( Rs. in crore)
The said equity shares of the Bank are listed on National Stock Exchange of IndiaLimited (NSE) and BSE Limited (BSE). The Unsecured Redeemable Non-ConvertibleSubordinated Perpetual Debentures issued by the Bank on a private placement basis arelisted on NSE and BSE. The Bonds issued by the Bank under the MTN programme are listed onSingapore Stock Exchange and the Green Bonds issued by the Bank are listed on London StockExchange. The Global Depository Receipts (GDR) issued by the Bank are listed on LondonStock Exchange.
The Bank has paid the listing fees to the said Stock Exchanges for the financial year2017-18.
In terms of Regulation 43A of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (Listing Regulations) the Bankhas formulated and adopted a Dividend Distribution Policy with the objective of providingclarity to its stakeholders on the profit distribution strategies of the Bank. The saidPolicy has been hosted on the website of the Bank at https://www.axisbank.com/shareholders-corner/corporate-governance/Compliance-Report.
The Diluted Earnings Per Share (EPS) of the Bank for the financial year 2017-18 stoodat Rs.1.12 per equity share of Rs.2/- each as compared to Rs.15.34 per equity share ofRs.2/- each in the previous financial year. After making mandatory appropriations toStatutory Reserve Investment Reserve Reserve Fund and Capital Reserve no profits areavailable for distribution as dividend for the financial year ended 31st March2018. Accordingly no dividend has been recommended by the Board of Directors of the Bankfor the financial year ended 31st March 2018.
CLOSURE OF SHARE TRANSFER BOOKS
The Register of Members and the Share Transfer Books of the Bank will be closed fromSaturday 2nd June 2018 to Wednesday 20th June 2018 (both daysinclusive) for the purpose of the 24th Annual General Meeting of theShareholders of the Bank to be held on 20th June 2018.
RATINGS OF VARIOUS DEBT INSTRUMENTS
The Unsecured Redeemable Non-Convertible Subordinated Debentures issued by the Bank ona private placement basis during the financial year 2017-18 were rated "CRISILAAA/Stable" by CRISIL Ltd "ICRA AAA hyb" by ICRA Limited and "INDAAA" by India Ratings and Research Private Limited.
The Unsecured Subordinated Perpetual Additional Tier 1 Basel III CompliantNon-Convertible Debentures issued by the Bank on a private placement basis during thefinancial year 2017-18 were rated "CRISIL AA+/Stable" by CRISIL Ltd "ICRAAA+ (hyb)" by ICRA Limited and "IND AA+" by India Ratings & ResearchPrivate Ltd.
The Bonds issued by the Bank under the MTN programme on a private placement basisduring the financial year 2017-18 were rated "Baa3" by Moodys "BBB-"by S&P and Fitch.
BOARD OF DIRECTORS
During the year the following changes took place in the composition of the Board ofDirectors of the Bank:
Shri V. R. Kaundinya ceased to hold office as an Independent Director of the Bank witheffect from the close of business hours on Wednesday 11th October 2017 uponcompletion of the maximum permissible tenure of 8 continuous years under Section 10A (2A)of the Banking Regulation Act 1949. The Board acknowledges the invaluable contributionsrendered by Shri V. R. Kaundinya during his tenure as an Independent Director of the Bankand places on record its deep appreciation for the insightful perspectives and suggestionsprovided by him at the meetings of the Board/Committees.
Shri Stephen Pagliuca (Nominee of entities affiliated to BAIN Capital) was appointed asan Additional Non-Executive (Nominee) Director of the Bank for a period of 4 consecutiveyears with effect from 19th December 2017 subject to approval of theShareholders of the Bank. Shri Stephen Pagliuca shall not be liable to retire by rotationduring the said period.
The current term of Smt. Shikha Sharma Managing Director & CEO of the Bank is dueto expire on 31st May 2018. The Board of Directors at its meeting held on 7thDecember 2017 had re-appointed Smt. Shikha Sharma as the Managing Director & CEO ofthe Bank for a further period of three years w.e.f. 1st June 2018. At themeeting of the Board of Directors held on 9th April 2018 Smt. ShikhaSharma requested the Board that the period of her re-appointment as the Managing Director& CEO of the Bank be revised from 1st June 2018 up to 31stDecember 2018. The Board considered her request and approved her re-appointment as theManaging Director & CEO of the Bank from 1st June 2018 up to 31stDecember 2018 (both days inclusive) and the terms and conditions relating to the saidre-appointment including remuneration subject to the approval of the RBI and theShareholders of the Bank which would also enable the Bank to manage the transition periodand ensure orderly succession for the said post. The RBI has granted its approval to thesaid re-appointment and the terms and conditions including remuneration thereof.
