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DCB Bank Ltd.

BSE: 532772 Sector: Financials
BSE 15:40 | 16 Mar 162.95 -1.25






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OPEN 163.05
VOLUME 29000
52-Week high 213.00
52-Week low 154.85
P/E 21.44
Mkt Cap.(Rs cr) 5,020
Buy Price 0.00
Buy Qty 0.00
Sell Price 162.95
Sell Qty 6.00
OPEN 163.05
CLOSE 164.20
VOLUME 29000
52-Week high 213.00
52-Week low 154.85
P/E 21.44
Mkt Cap.(Rs cr) 5,020
Buy Price 0.00
Buy Qty 0.00
Sell Price 162.95
Sell Qty 6.00

DCB Bank Ltd. (DCBBANK) - Director Report

Company director report

Your Directors are pleased to present the Annual Report of DCB Bank Ltd (hereinafterreferred to as the Bank/Your Bank/DCB Bank) together with the audited accounts for FY2017.

In FY 2017 the Bank has posted an Operating Profit of Rs. 418.21 crore (FY 2016 Rs.349.03 crore) and a Net Profit of Rs. 199.68 crore (FY 2016 Rs. 194.52 crore).

Total Assets have increased by Rs. 4927.86 crore and reached Rs. 24046.38 crore as onMarch 31 2017 (Rs. 19118.52 crore as on March 31 2016).

Customer Deposits have increased by Rs. 3141.13 crore and Advances have increased byRs. 2896.24 crore. The Bank has achieved the overall Priority Sector Lending (PSL) targetas required by the Reserve Bank of India (RBI).

The Net Interest Margin (NIM) has improved to 4.04% in FY 2017 from 3.94% in FY 2016and the Current and Savings Accounts (CASA) ratio stood at 24.3% as on March 31 2017(23.4% as on March 31 2016).

Cost to Income Ratio has increased to 60.0% in FY 2017 from 58.4% in FY 2016. TheBank's Operating Cost increased mainly due to increase in number of branches increase innumber of staff and higher business volumes.

Total Branch network stood at 262 as on March 31 2017 (198 as on March 31 2016) andATM network increased to 515 as on March 31 2017 (410 as on March 31 2016).

Provisions Other Than Tax have increased to Rs. 111.49 crore in FY 2017 from Rs. 87.91crore in FY 2016. The increase was mainly due to provision for existing and fresh NPAslippages higher Floating provision and Provision against Standard Assets.

Gross NPAs have increased to Rs. 254.20 crore as on March 31 2017 from Rs. 197.38crore as on March 31 2016. The overall NPA Provision Coverage Ratio as on March 31 2017was 73.80%. Net NPAs have increased to Rs. 124.41 crore as on March 31 2017 as againstRs. 97.46 crore as on March 31 2016.

Capital Adequacy Ratio (CAR) under Basel III as on March 31 2017 stood at 13.76%(14.11% under Basel III as on March 31 2016).

In November 2016 the Bank issued Basel III compliant Tier II Bonds and raised Tier IIcapital of Rs. 150 crore.


(Rs. in crore)

As at March 31 2017 As at March 31 2016 Increase / (Decrease)
Balance Sheet
Customer Deposits 15943.02 12801.89 3141.13
Inter Bank Deposits 3346.19 2124.10 1222.09
Total Deposits 19289.21 14925.99 4363.22
[Including Total CASA] [4689.18] [3489.87] [1199.31]
Advances 15817.63 12921.39 2896.24
Gross – NPA 254.20 197.38 56.82
Net – NPA 124.41 97.46 26.95
Provision for Standard Assets (including provision for unhedged foreign currency exposure) 85.05 63.38 21.67
Total Assets 24046.38 19118.52 4927.86


For the year ended March 31 2017 For the year ended March 31 2016 Increase / (Decrease)
Profit & Loss
Net Interest Income 797.09 619.50 177.59
Non Interest Income 249.45 220.46 28.99
Total Operating Income 1046.54 839.96 206.58
Operating Cost 628.33 490.93 137.40
Operating Profit 418.21 349.03 69.18
Provisions 111.49 87.91 23.58
Net Profit Before Tax 306.72 261.12 45.60
Tax 107.04 66.60 40.44
Net Profit After Tax 199.68 194.52 5.16


Your Board is pleased to recommend a dividend of Rs. 0.50 per equity share of Rs. 10.00each in respect of the financial year ended March 31 2017.



The Bank's vision is to be the most innovative and responsive neighbourhood bank inIndia serving entrepreneurs individuals and businesses. In line with our vision we beganimplementing a new strategy in FY 2010 which has now completed 7 years. The Bank continuesto make steady progress and improvements are clearly visible in most areas of itsbusiness. In order to accelerate the business momentum further in October 2015 the Bankannounced its plan to increase its network by 150 more branches in 24 months.

Target Market

Keeping in view its inherent strengths branch network and expertise the Bank's targetmarket is mainly small business owners /self-employed / small business segment (tradersshop keepers business owners MSMEs and SMEs). The Bank has chosen to have limitedpresence in the salaried segment. The MSME / SME sector plays a very important role in thegrowth of the Indian economy.

MSME sector plays a pivotal role in the economic and social development of the country.Some important information on MSME sector is given below:

• Number of Working Enterprises – 49 million Employment – 111 million

• Urban – 45% Rural – 55%

• Manufacturing – 32% Service – 68%

• Sole Proprietor – 94%

• Market value of Fixed Assets – INR 13637 billion

(Source: Annual Report 2014-15 Government of India Ministry of Micro Small and MediumEnterprise)

Also as per DNA survey June 2013 the Indian workforce consists of 51% self-employed.

DCB Bank Customers

Your Bank deals with several types of business owners self-employed / small businessesfor example - Trader Commodity Gold Trader Vegetable Trader Commission AgentRetailer Restaurant Owner Caterer Baker Vending Machine Supplier Consultant DoctorContractor Interior Decorator Software Designer Salon Beauty Parlour PrinterElectrical Engineer Saw Mill Flour Mill Rice Mill Grocery Store Brick Maker BuilderFabricator Artist Writer Auto Repair Ship Repair Pharmacy Computer SpecialistFurniture Maker Uniform Maker Garment Shop Fashion Tailor Hardware Shop AgriProcessor Pesticide Dealer Auto Dealer Scrap Dealer Stationery Supplier FMCG DealerTool Maker Agri Input Dealer Tractor Dealer Plastic Manufacturer MattressManufacturer Water Supplier Computer Classes Internet Caf Coaching Classes TourOperator Hotel Owner Transporter Ticketing Agent C&F Agent etc. The list of SelfEmployed occupation is endless. The target market is essentially Micro Small and MediumEnterprises both in Manufacturing and Services. (Please refer to MSMED Act 2006).Majority of lending to MSME sector qualifies for Priority Sector Lending. It is estimatedthat over 80% of CASA accounts and 80% of Mortgage loans are in the self-employed segmentfor the Bank.

Credit Rating

The Bank continues to enjoy ICRA A+ (hyb)/(stable) rating for Long Term –Subordinated Debt ICRA A1+ rating for Short Term Fixed Deposits CRISIL A1+ rating forboth Certificate of Deposits and Short Term - Fixed Deposits.


