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Kotak Mahindra Bank Ltd.

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P/E 55.01
Mkt Cap.(Rs cr) 182,148
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Sell Price 955.00
Sell Qty 1.00
OPEN 939.80
CLOSE 935.70
VOLUME 108622
52-Week high 980.20
52-Week low 692.40
P/E 55.01
Mkt Cap.(Rs cr) 182,148
Buy Price 0.00
Buy Qty 0.00
Sell Price 955.00
Sell Qty 1.00

Kotak Mahindra Bank Ltd. (KOTAKBANK) - Director Report

Company director report

To the Members of


The Directors present their Thirty-first Annual Report together with the auditedaccounts of your Bank for the year ended 31st March 2016.


Pursuant to the approval of the Reserve Bank of India to the Scheme of Amalgamation ofING Vysya Bank Ltd. (IVBL) with Kotak Mahindra Bank Ltd. (the Bank) IVBL merged with theBank effective from 1st April 2015. The current year consolidated and standalone figuresinclude operations of the erstwhile IVBL. Hence the previous year figures are notcomparable.

The financial highlights are summarized below:

(A) Kotak Mahindra Bank Limited - Consolidated financial highlights:

31st March 2016 31st March 2015
Rs. crore Rs. crore
Total income 28032.36 21471.08
Total expenditure excluding provisions and contingencies 22017.06 16715.37
Operating Profit 6015.30 4755.71
Provisions and contingencies excluding provision for tax 991.56 205.73
Profit before tax 5023.74 4549.98
Provision for taxes 1592.62 1484.90
Profit after tax 3431.12 3065.08
Less: Share of minority interest 65.19 59.51
Add: Share in profit of Associates 92.92 39.88
Consolidated profit for the Group 3458.85 3045.45
Earnings per Equity Share:
Basic (Rs.) 18.91 19.75
Diluted (Rs.) 18.87 19.70

(B) Kotak Mahindra Bank Limited - Standalone financial highlights:

31st March 2016 31st March 2015
Rs. crore Rs. crore
Total Income 18996.42 11748.32
Total expenditure excluding provisions and contingencies 14955.33 8750.86
Operating Profit 4041.09 2997.46
Provisions and contingencies excluding tax provisions 917.37 164.50
Profit before tax 3123.72 2832.96
Provision for taxes 1033.94 966.98
Profit after tax 2089.78 1865.98
Add: Surplus brought forward from the previous year 5095.26 4005.29
Add: Net Additions on Amalgamation 1674.71 -
Amount available for appropriation 8859.75 5871.27
Statutory Reserve under Section 17 of the Banking Regulation Act 1949 522.45 466.50
General Reserve - 93.30
Transfer to / (from) Investment Reserve Account (41.52) 86.65
Transfer to Capital Reserve 9.17 5.91
Transfer to Special Reserve 45.00 28.00
Proposed Dividend 91.84 82.07
Corporate Dividend Tax 18.69 13.58
Surplus carried to Balance Sheet 8214.12 5095.26


During the year pursuant to approval of the shareholders of the Bank at the AnnualGeneral meeting held on 29th June 2015 your Bank issued 912841920 Bonus shares in theratio of 1:1 i.e. one equity share for every one equity share held on the Record Date tothe Members on 10th July 2015.


Your Directors are pleased to recommend a dividend of ' 0.50 per equity share entailinga payout of ' 110.53 crore including dividend distribution tax. The dividend would be paidto all the shareholders whose names appear on the Register of Members/Beneficial Holderslist on the Book Closure date.


During the year your Bank has allotted 9991715 equity shares (adjusted for bonus)arising out of the exercise of Employees Stock Options granted to the employees andwhole-time directors of your Bank and its subsidiaries. As per the ESOP Schemes oferstwhile ING Vysya Bank Ltd. (eIVBL) the stock options granted to the employees vestedon an accelerated basis upon the merger. Consequently the number of stock options onwhich vesting was accelerated was 10491900 (on a post swap basis adjusted for bonusshares).

Post allotment of equity shares as aforesaid and the bonus allotment the issuedsubscribed and paid-up share capital of your Bank stands at ' 9171910790 comprising of1834382158 equity shares of ' 5 each as on 31st March 2016.

Your Bank is well capitalised and has a Capital Adequacy Ratio ('CAR') under Basel IIIas at 31st March 2016 of 16.34% with Tier I being 15.28%.

During the year your Bank has not issued any capital under Tier II. As on 31st March2016 outstanding Unsecured Redeemable Non-Convertible Subordinated Debt Bonds were '969.7 crore and outstanding Unsecured Non-Convertible Redeemable Debt CapitalInstruments Upper Tier II stood at ' 806.31 crore.


The Global Depository Shares (GDS) of the Bank were listed on Luxembourg StockExchange. Consequent to the issuance of notice of termination of the GDS program by theBank to the Custodian and the Depository the Depository Agreement entered into betweenthe Bank and the Depository was terminated. Subsequently the GDS program has beenterminated with effect from 4th September 2015.

OPERATIONS Consumer Banking

The merger of ING Vysya Bank (IVBL) with your Bank brought in 577 branches and 657 ATMsfrom the erstwhile IVBL.

Your Bank consolidated its network presence through a measured expansion of itsfootprint across the country and as of 31st March 2016 had 1333 branches and 2032 ATMscovering 706 locations. Of the 74 new branches commissioned this year 32 were in ruraland semi-urban locations. Your Bank added about 10.96 lac new customers this year acrosscore banking products of savings and checking accounts term deposits overdrafts andnon-resident accounts.

Your Bank rolled out several initiatives aimed at offering a superior anddifferentiated customer experience. Some key ones are:

Products and Services

• Launched its first E-Lobby at Andheri Metro Station Mumbai. The e-lobby offersa host of self service capabilities such as ATM Banking Kiosk Tablets Surface Tableetc. which can be used by both customers and non-customers.

