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IDBI Bank Ltd.

BSE: 500116 Sector: Financials
NSE: IDBI ISIN Code: INE008A01015
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VOLUME 290355
52-Week high 86.50
52-Week low 50.25
P/E
Mkt Cap.(Rs cr) 12,731
Buy Price 54.00
Buy Qty 90.00
Sell Price 0.00
Sell Qty 0.00
OPEN 56.00
CLOSE 56.10
VOLUME 290355
52-Week high 86.50
52-Week low 50.25
P/E
Mkt Cap.(Rs cr) 12,731
Buy Price 54.00
Buy Qty 90.00
Sell Price 0.00
Sell Qty 0.00

IDBI Bank Ltd. (IDBI) - Director Report

Company director report

Your Bank's Board of Directors is pleased to present the Report on its business andoperations for the financial year ended March 31 2017.

In the financial year 2016-17 the Indian economy's growth was healthy buoyed bypolicy reforms and improving macroeconomic fundamentals. Against this backdrop your Bankstrived to realign its portfolio mix in favour of retail and priority sector lendingbusiness. Various critical business enablers such as leveraging on the Bank's proven ITprowess innovations in digital products and delivery channels digitisation of processcapitalising on areas of core competencies such as project advisory and loan syndicationbusiness young and talented human capital among others has adeptly assisted the Bank toenhance value for all its stakeholders.

Financial Highlights

As on March 312017 your Bank's aggregate deposits and advances touched Rs.268538crore and Rs.190826 crore respectively. Your Bank's business highlights for the periodunder review are presented in Table 1.

Table 1 : Key Financials

(In Rs. crore)
As on March 31 2016 1 2017
Capital 2058.81 2058.81
Reserves & Surplus 25662.97) 20504.83
Deposits 265719.83) 268538.10
Borrowings 70591.64) 56363.98
Other Liabilities & Provisions 11356.57) 14302.18
Total Liabilities 375389.82 361767.90
Cash & Balances with RBI 13822.91 13346.92
Balances with Banks & Money at Call & Short Notice 977763) 1933716
Investments 9299713) 92934.41
Advances 215893.45) 190825.93
Fixed & Other Assets 42898.70 45323.48
Total Assets 375389.82 361767.90
For the period 2015-16 2016-17
Total Income 31453.46) 31758.97
Total Expenses (other than provisions) 26083.39) 27180.51
Provisions (other than tax) 10340.82) 13196.47
Profit/ (Loss) Before Tax (4970.75) (8618.01)
Provision for Tax* (1305.95) (3459.87)
Profit/ (Loss) After Tax (3664.80) (5158.14)

* Net of Current Income Tax and Deferred Income Tax

During the year under review your Bank's total income amounted to Rs.31759 crorecomprising interest income of Rs.27791 crore and other income of Rs.3968 crore. Totalexpenditure (excluding provisions and contingencies) stood at Rs.27180.52 crore withinterest expenses at Rs.22040 crore and operational expenses at Rs.5141 crore.

However total provisioning of your Bank increased in view of continued stress on theBank's portfolio. The provisions include Rs.13875.09 crore towards provision fornonperforming assets bad debts written-off and investments. As a result your Bankincurred a net loss of Rs.5158.14 crore during 2016-17

For each share with face value of Rs.10 Earnings per Share (EPS) during the year stoodat Rs.(25.05) while Book Value per Share (excluding Intangible Assets) stood at Rs.55.51as at end-March 2017 For calculating Book Value per Share the Government of India capitalinfusion of Rs.1900 crore was considered which is a part of other liability infinancials pending allotment of shares. For the financial year 2016-17 the Board ofDirectors has not recommended any dividend.