Your Bank received a number of awards and recognition in FY 2017:

• Best Data Center Design – Data Center Summit 2016

• Indian Express Award for Innovation – Aadhaar Based ATM

• BFSI Digital Innovators Award – Innovative Usage of Emerging Technology

• Finnoviti Innovation Award – Aadhaar Based ATM

• Best Prepaid Program – Drivers of Digital Awards 2016

Branch Expansion / ATMs

In October 2015 the Bank announced its intention to increase the number of branches by150 in 24 months. Accordingly in FY 2017 your Bank increased its branch network by 64branches – 30 in Retail and 34 in Agri and Inclusive Banking (AIB). The year endedwith 262 branches (150 in Retail and 112 in AIB) in 18 states and 2 union territories.Approximately 22 percent of the branches are in rural areas and 25 percent in semi-urbanareas. Your Bank has created fair degree of standardization in terms of "look andfeel" of the branches across India. Based on the business model adopted by the Banknew branches generally "break even" between 18 to 22 months from the date ofoperation. Over time the Bank has been able to make step by step improvements in theexecution of business model. The Bank believes in hiring suitable talent and ensuringproper grooming / mentoring through in-house training programs. In order to improve theoverall performance controls and customer service the Bank strengthened the organisationstructure of managing branch network. The concept of Cluster Services Operations Managers(CSOM) independent of the sales team was introduced in the previous year. The entirenetwork is grouped into manageable clusters for closer supervision. One of the key focusareas for the Branch Operations team is to simplify the existing processes in order toprovide better service to customers. Accordingly the Branch Operations team simplified 42processes in FY 2017. Simultaneously risk management and monitoring aspects were alsostrengthened. The Bank has increased its ATMs from 410 in FY 2016 to 515 in FY 2017.Unfortunately during demonetisation there was not enough cash available and therefore alarge number of ATMs could not be operated. This resulted in customer inconvenience andloss of business to the Bank. While all ATMs have been recalibrated and becomeoperational they will become fully functional in the coming months as cash availabilityis steadily improving.


Retail Banking offers comprehensive range of Deposits and Advances products. At the endof FY 2017 Retail Banking has 150 branches and has a multi-product approach with focus onproductivity and service excellence. In the deposit side a number of new products wereintroduced to address the needs of institutions as well as individuals. A large part ofthe retail banking responsibility is to steadily increase CASA and Term Deposits in orderto provide cost effective and stable funding for Advances. In FY 2017 CA balances grew by30 percent and SA balances grew by 36 percent. Some part of the CASA growth was due todemonetisation that resulted in cash deposits into both existing and new accounts. CASAratio was 24 percent at the end of FY 2017. Overall Term Deposits registered 29 percentgrowth. One of the highlights of FY 2017 is the launch of DCB Suraksha Deposit – aunique product where customers get insurance cover at zero cost if they opt for longertenor term deposit (subject to conditions).

Mortgage and Micro Mortgage

Mortgage is the lead product of the Bank addressing primarily the self-employed segmentoffering tailor made solutions. It contributes approximately 43 percent of Advances of theBank. Both home loans and business loans are offered. Almost all retail branches offerMortgage/Micro Mortgage loans. In order to support business growth dedicated sales teamsare present in 76 locations across India. Micro or small ticket mortgage loans are mostuseful for customers in the Tier 2 to Tier 6 locations. Many in the rural and semi-urbanareas are deriving incomes from unorganized sector. At times it becomes difficult to getproof of their capacity to repay. Therefore the Bank needs to have the ability to assessthe household income in order to determine eligibility. Personal discussion with thecustomer is an essential part of the credit assessment. The purpose of the loan interalia may include home construction home purchase home repairs business enhancementmarriage and education. In FY 2017 the retail Mortgages grew by approximately 22 percentas compared to the previous year.

Construction Finance (CF)

Construction of flats and providing housing is a critical part of a growing economy.India has a huge population which does not own flat/house. For banks financingconstruction is a good opportunity. However there are numerous risks that need to betaken into consideration. Demonetisation has impacted construction business. Thereforethe Bank needs to be very cautious in CF portfolio. The focus is on reputed builders witha strong track record who are targeting the end users with reasonably priced homescatering mainly to middle and lower incomes. The positive side effect of CF is growth inCA balances and providing home loans to home buyers. Real Estate (Regulation andDevelopment) Act 2016 (RERA) is likely to bring about major changes in the ConstructionBusiness and consequently financing.

Commercial Vehicle (CV)

CV financing was restarted in FY 2013 and is now offered in 108 locations. The mainobjective behind re-entering the business was to improve the Bank's ability to achievePSL. More than 85 percent of CV portfolio falls under PSL. Although economic conditionswere weak so far the portfolio quality has been maintained at an acceptable level. CVindustry is an essential part of the Indian economy and in the coming years the Bank has agood opportunity to build a large CV portfolio. Overall CV business achieved growth of 54percent in FY 2017 as compared to the previous year.

Loan against Gold

Loan against Gold is offered in almost all branches (Retail and AIB). In FY 2017 aspart of process improvement initiatives the Bank further expanded "One hour loanapproval / disbursal process" in many more branches. The Loan against Gold businessslowed down during demonetisation. With the increase in branches your Bank hopes tosteadily build a large Loan against Gold portfolio to provide further diversity to theoverall business.

Debit Cards

In FY 2017 as compared to the previous year Cards in Force (CIF) increased by 107percent. The number of Point of Sale (POS) transactions increased by 149 percent incomparison to the previous year. The number of e-commerce transactions increased by 60percent in comparison to the previous year. The demonetisation initiative has been one ofthe key factors in rapid increase in digital transactions.

DCB Payless Cards

This is a unique product offered by the Bank and is a preferred card for thoseself-employed segment that are unable to provide sufficient income proof or do not have anacceptable credit track record. In FY 2017 as compared to the previous year CIFincreased by 32 percent the number of transactions on POS increased by 45 percent and thenumber of e-commerce transactions increased by 46 percent.

DCB Janajeevan Prepaid Card

The Bank launched India's first co-branded prepaid card for disbursal of small loans byJanalakshmi Microfinance in FY 2014. The product is administered in association with JanaUrban Foundation. The program aims to provide cashless disbursal which has a majorpositive impact on financial inclusion. In FY 2017 the total cards issued crossed 57lakhs. As mentioned in the earlier year report the program also won two prestigious awards– (a) "The Best Prepaid Product of the Year" at the 5th IAMAI DigitalAwards (b) "The Most Innovative Prepaid Card" at the Finnoviti 2015.

Distribution of Mutual Funds and Insurance

The Bank distributes Mutual Funds Life Insurance and General Insurance products to newand existing customers. This helps in deepening relationship with Deposit and Advancescustomers.

Traditional Community Banking

With a vision of strengthening neighbourhood banking the Bank set up a separatevertical in FY 2010 with the aim of providing personalized attention to the communitycustomers and winning back lost relationships. In FY 2017 as compared to the previousyear Traditional Community Banking Deposits grew by 12 percent and Advances increased by22 percent.

Non-Resident Indian (NRI) business

In FY 2017 NRI deposits contributed 8 percent of the Total Deposits. During the yearapproximately 1683 new customers were acquired. The Bank has customers across 128countries. The NRI deposits achieved growth of 16 percent in FY 2017 as compared to theprevious year.