• Enhanced its suite of products positioned at specific customer segments andlaunched two new propositions MY FAMILY - a savings bank proposition tailored exclusivelyfor the entire family. The proposition gives the benefit of pooling in balances acrossfamily members & also gives them the benefit of a dedicated relationship manager forthe family and ALPHA - a savings bank proposition linked to investments. The customergets the benefit of a NMC waived savings account when they choose an RD (or) MF SIP (or)NPS along-with a term insurance premium of ' 300 per month (which offers a cover of '20lac) linked to their savings account. The proposition also offers Cash Back on Debit Cardspends & is targeted for the age group of 18-55.

• Tied up with Thomas Cook and Kuoni Travels to offer a Holiday Savings Accountlinked to a Recurring Deposit. Customers get benefit of various schemes & offerslaunched by these travel companies and the banking linkage enables them to save on amonthly basis to facilitate the holiday expense.

• Appointed as Authorised Collection Centre (ACC) by Stock Holding Corporation ofIndia Ltd (SHCIL) for providing E-stamping facility in the states of Punjab and Rajasthan.

• Appointed as one of the collecting Banks for Government of India's SovereignGold Bonds and was actively involved in raising subscriptions across all three tranches.

• Launched three new Current Account products - Kotak Pro Plus Kotak Elite Plusand Kotak Ace Plus offering more efficient cash management in select locations.

• Introduced Kotak Cheque Protect a calibrated credit oriented program foroffering cheque protection facility to existing customers for honouring cheques in theevent of shortfall in the bank account based on certain pre-approved parameters.

• Implemented Foreign Account Tax Compliance Act (FATCA) / Common ReportingStandard (CRS) which requires the Bank to carry out due diligence of its customers toidentify the individuals and entities which fulfill the indices as prescribed by theregulatory bodies and reporting to the Indian tax authorities for onward submission ofinformation to foreign authorities as appropriate.

Business Lines

a) Non Resident Indian Business

Some of the key initiatives taken this year are:

• Extended C2R money transfer mode for Canada. Your Bank's NRI clients can now usethis medium to transfer money from Canada to their Kotak Bank account in India.

• Further expanded the network of exchange house relationships and the count nowstands at 26.

• As a platform to reach out to the overseas Indian community your Bank hasparticipated in various international business forums organized by the Indian community invarious countries.

• In order to work closely with the mariner community & shipping companiesyour Bank has participated in various mariner events nationally.

b) Priority Banking Business

Privy League program positioned to cater to the affluent segment now services 3.4 laccustomers. A new tier-"Insignia" was launched at select locations to cater tocustomers with group relationship value of at least ' 1 crore. A Corporate Credit cardwith exclusive benefits for Privy League Business banking customers was introduced toincrease the segmental focus in the program. To address customers' need for legacyplanning Smart Will an automated online will writing solution was launched inassociation with Kotak Securities.

c) Corporate Salary Business

Salary2Wealth - Your Bank's corporate salary business now caters to over 17 laccustomers across 13700 corporates. The Salary2Wealth book grew by 33% Y-o-Y to close theyear at ' 3988 crore and acquired 4.90 lac new customers with more than 1700 newcorporate sign-up's.

d) Consumer Assets

Your Bank has continued to grow the product lines under the Consumer Assets business.

Credit Card: Credit card business has issued 6.34 lac cards by March 2016 and is in itsseventh year of operations. The premium range of our products - VISA Signature and VISAPlatinum have driven the spends growth in the portfolio and it contributes to 42% ofspends. The credit card business has clocked total spends of ' 4543 crore for the year at42% growth Y-o-Y with a book size of '942 crore.

Salaried Personal Loan: Salaried personal loan business offers salaried individualspersonal loans with a tenure of upto 60 months. This year the business has grown by 70%with outstanding loans of ' 1416 crore as of March 2016. The total customer base standsat 47500 customers.

Home Finance: Home finance business clocked growth of 19% in disbursements with loanbook growth of 19%. Your Bank has expanded its home finance business further in Tier IIcities. Cross Sell through Bank Branches Corporate Salary Privy and Wealth Teamscontributed to around 38% of total volume. This year also witnessed very low losses onaccount of effective recovery and collection processes and policies adopted.

e) Business Banking Assets (BBA)

Your Bank through its BBA division offers secured and unsecured Business loans Loansagainst Property & Working Capital Finance to selfemployed professionals /non-professionals and Small & Medium Enterprises. This has been a landmark year foryour Bank's BBA business with its book growing by 30%. It continues to maintain its bestin class portfolio quality through it effective and efficient risk management and recoverypolicies and practices. Capitalizing on the growing retail branch network your Bankmanaged to expand its BBA product offering in over 450 branches.

Wholesale Banking

Your Bank through its consolidated franchise has focussed on serving customers'requirements across segments with its wide array of customized financial products andservices that are driven through best-in-class technology platforms. Your Bank is atrusted banking franchise consistently delivering right and customised solutions to highquality customers through a passionate and entrepreneurial team.

Focussed approach on client selection and constant portfolio monitoring has ensured ahealthy portfolio through both volatile economic situation and tough credit environment inthe last financial year. In order to give more focus to our client activities your Bankcreated a separate Corporate Institutional & Investment Banking vertical which coversselected large Indian corporate houses with a view to provide a single platform to serviceboth their corporate banking and investment banking needs. Consequent to the merger of INGVysya Bank Limited with your Bank we now have a strong presence in the multinationalsegment i.e. as a banker to various multinational companies present in India.

The Integrated Global Transaction Banking with enhanced suite of products and solutionsis steered by innovation technology & "Kona Kona Kotak". The merger hasopened up new opportunities to cater to needs of customer segments such as InsuranceCorresponding Banking and Multinational Companies. In addition to serving existingcustomers as well as being bankers' Bank on Global Transaction Banking your Bank has ledfrom the front in offering services to new age segments viz. E-com and M-com. Your Bankrecognises the dynamic landscape in Transaction Banking and the evolving Banking space andhas suitably invested in fintech initiatives. It is your Bank's endeavour to continue toprovide simple secure reliable solutions leading to superior customer experience.