During the year no other changes took place in the composition of the Board ofDirectors of the Bank. The composition of the Board of Directors of the Bank is incompliance with the applicable norms.
SELECTION AND APPOINTMENT OF DIRECTORS
The selection and appointment of Directors of the Bank is done in accordance with therelevant provisions of the Companies Act 2013 the relevant Rules made thereunder theBanking Regulation Act 1949 the Guidelines issued by the RBI and the relevant provisionsof the Listing Regulations relating to Corporate Governance.
The Bank has a formal succession planning process in place pursuant to which itperiodically reviews its in-house talent across all levels and benchmarks it with thetalent available in the banking industry. In terms of the succession planning/ talentreview process the Bank proactively takes steps to review the existing talent at thesenior management level of the Bank and also engages the services of an externalconsultant to assess the suitability of potential candidates both from inside and outsidethe Bank taking into account the contemporary skills sets required for the said post andtheir ability to manage challenges faced by the Bank.
The Bank adheres to the process and methodology prescribed by the RBI in respect ofFit & Proper' criteria as applicable to Private Sector Banks signing of deed ofcovenants which binds the Directors to discharge their responsibilities to the best oftheir abilities individually and collectively in order to be eligible to be appointed asa Director of the Bank. The prescribed declarations given by the Directors other than thatof the Members of the Nomination & Remuneration Committee (NRC) are placed before theNRC and the declarations given by the Members of the NRC are placed before the Board forits review and noting. The said declarations are obtained from all the Directors on anannual basis and also at the time of their appointment / re-appointment in compliancewith the said laws. An assessment on whether the Directors fulfil the said criteria isalso carried out by the NRC and the Board on an annual basis before considering theircandidature for re-appointment.
The NRC also reviews the structure size composition of the Board the regional andindustry experience track record expertise and other relevant information and documentsof the Directors before making appropriate recommendations to the Board with regard totheir appointment re-appointment and remuneration designed to enhance the Board'seffectiveness.
The NRC on an ongoing basis also identifies potential candidates from diversebackgrounds including but not limited to accountancy agriculture and rural economybanking co-operation economics finance law small-scale industry informationtechnology core industries infrastructure sector payment and settlement systems humanresource risk management and business management thus providing the Board with memberswho have special knowledge practical experience and diverse set of skills who couldserve the diverse business interests of the Bank.
DECLARATION OF INDEPENDENCE
All the Independent Directors of the Bank have given their respective declarationsstating that they meet the criteria prescribed for independence under the applicable lawsand in the opinion of the Board all the Independent Directors of the Bank meet the saidcriteria.
KEY MANAGERIAL PERSONNEL
Smt. Shikha Sharma Managing Director & CEO Shri Jairam Sridharan Chief FinancialOfficer and Shri Girish V. Koliyote Company Secretary are the Key Managerial Personnel ofthe Bank in terms of Section 2(51) read with Section 203(1) of the Companies Act 2013.
During the year there were no changes in the composition of the Key ManagerialPersonnel of the Bank.
BOARD PERFORMANCE EVALUATION
The Companies Act 2013 and the Listing Regulations relating to Corporate Governancecontains provisions on evaluation of the performance of the Board as a whole IndividualDirectors including Independent Directors Non-Independent Directors Chairperson and theBoard Committees.
The Bank had engaged the services of an external consultant to help it conduct animpartial and independent Board performance evaluation as aforesaid. On the basis oftheir findings a process of evaluation was recommended to the NRC for adoption. Themanner in which the evaluation has been conducted is explained in the Report on CorporateGovernance which forms part of this report.
The schedule of the meetings of the Board and the Board Committees for the ensuingfinancial year is circulated in advance to the Members of the Board for theirconsideration and approval. During the year 9 meetings of the Board of Directors of theBank were held and the gap between the said meetings did not exceed the limit of 120 daysas prescribed under the relevant provisions of the Companies Act 2013 the relevant Rulesmade thereunder and the Listing Regulations relating to Corporate Governance.
