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Bandhan Bank Ltd.

BSE: 541153 Sector: Financials
NSE: BANDHANBNK ISIN Code: INE545U01014
BSE 00:00 | 09 Dec 543.00 -19.35
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565.00

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565.00

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540.45

NSE 00:00 | 09 Dec 543.20 -19.35
(-3.44%)
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563.50

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563.50

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540.25

OPEN 565.00
PREVIOUS CLOSE 562.35
VOLUME 137470
52-Week high 650.00
52-Week low 397.65
P/E 31.70
Mkt Cap.(Rs cr) 87,427
Buy Price 542.00
Buy Qty 1.00
Sell Price 543.00
Sell Qty 1145.00
OPEN 565.00
CLOSE 562.35
VOLUME 137470
52-Week high 650.00
52-Week low 397.65
P/E 31.70
Mkt Cap.(Rs cr) 87,427
Buy Price 542.00
Buy Qty 1.00
Sell Price 543.00
Sell Qty 1145.00

Bandhan Bank Ltd. (BANDHANBNK) - Director Report

Company director report

To

The Members

Your Directors take great pleasure in presenting the Fifth AnnualReport of your Bank's business and operations together with the audited accounts for thefinancial year ('FY') ended March 31 2019.

Financial Performance of the Bank

The financial highlights for the financial year under review arepresented below:

Summary of Financial Performance (र In Crore)

For year ended

Particulars As on March 31 2019 As on March 31 2018
Deposits: 43231.62 33869.00
- Savings Bank Deposits 14008.04 9209.39
- Current Account Deposits 3609.69 2414.53
- Term Deposits 25613.89 22245.08
Advances (Net): 39643.39 29713.04
- Cash credits overdrafts and loans repayable on demand 975.84 1149.39
- Term loans 38667.55 28563.65
Total Assets/Liabilities 56441.71 44310.06
Net Interest Income 4496.10 3032.24
Non-Interest Income: 1063.05 706.18
Operating Expenses (excluding depreciation) 1732.79 1222.39
Profit before Depreciation Provisions and Tax 3826.36 2516.03
Depreciation 78.17 85.92
Provisions 735.14 374.21
Profit before Tax 3013.05 2055.90
Provision for Tax 1061.55 710.34
Profit After Tax 1951.50 1345.56
Balance in Profit & Loss Account brought forward from previous year 2057.60 1048.43
Appropriations:
Transfer to Statutory Reserve 487.87 336.39
Transfer to Investment Fluctuation Reserve 87.85 -
Transfer to Capital Reserve 5.94 -
Dividend Paid (Including Dividend Distribution Tax) 143.80 -
Balance carried over to Balance Sheet 3283.64 2057.60
EPS (Basic) 16.36 12.26
EPS (Diluted) 16.34 12.26

The Bank commenced its banking business with effect from August 232015 with 501 branches across India. In a span of about three years the Bank has expandedits presence significantly in metro urban semi-urban and rural areas. As on March 312019 its network consisted of 4000 banking outlets of which 71 per cent are in rural& semi urban areas demonstrating your Bank's commitment to financial inclusion. Tofurther the cause of financial inclusion the Bank has augmented its Doorstep ServiceCentres ('DSCs') from 2764 on March 31 2018 to 3014

as on March 31 2019. With the expanding network of branches and DSCsthe number of customers grew during the FY 2018-19 from 1.30 crore to 1.65 crore with acorresponding growth in total deposits by 27.64 per cent to र43231.62 crore of whichर17617.73 crore (40.75 per cent) was Current Account and Savings Account ('CASA')deposits.

During FY 2018-19 your Bank enhanced shareholders' value by increasingits total income by 39.91 per cent to र7707.10 crore

as against the total income for FY 2017-18 of र5508.48 crore.

The profit after tax ('PAT') as at the end of the financial year wasर1951.50 crore an increase of 45.02 per cent over the previous year of र1345.56 crore.Further Return on Average Equity ('ROAE') was 19.00 per cent in FY 2018-19 against 25.98per cent in FY 2017-18. Return on Average Asset ('ROAA') was 4.23 per cent in FY 2018-19against 4.06 per cent in FY 2017-18. The Bank's basic earnings per share ('EPS') increasedfrom र12.26 to र16.36 and diluted earnings per share from र12.26 to र16.34 for FY 2017-18and FY 2018-19 respectively. The net interest margin ('NIM') was 10.43 per cent in FY2018-19 against 9.69 per cent in FY 2017-18.

The Reserve Bank of India ('RBI') has mandated Priority Sector Lending('PSL') of 40 per cent of advances for all the Banks. For your Bank this was anopportunity to leverage on its primary strength as it continues to focus on financialinclusion by providing various financial services to the underserved. During FY 2018-19your Bank's PSL went up from र28211 crore (net of IBPC of र2425.81 crore) on March 312018 to र37888.15 crore (net of IBPC of र4541.45 crore) on March 31 2019 of whichर28895 crore was sold to other banks falling short of PSL targets by way of PrioritySector Lending Certificate ('PSLC') (as against the previous year of र16454 crore). Atthe end of FY 2018-19 PSL as a proportion of the gross advances of र40234.63 crore was94.17 per cent (after IBPC & including PSLC).

Under the Small Enterprises Loan ('SEL') scheme loans between र1 lakhand र10 lakh are offered for income generating activities of small enterprises which aredescribed as enterprises with equipment investments below र25 lakh. SEL has helped yourBank to enhance its objective of financial inclusion with significant increase in lendingto small enterprises. As on March 31 2019 total SEL loan outstanding was र1497.36 crorefrom 84787 customers as against र1639 crore from 86089 customers as on March 31 2018.The Bank ventured into Gold Loan business during FY 2017-18 with operations at 57 branchesin Eastern India. As on March 31 2019 its outstanding gold loan book stood at र128.28crore from 22619 customers as against र43.1 crore from 8205 customers as on March 312018. Your Bank has also forayed into the distribution of third- party products/serviceswhich are made available through designated bank branches. The business segment began as apilot during FY 2017-18 and at present the Bank distributes mutual funds standalonehealth insurance general insurance and life insurance products. As on March 31 2019 theBank distributes mutual funds through 400 branches across various metro and urbanlocations and 60 semi-urban branches. Currently your Bank is distributing standalonehealth insurance products across all branches. The response for the products has beenencouraging. The Bank recognises microbanking activities as its core area and strives toperform better in this particular area. However at the same time your Bank also exploresbusiness opportunities in other areas too with a view to diversify its business risks.Your Bank is also aware of the need for providing best possible services to its everincreasing number of customers particularly those at the bottom of the pyramid. While yourBank uses technology at its optimum level for quality customer services your Bank alsomaintains relationship with the customers and addresses the grievances if any in astructured and satisfactory manner.

Dividend

Your Bank has a dividend policy that inter alia balances theobjectives of appropriately rewarding shareholders and retaining capital to maintain ahealthy capital adequacy ratio. Pursuant to Regulation 43A of the Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015 ('SEBILODR') the Board of Directors of the Bank have adopted a dividend distribution policywhich is in line with the parameters prescribed by SEBI for distribution of dividend.

The policy is available on the Bank's website: https://www.bandhanbank.com/pdf/Dividend-Policy.pdf.In line with this policy and in recognition of the financial performance during FY 2018-19and the promising future prospects while retaining capital to maintain a healthy capitaladequacy ratio to meet prudential and growth requirements your Directors are pleased torecommend a dividend of र3 per equity share of र10 each fully paid-up (30%) for financialyear 2018-19 as against a dividend of र1 per equity share of र10 each fully paid-up (10%)for the financial year 2017-18 for approval by the shareholders at the 5th Annual GeneralMeeting ('AGM') of the Bank. The dividend shall be subject to tax on distribution ofdividend to be paid by the Bank. This reflects overall confidence in your Bank's abilityto consistently grow earnings over a period of time.

In terms of the provisions of Section 124(5) of the Companies Act 2013(the 'Act') the Bank is not required to transfer the unclaimed dividend amount to theInvestors Education and Protection Fund as of yet since the Bank has declared thedividend only for the financial year 2017-18.

Transfer to Reserves

In line with the RBI regulations the Bank has transferred an amount ofर487.87 crore to the statutory reserve during the financial year ended March 31 2019.

Issuance of Equity Shares & Capital Adequacy Ratio

During the financial year 2018-19 your Bank has issued 277911 equityshares of र10 each pursuant to exercise of stock options by the eligible Employees of theBank aggregating to र2779110.

Post allotment of aforesaid equity shares the issued subscribed andpaid-up share capital of your Bank stood at र11930828550 comprising 1193082855equity shares of र10 each fully paid-up.

Your Bank has not issued any equity shares with differential votingrights during the financial year.

