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IDFC First Bank Ltd.

BSE: 539437 Sector: Financials
NSE: IDFCFIRSTB ISIN Code: INE092T01019
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OPEN 31.00
PREVIOUS CLOSE 31.25
VOLUME 186601
52-Week high 48.00
52-Week low 17.75
P/E
Mkt Cap.(Rs cr) 17,726
Buy Price 31.20
Buy Qty 46793.00
Sell Price 31.25
Sell Qty 1012.00
OPEN 31.00
CLOSE 31.25
VOLUME 186601
52-Week high 48.00
52-Week low 17.75
P/E
Mkt Cap.(Rs cr) 17,726
Buy Price 31.20
Buy Qty 46793.00
Sell Price 31.25
Sell Qty 1012.00

IDFC First Bank Ltd. (IDFCFIRSTB) - Director Report

Company director report

Dear Shareholders

Your Directors are pleased to present the Sixth Annual Report of IDFC FIRST BankLimited (‘IDFC FIRST Bank Rs or the ‘Bank') together with theaudited financial statements for the financial year ended March 31 2020.

FINANCIAL HIGHLIGHTS

Particulars FY 2020 FY 2019
Deposits 65108 70479
Borrowings 57397 69983
Investments 45405 58475
Advances 85595 86302
Total Assets/Liabilities 149200 167185
Total Income 17589 12800
Profit before Depreciation and Tax (2073) (483)
Net Profit (2864) (1944)
Appropriations
Transfer to Statutory Reserve - -
Transfer to Capital Reserve 166 2
Transfer to Special Reserve - -
Transfer from Investment Reserve - -
Dividend paid (includes tax on dividend) - 294*
Balance in profit and loss account carried forward (3560) (530)
Capital adequacy ratio (Basel III) 13.38% 15.47%
Gross NPA % 2.60% 2.43%
Net NPA % 0.94% 1.27%
Return on Assets (1.79%) (1.20%)

* Dividend amount pertains to FY 2017-18 which was declared and paid in FY 2018-19.

Note: In view of amalgamation of erstwhile Capital First Limited with IDFC BankLimited from the appointed date of October 01 2018 the figures for FY 2019-20 are notcomparable with FY 2018-19.

STATE OF AFFAIRS OF THE BANK

The Bank has successfully diversified its business mix and added new revenue streamsafter the Merger. Now it has expanded its reach to serve new customer segments both on theretail as well as wholesale side of the business. The achievements during the lastfinancial year FY 2019-20 are mentioned below -

1. Strong Growth in Retail Assets:

• Retail Book increased 40% Y-o-Y to Rs 57310 crores as on March 31 2020 from Rs40812 crores as on March 31 2019.

• Retail Funded Assets constitutes 54% of Funded Loan Assets as on March 31 2020compared to 37% as on March 31 2019. Including the PSL buyout portfolio the underlyingassets are retail loans the retail assets contribution to overall funded assets stood at61% as of March 31 2020.

• Wholesale Book decreased by 27% from Rs 53649 crores as on March 31 2019 to Rs39388 crores as on March 31 2020.

• Within Wholesale Book the Infrastructure loans decreased by 31% from Rs 21459crores as on March 31 2019 to Rs 14840 crores as on March 31 2020.

2. Strong Growth in Retail Liabilities

• The Total CASA Deposits increased to Rs 20661 crores as on March 31 2020 fromRs 7893 crores as on March 31 2019 Y-o-Y increase of 162%.

• CASA Ratio improved to 31.87% as on March 31 2020 from 11.40% as on March 312019.

• Strong CASA growth of Rs 12769 crores during FY20 and Rs 4458 crores during Q4FY20 despite the disturbance of COVID and one of the private sector bank issues.

• Retail Deposits (Retail CASA and Retail Term Deposits) increased to Rs 33924crores as on March 31 2020 from Rs 13214 crores as on March 31 2019 Y-o-Y increase of157%.

• IDFC FIRST Bank Fixed Deposit program assigned highest safety rating of FAAA byCRISIL.

• Bank consciously reduced Certificate of Deposits (CD) from Rs 28754 crores ason March 31 2019 to Rs 7111 crores as on March 31 2020 a Y-o-Y reduction of 75% as CDare short term and institutional borrowing in nature and replaced them with retail FD andCASA money thus strengthening and diversifying the liabilities significantly.

3. Strong growth in Core Earnings: (Q4 data are givenas figures of FY 2018-19 are notcomparable with

FY 2019-20 due to merger)

• Strong NII Growth: NII grew by 40% Y-o-Y to Rs 1563 crores in Q4 FY20 ascompared to Rs 1113 crores in Q4 FY19.

• Strong NIM improvement: NIM has improved to 4.24% in Q4 FY20 as compared to3.03% in Q4 FY19 and 3.86% in Q3 FY20.

• Strong growth in Total Income (NII + Fees + Trading Gain): Grew 67% Y-o-Y to Rs2314 crores in Q4 FY20 from Rs 1386 crores in Q4 FY19. Fee Income as a % of Total Income(net of Trading Gain) stood at 22% for Q4 FY20.

• Core Pre-provision Operating Profit (PPOP Net of treasury income) grew 70%from Rs 275 crores in Q4 FY19 to Rs 468 crores in Q4 FY20.

• Provision: The Bank was required to make COVID-19 related provision of Rs 25crores pertaining to accounts where asset classification benefit was given. The Bank hasprovided the entire amount in Q4 FY20 itself and has additionally taken Rs 200 crores ofCOVID-19 related provisioning proactively for over-dues of 1-89 days as of February 292020 taking total COVID-19 provisions to Rs 225 crores. Including this the totalprovisions for Q4FY20 was Rs 679 crores.

• Profit After Tax: The PAT for Q4 FY20 is reported at Rs 72 crores as compared toLoss of Rs 218 crores for Q4 FY19. For the full year FY20 the Bank made a net loss of Rs2864 crores mainly because of the provisions taken on the legacy loans primarily ininfrastructure telecom and financial sector corporate clients totaling to Rs 2688crores revaluation of DTA due to change in the Tax rate change by the Govt. of Indiaamounting to Rs 750 crores and lastly the additional COVID-19 impact related provisionsamounting to Rs 225 crores.

4. Asset Quality of the Bank remains high

• Bank's Gross NPA ratio as of March 31 2020 stood at 2.60% as compared to 2.43%as of March 31 2019. The Gross NPA ratio without considering the impact of moratoriumwould have been 2.88% as of March 31 2020. Gross NPA ratio as of December 31 2019 was2.83%.

• Bank's Net NPA ratio as of March 31 2020 stood at 0.94% as compared to 1.27% asof March 31 2019. The Net NPA ratio without considering the impact of moratorium wouldhave been 1.14% as of March 31 2020 which would have been still lesser than Net NPA ratioof 1.27% as of March 31 2019. Net NPA ratio as of December 31 2019 was 1.23%.

• Provision Coverage Ratio (PCR) has improved to 64.53% as of March 31 2020 ascompared to 48.18% as of March 31 2019 and as compared to 57.34% as of December 31 2019.

5. Strong Asset Quality on Retail Loan Book:

• Retail Asset Gross NPA ratio stood at 1.77% as of March 31 2020 as compared to2.18% as of March 31 2019 and 2.26% as of December 31 2019. Without moratorium theRetail Asset Gross NPA ratio as of March 31 2020 would have been 2.22%.

• Retail Asset's Net NPA ratio stood at 0.67% as of March 31 2020 as compared to1.24% as of March 31 2019 and 1.06% as of December 31 2019. Without moratorium theRetail Asset Net NPA ratio as of March 31 2020 would have been 0.99%.

6. Strong Capital Adequacy:

• Capital Adequacy Ratio is strong at 13.38% with CET-1 Ratio at 13.30% as ofMarch 31 2020.