The composition role and functions of the Audit Committee of the Board of Directors ofthe Bank is disclosed in the Report on Corporate Governance which forms part of thisreport.
The Bank has formulated and adopted a Comprehensive Remuneration Policy for itsDirectors Key Managerial Personnel and other Employees in terms of the relevantprovisions of Section 178 of the Companies Act 2013 the relevant Rules made thereunderand the Listing Regulations relating to Corporate Governance. The details of the saidRemuneration Policy have been disclosed in the Report on Corporate Governance which formspart of this report. The said Policy has been hosted on the website of the Bank athttps://www. axisbank.com/shareholders-corner/corporate-governance/Compliance-Report.
WHISTLE BLOWER POLICY AND VIGIL MECHANISM
The details of the Whistle Blower Policy and Vigil Mechanism have been disclosed in theReport on Corporate Governance which forms part of this report.
As on 31st March 2018 the Bank has the following eleven unlisted subsidiarycompanies and one step down subsidiary;
i) Axis Asset Management Company Ltd. undertakes the activities of managing the mutualfund business.
ii) Axis Bank UK Ltd. is the banking subsidiary of the Bank in the United Kingdom andundertakes the activities of banking.
iii) Axis Capital Ltd. provides services relating to investment banking equity capitalmarkets institutional stock broking mergers and acquisition advisory etc.
iv) Axis Finance Ltd. is an NBFC and carries on the activities of loan against sharesmargin funding IPO financing etc.
v) Axis Mutual Fund Trustee Ltd. acts as the trustee for the mutual fund business.
vi) Axis Private Equity Ltd. primarily carries on the activities of managing equityinvestments and provides venture capital support to businesses.
vii) Axis Securities Ltd. is primarily in the business of marketing of credit cards andretail asset products and also provides retail broking services.
viii) Axis Trustee Services Ltd. is engaged in trusteeship activities acting asdebenture trustee and as trustee to various securitisation trusts.
ix) A.TREDS Ltd. is engaged in the business of discounting trade receivables.
x) Freecharge Payment Technologies Private Ltd. which was acquired on 6thOctober 2017 is in the business of providing digital payments services through web &mobile-based platforms and payment gateways.
xi) Accelyst Solutions Private Ltd. which was acquired on 6th October 2017is in the business of providing digital payments services through web- & mobile-basedplatforms.
xii) Axis Capital USA LLC. is a wholly owned subsidiary of Axis Capital Limitedincorporated in USA and provides financial services relating to equity capital marketinstitutional stock broking to institutional investors in USA.
During the Financial Year 2017-18 Axis Securities Europe Ltd. engaged in the businessof financial advisory services was wound up with effect from 16th May 2017.
During the year the Bank acquired 100% equity capital of Accelyst Solutions PrivateLtd. and Freecharge Payment Technologies Private Ltd. Both the companies have becomewholly owned subsidiaries of the Bank. Freecharge Payment Technologies Private Ltd. isengaged in the business of operating payment system for semi-closed prepaid paymentinstruments and gift vouchers under the license issued by the Reserve Bank of India cardprocessing services payment aggregation services merchant acquisition services andpayment support services. Accelyst Solutions Private Ltd. is engaged in the business ofproviding and facilitating online recharge / bill payment / coupon services marketingplatform for third parties distribution of mutual funds and insurance products throughthe mobile application /website / mobile site.
During the year Axis Capital Ltd. incorporated Axis Capital USA LLC on 2ndAugust 2017 as its wholly owned subsidiary in USA to provide financial services relatingto equity capital market institution stock broking to institutional investors in USA. Itwill be operational after completion of registration formalities with Financial IndustryRegulatory Authority Inc. (FINRA) and Securities and Exchange Commission USA.
In accordance with the provisions of Section 129(3) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 as amended the Bank has prepared itsconsolidated financial statements including that of all its subsidiary companies whichforms part of this report. The financial position and performance of each of the saidsubsidiary companies are given in the statement containing the salient features of thefinancial statements of the said subsidiary companies of the Bank which is annexed tothis report.