Collections is an important function for the Bank. It helps to provide timely remindersto customers and also ensure portfolio quality. The Bank's in-house Collections team is acommon utility for all products and is present in 179 locations pan India. In the previousyear in order to assist field collections the Bank introduced m-Collect a smart phonebased application that helps in providing system generated receipts on the field. Theapplication also instantly provides real time updates to the loan system helping improveefficiency and provide customer convenience. Collections and recovery process was impactedby demonetisation. The Bank made extra efforts to ensure portfolio quality.

Strategic Alliances

One of the key strategies of the Bank is to look for alliances with entities that mayhave similar business objectives. The idea is to improve the product benefits to customersthat helps to improve fee income and loyalty.

• Aditya Birla Health Insurance – Corporate Agency – Health Insurance

• Birla Sunlife Insurance – Corporate Agency - Life Insurance

• HDFC Standard Life Insurance – Corporate Agency - Life Insurance

• ICICI Lombard GIC – Corporate Agency - General Insurance

• Annapurna Microfinance Lok Management Services New Opportunity ConsultancyPahal Financial Services People's Forum Taraashna Services - Business Correspondentsfor sourcing Small Savings Accounts Deposit Accounts and providing Micro Loans to JLGSHG individuals and micro-enterprises.

• Western Union Business Solutions (USA) – Technology Services - ForeignExchange Remittances

• Weizmann Forex – Referral Agent Trade Related Outward Remittances

• Paul Merchants Thomas Cook – Referral Agent Trade Related OutwardRemittances

• TVS Credit Services –Car Loan Business

• Janalakshmi Financial Services – Co-branded Prepaid Card

• Madura Microfinance – Prepaid Card

• Belstar Microfinance – Prepaid Card

• India Infoline (IIFL) – Co-branded Prepaid Card

• Muthoot Finance & Muthoot Forex – Co-branded Prepaid Card

• Midland Microfinance – Prepaid Card

• Fullerton India Credit Company (FICC) – Co-branded Prepaid Card

• Satin Creditcare Network Utkarsh Microfinance Annapurna

Microfinance Swaabhimaan Microfinance SV Creditline

Taraashna Services Namra Finance Svatantra Micro fin Fusion

Microfinance Kamal FinCap Saarthi Credit Co-Op Society

CashPor Micro Credit - Bajaj Allianz Death Claim Settlement on Prepaid Card

• Slonkit – Co-branded Prepaid Card cum Wallet

• Euronet – ATM and switching services provider

• ATOS Worldwide – POS deployment service provider

• M2P – Prepaid program manager

• India Infoline Ltd. (IIFL) – Partner for offering security tradingaccounts to customers

• Transcorp – Money transfer services

• Thomas Cook - Prepaid Alliance

• Cinqo - Prepaid Alliance

• Sabpaisa - Payment Collection Solution

The Bank is also working with many "Fintech" companies to introduce newproducts and or unique way of acquiring / servicing customers. The Bank has partnered withNiyopay to launch a unique salary account solution. In addition the Bank has partneredwith Seynse technologies and Zest Money for digital lending solutions. DCB Bank is alsoamongst the first few banks to have gone live on Bharat QR code solution. The Bank alsolaunched its own wallet during the year named as "Cippy".


The importance of MSME and SME to India's economy and the Bank's strategy of targetingthis segment have already been mentioned earlier in this discussion. The Bank has createdrobust sales underwriting and portfolio monitoring capability for growing the MSME/SMEbusiness offering a wide range of products and personalized services including ForeignExchange Cash Management Trade Finance and Internet Banking. The aim is to become thebusiness partner of this vibrant entrepreneurial segment of the economy. The Bank targetslargely small ticket size MSME / SME customers. In FY 2017 MSME/SME Advances grew byapproximately 18 percent as compared to the previous year. Competition is intense andtherefore the Bank put in place a special unit to ensure that quality customers areretained through constant relationship efforts. MSME / SME segment needs to embrace thedigitisation agenda of the country. They also need to make appropriate adjustments totheir business models to take advantage of Goods and Service Tax (GST) which is likely tobe implemented in the coming months.


Corporate Banking is present across India with regional offices in AhmedabadBengaluru Chennai Delhi Hyderabad Kolkata and Mumbai. The business objective is toprovide a complete range of commercial banking solutions including Foreign Exchange TradeFinance and Cash Management. In FY 2017 the Bank added 36 new relationships in CorporateBanking. The Bank has a robust underwriting and credit systems to address the inherentrisks in Corporate Banking exposure. The emphasis is on building a secured advancesportfolio and building long term relationships with high quality large and mid-corporatehouses. Regular review of the existing exposure is done with the aim of initiating timelyaction in case of any emerging risks. In FY 2017 we had some slippages into NPA primarilyon account of economic stress in some sectors. As a result of the early warning systems inplace and timely management of risky exposures Corporate Banking portfolio qualityremained stable.


AIB is a separate business unit formed to achieve financial inclusion. At the end of FY2017 this unit had 112 branches in 10 states. There are many opportunities to offersimple yet innovative products backed by superior technology in the rural and semi-urbanareas of India. Many of the new branches are located in Tier 2 to Tier 6 locations. Thereis a constant endeavour to cater to under and unbanked population of the country through awide range of products for example zero balance savings accounts small recurringdeposit account small loans to match the income and cash flow cycle. AIB also coordinatesthe entire PSL efforts for the Bank and is primarily responsible for achieving thefinancial inclusion targets. In FY 2017 AIB Advances grew by approximately 25 percent ascompared to the previous year.

Pradhan Mantri Jan-Dhan Yojana (PMJDY)

In FY 2017 your Bank actively participated in PMJDY and opened 26306 PMJDY accountsas on March 31 2017. The Bank has enabled Rupay Debit Cards for PMJDY account holders.

Pradhan Mantri Suraksha Bima Yojana (PMSBY) Pradhan Mantri Jeevan Jyoti Bima Yojana(PMJJBY) Atal Pension Yojana (APY)

The Bank successfully reached out to unbanked and economically weaker populationthrough PMSBY PMJJBY and APY programs that are designed to bring social security. YourBank had 7597 customers under PMSBY 10952 customers under PMJJBY and 1331 customers inAPY as on March 31 2017.

Basic Savings Bank Deposit Account (BSBDA)

BSBDA has replaced "No frills account". This is a wonderful product forachieving financial inclusion especially those who have limited transaction needs in thelow income group and may not have proper identity address date of birth or signatureproofs. Bank had 57967 BSBDA accounts as on March 31 2017.

Kisan Mitra

"Kisan Mitra" as the name suggests is a liability product which fulfils therequirement and enhances the saving habit in rural areas. It is a product speciallydesigned for members of co-operative institutions (example dairy co-operative sugarco-operative). It is a modified Savings Account with zero account opening amount and noAverage Quarterly Balance maintenance charges. Co-operative institution payments arerouted through this account.

Warehouse Construction Loan

There is a huge need in the country to provide farmers with scientific storage so thatwastage and stock deterioration can be reduced. Also proper warehousing helps famers toretain their produce and obtain fair pricing for their produce instead of selling indistress.