Your Bank has been in the limelight for its people products and services. It has beenadjudged Best Cash Management Bank across business categories - Small Medium and LargeCorporates. The Global Custodian magazine has conferred a dual recognition for the CustodyBusiness in the India Domestic Survey and later in the Survey of Agent Banks in EmergingMarkets.

Your Bank has introduced the following key initiatives to serve customers better:

• Service Support: To ensure a faster customer response a Service Solutionsvertical was set up during the year. This vertical is the single point of contact for allservice related and documentation issues for wholesale customers with personnel presentacross all key major 9 locations across the country.

• Secure Internet Banking: Given the growing online frauds the security of thenet banking platform has been further strengthened by offering secured token for loggingin. Customers can use the dynamic number on the token along with the password to accessthe account online and transact thereafter.

• KashPay: Offers "walkin" cash and cheque collection services throughbranch network thereby enhancing the reach and convenience for the customer. The productis capable of validating the collection data pre-fed by customer to ensure only validrequests are processed. The transaction processing is supported by comprehensive MIS forease of reconciliation and instant status of collection.

• Operation SAHAJ: In order to gain increased efficiencies your Bank has startedOperation SAHAJ. This focusses on improving existing client facing or back-end process inorder to deliver superior service to the client with a lower turnaround time withoutcompromising on credit / operational risk. One of our client facing endeavours has beenable to open any account in one day post receiving the complete documentation. As oftoday courtesy Operation SAHAJ accounts are being opened within the target of one day.Further various products are implementing monitoring and control systems to measure andimprove service parameters.

• Trade: Tie up with multiple offshore banks for facilitating client transactionslike offshore guarantees ECA financing ECB funding offshore subsidiary funding etc.Your Bank is preferred trade partner for top banks for Europe and US region for theirIndia centric business. Financial/ Performance Guarantees Letter of Credit andremittances of these banks now are handled at your Bank counters.

Commercial Banking

The Commercial Banking business has registered a reasonable growth in FY 2015-16despite subdued market sentiments and erratic monsoon.

Commercial Vehicles (CV) and Construction Equipment (CE) sectors which have beenwitnessing slowdown since 2011 showed strong signs of recovery. The CV situation hasimproved significantly over the previous year especially in the case of Medium CommercialVehicle (MCV) & Heavy Commercial Vehicle (HCV) sales across segments which was drivenby replacement demand. Your Bank has increased exposure significantly to this sector in FY2015-16. Light Commercial Vehicle (LCV) segment has also grown over the previous year.Further decrease in energy prices and all round improvement of load factors have improvedviability for transport operations and also reduced levels of delinquency. SmallCommercial Vehicles (SCV) segment is also showing signs of recovery with marginal growthin the last quarter.

Despite a second back to back dry spell last year the agri business (including thetractor finance business) managed to grow last year with the loans outstanding of '17993crore. The agri business increased its focus on financial inclusion activities by directlyfinancing the micro loans segment for women's Joint Liability Groups. Close to 56000women borrowers were added with loan sizes of around '20000 each to women in the statesof UP and Bihar.

Your Bank has maintained its market share in the tractor finance business. While thedelinquencies in this segment have increased it is under control.

Activities in focus were loans for construction of ware houses & cold storageswarehouse receipt funding under pledge micro loans and loans for purchase of pumps etc.These loans qualified for small and marginal farmer categorisations and direct individualfarmer funding. Other Agri loans included loans for food and Agro processing units.

The agri division (including tractor finance) continued to manage its delinquencythough incremental stress was observed across locations due to monsoon shortfall.

The growth of the Emerging Corporate Group's (ECG) portfolio has been modest in FY2015-16. There has been an increase in delinquencies in this segment mainly on account ofvolatile commodity prices and uncertainty in the economy.

Asset Reconstruction

It was challenging to sell large assets under possession as the market was sluggish forreal estate sales. The legal judicial system continues to languish in terms of passingtimely orders which cause significant delay in timely and effective recoveries.

The division continued to focus on last mile financing to companies which are on theturnaround path with clear focus on cash flow based recoveries. The recoveries from NPApurchase of retail portfolio continues to be robust.

Your Bank believes that banks and NBFCs in the next few years will continue to selltheir retail NPA portfolios which will help the division to acquire more portfolios.


Your Bank's treasury actively contributes to your Bank by way of:

• Proprietary Trading: The various proprietary trading desks actively trade inproducts such as Fixed Income Money Markets Derivatives Foreign Exchange and Bullion.Primary Dealer Desk - part of the proprietary trading desk actively participates in theprimary auctions of government securities makes market in government securities andengages in retailing of government securities.

• Customer Transactions:

• Facilitating access to foreign currency markets through cash & derivativesproducts and providing fine market rates to clients for remittance and trade transactions.

• Client solutions - standardised and structured pertaining to Debt CapitalMarkets including Syndication of Loans Bonds Mezzanine financing Promoter funding andacquisition financing and Securitisation.

• Balance Sheet Management: The Balance Sheet Management Unit (BMU) manages theAsset Liability mismatches Interest rate & Liquidity gaps and implementation of FundsTransfer Pricing between various business units. The Correspondent Banking Division withintreasury actively builds on relationships with offshore banks towards improving qualityand international reach for its customers.

Human Resources

The year 2015-16 has been a year of continued focus on employee well-being andinvestment in human capital stayed significant.

Your Bank undertook substantial work to drive the 'core' values and culture of the Bankin the last year that strengthened the merger of erstwhile ING Vysya Bank with KotakMahindra Bank. To ensure a seamless cultural integration various initiatives werelaunched to internalize behavioral parameters and the values across the organization.Further thrust was laid on employee engagement through its linkage to behavioralparameters.