Report on the Performance and Financial Position of Subsidiaries and Joint Ventureincluded in the Consolidated Financial Statement

(In Rs.‘000s)

Name of the entity

Net Assets i.e. total assets minus total liabilities

Share in profit or loss

As % of consolidated net assets Amount As % of consolidated profit or loss Amount
1 2 3 4 5
Parent : IDBI Bank Ltd. 95.94% 22563.65 103.50% (5158.14)
Subsidiaries:
Indian:
1. IDBI Capital Market Services Ltd. 1.39% 326.79 -0.28% 13.74
2. IDBI Intech Ltd. 0.20% 46.07 -0.28% 13.95
3. IDBI Asset Management Company Ltd. 0.44% 104.42 -0.15% 726
4. IDBI MF Trustee Company Ltd. 0.01% 1.20 0.00% 0.13
5. IDBI Trusteeship Services Ltd. 0.64% 151.58 -0.84% 41.96
Foreign: NA NA NA NA
Minority Interests in all subsidiaries 0.30% 70.57 -0.38% 19.01
Associates (Investment as per the equity method)
Indian
1. Biotech Consortium India Ltd. NA NA -0.01%" 0.45
2. National Securities Depository Ltd. NA NA -0.52% 26.16
3. NSDL e-Governance Infrastructure Ltd. NA NA -0.72% 36.05
4. North Eastern Development Finance Corporation Ltd. NA NA -0.20% 9.89

 

(In Rs.‘000s)

Name of the entity

Net Assets i.e. total assets minus total liabilities

Share in profit or loss

As % of consolidated net assets Amount As % of consolidated profit or loss Amount
1 2 3 4 5
Foreign NA NA NA NA
Joint Ventures
(as per proportionate consolidation / investment as per the equity method)
Indian
1. IDBI Federal Life Insurance Company Ltd. 1.39% 325.87 -0.50% 24.99
Foreign NA NA NA NA
TOTAL 100% 23519.59 100% (4983.56)
Elimination -1.09% (25728) 0.65% (32.35)
Net Total 98.91% 23262.31 100.65% (5015.91)

Note: None of the above subsidiaries have any subsidiary

Material changes and commitments if any affecting financial position of IDBI Bankwhich have occurred during the end of financial year and the date of Board Report.

There are no material changes and commitments affecting the financial position of theBank which have occurred between the end of the financial year of the Bank i.e. March 312017 and the date of the Directors' Report i.e. May 18 2017

The details in respect of adequacy of internal financial controls with reference to thefinancial statements.

The Bank has adequate internal controls and processes in place with respect to itsfinancial statements which provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements. These controls andprocesses are driven through various policies procedures and certifications. Theprocesses and controls are reviewed periodically.

Capital Adequacy

Your Bank computes regulatory capital requirement for credit market and operationalrisks as prescribed under the Pillar 1 guidelines of the Basel III framework.

As on March 312017 the Capital to Risk-weighted Assets Ratio (CRAR) of your Bank was10.70% as against the minimum regulatory requirement of 10.25%. Your Bank's Common EquityTier 1 (CET 1) ratio was 5.64% as against the minimum applicable CET 1 ratio of 6.75%(including capital conservation buffer i.e. CCB of 1.25%) stipulated by RBI. The Tier-Iratio stood at 781% as on March 31 2017 against the regulatory requirement of 8.25%(including CCB).

Basel guidelines have introduced a mandatory Capital Conservation Buffer (CCB) witheffect from March 312016. CCB is designed to ensure that banks build up buffers duringnormal times (i.e. outside periods of stress) which can be drawn down as losses areincurred during stressed period. In line with the transitional arrangements of theregulatory guidelines the CCB applicable for March 31 2017 is 1.25% (50% of total CCB of2.5%). Accordingly the minimum regulatory requirement of total capital + CCB is 10.25%(CRAR + CCB). Your Bank has a CRAR ratio of 10.70%. Similarly your Bank has a CET 1 + CCBratio of 5.64%.