Retail Agriculture Loan and Kisan Credit Card

In order to meet the credit needs of the farmers the Bank has several retail agriproducts namely Crop loans (example purchasing seeds fertilizers pesticides manuresirrigation) Animal Husbandry loans and loans for investment purpose like landimprovement irrigation and hi-tech agriculture.

Tractor Loans

Tractors form an integral part of the total agricultural equipment sector and is anindirect indicator of growth in the agricultural sector. The Bank has slowly built itsbusiness across Tier 2 to Tier 6 branches. Providing tractor loans helps the Bank topartly meet PSL targets for agriculture set by the RBI.

Microfinance Institutions (MFI) and Business Correspondents (BCs)

The Bank lends directly to MFIs who in turn lend to end borrowers. Over time the Bankhas created a strong network of MFIrelationships across India. The Bank is also providingunsecured loans through BCs in a few states of the country. The loans are given to membersof SHGs and JLGs for livelihood activities thereby enabling them to avail small loans frombanking sector instead of high cost borrowing from informal channels. These loans areprimarily provided to small farmers and weaker sections mainly in rural areas. In order tosupport the volume growth your Bank introduced new software system for managing BC Loans.This software helps maintain adequate information about the borrowers under SHG JLG andMicroenterprises categories. It provides a common platform to both Bank and BC for smoothprocessing of loans and has added immense value by reducing the loan disbursal cycle time.In recent months there is some stress being faced by the entire industry in the MFI/ BCbusiness. The Bank has always adopted a cautious approach towards this sector and it istaking measured steps to maintain portfolio quality.

Commodity Based Finance (CBF)

The Bank is engaged in lending to farmers and agri processors against agriculturalproduce stored in the designated warehouses. The Bank has a list of approved commoditiesagainst which the loans are given. Given the volatile market conditions the Bank haschosen to be cautious in pursuing CBF opportunities.



Treasury actively manages liquidity Fixed Income Securities Trading Investment inEquity through Initial Public Offers (IPOs) FX Trading and Customer Sales. Treasuryensures compliance with regulatory requirements such as CRR and SLR. As the Bank'sperformance continues to improve many reputed Financial Institutions (FIs) have startedsubscribing to Certificate of Deposits (CDs) issued by the Bank. In FY 2017 the Bank madecautious gains by utilizing the trading opportunities in G-Sec presented by declininginterest rates. The Bank invested in a number of Equity IPOs and booked moderate listinggains. The Bank also invested in medium term AAA Corporate bonds short term CommercialPapers and Certificate of Deposits of other banks in order to earn interest income onliquidity mismatches.

Money Market

The country reported Gross Domestic Product (GDP) growth of 7.1% in FY 2017. The Indexof Industrial Production (IIP) growth was low mainly due to contraction in manufacturingbecause of decline in demand for Capital Goods. The Consumer Price Index (CPI) inflationdeclined to 3.81% in March 2017 from a high of 6.07% in July 2016 primarily driven byfood and fuel prices. RBI conducted variable rate REPO and OMO in the market to maintainsufficient liquidity. Decline in global commodity prices and expectation of rate cuts byRBI led to softening of 10 year G-SEC yields. Demonetisation created excess liquidity andmarkets remained somewhat uncertain. The Monetary Policy Committee has targeted inflationat 4% and is likely to act accordingly with respect to monetary policy in the comingmonths.

Foreign Exchange

There were a few geo-political events in FY 2017 that affected the global and Indianmarkets. The two main events were Presidential Election in USA and Brexit in UK. BothBritish Pound vs US Dollars and Euro vs US Dollars were impacted by these massive events.In anticipation of large contracted outflow of FCNR funds INR depreciated. Howeversentiments improved towards later part of the year due the ruling party winning somecrucial state assembly elections. This resulted in strengthening of INR vs US Dollars. Oilprice remained range bound. Both domestic and foreign flows helped to liven up the Sensex.


Cash Management Services (CMS)

The Bank provides Corporates MSME / SMEs and Retail customers sophisticated and costeffective CMS. This helps customer to manage their payment logistics in a hassle freemanner. In the last few years the Bank has steadily increased CMS customers. At the endof FY 2017 the Bank had 4379 active customers using the CMS facility.

Business Internet Banking (BIB)

The Bank offers state-of-the-art BIB features especially designed for MSME / SMEcustomers. At the end of FY 2017 BIB facility was availed by 19772 users. The BIBsoftware is likely to be upgraded in FY 2018.

Credit Risk

The Credit Risk unit ensures alignment with the objectives of achieving growth whilemaintaining portfolio quality by making appropriate risk / reward trade-offs. The idea isto ensure long term sustainable performance across business cycles. Regular efforts aremade to improve risk assessment and control processes. Credit Risk unit over time hasdeveloped capabilities to assess the risks associated with various products and businesssegments. As far as possible efforts are made to standardize the entire process pan Indiawhile taking into account geographic nuances. The Bank has implemented a rating model thattakes into account both quantitative and qualitative factors and produces a rating thatbecomes one of the key inputs to credit decisions. In FY 2017 the Credit Risk unit ablysupported the business / branch expansion agenda of the Bank. One of the main focus areasfor the Credit function was improving productivity and customer experience. In order tocontinuously improve the quality of the portfolio the Credit Risk unit invested in SASanalytics and created several insightful analysis/models which helped in refining theproduct offering and collections/recoveries. Key processes in credit underwriting wereexamined and duplication was reduced to improve speed of processing and costs. Periodicportfolio reviews were conducted with business units which helped to improve customertargeting and profitability.

Concentration Risk

Concentration risk is monitored and managed both at the customer level and at theaggregate level. The Bank continuously monitors portfolio concentrations by segmentratings borrower group sensitive sectors unsecured exposures industry and geography.The Bank adopts a conservative approach within the regulatory prudential exposure norms.

Market Risk

Besides the usual monitoring of Structural Liquidity Interest Rate Sensitive Gaplimits and Absolute Holding limits the Bank also monitors interest rate risks using Valueat Risk limits. Exposures to Foreign Exchange and Capital Markets are monitored withinpre-set exposure limits margin requirements and stop-loss limits.

Country Exposure Risk

The Bank has established specific country exposure limits which is capped at 1.5% ofTotal Assets. The limit also depends upon rating of individual countries. The Bank usesthe mitigant of insurance cover available through the Export Credit and GuaranteeCorporation (ECGC) where appropriate.

Liquidity Risk

As part of the liquidity management and contingency planning the Bank assessespotential trends demands events and uncertainties that could result in adverse liquidityconditions. The Bank's Asset Liability Management (ALM) policy defines the gap limits forthe structural liquidity and the liquidity profile is analysed on both static and dynamicbasis by tracking cash inflow and outflow in the maturity ladder based on the expectedoccurrence of cash flow. The Bank undertakes behavioural analysis of the non-maturityproducts namely CASA Cash Credit and Overdraft accounts on a periodic basis to ascertainthe volatility of balances in these accounts. The renewal pattern and prematurewithdrawals of Term Deposits and drawdowns of unavailed credit limits are also capturedthrough behavioural studies. The liquidity profile is estimated on an active basis byconsidering the growth in Deposits Advances and investment obligations. The concentrationof large deposits is monitored on a periodic basis. Emphasis has been placed on growingRetail deposits and avoid as far as possible bulk deposits. The Bank periodically conductsliquidity stress testing.