Your Bank's capital adequacy ratio (CAR) calculated in line with theRBI Circular on Capital Adequacy Framework stood at 29.20 per cent on March 31 2019well above the minimum regulatory requirements of 10.875 per cent out of which Tier 1Capital Ratio was 27.88 per cent and Tier 2 Capital Ratio was 1.32 per cent.

Proceeds from Public Issues:

During the previous year ended March 31 2018 the Bank has raisedcapital of र3662.40 crore through Initial Public Offer ('IPO') by issuing 97663910Equity shares of र10 each. Pursuant to Regulation 32 of the SEBI LODR your Bank herebyconfirms that there has been no deviation in the use of IPO proceeds from the objectsstated in the prospectus.

The funds raised through IPO has been fully utilised and statement ofthe utilisation of the IPO proceeds as on March 31 2019 is as under:

Particulars Amount
(D in Crore)
Gross proceeds of IPO issue- A 3662.40
Less: Public issue expenses- B 65.37
Net proceeds from Public issue- C = (A-B) 3597.03
Less: Amounts utilised for the purpose received- D 3597.03
Balance E = (C-D) NIL

Rating of Various Debt Instruments

Instrument Rating (As on March 31 2019) Rating Agency Amount (D In crore)
Unsecured Subordinated CARE AA- Stable* CARE
Non-Convertible Ratings 160
Debenture [ICRA]AA & ICRA
Term Loans From Banks [ICRA]AA & ICRA 80
Certificate of Deposit [ICRA]A1+ ICRA 3000

*/& Under Rating Watch with Developing Implications

During the year ICRA has re-affirmed the short-term rating of[ICRA]A1+ (pronounced ICRA A one plus) for the certificates of deposit programme of yourBank which has been enhanced to र3000 crore from र1500 crore.

Performance and Financial Position of the Subsidiaries

Your Bank did not have any subsidiaries associates or Joint VentureCompanies during the financial year 2018-19.

Scheme of Amalgamation

In terms of the Guidelines for Licensing of New Banks in the PrivateSector issued by the RBI on February 22 2013 ("Licensing Guidelines") andLicensing conditions Bandhan Financial Holdings Limited ("BFHL" or the"NOFHC") the holding company of the Bank was required to bring its excessshareholding to 40% of the paid-up voting equity capital of the Bank within three yearsfrom the commencement of operation of the Bank i.e. by August 22 2018. The Bank andNOFHC have been exploring various options/opportunities to bring the shareholding to theprescribed level. In view of this the Board of Directors of the Bank at its meeting heldon January 07 2019 after considering the report of the Audit Committee have consideredand approved scheme of amalgamation of GRUH Finance Limited ('Transferor Company")into and with Bandhan Bank Limited ("Transferee Company" or the"Bank") and their respective Shareholders and Creditors under Sections 230 to232 and other applicable provisions of the Companies Act 2013 the Companies(Compromises Arrangements and Amalgamations) Rules 2016 and other relevant provisionsunder applicable law ("Scheme") subject to receipt of applicable regulatory andstatutory approvals.

The Scheme contemplates the amalgamation of Transferor Company into andwith the Transferee Company and the dissolution without winding up of the TransferorCompany pursuant thereto. The share exchange ratio for the amalgamation of the TransferorCompany into and with the Transferee Company shall be 568 (five hundred and sixty-eight)fully paid-up equity

shares of face value of र10 each of the Transferee Company for every1000 (one thousand) fully paid-up equity shares of र2 each of the Transferor Company(share exchange ratio).

The appointed date for the Scheme shall be January 01 2019 or suchother date as may be mutually agreed between the Transferor Company and Transferee Companyand is the date with effect from which the Scheme shall be operative. A copy of the Schemesetting out the rationale and other information along with various documents as prescribedunder SEBI Circular ref. no. CFD/DIL3/CIR/2017/21 dated March 10 2017 are available onthe website of the Bank and can be accessed at https://www.bandhanbank.com/Scheme-Amalgamation-Gruh-Finance-Limited.aspx.

On the effectiveness of the Scheme the shareholding of NOFHC in theBank would be reduced from current 82.26% to 61% (approx.) of the paid-up voting equityshare capital of your Bank post issue of voting equity shares to the shareholders of theTransferor Company in terms of the share exchange ratio.

Your Bank has made necessary applications to various authoritiesseeking approval on the Scheme of Amalgamation the status of the same is given hereinbelow:

• Reserve Bank of India vide its letter dated March 14 2019conveyed it's 'No-objection' for the voluntary amalgamation of GRUH Finance Limited intoand with the Bank.

• BSE Limited vide letter dated April 03 2019 has issued itsobservation letter as required under Regulation 37 of the SEBI LODR with "no adverseobservation" to the proposed Scheme.

• National Stock Exchange of India Limited vide letter dated April03 2019 has issued its observation letter as required under Regulation 37 of the SEBILODR with "no-objection" to the proposed Scheme.

• The Competition Commission of India ('CCI') by way of its letterdated April 15 2019 intimated that at its meeting held on April 15 2019 it hadconsidered the proposed combination Comb Reg no. (C-2019/03/651) pursuant to the Schemeand approved the same under sub-section (1) of Section 31 of the Competition Act 2002.

• The Bank has also filed the Company Application in relation tothe Scheme with the Hon'ble National Company Law Tribunal Kolkata bench on April 042019. The Company Application has been heard on April 23 2019 and stood adjourned forfurther hearing on May 06 2019.

In terms of Regulation 38 of the SEBI LODR read with Rule 19(2) andRule 19A of the Securities Contracts (Regulation) Rules

1957 your Bank is required to bring the public shareholding to thelevel of at least 25% within three years of listing of equity shares on the stockexchanges i.e. by March 2021. With a view to further facilitate listed entities tocomply with the minimum public shareholding ("MPS") requirements the Securitiesand Exchange Board of India ("SEBI") has by way of its circular dated February22 2018 bearing reference number SEBI/HO/CFD/CMD/

CIR/P/43/2018 ("SEBI Circular") prescribed the variousmethods to comply with the MPS requirements. However the methods prescribed under theSEBI Circular does not include amalgamation as an express method to comply with MPSrequirements. On the effectiveness of the Scheme of Amalgamation the public shareholdingin the Bank would increase from current 17.74% to 39% (approx.). Accordingly your Bankhad made an application to SEBI seeking approval for adoption of the proposed Scheme ofAmalgamation as a method to comply with the norms of MPS as required under Rule 19(2)(b)of the Securities Contracts (Regulation) Rules 1957. Pursuant to the Bank's applicationto SEBI SEBI has by way of its letter dated April 03 2019 conveyed its approval foradoption of the Scheme of Amalgamation as a method under clause (ix) of the Annexure tothe SEBI Circular to comply with the MPS norms subject to compliance with the terms andconditions specified therein.

Board of Directors

As on March 31 2019 the Board of your Bank consisted of twelveDirectors out of which nine are Independent Directors one Nominee Director(Non-executive) of Caladium Investment Pte. Ltd one Non-Executive Non-IndependentDirector and one Managing Director and CEO.

Appointments

Dr. Allamraju Subramanya Ramasastri

Pursuant to the recommendation of the Nomination and RemunerationCommittee ('NRC') the Board of Directors of the Bank approved the appointment of Dr.Allamraju Subramanya Ramasastri (DIN: 06916673) as an Additional Director (Independent) ofthe Bank with effect from August 08 2018. Pursuant to the provisions of Section 161 ofthe Act he continues to hold office as an Additional Director of the Bank up to the dateof the ensuing Annual General Meeting ('AGM') or the last date on which the AGM shouldhave been held whichever is earlier. Your Bank has received a notice in writing from amember proposing the candidature of Dr. Ramasastri as a Director on the Board of the Bank.Further the NRC and the Board of Directors of the Bank have also recommended hisappointment as an Independent Director not liable to retire by rotation to theShareholders at the ensuing AGM for a period of three years with effect from August 082018.

Dr. Anup Kumar Sinha

Pursuant to the recommendation of the NRC the Board of Directors ofthe Bank approved the appointment of Dr. Anup Kumar Sinha (DIN: 08249893) as an AdditionalDirector (Independent) of the Bank with effect from January 07 2019. Pursuant to theprovisions of Section 161 of the Act he continues to hold office as an AdditionalDirector of the Bank up to the date of the ensuing AGM or the last date on which the AGMshould have been held whichever is earlier. Your Bank has received a notice in writingfrom a member proposing the candidature of Dr. Sinha as a Director on the Board of theBank. Further the NRC and the Board of Directors of the Bank have also recommended hisappointment as an Independent Director not liable to retire by rotation to theShareholders at the ensuing AGM for a period of three years with effect from January 072019.