• The Bank announced it plans to mobilize Rs 2000 crores of fresh equity capitalduring Q1 FY21 process to complete by 1st week of June 2020.

• Post the capital raise the Capital Adequacy Ratio would be around 15%.

7. Franchisee:

• As on March 31 2020 the Bank has built a national footprint through theoperation of 464 branches (out of which 295 are Urban Branches and 169 are Rural Branches)across many cities in India 652 Corporate Business Correspondent (‘BC') branches356 ATMs 3 Central Processing Centers and 1 Clearing Hub.

Points of Presence comparison chart:

Particulars FY 2019-20 FY 2018-19
Urban Branches 295 133
Rural Branches 169 109
ATMs* 356 113
Asset Service Branches 128 102
Rural BC Branches (IDFC FIRST Bharat Limited) 380 354
Other BC Branches 272 100

'Excluding white label ATMs

• The Bank offers a wide gamut of products to cater to the needs of customers fromall segments which can be viewed on the Bank's website: www.idfcfirstbank.com.

UPDATE ON IMPACT OF COVID 19

Late December 2019 a cluster of pneumonia cases of unknown cause was reported byhealth authorities in Wuhan Hubei Province People's Republic of China.

As a precautionary measure and with pro-active readiness our Bank started monitoringand preparing early from January 22 2020:

Alert & Procurement of Personal Protective Equipments ('PPEs'): Newson this matter was monitored closely updates shared with the management and alerts sentto employees; PPEs including masks and sanitizers were procured early.

Policies: Work from Home and Quarantine Policies were formalized andpublished.

Remote Access Infrastructure: VPN infrastructure was readied beforelockdown including movement of laptops desktops to staff residence A COVID Center headedby V. Vaidyanathan Managing Director & Chief Executive Officer (‘MD & CEO')Madhivanan B. Chief Operating Officer (‘COO') and the management team along withCrisis Management Team provided strong leadership and tracked progress on a daily basis.The team monitored and provided necessary directions from time to time and successfullymanaged the crisis.

Various forms of communication advisories on the disease symptoms safeguardsrestrictions and the like were sent to the management and staff since January 22 2020 asthe disease progressed from a Public Health Emergency of International Concern and evolvedinto a Pandemic leading to complete lockdown in India.

All operating premises of the Bank are sanitized and kept safe for staff and customers.Daily disinfection (multiple times) is done sanitizers are deployed across premises andbranches checking and monitoring of staff's temperature is undertaken for any symptomsand immediate quarantine is advised in case of even the most minor symptoms based on theBank's Quarantine policy.

The Lockdown Strategy adopted by the Bank covers the following:

Branch Operations - All branches across the country are operated as per authoritiesdefined operating windows with skeletal staff (on rotation).

Essential Activities - Our Bank supported essential activities like Cash Deposits& Withdrawals Clearing of Cheques Remittances and Government transactions.

Digital Banking - All digital banking channels of the Bank were running seamlesslywith critical support team resources available for managing sudden spikes.

Split Operations and Work from Home-The Bank successfully implemented ‘Workfrom Home Rs for employees

Customer Service-The Bank adequately equipped its Customer Service Agents withcapabilities to work from home. The staff operated from their Homes as well as Offices viacall and e-mail without any disruption to services.

ATM & Branch Cash Adequacy-Adequate measures were taken to ensure supply ofcash to Bank's branches and ATMs.

Regulatory Submissions-The Bank's Compliance Team worked diligently pro-activelyupdated and responded to all the Statutory and Regulatory bodies queries.

IDFC FIRST Bank is fully functional and provides critical banking services to all itscustomers.

Moratorium as a relief measure to the borrowers

The coronavirus pandemic and the lockdown in the country impacted the income of manyespecially the self-employed. Against this backdrop the Reserve Bank of India ('RBI')vide it's circulars issued on March 27 2020 and subsequently amended advised certainregulatory measures to mitigate the burden of debt servicing and to ensure continuity ofviable businesses. Lenders could use their discretion to allow deferment of loaninstalments falling due between March 01 2020 and August 31 2020. This was essentially a‘pause Rs in contracted repayment obligations and interest on the loan continued toaccrue.

The said moratorium and further extensions made by the RBI provided relief to manyborrowers whose livelihood and income had suffered on account of the pandemic.

The Bank has been fully supportive of RBI's move and has provided moratorium facilityto borrowers thereby deferring their instalments until the end of the loan tenure alongwith accrued interest for the moratorium period. No charges have been applied on accountsduring this period.

This has enabled borrowers especially small and medium sized businesses who haveavailed the facility to cope with the difficult business conditions caused by thepandemic. The Bank proactively communicated all necessary information related tomoratorium to borrowers through its website SMSs emails social media and throughconversations with its customer service teams.

DIVIDEND

During FY 2019-20 the Bank had incurred losses. Further it may be noted that RBI videits circular no. RBI/2019-20/218 DOR.BP.BC.No.64/21.02.067/2019-20 dated April 17 2020has directed that banks shall not make any further dividend pay-outs from the profitspertaining to the financial year ended March 31 2020 until further instructions. RBIadvised that in an environment of heightened uncertainty caused by COVID-19 it isimportant that banks conserve capital to retain their capacity to support the economy andabsorb losses.

Accordingly the Directors did not recommend dividend on equity shares for the FY2019-20.

In accordance with Regulation 43A of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 as amended from timeto time (‘Listing Regulations') our Bank has formulated a DividendDistribution Policy which ensures a fair balance between rewarding its Shareholders andretaining enough capital for the Bank's future growth.

This Policy is available on the Bank's web-link: www.idfcfirstbank.com/Investor-relation/corporate-goverance.html.

PREPAREDNESS ON IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (‘IND-AS')

The RBI vide Circular RBI/2018-2019/146 DBR. BP.BC.No.29/21.07.001/2018-19 dated March22 2019 decided to defer the implementation of Ind-AS for banks till further notice.

The Bank has made significant progress on Ind AS implementation and in fact since theBank is an associate company of the Promoter Group - IDFC Limited which is a Non-BankingFinance Company ('NBFC') that falls under the ‘Ind AS Road map Rs mandatorilyapplicable from April 01 2018. Accordingly the Bank has been preparing and submittingspecial purpose "Fit-for-Consolidation" consolidated financials under Ind-AS toIDFC Limited with the transition date as April 01 2017. Under the RBI guidelines banksare not allowed to early adopt Ind AS and should be guided by the RBI guidelines.Accordingly the general purpose financial statements of the Bank presented in the AnnualReport are not under Ind AS.

Further the Bank also submits quarterly Standalone Proforma financials in the formatas prescribed by the RBI. These submissions are reviewed by the management and the AuditCommittee of the Bank before submission to the RBI. The working group of the Bank preparesquarterly pro-forma Ind-AS financials as required by the RBI.

The implementation of IND-AS is expected to result in significant changes to the waythe Bank prepares and presents its financial statements. The areas that are expected tohave significant accounting impact on the application of IND-AS are summarized below:

1. Financial assets (which include advances and investments) shall be classified underamortized cost fair value through other comprehensive income (a component of Reserves andSurplus) or fair value through profit/ loss categories on the basis of the nature of thecash flows and the intention of holding the financial assets.

2. Interest will be recognized in the income statement using the effective interestmethod whereby the coupon fees net of transaction costs and all other premiums ordiscounts will be amortized over the life of the financial instrument.

