The Board of Directors have the pleasure of presenting the 22nd AnnualReport of the Bank together with the Audited Statement of Accounts Auditors' Report andthe Report on the business and operations of the Bank for the financial year ended 31stMarch 2016.
The financial highlights for the year under review are presented below:
| || || || |
(Rs. in crores)
|Particulars ||2015-16 ||2014-15 ||Growth |
|Deposits ||357967.56 ||322441.94 ||ll.02% |
|Out of which || || || |
| Savings Bank Deposits ||105793.13 ||88292.08 ||19.82% |
| CurrentAccountDeposits ||63651.92 ||56108.22 ||13.45% |
|Advances ||338773.72 ||281083.03 ||20.52% |
|Out of which || || || |
| Retail Advances ||138520.90 ||lll932.27 ||23.75% |
| Non-retail Advances ||200252.82 ||169150.76 ||18.39% |
|Total Assets/Liabilities ||525467.62 ||461932.39 ||13.75% |
|Net Interest Income ||16832.97 ||14224.14 ||18.34% |
|Other Income ||9371.46 ||8365.04 ||12.03% |
|Out of which || || || |
| Fee Income ||7501.97 ||6778.98 ||10.67% |
| Trading Profit1'1' ||l246.9l ||ll34.94 ||9.87% |
| Misc. Income ||622.58 ||45l.l2 ||38.01% |
|Operating Expenses (excluding depreciation) ||9656.91 ||8798.07 ||9.76% |
|Profit before Depreciation Provisions and Tax ||16547.52 ||l379l.ll ||19.99% |
|Depreciation ||443.91 ||405.67 ||9.43% |
|Provision for Tax ||4170.09 ||3699.01 ||12.74% |
|Other Provisions and Write offs ||3709.86 ||2328.61 ||59.32% |
|Net Profit ||8223.66 ||7357.82 ||ll.77% |
|Appropriations: || || || |
|Transfer to Statutory Reserve ||2055.92 ||l839.46 ||ll.77% |
|Transfer (from)/to Investment Reserve ||(4l.8l) ||25.49 ||- |
|Transferto Capital Reserve ||62.04 ||63.14 ||(l.74%) |
|Transferto Reserve Fund ||l.74 ||(l.27) ||- |
|Proposed Dividend(2) ||2.8l ||l308.96 ||- |
|Surplus carried over to Balance Sheet ||6142.96 ||4122.04 ||- |
(1) Excluding Merchant Exchange Profit
(2) According to the Companies (Accounting Standards) Amendment Rules 2016proposed dividend is not recognised as a liability as on 31st March 2016
|Key Performance Indicators ||2015-16 ||2014-15 |
|Interest Income as a percentage ofworking funds* ||8.59% ||8.81% |
|Non-interest Income as a percentage ofworking funds* ||1.96% ||2.08% |
|Net Interest Margin ||3.90% ||3.92% |
|Return on Average Net Worth ||17.49% ||18.57% |
|Operating Profit as a percentage ofworking funds* ||3.38% ||3.33% |
|Return on Average Assets ||1.72% ||1.83% |
|Profit per Employee** ||'17.83 lacs ||'17.07 lacs |
|Business (Deposits less inter-bankdeposits + Advances) peremployee** ||'14.84 crores ||'13.71 crores |
|Net non-performing assets as a percentage of net customer assets*** ||0.70% ||0.44% |
Working funds represent average total assets
** Productivity ratios are based on average number of employees for the year
*** Customer assets include advances and credit substitutes representing Non-SLRinvestments through primary market Previous yearfigures have been re-grouped wherevernecessary
This year has been a mix of opportunities and challenges for the Indian Banking sector.Despite the challenges the Bank continues to perform well by leveraging upon its branchnetwork and innovative electronic channels a well-developed retail franchise and a numberof key corporate and SME relationships. During the year the Bank continued to expand itsnetwork as we believe that both physical branches and digital channels will co-exist tocreate the superior customer experiences which continue to remain the corner stone of ourvision and strategy. The Bank's retail businesses grew steadily during the year and therewas credible growth of both retail deposits and loans supported by an expanding networkthat is critical to the retail franchise. Our corporate advances portfolio grew higherthan industry growth rates as we continue to find attractive refinancing opportunities forhighly rated corporates that are new relationship additions to the Bank's franchise.
The Bank continued to show a healthy growth in both business and earnings with a netprofit of '8223.66 crores for the year ended 31st March 2016 registering agrowth of 11.77% over the net profit of '7357.82 crores last year. The operating profitof the Bank increased by 20.31% to '16103.61 crores from '13385.44 crores last year. TheBank continued to focus on the quality of growth and displayed strong growth in keybalance sheet parameters for the year ended 31st March 2016. The total assetsincreased by 13.75% to '525468 crores total advances increased by 20.52% to '338774crores. The total deposits of the Bank increased by 11.02% to '357968 crores against'322442 crores last year. Savings Bank deposits increased by 19.82% to '105793 croreswhile Current Account deposits increased by 13.45% to '63652 crores and togetherconstituted 47% of total deposits as compared to 45% last year.