Additionally pursuant to the recommendation of NRC the Board ofDirectors of the Bank at its meeting held on January 07 2019 have also approved theappointment of Dr. Anup Kumar Sinha as Non-Executive Part-Time Chairman of the Bank for aperiod of three years with effect from January 07 2019. The Board also approved theremuneration of र24 lakh per annum (consolidated) in addition to sitting fees andreimbursement of other expenses for attending meetings of the Board and Committees andtraveling and official expenses for performing his duty as Non-Executive Part-timeChairman of the Bank subject to approval of the Shareholders. The appointment andremuneration of Dr. Sinha as the Non-Executive Part-time Chairman of the Bank has beenpursuant to approval of the RBI.

Mr. Santanu Mukherjee

Pursuant to the recommendation of the NRC the Board of Directors ofthe Bank approved the appointment of Mr. Santanu Mukherjee (DIN: 07716452) as anAdditional Director (Independent) of the Bank with effect from January 07 2019. Pursuantto the provisions of Section 161 of the Act he continues to hold office as an AdditionalDirector of the Bank up to the date of the ensuing AGM or the last date on which the AGMshould have been held whichever is earlier. Your Bank has received a notice in writingfrom a member proposing the candidature of Mr. Mukherjee as a Director on the Board of theBank. Further the NRC and the Board of Directors of the Bank have also recommended hisappointment as an Independent Director not liable to retire by rotation to theShareholders at the ensuing AGM for a period of three years with effect from January 072019.

Re-appointment Dr. Holger Dirk Michaelis

In terms of the provisions of Section 152 of the Act out of the twoNon-Executive Non-Independent Directors Dr. Holger Dirk Michaelis (DIN: 07205838)Nominee Director being longest in office shall retire at the ensuing AGM and beingeligible offers himself for re-appointment.

Ms. Thekedathumadam Subramani Raji Gain

Ms. Thekedathumadam Subramani Raji Gain (DIN: 07256149) was appointedas an Independent Director of the Bank with effect from August 06 2015 for a period ofthree years. Accordingly pursuant to the recommendation of NRC the Board of Directors attheir meeting held on July 18 2018 had approved the re-appointment of Ms. Gain as anIndependent Director of the Bank for a period of four years with effect from August 062018 which is subject to approval of Shareholders of the Bank by way a specialresolution. Your Bank had received a notice in writing from a member proposing there-appointment of Ms. Gain as a Director on the Board of the Bank. Further the NRC andthe Board of Directors of the Bank have also recommended her re-appointment as anIndependent Director not liable to retire by rotation for the approval of Shareholdersat the ensuing AGM for second term of four years with effect from August 06 2018 by wayof special resolution.

Relevant details including the profiles of the above named personssetting out their accomplishments are appended to the Explanatory

Statement accompanying the Notice for the AGM and report on

Corporate Governance forming part of this Annual Report.

Shareholders Approved Appointments

During the financial year 2018-19 pursuant to recommendations

of the NRC and the Board of Directors of the Bank the

Shareholders of the Bank at its fourth AGM held on July 19 2018

had approved the following appointments:

• Mr. Ranodeb Roy (DIN: 00328764) Non-Executive Non-IndependentDirector who retired by rotation and being eligible offered himself for re-appointmentwas re-appointed by the Shareholders.

• Mr. Chandra Shekhar Ghosh (DIN: 00342477) was re-appointed asManaging Director & CEO of the Bank for a period of three years with effect from July10 2018. The RBI vide its letter dated July 04 2018 had approved the re-appointment ofMr. Ghosh as Managing Director & CEO of the Bank for a period of three years witheffect from July 10 2018 till July 09 2021.

• Mr. Harun Rasid Khan (DIN: 07456806) was appointed as anIndependent Director of the Bank for a period of three years with effect from March 272018 not liable to retire by rotation.

• Mr. Snehomoy Bhattacharya (DIN: 02422012) was re-appointed as anIndependent Director of the Bank with effect from July 09 2018 for a period of fouryears not liable to retire by rotation.

• Prof. Krishnamurthy Venkata Subramanian (DIN: 00487747) wasre-appointed as an Independent Director of the Bank with effect from July 09 2018 for aperiod of five years not liable to retire by rotation. However Prof. Subramanianresigned from the Board which was effective from January 04 2019.

• Mr. Chintaman Mahadeo Dixit (DIN: 00524318) was re-appointed asan Independent Directors of the Bank with effect from July 09 2018 for a period of twoyears not liable to retire by rotation.

• Mr. Sisir Kumar Chakrabarti (DIN: 02848624) was re-appointed asan Independent Director of the Bank with effect from April 01 2018 for a period of threeyears not liable to retire by rotation.

• Mr. Bhaskar Sen (DIN: 03193003) was re-appointed as anIndependent Director of the Bank with effect from April 01 2018 for a period of threeyears not liable to retire by rotation.

• Ms. Georgina Elizabeth Baker (DIN: 06601316) was appointed as aNominee Director (Non-executive Director - category Professional) of International FinanceCorporation and IFC FIG Investment Company I (jointly) on the Board of the Bank witheffect from July 26 2016. Ms. Baker ceased to be a Director of the Bank with effect fromAugust 31 2018 pursuant to withdrawal of her nomination by IFC.

• Dr. Holger Dirk Michaelis (DIN: 07205838) was appointed as aNominee Director (Non-executive Director - category Professional) of Caladium InvestmentPte. Ltd. on the Board of the Bank with effect from February 12 2016.

Cessations

Dr. Ashok Kumar Lahiri

Dr. Ashok Kumar Lahiri (DIN: 07234290) Non-Executive Part-time(Independent) Chairman of the Bank had demitted from the office with effect from theclose of business hours on April 09 2018 due to his difficulties in discharging theduties satisfactorily as he was simultaneously a Member of the Fifteenth FinanceCommission.

Thereafter Pursuant to the recommendation of the NRC the Board ofDirectors of the Bank approved the appointment of Mr. Harun Rasid Khan (DIN: 07456806) asthe Non-Executive Part-time Chairman of the Bank with effect from June 05 2018 subject toapproval of the RBI. Due to non-receipt of the RBI approval and increasing commitment ofMr. Khan in his other work areas the Bank submitted an application under Section 10B ofthe Banking Regulation Act 1949 with the RBI for appointment of Dr. Anup Kumar Sinha asNon-Executive Part-time Chairman of the Bank on the basis of recommendation of the NRC andthe Board. In terms of the approval received from the RBI and the recommendation of theNRC the Board at their meeting held on January 07 2019 approved the appointment of Dr.Anup Kumar Sinha as NonExecutive Part-time Chairman of the Bank for a period of threeyears with effect from January 07 2019.

Mr. Pravir Kumar Vohra

Mr. Pravir Kumar Vohra (DIN: 00082545) who was appointed as anAdditional Director (Independent) of the Bank not liable to retire by rotation witheffect from June 05 2018 for a period of three years had resigned from the office witheffect from June 25 2018 due to conflict of his responsibilities with another opportunityhe was considering in the financial services sector.

Mr. Boggarapu Sambamurthy

Mr. B. Sambamurthy (DIN: 00246211) Independent Director ceased to bea Director of the Bank with effect from July 09 2018 due to completion of his tenure ofthree years as an Independent Director as approved by the Shareholders.

Ms. Georgina Elizabeth Baker

Ms. Georgina Elizabeth Baker (DIN: 06601316) Nominee DirectorInternational Finance Corporation (IFC) and IFC FIG Investment Company I (jointly) ceasedto be a Director of the Bank with effect from August 31 2018 pursuant to withdrawal ofher nomination by IFC.

Prof. Krishnamurthy Venkata Subramanian

Prof. Krishnamurthy (DIN: 00487747) Independent Director of the Banktendered his resignation from the office of Director of the Bank with effect from December23 2018 vide his communication dated January 04 2019 due to his appointment as the ChiefEconomic Advisor (CEA) to the Government of India. Accordingly in terms of the provisionsof Section 168(2) of the Act Prof. Krishnamurthy ceased to be a Director of the Bank witheffect from January 04 2019.

The Board places on record its sincere appreciation for the valuableservices rendered by Dr. Ashok Kumar Lahiri Mr. B. Sambamurthy Prof. KrishnamurthyVenkata Subramanian Ms. Georgina Elizabeth

Baker and Mr. Pravir Kumar Vohra during their association with the Bankin the capacity of Chairman / Directors.

Apart from the above no other Director was appointed or has resignedduring the year under review.

Key Managerial Personnel

Mr. Chandra Shekhar Ghosh Managing Director & CEO Mr. SunilSamdani Chief Financial Officer and Mr. Indranil Banerjee Company Secretary of the Bankare the Key Managerial Personnel as per the provisions of the Act and rules madethereunder.