3. The impairment requirements of IND-AS 109 Financial Instruments are based on anExpected Credit Loss ('ECL') model that replaces the incurred loss model under the extantframework. The Bank will be generally required to recognize either a 12-Month or LifetimeECL depending on whether there has been a significant increase in credit risk sinceinitial recognition. IND-AS 109 will change the Bank's current methodology for calculatingthe provision for standard assets and nonperforming assets ('NPAs'). The Bank will berequired to apply a three-stage approach to measure ECL on financial instruments accountedfor at amortized cost or fair value through other comprehensive income. Financial assetswill migrate through the following three stages based on the changes in credit qualitysince initial recognition:

Stage 1: 12 Months ECL - For exposures which have not been assessed as credit-impaired or where there has not been a significant increase in credit risk since initial recognition the portion of the ECL associated with the probability of default events occurring within the next twelve months will need to be recognized.
Stage 2: Lifetime ECL - For credit exposures where there has been a significant increase in credit risk since initial recognition but are not credit-impaired a lifetime ECL will need to be recognized.
Stage 3: Lifetime ECL - Credit Impaired Financial assets will be assessed as credit impaired when one or more events having a detrimental impact on the estimated future cash flows of that asset have occurred. For financial assets that have become credit impaired a lifetime ECL will need to be recognized.

4. Accounting impact on the application of IND-AS at the transition date shall berecognized in Equity (Reserves and Surplus) as and when it becomes statutorily applicableto the Bank.

SHARE CAPITAL Paid-up Equity Share Capital

During FY 2019-20 28226604 equity shares of Rs 10 each were issued and allotted tothe eligible employees of the Bank on exercise of Options granted under IDFC FIRST BankLimited Employee Stock Option Scheme 2015 (‘IDFC FIRST Bank ESOS-2015').

As on March 31 2020 the issued subscribed and paid-up equity share capital of ourBank was Rs 48099030160 comprising 4809903016 equity shares of Rs 10 each.

Issue of Equity Shares on Preferential basis (‘Preferential Issue')

Our Bank has grown steadily on its business and financial parameters during the recentyears. Our Bank is one of India's fastest growing private sector banks with an expandingpresence across the country.

The Board of Directors of the Bank at their Meeting held on May 01 2020 subject toapproval of the shareholders and such other approvals as may be required approved thePreferential Issue involving the issue and allotment of up to 862440704 (Eighty-SixCrores Twenty-Four Lakh Forty Thousand Seven Hundred and Four) equity shares of facevalue of Rs 10/- (Rupees Ten only) each fully paid-up at a price of Rs 23.19/- perequity share (including premium of Rs 13.19/- per share) aggregating up to Rs 2000crores (rounded off) on a preferential basis to the below mentioned Promoter andNon-Promoter Investors the offer/issue price being determined in accordance with theapplicable provisions of the Securities and Exchange Board of India (Issue of Capital andDisclosure Requirements) Regulations 2018 (‘SEBI ICDR Regulations').

Name of the Investors/ Allottees No. of Shares to be allotted Category
IDFC Financial Holding Company Limited 344976282 Promoter Group
ICICI Prudential Life Insurance Company Limited 258732212 Non-Promoter Group
Dayside Investment Ltd (affiliated entity of Warburg Pincus) 86244070 Non-Promoter Group
HDFC Life Insurance Company Limited 86244070 Non-Promoter Group
Bajaj Allianz Life Insurance Limited 86244070 Non-Promoter Group
Total Shares 862440704

In view of the pandemic situation of COVID-19 and pursuant to the guidelines andnotification issued by the Ministry of Home Affairs Government of India and in light ofcirculars issued by the Ministry of Corporate Affairs Government of India (the ‘MCA')vide its General Circular No. 14/2020 dated April 08 2020 and General Circular No.17/2020 dated April 13 2020 (the ‘MCA Circulars') and pursuant to Section 110of the Companies Act 2013 and the Rules made thereunder our Bank proposed to seekshareholders Rs approval for this Preferential Issue through Postal Ballot by mechanism of‘Remote E-voting Rs process which will remain open for exercising votes from TuesdayMay 05 2020 at 09:00 a.m. India Standard Time (‘IST') till WednesdayJune 03 2020 at 05:00 p.m. (IST) (both days inclusive).

The object of the Preferential Issue was to strengthen the Capital Adequacy Ratio ofthe Bank and ensure it is adequately maintained over and above the regulatory minimum andalso with a view to augment funds to meet the short-term and long-term working capitalrequirements of the existing business operations and support its future growth plans andfor general corporate purposes.

As a result of the Preferential Issue there will be no change in the control ormanagement of the Bank. However voting rights will change in tandem with the shareholdingpattern.

Further this Preferential Issue was made pursuant to Sections 42 62(1)(c) and otherapplicable provisions if any of the Companies Act 2013 read with the Companies(Prospectus and Allotment of Securities) Rules 2014 and other relevant rules madethereunder in accordance with the guidelines rules and regulations of the Securities andExchange Board of India (‘SEBI') including Chapter V of SEBI ICDRRegulations the relevant provisions of the Banking Regulation Act 1949 the rulescirculars directions and guidelines issued by the RBI and subject to the MCA Circularsissued in April 2020. The Bank has ensured to comply with all legal and statutoryformalities.

Post the above Preferential Issue the issued subscribed and paid-up equity sharecapital of our Bank will be Rs 56723437200 comprising 5672343720 equity shares ofRs 10 each.

Reserve Bank of India has vide its letter dated May 10 2020 acknowledged the proposedincrease in Authorized Share Capital and consequent amendment to be carried out in theMemorandum of Association of the Bank subject to compliance with relevant statutes andcirculars/ instructions/ guidelines issued by RBI from time to time and shareholders Rsapproval.

Our Bank has not issued any equity shares with differential voting rights.

Authorised Share Capital

In order to meet Bank's growth objectives business expansion plans and to furtherstrengthen its financial position the Bank felt the need to infuse additional funds inthe form of further capitalization and to generate long term resources by issuingsecurities.

Considering the proposed Preferential Issue and allotment of equity shares onpreferential basis and in view to have an adequate Authorised Share Capital the Board ofDirectors of the Bank at their Meeting held on May 01 2020 approved to increase theAuthorised Share Capital of the Bank to Rs 75380000000/- (Rupees Seven thousand fivehundred thirty eight crores only) divided into 7500000000 (Seven hundred fifty crores)equity shares of Rs 10/- (Rupees Ten only) each and 3800000 (Thirty eight lakh)preference shares of Rs 100/- (Rupees One hundred only) each by creation of additional2175000000 (Two hundred seventeen crores and fifty lakh) equity shares of Rs 10/-(Rupees Ten only) each and the consequent alteration of its Memorandum of Associationsubject to approval of the Regulatory Authorities and the shareholders of the Bank byaforesaid Postal Ballot.

The Authorised Share Capital of the Bank pre and post increase is tabulated as under:

Pre - Increase Authorised Share Capital (as on March 31 2020)

Post - Increase Authorised Share Capital

Type

Face Value (Rs)

No. of shares Amount (Rs) No. of shares Amount (Rs)
Equity Shares

Rs 10/-

5325000000 Rs 53250000000 7500000000 Rs 75000000000
Preference Shares

Rs 100/-

3800000 Rs 380000000 3800000 Rs 380000000
Total Rs 53630000000 Rs 75380000000

CAPITAL ADEQUACY

Currently the Bank is required to maintain a minimum total Capital Adequacy Ratio of10.875% of which minimum Tier 1 is 8.875% including Capital conservation buffer.

Our Bank is well capitalised and has a Capital Adequacy Ratio (‘CAR') under BaselIII as at March 31 2020 of 13.38% (as against the RBI minimum requirement of 10.88%)& with Tier-I Capital Adequacy Ratio being 13.30%.

With Preferential Issue of Rs 2000 crores (rounded off) our Bank is availing aninsurance for an emerging COVID situation that positions itself for strong growth goingforward and take the capital adequacy of our Bank to around 15%. At such capital adequacyour Bank shall be one of the highest CET-1 capitalized banks in the country which is farhigher than the regulatory requirements.

