The Directors present their Twenty Ninth Annual Report together with
the audited accounts of your Bank for the year ended 31st March 2014
(A) Kotak Mahindra Bank Limited - Consolidated financial highlights:
31st March 2014 31st March 2013
Rs. crore Rs. crore
Total income 17,268.29 15,950.27
Total expenditure, excluding
provisions and contingencies 13,263.82 12,622.93
Operating Proft 4,004.47 3,327.34
Provisions and contingencies,
excluding provision for tax 308.97 183.18
Proft before tax 3,695.50 3,144.16
Provision for taxes 1,183.96 939.95
Profit after tax 2,511.54 2,204.21
Less: Share of minority interest 62.17 49.33
Add: Share in profit of
Associates 15.62 33.58
Consolidated profit for the Group 2,464.99 2,188.46
Earnings per Equity Share:
Basic (Rs.) 32.19 29.44
Diluted (Rs.) 32.14 29.33
(B) Kotak Mahindra Bank Limited - Standalone financial highlights:
31st March 2014 31st March 2013
Rs. crore Rs. crore
Total Income 10,166.83 9,203.16
Total expenditure, excluding
provisions and contingencies 7,589.68 7,046.55
Operating Profit 2,577.15 2,156.61
Provisions and contingencies,
excluding tax provisions 304.70 184.55
Profit before tax 2,272.45 1,972.06
Provision for taxes 769.93 611.34
Profit after tax 1,502.52 1,360.72
Add: Surplus brought forward from
the previous year 3,016.60 2,162.79
Amount available for
appropriation 4,519.12 3,523.51
Statutory Reserve under Section
17 of the Banking Regulation
Act, 1949 375.63 340.18
General Reserve 75.13 68.04
Transfer to / (from) Investment
Reserve Account (41.10) 10.52
Transfer to Capital Reserve 0.40 0.00
Transfer to Special Reserve 32.00 28.50
Proposed Dividend 63.08 52.38
Corporate Dividend Tax 8.69 7.29
Surplus carried to Balance
Sheet 4,005.29 3,016.60
Your Directors are pleased to recommend a dividend of Rs. 0.80 per equity
share (previous year Rs. 0.70 per equity share), entailing a payout of
Rs. 71.77 crore including dividend distribution tax (previous year Rs.
59.67 crore). The dividend would be paid to all the shareholders, whose
names appear on the Register of Members/Beneficial Holders list on the
Book Closure date.
Pursuant to the approval granted by the Members at an Extraordinary
General Meeting held on 9th May 2013 and receipt of other necessary
approvals, in May 2013 your Bank allotted 2,00,00,000 equity shares of
Rs.5 each to Caladium Investment Pte Ltd. (earlier known as Heliconia Pte
Ltd.), an affliate of Government of Singapore Investment Corporation
Pte Ltd. (GIC) on preferential basis at a price per equity share of
Rs.648 for a total consideration of Rs.1296 crore.
During the year, your Bank has allotted 37,01,975 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. 3,85,15,55,005
comprising of 77,03,11,001 equity shares of Rs. 5 each as on 31st March
Your Bank is well capitalised and has a Capital Adequacy Ratio (''CAR'')
under Basel III as at 31st March 2014 of 18.8% with Tier I being 17.8%.
At a consolidated level the CAR was 18.9% under Basel III.
During the year, your Bank has not issued any capital under Tier II. As
on 31st March 2014, 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. 405.62 crore.
Your Bank continued to expand its footprint across India and as at 31st
March 2014 had 605 branches and 1103 ATMs, covering 354 locations. Of
the 168 new branches commissioned this year, 94 were in rural and
semi-urban locations. Your Bank added over six hundred twenty 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
Products & Services
- Your Bank launched a new savings bank proposition for minors called
Kotak Junior. Under the proposition, the child gets a personalized
Junior Card and there is a regular investment from her account towards
Recurring Deposit /Systematic Investment Plan for her future goals.
There is a mandatory linked account of the Guardian who can opt for
convenience of a standing instruction for automatic transfer of fund
from his account to the minor''s account.
