement of Section 149(7) of the Companies Act, 2013 and
 the Board is satisfied that the Independent Directors meet the criteria
 of independence as mentioned in Section 149(6) of the Companies Act,
 Board Evaluation
 The Independent Directors of the Bank at their meeting held on 6th
 September 2014, had advised the management to appoint an external
 agency specialized in HR and management consultancy to finalise the
 criteria for performance evaluation of Non-Executive directors,
 Whole-time Directors and the Chairperson. Accordingly, the management
 has identified and shortlisted one external agency for finalizing the
 criteria for the performance evaluation of the Directors and would be
 presenting the proposal to the Independent Directors at their next
 meeting for their consideration and approval.
 Key Managerial Personnel (KMPs)
 The Board of Directors of the Bank at its meeting held on 30th April
 2014 confirmed and approved the appointment of the following officials
 of the Bank as Key Managerial Personnel pursuant to the provisions of
 Section 203 of the Companies Act, 2013:
 - Mr. Uday Kotak, Executive Vice Chairman and Managing Director
 - Mr. C. Jayaram, Joint Managing Director
 - Mr. Dipak Gupta, Joint Managing Director
 - Mr. Jaimin Bhatt, President & Group Chief Financial Officer
 - Ms. Bina Chandarana, Company Secretary
 Appointment & Remuneration of Directors & KMPs
 The appointment and remuneration of Directors of the Bank is governed
 by the provisions of Section 35B of the Banking Regulation Act, 1949.
 The Nomination and Remuneration Committee recommends to the Board the
 appointment of Directors. The Committee considers the qualifications,
 fit & proper status, positive attributes as per the suitability of the
 role and independent status as may be required of the candidate before
 such appointment.
 The Reserve Bank of India (''RBI'') vide its circular
 no.DBOD.No.BC.72/29.67.001/201 1-12 dated 13th January 2012 has issued
 the Guidelines on
 Compensation of Whole Time Directors / Chief Executive Officers / Other
 Risk Takers of Private Sector Banks on Compensation Policy which inter
 alia cover the following:
 - Proper balance between fixed pay and variable pay;
 - Variable pay not to exceed 70% (Seventy Per Cent) of the fixed pay
 in a year.
 In accordance with the aforesaid RBI Circular, the Board of the Bank
 has adopted a Compensation Policy for its Whole-time Directors, Chief
 Officer of the Bank and other employees which includes issue of stock
 appreciation rights as a form of variable pay, linked to the Bank''s
 stock price, payable over a period of time. The salient features of the
 Compensation Policy are as follows:
 - Objective is to maintain fair, consistent and equitable
 compensation practices in alignment with Kotak''s core values and
 strategic business goals.
 - Applicable to all employees of the Bank. Employees classified into
 3 groups:
 o Whole-time Directors/Chief Executive Officer
 o Risk Control and Compliance Staff
 o Other categories of Staff
 - Compensation structure broadly divided into Fixed, Variable and
 o Fixed Pay - Total cost to the Company i.e. Salary, Retirals and Other
 o Variable Pay - Linked to assessment of performance and potential
 based on Balanced Key Result Areas (KRAs), Standards of Performance and
 achievement of targets with overall linkage to Bank budgets and
 business objectives. The main form of incentive compensation includes -
 Cash, Deferred Cash/Incentive Plan and Stock Appreciation Rights.
 o ESOPs - Granted on a discretionary basis to employee based on their
 performance and potential with the objective of retaining the employee.
 - Compensation Composition - The ratio of Variable Pay to Fixed Pay
 and the ratio of Cash v/s Non Cash within Variable pay outlined for
 each category of employee classification.
 - Any variation in the Policy to be with approval of the Nomination &
 Remuneration Committee.
 - Malus and Clawback clauses applicable on Deferred Variable Pay.
 - Ensuring no personal hedging strategies by employees which
 undermine risk alignment effects as part of their remuneration.
 The details of the remuneration paid to the Non-Executive Chairman,
 Executive and Non-Executive Directors of the Bank for the year ended
 31st March 2015 is provided in the Corporate Governance Report annexed
 to this Report.
 The Non-Executive Directors of the Bank receive remuneration only by
 way of sitting fees for attending meetings of the Board or Committees
 thereof.  Remuneration paid to the KMPs is in line with the
 Compensation Policy of the Bank which is based on the RBI Guidelines.
 Messrs S. B. Billimoria & Co., Chartered Accountants, auditors of your
 Bank, retire on the conclusion of the Thirtieth Annual General Meeting.
 In terms of Section 139 of the Companies Act, 2013, every Company is
 required to appoint auditors for a term of five years subject to their
 appointment being ratified at every Annual General Meeting. However,
 pursuant to the guidelines issued by the Reserve Bank of India (RBI),
 an audit firm is allowed to continue as the statutory auditor of a bank
 for a continuous period of four years only.