Meetings of the Board and Board Committees

The Board met thirteen times during the Financial Year 2018-19 viz.on April 09 2018 April 27 2018 June 04 2018 June 05

2018 July 18 2018 August 08 2018 October 10 2018 October 312018 November 14 2018 January 07 2019 January 10 2019 February 26 2019 andFebruary 27 2019. The details of Board meetings held during the financial yearattendance of Directors at the meetings etc. have been provided separately in the Reporton Corporate Governance forming part of this Annual Report.

The Bank currently has following nine Board Committees additionallythe meeting of Independent Directors was also held during the financial year:

1. Audit Committee

2. Nomination & Remuneration Committee

3. Risk Management Committee

4. Customer Service Committee

5. Corporate Social Responsibility Committee

6. Stakeholders Relationship Committee

7. IT Strategy Committee

8. Special Committee for monitoring High Value Frauds

9. Committee of Directors

The details with respect to the composition terms of referencenumbers of meetings held etc. of these Board Committees are provided in the Report onCorporate Governance forming part of this Annual Report.

Corporate Social Responsibility

Your Bank has constituted the Corporate Social Responsibility ('CSR')Committee of the Board of Directors in accordance with the provisions of Section 135 ofthe Act read with the Companies (Corporate Social Responsibility) Rules 2014 as amended.

The CSR initiatives of your Bank are undertaken throughBandhan-Konnagar which is a Society Registered under the West Bengal SocietiesRegistration Act 1960. Various programmes run by Bandhan-Konnagar include targeting thehard core poor (THP) education health employment generation. Through the THP programmeassistance is extended to the women who are destitute or below the pyramid section of thesociety of a designated area where they are brought to the mainstream with

support and guidance. The education programme are run through variouspre-primary and primary schools across various areas and assisting them to enter theproper education system. The heath programme is attributed to development of awareness andprovide basic necessary health support awareness development for improvement of hygieneand guidance. Through the employing the unemployment programme the basic training is givento the youth who find some way to engage themselves either in running entrepreneurship orengaging in the service after completion of their training. Your Bank's objective is tohelp people from economically backward communities join the mainstream society by enablingthem to generate sustained income on their own in due course.

The details of CSR activities/projects undertaken during the year isgiven as Annexure - 1 and forms part of this Board's Report. The CSR Policy asrecommended by the CSR Committee and approved by the Board is available on the Bank'swebsite: https://www.bandhanbank.com/pdf/CSR-Policy-New-Format.pdf.

Declaration from Independent Directors

The Bank has received necessary declarations from all the IndependentDirectors under Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI LODR thatthey meet the criteria of independence laid down thereunder. The Board of Directors of theBank has reviewed the disclosures of independence submitted by the Independent Directorsand is of the opinion that the Independent Directors of the Bank fulfil the conditionsspecified in the Act and SEBI LODR and are independent of the management.

Familiarisation Programmes for Independent Directors

The familiarising programme for the Independent Directors are disclosedin the Report on Corporate Governance that forms part of this Annual Report.

Board Evaluation

Pursuant to the recommendation of NRC the Board of Directors of theBank has approved the Performance Evaluation Policy which laid down evaluation process andcriteria for the performance evaluation of all the Directors including Chairman MD &CEO Board Level Committees and the Board as a whole. Details of Board Evaluation processand performance evaluation carried out for financial year 2018-19 is included separatelyin the Report on Corporate Governance forming part of this Annual Report.

Appointment of Directors

Appointment of Directors on the Board of the Bank is guided by theprovisions of the Banking Regulation Act 1949 and the rules framed thereunder theCompanies Act 2013 and the SEBI LODR. Further the Board considers various skill setspractical experience gender diversity while appointing directors on the Board of theBank. The details of the same have been included in the Report on Corporate Governanceforming part of this Annual Report.

Remuneration Policy

The Board of Directors of the Bank had formulated and adoptedcompensation policy and HR Policy for Remuneration of

Employees of the Bank including the Executive Directors and theremuneration of Non-Executive Directors including the Chairman of the Bank are governed bythe respective regulatory provisions. The details of the same have been included in theReport on Corporate Governance forming part of this Annual Report.

Employees Remuneration

As on March 31 2019 your Bank had 32342 employees. The statementcontaining particulars of employees as required under Section 197(12) of the Act read withRule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel)

Rules 2014 are appended separately as Annexure - 2(a) and formpart of this report. The ratio of the remuneration of each Director to the medianremuneration of the employees of the Bank and other details in terms of Section 197(12) ofthe Act read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are forming part of this report as Annexure - 2(b).

Employee Stock Options

Your Bank has instituted Employees Stock Option Plans to enable itsemployees to participate in your Bank's future growth and financial success. Your Bankprovides its employees a platform for participating in important decision making andinstilling long-term commitment towards future growth of the Bank by way of rewarding themthrough stock options. Accordingly with the approval of the Shareholders of the Bank theBank had instituted an Employees Stock Option Scheme (ESOP) i.e. Bandhan Bank EmployeeStock Option Plan Series I ('Scheme'). In terms of the Shareholders' approved Scheme andthe remuneration Policy of the Bank NRC has approved the grant of 2220725 Stock Optionsto the eligible Employees of the Bank at a grant price of र180 per Option in the month ofDecember 2017 under Tranche 1.

The Scheme was approved by the shareholders of the Bank in the generalmeeting before the Initial Public Offering ('IPO') of the Bank on March 27 2018. Howeverin terms of compliance of Regulation 12 of the SEBI (Share Based Employee Benefits)Regulations 2014 ('SEBI SBEB') the Scheme is required to be approved by the shareholdersafter the IPO of the Bank. Accordingly your Bank proposes to seek the shareholdersapproval of the Scheme which was approved by the shareholders before the IPO of the Bank.In view of the above Regulations your Bank has made no grants under the Scheme after thelisting of its equity shares on the stock exchanges pursuant to the IPO. Approval of theShareholders' of the Bank is being sought on the Scheme along with granting of additional52536327 ESOPs under the Scheme in multiple tranches in terms of the provisions of theSEBI SBEB which is forming part of the AGM Notice.

The Scheme is administrated by the NRC. In terms of the Scheme theOptions would vest not earlier than one year and not later than four years from the dateof grant as decided by the Board / NRC. The Options granted shall be equally vested overfour years. The exercise period shall be maximum of five years from the date of respectivevesting of Options. Further the source of shares is primary in nature since your Bankhas been issuing new equity shares upon exercise of Options. None of the Directors were

The information pertaining to Employee Stock Options as prescribedunder SEBI SBEB read with SEBI Circular dated June 16 2015 on Requirements specifiedunder the SEBI (Share Based Employee Benefits) Regulations 2014 is attached as Annexure- 3.

Deposits

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

The details of the deposits received and accepted by your Bank as abanking company are enumerated in the financial statements for the financial year endedMarch 31 2019.

Internal Financial Controls Audit and Compliance

Your Bank has an Internal Audit department and a Compliance departmentwhich independently carry out evaluation of the adequacy of all internal controls. Thesedepartments ensure that operating and business units adhere to laid down internalprocesses and procedures as well as to regulatory and legal requirements. The auditdepartment also proactively recommends improvements in operational processes and servicequality. The Bank has put in place extensive internal controls including audit trailsappropriate segregation of front- and back-office operations post-transaction monitoringprocesses at the backend to mitigate operational risks. It further ensures independentchecks and balances and adherence to the laid down policies and procedures of the Bankare according to regulatory guidelines. Your Bank has adhered to the highest standards ofcompliance and governance and has placed controls and appropriate structure to ensurethis.

To safeguard independence the internal audit department reportsdirectly to the Chairman of the Audit Committee of the Board. The Audit Committee of theBoard also reviews the performance of the Audit department and Compliance department. Itfurther appraises the effectiveness of controls and compliance with regulatory guidelines.The Board of Directors confirms that there are internal controls in place with referenceto the Financial Statements and that such controls are operating effectively.

Related Party Transactions

There were no materially significant transactions with related partiesincluding promoters Directors key managerial personnel or relatives of the Directorsduring the financial year 2018-19 which could lead to a potential conflict of interestbetween the Bank and these parties. The details of the transactions with related partiesif any were placed before the Audit Committee from time to time. There were no materialindividual transactions with related parties which were not in the ordinary course ofbusiness of the Bank nor were there any transactions with related parties which were noton arm's length basis. Accordingly AOC-2 is not applicable to the Bank. Necessarydisclosure as required under the Accounting Standards (AS 18) has been made in the notesto the financial statements to the extent applicable to the Bank.

Your Bank's Policy on dealing with Related Party Transactions isavailable on the Bank's website:https://www.bandhanbank.com/ pdf/RelatedParty-Transactions-Policy.pdf

Particulars of Loans Guarantees or Investments

In terms of the provisions of Section 186 (11) of the Act theprovisions of Section 186 of Act except sub-section (1) do not apply to any loan madeany guarantee given or security provided or any investment made by a banking company inthe ordinary course of its business. However the particulars of investments made by theBank are disclosed in the Financial Statements as per the applicable provisions of theBanking Regulation Act 1949.