The Bank continued to enhance its shareholder value by delivering healthy financialreturn ratios. Basic Earnings Per Share (EPS) was '34.59 compared to '31.18 last yearwhile the Diluted Earnings Per Share was '34.40 compared to '30.85 last year. Return onEquity (RoE) stood at 17.49% compared to 18.57% last year and Return on Assets (RoA)stood at 1.72% compared to 1.83% last year. The Net Interest Margin (NIM) for the year was3.90% compared to 3.92% last year. The ratio of Gross NPAs to gross customer assets stoodat 1.67% and Net NPA ratio (Net NPAs as percentage of net customer assets) was 0.70%. TheBank's provision coverage stood at 72.27% after considering prudential write-offs.
During the year 12309627 equity shares of '2 each were allotted by the Bank to someof its Directors/Employees and that of its subsidiary companies pursuant to exercise ofoptions by them under the various Employee Stock Option Schemes of the Bank. Pursuant tosaid allotment the total issued and paid-up equity share capital of the Bank increased to'476.57 crores as compared to '474.10 crores as on 31st March 2015.
The shareholding pattern of the Bank as on 31st March 2016 was as under:
|Shareholder/ Category ||No. of Shares held ||% of Paid-up Capital |
|Promoters || || |
|1 Administratorofthe Specified Undertaking ofthe UnitTrustof India (SUUTI) ||274840905 ||11.53 |
|2 Life Insurance Corporation of India (LIC) ||348860225 ||14.64 |
|3 General Insurance Corporation of India ||40595000 ||1.70 |
|4 The New India Assurance Company Limited ||26103585 ||1.10 |
|5 National Insurance Company Limited ||4747285 ||0.20 |
|6 The Oriental Insurance Company Limited ||6330020 ||0.27 |
|7 United India Insurance Company Limited ||6927714 ||0.29 |
|Foreign Investors || || |
|8 Overseas Investors (including Flls/OCBs/NRIs) ||982906791 ||41.25 |
|9 Foreign Direct Investment (GDR issue) ||79957720 ||3.36 |
|Domestic Financial Institutions || || |
|10 Financial Institutions/Mutual Funds/Banks/NBFC ||246736628 ||10.35 |
|Retail Investors || || |
|11 Others ||364825953 ||15.31 |
|Total ||2382831826 ||100.00 |
The said equityshares are listed on the National Stock Exchange of India Limited (NSE)and BSE Limited (BSE). The Unsecured Redeemable Non Convertible Debentures issued by theBank on a private placement basis are listed on NSE and BSE. The Global DepositoryReceipts (GDR) issued by the Bank are listed on the London Stock Exchange. The Bondsissued by the Bank under the MTN programme are listed on the Singapore Stock Exchange. TheBank has paid the listing fees to the said Stock Exchanges for the current financial year.
Amendment to Articles of Association (AOA) of the Bank
The Shareholders of the Bank had by means of a special resolution passed on 10thMay 2016 through Postal Ballot approved the amendments to the relevant provisions of theArticles of Association (AOA) of the Bank. The new AOA of the Bank which has come intoeffect from 10th May 2016 is in compliance with the relevant provisions of theCompanies Act 2013 Rules made thereunder the Banking Regulation Act 1949 theGuidelines issued by the Reserve Bank of India from time to time and the SEBI (ListingObligations Disclosure Requirements) Regulations 2015 (Listing Regulations) includingany statutory amendment(s) modification(s) variation or re-enactment thereof.
In terms of the new AOA SUUTI and LIC has the power to nominate one director each onthe Board of the Bank and the Board would have the authority to appoint the Non-ExecutiveChairman of the Bank.
Application to the Foreign Investment Promotion Board (FIPB) for increase in theforeign investment limits
In terms of the Consolidated Foreign Direct Investment (FDI) Policy the FIPBDepartment of Economic Affairs Ministry of Finance New Delhi had granted its approval tothe Bank to increase the overall foreign investment limit from 49% to 62% of its totalpaid up share capital subject to the condition that the aggregate investments of ForeignInstitutional Investors (Fils) in the Bank does not exceed 49% of its total paid up sharecapital subject to compliance with other applicable laws.
The Ministry of Commerce and Industry Government of India vide Press Note No. 12 (2015Series) dated 24th November 2015 reviewed and amended the said FDI Policy onvarious sectors including the Private Sector Banks. The permissible limits of foreigninvestment in Private Sector Banks was increased to 74% of their total paid up sharecapital on a fully fungible basis subject to the limits prescribed in amended Clause220.127.116.11.2.4 (i) ofthe revised FDI Policy.
Accordingly the Bank had sought the approval of the FIPB to increase the foreigninvestment limit from 62% to 74% of its total paid up share capital on a fully fungiblebasis subject to the limits prescribed in amended Clause 18.104.22.168.2.4 (i) of the revisedFDI Policy.
