Your Directors are pleased to present the Third Annual Report of IDFCBank together with the audited financial statements for the financial year ended March 312017
State of Affairs of the Bank
Your Bank has successfully and steadily diversified its business mixand added new revenue streams. It has expanded its reach to serve new customer segmentsboth on the retail as well as wholesale side of the business.
Your Bank is building a national footprint with presence across 20States 150 districts 19 major cities and 33000 villages.
As on March 31 2017 your Bank's network comprised of 74branches 57 of which were Bharat branches 13 were Bharat Plus branches and 4 wereWholesale Bank branches. Your Bank had a total of 47 ATMs out of which 26 were WhiteLabel ATMs. Further your Bank had a total of 8142 outlets which include
MicroATMs cashless PDS outlets and Aadhaar Pay merchant points. As onMarch 31 2017 your Bank had a total of 13.8 lacs customers out of which 9.6 lacs werecustomers of subsidiary company of the Bank i.e. IDFC Bharat Limited (formerly known asGrama Vidiyal Micro Finance Limited).
Your Bank is now offering a wide gamut of products to cater to theneeds of customers from all segments which can be viewed on our website: www.idfcbank.com.During the year under review your Bank was recognised in various ways and the significantawards presented to your Bank are highlighted at the beginning of this Annual Report.
During FY17 your Bank acquired 100% equity stake of Grama VidiyalMicro Finance Limited (GVMFL') thereby making it a wholly owned subsidiary ofthe Bank.
GVMFL had I 1502 crore of Asset Under Management over 300 branches in7 states and over a million customers. It was a profitable entity with net profits of I 42crore in FY16 with Return on Assets of 3.4% and Return on Equity of 31%. Its net worthwas I 155 crore and its portfolio at risk as on March 31 2016 was 0.001%.Post-acquisition GVMFL surrendered its NBFC-MFI Licence issued by the Reserve Bank ofIndia (RBI'). GVMFL has now been renamed and is known as IDFC Bharat Limited.IDFC Bharat Limited (IDFC Bharat') is presently acting as a Business
Correspondent for distribution of the products of IDFC Bank and hasgiven an added momentum to the financial inclusion plan of the Bank.
As on March 31 2017 IDFC Bharat had a widespread network comprisingof 326 branches with operations in seven states namely Tamil Nadu Maharashtra MadhyaPradesh Puducherry Kerala Karnataka and Gujarat.
On November 08 2016 the Government of India announced thedemonetisation of all I 500 and I 1000 bank notes (Specified Bank Notes'). Theexchange of the Specified Bank Notes for bank notes of other valid denominations ordepositing the Specified Bank Notes for crediting to the customers' accounts waspermitted up to December 30 2016. Your Bank ensured timely compliance with RBInotifications issued in this regard from time to time. In the days following thedemonetisation the country faced severe cash shortages.
Your Bank took various steps to support this initiative of theGovernment of India and helped the general public in various ways. Some of them wereseparate counters at all branches for senior citizens and differently abled sections ofthe society door step facility for exchanging notes extra working hours put in byemployees to meet the requirement of cash faster account opening procedures etc. In theweeks following government's decision to demonetise currencies the
IN K CRORE
| || |
|PARTICULARS ||FY17 ||FY16* ||FY17 |
|Deposits ||40208 ||8219 ||40098 |
|Borrowings ||50262 ||57160 ||50262 |
|Advances ||49402 ||45699 ||49402 |
|Total Assets / Liabilities ||112160 ||83216 ||112064 |
|Total Income ||9546 ||4052 ||9597 |
|Profit before Depreciation & Tax ||1605 ||757 ||1650 |
|Net Profit ||1020 ||467 ||1019 |
|Amount available for appropriation ||2233 ||1661 || |
IN K CRORE
| ||STANDALONE |
|PARTICULARS ||FY17 ||FY16 |
|Transfer to Statutory Reserve ||255 ||118 |
|Transfer to Capital Reserve ||6 ||83 |
|Transfer to Investment Reserve ||1 ||- |
|Transfer to Special Reserve ||325 ||145 |
|Proposed dividend (incl. tax on dividend)** ||- ||102 |
|Balance in P&L account carried forward ||1646 ||1213 |
Key Performance Indicators
| ||STANDALONE |
|PARTICULARS ||FY17 ||FY16 |
|Capital Adequacy Ratio (Basel III) ||18.90% ||22.04% |
|Gross NPA ||2.99% ||6.16% |
|Net NPA ||1.14% ||2.39% |
|Return on Assets ||1.04% ||1.04% |
* The Bank commenced its banking operations w.e.f. October 01 2015.**The Board of Directors at their meeting held on April 25 2017 have proposed adividend of C 0.75 per equity share of C 10 each amounting to C 307.11 crore inclusive ofdividend distribution tax. The proposal is subject to the approval of Shareholders at theensuing Annual General Meeting. In terms of the revised Accounting Standard AS-4Contingencies and Events occurring after the Balance sheet date' as notified bythe Ministry of Corporate Affairs through amendments to Companies (Accounting Standards)Amendment Rules 2016 dated March 30 2016 proposed dividend is not recognised as aliability as on March 31 2017. Proposed dividend was however accounted for as a liabilityas at March 31 2016 in line with the existing accounting standard applicable at thattime.