- Your Bank has launched the Recurring Deposit product which completes
the suite of deposit offerings. This product offers a systematic
savings avenue to help build corpus for achieving short/ medium term
- A new platform, JIFI, was launched to enable banking on social
networking sites including Facebook and Twitter. The platform enables
digital natives to open accounts and transact payments on social
networking sites that they are familiar and comfortable with. The
account gives the customer loyalty points for his social as well as
transactional behavior which can be redeemed for gift & discount
vouchers from popular online shopping sites. This account also offers a
feature packed Debit Card.
- Your Bank has introduced differentiated cards with additional
features. These include the Infnite Debit Card, a top end Visa product
for Wealth customers, Signature Debit Card for Privy Optima customers
and a Multi-Currency Travel Card - a prepaid card that can be used
globally. As per RBI mandate, your Bank completed the launch of Chip
Debit Cards successfully. We were among the few banks to offer chip
cards on all debit card variants and also issue chip cards as default
cards to select segment of customers.
- Third Currency Chest in Ahmedabad - Your Bank has set up its third
Currency Chest in Ahmedabad in February 2014. This unit will facilitate
effective cash management services in Ahmedabad and parts of Gujarat.
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. Launch of NRI Tax Saver TD & FCNR (B) Deposit in Singapore Dollars
2. Launched of attractive high-yielding structures against FCNR (B)
3. Launch of Max Yield NRO Term Deposit to enable NRI customers
residing in select countries to avail lower TDS benefit under the Double
Taxation Avoidance Agreement (DTAA), between India and the overseas
4. Click2Remit service compliant with the regulatory requirement under
Section 1073 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of United States effective 28th October 2013.
5. Launched of ''Missed Call'' & ''SMS to call'' service for NRI
6. Introduction of a toll-free service for NRI customers in 5
additional geographies: UK, Canada, Singapore, Australia and Hong Kong.
7. Entered into an agreement with Overseas Chinese Banking Corporation
(OCBC, Singapore) facilitating NRIs and PIOs to open Bank accounts with
your Bank in India.
8. Tied up with Al Zamil exchange house, Saudi Arabia for NRI customer
referrals. This alliance has been initiated to facilitate the existing
customers of the exchange house.
9. As a platform to reach out to the overseas Indian community and
global business partners, your Bank participated in various
international business forums such as Pravasi Bhartiya Diwas
(PBD)-2014, Regional PBD, Sydney, AIA Diwali Mela – New York, TIE
Conference – California, Dilwale Dilliwale (One of the biggest Indian
community event in Canada)– Toronto.
b) Priority Banking Business
Privy League, the program for the affluent and mass affluent customer
segment, now services approximately 1.25 lakh households and
businesses. Your Bank strengthened the Privy League proposition by
launching ''Smart Home'', an exclusive offering for program customers. A
premium call back service KPRIVY, was launched which enhanced the
service delivery for the program customers. The Priority Banking
business piloted sourcing new accounts on a Tablet, which offers
clients a quick & paperless account opening experience.
c) Consumer Assets Business
Your Bank has continued to grow the product lines under the Consumer
Credit Card: Your Bank''s credit card business has issued 4.33 lac cards
by March 2014 and is in its sixth 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 57% of spends,
while accounting for 30% of customer base. The Credit card business has
clocked total spends of Rs.2437 crore for the year at 59% growth Y-o-Y
with a book size of Rs.488.3 crore. As per RBI data on electronic
payments released for November 2013, total credit card spends for the
industry has grown by 25% for April to November 2013 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. It has disbursed loans of Rs.390 crore in FY 2013-14 in its 3rd
year of operations. This year the business has grown by 56% with a SOH
of Rs. 510 crore as of March 2014. The total customer base stands at
Home Finance: Home Finance business has shown a decent growth during
the year with strong demand from both Tier I and Tier II cities despite
a highly volatile market. Capitalizing on Cross Sell Opportunities
through bank branches and continued focus on Self Employed segment led
to a sustained growth during the year. The year witnessed very low
losses on account of efficient and effective recovery and collection
processes and policies adopted.