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internalprocesses people or systems or external events. The Bank's operational risk managementframework is defined in the Operational Risk Management Policy approved by the Board ofDirectors. While the policy provides a broad framework Operational Risk ManagementCommittee (ORCO) oversees the operational risk management in the Bank. The policyspecifies the composition roles and responsibilities of the ORCO. The framework comprisesidentification assessment management and mitigation of risks through advanced tools andanalysis.

New products or services introduced are subject to a risk review and sign-off processso that relevant risks are identified and assessed independently from the unit proposingthe product. There is a separate Management Committee for Approval of Process (MCAP)constituted to approve and review various processes in the Bank. The said committeeconsists of experienced bankers and subject matter experts. Internal Audit also reviewsthe processes that are implemented as part of the audit function.

Reputational Risk

The Bank pays attention to issues that may create a Reputational risk. Events that cannegatively impact the Bank's position are handled cautiously ensuring utmost complianceand in line with the values of the Bank.

Implementation of Basel III guidelines

In accordance with RBI guidelines the Bank has migrated to Basel III capital adequacydisclosures with effect from Q1 FY 2014. The Bank continues to review and improve on itsrisk management systems and practices to align them with international best practices. TheBank has successfully implemented Standardized Approach for Credit Risk StandardizedDuration Approach for Market Risk and Basic Indicator Approach for Operational Risk.


The Bank has been making good progress towards "digitisation". Thedemonetisation initiative has been a major impetus in moving

India rapidly towards a "less cash" economy. Smart phone is steadily becomingubiquitous and customers want everything on their mobile phone. The Bank is ontransformational journey to stay ahead of competition. Last year the Bank launched India'sfirst Aadhaar based ATM and has installed close to 91 Aadhaar based ATMs pan India. TheBank's IT strategy has four pillars – 1) Core Applications – continuouslyupgrade to support digital transformation 2) Mobile/ Tab – create customerconvenience by optimum use of mobile devices 3) Payments – offer innovativesolutions that are dynamic secure and fast 4) Infrastructure – modernize to supportbusiness growth in a cost effective and secure manner. In FY 2017 the Bank implementedmany new applications/upgrades for example - a) Aadhaar IRIS based tab banking solutionfor instant verification of KYC b) DCB Delight (Instakit) instant account opening forSavings Account customers c) Online Foreign Exchange platform for retail customers d)Loans on the Go mobility application for providing information on loans e) Automated tradefinance inward remittances process through seamless integration of SWIFT and NEFT f)Successful migration to and certification of Information Security Management based on ISO27001:2013 standard g) Online Mutual Funds module for ease of buying and redeeming mutualfunds. The Bank also participated in a two day event "Digi Dhan Mela" organizedby Ministry of Electronics and Information Technology.


The Bank's focus is on creating a cost effective scalable Operations unit that candeliver superior customer experience. The Bank intends to achieve optimum centralizationof activities to National Processing Center (NPC) Chennai with the idea of creating acentre of excellence. The NPC faced enormous volume pressures during demonetisation period(November and December 2016). In FY 2017 Cheque Truncation System process was in-housedresulting in cost savings and reduction in potential errors. On a pilot basis theprinting of debit cards and PIN was also in-housed at NPC Chennai.


IA has a team of professionals experienced bankers domain experts and new comers withaudit and finance background. The Audit Committee of the Board (ACB) provides directionand monitors the effectiveness of the IA function. IA forms the third line of defence inthe overall risk management framework of the Bank. IA is independent and continuouslyevaluates and tests the internal controls to identify gaps inadequacies and residualrisks. The IA function incorporates RBI guidelines aims to embrace the best practicesfrom the industry professional bodies and strives to follow high standards. IA has put ina detailed risk assessment and audit planning process in place. IA approaches each auditwith adequate preparation relying on analytics to help identify areas of focus. In FY2017 IA conducted 216 branch audits 12 periodic audits 7 compliance audits 7information system audits and 8 snap audits. IA also undertook a special audit after thedemonetisation exercise was completed. IA continues to appraise the Board the ACB and theManagement teams in terms of newer emerging control issues and recommend appropriatemitigating measures.


Your Bank has a dynamic and creative HR unit. In FY 2017 the HR unit continued peopleagenda of developing caring engaging and building a culture that supports performanceand growth. The Bank's headcount went up from 4248 in FY 2016 to 4979 in FY 2017. Morethan 90% of the new employees were covered by the HR induction program. The HR unit has aspecial focus on "new generation" employees. This is necessary in order to builda pipeline of supervisors and leaders for the future. In order to improve the quality ofsupervision and supervisors an internal survey titled "Speak" was administeredin which 96% of the employee strength participated giving feedback on 7 key dimensions ofpeople management. The survey generated 557 supervisor scorecards. As part of the talentdevelopment initiative ACE program was launched especially for staff identified as"Hi-potential" and "Critical". The Bank improved its Great Place toWork score from 73% in FY 2016 to 75% in FY 2017. New program called Wizcom covering four"Cs" of communication was introduced in order to improve the skills ofemployees. Fun elements were added to Wizcom by introduction of informal "DCBToasstmasters Club" and "Adarsh" mascot. The Bank already has severalsignature development programs that have been in existence for more than 5 years namelyBudding Branch Manager ASPIRE LEAP and RISE. DCB Allympics (staff sports event) whichwas introduced in FY 2016 became much bigger and more exciting. All major locations inIndia where the Bank has its offices / branches conducted DCB Allympics in FY 2017. Inorder to explain the employee benefits in a creative manner a unique concept called DCBChaupal was organised in many locations providing an opportunity to directly connect withthe staff and explain the employment benefits in the Bank.


The Bank has a unique concept whereby each employee is allowed 2 days paid leave everyyear for participating in the Bank's CSR thrust areas. Over 300 employees participated invarious activities across Bengaluru Bhopal Delhi Hyderabad Mumbai and Pune. Forexample the Bank staff organised delivery of water tankers for 25 days to severely droughtaffected Saarul (population of approximately 2000) situated in Maharashtra. The villagehas only one well which had dried up. In Dongri area of Mumbai the Bank staff joinedhands with the local seniors and school children who went door to door to deliver garbagebins while conveying message of cleanliness. The event was attended by local MLA andsenior BMC staff. A large contingent of the Bank staff visited Sanjay Gandhi National Parkin Mumbai to learn about waste segregation and manure creation process. In Bengaluru theBank staff volunteered in de-weeding of Putenahalli lake. The Bank helped the BorderSecurity Force at Wagah Border in providing visitor friendly facilities such as wheelchairs and garbage bins.