As on 31th March 2016 the total foreign investment in the Bank was 44.61%of its total paid up share capital. The said increase in foreign investment limit wouldenable the Bank to enhance Shareholders value and provide flexibility to the Bank to raiselong term capital from foreign investors subjectto compliance with the revised FDIPolicy.
The said application made by the Bank seeking to increase the foreign investment limitfrom 62% to 74% of its total paid up share capital on a fully fungible basis has beenrecommended by the FIPB for the approval of the Cabinet Committee on Economic Affairs(CCEA).
The Diluted Earnings Per Share (EPS) of the Bank for the financial year 2015-16 hasrisen to '34.40 from '30.85 per equity share of '2 each in the previous year. In view ofthe overall performance of the Bank and with the objective of rewarding the Shareholdersof the Bank with cash dividends while retaining capital to maintain a healthy capitaladequacy ratio to support future growth the Board of Directors of the Bank at its Meetingheld on 26th April 2016 recommended a dividend of '5.00 per equity share of '2each for the financial year 2015-16 as compared to '4.60 per equity share of '2 each forthe financial year 2014-15. The said increase reflects our confidence in the Bank'sability to consistently grow earnings over time.
Closure of Share Transfer Books and Record Date for Dividend
The Register of Members and the Share Transfer Books of the Bank will be closed fromSaturday 9th July 2016 to Friday 22nd July 2016 (both daysinclusive) for the purpose of the 22nd Annual General Meeting of theShareholders of the Bank to be held on Friday 22nd July 2016 and fordetermining the entitlement to dividend if any declared by the Bank for the financialyear ended 31st March 2016.
The Record Date for payment of the said dividend if approved by the Members at the 22ndAnnual General Meeting has been fixed on Friday 8th July 2016. The saiddividend shall be paid to those Members whose name appears on the Register of Members ofthe Bank/ the Statements of Beneficial Ownership as received from the Depositories as atthe close of business hours on Friday 8th July 2016.
Ratings of various Debt Instruments
The Unsecured Redeemable Non Convertible Debentures issued by the Bank on a privateplacement basis during the financial year 2015-16 were rated "AAA" by CRISILCARE and ICRA.
The Bonds issued by the Bank under the MTN programme during the financial year2015-16 were rated "AAA" by CRISIL CARE and ICRA.
Board of Directors
During the year the following changes took place in the composition of the Board ofDirectors of the Bank:
Smt. Shikha Sharma was re-appointed as the Managing Director and CEO of the Bank for afurther period of three years with effect from 1st June 2015 upto 31stMay 2018 in terms of the approval granted by the Reserve Bank of India (RBI) and theShareholders of the Bank at the last Annual General Meeting held on 24th July2015.
Smt. Ireena Vittal resigned as an Independent Director of the Bank with effect fromthe close of business hours on 23rd August 2015. The Board places on record itsappreciation for the contributions made by Smt. Ireena Vittal during her tenure as anIndependent Director of the Bank.
At the meeting of the Board of Directors held on 24th July 2015 Shri V.Srinivasan was re-appointed as the Executive Director Head (Corporate Banking) of the Bankfor a period of 3 years with effect from 15th October 2015 to 14thOctober 2018 subject to the approval ofthe RBI and the Shareholders ofthe Bank.Thereafter atthe meeting ofthe Board of Directors held on 27th October 2015the Board re-designated Shri V. Srinivasan as the Deputy Managing Director of the Bankwith effect from 15th October 2015 subject to the approval of the RBI andShareholders of the Bank. However in terms of the approval granted by the RBI Shri V.Srinivasan took charge as the 'Deputy Managing Director' of the Bank for a period of 3years with effect from 21st December 2015. The approval of Shareholders of theBank will be obtained at the 22nd Annual General Meeting to be held on 22ndJuly 2016. In order to comply with the provisions of Section 152 of the Companies Act2013 Shri V Srinivasan will retire by rotation at the 22nd Annual GeneralMeeting and being eligible has offered himselfforre-appointment.
Shri Rakesh Makhija was appointed as an Independent Director of the Bank for a periodof five consecutive years with effect from 27th October 2015 subject to theapproval of the Shareholders of the Bank at the 22nd Annual General Meeting ofthe Bank. During the said tenure Shri Rakesh Makhija shall not be liable to retire byrotation.
Smt. Ketaki Bhagwati was appointed as an Independent Director of the Bank for a periodof five consecutive years with effect from 19th January 2016 subject to theapproval of the Shareholders of the Bank at the 22nd Annual General Meeting ofthe Bank. During the said tenure Smt. Ketaki Bhagwati shall not be liable to retire byrotation.
Shri Prasad R. Menon was re-appointed as an Independent Director of the Bank for hissecond term with effect from 23rd January 2016 up to 8th October2018 (both days inclusive). The approval of the Shareholders of the Bank was obtainedthrough Postal Ballot on 22nd December 2015. During the said tenure ShriPrasad R. Menon shall not be liable to retire by rotation.