Government initiated digitisation of payments on a war footing. Aspeople switched to mobile wallets and cards for payments a large section of thepopulation had no access to digital payment methods.
Subsequently your Bank officially launched IDFC Aadhaar PayIndia's first Aadhaar-linked cashless merchant solution. IDFC Aadhaar Pay proves thattechnology can revolutionise last mile payments. By using the fingerprint as digitalidentity it empowers even individuals without a phone to pay electronically for smallvalue transactions. The convenience of Aadhaar Pay is expected to encourage a behaviouralshift towards digital payments.
Further details on Financial Summary and Business Review are appearingin the Chapter Management Discussion and Analysis' which forms part of thisAnnual Report.
In accordance with Regulation 43A of Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 (ListingRegulations') your Bank has formulated a Dividend Distribution Policy which ensuresa fair balance between rewarding its Shareholders and retaining enough capital for theBank's future growth. This Policy is available on the Bank's website:www.idfcbank.com under the Investor Relations' section.
IDFC Bank started its banking operations on October 01 2015. Aftercompletion of just 18 months of operations your Directors are pleased to recommend adividend for the 2nd consecutive year at the rate of I 0.75 per equity share ofI 10 each (i.e. 7.5%) for the year ended March 31 2017 as against I 0.25 per equity sharefor FY16.
The Register of Members and Share Transfer Books will remain closedfrom Saturday July 22 2017 to Friday July 28 2017 (both days inclusive) for thepurpose of payment of dividend for the financial year ended March 31 2017. Dividend willbe paid to those Members whose names appear in the Register of Members as on Friday July21 2017; in respect of shares held in dematerialised form it will be paid to thoseMembers whose names are furnished by National Securities Depository Limited and CentralDepository Services (India) Limited as beneficial owners as on that date. Dividend shallbe subject to tax on dividend to be paid by the Bank.
Above dividend would be paid subject to approval by the Members at theensuing Annual General Meeting (AGM').
Capital Raising & Capital Adequacy Ratio
During FY17 6382848 equity shares of I 10 each were issued andallotted to the eligible employees of the Bank on exercise of Options granted under IDFCBank Limited Employee Stock Option Scheme 2015 (IDFC Bank ESOS-2015').
As on March 31 2017 the issued subscribed and paid-up share capitalof your Bank was I 33990061840 comprising of 3399006184 equity shares of I 10 each.
Subsequently on April 17 2017 May 16 2017 and June 15 2017 theBank issued and allotted 351921; 1121338 and 519411 equity shares of I 10 eachrespectively which resulted in an increase in share capital and the share capital as onthe date of this report stands at I 34009988540 i.e. 3400998854 equity shares of I10 each.
Also your Bank has not issued any equity shares with differentialvoting rights during the year.
During the year ended March 31 2017 your Bank had issued 4800 SeniorUnsecured Redeemable Long Term Bonds in the nature of Non-Convertible Debenturesaggregating to I 480 crore. These Bonds were rated IND AAA' (Stable Outlook) byIndia Ratings & Research Private Limited and [ICRA] AAA' (Stable Outlook)by ICRA Limited.
Your Bank is well capitalised and has a Capital Adequacy Ratio(CAR') under Basel III as at March 31 2017 of 18.90% as against RBI norms of13.00% with Tier I being 18.54%.
During the year your Bank has not issued any instrument eligible underTier II.
Being a banking company the disclosures required as per Rule8(5)(v)&(vi) of the Companies (Accounts) Rules 2014 read with Sections 73 and 74 ofthe Companies Act 2013 are not applicable to your Bank.
Loans Guarantees or Acquisition of Securities
Pursuant to Section 186(11) of the Companies Act 2013 loans madeguarantees given or securities provided or acquisition of securities by a banking companyin its ordinary course of business are exempted from disclosure requirements under Section134(3)(g) of the Companies Act 2013.