 Accordingly, it is proposed to appoint, subject to the regulatory
 approvals, Messrs S. R. Batliboi & Co. LLP, Chartered Accountants, as
 the statutory auditors of the Bank in place of Messrs S. B. Billimoria
 & Co., Chartered Accountants, who have completed four years as the
 statutory auditors. The appointment of Auditors is proposed to the
 members in the Notice of the current i.e. the Thirtieth Annual General
 Meeting for a period of four years from the conclusion of the Thirtieth
 Annual General Meeting until the conclusion of the Thirty fourth Annual
 General Meeting of the Bank, subject to the annual approval of RBI and
 ratification by the members every year.
 Pursuant to Section 204 of the Companies Act, 2013, your Bank has
 appointed Ms. Rupal D. Jhaveri, a Company Secretary in Practice, as its
 Secretarial Auditor. The Secretarial Audit Report for the financial
 year ended 31st March 2015 is annexed to this Report.
 Being a banking company, the disclosures required as per Rule 8(5)(v) &
 (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and
 74 of the Companies Act, 2013 are not applicable to your Bank.
 All the Related Party Transactions that were entered into during the
 financial year were on arm''s length basis and were in ordinary course
 of business.
 Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies
 (Accounts) Rules, 2014, there are no transactions to be reported under
 Section 188(1) of the Companies Act, 2013.
 All Related Party Transactions as required under Accounting Standards
 AS-18 are reported in Note 21 of Schedule 17 - Notes to Accounts of the
 Consolidated financial statements and Note 8 of Schedule 17 - Notes to
 Accounts of the Standalone financial statements of your Bank.
 The Bank''s Policy on dealing with Related Party Transactions is
 available on the Bank''s website viz. URL: PARTICULARS OF LOANS,
 Pursuant to Section 186(11) of the Companies Act, 2013, loans made,
 guarantees given, securities provided or acquisition of securities by a
 banking company in the ordinary course of its business are exempted
 from the disclosure requirement under Section 134(3)(g) of the
 Companies Act, 2013.
 Your Bank is committed to its Vision Statement of upholding its
 Global Indian Financial Services Brand creating an ethos of trust
 across all constituents, developing a culture of empowerment and a
 spirit of enterprise thereby becoming the most preferred employer in
 the financial services sector.
 Consistent with the Vision Statement, your Bank is committed to
 maintain and provide to all its employees and directors highest
 standards of transparency, probity and accountability. The Kotak Group
 endeavours to develop a culture where it is safe and acceptable for all
 employees and directors to raise / voice genuine concerns in good
 faith, and in a responsible as well as effective manner.
 A vigil mechanism has been implemented through the adoption of
 Whistleblower Policy with an objective to enable any employee or
 director, raise genuine concern or report evidence of activity by the
 Bank or its employee or director that may constitute: Instances of
 corporate fraud; unethical business conduct; a violation of Central or
 State laws, rules, regulations and/or any other regulatory or judicial
 directives; any unlawful act, whether criminal or civil; malpractice;
 serious irregularities; impropriety, abuse or wrong doing; deliberate
 breaches and non-compliance with the Bank''s policies; questionable
 accounting / audit matters / financial malpractice. The same option has
 now been extended to the vendors of the Bank also. The concerns can be
 reported on the website viz. URL:
 Currently an online mechanism enabling aforementioned reporting has
 been implemented over and above other modes of communication like
 e-mail, or a letter sent by mail, courier or fax to designated persons.
 Safeguards to avoid discrimination, retaliation, or harassment, and
 confidentiality have been incorporated in the policy. All employees and
 directors have access to the Chairman of the Audit Committee in
 appropriate and exception circumstances.
 The Policy has been uploaded on the Bank''s intranet as well as website
 viz. URL: and regular
 communication is made for sustained awareness.
 Your Bank has constituted a Corporate Social Responsibility (CSR)
 Committee consisting of the following Directors:
 - Mr. C Jayaram Joint Managing Director and Chairman of CSR Committee
 - Mr. Dipak Gupta, Joint Managing Director
 - Prof S. Mahendra Dev, Independent Director
 Your Bank''s CSR Committee drives the CSR programme of the Bank. Your
 Bank has a Board approved CSR policy, charting out its CSR approach,
 and is available on the Bank''s website viz. URL:
 The CSR expenditure incurred for the period 1st April 2014 to 31st
 March 2015 under Section 135 of Companies Act, 2013 in the financial
 year 2014-15 amounts to Rs. 1,197 lac as against Rs. 363 lac CSR spent in
 the financial year 2013-14.
 Your Bank is building its CSR capabilities on a sustainable basis and
 is committed to gradually increase its CSR spend in the coming years.
 The CSR Committee of the Board confirms that the implementation and
 monitoring of CSR Policy, is in compliance with CSR objectives and
 Policy of the company.
 The details of CSR activities and report under Section 135 of the
 Companies Act, 2013, are provided on pages 145-146 and 152-161 of the
 annual report FY 2014-15.