Shri K. N. Prithviraj (Nominee of SUUTI) ceased to be the Non-Executive Director ofthe Bank with effect from the close of business hours on 8th January 2016. TheBoard places on record its appreciation for the contributions made by Shri K. N.Prithviraj during his tenure as the Non-Executive Director of the Bank.
Shri B. Babu Rao (Nominee of SUUTI) was appointed as a Non-Executive Director of theBank liable to retire by rotation with effect from 19th January 2016 subjectto the approval of the Shareholders of the Bank at the 22nd Annual GeneralMeeting of the Bank.
The tenure of Dr. Sanjiv Misra (Nominee of SUUTI) as the Non-Executive Chairman of theBank ended on 7th March 2016. In terms of SUUTI's letter dated 8thMarch 2016 the Board of Directors of the Bank re-appointed Dr. Sanjiv Misra as theNon-Executive Chairman of the Bank for a period of three months with effect from 8thMarch 2016 subject to the approval of the RBI and the Shareholders of the Bank. Howeverin terms of the approval granted by the RBI the said re-appointment was approved for aperiod of three months with effect from 11th March 2016. The approval of theShareholders of the Bank was obtained through Postal Ballot on 10th May 2016.
Shri Sanjeev Kumar Gupta Executive Director (Corporate Centre) of the Bank retiredfrom the services of the Bank with effect from the close of business hours on 18thMarch 2016. The Board places on record its deep appreciation and gratitude for thevaluable services rendered by Shri Sanjeev Kumar Gupta during his tenure as an Employee /Executive Director of the Bank.
Apart from the above no other Director was appointed or has resigned or has retiredduring the financial year 2015-16.
Pursuant to the amendments to the AOA of the Bank the right of nomination available toSUUTI to nominate the Chairman of the Bank got rescinded. In view of the above Dr. SanjivMisra resigned as the Non-Executive Chairman of the Bank (as a nominee of SUUTI) witheffect from 11th May 2016.
Thereafter in terms of the new Article 90 of the AOA of the Bank the Board ofDirectors at its meeting held on 12th May 2016 appointed Dr. Sanjiv Misra as anIndependent Director and as the Non-Executive (Part-time) Chairman of the Bank for aperiod of five consecutive years with effect from 12th May 2016 subject tothe approval of the RBI and the Shareholders of the Bank at the 22nd AnnualGeneral Meeting of the Bank.
Shri Rajiv Anand Group Executive (Retail Banking) of the Bank was appointed as theDirector of the Bank and as the Wholetime Director designated as the 'Executive Director(Retail Banking)' of the Bank for a period of three years with effect from 12thMay 2016 subject to the approval of the RBI and the Shareholders of the Bank at the 22ndAnnual General Meeting of the Bank. During the said tenure Shri Rajiv Anand shall beliable to retire by rotation.
Shri Rajesh Dahiya Group Executive Head (Corporate Centre) of the Bank was appointedas the Director of the Bank and as the Wholetime Director designated as the 'ExecutiveDirector (Corporate Centre)' of the Bank for a period of three years with effect from 12thMay 2016 subject to the approval of the RBI and the Shareholders of the Bank at the 22ndAnnual General Meeting of the Bank. During the said tenure Shri Rajesh Dahiya shall beliable to retire by rotation.
The above appointments were made after taking into consideration the experienceknowledge skills and expertise that the said persons would bring to the Board and therequirements as prescribed under Section 10A of the Banking Regulation Act 1949.
The ordinary resolutions in respect of the Directors who are to be appointed/re-appointed as aforesaid have been included in the Notice convening the 22ndAnnual General Meeting of the Bank to be held on 22nd July 2016. A briefprofile of the said Directors have been annexed to the said Notice.
Selection and Appointment of Directors
The appointment of Directors of the Bank are done in accordance with the relevantprovisions of the Companies Act 2013 the relevant Rules made thereunder the BankingRegulation Act 1949 the Guidelines issued by the RBI in this regard from time to timeand the Listing Regulations.
The Bank adheres to the process and methodology prescribed by the RBI in respect of'Fit Proper' criteria as applicable to Private Sector Banks signing of deed of covenantswhich binds the Directors to discharge their responsibilities to the best of theirabilities individually and collectively in order to be eligible to be appointed as aDirector of a Bank. The prescribed declarations given by the Directors other than membersof the Nomination Remuneration Committee (NRC) are placed before the NRC and thedeclarations given by the Members of the NRC are placed before the Board for its reviewand noting. The said declarations from the Directors are obtained at the time of theirappointment / re-appointment in compliance with the said laws. Assessment on whether theDirectors fulfill the said criteria is also made bythe NRC and the Board on an annualbasis.
The Members of the NRC reviews the structure size composition of the Board theregional and industry experience track record expertise and other relevant informationand documents of the directors before making appropriate recommendations to the Board withregard to their appointment re-appointment remuneration and assignment of duties(nomination to various Committees of the Board) designed to enhance the Board'seffectiveness. The NRC also identifies potential candidates from diverse backgroundsincluding but not limited to accountancy agriculture and rural economy bankingco-operation economics finance law small-scale industry information technology coreindustries infrastructure sector thus providing the Board with members who have specialknowledge practical experience and skills to serve the business interest of the Bank.