Subsidiary / Associate Companies
IDFC Bank acquired 100% equity stake of Grama Vidiyal Micro FinanceLimited (now renamed as IDFC Bharat Limited) on October 13 2016 thereby making it awholly owned subsidiary of the Bank. Post acquisition IDFC Bharat surrendered its NBFC-MFI Licence issued by the RBI and has discontinued its micro finance business. IDFC Bharatis presently acting as a Business Correspondent for distribution of the products of IDFCBank and has given an added momentum to the financial inclusion plan of the Bank.
The Bank's policy for determining material subsidiaries isavailable on the Bank's website: www.idfcbank.com under the InvestorRelations' section. The Bank does not have any material subsidiary company as per theCompanies Act 2013 and the Listing Regulations.
In accordance with the provisions of Section 129(3) of the CompaniesAct 2013 read with the Companies (Accounts) Rules 2014 the Bank has prepared itsconsolidated financial statements which forms part of this Annual Report.
Further pursuant to Section 136(1) of the Companies Act 2013 theAnnual Report of the Bank containing therein its standalone and consolidated financialstatements has been hosted on the Bank's website: www.idfcbank.com under theInvestor Relations' section.
In addition thereto the Annual Report of IDFC Bharat containingtherein its audited financial statements has also been hosted on the Bank's website:www.idfcbank.com under the Investor Relations' section.
The Annual Report of IDFC Bank and IDFC Bharat is also available forinspection at the Registered Office of the Bank during business hours i.e. from 9.30 a.m.to 6.30 p.m. on all days (except Saturday Sunday and Public Holidays).
Any Shareholder who is interested in obtaining a physical copy of anyof the aforesaid Annual Report may write to the Company Secretary & Chief ComplianceOfficer of the Bank on: mahendra.shah@ idfcbank.com or send an email email@example.com.
IDFC Bank has two associate companies namely Feedback Infra PrivateLimited and Millennium City Expressways Private Limited in which it holds 24.61% and29.98% equity stake respectively.
A statement containing salient features of the financial statement ofsubsidiary and associate companies in Form AOC-1 is appended as Annexure 1.
The highlights of performance of subsidiary and associate companies andtheir contribution to the overall performance of the Bank can be referred in Form AOC-1 aswell as Consolidated Financial Statements which forms part of this Annual Report.
Your Bank considers gender diversity during its recruitment process.Your Bank has grown significantly with a talent base of 3905 permanent employees as onMarch 31 2017 out of which 686 were women employees. Also IDFC Bharat subsidiarycompany of the Bank had a strong employee base of 3432 employees as on March 31 2017.
Your Directors are proud to inform that your Bank has been officiallylisted in LinkedIn's Top Companies list where India wants to work now. This is anincredible recognition and indeed a proud moment for all of us at IDFC Bank as wecontribute to build the Bank of Now'.
Your Bank stood out for the intent to shake up the industry's"age-old conventions" the benefits that begin even before the first day and theappetite for innovative ways of working like the Twitter resume initiative.
In terms of the provisions of Section 197(12) of the Companies Act2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 a statement showing the names and other particulars ofthe employees drawing remuneration in excess of the limits set out in the said rules areprovided in this Annual Report. Having regard to the provisions of the first proviso toSection 136(1) of the Companies Act 2013 the Annual Report excluding the aforesaidinformation is being sent to the Members of the Bank. The said information is availablefor inspection at the Registered Office and Corporate Office of the Bank during workinghours and any Member interested in obtaining such information may write to the CompanySecretary & Chief Compliance Officer and the same will be furnished on request.Disclosures pertaining to remuneration and other details as required under Section 197(12)of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is appended as Annexure 2.
Employee Stock Option Scheme
The Employee Stock Option Scheme (IDFC Bank ESOS-2015) was framed withan object of encouraging higher participation on the part of employees in the Bank'sfinancial growth and success. An effective stock option scheme enables retention of talentand aligning employee interest to that of the Shareholders. IDFC Bank ESOS-2015 wasapproved by the Members at their meeting held on December 09 2014. The Members at the AGMheld on July 27 2016 approved reduction in the ESOP pool from 7% to 6% of the paid upshare capital of the Bank.
There were 74651161 Options outstanding at the beginning of FY17.During FY17 31387500 Options were granted to the eligible employees under IDFC BankESOS-2015. Further 8943069 Options were lapsed / forfeited and 6382848 Options wereexercised during the year ended March 31 2017. Accordingly 90712744 Options remainoutstanding as on March 31 2017. All Options vests in a graded manner and are required tobe exercised within a specific period. The Bank has used the intrinsic value method toaccount for the compensation cost of stock options to employees of the Bank. Intrinsicvalue is the amount by which the quoted market price of the underlying share on the dateprior to the date of the grant exceeds the exercise price on the Option. IDFC BankESOS-2015 is administered by the Nomination & Remuneration Committee (NRC')of the Board of the Bank. During FY17 there has been no material change in IDFC BankESOS-2015 and the said scheme is in compliance with Securities and Exchange Board of India(Share Based Employee Benefits) Regulations 2014 as amended from time to time.Disclosures as required under Securities and Exchange Board of India (Share Based EmployeeBenefits) Regulations 2014 and circulars issued thereunder have been uploaded on theBank's website: www.idfcbank.com.