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 Enterprises. The growth in your Bank''s BBA
business was robust during the financial year ended 31st March 2014 with
its book growing by 20.7%. 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
retail branch network your Bank managed to expand its product offering
in over 300 Branches.
Your Bank consolidated its franchise across customer segments by
focusing towards serving customised requirements through an array of
financial products and services driven through best-in-class technology
Your Bank also continued to work towards ensuring a healthy portfolio
through a volatile economic as well as a tough credit scenario in the
last financial year. The financial year saw a stable demand on credit
Over the past year, the Transaction Banking Group has focused on
reinforcing your Bank as the Best Domestic Bank in this area. Driven by
innovation, leveraged on robust technology and specialized product
solutions, your Bank has been able to consistently add value to
transaction banking clients across Cash Management & Trade Services.
This has helped clients achieve optimized working capital & liquidity
management benchmarks. Conscious competition benchmarking, highly
evolved process and product parameters, continuous client feedback &
customized solutions have enabled your Bank to cater to the needs of
ever-changing industry landscape. Your Bank has introduced the
following key initiatives to serve customers better:
- Service Hubs: To move the trade services closer to the customers,
your Bank has set up service hubs in trade centric locations – Tirupur,
Rajkot, Jodhpur, Indore, Faridabad, Kanpur and Ludhiana. This has
helped reducing the processing time of export and import transactions.
Global Bulk Payment Solution: Your Bank has launched a convenient way
of handling multiple payments of repetitive nature with less paper work
and better operational control through its Global Bulk Payment Solution
platform. This facility enables customers to upload flees containing the
details of several cross-border payments (in USD) to be remitted to
various recipients across the globe, thereby eliminating the
transaction level paper work and reducing the overall cost for
Multiple Currency EEFC & SFC accounts: To help export- import customers
manage the FX flows in a more efficient manner, your Bank has started
operations in currencies such as Swedish Kroner (SEK), Hong Kong Dollar
(HKD), South African Rand (ZAR) and Danish Kroner (DKK). Thus, the
total number of currencies handled by your Bank has increased to 13.
Tax Payment: Your Bank offers a ''Comprehensive Statutory Payment
Solution'' to its Customer 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 VAT & CST, b) Andhra
Pradesh all Commercials taxes, c) Punjab VAT & CST, d) Bihar VAT & CST
and e) Odisha VAT & CST.
Your Bank''s in-depth understanding of client requirements 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
& Forfeiting Review and Best Local Cash Management Bank in India by
Asiamoney (the Asiamoney awards are based on scores formed from a
corporate survey conducted by Asiamoney (turnover less than or equal to
USD 100 mn). These awards stand testimony to your Bank''s focused
approach towards Transaction Banking and Client Centric solutions.
Commercial Vehicles & Construction Equipment
The Commercial Vehicles (CV) and Construction Equipment (CE) sectors
have witnessed continued slow down since 2011-12 which persisted this
year. This is the longest period of cyclical slow down ever witnessed
in the CV sector. CV sales, across segments dropped on a reduced base.
The CE sector witnessed lower off take, elongated payment cycles and
the drop in the investment rate hit the sector hard. In the light of
these factors, your Bank''s strategy was to sharply focus on receivables
management during the year. Indications are that the CV sector may have
bottomed out as indicated by the slight improvement in freight rates in
Q4 and operator confidence improving. On a macro level, the GDP growth
in 2014-15 is expected to be better than the previous year. Given this,
the CV sector is expected to grow (with a lag) towards the latter half
of 2014-15. Emphasis on infrastructure growth and project clearances
should pave the way for a revival in the CE sector as well. Your Bank
is positioned to accelerate growth in these segments should a
sustainable turnaround be seen.
Some of the salient developments in the Agri Business are as follows:
- Direct customer lending through retail agri loans portfolio has
increased 39% Y-o-Y indicating the continuing robustness in the Agri
- The Agri Business reached a presence in 100 locations that cover over
300 districts in 17 states.
- The Corporate Agri team exclusively handled their first Inter Bank
Participation Certificate transaction of Priority sector qualifying SME
loans amounting to Rs.99.7 crore from Citi Bank. They also handled the
frst exclusively managed inward remittance from an International Equity
fund for a stake buy of Rs. 92 crore in their MFI client.