Your Bank has taken strides in the past year and continues to grow with a talent baseof over 31000 employees. A proactive approach to adopting the best of human resourcepractices efficient systems processes and continuous investments in technology hashelped manage the scale and complexity of a large and distributed workforce.

With an average age of 33 years your Bank continues to attract talent across all itsbusinesses and hierarchy. Pre-trained manpower acquisition channels such as Kotak SalesOfficer (KSO) and Junior Sales Officer (JSO) programs have been further strengthened tocreate a sustainable workforce pipeline. To enhance ability to deliver on strategicwork-force planning and hiring goals a dedicated team was institutionalized to focus onend to end talent acquisition process - maximizing channel efficiencies optimizing costssimplifying and standardizing hiring process and creating a seamless hiring experience topotential employees.

With 19% of the workforce being women your Bank realizes that achieving progressivegender representation requires addressing mindsets and developing a more inclusiveholistic diversity agenda. Your Bank continues to strive to provide opportunities for adiverse and competent workforce.

Your Bank is committed to developing its capabilities as an organization and asindividuals to meet current and future business challenges. In the year 2015-16 we haveinvested significantly in training and professional development - leveraging the latesttechnologies to deliver highly impactful and relevant training programs to our employees.These learning initiatives are designed around development of individual and teamcompetencies in partnership with top academic institutions and renowned industryprofessionals. Leadership Development Programs focused on developing the leadershipcapabilities of our senior executives to help them prepare for future roles in theorganization.

Your Bank continues its focus on engagement and retention through initiatives thatprovides a holistic environment where employees get opportunities to realize theirpotential. Talent management as an integral part of overall performance management processin the Bank aims to provide long term sustained and meaningful careers to employeesacross the organization. 'Pulse' engagement survey along with other engagementinitiatives provided insights on distinct employee needs that helped developingappropriate interventions.

We are entering a new age where digital is default and this technological change isshaping the sociological change impacting every facet of life and work. Anticipatingdigital being a significant transformation opportunity we are on the journey to leveragedigital technology to enable greater engagement interaction and flexibility.

Guided by our value system that motivates our attitudes and action your Bank isfocused on forward looking policies lean processes and nurturing talent.


With the announcement of the merger with ING Vysya Bank your Bank took up theinitiative of merging the technology systems and data of the two banks. The mergerprovided an opportunity to leverage the "best of breed" systems from both banks.As the technology integration progressed across business verticals your Bank identifiedsynergies in systems and capabilities to optimize costs across the technology operationsof the two banks. The merged systems will provide a standard customer experience acrossall channels to all customers of the merged entities.

Customer data security and risk management need to keep pace with digital offerings.With this in mind the Distributed Denial of Service was augmented with an in-premisesolution. A fraud management solution to track customer transactions across channels wasimplemented. On the regulatory side a new Enterprise Risk System was implemented for theValue at Risk calculation of the treasury products.


Focus on creating more and more digitally enabled services across channels remained akey priority for your Bank in this year. Some of the highlights being:

• Launched a comprehensive microsite for New Pension System with variouscalculators and educative content to demystify the concept of pension and also enablepeople to get started with opening their pension account online.

• Launched a real time customer acquisition platform for personal loan where acustomer PAN Adhaar & CIBIL are checked real time & decision about the loanamount and interest rate can be given instantly.

• Launched Pre-approved Personal Loan on Net Banking for salaried customers. Thisenables a pre-qualified customer to apply for personal loan while logged into thenet-banking account and the disbursed amount is instantly credited to customer's bankingaccount.

• Launched tab based account opening process for Saving Account. This is anend-to-end digitized workflow from lead capture to account set up thereby reducing theprocessing time and enhancing customer experience.

• Hashtag banking was given further fillip by creating capability to order a bookor special promotional movies by just a single tweet.

• Launched Kotak Bharat Banking - India's first internet-free app. This app doesnot need internet to transact. Customer can do 25 different transactions including mobilerecharge and small value fund transfer. The app is available in 6 languages (HindiGujarati Marathi Tamil Kannada and English). Response messages within the app will alsobe in regional language.

• Rolled out e-store on Net Banking after successful roll out of m-store onbanking app. This includes travel categories like flight tickets bus tickets and hotelbooking.

• Introduced new features in the iPhone version of mobile app. iPhone customerscan now book a Recurring Deposit (RD) Add a new biller and set Auto Pay amongst variousnew services introduced.

• Turn-around times for lending to commercial customers significantly improved bydigitizing the process by introducing a tablet based lead management system for use bysales people in the field.

• Corporate customers got an upgraded FX trading portal.

• Digitization for wealth management customers was also strengthened with thelaunch of a portal providing a single view of all their investments.

Investment in Airtel M Commerce Services Ltd.

Airtel M Commerce Services Ltd. Company (AMSL) 100% subsidiary of Bharti Airtel Ltd.(BAL) had been granted in-principle approval for setting up a Payments Bank by theReserve Bank of India (RBI) in August 2015. Basic but critical services such as smallsavings account remittances etc. will bring a large number of low income households andsmall businesses under formal banking network. Your Bank in February 2016 has signed aShare Subscription and Shareholders Agreement with AMSL and BAL for acquisition of 19.90%equity stake in AMSL. Subsequently your Bank has invested in AMSL. AMSL has receivedfinal license from RBI in April 2016.


Your Bank's subsidiaries are established players in the different areas of financialservices viz. car finance investment banking stock broking asset management and lifeinsurance.