Directors and Key Managerial Personnel
All appointments of Directors are made in accordance with the relevantprovisions of the Companies Act 2013 and the Rules framed thereunder the ListingRegulations the Banking Regulation Act 1949 and the rules guidelines and circularsissued by the RBI from time to time.
The NRC conducts due diligence before appointment of Directors andensures adherence to Fit and Proper' criteria as prescribed by RBI to PrivateSector Banks.
Based on the recommendations of the NRC and subject to the approval ofthe Shareholders the Board accorded its consent to appoint Mr. Anand Sinha (DIN:00682433) as an Independent Director for a period of three (3) years w.e.f. August 012016.
The Board further appointed
Ms. Anindita Sinharay (DIN: 07724555) as a Nominee Directorrepresenting the Ministry of Finance Government of India w.e.f. February 01 2017.
Mr. Avtar Monga (DIN: 00418477) was appointed as the ExecutiveDirector of the Bank for a period of three (3) years w.e.f. April 25 2017 subject toapproval of the RBI and Shareholders.
Mr. Vikram Limaye (DIN: 00488534) tendered his resignation from theBoard of IDFC Limited effective from July 15 2017 consequent to his appointment as theManaging Director & CEO by the Board and Shareholders of National Stock Exchange ofIndia Limited. Thereafter the Board of IDFC Limited appointed Mr. Sunil Kakar (DIN:03055561) as the Managing Director & CEO of IDFC Limited in place of Mr. Limaye w.e.f.July 16 2017. Mr. Kakar is presently serving as the Chief Financial Officer of IDFC Bankand would resign from this position on his taking charge as the Managing Director &CEO of IDFC Limited. As a result Mr. Limaye resigned from the Board of IDFC Bank w.e.f.July 15 2017. IDFC Limited has now nominated Mr. Sunil Kakar on the Board of IDFC Bankw.e.f. July 16 2017 in place of Mr. Limaye.
Your Directors appointed Mr. Sunil Kakar as a Nominee Directorrepresenting IDFC Limited (Ultimate Holding Company) w.e.f. July 16 2017 subject toapproval of the Shareholders.
None of the Directors of the Bank are disqualified to be appointed asDirectors in accordance with Section 164 of the Companies Act 2013.
Further the Bank had received a declaration from all the IndependentDirectors at the time of appointment and also before the first meeting of the Board ofDirectors held in FY17 that they meet the criteria of independence specified undersub-section (6) of Section 149 of the Companies Act 2013 read with Rule 5 of theCompanies (Appointment and Qualification of Directors) Rules 2014 and Regulation 16 of theListing Regulations for holding the position of Independent Director and that they shallabide by the Code for Independent Directors' as per Schedule IV of theCompanies Act 2013.
In terms of Section 160 of the Companies Act 2013 your Bank hasreceived notice in writing from Members along with requisite deposit of H 100000 eachproposing candidature of Mr. Anand Sinha Ms. Anindita Sinharay Mr. Avtar Monga and Mr.Sunil Kakar. The Board recommends the appointment of the aforesaid directors to theShareholders at the ensuing AGM.
Brief Profiles and other details of all the aforesaid Directors areavailable on the Bank's website: www.idfcbank.com.
During the year Mr. Vinod Rai (DIN: 01119922) Nominee Directoron the Board of the Bank representing IDFC Limited resigned w.e.f. July 31 2016 on beingappointed as the Chairman of the Banks Board Bureau.
Mr. Anil Baijal (DIN: 01608892) resigned from the Board as aDirector and Non-Executive Chairman w.e.f. December 08 2016 pursuant to completion ofhis RBI approved tenure. Mr. Baijal is now serving as the 21st LieutenantGovernor of Delhi.
Subsequently Ms. Veena Mankar (DIN: 00004168) was appointed as theIndependent Non-Executive Chairperson of the Bank in his place w.e.f. December 09 2016.The RBI accorded its approval to Ms. Veena Mankar for holding the position of IndependentNon-Executive Chairperson of the Bank w.e.f. January 30 2017.
Ms. Veena Mankar has been with the Bank as an Independent Directorsince July 27 2015.
Dr. Ashok Gulati (DIN: 07062601) resigned from the Board w.e.f.February 10 2017 pursuant to being nominated by the Government as part-time non-officialDirector on the Central Board of RBI.