Your Bank has a Board approved policy on Internal Capital Adequacy Assessment Process(ICAAP) in line with the Pillar 2 norms of the Basel III framework which enables theBank to internally assess and quantify those risks that are not covered under Pillar 1 aswell as develop appropriate strategies to manage risks under normal and stress conditions.Your Bank has adopted a Disclosure Policy in accordance with the Pillar 3 requirementsunder the Basel norms and accordingly publishes disclosures on the Bank's website at theend of each quarter.

Business Strategy

Rebalancing the portfolio mix continued to be the focal point of your Bank's businessstrategy. In alignment with its business strategy your Bank took various measures thattargeted the retail and priority sector segment.

Your Bank has been improving its accessibility by strategically expanding its branchand ATM network. Furthermore your Bank being one of the leading players in the digitalbanking domain has been embracing latest cutting edge technology to provide digitalofferings to seamlessly cater to its customers' banking and financial requirements.Additionally your Bank continued to introduce technological innovations which aided inimproving its operational convenience and also enhanced efficiency and security of itssystems and processes.

Key Business Initiatives

In alignment with the corporate objective of attaining a more balanced businessportfolio mix your Bank continued to take initiatives to promote its retail business.Your bank offers a wide range of products and services encompassing Asset LiabilityThird Party and Capital Market products among others. Your Bank through its branchesATMs and digital channels offers a wide range of products and services to cater to thecontinuously evolving as well as emerging customer needs. Your Bank has been fine-tuningits existing products and services as also designing customised products and servicesacross various retail segments to maintain its competitive edge.

To increase its accessibility to its retail customers your Bank has been continuouslystriving to expand its banking footprints by strategically augmenting its branch and ATMnetwork. As on March 312017 your Bank's network stood at 1896 branches (including oneoverseas branch and one International Banking Unit) and the number of ATMs stood at 3537.

Your Bank has proactively deployed cutting-edge technology solutions to offer variousdigital avenues for customers to transact at their convenience. Your Bank's digitalbanking channels viz. ATM internet banking mobile banking kiosks e-lounge facilityetc. are designed to deliver a wide range of banking services in a seamless manner. Apartfrom being a frontrunner in digital initiatives your Bank also places utmost importanceon security and confidentiality of customer transactions information and data. Inaddition to employing highly sophisticated technology to ensure safe and secureenvironment for the customer while transacting through digital channels your Bank alsosensitises its customers on cyber frauds and its prevention through emails SMS andinserts sent along with Bank's statements on a periodic basis.

In adherence to the regulatory guidelines as well as to tap the potential businessopportunities your Bank worked towards building its Priority Sector Lending (PSL)business by taking various initiatives and campaigns. Your Bank is also leveraging itsBusiness Correspondents (BCs)/ Business Facilitators (BFs) network in addition to itsbranch and ATM network to expand its reach to the priority sector segment especially inthe rural and semiurban areas thereby building a sustainable PSL portfolio.

In order to ensure inclusive growth in the economy your Bank has been activelypartnering with the policymakers to further the objective of financial inclusion. Throughits intervention in four key areas viz. expanding banking infrastructure offeringappropriate financial products making intensive use of technology and enhancing financialliteracy your Bank has been ensuring access to appropriate financial products andservices needed by most vulnerable sections of the society at an affordable cost in a fairand transparent manner.

Your Bank's corporate banking portfolio includes exposure to sectors as varied aspower textiles cement steel engineering construction paper and paper productselectronics and electrical equipment sugar chemicals automobiles Non-Banking FinancialCompanies (NBFCs) among others. Your Bank's asset products basket for corporate clientsincludes term loans working capital (both fund-based and non-fund based) packing creditto exporters receivables buyout bill discounting lending to NBFCs among others. YourBank continues to be proactive in extending project appraisal debt syndicationstructuring and advisory services across various sectors. During the year your Bankreceived several mandates for appraisal and debt syndication.