As at 31st March 2016 your Bank has eighteen (18) subsidiaries as listed below:

Domestic Subsidiaries

Kotak Mahindra Prime Limited

Kotak Securities Limited

Kotak Mahindra Capital Company Limited

Kotak Mahindra Old Mutual Life Insurance Limited

Kotak Mahindra Investments Limited

Kotak Mahindra Asset Management Company Limited

Kotak Mahindra Trustee Company Limited

Kotak Investment Advisors Limited

Kotak Mahindra Trusteeship Services Limited

Kotak Forex Brokerage Limited

Kotak Mahindra Pension Fund Limited

Kotak Mahindra General Insurance Company Limited

IVY Product Intermediaries Limited (formerly known as 'ING Vysya Financial ServicesLimited')

International Subsidiaries

Kotak Mahindra (International) Limited

Kotak Mahindra (UK) Limited

Kotak Mahindra Inc.

Kotak Mahindra Financial Services Limited

Kotak Mahindra Asset Management (Singapore) Pte. Limited

Kotak Mahindra General Insurance Company Limited which was incorporated in December2014 with principal objective of carrying on business of general insurance receivedapproval from Insurance Regulatory and Development Authority of India (IRDAI) to commencethe business of general insurance in November 2015 and subsequently commenced itsoperations in December 2015.

The various activities of the subsidiaries and the performance and financial positionof the subsidiaries and associates are outlined in the Management Discussion and Analysissection appended to this Report.

The Bank's Policy for determining material subsidiaries is available on the Bank'swebsite viz. URL: As at 31st March 2016 yourBank has following four (4) Associate companies:

ACE Derivatives & Commodity Exchange Limited

Infina Finance Private Limited

Matrix Business Services India Private Limited

Phoenix ARC Private Limited

The Annual Report which consists of the financial statements of your Bank on standalonebasis as well as consolidated financial statements of the group for the year ended 31stMarch 2016 is sent to all the members of your Bank. Web link of the Annual Report is sentto all members whose email IDs are registered with the Bank/Depository Participant(s). Formembers who have not registered their email IDs physical copies of the Annual Report aresent. It does not contain Annual Reports of your Bank's subsidiary companies. Your Bankwill make available full Annual Report (including the Annual Reports of all subsidiaries)either a hard or soft copy depending upon request by any member of your Bank. These AnnualReports will be available on your Bank's website viz. URL: and will also be available for inspection by any memberat the Registered Office of your Bank.


The shareholders of the Bank at its Annual General Meeting held on 29th June 2015approved a new Scheme under the Securities and Exchange Board of India (Share BasedEmployee Benefits) Regulations 2014 for the purposes of granting options and stockappreciation rights to the employees of the Bank its subsidiaries and its associatecompanies as applicable viz. Kotak Mahindra Share Based Employee Benefit Scheme 2015comprising of:

• Kotak Mahindra Equity Option Scheme 2015 and

• Kotak Mahindra Stock Appreciation Rights Scheme 2015

Further pursuant to the Scheme of Amalgamation of ING Vysya Bank (IVBL) with the Bankthe ESOP Schemes of the erstwhile IVBL have been renamed and adopted by the Bank as givenbelow:

• Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2005

• Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2007

• Kotak Mahindra Bank Ltd. (IVBL) Employee Stock Option Scheme 2010

• Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2013

The stock options granted to the employees currently operate under the followingSchemes:

• Kotak Mahindra Equity Option Scheme 2007

• Kotak Mahindra Equity Option Scheme 2015

• Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2007

• Kotak Mahindra Bank Ltd. (IVBL) Employee Stock Option Scheme 2010

• Kotak Mahindra Bank Ltd. (IVBL) Employees Stock Option Scheme 2013

The disclosure requirements under the Securities and Exchange Board of India (ShareBased Employee Benefits) Regulations 2014 for the aforesaid

ESOP & SARs Schemes in respect of the year ended 31st March 2016 are disclosed onthe Bank's website viz. URL:


Pursuant to Regulation 27 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (SEBI LODR Regulations) a separate section entitled 'Report onCorporate Governance' has been included in this Annual Report. The Report of CorporateGovernance also contains certain disclosures required under the Companies Act 2013. ABusiness Responsibility Report containing the requisite details under Regulation 34 of theSEBI LODR Regulations is disclosed on the Bank's website viz. URL:

DIRECTORS & KEY MANAGERIAL PERSONNEL Directors retiring by rotation

Mr. N.P. Sarda (DIN 03480129) Non-Executive & Non-Independent Director of theBank retires by rotation as a Director at this Annual General Meeting but having crossed70 years of age is not offering himself for re-appointment in line with Reserve Bank ofIndia policy and directions.

The Bank does not intend to fill this vacancy at this Annual General Meeting.

Changes in Directors

Mr. C. Jayaram (DIN 00012214) retired as Joint Managing Director of the Bank on 30thApril 2016 on attaining the age of superannuation. However Mr. Jayaram continues as aNon-Executive Non-Independent Director of the Bank with effect from 1st May 2016 up to thedate of this Annual General Meeting. Approval of shareholders is being sought at thisAnnual General Meeting for his appointment as a Non-executive Non-Independent Director ofthe Bank who would be liable to retire by rotation.

Mr. Asim Ghosh (DIN 00116139) retired as a Director of the Bank with effect from 9thMay 2016 due to completion of his eight years tenure pursuant to the provisions of Section10A(2A)(i) of the Banking Regulation Act 1949.

Your Directors place on record their appreciation for the valuable advice and guidancerendered by Mr. N.P Sarda and Mr. Asim Ghosh during their tenure as Directors of the Bank.

The details of the Directors appointed are set out in the Corporate Governance Reportannexed to this Report.

Declaration from Independent Directors

The Board has received declarations from the Independent Directors as per therequirement of Section 149(7) of the Companies Act 2013 and the Board is satisfied thatthe Independent Directors meet the criteria of independence as mentioned in Section 149(6)of the Companies Act 2013.

Board Evaluation

The Nomination and Remuneration Committee of the Bank's Board under the expert adviceof an external agency specialized in Human Resource and management consultancy hasformulated the criteria for performance evaluation of the Directors and the Board as awhole. The Criteria formulated broadly covers the Board role Board/Committee membershippractice & procedure and collaboration & style.