Whistle-Blower Policy/Vigil Mechanism

Your Bank has adopted a Whistle-Blower Policy pursuant to which theBank's employees can raise their concerns relating to fraud malpractice or any otheractivity or event which is against the interests of the Bank or society as a whole.According to this policy the Audit Committee has been entrusted with the responsibilityof reviewing the complaints received and the action taken thereof. Detailed information onthe Vigil Mechanism of the Bank is provided in the Report on the Corporate Governancewhich forms part of this Annual Report.

Business Responsibility Report

In terms of the provisions of SEBI LODR a Business ResponsibilityReport describing the initiatives taken by your Bank from environmental social andgovernance perspective is available on the Bank's website at the link: www.bandhanbank.com

Significant and Material Orders Passed by Regulators or Courts orTribunals

During FY 2018-19 no significant or material orders were passed by anyRegulators or Courts or Tribunals against the Bank impacting its going concern status andoperations in future. However the Reserve Bank of India vide its letter dated September19 2018 has imposed two restrictions on the Bank one is withdrawal of general permissionto open new branches whereby the Bank is not permitted to open new branches without theprior approval of the RBI and the other is freezing of remuneration of the MD & CEO atthe existing level due to non-compliance of one licensing condition of dilution of excessshareholding of Non-operative Financial Holding Company ('NOFHC') in the Bank to 40% ofthe paid-up capital of the Bank within three years from the commencement of theoperations of the Bank. Your Bank has taken initiatives to comply with the only remaininglicensing condition and in that regard amalgamation of GRUH Finance Limited into and withthe Bank has been approved by the Board by which the existing shareholding of NOFHC in theBank will be brought down to 61% (approx.). Your Bank along with NOFHC has also initiatedseveral other steps to comply with the only remaining licensing condition at the earliest.Your Bank is constantly in touch with the RBI on the matter.

Statutory Auditors and their Report

The Members of the Bank at the 1st Annual General Meeting held on June29 2015 have approved the appointment of S. R. Batliboi & Associates LLP CharteredAccountants (ICAI Firm Registration Number 101049W) as Statutory Auditors of the Bank andwas thereafter re-appointed every year with the prior-approval of the

RBI and the approval of the Shareholders. However as per the RBIcircular DBS.No.ARS.BC.8/08.91.001/2000-2001 dated January 30 2001 andDBS.ARS.BC.04/08.91.001/2017-2018 dated July 27 2017 Statutory Auditors for PrivateBanks cannot be appointed for more than four years. Hence the term for current Auditors ofthe Bank will end at the ensuing AGM. Accordingly on the basis of recommendations of theAudit Committee the Board of Directors of the Bank have approved the appointment ofDeloitte Haskins & Sells Chartered Accountants (ICAI Firm Registration Number117365W) as the Statutory Auditors of the Bank for a period of four years from theconclusion of 5th AGM till the conclusion of 9th AGM subject to approval of Shareholdersof the Bank and by the RBI every year as required under the RBI circular dated January 302001 and July 27 2017 as mentioned above. The approval of the RBI has been received forappointment of Deloitte Haskins & Sells Chartered Accountants as the StatutoryAuditors of the Bank for the financial year 2019-20 i.e. from the conclusion of 5th AGMtill the conclusion of 6th AGM. Accordingly your Board recommends to the shareholdersthe appointment of Deloitte Haskins & Sells Chartered Accountants (ICAI FirmRegistration Number 117365W) as the statutory auditors of your Bank for a period of fouryears from the conclusion of ensuing AGM till the conclusion of 9th AGM subject toapproval of the RBI on an annual basis.

The Report given by the Auditors on the financial statements of theBank for the financial year ended on March 31 2019 forms part of this Annual Report.There has been no qualification reservation adverse remark or disclaimer given by theAuditors in their Report. Also no offence of fraud was reported by the Auditors of theBank.

Secretarial Auditors and their Report

Pursuant to the provisions of Section 204 of the Act your Bank hasappointed Mr. Deepak Kumar Khaitan Practicing Company Secretary (C.P. 5207) asSecretarial Auditor to conduct Secretarial Audit of the Bank for the FY 2018-19.Accordingly the Secretarial Audit Report for FY 2018-19 is annexed to this report as Annexure- 4. There are no reservations adverse remark or disclaimer in the Secretarial AuditReport except three observations i.e. first w.r.t. the letter dated September 19 2018by Reserve Bank of India which has been explained above under the head 'Significant andMaterial Orders Passed by Regulators or Courts or Tribunals' second w.r.t. the Securitiesand Exchange Board of India ('SEBI') approving the Scheme of Amalgamation as a method tocomply with Minimum Public Shareholding ('MPS') requirements which has also beenexplained above under the 'Scheme of Amalgamation' and third w.r.t. SGL bouncing. In thisregard it may be noted that no penalty has been levied on the Bank by the RBI during theyear ended March 312019 and March 312018. However a single instance of SGL bouncingoccurred on October 04 2018 due to security being available in Repo account instead ofPrimary account with the RBI. A lenient view was taken by the RBI and the monetary penaltywas waived off with necessary directions vide letter dated October 25 2018. Appropriatecontrol measures have been taken by your Bank internally to prevent such recurrence.

No offence of fraud was reported by the Secretarial Auditor of theBank.

Cost Records

In terms of the provisions of Section 148(1) of the Act read with

Rule 3 of the Companies (Cost Records and Audit) Rules 2014 your Bankis not required to maintain cost records and accordingly is not required to undergo costaudit.

Conservation of Energy Technology Absorption and Foreign ExchangeEarnings and Outgo

Energy and natural resource conservation have been one of the focusarea for the Bank and conscious efforts are being made towards improving energyperformance year on year. Some of the steps undertaken by the Bank towards conservationof energy are as under:

• Replacement of CFL and conventional lighting to LED in selectpremises

• Saving of water through use of Bio-blocks in urinals at SelectLarge Facilities

• Installations of green locks and AC controllers in airconditioning machines in order to save energy

• Put controls on usage of lifts ACs common passage lights andother electrical equipment

Your Bank has used information technology in its operations details ofthe same has been provided under section on Information Technology at Bandhan Bank in thisReport. The Bank is however constantly pursuing its goal of technological upgradation ina cost-effective manner for delivering quality customer services.

The Foreign exchange earnings of the Bank for the financial year2018-19 was र36.49 lakh whereas foreign exchange outgo was of र1.93 crore during FY2018-2019.

Corporate Governance

Corporate governance is based on the principles of conducting thebusiness with all integrity fairness and being transparent with all transactions makingnecessary disclosures and decisions complying with the laws of the land accountabilityand responsibility towards the stakeholders and commitment of conducting the business inan ethical manner. Your Bank is committed to achieve the highest standards of CorporateGovernance and also adheres to the Corporate Governance requirements set byregulators/applicable laws. A separate section on Corporate Governance standards followedby your Bank and the relevant disclosures as stipulated under the SEBI LODR the Act andrules made thereunder is annexed to this Report as Annexure - 5.

A Certificate from CS Deepak Kumar Khaitan Practicing CompanySecretary (C.P. 5207) confirming compliance by the Bank to the conditions of CorporateGovernance as stipulated under SEBI LODR is annexed to the Report on CorporateGovernance which forms part of this Annual Report.

Annual Return

Pursuant to the provisions of Section 134(3)(a) and Section 92(3) ofthe Act and Rule 12(1) of the Companies (Management and Administration) Rules 2014 theextract of Annual Return as at March 31 2019 forms part of this Report as Annexure - 6and the Annual Return of the Bank as at March 31 2019 is placed on its website andcan be accesses at www.bandhanbank.com.

Management's Discussions and Analysis

The Management Discussion and Analysis report for the financial

year 2018-19 as prescribed under SEBI LODR is enclosed as Annexure -7 which forms part of this report.