While 2016-17 witnessed a number of policy reforms from the Government the core sectorindustries and infrastructure sector continued to face marginal profitability andliquidity constraints thus leading to persistence of stress. Since your Bank hashistorically been a major lender for these industrial sectors the stress in the corporateadvances portfolio of the bank continued during the year. However the Bank had initiatednecessary measures for resolution of these stressed assets within the available regulatoryframework like Strategic Debt Restructuring (SDR) Scheme for Sustainable Structuring ofStressed Assets (S4A) 5/25 structuring etc. under the aegis of Joint Lenders Forum(JLF). With the recent amendments to Banking Regulation Act and revised guidelines on JLFmechanism issued by RBI the Bank expects to have expeditious resolution of these stressedassets in the current year.

Your Bank conducts its Trade Finance (TF) business through its full-fledged AuthorisedDealer TF Centres and retail TF branches. Your Bank continued to show impressive growthand set new service standards by working closely with its customers to create customersolutions in TF business. As part of your Bank's on-going digital transformation IDBIeTrade Portal - an innovative online facility - was revamped to enable its customers toavail a basket of facilities in a paperless mode and hassle- free manner.

Your Bank acts as an agent for Central and State Governments to manage their receiptsand payments. Besides being authorised to collect various Central Government taxes yourBank also has the mandate for collecting electronic payment of railway freight charges andCommercial Tax and other Government receipts for 23 State Governments and four UnionTerritories.

Your Bank has received in-principle approval for Bharat Bill Payment System (BBPS) - anRBI mandated system - which aims at offering integrated and interoperable bill paymentsystem in the country.

Your Bank became the first public sector bank to open its IFSC Banking Unit (IBU) atIndia's first and only International Financial Services Centre (IFSC) at GujaratInternational Finance Tec-City (GIFT). Your Bank through its GIFT IBU branch and itsoverseas branch at the Dubai International Financial Centre (DIFC) Dubai offers a widerange of corporate banking services to meet its Indian clients' fund requirements fortheir Indian operations as well as overseas ventures.

Your Bank in its endeavour to be a socially responsible entity appreciates theimportance of Corporate Social Responsibility (CSR) activities and has put in place aBoard-approved CSR policy with effect from April 1 2014 in compliance with Companies Act2013. Your Bank's CSR activities embody its commitment to contribute to the sustainablesocial and economic development of the society. Your Bank through its diverse CSRactivities contributed towards providing improved access to health services promotingeducation for children promoting gender equality promotion and installation of renewableenergy systems promotion of sports enhancement of livelihood opportunities advancementof vocational and employable skills and holistic development of villages by undertakingplanned interventions.

The detailed descriptive of the Bank's initiatives undertaken during the year iscontained in the Management Discussion and Analysis section of the Annual Report.

Board of Directors

Your Bank's Board of Directors is broad-based and its constitution is governed by theprovisions of the Banking Regulation Act 1949 the Companies Act 2013 the Articles ofAssociation of your Bank and the requirements of Corporate Governance as envisaged inSEBI (LODR) Regulations 2015. The Board functions directly as well as through variousBoard Committees constituted to provide focussed governance in the important functionalareas of your Bank.

As on March 31 2017 the Board comprised of nine Directors including ManagingDirector and CEO (MD & CEO) two Deputy Managing Directors (DMDs) two Non-ExecutiveDirectors and four Independent Directors. Shri Kishor Kharat MD & CEO Shri K.P.Nairand Shri G.M.Yadwadkar DMDs Shri Pankaj Jain and Shri Praveen Garg Central Governmentofficial Nominees as Non-Executive Directors Shri S. Ravi Shri Ninad Karpe Shri GyanPrakash Joshi and Ms. Neeru Abrol as Independent Directors constituted the Board as onMarch 31 2017 The strength of 9 (nine) Directors on the Board as against the compositionfor maximum strength of 13 Directors provided under Article 116(1) of the Articles ofAssociation meets the requirement provided under Article 114(a) of the Articles ofAssociation.