A Board effectiveness assessment questionnaire was designed for the performanceevaluation of the Board its Committees Chairman and individual directors in accordancewith the criteria set and covering various aspects of performance including compositionrelationship among directors director competency contribution to risk managementcompliance roles and responsibility board procedures processes functioning andeffectiveness. The said questionnaire was circulated to all the directors of the Bank forthe annual performance evaluation.

Based on the assessment of the responses received to the questionnaire from thedirectors on the annual evaluation of the Board its Committees Chairman and theindividual Directors the Board Evaluation Report was placed before the meeting of theIndependent Directors for consideration. Similarly the Board at its meeting assessed theperformance of the Independent Directors. The Directors were satisfied with the results ofthe performance evaluation of the Board & its Committees Chairman and individualdirectors.

Key Managerial Personnel (KMPs)

Mr. C. Jayaram ceased to be a 'Key Managerial Personnel' with effect from 1st May 2016upon his retirement as a Joint Managing Director of the Bank.

The following officials of the Bank continue to be the "Key ManagerialPersonnel" pursuant to the provisions of Section 203 of the Companies Act 2013:

• Mr. Uday Kotak Executive Vice Chairman and Managing Director

• Mr. Dipak Gupta Joint Managing Director

• Mr. Jaimin Bhatt President & Group Chief Financial Officer

• Ms. Bina Chandarana Company Secretary

Appointment & Remuneration of Directors & KMPs

The appointment and remuneration of Directors of the Bank is governed by the provisionsof Section 35B of the Banking Regulation Act 1949. The Nomination and RemunerationCommittee of the Bank's Board has formulated criteria for appointment of Senior Managementpersonnel and the Directors. Based on the criteria set it recommends to the Board theappointment of Directors and Senior Management personnel. The Committee considers thequalifications experience fit & proper status positive attributes as per thesuitability of the role independent status and various regulatory/statutory requirementsas may be required of the candidate before such appointment.

The Reserve Bank of India ('RBI') vide its circularno.DBOD.No.BC.72/29.67.001/201 1-12 dated 13th January 2012 has issued the Guidelines onCompensation of Whole Time Directors / Chief Executive Officers / Other Risk Takers ofPrivate Sector Banks on Compensation Policy which inter alia cover the following:

• Proper balance between fixed pay and variable pay;

• Variable pay not to exceed 70% (Seventy Per Cent) of the fixed pay in a year;

In accordance with the aforesaid RBI Circular the Board of the Bank has adopted aCompensation Policy for its Whole-time Directors Chief Executive Officer of the Bank andother employees which includes issue of stock appreciation rights as a form of variablepay linked to the Bank's stock price payable over a period of time. The salient featuresof the Compensation Policy are as follows:

• Objective is to maintain fair consistent and equitable compensation practicesin alignment with Kotak's core values and strategic business goals.

• Applicable to all employees of the Bank. Employees classified into 3 groups:

• Whole-time Directors/Chief Executive Officer

• Risk Control and Compliance Staff

• Other categories of Staff

• Compensation structure broadly divided into Fixed Variable and ESOPs

• Fixed Pay - Total cost to the Company i.e. Salary Retirals and Other Benefits

• Variable Pay - Linked to assessment of performance and potential based onBalanced Key Result Areas (KRAs) Standards of Performance

and achievement of targets with overall linkage to Bank budgets and businessobjectives. The main form of incentive compensation includes - Cash DeferredCash/Incentive Plan and Stock Appreciation Rights.

• ESOPs - Granted on a discretionary basis to employee based on their performanceand potential with the objective of retaining the employee.

• Compensation Composition - The ratio of Variable Pay to Fixed Pay and the ratioof Cash v/s Non Cash within Variable pay outlined for each category of employeeclassification.

• Any variation in the Policy to be with approval of the Nomination &Remuneration Committee.

• Malus and Clawback clauses applicable on Deferred Variable Pay.

• Ensuring no personal hedging strategies by employees which undermine riskalignment effects as part of their remuneration.

The details of the remuneration paid to the Non-Executive Chairman Executive andNon-Executive Directors of the Bank for the year ended 31st March 2016 is provided in theCorporate Governance Report annexed to this Report.

The Non-Executive Chairman of the Bank receives a fixed amount of remuneration asrecommended by the Board and approved by the shareholders of the Bank and RBI from timeto time. He also receives remuneration by way of sitting fees for attending meetings ofthe Board or Committees thereof.

RBI vide its circular no. DBR.No.BC.97/29.67.001/2014-15 dated June 1 2015 has issuedguidelines on payment of compensation to the NEDs of private sector banks which inter-aliaspecifies the following:

• The Board of Directors of the Bank (in consultation with the Nomination &Remuneration Committee) needs to formulate and adopt a comprehensive compensation policyfor NEDs (other than part-time non-executive Chairman).

• Maximum amount of profit related commission not to exceed '10 lac per annum foreach director of the Bank.

Accordingly in line with the RBI circular and pursuant to the relevant provisions ofthe Companies Act 2013 and the recommendation of the Nomination and RemunerationCommittee of the Bank the Board of Directors have adopted a compensation policy for theNEDs (excluding the parttime Non-Executive Chairman). The salient features of theCompensation Policy are as follows:

• Compensation structure broadly divided into

• Sitting fees

• Re-imbursement of expenses

• Commission (profit based)

• Amount of sitting fees and commission to be decided by the Board from time totime subject to the regulatory limits.

• Overall cap on commission for each director '10 lac per annum.

• NEDs not eligible for any stock options of the Bank.

Approval of shareholders for the payment of commission to the NEDs of the Bank is beingsought at the ensuing Annual General Meeting of the Bank. Remuneration paid to the KMPs isin line with the Compensation Policy of the Bank which is based on the RBI Guidelines.

Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014


1) Remuneration includes Fixed pay + Variable paid during the year + perquisite valueas calculated under the Income Tax Act 1961. Remuneration does not include value of StockOptions.

2) Stock Appreciation Rights (SARs) are awarded as variable pay. These are settled incash and are linked to the average market price of the Bank's stock on specified valuedates. Cash paid out during the year is included for the purposes of remuneration.

3) * Mr. C. Jayaram retired as Joint Managing Director of the Bank on 30th April 2016on attaining the age of superannuation. He continues as a non-executive non-independentdirector of the Bank w.e.f. 1st May 2016.

4) The merger of ING Vysya Bank ('IVBL') with Kotak Mahindra Bank ('Bank') waseffective from 1st April 2015. Accordingly there has been integration of the erstwhileIVBL with the Bank and a consequent increase in the employee base for the FY 2015-16.Hence the numbers for FY 2015-16 are not comparable with that of FY 2014-15.


Pursuant to Section 204 of the Companies Act 2013 your Bank has appointed Ms. RupalD. Jhaveri a Company Secretary in Practice as its Secretarial Auditor. The SecretarialAudit Report for the financial year ended 31st March 2016 is annexed to this Report.


Being a banking company the disclosures required as per Rule 8(5)(v) & (vi) of theCompanies (Accounts) Rules 2014 read with Section 73 and 74 of the Companies Act 2013are not applicable to your Bank.


In terms of Section 139 of the Companies Act 2013 Messrs S.R. Batliboi & Co. LLPChartered Accountants were appointed as statutory auditors of your Bank for a period offour years from the conclusion of the Thirtieth Annual General Meeting until theconclusion of the Thirty fourth Annual General Meeting of the Bank subject to the annualapproval of RBI and ratification by the members every year. Accordingly requisiteresolution forms part of the Notice convening the Annual General Meeting.


The Board of Directors confirms that your Bank has laid down set of standardsprocesses and structure which enables to implement Internal Financial controls across theorganization with reference to Financial Statements and that such controls are adequateand are operating effectively. During the year under review no material or seriousobservation has been observed for inefficiency or inadequacy of such controls.


All the Related Party Transactions that were entered into during the financial yearwere on arm's length basis and were in ordinary course of business.

Pursuant to Section 134(3)(h) read with Rule 8(2) of the Companies (Accounts) Rules2014 there are no transactions to be reported under Section 188(1) of the Companies Act2013 in form AOC-2.

All Related Party Transactions as required under Accounting Standards AS-18 arereported in Note 24 of Schedule 17 - Notes to Accounts of the Consolidated financialstatements and Note 7 of Schedule 18 C - Notes to Accounts of the Standalone financialstatements of your Bank.

The Bank's Policy on dealing with Related Party Transactions is available on the Bank'swebsite viz. URL:


Pursuant to Section 186(11) of the Companies Act 2013 loans made guarantees givensecurities provided or acquisition of securities by a banking company in the ordinarycourse of its business are exempted from the disclosure requirement under Section134(3)(g) of the Companies Act 2013.


Your Bank is committed to its "Vision Statement" of upholding its GlobalIndian Financial Services Brand creating an ethos of trust across all constituentsdeveloping a culture of empowerment and a spirit of enterprise thereby becoming the mostpreferred employer in the financial services sector.

Consistent with the Vision Statement your Bank is committed to maintain and provide toall its employees and directors highest standards of transparency probity andaccountability. The Kotak Group endeavours to develop a culture where it is safe andacceptable for all employees and directors to raise / voice genuine concerns in goodfaith and in a responsible as well as effective manner.

A vigil mechanism has been implemented through the adoption of Whistleblower Policywith an objective to enable any employee or director raise genuine concern or reportevidence of activity by the Bank or its employee or director that may constitute:Instances of corporate fraud; unethical business conduct; a violation of Central or Statelaws rules regulations and/or any other regulatory or judicial directives; any unlawfulact whether criminal or civil; malpractice; serious irregularities; impropriety abuse orwrong doing; deliberate breaches and non-compliance with the Bank's policies; questionableaccounting/audit matters/financial malpractice. The same option has now been extended tothe vendors of the Bank also. The concerns can be reported on the website viz. URL:

Currently an online mechanism enabling aforementioned reporting has been implementedover and above other modes of communication like e-mail or a letter sent by mail courieror fax to designated persons.

Safeguards to avoid discrimination retaliation or harassment and confidentialityhave been incorporated in the policy. All employees and directors have access to theChairman of the Audit Committee in appropriate and exception circumstances.

The Policy has been uploaded on the Bank's intranet as well as website viz. URL: and regular communication is made forsustained awareness.


Your Bank has constituted a Board Corporate Social Responsibility Committee (CSRCommittee) and consists of the following Directors:

• Mr. C Jayaram Non-Executive Non-Independent Director & Chairman of the CSRCommittee

• Mr. Dipak Gupta Joint Managing Director

• Prof S. Mahendra Dev Independent Director

Your Bank's CSR Committee drives the CSR programme of the Bank. Your Bank has a Boardapproved CSR policy charting out its CSR approach. This policy articulates the Bank's aimto positively contribute towards economic environmental and social well-being ofcommunities through its Corporate Social Responsibility agenda. The Bank's CSR agenda isdriven by its key focus areas:

a. Promoting education - primary focus area

b. Enhancing vocational skills and livelihood

c. Promoting preventive healthcare and sanitation

d. Reducing inequalities faced by socially and economically backward groups

e. Sustainable development

f. Relief and rehabilitation

g. Clean India

h. Sports

The Bank's CSR policy is available on the Bank's website viz. URL :

Pursuant to the provisions of Section 135 schedule VII of the Companies Act 2013 (theAct) read with the Companies (Corporate Social Responsibility) Rules 2014 the report ofthe expenditure on CSR by the Company is as under:

The average net profit U/S 198 of the Bank standalone for the last three financialyears preceding 31st March 2016 is ' 2366.37 crore.