Ensuring customer delight in every interaction remains the Bank's core desire forgrowth and success. Customer complaints and satisfaction levels are monitored by the MD& CEO and Senior Management team. An independent Service Excellence team analysescustomer complaints identifies the root cause makes suggestions for process improvementsand follows up with the respective units for rectification. The Bank has a"Centralised Complaint Management" system to ensure that customer queries andcomplaints are not missed out. Customer queries and complaints are followed up to ensuretimely resolution and quality standards are imposed on the Bank's staff. The Bankcontinues to make steady progress on the concept of Power of Three - Empathy Speed andQuality (ESQ) initiative launched 5 years ago. During demonetisation most of the branchesdealt with huge walk-ins (existing and new customers). The Bank staff "livedESQ" under volume pressure and many positive comments were received on FacebookTwitter and media for the services rendered during demonetisation. The Bank iscontinuously working on the six pillars of Service Excellence – Voice of CustomerService Recovery Attrition Calling Process Simplification Service Culture and Measures& Metrics. The Service Excellence team regularly conducts customer complaint meetingsreview of progress on six pillars with key stakeholders weekly calls with frontline staffto obtain feedback make surprise visits to branches conduct customer meetings focusgroups with branch staff and mystery shopping to understand frontline service culture andcompetence. The progress on Service Excellence is regularly monitored by the CustomerService Committee (CSC) of the Board. In FY 2017 105 individuals and 2 teams wererecognised through ESQuire (in-house newsletter to celebrate ESQ). A special edition ofESQuire was issued to recognise 21 branches 20 individuals and 2 teams for the hard workdone during demonetisation period.

Non-Branch Channels

Your Bank provides customers the choice of accessing DCB 24 hour Customer Care PhoneBanking ATMs Internet and Mobile Banking for completing their banking needs. The Bankstrives to provide best-in-class technology and service platform and hence introduced theMissed Call Facility which enables customers to complete their basic banking by simplygiving a missed call. The Bank's mobile banking platform "DCB on the Go" isperiodically upgraded. The Bank provides instant fund transfer facility through Inter BankMobile Payment System (IMPS). In FY 2017 DCB Bank was amongst the first banks to offerUnified Payment Interface (UPI) a truly seamless and modern payment option on mobilephone. In FY 2017 the Bank's Customer Care Associates attended to almost 10.87 lakhcalls. At DCB Bank's 24 Hour Toll Free Customer Care customers directly get connectedwith the Bank officer (Customer Care Associate) without going through the pain of IVR.Thus customers receive personal care. The Bank offers Phone Banking services in 9languages of India (Hindi English Marathi Gujarati Tamil Telugu Odiya Kannada andPunjabi) making it one of the best in the industry.

Marketing / Brand Awareness

Marketing unit works very closely with all the business units. The approach is oncreating brand awareness in a cost effective manner across our footprint. Continuous micromarketing activities are conducted in almost every branch location throughout the year.This has helped achieve brand visibility goodwill and new business. The Bank was theofficial partner - SunRisers Hyderabad (SRH) in IPL 2016. DCB Bank logo was prominent onthe lead arm of the official jersey of all the players throughout the 2 month longtournament.

It was wonderful to witness SRH win the IPL 2016 tournament. On the eve of WorldEnvironment Day the Bank was the title sponsor for "Ahmedabad Go Green Marathon2016". The Bank's signature customer event "Ek Mulaquat Kuch Baatein" wasconducted in a few locations. Large number of customers attended and the Bank ChairmanDirectors and Senior Management were able to freely exchange ideas in the meetings. Aspart of encouraging "start-ups" the Bank once again tied up with BITS Pilaniand presented "Conquest 2016" a prestigious competition where young new ageentrepreneurs compete to show case their products / business. At Ajmer the Bank sponsoredthe "Bikers" group of Royal Enfield (North) for propagating the message of safedriving and cleanliness. At Bengaluru the Bank organised "Captain's Tankard GolfTournament" at the prestigious Karnataka Golf Association. This event receivedoverwhelming response from the club members. At Chennai the Bank sponsored "TNFinance Conclave". The theme was "Gearing up for a changing environment".This event was attended by leaders from the finance function from various industries. TheBank was proud to be associated for the second time with the Indian Navy PSO Cup GolfTournament at Ambience Golf Greens Gurgaon. This was a unique night golf event graced bythe Chief of Naval Staff and senior Navy Officers. The golf event was followed by galadinner with music and singing by enthusiastic Navy and the Bank staff. An internationalboxing event at New Delhi called "Night of the Champions" was sponsored by theBank. The match was live telecast in Star Sports and Hotstar. Your Bank was one of thesponsors for a wonderful event called "Jubilee Games" in Dubai. It was anextravagant show attended by the global community. More than 10000 spectators and 2500athletes participated. Your Bank was also associated with musical events at BengaluruSurat Vejalpur and Jaipur. A high profile seven day night cricket tournament inpartnership with Jain Social Foundation was sponsored by the Bank at Jodhpur Rajasthan.


Not applicable being a banking company.


All the transactions with related parties are in the ordinary course of business and onarm's length basis; and there are no ‘material' contracts or arrangement ortransactions at arm's length basis and thus disclosure in from AOC-2 is not required.


The Bank has a policy on Related Party Transaction and the same has been displayed onthe Bank's website:


In terms of Regulation 34(2)(f) of the SEBI LODR Regulations the Bank's BusinessResponsibility Report describing the initiatives taken by the Bank from an environmentalsocial and governance perspective forms part of this Report and has been hosted on thewebsite of the Bank


A Board level committee for CSR has already been in place as stated in the section onCorporate Governance. The report on CSR is given below: Report on Corporate SocialResponsibility (CSR) Activities during the FY 2016-17:

Sr. No. Description Particulars/Details
1. A brief outline of the company's CSR policy including overview of projects or programs proposed to be undertaken and a reference to the web-link to the CSR policy and projects or programs Outline:
CSR Activities shall mean all the Corporate Social Responsibility activities / programs / initiatives of the company either ongoing or new dealing with the activities mentioned in thrust areas. The activities shall conform to those specified in Schedule VII to the Act (as amended from time to time) and as recommended by the CSR Committee and approved by the Board.
The Bank's thrust area is also in keeping with the Government of India's Swachh Bharat initiative.
Thrust areas or activities ascribed to them are defined in the Policy as amended by the Board from time to time.
Projects/ Programmes to be undertaken:
CSR Thrust Areas for DCB Bank
Thrust areas shall mean and include any one or more of the following CSR activities:
a) Conservation of water / water storage / water usage / protecting water bodies
b) Waste Management
c) Recycling
Project/s supported:
The availability of water and the stress on the water resources across cities and villages is acute as well as alarming. Sustainable methods for preservation of water bodies and resources is a dire need not only for the current generation but for all times to come. The Water situation is a grave one despite the availability of technical knowhow on rain water harvesting water recharging structures which can give small and marginal farmers a better quality of life and livelihood.
DCB Bank's CSR Projects are at Kishangarh and Udaipur in Rajasthan; at Nuh in Haryana in Amritsar district in Punjab and Ratnagiri in Maharashtra. Additionally employee volunteer projects were completed in across locations such as Bhopal Delhi Chennai Gurgaon/ Sohna Hyderabad & Pune. Adherence to the Bank's CSR main thrust area of Water the FY 2016-17 projects are:
a. Conservation of forests in the western ghats to enable rejuvenation of rivers streams and natural water springs. Conservation of top soil through forestry.
b. Ground water resources development in semi-arid villages.
c. Rainwater harvesting structures in village schools as well as colleges. Creation of self sustaining water conservation structures for village schools in areas with prevalence of brackish water. Website link for DCB Bank CSR policy:
2. The Composition of the CSR Committee. The members of the CSR Committee are Mr. Nasser Munjee (Chairman) Mr. Keki Elavia Mr. S. Sridhar Ms. Rupa Devi Singh and MD & CEO Mr. Murali M. Natrajan. Majority of the members are Independent Directors.
3. Average net profit of the company for last three financial years (after adjusting for brought forward accumulated losses) Rs. 143.33 crore
4. Prescribed CSR Expenditure (two per cent. of the amount as in item 3 above) Rs. 2.87 crore
5. Details of CSR spent during the financial year:
a) Total amount to be spent for the financial year; Rs. 0.98 crore
b) Amount unspent if any; Rs. 1.89 crore
c) Manner in which the amount spent during the financial year is detailed on the following page -See the table on the following page-