Information Under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal)

Act 2013

Your Bank has zero tolerance towards any action on the part of any ofits employees which may fall under the ambit of 'sexual harassment' at workplace and isfully committed to uphold and maintain the dignity of every woman constituent associatedwith the Bank. It takes all necessary measures to ensure a harassment free workplace andhas instituted an Internal Committee for redressal of complaints and to prevent/prohibitsexual harassment in compliance with the guidelines enumerated in the Sexual Harassmentof Women at Workplace (Prevention Prohibition and Redressal) Act 2013. The Policyprovides for protection against sexual harassment of women at workplace and for preventionand redressal of such complaints. All the complaints received decisions taken anddissemination of action initiated by the Bank placed to the Audit Committee of the Boardperiodically. Details of the cases filed and resolved during the financial year 2018-19 isgiven hereunder:

Number of complaints pending as at the beginning of the

financial year

Number of complaints filed during the financial year Number of complaints disposed of during the financial year Number of complaints pending as at the end of the financial year
0 14 14 0

Human Resource Management

Your Bank recognises that the human resource is key to organisationalsuccess. Thus the goal of the Human Resources ('HR') department is to ensure that theemployees are recruited engaged retained and motivated to contribute to the Bank'sgrowth and strategic mission. The HR Department proactively engages with employees at alllevels for this purpose. Its vision is to create an environment of learning and superiorperformance in line with the Bank's corporate values and aligning the personal aspirationsof employees to business imperatives.

The employee engagement initiatives place greater emphasis on learningand development providing opportunities for staff to seek aspirational rolesstreamlining the Performance Management System and introducing performance-linked rewards.A host of programmes are being run to meet the ongoing learning and development needs inthe Bank and promote a climate of learning self-growth and excellence. The learningarchitecture in your Bank focusses on:

1. Developing tailor-made competency-mapped programmes for differentsets of employees based on their roles in

the Bank

2. Induction/orientation of new hires for acquaintance with the cultureof the Bank

3. Training on operational risk audit compliance and regulatoryaspects for frontline staff

4. People management customer-centric and compliance- based programmesfor employees in leadership roles

Through its 11 residential training centres across the country andthrough a wide range of training programmes your Bank has provided 100060 days oftraining to its people. The trainings were provided to people across departments andfunctions to build their professional competence and improve their skill sets and thusenable them to contribute to your Bank's mission.

Additionally the Bank continues to engage with leading managementinstitutes for leadership and management development programmes and specialised programmesfor employees across senior and mid-management levels of staff.

Your Bank believes that the Performance Management ('PM') process is apowerful driver of individual and corporate performance. An online PM System ('PMS') withfocus on building transparency in performance assessments employee ownership of the goalsand encouraging dialogue on performance and developmental feedback between the appraiseeand appraiser was introduced in your Bank. Softer behavioural attributes like theemployee's adherence to values of the organisation customer focus accountabilityability to work in a team and others build a culture conducive to sustainable businessperformance and promote desired behaviour. Recognising their importance attention wasalso paid to such softer behavioural attributes.

Your Bank shall continue to leverage and/or align HR practices to buildcritical organisational capabilities build a conducive work environment to enhance andshape employee satisfaction and enable achievement of the strategic goals.

Risk Management Framework

Managing risk is an integral part of the banking business and your Bankaims at delivering a superior stakeholder value by achieving an appropriate equilibriumbetween risk and return. Your Bank has put in place an Integrated Risk Managementframework that articulates its risk appetite and drills down the same into a limitframework for various risk categories. The risk governance framework ensures oversightmonitoring for vulnerability mapping and an integrated evaluation for effective riskmanagement.

The Board of Directors provides oversight on all the risks assumed bythe Bank. The Board has established Committees with specific terms of reference tofacilitate focused oversight. At organisational level overall risk management is assignedto an independent Risk Management Committee of Board ('RMCB'). The Bank's Risk Committeereviews risk management policies key risk indicators and the limit frameworks includingstress test limits for various risks. Policies approved by the Board of Directors orCommittees of the Board from time to time constitute the governing framework for each typeof risk. Business activities are undertaken within this policy framework.

The Bank has set up various executive-level committees havingparticipation from various business and control functions that are designed to review andoversee matters pertaining to various material risks.

Commitment towards the independence of Risk Management Department ofthe Bank headed by a Chief Risk Officer ('CRO') an employee of rich experience andseniority to facilitate independent evaluation monitoring and reporting of various risksis supervised by RMCB on a regular basis and reviewed by the Board on an annual basis. TheBank is in constant endeavour to upgrade its system and processes for establishment of aneffective risk management system.

Credit Risk

Credit risk is the risk that arises when a borrower is unable to meetits financial obligation to the lender. All credit risk aspects are governed by CreditPolicy and Credit Risk Policy of the Bank. The Credit Risk Management Committee ('CRMC')chaired by MD & CEO oversees and reviews the credit risk of your Bank.

The CRMC reports to the RMCB the apex body for risk management in theBank.

Your Bank has a uniqueness in terms of the composition of its creditportfolio with the preponderance of the small ticket microbanking portfolio and is alsoexpanding into the General Banking loans the Bank has various assessment approaches intandem with the segmental risk profile of borrowers. Credit Underwriting is not part ofBusiness and reports into a separate Underwriting Unit under the Risk Department. Forlarge size loans credit proposals are approved at the Head Office Credit Committeesdepending on the delegation of power vested in them. To limit the magnitude of creditrisk prudential limits are laid down on various aspects of credit benchmark on variousratios borrower type limits industry and sectoral limits among others.

An independent Credit Risk Management Department ('CRMD') reportinginto the CRO implements the Credit Risk framework.

Market and Liquidity Risk

The Asset-Liability Management Committee ('ALCO') reporting into theRMCB functions as the top operational unit for managing the balance sheet within theperformance/risk parameters laid down by the Board. It determines the asset liabilitymanagement strategy in light of the current and expected business environment and reviewspositions of the trading groups and the interest rate and liquidity gap positions on thebanking book. The ALCO also sets deposit and benchmark lending rates.

Market risk arises largely from the Bank's statutory reserve managementand trading activity and is managed through a well- defined Board-approved InvestmentPolicy and Market Risk Policy that caps risk in different trading desks or/and varioussecurities through trading risk limits/triggers and is supplemented by a Board approvedstress testing framework that simulates various market risk scenarios to measure lossesand initiate remedial measures.

Liquidity Risk is the risk that a bank may not be able to meet itsshort term financial obligations due to an asset-liability mismatch or interest ratefluctuations. Your Bank's framework for liquidity

and interest rate risk management is spelt out in its AssetLiquidity-Management policy that is implemented monitored and periodically reviewed bythe ALCO. The Liquidity Coverage Ratio ('LCR') seeks to ensure that the Bank has anadequate stock of unencumbered High-Quality Liquid Assets ('HQLA') that can be convertedinto cash easily and immediately to meet its liquidity needs under a 30-day calendarliquidity stress scenario. Your Bank is maintaining the LCR limit as prescribed by theRBI.

An independent Market Risk Management Department ('MRMD') reportinginto the CRO implements the Market & Liquidity Risk framework

Operational Risk

Operational risk is the risk of loss resulting from inadequate orfailed internal processes people and systems or from external events. To manageoperational risks the Bank has in place a comprehensive operational risk managementframework whose implementation is supervised by the Operational Risk Management Committee('ORMC') chaired by MD & CEO and reviewed by the RMCB.

The risk framework employs a judicial mixture of quantitative andqualitative assessment tools to assess the operational risk in products and processes. Anindependent Operational Risk Management Department ('ORMD') reporting into the CROimplements the framework.

The Bank has well laid down processes for management of its day-to-dayactivities which is approved by Product & Process Change Management Committee ('PCMC')comprising of senior functionaries of Business and Control groups. The Bank followsestablished well-designed controls which include traditional four eye principleseffective separation of functions segregation of duties call back processesreconciliation exception reporting and periodic MIS.

Your Bank as a part of its strategy has outsourced significant portionof its Information Technology Operations an independent Outsourcing Committee comprisingof members of Senior Management oversees the outsourcing risk framework under the guidanceof the RMCB.

The Bank undertakes fraud risk assessment to identify and understandrisks to its business. The Fraud Prevention and Monitoring Committee ('FPMC') comprisingsenior functionaries of the Bank is responsible for identification of fraudsdeliberation analysis of fraud events gaps in controls and processes and initiateremedial actions and reports into the Audit Committee of the Board('ACB').

Information Security Management

The Bank operates in a highly automated environment and makes use ofthe latest technologies to support various operations. This throws up operational riskssuch as business disruption risks related to information assets data securityintegrity reliability and availability amongst others. In view of the same your Bank hasestablished an information security architecture to assess its

IT-related vulnerabilities and manage the existing and emergingcybersecurity risks.

The IT Strategy Committee of the Board ('ITSCB') is the apex bodythrough which the Board keeps an oversight on the entire IT strategy of the Bankincluding the cybersecurity strategy. The RMCB and the ACB also monitors the InfoSecaspects from their corresponding angles.

The teams monitor systems from the standpoint of operationsavailability and security. In the endeavour towards providing high availability andcontinuity of services to its customers including high availability of customer-facing ITsystems the Bank has a Board-approved Business Continuity Plan which includes plans forrecovery of its IT systems in the event of any disaster or contingency. The Bank has aBoard-approved Information Security and Cyber Security Policy which also incorporates acyber-crisis management plan. The Bank has used the service of renowned auditing firms toconduct Statutory Audit of IT systems and controls. The Bank has laid down processes forchange management identity management access management and security operations andthese processes are periodically reviewed and refined to keep abreast of emerging risksand to ensure that commensurate controls to mitigate such risks are put in place.