At high levels of Capital Adequacy our Bank will continue to enjoy the highest levelsof confidence from the Indian financial ecosystem including capital market participantsdepositors and our customers.

With the strong opportunities in India (India is an emerging economy and an underservedand under-penetrated market) the strong asset track record (combined with Capital Firstand IDFC Bank) combined with robust liability franchise our Bank is well placed to growits business in the future. Also the capital raise does give the buffer on account ofunforeseen circumstances on account of COVID.

As a Bank it is our role to be strong and be strong custodians of public depositors/shareholders and such Preferential Issue will help to further strengthen the balance sheetimmensely.

RATINGS

Credit rating details for 80CCF Long Term Infrastructure Bonds Private Placement Bondsand other instruments of IDFC FIRST Bank is available on the Bank's web-link: www.idfcfirstbank.com/InvRstor-rRlation/ifb-credit-ratings.html.

Our Bank is rated ‘FAAA Rs by CRISIL for Rs 50000 crores Fixed Deposit Programwhich is the highest level of safety rating by CRISIL.

During the FY 2019-20 our Bank has not issued any Senior Unsecured RedeemableLong-Term Bonds in the nature of Non-Convertible Debentures and/ or non-equity regulatorycapital instrument.

DEPOSITS

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

As per the applicable provisions of the Banking Regulation Act 1949 details of theBank's deposits have been included under Schedule 3 - Deposits in the preparation andpresentation of the financial statements of the Bank.

RBI COMPLIANCES

As a Banking Company our Bank always aims to operate in compliance with applicable RBIguidelines and regulations and employs its best efforts towards achieving the same.

During the period under review the Bank has complied with the provisions of the ActRules Regulations Guidelines Standards etc. mentioned above to the extent applicable.During the financial year ended March 31 2020 Reserve Bank of India (RBI) has vide itsletter dated March 4 2020 imposed a monetary penalty of Rs 10000/- on the Bank withrespect to certain deficiencies observed on note/ coin exchange and clean note policyduring the incognito visit at one of the branch.

LOANS GUARANTEES OR ACQUISITION OF SECURITIES

Pursuant to Section 186(11) of the Companies Act 2013 loans made guarantees given orsecurities provided or acquisition of securities by a Banking Company in its ordinarycourse of business are exempted from disclosure requirements under Section 134(3)(g) ofthe Companies Act 2013.

PERFORMANCE AND CONTRIBUTION OF SUBSIDIARY AND ASSOCIATE COMPANIES

IDFC FIRST Bank has one wholly owned Subsidiary Company namely IDFC FIRST BharatLimited (‘IDFC FIRST Bharat‘) which was formerly known as IDFC Bharat Limited.

IDFC FIRST Bharat is acting as a Business Correspondent (‘BC') for distribution ofthe products of IDFC FIRST Bank and has given an added momentum to the financial inclusionplan of the Bank.

The Board of Directors and Shareholders of IDFC FIRST Bharat had approved the change ofname of the Company from ‘IDFC Bharat Limited Rs to ‘IDFC FIRST Bharat LimitedRs and the consequential amendment to the Memorandum and Articles of Association of theCompany.

The name of the Subsidiary has changed from 'IDFC Bharat Limited Rs to ‘IDFC FIRSTBharat Limited Rs with effect from April 29 2019 by virtue of 'Certificate ofIncorporation pursuant to change of name Rs issued by the ROC Chennai.

During FY 2019-20 IDFC FIRST Bharat has sourced Rs 6989 crores of which Rs 5855crores is in Joint Liability Group ('JLG') Rs 520 crores is in Micro Enterprises Loan('MEL') and Rs 588 crores is in Micro Housing Loan ('MHL') products Rs 28.3 crores is inTwo Wheeler ('TW') products and Rs 15.3 crores is in Housing Loan & Loan AgainstProperty ('HL/LAP') products as a BC to IDFC FIRST Bank. The year end portfoliooutstanding disbursed by IDFC FIRST Bharat for the financial year ended March 31 2020 hasincreased to Rs 5891 crores as compared to Rs 3732 crores for the financial year endedon March 31 2019.

IDFC FIRST Bank's policy for determining material subsidiaries is available on theBank's web-link: www.idfcfirstbank.com/ Investor-relation/corporate-goverance.html.

In accordance with the provisions of Section 129(3) of the Companies Act 2013 readwith the Companies (Accounts) Rules 2014 the Bank has prepared its consolidatedfinancial statements which forms part of this Annual Report.

Further pursuant to Section 136(1) of the Companies Act 2013 the Annual Report ofthe Bank containing therein its standalone and consolidated financial statements has beenhosted on the Bank's website: www.idfcfirstbank.com under the ‘InvestorRelations Rs section.

In addition thereto the Annual Report of IDFC FIRST Bharat containing therein itsaudited financial statements has also been hosted on the Bank's website: www.idfcfirstbank.comunder the ‘Investor Relations Rs section.

IDFC FIRST Bank has only one Associate Company as on March 31 2020 viz MillenniumCity Expressways Private Limited in which it holds 29.98% equity stake.

The highlights on performance of the Subsidiary and Associate Company and theircontribution to the overall performance of the Bank can be referred to in Form AOC-1appended as ANNEXURE 1.

PROMOTER

Pursuant to the RBI Guidelines for 'Licensing of New Banks in the Private Sector Rsdated February 22 2013 the Promoter - IDFC Financial Holding Company Limited (‘IDFCFHCL') is required to hold a minimum of 40% of the paid-up voting equity capital of theBank which shall be locked in for a period of five years from the date of commencement ofbusiness of the Bank i.e. from October 01 2015. Further the shareholding by IDFC FHCL inthe Bank in excess of 40% of the total paid-up voting equity capital was required to bebrought down to 40% within three years from the date of commencement of business of theBank. Also in the event of the Bank raising further voting equity capital during thefirst five years from the date of commencement of business IDFC FHCL should continue tohold 40% of the enhanced voting equity capital of the Bank for a period of five years fromthe date of commencement of business of the Bank. Accordingly as and when equity sharesare allotted by IDFC FIRST Bank pursuant to the ESOP Scheme or by way of any otherallotment IDFC FHCL purchases new shares for maintaining 40% shareholding in the Bank.

EMPLOYEES

The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with Rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 may be obtained by the shareholders by writing to theHead - Legal and Company Secretary of our Bank.

Disclosures pertaining to remuneration and other details as required under Section197(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 FIRST Bank ESOS - 2015'/ 'ESOS') wasframed with an object of encouraging higher participation on the part of employees in theBank's financial growth and success. An effective stock option scheme enables retention oftalent and aligning employee interest to that of the Shareholders.

IDFC FIRST Bank ESOS - 2015 was approved by the shareholders at their meeting held onDecember 09 2014. The shareholders at the 5th Annual General Meeting ('AGM')held on July 25 2019 approved increase in Employee Stock Options ('ESOP') pool from 6% to8% of the paid-up share capital of the Bank from time to time and revised the exerciseperiod within a period of 3 (three) years from the date of Vesting.

There were 256339705 Options outstanding at the beginning of FY 2019-20. During FY2019-20 41026000 Options were granted to the eligible employees under IDFC FIRST BankESOS-2015.

Further 34945742 Options had lapsed/ forfeited and 28226604 Options wereexercised during the year ended March 31 2020. Accordingly 234193359 Options remainedoutstanding as on March 31 2020. All Options vests in a graded manner and are required tobe exercised within a specific period in accordance with IDFC FIRST Bank ESOS-2015 andSecurities and Exchange Board of India (Share Based Employee Benefits) Regulations 2014as amended from time to time.