- The newly started small ticket business loans focused on micro SME
clients in small towns has crossed 400 contracts with nil delinquency.
- The new specialised Agriculture Financing branches were opened in the
4 metros of Navi Mumbai, Jaipur, Chennai & Hyderabad in the APMC
markets. 3 of the branches were inaugurated by the Executive
Director/Regional Directors of Reserve Bank of India (RBI) indicating
their significance to the Financial Inclusion mandate of the RBI.
- The Agri business also had a significant focus on liability products
in the liability branches run by the Agri team Emerging Corporate Group
- The Emerging Corporate Group expanded to new locations to partner
with SMEs, and launched knowledge forums and engagement initiatives
with promoters of SMEs.
- The group participates in India''s growth by partnering some of the
best small and medium enterprises (SMEs)
The retail recoveries of credit card, business loans, personal and
mortgage loans have been robust with respect to the portfolios
purchased from other banks and NBFCs. The recoveries were further
enhanced due to CIBIL reporting and scoring of borrower rating by the
retail credit rating agencies. The corporate recoveries continue to be
challenging with the economy being sluggish and the exit from few large
accounts expected to happen through the sale of assets.
Your Bank is expecting several special situation opportunities in the
coming financial year and it will be in a position to invest in such
opportunities, in the coming 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.
- Customer Transactions:
- Facilitating access to foreign currency markets through cash &
derivatives products and providing fine market rates to clients for
remittance and trade transactions.
- Client solutions - standardized and structured, pertaining to Debt
Capital Markets including Syndication of Loans, Bonds, Mezzanine
financing, Promoter funding and acquisition financing and Securitisation.
- 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.
RBI vide circular DBOD.BP.BC.No.41/21.04.141/2013-14 dated 23rd August
2013 on Investment portfolio of banks - Classification, Valuation and
Provisioning, as a one-time measure permitted banks to transfer SLR
securities from Available For Sale (AFS)/Held For Trading (HFT)
category to Held To Maturity (HTM) category at valuation rates
prevailing on 15th July 2013, provided the transfer happened before
30th September, 2013. Your Bank has not transferred any SLR security
from AFS/HFT category to HTM category. The Bank''s SLR securities in HTM
category as at 31st March 2014 were 11.43% of net demand and time
liabilities (NDTL). As permitted under the same circular, your Bank has
opted to distribute the net depreciation on the AFS and HFT portfolios
over the last three quarters during the financial year 2013-2014.
Accordingly, your Bank has recognised Rs. 175.08 crore in the Profit and
Loss Account for the year ended 31st March 2014 respectively.
Your Bank has continued its investment in its Human Capital. The talent
management programme has become an integral part of overall performance
management process in the Bank. Your Bank believes in driving
businesses through its core values. Through organizational values and
talent management process we aim to provide long term, sustained and
meaningful career to employees across the organization. Our talent
management philosophy not only caters to the needs of the top talent
but also recognises the handholding and specific support or development
that is required by talent all across the Bank.
The Kotak Probationary officer (KPO) programme has now been established
as a sustainable source of quality resources who have been pre-trained
to become specialist bankers with managerial skills. The KPO programme
will help us meet our staffing needs in a regular and timely manner.
As we grow and evolve further as an organization, leadership
development remains a key focus area in our organizational learning
initiative. Areas like managing and developing teams, self-development,
service delivery and strategy were some other areas wherein we
continued our investment. We also recognise that functional training is
key to equip employees with strong domain knowledge and your Bank has
continued in its focus and commitment towards developing strong
functional competencies in its employees.
Your Bank has a robust e-learning platform and employees of all
divisions get their basic training imparted through this platform and
benefit from the same. This year your Bank introduced mandatory annual
e-learning certifications starting with Anti-Money Laundering and Know
your Customer Norms for all consumer bank employees with a focus to
ensure employee alertness and awareness in the changing environment.
Engaging employees in knowledge development, K Factor, the 6th Annual
Consumer Bank quiz was held and got participation from 5000 employees,
an increase of 15% over the last year.