Apex Committees

The Board has fifteen sub-committees namely Audit Committee of the BoardRemuneration Committee Executive Committee Nomination Committee Stakeholders'Relationship Committee HR Steering

Committee Frauds Monitoring Committee Recovery Review Committee Risk ManagementCommittee Independent Directors' Committee Corporate Social Responsibility CommitteeNon-Cooperative Borrowers' Review Committee Customer Service Committee WilfulDefaulters' Review Committee and Information Technology Committee to oversee variousfunctional aspects of your Bank's business and operations.

Corporate Governance

Your Bank is committed to adopting the best corporate governance practices. It believesthat effective corporate governance is not just a requirement for regulatory compliancebut also a facilitator for enhancement of stakeholders' value. The details of your Bank'scorporate governance practices are given in this Annual Report as a separate section underCorporate Governance Report.

Business Responsibility Report

The Securities and Exchange Board of India (SEBI) vide its notification dated December22 2015 has mandated the inclusion of Business Responsibility (BR) Report as part of theAnnual Report for Top 500 listed entities based on market capitalisation at BSE and NSE.The BR Report should describe initiatives taken by the listed entity from anenvironmental social and governance perspective. The Bank's Business ResponsibilityReport has been hosted on the website of the Bank (www.idbi.com).

Statement under Section 134 of the Companies Act 2013 read with Rule 5 of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014

There were no personnel in your Bank's services during the financial year underreview who received remuneration over Rs.1.02 crore annually. Besides there were nopersonnel in the service of the Bank for a part of the year who received remuneration inexcess of Rs.8.50 lakh per month. Further there was no personnel employed throughout thefinancial year or part thereof who was in receipt of remuneration at a rate which in theaggregate was in excess of that drawn by the Managing Director & CEO or the DeputyManaging Directors of the Bank and who held by himself or along with his spouse anddependent children not less than 2% of the equity shares of the Bank.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

The provisions of Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 are not applicable to your Bank. However your Bankhas been increasingly using information technology in its operations.

RBI's Prompt Corrective Action

The RBI vide its letter dated May 05 2017 has initiated Prompt Corrective Action(PCA) for your Bank in view of its high net Non-Performing Assets (NPA) and negativeReturn on Assets (ROA). The Bank is taking necessary actions to comply with the RBI'sdirective in this regard.

Directors' Responsibility Statement

The Board of Directors hereby declares and confirms that:

a. In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

b. The Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Bank at the end of the financial year and of theprofit and loss of the Bank for that period;

c. The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Bank and for preventing and detecting fraud and other irregularities;

d. The Directors had prepared the annual accounts on a going concern basis;

e. The Directors had laid down internal financial controls to be followed by the Bankand that such internal financial controls are adequate and were operating effectively; and

f. The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Acknowledgements

Your Bank's Board of Directors is sincerely grateful to the Government of IndiaReserve Bank of India (RBI) Securities and Exchange Board of India (SEBI) InsuranceRegulatory and Development Authority of India (IRDA) and all other statutory/ regulatoryauthorities for their valuable co-operation and guidance. The Board also acknowledgeswith gratitude the co-operation and support received from various State Governments andother banks/ financial institutions. The Board thanks various multilateral institutionsand international banks/ institutions for their periodic support. The Board takes thisopportunity to put on record its deep sense of gratitude to its loyal shareholders andcustomers for extending their support during the year and looks forward to theircontinued association in the years ahead. During the financial year the Bank has receivedvarious recognitions and accolades for its excellence in the banking domain. The Board isthankful to all such organisations/ agencies for formally recognising the Bank's efforts.The Board appreciates the sincere and devoted services displayed by its entire staff andhighly values their commitment towards the Bank.

[K.P. Nair] [Mahesh Kumar Jain]
Deputy Managing Director Managing Director & CEO
Place: Mumbai
Date : May 18 2017