 Your Bank has in place a comprehensive Enterprise wide Risk Management
 (ERM) framework supported by detailed policies and processes for
 management of Credit Risk, Market Risk, Liquidity Risk, Operational
 Risk and various other Risks. Details of identification, assessment,
 mitigations, monitoring and the management of these Risks are mentioned
 in the Management Discussion and Analysis section appended to this
 The provisions of Section 134(3)(m) of the Companies Act, 2013 read
 with Rule 8(3) of the Companies (Accounts) Rules, 2014 are not
 applicable to your Bank. However, your Bank has been increasingly using
 information technology in its operations.
 The employee strength of your Bank, standalone, was 18,335 and along
 with its subsidiaries was 31,432 as of 31st March 2015. Upon the
 merger, 10,314 employees have been added up in the Bank and 514
 employees in the subsidiaries.
 191 employees employed throughout the year and 30 employees employed
 for part of the year were in receipt of remuneration of Rs. 60 lacs or
 more per annum.
 With an average age of 31 years your Bank continues to attract talent
 across all its businesses and hierarchy and has put in place various
 processes and systems to ensure alignment of employee behaviors with
 the organization''s core values.
 Organizational culture aspects like trust & inclusiveness were also
 reiterated through 113 cross functional meets conducted by senior
 business leaders for employees at mid management level under the Meet
 5 initiative.
 In a very short span of two years, your Bank has crossed several
 milestones in its Gender Diversity agenda.
 - A differentiated talent acquisition strategy to increase women
 employee base across various suitable roles has helped us to continue
 adding 20% women amongst all new hires in the Bank.
 - Your Bank''s top senior women professionals (around forty women
 across Kotak) have been brought together under our diversity initiative
 Astra and these women leaders now play a pivotal role in guiding and
 mentoring other mid-level women employees to sustain and grow in the
 - Your Bank''s internal women''s cell Strisangini continues to address
 women issues at workplace and facilitates mass-mentoring programs with
 senior women leaders.
 - POSH: Prevention Of Sexual Harassment (POSH) Policy has been
 formally instituted with 3 Regional Internal Complaints Committees
 (ICC). The ICC members have been trained in handling and resolving
 complaints and have also designed an online e-learning POSH Awareness
 module which covers the larger employee base.
 Following is a summary of sexual harassment complaints received and
 disposed off during the year 2014-15: o No. of complaints received : 5
 o No. of complaints disposed off : 4
 As part of the Leadership Transformation program, new promotes are now
 put through an intensive two day intervention to orient them on
 expected skill-sets and competencies and create a leadership mindset
 apart from other managerial and leadership development program.
 As your Bank enters in its next phase of growth and expansion of
 footprint across urban and rural India, your Bank and its subsidiaries
 continued to carry out several initiatives to attract and retain a pool
 of highly skilled and motivated employees who are aligned to the firm''s
 vision of becoming the most trusted financial services provider.
 I n accordance with the provisions of Rule 5 of the Companies
 (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the
 names and other particulars of employees are set out in the annexure to
 the Directors'' Report. In terms of the Proviso to Section 136(1) of the
 Companies Act, 2013, the Directors'' Report is being sent to all
 shareholders excluding the aforesaid annexure. The annexure is
 available for inspection at the Registered Office of your Bank. Any
 shareholder interested in obtaining a copy of the said annexure may
 write to the Company Secretary at the Registered Office of your Bank.
 The Directors, based on the representations received from the
 operational management, confirm in pursuance of Section 134(5) of the
 Companies Act, 2013, that:
 (i) your Bank has, in the preparation of the annual accounts for the
 year ended 31st March 2015, followed the applicable accounting
 standards along with proper explanations relating to material
 departures, if any;
 (ii) they have selected such accounting policies and applied them
 consistently and made judgements and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 your Bank as at 31st March 2015 and of the profit of your Bank for the
 financial year ended 31st March 2015;
 (iii) they have taken proper and sufficient care to the best of their
 knowledge and ability, for the maintenance of adequate accounting
 records in accordance with the provisions of the Act for safeguarding
 the assets of your Bank and for preventing and detecting fraud and
 other irregularities;
 (iv) the annual accounts have been prepared on a going concern basis;
 (v) they have laid down internal financial controls to be followed by
 the Bank and that such internal financial controls are adequate and are
 operating effectively; and
 (vi) they have devised proper systems to ensure compliance with the
 provisions of all applicable laws and that such systems are adequate
 and operating effectively.
 Following statements/reports are set out as Annexures to the Directors''
 - Extract Of Annual Return under Section 134(3)(a) of the Companies
 Act, 2013 read with Rule 12 (1) of Companies (Management &
 Administration) Rules, 2014 (Annexure-A).
 - Secretarial Audit Report pursuant to Section 204 of the Companies
 Act, 2013 (Annexure-B).
 Your Directors would like to place on record their gratitude for the
 valuable guidance and support received from the Reserve Bank of India,
 Securities and Exchange Board of India, Insurance Regulatory and
 Development Authority and other Government and Regulatory agencies.
 Your Directors acknowledge the support of the members and also wish to
 place on record their appreciation of employees for their commendable
 efforts, teamwork and professionalism.
                         For and on behalf of the Board of Directors
                                                Dr. Shankar Acharya 
 Place: Mumbai,
 Date: 5th May 2015
Source : Dion Global Solutions Limited
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