The Bank has used the intrinsic value method to account for the compensation cost ofStock Options to employees of the Bank. Intrinsic value is the amount by which the quotedmarket price of the underlying share on the date prior to the date of the grant exceedsthe exercise price on the Option. IDFC FIRST Bank ESOS - 2015 is administered by theNomination & Remuneration Committee (‘NRC') of the Board of the Bank.

Apart from above there has been no material change in IDFC FIRST Bank ESOS - 2015during FY 2019-20 and the said IDFC FIRST Bank ESOS - 2015 is in compliance with theSecurities and Exchange Board of India (Share Based Employee Benefits) Regulations 2014as amended from time to time.

The details and disclosures with respect to ESOS as required under Securities andExchange Board of India (Share Based Employee Benefits) Regulations 2014 and circularsissued thereunder have been uploaded on the Bank's website: www.idfcfirstbank.com underthe ‘Investor Relations Rs section.

Further disclosure as per the 'Guidance Note on Accounting for Employee Share-basedPayments Rs issued by the Institute of Chartered Accountants of India are appearing inthe Notes to the Standalone Financial Statements of IDFC FIRST Bank forming part of thisAnnual Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Appointment & Cessation

All appointments of Directors are made in accordance with the relevant provisions ofthe Companies Act 2013 and the Rules framed thereunder the Listing Regulations theBanking Regulation Act 1949 and the rules guidelines and circulars issued by the RBIfrom time to time.

The NRC conducts due diligence before appointment of Directors and ensures adherence to‘Fit and Proper Rs criteria as prescribed by RBI.

During the year under review the Board of Directors on the recommendation of the NRChad re-appointed Mr. Anand Sinha (DIN: 00682433) as a Independent Director of the Bank fora second term of four (4) consecutive years effective from August 01 2019 to hold officeup to July 31 2023 or for such other period subject to approval of the shareholders ofthe Bank and other applicable statutory/ regulatory approvals.

Mr. Sanjeeb Chaudhuri (DIN: 03594427) was appointed as an Additional Director in thecategory of Independent Director of the Bank for a period of four (4) consecutive yearseffective from May 10 2019 to hold office up to May 09 2023 subject to approval of theshareholders of the Bank and other applicable statutory/ regulatory approvals.

Accordingly the shareholders at its 5th Annual General Meeting of the Bankheld on July 25 2019 approved the following appointment:

• Appointed Mr. Pravir Vohra (DIN: 00082545) as an Independent Director for aperiod of three (3) years with effect from August 01 2018.

• Appointed following Directors on the Board of IDFC FIRST Bank for a period offive (5) years with effect from December 18 2018:

[a] Dr. (Mrs.) Brinda Jagirdar (DIN: 06979864) as an Independent Director;

[b] Mr. Hemang Raja (DIN: 00040769) as an Independent Director;

[c] Mr. Aashish Kamat (DIN: 06371682) as an Independent Director; and

[d] Mr. Vishal Mahadevia (DIN: 01035771) as a Non-Executive Non-Independent Director.

• Re-appointed Mr. Anand Sinha (DIN: 00682433) as an Independent Director for asecond term of four (4) years with effect from August 01 2019.

• Appointed Dr. Rajiv B. Lall (DIN: 00131782) as the Part-Time Non-ExecutiveChairman of the Bank for a period of two (2) years with effect from December 19 2018.

• Appointed Mr. V. Vaidyanathan (DIN: 00082596) as Managing Director and ChiefExecutive Officer for the period of three (3) years with effect from December 19 2018.

• Appointed Mr. Sanjeeb Chaudhuri (DIN: 03594427) as an Independent Director for aperiod of four (4) years with effect from May 10 2019.

During the year under review Mr. Desh Raj Dogra (DIN: 00226775) tendered hisresignation from the Board of IDFC FIRST Bank effective from April 04 2019 in order toavoid potential conflict of interest with his other Board memberships.

Brief profiles of all the Directors of the Bank are available on the Bank's web-link: www.idfcfirstbank.com/about-us/board-of-directors.html under the 'Board of Directors Rs section.

None of the Directors of the Bank are disqualified in accordance with Section 164 ofthe Companies Act 2013.

Further the Bank had received declaration from all the Independent Directors ('IDs')at the time of appointment and also at the first meeting of the Board of Directors held inFY 2019-20 that they meet the criteria of independence specified under sub-section (6) ofSection 149 of the Companies Act 2013 read with Rule 5 of the Companies (Appointment andQualification of Directors) Rules 2014 and Regulation 16(1)(b) of the ListingRegulations for holding the position of ID and that they shall abide by the ‘Codefor Independent Directors Rs as per Schedule IV of the Companies Act 2013. In the opinionof the Board the IDs possess the requisite integrity experience expertise andproficiency required under all applicable laws and the policies of the Bank.

Further all the IDs of the Bank have complied and affirmed to abide by Rule 6(Creation and Maintenance of Databank of Persons Offering to become Independent Directors)of the Companies (Appointment and Qualification of Directors) Rules 2014 as amended fromtime to time and have also declared their enrollment in the databank of IndependentDirectors maintained by Indian Institute of Corporate Affairs (‘IICA').

Further it is reported by the Bank's Secretarial Auditor that during the financialyear under review the Board of Directors of the Bank is duly constituted with properbalance of Executive Director Non-Executive Directors and Independent Directors. Thechanges in the composition of the Board of Directors that took place during the periodunder review were carried out in compliance with the provisions of the Companies Act 2013and Listing Regulations.

Further as per the Listing Regulations the certificate from the Bank's SecretarialAuditor being a Company Secretary in Practice has also been received and forms part ofCorporate Governance Report stating that none of the Directors on the Board of the Bankhave been debarred or disqualified from being appointed or continuing as directors ofCompanies by the Securities and Exchange Board of India/ Ministry of Corporate Affairs orany such statutory authority.

FRAMEWORK FOR APPOINTMENT OF DIRECTORS

The Bank has in place a framework for Board Diversity Fit & Proper Criteria andSuccession Planning for appointment of Directors on the Board of the Bank.

FAMILIARISATION PROGRAMMES FOR BOARD MEMBERS

At the time of appointment all Directors of our Bank are familiarized with theirroles responsibilities rights and duties along with a brief overview of our Bank'soperations in a nutshell.

The Board members are further provided with necessary documents reports and internalpolicies to enable them to familiarize with the Bank's procedures and practices.

Periodic presentations are made at the Board and Committee meetings on business andperformance of the Bank global business environment business strategy and associatedrisks responsibilities of the Directors etc.

Detailed presentations on the Bank's business and updates thereon were made at themeetings of the Board and Committees held during the year.

The details of the said programmes are available on the Bank's web-link: www.idfcfirstbank.com/Investor-relation/corporate-goverance.html.

BOARD EVALUATION

The Board of Directors has carried out an annual evaluation of its own performanceBoard Committees and Individual Directors pursuant to the provisions of the CompaniesAct 2013 and Listing Regulations for the financial year 2019-20. Additionally thenecessary evaluation was carried out by the NRC and IDs at their respective meetings heldfor the purpose.

The detailed process indicating the manner in which the annual evaluation has beencarried out pursuant to Listing Regulations and Companies Act 2013 is provided in theCorporate Governance Report which forms part of this Annual Report.

NUMBER OF MEETINGS OF THE BOARD

The Board met seven (7) times during FY 2019-20 viz. April 05 2019 May 10 2019July 24 2019 October 24 2019 January 29 2020 March 19 2020 and March 27 2020;details of which are given in the Corporate Governance Report which forms part of thisAnnual Report. The maximum interval between any two consecutive meetings did not exceeded120 days.

BOARD COMMITTEES

In compliance with various regulatory requirements several Board-level Committees havebeen constituted to delegate matters that require greater and more focused attention.