This year, your Bank had a major focus in the area of digitization. An
upgraded Mobile Banking platform was launched which received much
customer appreciation. Its capability extends across the gamut of
banking including payments, credit cards, depository and investment
Your Bank''s website was upgraded providing esthetically designed
screens and ease of navigation. New banking functions were added to
provide a wider range of self service options especially in the area of
fxed deposits and bill payments. Your Bank has tied up with IRCTC to
allow customers to book train tickets using Kotak net banking. An
online fully automated platform has been launched for personal loans
whereby the customer can apply for a loan, get to know eligibility, as
well as get in principle approval based on his data.
Simultaneously, security on the internet was emphasized with improved
password generation mechanisms. We have also added the digital
signature facility to the Bank''s statements. With the launch of a new
alert system it is now possible for us to send alerts to customers in
real time on their transactions both on ATM and POS terminals. These
initiatives enhance the security and authenticity of our proposition
In our endeavor to enhance our customer''s banking experience we have
launched kiosk banking, which is a self- service banking terminal that
can fulfill non-cash banking requirements such as printing account
statements, requests for cheque books, transfer of funds, information
on products and so on We have also enhanced our multi lingual
interactive voice recognition capability in telephone banking to
include 4 regional languages, namely Hindi, Marathi, Gujarati and
Your Bank has introduced a Visa Intellilink Reporting System which
gives corporate clients the ability to access and control spends on
their corporate cards.
Your Bank also started initiatives in the area of analytics to better
understand customer preferences and needs. A world class system, Unica
from IBM, was implemented and leveraged to launch several customer
campaigns for cross sell and targeted product offers.
Governance and Control was an area of concentration, with systems being
deployed for bank-wide credit management, automated concurrent audits,
budgeting and regulatory reporting. Your Bank deployed a best in class
risk control and aggregation system called GLEMS from Tata Consultancy
Services Limited which enables it to evaluate customer risk better and
gives a single view of the entire customer relationship with all
associated parameters across the lending businesses of the Kotak group.
- The Banking Codes and Standard Board of India along with CRISIL
surveyed and rated 48 banks for the first time on different aspects such
as Information Dissemination, Transparency, Customer Centricity,
Grievance Redressal and Customer Feedback. Your Bank has been assigned
high rating with a total score of 85, ranking second among the 19
private sector banks and third among all banks on level of compliance.
- Your Bank has obtained the ISO 10002:2004 Certification for Complaints
Management in the Consumer Bank for the third year in a row. Your Bank
is only the second bank and fourth organization in India to achieve
- Your Bank is one of very few in India, that uses Twitter as a
customer support channel, with over 85% of our tweets being replies to
customers. Your Bank is the first bank in the country to reach the
milestone of 1 lac followers on Twitter.
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.
The overall macro-economic environment for the Indian economy in FY
2014 continued to stay on a relatively weak footing, even though some
improvements were seen with respect to the twin deficit problems – both
the fiscal and the current account. The financial markets witnessed
turbulence in the early part of the year, mostly as a reaction to the
talks of the Quantitative Easing (''QE'') withdrawal by the US Federal
reserve, leading to some sharp depreciation pressures on the INR and
also a sharp increase in the government security yields. On the other
hand, the economy continued to witness relatively high inflation levels,
mainly on account of higher food prices. After being in a narrow range
in the early part of the financial year, USD/INR witnessed significant
depreciation pressure from around mid-May as the US Fed announced its
intention to scale back its bond purchases. INR depreciated sharply
between 23rd May 2013 (quoting at 55.58/USD) to the highs of 68.83/USD
on 28th August 2013. The equity markets were volatile in FY 2014 due to
shift of investor preference towards debt, commodities and realty. The
subsidiaries continued focus on cost control, maintaining market share
and containing credit losses.
Kotak Mahindra Prime Limited, the car finance company continued to focus
on cost control and containing credit losses, while improving its
positioning in the car finance market by scaling up the business.
Kotak Securities Limited, the stock broking company continued to face
challenges due to shift in mix from the cash segment towards
low-yielding derivative segment with cash segment being less than 10%
of the total traded market volumes. The broking industry faces over
capacity causing pressure on realization rates.