Declaration of Independence
All the Independent Directors of the Bank have given their respective declarationsstating that they meet the criteria of independence as laid down under the applicable lawsand in the opinion of the Board the Independent Directors meet the said criteria.
Key Managerial Personnel
Shri Jairam Sridharan was appointed as the Chief Financial Officer (CFO) of the Bankwith effect from 28th October 2015 in place of Shri Sanjeev Kumar GuptaExecutive Director (Corporate Centre) of the Bank who had stepped down as the CFO of theBank. Currently Shri Jairam Sridharan is designated as the 'Group Executive CFO' of theBank.
Shri Girish V. Koliyote was appointed as the Company Secretary of the Bank with effectfrom 1st May 2015 in place of Shri Sanjeev Kapoor who had resigned as theCompany Secretary of the Bank with effect from the close of business hours on 30thApril 2015.
The Board has conducted annual evaluation of the performance of all its DirectorsCommittees of the Board and that of its Non-Executive Chairman in terms of the relevantprovisions of the Companies Act 2013 the Rules made thereunder and the ListingRegulations.
The Bank had engaged the services of an external consultant to help it to conduct animpartial and independent Board evaluation as aforesaid. On the basis of their findingsa process of evaluation was recommended to the Board for adoption. The manner in which theevaluation was conducted by the Bank has been explained in the Report on CorporateGovernance which is forming part of this report.
The schedule of the meetings of the Board and the Committees thereof for the nextfinancial year is circulated well in advance to all the Members of the Board for theirconsideration and approval. During the year 5 meetings of the Board of Directors of theBank were held and the gap between the said meetings did not exceed the limit of 120 daysas prescribed under the relevant provisions of the Companies Act 2013 the Rules madethereunder and the Listing Regulations.
The composition role and functions of the Audit Committee of the Board of Directors ofthe Bank is disclosed in the Report on Corporate Governance which is forming a partofthis report.
The Bank has formulated and adopted a Remuneration Policy for its Directors KeyManagerial Personnel and other Employees in terms of Section 178 of the Companies Act2013 the Rules made thereunder and the Listing Regulations. The details of theRemuneration Policy have been disclosed in the Report on Corporate Governance which isforming part of this report.
Whistle Blower Policy and Vigil Mechanism
The details of the Whistle Blower Policy and Vigil Mechanism have been disclosed in theReport on Corporate Governance which is forming part of this report.
As on 31st March 2016 the Bank has the following nine unlisted subsidiarycompanies:
i) Axis Asset Management Company Ltd. undertakes the activities of managing the mutualfund business.
ii) Axis Bank UK Ltd. is the banking subsidiary of the Bank in the United Kingdom andundertakes the activities of banking.
iii) Axis Capital Ltd. provides services relating to investment banking equity capitalmarkets institutional stock broking mergers and acquisition advisory etc.
iv) Axis Finance Ltd. is an NBFC and carries on the activities of loan against sharesmargin funding IPO financing etc.
v) Axis Mutual Fund Trustee Ltd. acts as the trustee forthe mutual fund business.
vi) Axis Private Equity Ltd. primarily carries on the activities of managing equityinvestments and provides venture capital support to
vii) Axis Securities Ltd. is primarily in the business of marketing of credit cards andretail asset products and also provides retail broking services.
viii) Axis Trustee Services Ltd. is engaged in trusteeship activities acting asdebenture trustee and as trustee to various securitisation trusts.
ix) Axis Securities Europe Ltd. is engaged in financial advisory service company.
During the financial year 2015-16 the Bank acquired the entire share capital of AxisSecurities Europe Ltd. its step-down subsidiary company at a consideration of Rs. 19.02crores from Axis Capital Ltd. a wholly owned subsidiary of the Bank. Accordingly AxisSecurities Europe Ltd. became a wholly owned subsidiary company of the Bank with effectfrom 19th August 2015.
In accordance with the provisions of Section 129(3) of the Companies Act 2013 readwith Rule 8 of Companies (Accounts) Rules 2014 as amended the Bank has prepared itsconsolidated financial statement including that of all of its subsidiary companies whichis forming part of this report. The financial position and performance of each of itssubsidiary companies are given in the statement containing the salient features of thefinancial statements of the said subsidiary companies which forms part as an annexure tothis report.
In accordance with third proviso to Section 136(1) of the Companies Act 2013 theAnnual Report of the Bank containing therein its standalone and the consolidatedfinancial statements has been hosted on its website www.axisbank.com. Further as perfourth proviso to the said section the audited annual accounts of each of the saidsubsidiary companies of the Bank have also been hosted on the Bank's websitewww.axisbank.com.
Any shareholder who may be interested in obtaining a physical copy of the aforesaidfinancial statements may write to the Company Secretary of the Bank at its Registeredoffice. Further please note that the said financial statements will be available forinspection by the Shareholders of the Bank at the Registered Office of the Bank duringbusiness hours from 11.00 a.m. to 1.00 p.m. on all working days except Saturdays SundaysBank Holidays and National Holidays.