Details on the constitution brief terms of reference meetings held and attendance ofall the Board-level Committees are given in the Corporate Governance Report which formspart of this Annual Report.

A brief overview of some of the Board-level Committees is furnished below:

Audit Committee

The Audit Committee met seven (7) times during FY 2019-20 i.e. on May 10 2019 May 202019 July 24 2019 August 02 2019 October 24 2019 January 29 2020 and March 272020.

All recommendations made by the Audit Committee during the year were accepted by theBoard.

Further the Audit Committee comprises of the following members as on the date of thisreport:

Mr. Aashish Kamat - Chairperson Independent Director
Mr. Pravir Vohra - Member Independent Director
Mr. Sanjeeb Chaudhuri - Member Independent Director
Mr. Sunil Kakar Member Non-Executive Non-Independent Director

Nomination and Remuneration Committee (NRC)/Remuneration Policy

The NRC is constituted in compliance with the RBI Guidelines Section 178 of theCompanies Act 2013 and Listing Regulations.

The NRC met six (6) times during FY 2019-20 on May 09 2019 July 24 2019 September05 2019 October 24 2019 January 29 2020 and March 27 2020.

Further the NRC comprised of the following members as on the date of this report:

Mr. Hemang Raja - ChairpersonIndependent Director
Mr. Aashish Kamat - MemberIndependent Director
Dr. (Mrs.) Brinda Jagirdar - Member Independent Director
Mr. Vishal Mahadevia Member Non-Executive Non-Independent Director

In line with the provisions of the Companies Act 2013 and RBI guidelines issued inthis regard from time to time our Bank has a stable framework for remuneration of thevarious categories of persons at IDFC FIRST Bank and accordingly has two separateremuneration policies as given below:

I. Remuneration Policy for the Whole Time/Executive Directors Non-Executive/Independent Directors Key Managerial Personnel and Senior Management Personnel.

The various components of remuneration itemized in this policy inter-alia are asfollows:

For Whole Time/Executive Directors:

[a] Fixed Pay as decided by the NRC and the Board within the overall approval of theRBI;

[b] Variable Pay in the form of annual performance bonus will be determined based onthe Bank business units and individual performance and other evaluation criteria and isnot an entitlement;

[c] Retiral benefits allowances perquisites and other benefits;

[d] Stock Options;

[e] Directors and Officers Liability Insurance Policy;

[f] Severance Pay if mandated by any applicable laws.

[g] Malus/Clawback

For Non-Executive/Independent Directors:

[a] Commission to Non-Executive/Independent Directors (other than the Part - timeChairperson);

[b] Remuneration to Non-Executive Part-time Chairperson;

[c] Sitting Fees and Other Expenses; and

[d] Directors and Officers Liability Insurance Policy.

For Key Managerial Personnel (‘KMP') and Senior Management Personnel (‘SMP'):

[a] Fixed Pay as decided by the NRC and the Board;

[b] Variable Pay in the form of annual performance bonus will be determined based onBank business unit and individual performance and other evaluation criteria and is not anentitlement;

[c] Retiral benefits allowances perquisites and other benefits;

[d] Stock Options;

[e] Directors and Officers Liability Insurance Policy;

[f] Severance Pay if mandated by any applicable laws.

[g] Malus/Clawback.

II. Remuneration Policy for Employees (Including Risk-Takers) except for the WholeTime/Executive Directors Non-Executive/Independent Directors KMP and SMP.

The various components of remuneration itemized in this policy inter-alia are asfollows:

[a] Fixed Pay;

[b] Variable Pay in the form of annual performance bonus will be determined based onBank Business unit and individual performance and other evaluation criteria and is not anentitlement.

The organization has a robust policy around performance management which has a directbearing on Variable Pay. The organization applies the malus model through the performancemanagement framework.

In the event of significant negative contributions of the Bank and/ or the relevantline of business in any year the deferred compensation (if any) would be subjected toclawback arrangement;

[c] Statutory Bonus as may be mandated by any applicable laws;

[d] Stock Options;

[e] Severance Pay if mandated by any applicable laws.

The principles for remuneration at IDFC FIRST Bank are guided by the Bank's philosophyfor driving employee performance to achieve its medium term and long-term objectivesbalanced with prudent risk taking and are in compliance with the RBI's Guidelines onCompensation of Whole-Time Directors/ Chief Executive Officers/ Risk takers and Controlfunction staff etc. dated January 13 2012.

Both the remuneration policies are available on the Bank's web-link: www.idfcfirstbank.com/Investor-relation/corporate-goverance.html.

Our Bank also has a process in place for identification of independence qualificationsand positive attributes of its Directors. The NRC ensures a transparent nomination processto the Board of Directors with diversity of gender thought experience knowledge andperspective in the Board.

The NRC after taking into consideration the Remuneration Policy for the Whole Time/Executive Directors Non-Executive/ Independent Directors KMP and SMP recommends theirremuneration to the Board for its approval.

Corporate Social Responsibility (CSR) Committee

The CSR Committee met one (1) time during FY 2019-20 on May 09 2019. The CSR Policy ofthe Bank is available on the Bank's web-link: www.idfcfirstbank.com/Investor-relation/corporate-goverance.html.

The CSR initiatives of the Bank in FY 2019-20 were implemented through variousimplementation agencies/ partners. In order to achieve impact and scale the CSRactivities undertaken during the year mainly focused on areas:

[a] Livelihoods

[b] Health and Sanitation

[c] Education

[d] Women Empowerment and

[e] Others (Disaster Relief).

The amount spent for CSR contribution by the Bank for FY 2019-20 was Rs 72429374.

Details of the CSR initiatives undertaken by IDFC FIRST Bank through variousimplementation partners/ agencies are given in ANNEXURE 3.

Further the CSR Committee comprises of the following members as on the date of thisreport:

Mr. V. Vaidyanathan - Chairperson MD & CEO
Dr. (Mrs.) Brinda Jagirdar - Member Independent Director
Mr. Hemang Raja - Member Independent Director

KEY MANAGERIAL PERSONNEL

As on the date of this report the following officials of the Bank are the ‘KeyManagerial Personnel Rs pursuant to the provisions of Section 203 of the Companies Act2013:

Mr. V. Vaidyanathan

Managing Director and Chief Executive Officer

Mr. Sudhanshu Jain

Chief Financial Officer and Head - Corporate Centre (appointed with effect from March27 2020)

Mr. Satish Gaikwad

Head - Legal and Company Secretary

During the year under review consequent to Mr. Pankaj Sanklecha's appointment as theChief Risk Officer of the Bank he stepped down as the Chief Financial Officer and Head -Corporate Centre of the Bank with effect from close of business hours of December 272019.

INTERNAL FINANCIAL CONTROLS

The Bank has adequate internal controls and processes in place with respect to itsfinancial statements that provide reasonable assurance regarding the reliability offinancial reporting and preparation of financial statements. These controls and processesare driven through various policies procedures and certifications which also ensure theorderly and efficient conduct of the Bank's business including adherence to Bank'spolicies safeguarding of assets prevention and detection of frauds and errors accuracyand completeness of the accounting records and the timely preparation of reliablefinancial information. The controls and processes are being reviewed periodically. TheBank has a mechanism of testing the controls and processes at regular intervals for theirdesign and operating effectiveness to ascertain the reliability and authenticity offinancial information.