Kotak Mahindra Capital Company Limited successfully completed 17
marquee transactions across various product formats, including FPO of
Power Grid Corporation of India Limited and Engineers India Limited
that hit the Indian capital markets in FY 2014.
Average Assets under management (AAUM) of Kotak Mahindra Asset
Management Company increased by 14.19%, higher than the industry growth
Kotak Mahindra Old Mutual Life Insurance Limited continued to adjust to
the changes in industry and environment and further improved its
distribution strength. The Company continues to demonstrate consistent
growth in a challenging and competitive environment.
The overall profitability of the International subsidiaries improved
during the year owing to robust revenues from asset management,
proprietary investments and advisory income.
During the year, a new subsidiary of the Bank viz. Kotak Mahindra Asset
Management (Singapore) Pte. Ltd. was incorporated in Singapore with the
principal objective of carrying on asset management activity out of
Singapore for International investors.
The various activities of the subsidiaries are outlined in the
Management Discussion and Analysis section appended to this Report.
In terms of the general exemption granted by the Central Government
vide its General Circular No.2/2011 dated 8th February 2011 under
Section 212(8) of the Companies Act, 1956, 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 2014, 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 :
http://ir.kotak.com/annual-reports and will also be available for
inspection by any member at the Registered Office of your Bank.
EMPLOYEE STOCK OPTION SCHEME
The stock options granted to the employees currently operate under
Kotak Mahindra Equity Option Scheme 2007 (Scheme 2007). The
disclosures below are in respect of the year ended 31st March 2014.
Options granted during the year Series 40 - 10,07,160 options
Series 41 - 60,000 options
Series 42 - 24,000 options
Series 43 - 50,000 options
Pricing Formula The Exercise Price shall be a price,
as may be determined by the Board /
ESOP / Compensation Committee,
equivalent to or discounted up to 50%
of the ''Average Market Price''. The
''Average Market Price'' for this
purpose would mean the average of the
closing price of Equity Shares of your
Bank, during two weeks period prior to
the date of the meeting of Board/ESOP/
Compensation Committee at which ''Plan
Series'' under the Scheme is approved,
on the Stock Exchange, where there was
highest trading volume during the said
two week period, on which the Equity
Shares of your Bank are listed.
''Plan Series'' means a documented plan
framed by Board / ESOP / Compensation
Committee for each tranche of grant of
Options, to all Eligible Employees, at
a specific Exercise Price (which is
determined by the Board / ESOP /
Compensation Committee for the purpose
of that particular Plan Series) and
other terms and conditions as
mentioned in that Plan Series.
The Board / ESOP / Compensation
Committee under special circumstances
decides that the Exercise Price shall
be Rs. 5 per share. In such cases, the
immediately succeeding Directors''
Report / Corporate Governance Report
shall carry details of the same.
Options in force at the
beginning of the year 84,19,532 options
Options Vested during the year 31,38,334 options
Options exercised during the
year 37,01,975 options
Total number of shares arising
as a result of exercise of
options 37,01,975 equity shares of Rs. 5 each
Options lapsed 5,05,047 options
Options granted during the year 11,41,160 options
Variation of terms of options No variations made in the terms of the
options granted under Scheme 2007.
Money realized by exercise of
options Exercise amount received: Rs.
Total number of options in force Outstanding options - 53,53,670
Details of options granted
during the year to : Name of Senior No. of
Management Personnel granted
(i) Senior management personnel
Series 41 Mr. Dipak Gupta 60,000
Series 42 Mr. C. Jayaram 24,000
(ii) Any other employee who
receives a grant in any one Nil
year of options amounting to
5% or more of options granted
during that year
(iii) Identified employees who
were granted option, during Nil
any one year, equal to or
exceeding 1% of the issued
capital (excluding outstanding
warrants and conversions) of
the Company at the time of
Diluted Earnings Per Share (EPS)
pursuant to issue of shares * The diluted Earnings Per Share (EPS)
on exercise of options calculated pursuant to issue of shares on
in accordance with AS-20 exercise of options calculated in
Earning Per Share accordance with AS-20 is Rs. 32.14
(Consolidated) and Rs. 19.56
Where the company has calculated
the employee * Had your Bank (on Consolidated
basis) followed the fair value
method for accounting
compensation cost using the
intrinsic value of stock options, the stock option compensation
expense would have been higher by
Rs. 33.83 crore
the difference between the
employee compensation cost so with consequent lower Consolidated
profits before tax. On account of the
computed and the employee
compensation cost that shall diluted EPS of your Bank
(Consolidated) would have been less
by Rs. 0.30 per share.