Related Party Transactions
All related party transactions entered into during the financial year were on an arm'slength basis and in the ordinary course of the business of the Bank. Accordingly AOC-2 isnot applicable to the Bank. All related party transactions are placed before the AuditCommittee of the Board of Directors (ACB) for its approval. Prior omnibus approval of theAudit Committee of the Board is obtained for the transactions which are of foreseen andrepetitive nature. A statement giving details of all related party transactions enteredpursuant to the omnibus approval so granted is placed before the ACB for their review ona quarterly basis. The Bank has developed a Standard Operating Procedure for the purposeof identifying and monitoring such transactions. The policy on Related Party Transactionsas approved by the Board at its meeting held on 19th January 2016 has beenhosted on the Bank's website. During the year under reference the Bank has not enteredinto any transaction with any related party which may be deemed to be material in termsof explanation to Regulation 23 of the Listing Regulations.
The Ministry of Corporate Affairs (MCA) vide its notification dated 25th May2015 had empowered the ACB to grant omnibus approval for related party transactions on anannual basis in line with the Listing Regulations. Further the MCA vide itsnotifications dated 14th December 2015 had provided that the Board of Directorsshould approve the criteria based on which the ACB could accord such omnibus approval.Accordingly the criteria to be considered by ACB for granting such omnibus approval wasapproved by the Board of Directors of the Bank at its meeting held on 19thJanuary 2016.
Employee Stock Option Plan (ESOP)
Since the financial year 2000-01 the Bank has formulated and adopted several EmployeeStock Option Schemes (ESOS) in accordance with the Securities and Exchange Board of India(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999/Securities and Exchange Board of India (Share Based Employee Benefits) Regulations 2014as amended from time to time. The objective of the said ESOS is to enhance employeemotivation enable employees to participate directly or indirectly in the long-termgrowth and financial success of the Bank to act as a retention mechanism by enablingemployee participation in the business as an active stakeholder and to usher in an'owner-manager' culture.
Under the said ESOS upto 240087000 options can be granted to the eligible Directors/ Employees of the Bank and that of its subsidiary companies. The eligibility and numberof options to be granted to the eligible Directors / Employees is determined on the basisof their performance and such other criteria as may be approved by the NRC / Board ofDirectors of the Bank from time to time.
During the period from February 2001 to July 2013 the Shareholders of the Bank hadapproved the grant of stock options to the eligible Directors / Employees of the Bank andthat of its subsidiary companies as aforesaid on six occasions. Under the first twoSchemes and in respect of the grants made upto 29th April 2004 the optionconversion price was set at the average daily high-low price of the Bank's equity sharestraded during the 52 weeks preceding the date of grant at the Stock Exchange which had themaximum trading volume of the Bank's equity share during that period. Under the third andsubsequent Schemes and with effect from the grants made by the Bank on 10thJune 2005 and thereafter the pricing formula has been changed to the latest availableclosing price of the equity shares of the Stock Exchange recording higher trading volumeon the day prior to the date of grant.
Pursuant to the sub-division of the equity shares of the Bank the Shareholders of theBank at the 20th Annual General Meeting held on 27th June 2014 alsoapproved the consequent adjustments to the stock options granted to the eligible Directors/ Employees of the Bank and that of its Subsidiary Companies under its various Schemessuch that all stock options available for grant (including lapsed and forfeited optionsavailable for reissue) and those already granted but not vested/exercised as on recorddate fixed for the purpose of sub-division were proportionately converted into optionsbearing equity shares of the face value of '2 each of the Bank and the grant price of allthe outstanding stock options (vested unvested and unexercised) as on the said recorddate were proportionately adjusted by dividing the existing grant price by 5. The recorddate for the said sub-division was 30th July 2014.
Since 24th February 2001 upto 10th September 2015 the NRC /Board had out of the 240087000 options approved the grant of 239119950 options interms of the various Schemes. The said options are non-transferable and vest at rates of30% 30% and 40% on each of three successive anniversaries following the date ofrespective grant subject to standard vesting conditions. The said options are required tobe exercised by the concerned Directors / Employees of the Bank and that of its SubsidiaryCompanies within a period of three / five years from the date of its respective vesting.
As of 31st March 2016 out of the said 239119950 options so granted198869586 options had been vested and exercised 15670500 options had been unvestedand 24579864 options had been treated as lapsed/cancelled.
Otherstatutory disclosures as required under Regulation 14 of the SEBI (Share BasedEmployee Benefits) Regulations 2014 have been hosted on the website of the Bankhttp://www.axisbank.com/download/other statutory disclosures.pdf.
The Listing Regulations which was notified by the Securities and Exchange Board ofIndia on 2nd September 2015 has replaced the erstwhile Clause 49 of the ListingAgreement with effect from 1st December 2015.