INFORMATION/CYBER SECURITY FRAMEWORK

IDFC FIRST Bank since its inception has put in place a robust Information/ CyberSecurity Framework. Our Bank being a green field setup has Information Security woveninto our banking platform and seamlessly merges both culturally and technologically. Adedicated team of security professionals are part of the Information Security Group(‘ISG') who govern the Information Security practices in the Bank. Our Bank has putin place state of the art security technologies including several industry ‘firsts Rstechnology solutions and adopted ‘defense in depth Rs approach & industry bestpractices as part of our security framework and architecture. This year the Bank has putsubstantial effort in redesigning the cyber security framework and posture. Besides this acomplete review of the overall security practices was also undertaken leading to severalchanges in processes and automation of some of the key security assessments undertaken inthe Bank. Our Bank is mindful of the need to always be on the guard and monitors itsenvironment 24x7x365. Given the changing threat landscape and evolving technologyplatforms the attempt is to progressively move towards adoption of proactive and adaptiveplatforms for automated detection response and recovery.

INTERNAL OMBUDSMAN

In compliance with regulatory guidelines the Bank has appointed Mr. Dayanand P.Kasabe a senior retired Central Banker as Internal Ombudsman for a period of 3 years witheffect from December 03 2018 as per the Internal Ombudsman Scheme 2018 to enhance ourBank's customer grievance redressal mechanism and to improve service delivery.

STATUTORY AUDITORS

In terms of RBI circular DBS.ARS.BC.04/08.91.001/2017-18 dated July 27 2017 and titledAppointment of Statutory Central Auditors (SCAs) - modification of rest period' an auditfirm after completing its four (4) years tenure in a particular private/foreign bankwill not be eligible for appointment as SCA of the same bank for a period of six (6)years. This practice is based on the guidelines on periodical rotation and resting ofstatutory auditors.

In terms of Section 30(1) of the Banking Regulation Act 1949 the Statutory Auditorsof banks are required to be appointed in the AGM with the prior approval of RBI. TheAudit Committee and the Board of Directors of the Bank vide circular resolutions datedApril 20 2019 and April 23 2019 respectively approved the appointment of StatutoryAuditors of the Bank for FY 2019-20 in the order of preference with a panel of 3 auditorsfor onward submission to the RBI.

In accordance with the aforesaid circular and post receipt of RBI approval B S R &Co. LLP Chartered Accountants (Firm Registration No. 101248W/W-100022) were appointed asthe Statutory Auditors of the Bank by the shareholders at its 5th AGM held onJuly 25 2019 for a period of one (1) year from the 5th AGM.

The Audit Committee and the Board of Directors of the Bank at their respective Meetingsheld on May 22 2020 basis the approval received from RBI approved the appointment of BS R & Co. LLP Chartered Accountants as the Statutory Auditors of the Bank for thesecond year 2020-21 i.e. from the conclusion of 6th AGM till the conclusion of7th AGM to be held in 2021 subject to other necessary approvals including thatof shareholders at the ensuing AGM.

AUDITORS Rs REPORT

There were no qualifications reservations adverse remarks or disclaimers made by theStatutory Auditors in their report for the financial year ended March 31 2020.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act 2013 read with Rule 9of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theBank had appointed M/s. Bhandari & Associates Company Secretaries to undertake theSecretarial Audit of the Bank for the financial year ended March 31 2020.

The Bank provided all assistance and facilities to the Secretarial Auditors forconducting their audit.

The Secretarial Audit Report is appended as ANNEXURE 5 to this report.

There were no qualifications reservations adverse remarks or disclaimers made by theSecretarial Auditors in their report for the financial year ended March 31 2020.

COMPLIANCE WITH APPLICABLE SECRETARIAL STANDARDS

The Bank has generally complied with the applicable Secretarial Standards issued by theInstitute of Company Secretaries of India.

CONCURRENT AUDIT

Our Bank has a regular and well-defined process of concurrent audits for importantfunctions such as treasury trade finance operations retail operations wholesaleoperations information technology data center etc. in line with the extant regulatoryguidelines. Reputed Chartered

Accountant/CERT-IN certified firms carry out these Concurrent Audits. Key findings ofthese audits are placed before the Audit Committee of the Board on a quarterly basis.

REQUIREMENT FOR MAINTENANCE OF COST RECORDS

The Bank is not required to maintain cost records as specified by the CentralGovernment under Section 148(1) of the Companies Act 2013.

AWARDS AND RECOGNITIONS

During the year under review our Bank was recognized in various ways and thesignificant awards presented to our Bank are listed below:

• "Most Promising New Bank in India 2019" by Capital FinanceInternational (CFI);

• CNBC Awaaz "Entrepreneur of the Year" Award 2019; &

• "Prestigious Brands of India 2020" by Herald Global and BARC Asia.

INSTANCES OF FRAUD IF ANY REPORTED BY THE AUDITORS OR THE MANAGEMENT

No offence of fraud was reported by the Auditors of the Bank under Section 143(12) ofthe Companies Act 2013. The details of provisioning pertaining to Fraud Accounts duringthe year under review are provided in Note No. 18.17 to the Standalone FinancialStatements as at March 31 2020.

RISK MANAGEMENT FRAMEWORK

Our Bank promotes a strong risk culture throughout the organization. A strong riskculture is designed to help reinforce the Bank's resilience by encouraging a holisticapproach to management of risk & return and an effective management of risk capitaland reputational profile.

Consequent to the amalgamation of erstwhile Capital First Group with IDFC Bankeffective December 18 2018 Bank has re-aligned its key policies and Risk Frameworkforming an overall Risk Framework of the merged entity. Our Bank operates within aneffective Risk Management Framework to actively manage all the material risks faced by theBank in a manner consistent with the Bank's risk appetite. Our Bank aims to establishitself as an industry leader in the management of risks and strive to reach the efficientfrontier of risk and return for the Bank and its shareholders. The Board has ultimateresponsibility for the Bank's Risk Management Framework. It is responsible for approvingthe Bank's risk appetite risk tolerance and related strategies and policies. The Board isassisted by Risk Management Committee of the Board (‘RMC') and is supported byvarious management committees as part of the Risk Governance framework to ensure that Bankhas sound system of risk management and internal controls. The RMC assists the Board inrelation to the oversight and review of the Bank's risk management principles andpolicies strategies appetite processes and controls.

The RMC of the Board reviews risk management policies of the Bank pertaining to creditmarket liquidity and operational risks. The Committee also reviews the Risk Appetite& Enterprise Risk Management framework Internal Capital Adequacy Assessment Process(‘ICAAP') and Stress Testing. ICAAP & Stress Testing requires the Bank toundertake rigorous forward-looking assessment of risks by identifying severe events orchanges in market conditions which could adversely impact the Bank.

Our Bank has in place a Board approved Risk Management Policy. The Policy aims atestablishing a risk culture and governance framework to enable identificationmeasurement mitigation and reporting of risks within the Bank in line with the Bank'srisk appetite risk - return trade-off and the escalation & accountability framework.

Our Bank manages its capital position to maintain strong capital ratios well in excessof regulatory and Board approved minimum capital adequacy at all times. The strong Tier Icapital position of the Bank is a source of competitive advantage and provides assuranceto regulators credit rating agencies depositors and shareholders. Capital managementpractices are designed to maintain a risk reward balance while ensuring that businessesare adequately capitalized to absorb the impact of stress events including pandemic risks.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Bank has implemented a Whistle Blower Policy in compliance with the provisions ofthe Listing Regulations Companies Act 2013 and RBI notification on Introduction of‘Protected Disclosures Scheme for Private Sector and Foreign Banks'. Pursuant to thispolicy the Whistle Blowers can raise concerns relating to reportable matters (as definedin the policy) such as breach of IDFC FIRST Bank's Code of Conduct employee misconductfraud illegal unethical imprudent behavior corruption safety and misappropriation ormisuse of Bank funds/ assets etc.

Further the mechanism adopted by the Bank encourages the Whistle Blower to reportgenuine concerns or grievances and provides for adequate safeguards against victimizationof Whistle Blower to those who avail such mechanism and also provides for direct access tothe Chairman of the Audit Committee in exceptional cases.