In accordance with the third proviso to Section 136(1) of the Companies Act 2013 theAnnual Report of the Bank containing therein its standalone financial statements and theconsolidated financial statements and all other documents required to be attached theretohas been hosted on its website www.axisbank.com.
Further in accordance with the fourth proviso to the said section the audited annualaccounts of each of the said subsidiary companies of the Bank have been hosted on theBank's website https://www.axisbank.com/shareholders-corner/shareholder's-information/annual-reports#/.
Any shareholder interested in obtaining a physical copy of the aforesaid financialstatements may write to the Company Secretary at the Registered Office of the Bank.Further please note that the said financial statements will also be available forinspection by the Members of the Bank and Trustees of Debenture holders at the RegisteredOffice of the Bank during business hours from 11.00 a.m. to 1.00 p.m. on all working daysexcept Saturdays Sundays Bank Holidays and National Holidays.
RELATED PARTY TRANSACTIONS
During the year the Bank has not entered into any materially significant transactionswith its Promoters Directors Management Subsidiaries or Relatives of theDirectors/Management which could lead to potential conflict of interest between the Bankand these parties other than transactions entered into in the ordinary course of itsbusiness.
Transactions entered into by the Bank with related parties in the normal course of itsbusiness were placed before the Audit Committee of the Board (ACB). There were no materialindividual transactions with related parties which were not in the normal course of thebusiness of the Bank nor were there any material transactions with related parties orothers which were not on arm's length basis. Accordingly AOC-2 is not applicable to theBank. A statement giving details of all related party transactions entered pursuant tothe omnibus approval so granted is placed before the ACB for their review on a quarterlybasis. The Bank has developed a Standard Operating Procedure for the purpose ofidentifying and monitoring such transactions. The policy on Related Party Transactions hasbeen hosted on the Bank's website athttps://www.axisbank.com/docs/default-source/quarterly-reports/6policy-on-related-partytransactions.pdf?sfvrsn=2 in terms of the Listing Regulations relating to CorporateGovernance.
EMPLOYEE STOCK OPTION PLAN (ESOP)
Since the financial year 2000-01 the Bank has formulated and adopted several EmployeeStock Option Schemes (ESOS) for the benefit of the eligible Directors / Employees of theBank and some of its subsidiary companies in terms of the Securities and Exchange Boardof India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines1999 / Securities and Exchange Board of India (Share Based Employee Benefits) Regulations2014 as amended from time to time. The objective of the said ESOS is to enhance employeemotivation enable employees to participate directly or indirectly in the long-termgrowth and financial success of the Bank to act as a retention mechanism by enablingemployee participation in the business of the Bank as its active stakeholder and to usheran owner-manager' culture.
In terms of the said ESOS as on date up to 240087000 options can be granted by theBank to the eligible Directors / Employees of the Bank and some of its SubsidiaryCompanies. The eligibility and number of options to be granted to such eligible Directors/ Employees is determined on the basis of their performance and such other criteria asreviewed and approved by the NRC / Board of Directors of the Bank as the case may befrom time to time.
During the period from February 2001 to July 2013 the Shareholders of the Bank hadapproved the grant of stock options as aforesaid on six occasions. Under the first twoESOS of the Bank and in respect of the grant of stock options made by the Bank upto 29thApril 2004 the option conversion price was set at the average of the daily high-low priceof the Bank's equity shares traded during the 52 weeks preceding the date of approval ofgrant by the Board of Directors of the Bank / NRC prevailing on the Stock Exchange whichhad the maximum trading volume of the Bank's equity share during the said period.Thereafter under the third and subsequent ESOS of the Bank and with effect from the saidgrants made by the Bank on or after 10th June 2005 the option conversion pricewas changed to the latest available closing price of the equity shares prevailing on theStock Exchange which recorded higher trading volume on the day prior to the date ofapproval of grant by the NRC.
Pursuant to the sub-division of the equity shares of the Bank the Shareholders of theBank at the 20th Annual General Meeting held on 27th June 2014 alsoapproved the consequent adjustments to the stock options granted to the eligible Directors/ Employees of the Bank and that of its Subsidiary Companies under the various ESOS ofthe Bank such that all stock options available for grant (including lapsed and forfeitedoptions available for reissue) and those already granted but not vested and those vestedbut not exercised as on the record date fixed for the purpose of sub-division wereproportionately converted into options bearing equity shares of the face value of Rs.2each of the Bank and the grant price of all the outstanding stock options (unvestedvested and unexercised) as on the said record date for the purpose of sub-division wereproportionately adjusted by dividing the existing grant price by 5. The record date forthe said sub-division was 30th July 2014.