Mr. Vikram Limaye has resigned from the Board of IDFC Bank w.e.f.July 15 2017 consequent to his appointment as the Managing Director & CEO by theBoard and Shareholders of National Stock Exchange of India Limited.
The Board placed on record its appreciation for the valuable servicesrendered by Mr. Vinod Rai Mr. Anil Baijal Dr. Ashok Gulati and Mr. Vikram Limaye duringtheir tenure as Directors of the Bank.
RETIREMENT BY ROTATION
As on date of this report your Bank has nine (9) Directors as follows:Five (5) IDs - Ms. Veena Mankar Mr. Anand Sinha Mr. Abhijit Sen Mr. Ajay Sondhi and Mr.Rajan Anandan Two (2) Nominee Directors - Mr. Vikram Limaye and Ms. Anindita Sinharay Two(2) Executive Directors -Dr. Rajiv B. Lall and Mr. Avtar Monga In accordance with theArticles of Association of the Bank and pursuant to the provisions of Section 152 of theCompanies Act 2013 IDs are not liable to retire by rotation. Out of the Two (2)Executive Directors Dr. Rajiv B. Lall Founder Managing Director & CEO is not liableto retire by rotation as per his terms of appointment. Mr. Avtar Monga Executive Directoris an Additional Director who was appointed w.e.f. April 25 2017 and his appointment isplaced for approval at the ensuing AGM in accordance with Section 160 and Section 161 ofthe Companies Act 2013. Hence he is not liable to retire by rotation at the ensuing AGM.
Out of the Two (2) Nominee Directors Ms. Sinharay is an AdditionalDirector who was appointed during FY17 and her appointment is placed for approval at theensuing AGM in accordance with Section 160 and Section 161 of the Companies Act 2013.Accordingly she is not liable to retire by rotation at the ensuing AGM. Mr. VikramLimaye Nominee Director was eligible to retire by rotation at the ensuing AGM to be heldon July 28 2017. However Mr. Limaye has resigned from the Board of IDFC Bank w.e.f. July15 2017.
In view of these circumstances there would be no director who would beliable to retire by rotation at the ensuing AGM.
KEY MANAGERIAL PERSONNEL
As on the date of this report the following officials of the Bank arethe Key Managerial Personnel' pursuant to the provisions of Section 203 of theCompanies Act 2013:
Dr. Rajiv B. Lall
Founder Managing Director & CEO
Mr. Sunil Kakar
Chief Financial Officer (resigned w.e.f. July 15 2017)
Mr. Mahendra N. Shah
Company Secretary & Chief Compliance Officer
Familiarisation Programmes for Board Members
At the time of appointment all Directors of your Bank are madefamiliar with their roles responsibilities rights and duties along with a brief overviewof your Bank's operations in a nutshell.
The Board members are further provided with necessary documentsreports and internal policies to enable them to familiarise with the Bank'sprocedures and practices.
Periodic presentations are made at the Board and Committee meetings onbusiness and performance of the Bank global business environment business strategy andassociated risks responsibilities of the Directors etc. Detailed presentations on theBank's business and updates thereon were made at the meetings of the Directors andCommittees held during the year.
The details of the said programmes are available on the Bank'swebsite: www.idfcbank.com under the Investor Relations' section.
Pursuant to Listing Regulations and Companies Act 2013 the processindicating the manner in which annual evaluation has been done by the Board of its ownperformance and that of its Committees and individual Directors is given in the Corpor ateGovernance Report which forms part of this Annual Report.
During the period under review seven (7) board meetings were held;details of which are given in the Corporate Governance Report which forms part of thisAnnual Report.
In compliance with various regulatory requirements several BoardCommittees have been constituted to delegate matters that require greater and more focusedattention.
The details of the constitution terms of reference and meetings of allthe Board-level Committees are given in the Corporate Governance Report which forms partof this Annual Report.
A brief overview of some of the Board-level Committees is furnishedbelow:
The Audit Committee as constituted under Section 177 of the CompaniesAct 2013 has the following members:
Mr. Abhijit Sen
Chairman Independent Director
Mr. Ajay Sondhi
Member Independent Director
Mr. Anand Sinha
Member Independent Director
Ms. Veena Mankar
Member Independent Director
Mr. Vikram Limaye
Member Nominee Director
The Audit Committee met five (5) times during FY17 i.e. on April 262016; July 26 2016; October 25 2016; November 28 2016 and January 25 2017.
All the recommendations made by the Audit Committee during the yearwere accepted by the Board.