With technology becoming an integral part of the banking industry theBank has established an information security architecture to assess its IT-relatedvulnerabilities and manage the existing and emerging cybersecurity risks. Awell-documented Board approved information security policy is put in place. In additionemployees mandatorily periodically undergo information security training and sensitisationexercises.

Information Security (InfoSec) Team under Chief Information SecurityOfficer ('CISO') reports into the overall Risk Management Department under CRO. The teamfollows strategies and procedures for managing the processes tools and policies necessaryto prevent detect document and counter threats to digital and non-digital informationand automated processes. InfoSec responsibilities include establishing a set of processesthat will safeguard information assets regardless of how the information is structured orwhether it is in transit/being processed or is at rest in storage. Your Bank is alsobuilding up its own independent 24*7 C-SOC (Cyber Security Operations Centre) for state ofthe art centralised and consolidated cybersecurity incident prevention security eventmonitoring detection and response capabilities.

Your Bank reaches out to customers through various channels both brickand mortar like Branches & door step centres and click like Internet Banking MobileBanking UPI as also ATMs. The security of digital channels is very critical given highnumber of cybersecurity incidents getting reported across the globe. Your Bank has takenup various steps like two-factor authentications implementation of transaction limit fordigital channels implementation of data leakage prevention solution monitoring oftransactions for card based transactions to

protect its digital channels from misuse by external and internalincidents.

Information Technology at Bandhan Bank

Your Bank has taken giant strides in its IT & Digital Initiativesfor the Bank. Information technology has played a key driver in this journey withsolutions around the key levers of the Bank. Few key initiatives across Payments CustomerExperience Operational Efficiency and Channel Upgrades are mentioned below:

Payments

BHIM *99#: This initiative has been introduced to drive digital usageof banking services especially in Rural Areas. This form of mobile banking usesUnstructured Supplementary Service Data ('USSD') channel and can be used by customerswithout a smartphone. This application provides basic banking services like Fund Transferand Balance Enquiry through simple steps.

BHIM App: Your Bank has been listed as an issuer in NPCI and otherBank's Payment System Player ('PSP') apps so that customers can send and receive fundsto/from Bandhan Accounts using Unified Payments Interface as mode of the transaction.

BHIM Bandhan UPI (Google Play store): Your Bank has launched its ownAndroid UPI Application hosted in Google Play store thereby announcing its arrival as aPayment System Player in the UPI Payment Ecosystem.

Bharat QR Customer App (RuPay Version 2) : Enhancement of the Bharat QRApp thereby providing additional features to buyers and sellers while performing QR basedpayments.

Customer Experience

Chatbot: A software driven automated "Question and Answer"bot deployed within the Bandhan Bank website as virtual agents. These agents can servemultiple customers at the same time. Customers now receive response to their basic queriesthrough questions asked to the bot using natural English language.

Home Loan Appraisal System: An intelligent scorecard built on creditscore algorithms and set of business rules. This utility equips your Bank's CreditUnderwriters to assess the customer quality during the loan review cycle.

Micro Home Loan: Through this solution your Bank has been able to helpcustomers by providing loans to build houses as part of affordable housing initiative.

Paperless Insurance Claim: Your Bank has established system integrationwith its insurance partner HDFC for digitising the insurance claims.

Agri and Term Loans with Kisan Credit Card: Through this solution yourBank has been able to support farmers through disbursal of Agri and term loans using theirKisan credit card.

Operational Efficiency

Gold Loan Lead Generation: Through this module all prospective leadsare captured and tracked periodically and effectively by the Bank.

De-Dupe: This utility helps Central Processing Unit Team to validateKYC input errors and rectify them as and where required.

Meet2Govern: End-to-End digitisation of the meeting management softwarethrough document generation meeting schedules and effective workflows.

Data Driven Decision: Branch Health Index: An in-house developed VisualDashboard to analyse branch performance against defined criterias.

Channels Upgrades

Corporate Internet Banking Upgrade:

1. Delivery of Corporate Internet Banking phase II

In Phase II of Corporate Internet Banking the Bank has introduced thefollowing functionalities:

i) Bulk file upload for inter-bank & intra-bank Fund Transfers

ii) Account-wise transaction limit set-up

iii) Transaction in Cash Credit (CC) & Overdraft (OD) accounts

2. New functionalities in mBandhan application in Android version:

i) VISA Rupay Offers

ii) Facility to update E-mail ID

iii) Change of language from "Hotlist Debit Card" to"Block Debit Card"

iv) Option to create and save Nominee details for TD purposes

v) Apply for a new SB/CA/Loan

vi) Favourite Transactions

vii) Update Limits per transaction/daily limit at customer's end

viii) Sequence change

ix) ATM PIN regeneration

Material Changes and Commitment Affecting Financial Position of theBank

There was no material changes and commitments affecting the financialposition of the Bank which has occurred between the end of the financial year of theBank i.e. March 31 2019 and the date of this Directors' Report.

Compliance with Secretarial Standards

The Board of Directors affirm that the Bank has complied with theapplicable Secretarial Standards issued by the Institute of Companies Secretaries of India(SS1 and SS2) respectively relating to Meetings of the Board its Committees and theGeneral Meetings.

Directors' Responsibility Statement

Pursuant to the provisions of Section 134(3)(c) read with Section134(5) of the Act the Directors hereby confirm that:

i) in the preparation of the annual accounts the applicable accountingstandards have been followed along with proper explanation relating to materialdepartures;

ii) they have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the Bank's state of affairs as on March 31 2019 and of itsprofit for the year ended on that date;

iii) they have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Bank and for preventing and detecting fraud and other irregularities;

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

v) they have laid down internal financial controls to be followed bythe Bank and that such internal financial controls are adequate and were operatingeffectively; and

vi) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and were operatingeffectively.

Acknowledgments

The Board of Directors places on record its gratitude to the RBI othergovernment and regulatory authorities financial institutions and correspondent banks fortheir strong support and guidance. The Board acknowledges the support of the shareholdersand also places on record its sincere thanks to its valued clients and customers for theirpatronage. The Board also expresses its deep sense of appreciation to all employees of theBank for their strong work ethic excellent performance professionalism teamworkcommitment and initiative which has led to the Bank making commendable progress intoday's challenging environment. Your Board will continue to ask for more and moreimprovements as your Bank continues its unique journey by combining microbanking withtraditional commercial banking.

For and on behalf of the Board of Directors
Bandhan Bank Limited
Anup Kumar Sinha
Place: Mumbai Non-executive Part-time Chairman
Date: May 02 2019 (DIN: 08249893)

 

1 A brief outline of the Bank's CSR Policy including overview of projects or programmes proposed to be undertaken and a reference to the web-link to the CSR Policy and projects or programmes. Refer Section on Corporate Social Responsibility forming part of the Board's Report.
2 Composition of CSR Committee: i. Ms. T. S. Raji Gain Chairperson
ii. Mr. Chandra Shekhar Ghosh Member
iii. Mr. Harun Rasid Khan Member
3 Average net profit of the Bank for last three financial years र139129 lakh
4 Prescribed CSR expenditure (two per cent of the amount mentioned in item 3 above) र2783 lakh
5 Details of CSR spent during the financial year:
(a) Total amount to be spent for the financial year (2018-19) र2783 lakh
(b) Amount unspent if any Not applicable
(c) Manner in which the amount spent during the financial year Details Given below

Details of amount spent on CSR activities during the Financial Year2018-19

Sl. No CSR Project or activity identified Sector in which the project is covered (Clause No. of Schedule VII to the Companies Act 2013 as amended) Projects or programme (1) Local Area or other (2) Specify the State and districts where projects or programme was undertaken Amount outlay (budget project or programme wise) (D in lakh) Amount spent on project or programme Sub-heads: 1. Direct expenditure on project or programmes. 2. Overheads (D in lakh) Cumulative expenditure upto the reporting period (D in lakh) Amount Spent: Directly or through implementing agency
1 Targeting the Hardcore Poor Programme Clause No. (i) Eradicating hunger poverty and malnutrition promoting preventive healthcare and sanitation and making available safe drinking water. Clause (x) Rural development projects West Bengal Bihar Odisha & Jharkhand 1295 1295 1295 Implementing Agency: Bandhan- Konnagar*
2 Education Programme Clause No. (ii) Promoting education including special education and employment enhancing vocation skills especially among children women elderly and the differently abled and livelihood enhancement projects West Bengal Bihar 693 693 693 Implementing Agency: Bandhan- Konnagar*
3 Health Programme Clause No. (i) Eradicating hunger poverty and malnutrition promoting preventive healthcare and sanitation and making available safe drinking water. Clause (x) Rural development projects West Bengal Jharkhand 880 855 855 Implementing Agency: Bandhan- Konnagar*
4 Employing the Unemployed Clause No. (ii) Promoting education including special education and employment enhancing vocation skills especially among children women elderly and the differently abled and livelihood enhancement projects West Bengal Odisha Madhya Pradesh 132 157 157 Implementing Agency: Bandhan- Konnagar*
Total 3000 3000 3000

*Bandhan-Konnagar is a society registered under the Societies of WestBengal Registration Act XXVI of 1961

6. The Bank has spent two per cent of the average net profit of thelast three financial years and there were no unspent amount which is required to bereported.