The prescribed CSR expenditure required U/S 135 of the Act for FY 2015-16 is ' 4733lac.

The CSR expenditure incurred for the period 1st April 2015 to 31st March 2016 underSection 135 of Companies Act 2013 amounts to ' 1641 lac as against ' 1197 lac CSR spendin the financial year 2014-15.

CSR expenditure of ' 1641 lac in FY 2015-16 as a percentage of average net profit U/S198 of the Bank standalone at ' 2366.37 crore is 0.69%.

Your Bank is building its CSR capabilities on a sustainable basis and is committed togradually increase its CSR spend in the coming years. The CSR Committee of the Boardconfirms that the implementation and monitoring of CSR Policy is in compliance with CSRobjectives and Policy of the company.

The details of CSR activities and spends under Section 135 of the Companies Act 2013for FY 2015-16 are annexed to this Report.


Your Bank has in place a comprehensive Enterprise wide Risk Management (ERM) frameworksupported by detailed policies and processes for management of Credit Risk Market RiskLiquidity Risk Operational Risk and various other Risks. Details of identificationassessment mitigations monitoring and the management of these Risks are mentioned in theManagement Discussion and Analysis section appended to this Report.


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.


The employee strength of your Bank standalone was over 31000 and along with itssubsidiaries was over 46000 as of 31st March 2016.

312 employees employed throughout the year and 132 employees employed for part of theyear were in receipt of remuneration of ' 60 lac or more per annum.

With an average age of 33 years your Bank continues to attract talent across all itsbusinesses and hierarchy and has put in place various processes and systems to ensurealignment of employee behaviors with the organization's core values.

Organizational culture aspects like trust & inclusiveness were also reiteratedthrough 90+ cross functional meets conducted by senior business leaders for employees atmid management level under the "Meet 5" initiative.

In a very short span your Bank has crossed several milestones in its Gender Diversityagenda.

• A differentiated talent acquisition strategy to increase women employee baseacross various suitable roles has helped us to continue adding 20% women amongst all newhires in the Bank. While continuing with our philosophy of providing equal opportunitiesan aggressive push in this area will help us achieve a better balance in gender diversity.

• Your Bank's top senior women professionals (around forty women across Kotak)have been brought together under our diversity initiative "Astra" and thesewomen leaders now play a pivotal role in guiding and mentoring other mid-level womenemployees to sustain and grow in the careers.

• Prevention of Sexual Harassment (POSH): Your Bank continues with the belief onzero tolerance towards sexual harassment at workplace and continues to uphold and maintainitself as a safe and non-discriminatory organization. To achieve the same Kotak reinforcesthe understanding and awareness of Prevention of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013. Your Bank has formulated InternalComplaints Committee (ICC) at three regions for reporting any untoward instance. Anycomplaints pertaining to sexual harassment are diligently reviewed and investigated andtreated with great sensitivity. The ICC members have been trained in handling andresolving complaints and have also designed an online e-learning POSH Awareness modulewhich covers the larger employee base.

Following is a summary of sexual harassment complaints received and disposed of duringthe year 2015-16:

• No. of complaints received : 8
• No. of complaints disposed of : 4

In the case of 4 pending cases enquiries were in progress at the close of the year.

With our objective to identify build and nurture leaders across levels to deliversuperior business results and address individual career aspirations this year your Bankintroduced a new contemporary approach to assess and diagnose leadership competency gapsfollowed by a development plan.

As your Bank enters in its next phase of growth and expansion of footprint across urbanand rural India your Bank and its subsidiaries continued to carry out several initiativesto attract and retain a pool of highly skilled and motivated employees who are aligned tothe firm's vision of becoming the most trusted financial services provider.

In accordance with the provisions of Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the names and other particulars ofemployees are set out in the annexure to the Directors' Report. In terms of the Proviso toSection 136(1) of the Companies Act 2013 the Directors' Report is being sent to allshareholders excluding the aforesaid annexure. The annexure is available for inspection atthe Registered Office of your Bank. Any shareholder interested in obtaining a copy of thesaid annexure may write to the Company Secretary at the Registered Office of your Bank.


The Directors based on the representations received from the operational managementconfirm in pursuance of Section 134(5) of the Companies Act 2013 that:

(i) your Bank has in the preparation of the annual accounts for the year ended 31stMarch 2016 followed the applicable accounting standards along with proper explanationsrelating to material departures if any;

(ii) they have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of your Bank as at 31st March 2016 and of the profit of yourBank for the financial year ended 31st March 2016;

(iii) they have taken proper and sufficient care to the best of their knowledge andability for the maintenance of adequate accounting records in accordance with theprovisions of the Act for safeguarding the assets of your Bank and for preventing anddetecting fraud and other irregularities;

(iv) the annual accounts have been prepared on a going concern basis;

(v) they have laid down internal financial controls to be followed by the Bank and thatsuch internal financial controls are adequate and are operating effectively; and

(vi) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.


Following statements/reports/certificates are set out as Annexures to the Directors'Report:

• Extract of Annual Return under Section 134(3)(a) of the Companies Act 2013 readwith Rule 12 (1) of Companies (Management & Administration) Rules 2014 (Annexure -A).

• Secretarial Audit Report pursuant to Section 204 of the Companies Act 2013(Annexure - B).

• Details of CSR Activities and Spends (Annexure - C).


Your Directors would like to place on record their gratitude for the valuable guidanceand support received from the Reserve Bank of India Securities and Exchange Board ofIndia Insurance Regulatory and Development Authority and other Government and Regulatoryagencies. Your Directors acknowledge the support of the members and also wish to place onrecord their appreciation of employees for their commendable efforts teamwork andprofessionalism.

For and on behalf of the Board of Directors

Dr. Shankar Acharya Uday Kotak Place: Mumbai
Chairman Executive Vice Chairman and Managing Director Date: 11th May 2016