Corporate Social Responsibility Committee
The Corporate Social Responsibility (CSR') Committee asconstituted under Section 135 of the Companies Act 2013 has the following members:
Dr. Rajiv B. Lall
Chairman Founder Managing Director & CEO
Mr. Abhijit Sen
Member Independent Director
Ms. Veena Mankar
Member Independent Director
The CSR Committee of the Bank met two (2) times during FY17 i.e. onApril 26 2016 and November 25 2016.
The CSR Policy of the Bank is available on the Bank's website:www.idfcbank.com under the Investor Relations' section.
The CSR initiatives undertaken by IDFC Bank through IDFC Foundation aSection 8 company under the Companies Act 2013 are given in Annexure 3.
Nomination and Remuneration Committee / Remuneration Policy
The Nomination and Remuneration Committee was constituted in compliancewith the RBI Guidelines Section 178 of the Companies Act 2013 and Listing Regulations.The NRC has the following members:
Mr. Ajay Sondhi
Chairman Independent Director
Mr. Anand Sinha
Member Independent Director
Ms. Veena Mankar
Member Independent Director
The Bank has a process in place for identification of independencequalifications and positive attributes of Directors.
Your Bank's remuneration policy seeks to provide a framework forthe remuneration of the following categories of people at IDFC Bank:
1. Whole Time / Executive Directors
2. Non-Executive / Independent Directors
3. Key Managerial Personnel and Senior
The aforesaid remuneration policy is in line with the provisions of theCompanies Act 2013 and RBI guidelines issued in this regard from time to time.
Taking into consideration the aforesaid remuneration policy the NRCrecommends remuneration of Executive Directors Key Managerial Personnel and SeniorManagement Personnel to the Board for its approval.
Internal Financial Controls
The Bank has adequate internal controls and processes in place withrespect to its financial statements which provide reasonable assurance regarding thereliability of financial reporting and preparation of financial statements. These controlsand processes are driven through various policies procedures and certification. Thecontrols and processes are being reviewed periodically. The Bank has a mechanism oftesting the controls and processes at regular intervals for their design and operatingeffectiveness to ascertain the reliability and authenticity of financial information.
Deloitte Haskins & Sells Chartered Accountants Ahmedabad(DHS') (Registration No: 117365W) will retire as the Statutory Auditors of theBank at the ensuing AGM. In terms of Section 139 of the Companies Act 2013 read withCompanies (Audit & Auditors) Rules 2014 the Board of Directors has recommended theappointment of DHS as Statutory Auditors of the Bank for a period of One (1) year subjectto approval of the RBI to hold office from the conclusion of the ensuing 3rd AGMtill the conclusion of 4th AGM on a remuneration to be decided by theBoard or Committee thereof.
DHS the retiring auditors have confirmed that their appointment ifmade would be in conformity with the provisions of Section 139(1) read with Rule 4 of theCompanies (Audit and Auditors) Rules 2014 and Section 141 of the Companies Act 2013 andhave given their consent to be appointed.
The Board recommends the appointment of DHS as the Statutory Auditorsof the Bank at the ensuing AGM.
There were no qualifications reservations adverse remarks ordisclaimers made by the Statutory Auditors in their report for the financial year endedMarch 31 2017.
Pursuant to the provisions of Section 204 of the Companies Act 2013and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the Bank had appointed Bhandari & Associates Company Secretaries to undertakethe Secretarial Audit of the Bank for the financial year ended March 31 2017.
The Bank provided all assistance and facilities to the SecretarialAuditors for conducting their audit.
The Secretarial Audit Report is appended as Annexure 4 to thisreport.
There were no qualifications reservations adverse remarks ordisclaimers made by the Secretarial Auditors in their report for the financial year endedMarch 31 2017.
Your Bank has a regular process of getting concurrent audit done forthe treasury and trade finance operations. The concurrent audit is done by BSR & Co.LLP Chartered Accountants for treasury operations and Ernst & Young LLP CharteredAccountants for trade finance operations. The concurrent audit reports for both thefunctions are placed before the Audit Committee for review.
Instances of Fraud if any reported by the Auditors or the Management
There have been no instances of fraud reported by the Auditors underSection 143(12) of the Companies Act 2013 or by the Management.
Risk Management Policy
Your Bank operates within an effective risk management framework toactively manage all the material risks faced by the Bank in a manner consistent with theBank's risk appetite. Your Bank aims to establish itself as an industry leader in themanagement of risks and strives to reach the efficient frontier of risk and return for theBank and its Shareholders. The Board has the ultimate responsibility for the Bank'srisk management framework. The Board is responsible for approving the Bank's riskappetite risk tolerance and related strategies and policies. To ensure the Bank has asound system of risk management and internal controls in place the Board has establishedthe Risk Management Committee of the Board. The Risk Management Committee of the Boardreviews risk management policies of the Bank pertaining to credit market liquidity andoperational risks. The Committee also reviews the Risk Appetite & Enterprise RiskManagement framework Internal Capital Adequacy Assessment Process (ICAAP') andStress Testing. Your Bank has in place a Risk Management Policy approved by the Board.