Since 24th February 2001 up to 15th May 2017 the NRC / Board hadout of the said 240087000 options approved the grant of 253158700 options(including 26212797 options which were lapsed and forfeited) to the eligible Directors/ Employees of the Bank and some of its Subsidiary Companies in terms of the various ESOSof the Bank. The said options are non-transferable and vest at rates of 30% 30% and 40%on each of three successive anniversaries following the date of respective grant subjectto standard vesting and other conditions as set out in the respective ESOS of the Bank.The said options are required to be exercised by the concerned Directors / Employees ofthe Bank and some of its Subsidiary Companies within a period of three / five years fromthe date of its respective vesting in terms of the respective ESOS of the Bank.
As of 31st March 2018 out of the said 253158700 options so granted213453153 options have been vested out of which 197390994 options have beenexercised and the balance 16062159 options remain unexercised. Further 13492750options remained unvested and 26212797 options had been treated as lapsed andforfeited.
There were no material changes in the ESOS of the Bank during the financial year2017-18 and the same is in compliance with the relevant provisions of the SEBI (ShareBased Employee Benefits) Regulations 2014.
Statutory disclosures as mandated under Regulation 14 of the SEBI (Share Based EmployeeBenefits) Regulations 2014 have been uploaded on the website of the Bank athttps://www.axisbank.com/shareholders-corner/corporate-governance/compliance-report.
The Bank is committed to achieving and adhering to the highest standards of CorporateGovernance and it constantly benchmarks itself with best practices in this regard.
The Report on Corporate Governance for the financial year 2017-18 along with aCertificate issued by the Statutory Auditors of the Bank confirming compliance with themandatory requirements relating to Corporate Governance as stipulated under Chapter IV ofthe Listing Regulations forms part of this report.
The Corporate Governance framework of the Bank incorporates all the mandatoryrequirements as prescribed in the Listing Regulations. The Bank has also adopted thenon-mandatory requirements as recommended in the Listing Regulations detailed in theReport on Corporate Governance which forms part of this report.
DIRECTORS' RESPONSIBILITY STATEMENT
The Board of Directors of the Bank hereby declares and confirms the followingstatements in terms of Section 134(3)(c) of the Companies Act 2013:
a) That in the preparation of the annual accounts for the financial year ended 31stMarch 2018 the applicable accounting standards had been followed along with properexplanation relating to material departures.
b) That such accounting policies as mentioned in Note 17 of the Notes to accounts ofthe Financial Statements have been selected and applied consistently and judgments andestimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Bank as at 31st March 2018 and of theprofit of the Bank for the year ended on that date.
c) That proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Bank and for preventing and detecting fraud and otherirregularities.
d) That the annual accounts have been prepared on a going concern basis.
e) That internal financial controls to be followed by the Bank were in place and thatthe same were adequate and were operating effectively.
f) That proper system to ensure compliance with the provisions of all applicable lawswas in place and the same were adequate and operating effectively.
EXTRACT OF ANNUAL RETURN
Pursuant to Section 92(3) and Section 134(3) of the Companies Act 2013 read with Rule12 (1) of the Companies (Management and Administration) Rules 2014 as amended theextract of the Annual Return in Form MGT 9 is provided as an annexure to this report.
PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 (1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended in respectof directors / employees of the Bank is provided as an annexure to this report.
As on 31st March 2018 the Bank had 50 employees who were employedthroughout the year and were in receipt of remuneration of more than Rs.1.02 crore perannum and 6 employees of the Bank who were employed for part of the year and were inreceipt of remuneration of more than Rs.8.50 lakhs per month.