7. Responsibility Statement

The Responsibility Statement of the CSR Committee of the Board ofDirectors of the Bank is reproduced below:

'The implementation and monitoring of Corporate Social Responsibility(CSR) policy is in compliance with CSR objectives and policy of the Bank.'

Chandra Shekhar Ghosh T. S. Raji Gain
Managing Director & CEO Chairperson
(DIN: 00342477) Corporate Social Responsibility Committee
(DIN: 07256149)
For and on behalf of the Board of Directors
Bandhan Bank Limited
Anup Kumar Sinha
Place: Mumbai Non-Executive Part-time Chairman
Date: May 02 2019 (DIN: 08249893)

 

SI. No. Name of the Employee Designation Remuneration received during FY 2018-19 (Amt. in र) Nature of employment whether contractual or otherwise Qualifications and experience Date of joining the Bank Age (in years) Last employment before joining the Bank
1. Chandra Shekhar Ghosh Managing Director & CEO 20447379 Regular M.Sc. in Statistics with more than 31 years of experience From the incorporation of the Bank 59 Bandhan Financial Services Limited
2. Deepankar Bose Head Corporate Centre 11291400 Regular M.A in Economics with 36 years of experience in banking industry March 22 2018 60 State Bank Of India
3. Sunil Samdani Chief Financial Officer 11002852 Regular CA with 21 years of experience March 14 2015 44 Karvy Financial Services Ltd.
4. Rahul Johri* Head Retail Banking 10717211 Regular B. Tech and Masters in Management with 26 years of experience March 01 2016 51 DBS Bank Ltd
5. Subhro Kumar Gupta Chief Audit Executive 1.00.93.655 Regular MBA with 34 years of experience February 06 2017 59 ICICI Bank Ltd
6. Santanu Banerjee Head Human Resorces 10002323 Regular M.Sc. & MBA - Finance with 23 years of experience September 03 2014 50 Axis Bank Ltd.
7. Vijaykumar Ramakrishna Chief Information Officer 9877570 Regular BE- Electronics & MBA- Finance with 17 years of experience February 01 2016 46 YES Bank Limited
8. Ronti Kar Head Information Technology Applications Technology Governance & Admin 8340918 Regular Masters in Computer Science & Engineering with 25 years of experience Since the commencement of business 51 Bandhan Financial Services Limited
9. Dibakar Chandra Ghosh Head Information Technology Operations Systems & Networking 7410975 Regular Masters in Computer Science with 24 years of experience Since the commencement of business 51 Bandhan Financial Services Limited
10. Arvind Kanagasabai Head- Treasury 7204580 Regular Bachelor's degree in commerce & post graduate diploma in Human Resource Development with more than 30 years of experience November 24 2016 58 SBI DFHHL Mumbai.

* ceased to be in the employment of the Bank with effect from September30 2018.

Notes:

1. Remuneration shown above includes basic salary allowancesperformance bonus cash allowances in lieu of perquisites or taxable value of perquisitesif availed as computed as per Income-tax ru les but excludes gratuity PF settlementsuper annuation settlement perquisite on ESOP & super annuation perquisite.

2. All appointments are terminable by one / three months' notice as thecase may be on either side.

3. None of the employees listed above hold 2% or more of thepaid-up share capital of the Bank as at March 31 2019.

4. Other than Mr. Chandra Shekhar Ghosh Managing Director & CEOwho holds 0.13% of the paid up share capital of the Bank the shareholding of theemployees listed above does not exceed 0.01% of the paid u p share capital of the Bank asat March 31 2019.

5. None of the employees listed above is a relative of any director ofthe Bank except Mr. Dibakar Chandra Ghosh who is the relative of MD & CEO.

For and on behalf of the Board of Directors
Bandhan Bank Limited
Anup Kumar Sinha
Place: Mumbai Non-Executive Part-time Chairman
Date: May 02 2019 (DIN: 08249893)

Disclosure on remuneration as per Rule 5(1) of the Companies

(Appointment and Remuneration of Managerial Personnel) Rules 2014 forFY 2018-19

1. Ratio of remuneration of each Director to the median employees'remuneration for the year

Designation Ratio
Chairman 36:1
Managing Director & CEO 102:1

Note:

a) Fixed pay for the computation of ratio has been considered.

b) Fixed pay includes - Basic Allowances and employer contribution ofProvident Fund.

c) The above includes all employees of the Bank excluding advisors.

2. Percentage increase in remuneration of each Director CFO CEO CSor Manager if any in the financial year

Designation Percentage Increase
Chairman 100
Managing Director & CEO Nil
CFO 27.62
CS 65.4

3. Percentage increase in the median remuneration of employees in thefinancial year

Percentage increase in the median remuneration of employees in thefinancial year 2018-19 was 16.38 per cent.

4. The number of permanent employees on the rolls of the Bank

As on March 31 2019 the number of permanent employees on the rolls ofthe Bank was 32342.

5. Average percentage increase already made in the salaries ofemployees other than the managerial personnel in the last financial year and itscomparison with the percentage increase in the managerial remuneration and justificationthereof and point out if there are any exceptional circumstances for increase in themanagerial remuneration.

The average percentage increase for Managerial personnel: 17.55 percent

The average percentage increase for Non-Managerial Staff: 17.32 percent

6. Affirmation that the remuneration is as per the remuneration policyof the Bank: Yes

For and on behalf of the Board of Directors
Bandhan Bank Limited
Anup Kumar Sinha
Place: Mumbai Non-Executive Part-time Chairman
Date: May 02 2019 (DIN: 08249893)

Annexure-3

Disclosure on the Employees' Stock Options for the financial year2018-19

Date of Shareholders Approval Total Number of options approved Total Number of options outstanding at the Beginning of the period Total number of option Granted (During FY 2018-2019) Exercise price or the Pricing Formula November 23 2017 and December 20 2017 22.20.725 22.20.725 Nil T180 derived by Fair Market Value
Option Vested (During FY 2018-2019) 554551
Option Exercised (During FY 2018-2019) 284885
Total Number of shares arising as a result of Exercise of option *284885
Total number of Options in force 1857049
Options Lapsed/Forfeited 78791
Total Number of Options outstanding at the end of the Year 1857049
Total Number of Options Exercisable at the end of the Year 250019
Variation in terms of options None
Money realised by exercise of Options (During FY 2018-2019) र50930460
Scheme Name Bandhan Bank Employee Stock Option Plan Series 1 Tranche 1
Total Number of Options Granted to senior Managerial Personal (KMP) 268616
Total Number of Options Granted to senior Managerial Personal (SMP excluding KMP) 140528
Any other employee who received a grant in any one year of options amounting to 5% or more of options granted during that year Nil
Identified employees who are granted options during any one year equal to or exceeding 1% of the Issued Capital (excluding outstanding warrants and conversions) to the Bank at the time of grant Nil
Diluted Earnings Per Share ('EPS') of the Bank after considering the effect of potential equity shares on account of exercise of Options र16.29
Impact of the difference between the Intrinsic Value of the Options and the Fair Value र(6.59 crore) on Profits &
of the Options on Profits and on EPS र(0.06) per share on EPS
Weighted average price of the shares exercised during the year र180 per share
Weighted average fair values of the outstanding options र72.54
Method used to account for ESOS- Intrinsic or fair value Intrinsic value

* 6974 Options exercised during the year but yet to be allotted as atthe end of financial year.

The weighted average fair value of stock options granted was र68.97.The Black Scholes valuation model has been used for computing the weighted average fairvalue considering the following inputs:

Share Price on the date of Grant (र): र180

Exercise price (र): र180

Dividend yield (%): 0.23%

Expected volatility (%): 23.55% - 29.85%

Risk-free interest rate (%): 6.7%- 7.1%

Weighted average share price (र): र180

For and on behalf of the Board of Directors
Bandhan Bank Limited
Anup Kumar Sinha
Place: Mumbai Non-Executive Part-time Chairman
Date: May 02 2019 (DIN: 08249893)