The Bank is committed to achieve the highest standards of Corporate Governance and itconstantly benchmarks itself with best practices in this regard. The Report on CorporateGovernance for the financial year 2015-2016 along with a Certificate from the StatutoryAuditors of the Bank confirming compliance with the conditions relating to CorporateGovernance as stipulated under Chapter IV of the Listing Regulations is forming part ofthis report. The Corporate Governance framework of the Bank incorporates all the mandatoryrequirements set out in the Listing Regulations.
Directors' Responsibility Statement
The Board of Directors of the Bank hereby declares and confirms the followingstatements in terms of Section 134(3)(c) of the Companies Act 2013:
a. That in the preparation of the annual accounts for the year ended 31stMarch 2016 the applicable accounting standards had been followed along with properexplanation relating to material departures.
b. That such accounting policies as mentioned in Note 18 of the Notes to accounts ofthe Financial Statements have been selected and applied consistently and judgments andestimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Bank as at 31st March 2016 and of theprofit of the Bank for the year ended on that date.
c. That proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Bank and for preventing and detecting fraud and otherirregularities.
d. That the annual accounts have been prepared on a going concern basis.
e. That internal financial controls to be followed by the Bank were in place and thatthe same were adequate and were operating effectively.
f. That proper system to ensure compliance with the provisions of all applicable lawswas in place and the same were adequate and operating effectively.
Extract of Annual Return
Pursuant to Section 92 (3) of the Companies Act 2013 and Rule 12 (1) of the Companies(Management and Administration) Rules 2014 the extract of the Annual Return in Form MGT9 is provided as an annexure to this report.
Particulars of Employees
The information required pursuant to Section 197 read with Rule 5 (1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofemployees of the Bank forms part as an annexure to this report.
As on 31st March 2016 the Bank had 163 employees who were employedthroughout the year and were in receipt of remuneration more than '60 lakhs per annum and53 employees who were employed for part of the year and were in receipt of remuneration ofmore than '5 lakh per month.
In terms of Section 136 of the Companies Act 2013 the copy of the financialstatements of the Bank including the consolidated financial statements the auditor'sreport and relevant annexures to the said financial statements and reports are being sentto the Members and other persons entitled thereto excluding the information in respect ofthe said employees containing the particulars as specified in Rule 5 (2) of the saidRules which is available for inspection by the Members at its Registered Office duringbusiness hours of the Bank up to the date of the ensuing Annual General Meeting. If anyMember is interested in obtaining a copy thereof may write to the Company Secretary ofthe Bank at its Registered Office. The financial statements and other reports of the Bankannexed thereto have been hosted on the website of the Bank www.axisbank.com.
Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo
The steps taken /impact on conservation of energy:
The Bank has always considered energy and natural resource conservation as a focus areaand has been consciously making efforts towards improving the energy performance year onyear. Energy efficiency improvement initiatives have been implemented across all theplants and offices by undertaking various energy and resource conservation projects forSustainable development.
The Bank ensures strict compliance with all the statutory requirements and has takenseveral sustainable steps voluntarily to contribute toward better environment. Select fewsteps /impact are listed below:
Implementation of solar energy of aggregate ~2.7 MW spread over selectBranches/Offices.
Implementing Energy Management System (EMS) to monitor and control energyconsumption in select Branches.
Conversion of conventional lighting to LED.
Installed Compost Machine for converting food waste into manure at Axis House.
Maintenance of unity power factor through 500 KVAR x 4 Nos of APFC panels inauto mode for optimum use of power at Axis House.
Motion sensors installation for the workstations at Axis House.
Recycle and Reuse of Food waste Dry waste and Sewage at Axis House.
Sewage Treatment Plant of 150 KL capacity recycles sewage water at Axis Houseevery day.
Use of water flow reducer to reduce the water consumption at Axis House andGigaplex (Airoli.)
Rain Water Harvesting at Axis House.
Introduction of bio blocks in urinals at Select Large Facilities thereby savingflushing water.
Management's Discussion and Analysis Report
The Management's Discussion and Analysis Report for the year under review asstipulated under Regulation 34(2)(e) of the Listing Regulations is given as an annexure tothis report.
Pursuant to Regulation 21 of the Listing Regulations the Bank has already constitutedthe Risk Management Committee of the Board of Directors. The details of the said Committeeand its terms of reference are set out in the Report on Corporate Governance which isforming part of this report.
The Bank has formulated and adopted a robust Risk Management Framework. Whilst theBoard is responsible for framing implementing and monitoring the said Risk ManagementFramework it has delegated its powers relating to monitoring and reviewing of riskassociated with the business of the Bank to the said Committee. The details of the RiskManagement Framework and issues related thereto have been explained in the Management'sDiscussion and Analysis Report which is annexed to this report.
Business Responsibility Report
In terms of Regulation 34(2)(f) of the Listing Regulations top 500 listed entitiesbased on their market capitalisation as on 31st March every year are requiredto submit their Business Responsibility Report (BRR) as a part of the Annual Report. TheBank's Business Responsibility Report describing the initiatives taken by the Bank from anenvironmental social and governance perspective has been hosted on the website of theBank www.axisbank.com. Any Member interested in obtaining a copy of the BRR may write tothe Company Secretary of the Bank at its Registered Office.