In terms of Section 136 of the Companies Act 2013 the copy of the financialstatements of the Bank including the consolidated financial statements the auditor'sreport and relevant annexures to the said financial statements and reports are being sentto the Members and other persons entitled thereto excluding the information in respect ofthe said 56 employees of the Bank containing the particulars as specified in Rule 5 (2) ofthe said Rules which is available for inspection by the Members at the Registered Officeof the Bank during business hours of the Bank up to the date of the ensuing Annual GeneralMeeting. Any Member interested in obtaining a copy thereof may write to the CompanySecretary of the Bank at its Registered Office.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION:
Energy and natural resource conservation have been focus areas for the Bank andconscious efforts are being made towards improving energy performance year on year.
For Sustainable Development Energy efficiency initiatives have been implemented acrossseveral branches and offices through energy and resource conservation projects.
The Bank ensures strict compliance with all statutory requirements and voluntarilyundertakes several sustainable steps in order to contribute towards a better environment.
Some of the steps undertaken and the impact perceived are listed below:
Implementation of Solar energy projects across select Branches/ Officesaggregating ~5.05 MW. This also includes 1.27 MW project at Axis House NOIDA
Implementation of Centralised Energy Management System (CEMS) to monitor andcontrol energy consumption.
Conversion of conventional lighting to LED in select premises &implementation of LED lights in all new Branches/Offices.
Conversion of Food/Wet waste at Axis House into manure through compost machinefor use in landscaping/gardening.
Maintenance of unity power factor through 500 KVAR x 4 Nos of APFC panels inauto mode for optimum use of power at Axis House
Installation of Motion sensors for workstation and common area lighting at AxisHouse.
Re-cycling of Dry waste at Axis House into stationery items like notepads.
Daily re-cycling of 150 KL of water through Sewage Treatment Plant at AxisHouse Worli.
Reduction of water consumption at Axis House and Gigaplex (Airoli) through useof aerators.
Rain Water Harvesting at Axis House.
Saving of water through use of Bio-blocks in urinals at Select Large Facilities.
Installation of sensors i3n washbasins to optimise flow of water.
FOREIGN EXCHANGE EARNING AND OUTGO:
The provisions relating to Section 134(3)(m) of the Companies Act 2013 on particularsrelating to Foreign Exchange Earning and Outgo are not applicable to a Banking Company assuch no disclosure is being made in this regard.
MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT
The Management's Discussion and Analysis Report for the year under review asstipulated under Regulation 34(2)(e) of the Listing Regulations is provided as anannexure to this report.
Pursuant to Regulation 21 of the Listing Regulations the Bank has constituted a RiskManagement Committee of the Board of Directors. The details of the said Committee and itsterms of reference are set out in the Report on Corporate Governance which forms part ofthis report.
The Bank has formulated and adopted a robust Risk Management Framework. Whilst theBoard is responsible for framing implementing and monitoring the Risk ManagementFramework it has delegated its powers relating to monitoring and reviewing of risksassociated with the business of the Bank to the said Committee. The details of the RiskManagement Framework and issues related thereto have been explained in the Management'sDiscussion and Analysis Report which is provided as an annexure to this report.
BUSINESS RESPONSIBILITY REPORT
In terms of Regulation 34(2)(f) of the Listing Regulations top 500 listed entitiesbased on their market capitalisation as on 31st March every year are requiredto submit their Business Responsibility Report (BRR) as a part of the Annual Report. TheBank's Business Responsibility Report describing the initiatives taken by the Bank from anenvironmental social and governance perspective has been hosted on the website of theBank www.axisbank.com athttps://www.axisbank.com/shareholders-corner/shareholder's-information/business-responsibility-report. Any Member interested in obtaining a copy of the BRR maywrite to the Company Secretary of the Bank at its Registered Office.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
The provisions relating to Section 134(3)(g) of the Companies Act 2013 on particularsof loans guarantees and investments are not applicable to a Banking Company as such nodisclosure is being made in this regard.
CORPORATE SOCIAL RESPONSIBILITY
The Bank has constituted the Corporate Social Responsibility (CSR) Committee of theBoard of Directors in accordance with the provisions of Section 135 of the Companies Act2013 read with the Companies (Corporate Social Responsibility) Rules 2014 as amended.
The brief outline of the CSR Policy including overview of the programs undertaken bythe Bank the composition of the CSR Committee average net profits of the Bank for thepast three financial years prescribed CSR expenditure and details of the amounts spent bythe Bank on CSR activities during the year under review have been provided as an annexureto this report.