Vigil Mechanism / Whistle Blower Policy
The Bank has implemented a Whistle Blower Policy in compliance with theprovisions of the Listing Regulations Companies Act 2013 and RBI notification onIntroduction of Protected Disclosures Scheme for Private Sector and Foreignbanks'. Pursuant to this policy the Whistle Blowers can raise concerns relating toreportable matters (as defined in the policy) such as breach of IDFC Bank Code of Conductemployee misconduct fraud illegal unethical imprudent behaviour corruption safety andmisappropriation or misuse of Bank funds / assets etc. Further the mechanism adopted bythe Bank encourages the Whistle Blower to report genuine concerns or grievances andprovides for adequate safeguards against victimisation of Whistle Blower to those whoavail such mechanism and also provides for direct access to the Chairman of the AuditCommittee in exceptional cases. The Audit Committee reviews the functioning of the VigilMechanism from time to time. None of the Whistle Blowers has been denied access to theAudit Committee of the Board. The Whistle Blower Policy is available on the Bank'swebsite: www.idfcbank.com under the Investor Relations' section. The WhistleBlower Policy is periodically communicated to the employees and is also posted on theBank's intranet.
In addition to the above IDFC Bank has formulated Vigilance Policy foreffectively managing the risks faced by the Bank on account of corruption malpracticesand frauds. Dr. Rajeev Uberoi General Counsel and Head - Legal and Audit is the ChiefVigilance Officer of the Bank.
Anti Sexual Harassment Policy
Your Bank has in place a policy on Anti Sexual Harassment whichreflects the Bank's zero-tolerance towards any form of prejudice gender bias andsexual harassment at the workplace. Your Bank undertakes ongoing trainings to createawareness on this policy. During FY17 employees were given training on the subjectthrough intranet quiz and lectures so that they understand the anti sexual harassmentpolicy the complete framework adopted by the Bank to report and resolve instances ofsexual harassment etc. For details on initiatives taken by your Bank in this regardsexual harassment cases etc. please refer the Business Responsibility Report which ishosted on the Bank's website: www.idfcbank.com.
Significant and Material Orders passed by the Regulators / Courts /Tribunals
During the year under review no significant and material orders werepassed by the regulators or courts or tribunals impacting the going concern status oroperations of the Bank.
Material Changes and Commitments affecting the Financial Position ofthe Bank
There are no material changes and commitments affecting the financialposition of the Bank which have occurred between the end of the financial year of the Banki.e. March 31 2017 and the date of this Board's Report.
Related Party Transactions
All the related party transactions that were entered into during thefinancial year were on arm's length basis and in the ordinary course of business ofthe Bank. IDFC Group including IDFC Bank have always been committed to good corporategovernance practices including in matters relating to related party transactions. All therelated party transactions are placed before the Audit Committee for approval. Prioromnibus approval is obtained from the Audit Committee for foreseen related partytransactions. Prior omnibus approval is also obtained for unforeseen related partytransactions subject to their value not exceeding I 1 crore per transaction. The requireddisclosures are made to the Committee on a quarterly basis in terms of the omnibusapproval of the Committee.
Pursuant to the provisions of Companies Act 2013 and Rules madethereunder Listing Regulations and in the back-drop of Bank's philosophy on suchmatters the Bank has in place board approved policy on related party transactions. Thesaid policy is also uploaded on the Bank's website: www.idfcbank.com under theInvestor Relations' section. Since all related party transactions entered intoby the Bank were in the ordinary course of business and on arm's length basis FormAOC-2 as prescribed under Section 134(3)(h) of the Companies Act 2013 is not applicableto the Bank.
Conservation of Energy
Technology Absorption Foreign Exchange Earnings and Outgo
The provisions of Section 134(3)(m) of the Companies Act 2013 readwith Rule 8(3) of the Companies (Accounts) Rules 2014 are not applicable to your Bank.
However your Bank has been taking steps at all times for conservationof energy. The initiatives taken for conservation of energy has been mentioned in theBusiness Responsibility Report which is hosted on the Bank's website:www.idfcbank.com.
Also your Bank has been increasingly using information technology inits operations for more details please refer Management Discussion and Analysis whichforms part of this Annual Report.
The Board of Directors recommends the following items under specialbusiness for approval of the Shareholders at the ensuing AGM:
1. Offer and Issue of Debt Securities on
Private Placement basis.