Particulars of Loans Guarantees and Investments
The provisions relating to Section 134(3)(g) of the Companies Act 2013 on particularsof loans guarantees and investments are not applicable to a Banking Company and as suchno disclosure are being made in this regard.
Corporate Social Responsibility
The Bank has constituted the Corporate Social Responsibility (CSR) Committee of theBoard of Directors in accordance with the provisions of Section 135 of the Companies Act2013 read with the Companies (Corporate Social Responsibility) Rules 2014 as amended.
The brief outline of the CSR Policy including overview of the programs undertaken thecomposition of the CSR Committee average net profits of the Bank for the past threefinancial years prescribed CSR expenditure and details of the amounts spent by the Bankon CSR activities during the year have been disclosed as an annexure to this report.
At the 20th Annual General Meeting of the Shareholders of the Bank held on27th June 2014 M/s S. R. Batliboi Co. LLFf Chartered Accountants StatutoryAuditors of the Bank (Membership No.301003E) were appointed as the Statutory Auditors ofthe Bank to hold office as such from the conclusion of the Twentieth Annual GeneralMeeting until the conclusion of the Twenty Fourth Annual General Meeting subject to theapproval of the Reserve Bank of India each year on such remuneration as may be approvedby the ACB.
In terms of the first proviso to Section 139 of the Companies Act 2013 theappointment of the Statutory Auditors is required to be placed for ratification at everyAnnual General Meeting. Accordingly the appointment of M/s. S. R. Batliboi Co. LLFfChartered Accountants as Statutory Auditors of the Bank for the financial year 2016-17is placed for ratification by the Shareholders of the Bank at the 22nd AnnualGeneral Meeting.
As recommended by the ACB the Board of Directors has proposed the ratification ofappointment of M/s. S. R. Batliboi Co. LLIf Chartered Accountants as Statutory Auditorsof the Bank for the financial year 2016-17 for the approval of the Shareholders of theBank at the 22nd Annual General Meeting. The Shareholders are requested toratify the said appointment of the Statutory Auditors and payment of remuneration asapproved by the ACB.
In this regard the Bank has received a certificate from the Statutory Auditors to theeffect that the ratification of their appointment if made would be in accordance withthe provisions of Section 141 of the Companies Act 2013.
As required under Regulation 33(1 )(d) of the Listing Regulations the StatutoryAuditors have confirmed that they have subjected themselves to the peer review process ofthe Institute of Chartered Accountants of India (ICAI) and that they hold a validcertificate issued by the Peer Review Board of ICAI.
There are no qualifications reservations or adverse remarks made by M/s. S. R.Batliboi Co. LLFf Chartered Accountants Statutory Auditors of the Bank in their report.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Bank has appointedM/s. BNP Associates Company Secretaries Mumbai as the Secretarial Auditor of the Bank toconduct secretarial audit.
The secretarial audit of the Bank has been conducted on a concurrent basis in respectof the matters as set out in the said Rules and have been provided in the SecretarialAudit Report for the financial year 2015-16 which is given as an annexure to this report.
There are no qualifications reservations or adverse remarks made by M/s. BNPAssociates Company Secretaries Secretarial Auditor of the Bank in their report.
Significant and Material Order Passed by Regulators or Courts or Tribunals Impactingthe Going Concern Status and Operations of the Bank
During the financial year 2015-16 no significant or material orders were passed by anyRegulator Court or Tribunal against the Bank which could impact its going concern statusand operations.
Adequacy of Internal Financial Controls Related to Financial Statements
The Board has inter alia reviewed the adequacy and effectiveness of the Bank's internalfinancial controls relating to its financial statements.
The Board has discussed with the Management of the Bank the major financial riskexposures and the steps taken by it to monitor and control such exposures overseen andreviewed the functioning of the Whistle Blower Mechanism (which is a part of the Bank'sFraud Risk Management Policy) and the findings in respect of the investigations conductedon frauds which were material in nature and the actions taken by the Management in thisregard.
CEO CFO Certification
Certificate issued by Smt. Shikha Sharma Managing Director CEO and Shri JairamSridharan CFO of the Bank for the financial year under review was placed before theBoard of Directors at its meeting held on 26th April 2016 in terms ofRegulation 17(8) of the Listing Regulations.
The Board of Directors places on record its gratitude to the RBI FIPB MCA SEBIother government and regulatory authorities financial institutions stock exchangesregistrar and share transfer agent debenture trustees depositories and correspondentbanks for their strong support and guidance. The Board acknowledges the support of theShareholders and also places on record its sincere thanks to its valued clients andcustomers for their continued patronage. The Board also expresses its deep sense ofappreciation to all the employees of the Bank for their strong work ethic excellentperformance professionalism teamwork commitment and initiative which has led to theBank making commendable progress in today's challenging environment.
| ||For and on behalf of the Board of Directors |
|Place : Mumbai ||Dr. Sanjiv Misra |
|Date : 12th May 2016 ||Chairman |