Manner in which the amount spent during the financial year 2016-17

(1) (2) (3) (4) (5) (6) (7) (8)
S. No CSR project or activity identified. Sector in which the Project is covered Projects or programs (1) Local area or other (2) Specify the State and district where projects or programs were undertaken Amount outlay (budget) Project or programs wise Amount spent on the Projects or programs Sub-heads: (l)Direct expenditure on projects or programs. (2) Overheads: Cumulative expend- iture up to the reporting period Amount spent Direct or through implementing agency *
1 Provision of water storage facility for farming community use and recharge ground water and underground reservoirs Water resource management & sustainable livelihood for tribal farmers (1) Project located in other area. (2) Project site is in the State of Rajasthan Udaipur District. Rs. 5016311 (1) Direct expenditure Rs. 4363051 (2) Overheads Rs. 653260 Complete amount disbursed to the project CSR project amount is spent through implementing agency Concern India Foundation
2 Conservation of forests in the western ghats to enable rejuvenation of rivers streams and natural water springs. Conservation of top soil through forestry. Prevention of degradation of pristine tropical forests. To arrest topsoil runoff and prevent loss of freshwater streams springs and natural habitat (2) Project is in the State of Maharashtra Ratnagiri District. Rs. 1039500 (1) Direct expenditure Rs. 814100 (2) Overheads Rs. 225400 Complete amount disbursed to the project CSR project amount is spent through implementing agency Applied Environmental Research Foundation (AERF)
3 Rainwater harvesting structures in village schools. Creation of self sustaining water conservation structures for village schools in areas with prevalence of brackish water Project is in the State of Haryana in Nuh District Rs. 3305620 (1) Direct expenditure Rs. 3209760 (2) Overheads Rs. 95860 Complete amount disbursed to the project CSR project amount spent through implementation agency SM Sehgal Foundation
4 Installation of waterless urinals in water stressed areas to reduce usage of a scarce resource Installed waterless urinals in areas having severely depleted underground water availability. Reducing sewerage discharge issues Project is in the State of Punjab in Amritsar District Rs. 136806 Direct expenditure Rs. 136806 Complete amount disbursed to the project CSR project amount spent through implementation agency Ekam Ecosolutions
5 CSR impact projects with DCB Bank CSR Employee volunteers Various activities in line with the Bank's CSR thrust areas: Waste management recycling protection of water bodies & composting Projects in Mumbai Navi Mumbai Pune Hyderabad Delhi Chennai Bhopal Bengaluru & Sohna Rs. 338345 Expenditure Rs. 338345 Complete amount disbursed to the projects Implemented directly as well as with agencies Concern India Foundation United Way of Mumbai Putenahalli Lake Trust Gurgaon Mahila Sewa Samti.
TOTAL - - Rs. 9836582 Rs. 9836582 - -

* Details of implementing agency to be given

6. Reason for not spending the two per cent of the average net profit of the last threefinancial years or any part thereof:

The Bank's approach has been measured and nuanced to build the CSR project pipeline.The resources deployed the amount spent and locations coverd has shown a remarkableincrease over the previous Financial Year. The Bank will continue to assess fresh projectsand explore new geographies.

7. Responsibility Statement:

The CSR Committee of the Bank hereby states that the implementation and monitoring ofCSR Policy is in compliance with CSR objectives and policy of the Bank.

Sd/- (Chief Executive Officer or Managing Director or Director)

Sd/- (Chairman- CSR Committee)


The Board shall have minimum 3 and maximum 15 directors unless otherwise approved. Noperson of age less than 21 years shall be appointed as a director on the Board. The Bankshall have such person on the Board who complies with the requirements of the CompaniesAct 2013 the Banking Regulation Act 1949 Provisions of the Listing Regulations the‘Fit & Proper' criteria prescribed by the Reserve Bank of India (RBI) Memorandumof Association and Articles of Association of the Bank and all other statutory provisionsand guidelines as may be applicable from time to time. Composition of the Board shall bein compliance with the requirements of Regulation 17 of the Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015 (the ListingRegulations). Majority of the Directors as required under BR Act shall have specialisedknowledge/experience in the areas like Agriculture Banking SSI Legal Risk ManagementAccountancy Finance etc. Except for the Chairman and the MD & CEO no other directorsare paid remuneration but are paid only sitting fees. The Chairman and the MD & CEOare paid remuneration as approved by RBI and other applicable authorities but are notpaid sitting fees. MD & CEO Company Secretary and Chief Financial Officer shall bethe Key Managerial Personnel (KMPs) of the Bank. All persons who are Directors / KMPsmembers of Senior Management and all other employees shall abide by the Code of Conduct.Independent Directors are not entitled for ESOPs. Directors/KMPs shall not acquire anydisqualification and shall be persons of sound integrity and honesty apart fromknowledge experience etc. in their respective fields.


The Bank had 4979 employees as on March 31 2017. 7 employees employed throughout theyear were in receipt of remuneration of more than Rs. 1.02 Crore per annum. The details ofsuch employees in terms of Section 197(12) of the Companies Act 2013 read with Rule

5 (2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 are appended separately (Annexure-I) and form part of this Report. The Reportand Accounts are being sent to the shareholders excluding these particulars and anyshareholder interested in obtaining the said details may write to the Company Secretary atthe Registered Office of the Bank.


The information pertaining to the Employee Stock Options is given in ANNEXURE-II tothis Report.

PARTICULARS PURSUANT TO SECTION 197(12) AND THE RELEVANT RULES: a) The ratio of theremuneration of each director to the median employee's remuneration for the financial yearended March 31 2017 and such other details as prescribed are as given below:

Name Ratio
Mr. Nasser Munjee (Chairman) 5 : 1
Mr. Murali M Natrajan (Managing Director & CEO) 148 : 1

b) The percentage increase in remuneration of each director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year:

Mr. Nasser Munjee – (Chairman): 0 %
Mr. Murali M Natrajan – (Managing Director & CEO): 8 %
Mr. Bharat Laxmidas Sampat – (Chief Financial Officer): 7 %
Mr. Hemant Vinayak Barve – (Company Secretary): 10 %
c) The percentage increase in the median remuneration of employees in the financial year : 7 %

d) The number of permanent employees on the rolls of Bank: 4928 e) Average percentileincrease already made in the salaries of employees other than the managerial personnel inthe last financial year ended March 31 2017 and its comparison with the percentileincrease in the managerial remuneration and justification thereof and any exceptionalcircumstances for increase in the managerial remuneration: Average increase inremuneration is 11 % for Employees other than Managerial Personnel & 9 % forManagerial Personnel (KMP and Senior Management). There are no exceptional circumstancesfor increase in the managerial remuneration. f) If remuneration is as per the remunerationpolicy of the Bank: Yes


The provisions of Section 134(3)(m) of the Companies Act 2013 relating to conservationof energy and technology absorption do not apply to the Bank. However as mentioned inearlier part of the Report the Bank has been continuously and extensively usingtechnology in its operations. Foreign Exchange earnings and outgo are part of the normalbanking business of the Bank.