The Bank's Corporate Social Responsibility Policy which has been reviewed and approvedby the CSR Committee has been hosted on the website of the Bank athttps://www.axisbank.com/csr.
PLAN AND STATUS OF IND AS IMPLEMENTATION
The Reserve Bank of India (RBI) issued a circular in February 2016 requiring banks toimplement Indian Accounting Standards (Ind AS) and prepare standalone and consolidated IndAS financial statements with effect from 1st April 2018. Banks are alsorequired to report the comparative financial statements for the financial year 2017-18 tobe published along with the financial statement for the year beginning 1stApril 2018. However the RBI in its press release issued on 5th April 2018 hasdeferred the applicability of Ind AS by one year for Scheduled Commercial Banks. Banks arenow required to implement Ind AS with effect from 1st April 2019 and preparestandalone and consolidated Ind AS financial statements for FY 2019-20 with comparativefigures for financial year 2018-19.
In line with the RBI guidelines on Ind AS implementation the Bank has formed aSteering Committee comprising members from the concerned functional areas headed by theDeputy Managing Director of the Bank. A quarterly progress report on the status of Ind ASimplementation in the Bank is presented to the Audit Committee of the Board. During FY2016-17 the Bank has undertaken a preliminary diagnostic analysis of the GAAP differencesbetween Indian GAAP vis-a-vis Ind AS. The Bank has also submitted Proforma Ind ASfinancial statements for the six months ended 30th September 2016 and threemonths ended 30th June 2017 to the RBI.
The Bank has identified and evaluated data gaps process and system changes required toimplement Ind AS and is in the process of implementing necessary changes in its IT systemand other processes. Dry-run of accounting systems and end-to-end reporting process willbe undertaken at the appropriate time during the year. The Bank has been holding workshopsand training for its staff which will continue in the current year.
The Bank is in the process of preparation of opening Ind AS financials as on 1stApril 2018 and is also examining impact of Ind AS on business planning budgetingtaxation capital planning and on capital adequacy. The Bank will prepare quarterly Ind ASfinancials during the year 2018-19 for internal purpose which will be used later ascomparative numbers for the financial year 2019-20.
At the 20th Annual General Meeting of the Shareholders of the Bank held on27th June 2014 M/s S. R. Batliboi & Co. LLP Chartered AccountantsStatutory Auditors of the Bank (Membership No. 301003E/ E300005) was appointed as theStatutory Auditors of the Bank to hold office as such from the conclusion of the 20thAnnual General Meeting until the conclusion of the 24th Annual General Meetingsubject to the approval of the Reserve Bank of India and ratification by the Shareholderseach year and on such remuneration as may be approved by the Audit Committee of the Board(ACB).
As the term of M/s S. R. Batliboi & Co. LLP Chartered Accountants will expire atthe conclusion of the ensuing 24th Annual General Meeting of the Bank it isproposed to appoint M/s Haribhakti & Co. LLP Chartered Accountants Mumbai(Membership Number 103523W/W100048) as the Bank's new Statutory Auditor subject to theapproval of the Shareholders of the Bank. Pursuant to the recommendation of the AuditCommittee of the Board the Board of Directors has proposed the appointment of M/sHaribhakti & Co. LLP Chartered Accountants having registration number103523W/W100048 issued by the Institute of Chartered Accountants of India as theStatutory Auditors of the Bank for a period of four consecutive years and to hold officeas such from the conclusion of the 24th Annual General Meeting upto theconclusion of the 28th Annual General Meeting. The Shareholders are requestedto consider their appointment on such remuneration as may be decided by the ACB. The saidappointment has been approved by the RBI.
In this regard the Bank has received a certificate from the said Statutory Auditor tothe effect that the appointment if made would be in accordance with the relevantprovisions of Section 141 of the Companies Act 2013. The said appointment has also beenapproved by the RBI in terms of relevant provisions of the Banking Regulation Act 1949.
As required under Regulation 33(1)(d) of the Listing Regulations the StatutoryAuditors have confirmed that they have subjected themselves to the peer review process ofthe Institute of Chartered Accountants of India (ICAI) and that they hold a validcertificate issued by the Peer Review Board of ICAI.
There are no qualifications reservations or adverse remarks made by M/s S. R. Batliboi& Co. LLP Chartered Accountants Statutory Auditors of the Bank in their report.Further pursuant to Section 143(12) of the Companies Act 2013 the Statutory Auditors ofthe Bank have not reported any instances of frauds committed in the Bank by its officersor employees.