have been recognized if it had
used the fair value of the
options, shall be disclosed. The
impact of this difference on * Had your Bank (on Standalone basis)
followed the fair value method for
profits and on EPS of the Company
shall also be disclosed. the stock option compensation
expense would have been higher by Rs.
22.19 crore with consequent lower
Standalone profits before tax. On
account of the same the diluted EPS
of your Bank (Standalone) would have
been less by Rs. 0.19 per share.
Weighted - average exercise
prices and weighted - average * The weighted average price of the
stock options exercised is Rs. 544.55
and the Weighted Average fair value
fair values of options shall be is Rs.715.40.
disclosed separately for options
whose exercise price either
equals or exceeds or is less than
the market price of the stock.
*Note: Above figures are derived by considering the options granted and
exercised by employees of your Bank and its subsidiaries.
A description of the method and
significant assumptions A. Stock price
used during the year to estimate
the fair values of options,
including the following weighted
- average information: It is the closing market price on
the National Stock Exchange of
India Limited prior to the meeting
of the Board in which the options
Volatility is a measure of the
amount by which a price has
fluctuated or is expected to
fluctuate during a period. The
measure of volatility used in the
Black-Scholes option-pricing model
is the annualized standard
deviation of the continuously
compounded rates of return on the
stock over a period of time.
Accordingly, daily volatility of
your Bank''s stock price on the NSE
for the period corresponding to the
respective expected live of the
different vesting, prior to the
grant date has been considered.
C. Risk free interest rate
The risk-free interest rate being
considered for the calculation is
the interest rate applicable for
maturity equal to the expected life
of the options based on the
zero-coupon yield curve for
Government Securities as on the
date of the respective grant.
D. Time to Maturity/Expected Life of
The minimum life of a stock option
is the vesting period and the
maximum life is vesting period plus
the exercise period. The Expected
life of the options has been
calculated as the average of the two
extremes - the minimum life and the
maximum life. Since each vest has
been considered as a separate
grant, the expected life has been
calculated for each vesting
E. Dividend yield
The dividend yield for each grant
has been derived by dividing the
dividend per share by the market
price per share.
Weighted average information in
respect of above assumptions has been
provided in note 10 of Schedule 17 of
the notes to accounts to the
Consolidated financial statement of
Weighted average information in
respect of above assumptions has been
provided in note 9 of Schedule 18B of
the notes to accounts to the
Standalone financial statement of your
CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT
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
Your Bank has implemented number of recommendations given in the
Corporate Governance Voluntary Guidelines 2009 by the Ministry of
Corporate Affairs and is examining the possibility of implementing the
CHANGE OF REGISTERED OFFICE
Your Bank has inaugurated its new Corporate Office at Bandra Kurla
Complex, Mumbai. The Board of Directors at its meeting held on 14th
March 2014, approved the change of Registered Office of the Bank from
its earlier location at 36-38A Nariman Bhavan, 227, Nariman Point,
Mumbai - 400 021, to 27BKC, C 27, G Block, Bandra Kurla Complex, Bandra
(E), Mumbai – 400 051 with effect from 31st March 2014.
Mr. N. P. Sarda, the Non-Independent Director of the Bank, retires by
rotation at the Twenty Ninth Annual General Meeting and is eligible for
The Board of Directors of the Bank, at its meeting held on 9th May
2014, has re-appointed Mr. Uday Kotak as Executive Vice-Chairman and
Managing Director for the period from 1st January 2015 to 31st December
2017, subject to the approval of the shareholders and of the Reserve
Bank of India. Mr. Dipak Gupta has been re-appointed as Whole-time
Director of the Bank designated as Joint Managing Director for the
period from 1st January 2015 to 31st December 2017 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 Bank.