The Audit Committee reviews the functioning of the Vigil Mechanism from time to time.None of the Whistle Blowers has been denied access to the Audit Committee of the Board.The Whistle Blower Policy is available on the Bank's web-link: www.idfcfirstbank.com/Investor-relation/corporate-goverance.html. The Whistle Blower Policy is communicated to the employees and is alsoposted on the Bank's intranet.

In addition to the above the Bank has formulated a Vigilance Policy for effectivelymanaging the risks faced by the Bank on account of corruption malpractices and frauds.

Mr. Avinash Saraiya is the Chief Vigilance Officer of the Bank.

PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE

Our Bank has an Internal Committee to investigate and inquire into sexual harassmentcomplaints in line with The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013.

Our Bank has in place a policy on Anti-Sexual Harassment which reflects the Bank'szero-tolerance towards any form of prejudice gender bias and sexual harassment at theworkplace. Our Bank has set up an Internal Complaints Committee ('ICC') to receive andredress complaints of sexual harassment. Our Bank undertakes ongoing trainings to createawareness on this policy.

During the year under review i.e. FY 2019-20 six sexual harassment complaints werefiled out of which five complaints were closed during the year. One complaint wasreceived in the month of March 2020 hence under work in progress and shall be resolvedwithin the timelines.

During FY 2019-20 employees were given online training and classroom training wasimparted to all ICC members in order to understand the Policy on Prevention of SexualHarassment and framework for reporting and resolving instances of sexual harassmentdetails of which have been mentioned in the Business Responsibility Report which ishosted on the Bank's web-link: www.idfcfirstbank.com/Investor-relation/corporate-goverance.html.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS/ COURTS/ TRIBUNALS

There were no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status or the operations of the Bank.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE BANK

There are no material changes and commitments affecting the financial position of theBank between the end of the financial year of the Bank i.e. March 31 2020 and the date ofthe Board Meeting in which the Directors Rs Report was approved i.e. May 22 2020.

RELATED PARTY TRANSACTIONS

All the related party transactions that were entered into during the financial yearwere on arm's length basis and in the ordinary course of business of the Bank. IDFC FIRSTBank have always been committed to good corporate governance practices including mattersrelating to related party transactions.

All the related party transactions are placed before the Audit Committee for approval.Prior omnibus 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 Rs 1 crore per transaction. The requireddisclosures are made to the Audit Committee on a quarterly basis for all the related partytransactions.

Pursuant to the provisions of Companies Act 2013 and Rules made thereunder ListingRegulations and in the backdrop of the Bank's philosophy on such matters the Bank has inplace a Board approved policy on related party transactions. The said policy is alsouploaded on the Bank's web-link: www.idfcfirstbank.com/Investor-relation/corporate-goverance.html. Since all related party transactions entered into by the Bank were inthe ordinary course of business and on arm's length basis Form AOC-2 as prescribed underSection 134(3)(h) of the Companies Act 2013 is not applicable to the Bank.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

The provisions of Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 relating to conservation of energy and technologyabsorption are given as under:

Detailed initiatives taken for conservation of energy has been mentioned in theBusiness Responsibility Report which is hosted on the Bank's website: www.idfcfirstbank.comunder the ‘Investor Relations' section.

Also our Bank has been increasingly using information technology in its operationsfor more details please refer Management Discussion and Analysis Report which forms partof this Annual Report.

Further Foreign Exchange earnings and outgo are part of the normal banking business ofthe Bank.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review as required byRegulation 34(2)(e) of the Listing Regulations forms part of this Annual Report.

CORPORATE GOVERNANCE

Your Directors ensure the Bank's prosperity by collectively directing its affairswhile meeting the appropriate interests of its Shareholders and other Stakeholders.

Our Bank is committed to achieve the highest standards of Corporate Governance. Aseparate section on Corporate Governance standards followed by our Bank and the relevantdisclosures as stipulated under Listing Regulations Companies Act 2013 and Rules madethereunder forms part of this Annual Report.

A Certificate from the Secretarial Auditors of the Bank M/s. Bhandari &Associates Company Secretaries confirming compliance to the conditions of CorporateGovernance as stipulated under Listing Regulations is enclosed at the beginning of theCorporate Governance Report and forms part of this Annual Report.

CEO & CFO CERTIFICATION

Certificate issued by Mr. V. Vaidyanathan MD & CEO and Mr. Sudhanshu Jain ChiefFinancial Officer and Head - Corporate Centre of the Bank in terms of Regulation 17(8) ofListing Regulations for the year under review was placed before the Board of Directorsand forms part of this Annual Report.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report in terms of Regulation 34(2)(f) of ListingRegulations describing the initiatives taken by IDFC FIRST Bank from an environmentalsocial and governance perspective is hosted on the Bank's website: www.idfcfirstbank.comunder the ‘Investor Relations Rs section and constitutes a part of this AnnualReport. Any shareholder interested in obtaining soft copy of the same may write to theHead - Legal and Company Secretary of the Bank by sending an e-mail onbank.info@idfcfirstbank.com. The same will be replied by the Bank suitably.

ANNUAL RETURN

An extract of the Annual Return as of March 31 2020 pursuant to the sub-section (3) ofSection 92 of the Companies Act 2013 read with Rule 12 (1) of the Companies (Managementand Administration) Rules 2014 and forming part of this report is placed on the Bank'swebsite: www.idfcfirstbank.com under the ‘Investor Relations Rs section as perprovisions of Section 134(3)(a) and is also set out in ANNEXURE 4 to this AnnualReport.

DIRECTORS Rs RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(5) of the Companies Act 2013 it ishereby confirmed that:

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

[b] the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Bank as on March 31 2020 and of the loss of theBank 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 concern basis;

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

[f] the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively

GREEN INITIATIVE

To support the ‘Green Initiative' shareholders who have not updated their e-mailaddresses are requested to update the same with their respective Depository Participants(DPs) in case shares held are in electronic form or communicate their e-mail address tothe Registrar and Share Transfer Agent i.e. KFin Technologies Private Limited or to theBank in case shares are held in physical form so that future communications can be sentto shareholders in electronic mode. Note on Green Initiative forms part of the 6thAGM Notice.

ACKNOWLEDGMENT

Your Directors take this opportunity to express their deep and sincere gratitude to ourCustomers Business Partners

Business Correspondents and Vendors for the trust and confidence reposed by them in theBank. We would like to thank our Shareholders Bondholders Investors and FinancialInstitutions for their co-operation and assistance during the year under review.

Your Directors would like to place on record their appreciation for the supportreceived from IDFC Group Government of India State Governments various MinistriesReserve Bank of India ('RBI') Securities and Exchange Board of India ('SEBI') InsuranceRegulatory and Development Authority of India (‘IRDA') Financial IntelligenceUnit-India (FIU-IND) Stock Exchanges ('National Stock Exchange of India Limited Rs &'BSE Limited') Depositories Rating Agencies Unique Identification Authority of India(‘UIDAI') National Payments Corporation of India (‘NPCI') The ClearingCorporation of India Limited (‘CCIL') Indian Banks Rs Association (‘IBA')Fixed Income Money Market and Derivatives Association of India (‘FIMMDA') and allother regulatory agencies and associations with which the Bank interacts.

Your Directors sincerely acknowledge the commitment and hard work put in by allemployees of the Bank through its transformational journey. Their valuable contributionhas enabled the Bank to make significant progress towards achieving its objective ofbecoming a diversified universal Bank with a focus on retail banking.

For and on behalf of the Board of Directors of
IDFC FIRST Bank Limited
Dr. Rajiv B. Lall
Date: May 22 2020 Chairman
Place: Mumbai DIN: 00131782

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