2. Appointment of Mr. Anand Sinha as an
3. Appointment of Ms. Anindita Sinharay as a Nominee Directorrepresenting Government of India.
4. Appointment of Mr. Sunil Kakar as a
Nominee Director representing
IDFC Limited (Ultimate Holding Company).
5. Appointment of Mr. Avtar Monga as a
6. Appointment of Mr. Avtar Monga as the
In accordance with Green Initiative' your Bank is sendingthe Annual Report and Notice of AGM in electronic mode to those Shareholders whose e-mailaddresses are registered with the Bank and / or the Depository Participants.
Your Directors are thankful to the Shareholders for their participationin this Green Initiative.
We look forward to your continued support towards this Initiative.
Management Discussion and Analysis Report
The Management Discussion and Analysis Report for the year underreview as required by Regulation 34(2)(e) of the Listing Regulations forms part of thisAnnual Report.
Your Directors ensure the Bank's prosperity by collectivelydirecting its affairs whilst meeting the appropriate interests of its Shareholders andother Stakeholders.
Your Bank is committed to achieve the highest standards of CorporateGovernance. A separate section on Corporate Governance standards followed by your Bank andthe relevant disclosures as stipulated under Listing Regulations Companies Act 2013 andRules made thereunder forms part of this Annual Report.
A Certificate from the Statutory Auditors of the Bank Deloitte Haskins& Sells Chartered Accountants Ahmedabad (Registration No. 117365W) conformingcompliance to the conditions of Corporate Governance as stipulated under ListingRegulations is affixed at the beginning of the Corporate Governance Report and forms partof this Annual Report.
CEO & CFO Certification
Certificate issued by Dr. Rajiv B. Lall Founder Managing Director& CEO and Mr. Sunil Kakar Chief Financial Officer of the Bank in terms of Regulation17(8) of Listing Regulations for the year under review was placed before the Board ofDirectors and forms part of this Annual Report.
Business Responsibility Report
The Business Responsibility Report in terms of Regulation 34(2)(f) ofListing Regulations describing the initiatives taken by IDFC Bank from an environmentalsocial and governance perspective is hosted on the Bank's website: www.idfcbank.comunder the Investor Relations' section. Any Member interested in obtaining aphysical copy of the same may write to the Company Secretary & Chief ComplianceOfficer of the Bank by sending an e-mail on mahendra.shah@ idfcbank.com.
Extract of Annual Return
Pursuant to sub-section 3(a) of Section 134 and sub-section (3) ofSection 92 of the Companies Act 2013 read with Rule 12 of the Companies (Management andAdministration) Rules 2014 the extract of the Annual Return (Form No. MGT-9) as at March31 2017 forms part of this report and is appended as Annexure 5.
Directors' Responsibility Statement
Pursuant to the requirement under Section 134(5) of the Companies Act2013 it is hereby confirmed that: a. in the preparation of the annual accountsthe applicable accounting standards had been followed along with proper explanationrelating to material departures; b.the Directors had selected such accountingpolicies and applied them consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of theBank at the end of the financial year and of the profit of the Bank for that period; c.the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Bank and for preventing and detecting fraud and otherirregularities; d.the Directors had prepared the annual accounts on a going concernbasis; e. the Directors had laid down internal financial controls to be followed bythe Bank and that such internal financial controls are adequate and were operatingeffectively; and f. the Directors had devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems were adequate andoperating effectively.
Your Directors take this opportunity to express their deep and sinceregratitude to our Customers Business Partners Business Correspondents and Vendors for thetrust and confidence reposed by them on the Bank which has helped your Bank gain momentumin just 18 months of its operations.
We would like to thank our Shareholders Bondholders Investors andFinancial Institutions for their co-operation and assistance during the year under review.Your Directors would like to place on record their appreciation for the support receivedfrom IDFC Group Government of India State Governments various Ministries RBI SEBIStock Exchanges Depositories Rating Agencies Unique Identification Authority of India(UIDAI') National Payments Corporation of India (NPCI') TheClearing Corporation of India Limited (CCIL') Indian Banks' Association(IBA') Insurance Regulatory and Development Authority of India(IRDA') and all other regulatory agencies and associations with which the Bankinteracts. Your Directors recognise the commitment drive and hard work put in by eachemployee of the Bank as well as its subsidiary company to help your Bank towards achievingits "dharma" to materially deepen and broaden our reach deliveringdifferentiated service to the full range of customers - corporate and retail urban andrural - through innovation in products processes and technology empowering thecommunities we serve to grow and prosper.
|For and on behalf of the Board of |
|VEENA MANKAR |
|Independent Non-Executive Chairperson |
|JUNE 30 2017 |