The term of Mr. C. Jayaram as Whole-time Director of the Bank
designated as Joint Managing Director expires on 31st December 2014.
Mr. Jayaram would retire on the expiry of his term.
In terms of Section 139 of the Companies Act, 2013, every Company is
required to appoint Auditors for a term of 5 years subject to their
appointment being ratified at every Annual General Meeting. However,
pursuant to the guidelines issued by the Reserve Bank of India, an
audit form is allowed to continue as the Statutory Central Auditor of a
bank for a continuous period of four years only.
Messrs S. B. Billimoria & Co., Chartered Accountants, were appointed as
auditors of your Bank from the financial year 2011-12 onwards. They have
already completed three years as the statutory auditors of the Bank and
would retire on the conclusion of Twenty Ninth Annual General Meeting.
They are eligible for re-appointment subject to the approval of Reserve
Bank of India and the shareholders, for a period of one year. As
recommended by the Audit Committee of the Board, the Board of Directors
has proposed the appointment of Messrs S. B. Billimoria & Co.,
Chartered Accountants as the Statutory Auditors for the current
financial year 2014-15. You are requested to re-appoint the auditors for
the current financial year and to fix their remuneration.
The Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1998, are not applicable to your Bank, however, your
Bank has been increasingly using information technology in its
The employee strength of your Bank along with its subsidiaries as of
31st March 2014 was over 26,500 as compared to around 23,500 employees
a year ago.
Your Bank standalone had over 16,000 employees as of 31st March 2014.
162 employees employed throughout the year and 17 employees employed
for part of the year were in receipt of remuneration of Rs. 60 lacs or
more per annum.
With a young and largely professionally qualified employee base (average
age of 31 years and 45% CA/ MBAs/ Post Graduates) your Bank continues
to attract talent across all its businesses and hierarchy. In the last
one year your Bank has made substantial investments in strengthening
our frontline talent pipeline through tie-ups with educational
institutes for pre-trained good quality Manpower.
Productivity, Service Quality and development of key competencies such
as People Development continue to be the focus areas for which your
Bank has partnered with top academic institutions as well as renowned
industry experts. A significant intervention was also planned and
implemented for career & succession planning particularly in the Branch
Your Bank continues to ensure values alignment and ethical behavior by
all its resources in all their dealing with internal and external
stakeholders through linkage of the form’s core values with all key
Human Resource processes.
With continued emphasis on employee engagement, the Bank along with most
of its subsidiaries undertook an organization wide engagement study
which had close to 90% participation and feedback received on various
parameters have formed the basis of action plans across various work
Diversity initiatives in the Bank were given an impetus by setting up
of a team of internal women to address women issues at workplace,
mass-mentoring programs with senior women leaders, revision of the
Policy for Sexual Harassment at workplace and tie ups for hiring
differently baled candidates.
As we enter our next phase of growth and expansion of our footprint
across urban and rural India, the 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.
The Bank and its subsidiaries continued to carry out several
initiatives and innovative processes which have helped in building a
pool of highly committed and motivated employees who are aligned to the
vision of the organization and consistently excel in delivering best in
class products and services to our customers.
In accordance with the provisions of Section 217(2A) of the Companies
Act, 1956 and the rules framed there under, the names and other
particulars of employees are set out in the annexure to the Directors''
Report. In terms of the provisions of Section 219(1)(b)(iv) of the
Companies Act, 1956, 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.
DIRECTORS'' RESPONSIBILITY STATEMENT
The Directors, based on the representations received from the
operational management, confirm in pursuance of Section 217(2AA) of the
Companies Act, 1956 and Section 134(5) of the Companies Act, 2013,
(i) your Bank has, in the preparation of the annual accounts for the
year ended 31st March 2014, 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 judgments 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 2014 and of the profit of your Bank for the
financial year ended 31st March 2014;
(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
(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.
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,
Chairman Date: 9th May 2014