The Bank has in place a vigil mechanism pursuant to which a Whistle Blower Policy hasbeen in vogue for the last several years. The policy was last reviewed in FY2015-16.ThisPolicy inter alia provides a direct access to a Whistle Blower to the Chairman of ACB onhis dedicated email-ID The Whistler Blower Policy covering all employeesand directors is hosted on the Bank's website at "".

None of the Bank's personnel have been denied access to the Audit Committee


The Bank has designed and implemented a process driven framework for Internal FinancialControls ("IFC") within the meaning of the explanation to Section 134 (5) (e)IFC of the Companies Act 2013. For the year ended March 31 2017 the Board is of theopinion that the Bank has sound IFC commensurate with the nature and size of its businessoperations wherein controls are in place and operating effectively and no materialweaknesses exist. The Bank has a process in place to continuously monitor the existingcontrols and identify gaps if any and implement new and /or improved controls whereverthe effect of such gaps would have a material effect on the Bank's operation.


Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Bank the work performed by the internal statutory andsecretarial auditors and the reviews performed by the Management and the relevant BoardCommittees including the Audit Committee of the Board the Board is of the opinion thatthe Bank's internal financial controls were adequate and effective during the year endedMarch 31 2017. Accordingly pursuant to Section 134 (5) of the Companies Act 2013 basedon the above and the representation received from the Operating Management the Board ofDirectors to the best of their knowledge and ability confirms that: (i) in thepreparation of the annual accounts the applicable accounting standards have been followedand that there were no material departure there from; (ii) they have in the selection ofthe accounting policies consulted the statutory auditors and have applied theirrecommendations consistently and made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the Bank as at March31 2017 and of the profit of the Bank for the year ended on that date; (iii) they havetaken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act 2013 for safeguarding the assets ofthe Bank and for preventing and detecting fraud and other irregularities; (iv) they haveprepared the annual accounts on a going concern basis; (v) they have laid down internalfinancial controls to be followed by the Bank and that such internal financial controlsare adequate and were operating effectively during the year ended March 31 2017; and (vi)proper system has been devised to ensure compliance with the provisions of all applicablelaws and that such systems were adequate and operating effectively during the year endedMarch 31 2017.


An extract of the Annual Return as of March 31 2017 pursuant to the sub-section (3) ofSection 92 of the Companies Act 2013 and forming part of the report is attachedseparately as ANNEXURE-III to this report..


The Bank has been continuously observing the best corporate governance practices andbenchmarks itself against each such practice. A separate section on Corporate Governanceand a Certificate from the Statutory Auditors M/s. Deloitte Haskins & SellsChartered Accountants (Registration No. 117365W) regarding compliance of the conditions ofCorporate Governance as stipulated in Schedule V of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 forms part of this Annual Report.


During FY 2017 Mr. Suhail Nathani an Independent Director of the Bank has ceased tobe a Director of the Bank on January 28 2017 after completing the term of eightconsecutive years [the maximum permissible] as per the provisions of the BankingRegulation Act 1949. The Board of Directors places on record its deep sense ofappreciation of the valuable contributions made by Mr. Suhail Nathani during hisassociation of 8 years as an Independent Director of the Bank.

A brief resume relating to Mr. Manekia who is to be re-appointed as Director isfurnished in the notice of the 22nd AGM as well as in the report on Corporate Governance.Based on the Disclosures provided by him Mr. Manekia is not disqualified from beingappointed as a Director as specified in terms of Section 164 of the Companies Act 2013.

None of the Directors of the Bank is related to each other per se.


1. The Chairman of the Nomination and Remuneration Committee of the Board sent draftparameterized feedback forms for evaluation of the Board the Independent Directors andthe Chairman.

2. Independent Directors at a meeting without anyone from the non-independent directorsand management considered/evaluated the Board's performance performance of the Chairmanand other non-independent Directors.

3. The Board subsequently evaluated performance of the Board the Committees andIndependent as well as Non-Independent Directors (without participation of the relevantdirector) The members of the Board and committees evaluated the respective entity. Everyindividual Director evaluated every other Director. The results were collated and theChairman informed that the performance of the Board as a whole and its Committees wassatisfactory.

The Chairman also commented that individual performance of the Directors was alsosatisfactory.



M/s. Deloitte Haskins & Sells Chartered Accountants (Registration No. 117365W)were appointed as Statutory Auditors at the last Annual General Meeting. They are eligiblefor re-appointment for the FY 2017-18. Section 139 of the Companies Act 2013 and theRules made there under provide that a company can appoint a firm as auditor for maximumtwo terms of five consecutive years. In other words company can make appointment ofauditor for five years at a time. However the Bank is also governed by the provisions ofBanking Regulation Act 1949 and the circulars/notification/ guidelines issued by ReserveBank of India (RBI) from time to time. As per the extant provisions RBI gives permissionfor appointment of auditor on year to year basis. Further as per RBI's directive it ismandatory to rotate the Auditor after completion of four years. M/s. Deloitte Haskins& Sells Chartered Accountants (Registration No. 117365W) has already completed termof one year. Taking this into consideration ratification of the appointment of theauditors has been recommended for financial year 2017-18.which is also subject to priorapproval of RBI. The Reserve Bank of India has been approached for their re-appointment.Your Board recommends ratification of their appointment as Statutory Auditors at theensuing Annual General Meeting subject to RBI approval.


Pursuant to the requirements of the Companies Act 2013 the Bank has appointed M/sAnanthasubramanian & Co. Practicing Company Secretaries (COP 1774) as the SecretarialAuditor for FY 2017 and their report of April 7 2017 is attached separately to thisreport.


Your Board wishes to thank the principal shareholder and promoters the Aga Khan Fundfor Economic Development S.A. (AKFED) and all the other shareholders for the confidenceand trust they have reposed in the Bank. Your Board also acknowledges with appreciationthe Reserve Bank of India (RBI) for its valuable guidance and support to the Bank. YourBoard similarly expresses gratitude for the assistance and co-operation extended by SEBIBSE NSE NSDL CDSLNPCIL Central Government and the Governments of various StatesUnion Territories and the National Capital Region of Delhi where the Bank has itsbranches.

Your Board acknowledges with appreciation the invaluable support provided by theBank's auditors lawyers business partners and investors. Your Board is also thankful forthe continued co-operation of various financial institutions and correspondents in Indiaand abroad.

Your Board wishes to sincerely thank all its customers for their patronage. Your Boardrecords with sincere appreciation the valuable contribution made by employees at alllevels and looks forward to their continued commitment to achieve further growth and takeup more challenges that the Bank has set for the future.

On behalf of the Board of Directors
Place: New Delhi Nasser Munjee
April 14 2017 Chairman