The Board of Directors places on record their appreciation for the professionalservices rendered by M/s S. R. Batliboi & Co. Chartered Accountants during theirtenure as the Statutory Auditors of the Bank.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and the relevantprovisions of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the Bank had appointed M/s BNP & Associates Company Secretaries Mumbai to actas the Secretarial Auditor of the Bank for the financial year 2017-18. The secretarialaudit of the Bank was conducted on a quarterly basis in respect of the matters prescribedin the said Rules and as set out in the Secretarial Audit Report for the financial year2017-18 which is provided as an annexure to this report.
The Secretarial Auditor of the Bank in its report has made an observation on theDirections issued by SEBI on 27th December 2017 with respect to the allegedleakage of Unpublished Price Sensitive Information (UPSI) relating to the unauditedfinancial results of the Bank for the quarter ended 30th June 2017.
Pursuant to the said Directions the Bank had appointed Deloitte Touche Tohmatsu IndiaLLP Mumbai (Deloitte) to evaluate and suggest measures to strengthen the processcontrols and systems relating to preparation finalization and disclosure of the financialresults of the Bank and conduct a fact-finding review into the alleged leakage ofunpublished price sensitive information relating to the unaudited financial results of theBank for the quarter ended 30th June 2017 and submit a report to the Bankwithin the time frame prescribed by SEBI. The Bank had also appointed Ernst & Young(EY) to conduct a similar review in respect of the representatives of the StatutoryAuditors of the Bank as they had access to the said results.
The Bank has submitted its report to SEBI in compliance with the said Directions.Based on the procedures performed by Deloitte and EY their findings indicate that theydid not come across any specific instance that indicates sharing or forwarding of UPSIdata relating to the said financial results of the Bank with any external parties/individuals.
The Bank has also taken measures to further strengthen its process controls andsystems relating to preparation finalisation and disclosure of its financial results andto plug any possible source of leakage of UPSI relating to its financial results infuture.
Apart from the above there are no qualifications reservations or adverse remarks madeby the Secretarial Auditor of the Bank in its report.
SIGNIFICANT AND MATERIAL ORDER PASSED BY REGULATORS OR COURTS OR TRIBUNALS IMPACTINGTHE GOING CONCERN STATUS AND OPERATIONS OF THE BANK
During the financial year 2017-18 no significant or material orders were passed by anyRegulator Court or Tribunal against the Bank which could impact its going concern statusor operations.
ADEQUACY OF INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS
The Board has inter alia reviewed the adequacy and effectiveness of the Bank's internalfinancial controls relating to its financial statements.
The Board has discussed with the Management of the Bank the major financial riskexposures and the steps taken by it to monitor and control such exposures overseen andreviewed the functioning of the Whistle Blower Mechanism (which is a part of the Bank'sFraud Risk Management Policy) and the findings in respect of the investigations conductedon frauds which were material in nature and the actions taken by the Management in thisregard.
CEO & CFO CERTIFICATION
Certificate issued by Smt. Shikha Sharma Managing Director & CEO and Shri JairamSridharan Group Executive & CFO of the Bank for the financial year ended 31stMarch 2018 was placed before the Board of Directors at its meeting held on 26thApril 2018 in terms of Regulation 17(8) of the Listing Regulations.
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE BANK
There are no material changes and commitments which affected the financial position ofthe Bank which occurred between the end of the financial year of the Bank to which thefinancial statements relate and the date of this report.
The Board of Directors places on record its gratitude to the Reserve Bank of IndiaMinistry of Corporate Affairs Securities and Exchange Board of India other Statutory andRegulatory Authorities Financial Institutions Stock Exchanges Registrar and ShareTransfer Agent Debenture Trustees Depositories and Correspondent Banks for theircontinued support and guidance.
The Board also places on record its appreciation to the Shareholders of the Bank fortheir continued support and to its valued customers for their continued patronage. TheBoard also expresses its deep sense of appreciation to all the employees of the Bank fortheir strong work ethic excellent performance professionalism teamwork commitment andinitiatives which has led to the Bank reinforcing its customer centric image and makingcommendable progress in today's challenging environment.